<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FIRST BANK SYSTEM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
la10
FIRST BANK SYSTEM, INC.
FIRST BANK PLACE
601 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402
March 11, 1996
To Our Stockholders:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders
which will be held at 2:00 p.m. on Wednesday, April 17, 1996, at the
Minneapolis Convention Center, 1301 Second Avenue South, Minneapolis, Minnesota
55403. For your convenience, a map showing the location of the Minneapolis
Convention Center is provided on the back of this Proxy Statement.
You are urged to read the enclosed Notice of Meeting and Proxy Statement so
that you may be informed about the business to come before the Annual Meeting
of Stockholders. At your earliest convenience, please mark, sign and return the
accompanying form of proxy in the enclosed postage-paid envelope. We hope you
will be able to attend the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN AND RETURN
YOUR PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE
AND RETURN THE ENCLOSED BUSINESS REPLY POST CARD TO REQUEST AN ADMISSION
TICKET, WHICH WILL BE MAILED TO YOU PRIOR TO THE MEETING DATE.
Very truly yours,
LOGO
John F. Grundhofer
Chairman, President and
Chief Executive Officer
<PAGE>
LOGO
FIRST BANK SYSTEM, INC.
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 17, 1996
To the Stockholders
of First Bank System, Inc.:
The Annual Meeting of Stockholders of First Bank System, Inc. (the
"Company") will be held at the Minneapolis Convention Center, 1301 Second
Avenue South, Minneapolis, Minnesota 55403 on Wednesday, April 17, 1996, at
2:00 p.m. for the following purposes:
1. To elect five persons to the Board of Directors.
2. To consider and act upon a proposal to approve the 1996 Stock Incentive
Plan (and thereby amend and restate the Company's 1991 Stock Incentive
Plan and 1994 Stock Incentive Plan).
3. To consider and act upon a proposal to amend the Company's Amended and
Restated Employee Stock Purchase Plan to increase the number of shares
of the Company's Common Stock available for issuance thereunder.
4. To consider and act upon a proposal to ratify the selection by the Board
of Directors of the firm of Ernst & Young LLP as independent auditors of
the Company for the fiscal year ending December 31, 1996.
5. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on February 26, 1996
will be entitled to notice of and to vote at the meeting and any adjournments
thereof. A list of such holders will be available for examination by any
stockholder for any purpose germane to the meeting during ordinary business
hours for ten days prior to the meeting at the Company's headquarters, First
Bank Place, 601 Second Avenue South, Minneapolis, Minnesota.
March 11, 1996 By Order of the Board of Directors
LOGO
Lee R. Mitau
Secretary
PLEASE NOTE
YOUR VOTE IS IMPORTANT. IF YOU DO NOT EXPECT TO ATTEND THE
ANNUAL MEETING OR IF YOU PLAN TO ATTEND BUT DESIRE THE
PERSONS NAMED AS PROXIES TO VOTE YOUR STOCK, PLEASE MARK,
SIGN AND DATE YOUR PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. STOCKHOLDERS ATTENDING THE MEETING MAY REVOKE THEIR
PROXIES AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE>
PROXY STATEMENT
OF
FIRST BANK SYSTEM, INC.
LOGO
FIRST BANK PLACE
601 SECOND AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55402
(612) 973-1111
GENERAL MATTERS
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors for
use at the Company's Annual Meeting of Stockholders to be held on April 17,
1996, and at any adjournments thereof. The cost of soliciting proxies will be
borne by the Company. In addition to solicitation by mail, officers and
employees of the Company may solicit proxies by telephone, special
communications or in person but will receive no special compensation for such
services. The Company will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them
in sending proxy material and annual reports to the owners of the stock in
accordance with the New York Stock Exchange schedule of charges. The Company
has engaged Morrow & Co., Inc. to assist in proxy solicitation for an
estimated fee of $15,000 plus out-of-pocket expenses. This Proxy Statement and
the accompanying proxy are first being mailed to stockholders on or about
March 11, 1996.
VOTING, EXECUTION AND REVOCATION OF PROXIES
Only stockholders of record at the close of business on February 26, 1996,
the record date for the meeting, will be entitled to receive notice of and to
vote at the meeting. As of that date there were approximately 144,143,244
shares of Common Stock of the Company outstanding and entitled to vote at the
meeting. Each share is entitled to one vote. There is no cumulative voting.
When stock is registered in the name of more than one person, each such
person should sign the proxy. If the stockholder is a corporation, the proxy
should be signed in its corporate name by an executive or other authorized
officer. If a proxy is signed as an attorney, executor, administrator,
trustee, guardian, or in any other representative capacity, the signer's full
title should be given.
If a proxy is properly executed and returned in the form enclosed, it will
be voted at the meeting as follows, unless otherwise specified by the
stockholder in the proxy: (i) in favor of the election as Directors of all the
nominees listed herein; (ii) in favor of the proposal to
<PAGE>
approve the 1996 Stock Incentive Plan (and thereby amend and restate the
Company's 1991 Stock Incentive Plan and 1994 Stock Incentive Plan); (iii) in
favor of the proposal to amend the Company's Amended and Restated Employee
Stock Purchase Plan to increase the number of shares of the Company's Common
Stock available for issuance thereunder; (iv) in favor of the ratification of
the selection of Ernst & Young LLP as independent auditors of the Company for
the fiscal year ending December 31, 1996; and (v) in accordance with the
judgment of the persons named in the proxy as to such other matters as may
properly come before the meeting. Shares held in the Company's Capital
Accumulation Plan, a 401(k) plan ("CAP"), for which a proxy is not received at
least ten days prior to the meeting will be voted by the trustee in the same
proportion as votes actually cast by CAP participants, in accordance with the
terms of the CAP. A proxy may be revoked at any time before being exercised by
delivery to the Secretary of the Company of a written notice of termination of
the proxy's authority or a duly executed proxy or ballot bearing a later date.
If an executed proxy card is returned and the stockholder has abstained from
voting on any matter or, in the case of the election of Directors has withheld
authority to vote with respect to any or all of the nominees, the shares
represented by such proxy will be considered present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote, but
will not be considered to have been voted in favor of such matter or, in the
case of the election of Directors, in favor of such nominee or nominees. If an
executed proxy is returned by a broker holding shares in street name which
indicates that the broker does not have discretionary authority as to certain
shares to vote on one or more matters, such shares will be considered present
at the meeting for purposes of determining a quorum, but will not be
considered to be represented at the meeting for purposes of calculating the
vote with respect to such matter.
ANNUAL REPORT
The 1995 First Bank System, Inc. Annual Report to Stockholders and Annual
Report on Form 10-K, including financial statements for the year ended
December 31, 1995, accompanies this Proxy Statement.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of February 26, 1996 with
respect to shares of the Company's Common Stock which are held by the only
persons known to the Company to be beneficial owners of more than 5% of such
stock. For purposes of this Proxy Statement, beneficial ownership of
securities is defined in accordance with the rules of the Securities and
Exchange Commission and means generally the power to vote or dispose of
securities, regardless of any economic interest therein.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned
-------------------------
Name of Stockholder Shares Percent
- ------------------- ------------ ---------
<S> <C> <C>
Wellington Management
Company................. 7,845,856(1) 5.4%
75 State Street
Boston, Massachusetts
02109
Corporate Advisors,
L.P. ................... 7,440,000(2) 5.2%
One Rockefeller Plaza
New York, New York 10020
</TABLE>
2
<PAGE>
- --------
(1) Information is based solely on a Schedule 13G filed with the Securities
and Exchange Commission by Wellington Management Company ("Wellington"), a
registered investment adviser, with respect to shares held as of December
31, 1995. The Schedule 13G indicates that the shares reported are owned by
numerous investment counseling clients and that Wellington has shared
voting power with respect to 1,609,442 shares and shared dispositive power
with respect to 7,845,856 shares.
(2) Corporate Advisors, L.P., in its capacity as the general partner of
Corporate Partners, L.P., the general partner of Corporate Offshore
Partners, L.P. and the investment manager for The State Board of
Administration of Florida, holds sole voting and investment power with
respect to all of the reported shares. A representative of Corporate
Advisors, L.P. is entitled to attend meetings of the Company's Board of
Directors and its Committees. The State Board of Administration of Florida
also holds sole voting and investment power with respect to an additional
approximately 1,148,132 shares of Common Stock.
MATTERS SUBMITTED TO VOTE
Following is a discussion of the matters to be presented at the meeting:
I. ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
The Bylaws of the Company provide for a Board of Directors consisting of 17
members. Commencing with the election of Directors at the annual meeting of
stockholders in 1986, the Directors were divided into three classes: Class I,
Class II and Class III, each such class, as nearly as possible, to have the
same number of Directors. The term of office of the Class I Directors will
expire at the annual meeting in 1996, the term of office of the Class II
Directors will expire at the annual meeting in 1997, and the term of office of
the Class III Directors will expire at the annual meeting in 1998. At each
annual election of Directors, the Directors chosen to succeed those whose
terms have then expired shall be identified as being of the same class as the
Directors they succeed and shall be elected for a term expiring at the third
succeeding annual election of Directors.
Vacancies and newly created directorships resulting from an increase in the
number of Directors may be filled by a majority of the Directors then in
office and the Directors so chosen will hold office until the next election of
the class for which such Directors shall have been chosen and until their
successors are elected and qualified.
It is intended that proxies accompanying this Proxy Statement will be voted
at the meeting FOR the election to the Board of Directors of the nominees
named, unless authority to vote for one or more of the nominees is withheld as
specified in the proxy card. The affirmative vote of a majority of the shares
of Common Stock represented at the meeting and entitled to vote is necessary
for the election of each nominee, and cumulative voting is not permitted.
Class I Directors are to be elected at the meeting for a three-year term
expiring at the annual meeting in 1999 and until their successors are elected
and qualified.
3
<PAGE>
Nominees for Class I Directors are Roger L. Hale, Richard L. Knowlton, Edward
J. Phillips, James J. Renier and Richard L. Schall. All of these nominees are
presently serving as Class I Directors. If any of the nominees should be
unavailable to serve as a Director, an event which is not anticipated, the
persons named as proxies reserve full discretion to vote for any other persons
who may be nominated.
All current Directors were previously elected by the Company's stockholders
except Arthur D. Collins, Jr., Peter H. Coors, Norman M. Jones and Jerry W.
Levin who were elected by action of the Board of Directors.
BOARD OF DIRECTORS AND COMMITTEES
During 1995, the Board of Directors of the Company held six regular meetings
and five special meetings. The Board has established the following committees
to perform their assigned functions: Executive Committee, Audit Committee,
Credit Policy and Community Responsibility Committee, Compensation and Human
Resources Committee, Finance Committee and Governance Committee. During the
past year, the Executive Committee did not meet, the Audit Committee met five
times, the Credit Policy and Community Responsibility Committee met four
times, the Compensation and Human Resources Committee met six times, the
Finance Committee met three times and the Governance Committee met six times.
Incumbent Directors' attendance at Board and Committee meetings averaged 93%
during 1995 and each incumbent member of the Board of Directors attended at
least 75% of the aggregate of the total number of meetings of the Board of
Directors and of the Committees of which such Director was a member.
The members of the Executive Committee are Directors Grundhofer
(Chairperson), Hale, Macke, Nelson, Renier, Richey and Schall. The Executive
Committee is charged with acting with the authority of the Board of Directors
when the Board is not in session, subject to applicable limitations set forth
in the Company's Bylaws and under Delaware law.
The members of the Audit Committee are Directors Schall (Chairperson),
Collins, Hale, Johnson, Robinson and Schroeder. The Audit Committee is charged
with assisting the Board in meeting its responsibilities for external and
internal audits, determining that adequate external and internal accounting
and administrative controls are in place and reviewing certain financial
information that is to be disseminated to stockholders and the general public.
The members of the Credit Policy and Community Responsibility Committee are
Directors Hale (Chairperson), Coors, Grundhofer, Kareken, Levin, Nelson,
Phillips and Schall. The Credit Policy and Community Responsibility Committee
reviews lending and credit administration policies, practices and controls for
the Company. The Committee reviews loan quality trends and summaries of credit
examination reports and reviews and approves the adequacy of the Company's
allowance for credit losses. The Committee also has oversight responsibility
for the Company's policy and performance under the Community Reinvestment Act.
The members of the Compensation and Human Resources Committee are Directors
Macke (Chairperson), Levin, Nelson, Renier, Richey and Robinson. The
Compensation and
4
<PAGE>
Human Resources Committee is charged with oversight responsibility for the
adequacy and effectiveness of compensation and benefit plans and senior
management succession plans. In addition, the Committee makes recommendations
to the Board of Directors regarding remuneration for senior management and
Directors, adoption of employee compensation and benefit plans, and the
administration of such plans, including the granting of stock options or other
benefits.
The members of the Finance Committee are Directors Richey (Chairperson),
Collins, Grundhofer, Jones, Kareken, Knowlton, Phillips, Renier and Schall (ex
officio). The Finance Committee reviews, approves and monitors compliance with
policies governing capital adequacy, dividends, interest rate sensitivity and
liquidity for the Company, as well as policies governing the investment
portfolio. The Committee makes recommendations to the Board of Directors
regarding the sale and issuance and repurchase of debt and equity securities
and reviews other actions regarding financial aspects of the Company.
The members of the Governance Committee are Directors Schall (Chairperson),
Grundhofer, Hale, Macke and Richey. The Committee serves as a forum for ideas
and suggestions to improve the quality of stewardship provided by the Board of
Directors. The Committee also focuses on Board development and succession,
assisting the Board by identifying, attracting and recommending candidates for
Board membership and administering the Director retirement policy. The
Committee recommends to the Board those persons whom it believes should be
nominees for election as Directors. The Committee will consider qualified
nominees recommended by stockholders. Any such recommendation for the 1997
election of Directors should be submitted in writing to the Secretary of the
Company so as to be received no later than 90 days in advance of the 1997
annual meeting of stockholders. Such recommendation must include information
specified in the Company's Bylaws that will enable the Governance Committee to
evaluate the qualifications of the recommended nominee.
Directors who are not employees of the Company receive an annual retainer of
$20,000, with the exception of the Chairperson of the Audit Committee who
receives an annual retainer of $21,000, plus $1,000 for each meeting of the
Board attended. In addition, non-employee Committee Chairpersons receive
$2,000 and non-employee Directors receive $1,000 for each Committee meeting
attended.
It is the Company's policy that a Director shall retire as of the annual
meeting of stockholders following the earlier of either 12 years of service
(except that a Director who has completed 12 years of service as of October
1994 will not be subject to term limits) or such Director's sixty-seventh
birthday. Notwithstanding this policy, however, the Board of Directors may, in
consultation with the Governance Committee, ask a particular Director to
continue service beyond the normal retirement date. Two of the nominees for
election as Class I Directors, Dr. Renier and Mr. Schall, will turn 67 prior
to the 1997 annual meeting of stockholders.
On February 18, 1987, the Company adopted a Director Retirement and Death
Benefit Plan which provides for payments to Directors after they cease to be
Directors. The Plan was amended and restated effective May 15, 1991 and
amended February 15, 1995 to
5
<PAGE>
conform to Board policy regarding suggested retirement age. Plan benefits are
payable to persons who have completed 60 months of service as a Director.
Benefits accrue in the amount of the annual retainer in effect on the date a
Director's service terminates multiplied by the number of years of service,
not to exceed 10 years. Benefits are paid in annual installments over a 10-
year period or, in the event of the Director's death, a lump sum payment may
be made. If a Director's service terminates after the Director attains the age
of 67, however, and the 10 installments have been paid prior to the Director's
death, annual payments equal to the installment amount are made through the
time of the Director's death. In the event of a change of control of the
Company, benefits payable under the Plan will be paid in a lump sum within 30
days thereof.
Directors are offered the opportunity to defer all or a part of their
Director compensation in accordance with the terms of the Deferred
Compensation Plan for Directors. Under such plan, a Director may defer all
retainer and meeting fees until such time as the Director ceases to be a
member of the Board. In the event of a change of control of the Company, the
plan will terminate and all deferred amounts will be paid in a lump sum within
30 days thereof.
Directors may also elect to use their Director compensation to purchase
shares of the Company's Common Stock through the Amended and Restated Employee
Stock Purchase Plan in accordance with substantially the same terms and
conditions as apply to employees, with certain exceptions. Directors may
purchase shares of Common Stock with all or any portion of the fees earned as
a Director of the Company. Each non-employee Director is required to make a
single election to participate in the Employee Stock Purchase Plan with
respect to all or a designated portion of his or her Director fees, which
election is irrevocable for as long as such person is a non-employee Director.
The purchase price is the lower of (a) 85% of the fair market value of the
Company's Common Stock on the first day of the purchase period, or (b) 85% of
the fair market value of the Company's Common Stock on the last day of the
purchase period. On the last business day of the purchase period, each
participant receives the largest number of whole shares of the Company's
Common Stock that can be purchased with the participant's accumulated
deductions at the established purchase price.
Under the Company's 1991 Stock Incentive Plan, each non-employee Director of
the Company receives options to purchase 2,500 shares of the Company's Common
Stock upon first being elected to the Board of Directors and, thereafter,
options to purchase 1,500 shares of the Company's Common Stock on the date of
each annual meeting of stockholders if such Director's term of office
continues after such grant date. Each option granted to a non-employee
Director as of the date of each annual meeting of stockholders is exercisable
in full as of the date of grant, has an exercise price per share equal to the
fair market value of a share of Common Stock as of the date of grant and
expires on the tenth anniversary of the date of grant. Options granted to non-
employee Directors include a provision entitling the optionee to a further
option (a "reload option") if the optionee exercises an option, in whole or in
part, by surrendering other shares of the Company's Common Stock, which reload
option shall be for the number of shares of the Company's Common Stock
tendered as payment. The 1996 Stock Incentive Plan, if approved by the
6
<PAGE>
stockholders at the meeting, would provide for the grant of options to non-
employee Directors under the same circumstances and having substantially the
same terms as are currently provided under the 1991 Stock Incentive Plan. See
"Proposal to Approve the 1996 Stock Incentive Plan (And Thereby Amend and
Restate the Company's 1991 Stock Incentive Plan and 1994 Stock Incentive
Plan)" below.
As required by the merger agreement relating to the Company's acquisition of
Metropolitan Financial Corporation, the Company entered into a consulting
agreement with Norman M. Jones dated January 23, 1995 engaging Mr. Jones for a
three-year period as an independent consultant to assist the Company in
identifying and contacting, on behalf of the Company, potential financial
institution acquisition candidates as requested from time to time by the
Company. The agreement further provides that the Company is required to use
its best efforts to secure the election of Mr. Jones to the Company's Board of
Directors for a term of at least three years and to appoint Mr. Jones as
Chairman of the Board of Directors of First Bank, fsb, a subsidiary of the
Company, for at least three years. The agreement provides that Mr. Jones will
be paid cash compensation equal to $200,000 annually for such services,
including his service as a Director of the Company.
INFORMATION REGARDING NOMINEES AND OTHER CONTINUING DIRECTORS
There is shown below for each nominee for election as a Director and for
each other person whose term of office as a Director will continue after the
meeting, as furnished to the Company, the individual's name, age, principal
occupation and business experience; his or her period of service as a Director
of the Company and other directorships held.
CLASS I DIRECTORS--NOMINEES FOR ELECTION FOR A TERM EXPIRING AT THE 1999
ANNUAL MEETING
- -------------------------------------------------------------------------------
ROGER L. HALE, 61 Director Since 1987
Mr. Hale is President and Chief Executive Officer of TENNANT
Company, a Minneapolis-based manufacturer of industrial and
Photo of commercial floor maintenance equipment and products. He
Roger L. Hale joined TENNANT in 1961 and was appointed Assistant to the
Appears Here President in 1963. Mr. Hale was elected Vice President in
1968 and, in 1975, was elected President and Chief Operating
Officer. He was elected Chief Executive Officer in 1976. He
serves as a Director of TENNANT and Dayton Hudson
Corporation. His community activities include serving as
Chairman of the Minneapolis Neighborhood Employment Network
and as Vice Chair of Public Radio International. Mr. Hale
serves as Chairperson of the Credit Policy and Community
Responsibility Committee and also as a member of the
Executive Committee, the Audit Committee and the Governance
Committee.
7
<PAGE>
- -------------------------------------------------------------------------------
RICHARD L. KNOWLTON, 63 Director Since 1992
Mr. Knowlton is Chairman of The Hormel Foundation, Austin,
Minnesota, a public foundation organized and operated for the
Photo of benefit of charitable organizations. He became Chairman of
Richard L. the Hormel Foundation in December 1995 upon resigning as
Knowlton Chairman and Chief Executive Officer of Hormel Foods
Appears Here Corporation, a meat and food processing company. He joined
Hormel Foods Corporation in 1948 and held numerous positions
with the company, including Sales Manager, Vice President--
Operations, President and Chief Operating Officer, and
Chairman and Chief Executive Officer. Mr. Knowlton serves as
a Director of ReliaStar Financial Corp. and SUPERVALU INC. In
addition to being Chairman of The Hormel Foundation, he is
also a Director of the University of Colorado Foundation, the
Mayo Foundation and the Horatio Alger Association. Mr.
Knowlton serves as a member of the Finance Committee.
- -------------------------------------------------------------------------------
EDWARD J. PHILLIPS, 51 Director Since 1988
Mr. Phillips is Chairman and Chief Executive Officer of
Phillips Beverage Company, Minneapolis, Minnesota, an
Photo of importer and marketer of distilled spirits. Mr. Phillips has
Edward J. been associated with Phillips Beverage Company since 1969,
Phillips having previously served as its President during its
Appears Here ownership by Alco Standard Corporation. He is a Director of
Venturian Corporation and Weisman Enterprises, Inc. His
community activities include serving as Vice Chairman and
Director of Metropolitan-Mount Sinai Foundation and as a
Director of Amicus, the Phillips Eye Institute, the Minnesota
AIDS Project and the Page Education Foundation. Mr. Phillips
serves as a member of the Finance Committee and the Credit
Policy and Community Responsibility Committee.
- -------------------------------------------------------------------------------
JAMES J. RENIER, 66 Director Since 1986
Dr. Renier is the retired Chairman and Chief Executive
Officer of Honeywell Inc., Minneapolis, Minnesota, an
Photo of international controls manufacturer. He joined Honeywell in
James J. 1956 as a senior research scientist and was elected Chief
Renier Executive Officer in 1987. He retired in 1994. Dr. Renier
Appears Here serves as a Director of Deluxe Corporation, ReliaStar
Financial Corp., KLM Royal Dutch Airlines, MarketLink, Inc.,
Norris Education Innovations Inc. and North Memorial Health
Care. He is a member of the Board of Trustees of the
University of St. Thomas, the Board of Overseers, Curtis L.
Carlson School of Management, University of Minnesota, the
Iowa State University Foundation Board of Governors and the
Board of Governors of the United Way of America and the
United Way of Minneapolis. He is also a Director of the
Carnegie Foundation and the National Parenting Association.
Dr. Renier serves as a member of the Executive Committee, the
Finance Committee and the Compensation and Human Resources
Committee.
- -------------------------------------------------------------------------------
RICHARD L. SCHALL, 66 Director Since 1987
Mr. Schall is the retired Vice Chairman of the Board and
Chief Administrative Officer of Dayton Hudson Corporation,
Photo of Minneapolis, Minnesota, a diversified retail company. He
Richard L. retired from active employment in February 1985. Mr. Schall
Schall is a Director of Medtronic, Inc., Meritex, Inc., CTL Credit
Appears Here Inc. and Ecolab, Inc. He is also a member of the Boards of
the Santa Barbara City College Foundation, SEE International
and Las Positas Park Foundation. Mr. Schall serves as
Chairperson of the Audit Committee and of the Governance
Committee and also as a member of the Executive Committee and
the Credit Policy and Community Responsibility Committee. He
is an ex officio member of the Finance Committee.
8
<PAGE>
CLASS II DIRECTORS--WHOSE TERMS EXPIRE AT THE 1997 ANNUAL MEETING
- -------------------------------------------------------------------------------
Photo of PETER H. COORS, 49 Director Since 1996
Peter H. Coors Mr. Coors is Vice Chairman and Chief Executive Officer of
appears here Coors Brewing Company, Golden, Colorado, and Vice President
of Adolph Coors Company. Mr. Coors has been associated with
Coors Brewing Company since 1970 and has served in various
capacities, including as Director of Financial Planning,
Director of Market Research, Vice President of Sales and
Marketing and President of Coors Distributing Company, and as
President of the brewing division of Adolph Coors Company. He
serves as a Director of Adolph Coors Company. His community
activities include serving as a member of the advisory
council of Opportunities Industrialization Centers of
America, the advisory council of the National Council of La
Raza and the Young Presidents' Organization. He is also an
Executive Board member and Executive Vice President of the
Denver Area Council of the Boy Scouts of America, a Board
member of Up With People and a Trustee of the Adolph Coors
Foundation. Mr. Coors serves as a member of the Credit Policy
and Community Responsibility Committee.
- -------------------------------------------------------------------------------
Photo of NORMAN M. JONES, 65 Director Since 1995
Norman M. Mr. Jones serves as Chairman of the Board of First Bank,
Jones appears fsb, formerly known as Metropolitan Federal Bank, the thrift
here subsidiary of the Company. Prior to the Company's acquisition
of Metropolitan Financial Corporation in January 1995, Mr.
Jones served as Chairman of Metropolitan Financial
Corporation. He was employed by that company from 1952
through January 1995 in various capacities, including as Vice
President and Secretary, President, and Chief Executive
Officer. Mr. Jones has served as Chairman of the SAIF
Industry Advisory Committee, as a Director of the S & L
Computer Trust of Des Moines, as a member of the Thrift
Advisory Board to the Federal Reserve and as a member of the
Advisory Board to the Federal Savings and Loan Insurance
Corporation. He currently serves as National Director of
Lutheran Health Systems, as a member of the Board of Regents
of Concordia College and as Chairman of Luther Seminary
Foundation. Mr. Jones serves as a member of the Finance
Committee.
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Photo of MARILYN CARLSON NELSON, 56 Director Since 1978
Marilyn Mrs. Nelson serves as Vice Chairman, a Director and a member
Carlson of the Executive Committee of the Board of Directors of
Nelson appears Carlson Holdings, Inc., the parent company of Carlson
here Companies, Inc., Minneapolis, Minnesota. Carlson Companies,
Inc. is a diversified hotel, restaurant, travel and sales and
business incentives company. She was elected as a Director of
the Carlson Companies, Inc. in 1978. Mrs. Nelson also serves
as a Director of Exxon Corporation and U S WEST, Inc. Mrs.
Nelson serves as a member of the Executive Committee, the
Compensation and Human Resources Committee and the Credit
Policy and Community Responsibility Committee.
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S. WALTER RICHEY, 60 Director Since 1990
Mr. Richey is President and Chief Executive Officer of
[Photo of Meritex, Inc., a company involved in real estate management
S. Walter and development and warehousing located in Minneapolis,
Richey Minnesota. Mr. Richey has been with Meritex, Inc. (and its
Appears here] predecessor company) since 1973. He was elected to his
present position in 1978. Mr. Richey also serves on the Board
of Directors of BMC Industries, Inc., Donaldson Company, Inc.
and as an Advisory Director of Liberty Mutual Insurance
Company. He is also a member of the Board of Regents of St.
John's University, Collegeville, Minnesota. Mr. Richey serves
as Chairperson of the Finance Committee and also as a member
of the Executive Committee, the Governance Committee and the
Compensation and Human Resources Committee.
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[Photo of RICHARD L. ROBINSON, 66 Director Since 1993
Richard L. Mr. Robinson has been Chairman and Chief Executive Officer of
Robinson Robinson Dairy, Inc. in Denver, Colorado since 1975. Prior to
Appears here] that time, he served in various capacities with Roberts Dairy
Company and Roberts Foods, Inc. in Omaha, Nebraska. He was a
Director of Bank Western and Western Capital Investment
Corporation prior to the merger of WCIC into Central
Bancorporation, Inc., an affiliate of the Company. Mr.
Robinson is a Director of Asset Investors, Inc., past
Chairman of the Greater Denver Chamber of Commerce, past
Chairman of the Denver Area Council--Boy Scouts of America,
past Chairman of the Mountain States Employers Council and
serves as a Director of numerous civic organizations. Mr.
Robinson serves as a member of the Audit Committee and the
Compensation and Human Resources Committee.
CLASS III DIRECTORS--WHOSE TERMS EXPIRE AT THE 1998 ANNUAL MEETING
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[Photo of ARTHUR D. COLLINS, Jr., 48 Director Since 1996
Arthur D. Mr. Collins is Chief Operating Officer of Medtronic, Inc.,
Collins Minneapolis, Minnesota, a leading medical device company. Mr.
Appears here] Collins joined Medtronic in 1992. He was elected to his
present position in 1994 and previously served as Corporate
Executive Vice President and President of Medtronic
International. Prior to joining Medtronic, Mr. Collins served
in a number of senior executive positions with Abbott
Laboratories from 1978 through 1992, most recently as
Corporate Vice President responsible for worldwide diagnostic
business units. He serves as a Director of TENNANT Company,
GalaGen, Inc. and Fairview Physician Associates. He is also a
member of the Board of the National Association of
Manufacturers, the Medtronic Foundation and numerous civic
organizations. Mr. Collins serves as a member of the Audit
Committee and the Finance Committee.
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[Photo of JOHN F. GRUNDHOFER, 57 Director Since 1990
John F. Mr. Grundhofer is Chairman, President and Chief Executive
Grundhofer Officer of the Company. Prior to joining the Company on
Appears here] January 31, 1990, Mr. Grundhofer served as Vice Chairman and
Senior Executive Officer for Southern California with Wells
Fargo Bank, N.A. He is Chairman of the Minnesota Business
Partnership and is a Trustee of Minnesota Mutual Life
Insurance Company. He is also a member of the Bankers
Roundtable, a Director of Irvine Apartment Communities, Inc.,
a Director of the Minneapolis Institute of Arts, a Director
of Minnesota Meeting, a Director of United Way, Minneapolis
area, Honorary Chair of the Minnesota Olympic Committee and
1996 Chairman of the United Negro College Fund, Minneapolis
area. Mr. Grundhofer serves as Chairperson of the Executive
Committee and also as a member of the Credit Policy and
Community Responsibility Committee, the Finance Committee and
the Governance Committee.
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[Photo of DELBERT W. JOHNSON, 57 Director Since 1994
Delbert W. Mr. Johnson is Chairman, President and Chief Executive
Johnson Officer of Pioneer Metal Finishing Co., a division of
Appears here] Safeguard Scientifics Inc. and one of the largest metal
finishing companies in the United States. He joined the
company in 1965 and was elected to his present position in
1978. From 1987 through 1993, Mr. Johnson served on the Board
of Directors of the Federal Reserve Bank of Minneapolis and,
in 1989, was named Chairman. In 1990, he was selected as Vice
Chairman of the Federal Reserve Board Conference of Chairmen
and in 1990 became Chairman. He serves as a Director of Ault
Inc., TENNANT Company, Safeguard Scientifics Inc., Coherent
Communications Systems Corp. and CompuCom Systems, Inc. He
also serves on the Board of Trustees of St. Thomas
University, on the Advisory Boards of Hospitality House and
Turning Point, Inc. and as Chairperson of Minnesota United
Negro College Fund Corporate Gifts. Mr. Johnson serves as a
member of the Audit Committee.
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[Photo of JERRY W. LEVIN, 51 Director Since 1995
Jerry W. Mr. Levin is Chairman and Chief Executive Officer of Revlon,
Levin Inc., New York, New York, a maker of cosmetics and personal
Appears here] care and professional products, and Executive Vice President
of MacAndrews & Forbes Holdings, Inc., Revlon's principal
shareholder. Mr. Levin joined Revlon in 1991 as President and
was elected Chairman in November 1995. Prior to joining
Revlon, Mr. Levin was Chairman of another MacAndrews & Forbes
affiliate, Coleman Holdings, Inc., the parent of The Coleman
Company, Inc., a manufacturer and marketer of outdoor
recreational products. Before joining MacAndrews & Forbes,
Mr. Levin served in a number of senior executive positions
with The Pillsbury Company from 1974 through 1989, including
as Chairman and Chief Executive Officer of the Burger King
Corporation, a Pillsbury subsidiary. In addition to serving
on the Board of Directors of Revlon, he is also a Director of
Apogee Enterprises, Inc., The Coleman Company, Inc., Ecolab,
Inc., Meridian Sports, Inc. and Paradise Kitchens, Inc. His
community activities include serving as a Director of United
Way of New York City, B'nai B'rith Hillel of New York, UJA-
Federation of New York, the New York Philharmonic, the
Council on the Graduate School of Business--University of
Chicago and the National Advisory Committee of the College of
Engineering--University of Michigan. Mr. Levin serves as a
member of the Credit Policy and Community Responsibility
Committee and the Compensation and Human Resources Committee.
11
<PAGE>
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[Photo of KENNETH A. MACKE, 57 Director Since 1985
Kenneth A. Mr. Macke is the retired Chairman and Chief Executive Officer
Macke Appears of Dayton Hudson Corporation, Minneapolis, Minnesota, a
here] diversified retail company. He joined Dayton Hudson
Corporation in 1961 and had been continuously employed by the
company until June 1994. Mr. Macke served as President of
Dayton Hudson Corporation from 1981 to 1984. In 1982, he was
elected Chief Operating Officer and was elected Chief
Executive Officer in 1983. In 1984, Mr. Macke was elected
Chairman of the Board of the company. He is also a Director
of Unisys Corporation and General Mills, Inc. Mr. Macke
serves as Chairperson of the Compensation and Human Resources
Committee and also as a member of the Executive Committee and
the Governance Committee.
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Directors John H. Kareken and Lyle E. Schroeder are expected to retire at
the 1996 annual meeting of stockholders.
II. PROPOSAL TO APPROVE THE 1996 STOCK INCENTIVE PLAN
(AND THEREBY AMEND AND RESTATE THE
COMPANY'S 1991 STOCK INCENTIVE PLAN AND
1994 STOCK INCENTIVE PLAN)
In February 1996, the Board of Directors adopted the First Bank System, Inc.
1996 Stock Incentive Plan (the "1996 Plan"), which would amend and restate the
Company's 1991 Stock Incentive Plan (the "1991 Plan") and the Company's 1994
Stock Incentive Plan (the "1994 Plan"), subject to stockholder approval. The
purpose of the 1996 Plan is to aid in attracting and retaining management
personnel and members of the Board of Directors who are not also employees of
the Company ("Non-Employee Directors") capable of assuring the future success
of the Company, to offer such persons incentives to put forth maximum efforts
for the success of the Company's business and to afford such persons an
opportunity to acquire a proprietary interest in the Company. The following
summary description of the 1996 Plan is qualified in its entirety by reference
to the full text of the plan, which is attached to this Proxy Statement as
Exhibit A.
SUMMARY OF THE 1996 PLAN
Each of the 1991 Plan and the 1994 Plan provides that 5,000,000 shares of
the Company's Common Stock are available for the granting of awards under such
Plans (for a total of 10,000,000 shares). As of February 29, 1996, 1,344,244
shares remained available for grant under the 1991 Plan and 699,667 shares
remained available for grant under the 1994 Plan. All outstanding options,
restricted stock and other awards subject to the terms of the 1991 Plan or the
1994 Plan will remain outstanding and subject to the terms and conditions of
those plans but are counted as part of the total number of shares of Common
Stock authorized for issuance under the 1996 Plan. The Board of Directors has
determined that in order to meet the Company's needs for approximately the
next three years, 7,000,000 additional shares of the Company's Common Stock
are required to be authorized for issuance under the 1996 Plan. Not more than
1,000,000 shares would be available for the grant of additional restricted
stock awards following stockholder approval of the 1996
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Plan. The 1996 Plan will authorize the issuance of an aggregate of 17,000,000
shares of the Company's Common Stock (which includes the 10,000,000 shares
previously approved by the Company's stockholders under the 1991 Plan and the
1994 Plan, only 2,043,911 of which remain available for the granting of
awards), of which approximately 9,043,911 shares will be available for grant.
If any shares of Common Stock subject to any award or to which an award
relates are not purchased or are forfeited, or if any such award terminates
without the delivery of shares or other consideration (in each case, including
those awards granted under the 1991 Plan and the 1994 Plan), the shares
previously used for such awards will be available for future awards under the
1996 Plan. In addition, any shares that are used by a 1996 Plan participant as
full or partial payment to the Company of the purchase price relating to an
award, or in connection with the satisfaction of tax obligations relating to an
award in accordance with the provisions relating to tax withholding under the
1996 Plan (including those awards granted under the 1991 Plan and the 1994
Plan), shall again be available for the granting of awards under the 1996 Plan.
Notwithstanding the foregoing, the total number of shares of Common Stock that
may be purchased upon exercise of Incentive Stock Options (as defined below)
granted under the 1996 Plan (subject to adjustment as described below) may not
exceed 7,000,000 shares. Except as otherwise provided under the procedures
adopted by the Committee described below to avoid double counting with respect
to awards granted in tandem with or in substitution for other awards, all
shares relating to awards granted will be counted against the aggregate number
of shares available for granting awards under the 1996 Plan. No person may be
granted any award or awards the value of which awards are based solely on an
increase in the value of the Common Stock after the date of grant for more than
1,000,000 shares of Common Stock, in the aggregate, in any calendar year.
Eligibility--Any employee, officer, consultant or independent contractor of
the Company and its affiliates is eligible to receive awards under the 1996
Plan. The 1996 Plan also provides for the automatic grant of options to Non-
Employee Directors as described below. The Company estimates that approximately
14,750 employees will be eligible to participate in the 1996 Plan during 1996.
The 1996 Plan will become effective immediately upon approval by the
stockholders of the Company. Awards granted under the 1996 Plan will only be
granted during a 10-year period beginning on the effective date of the 1996
Plan. However, unless otherwise expressly provided in the 1996 Plan or an
applicable award agreement, any award granted may extend beyond the end of such
10-year period.
Types of Awards; Plan Administration--The 1996 Plan will permit the granting
of (a) stock options, including "incentive stock options" ("Incentive Stock
Options") meeting the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and stock options that do not meet such
requirements ("Nonqualified Stock Options"), (b) stock appreciation rights
("SARs"), (c) restricted stock and restricted stock units, (d) performance
awards and (e) other awards valued in whole or in part by reference to or
otherwise based upon the Company's stock ("other stock-based awards"). The 1996
Plan will be administered by a committee of the Board of Directors consisting
exclusively of three or more Non-Employee Directors (the "Committee"), with the
exception of the provision for automatic grants of stock options to Non-
Employee Directors, which will be administered by the Board of Directors. The
Committee will have the authority to establish rules for the administration of
the 1996 Plan, to select the individuals to whom awards are
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<PAGE>
granted, to determine the types of awards to be granted and the number of
shares of Common Stock covered by such awards, and to set the terms and
conditions of such awards. The Committee may also determine whether the
payment of any amounts received under any award shall or may be deferred.
Determinations and interpretations with respect to the 1996 Plan will be at
the sole discretion of the Committee, whose determinations and interpretations
will be binding on all interested parties. The Committee may delegate to one
or more officers the right to grant awards with respect to individuals who are
not subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "1934 Act").
Awards shall be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. Awards may provide that
upon the grant or exercise thereof the holder will receive shares of Common
Stock, cash or any combination thereof, as the Committee shall determine. The
exercise price per share under any stock option, the grant price of any SAR,
and the purchase price of any security which may be purchased under any other
stock-based award shall not be less than 100% of the fair market value of the
Company's Common Stock on the date of the grant of such option, SAR or award.
Options shall be exercised by payment in full of the exercise price, either in
cash or, at the discretion of the Committee, in whole or in part by tendering
shares of Common Stock or other consideration having a fair market value on
the date the option is exercised equal to the exercise price. Determinations
of fair market value under the 1996 Plan shall be made in accordance with
methods and procedures established by the Committee. For purposes of the 1996
Plan, the fair market value of shares of Common Stock on a given date shall be
the closing price of the shares as reported on the New York Stock Exchange on
such date, if the shares are then listed on the New York Stock Exchange.
The 1996 Plan will provide that the Committee may grant reload options,
separately or together with another option, and may establish the terms and
conditions of such reload options. Pursuant to a reload option, the optionee
would be granted a new option to purchase the number of shares not exceeding
the sum of (i) the number of shares of Common Stock tendered as payment upon
the exercise of the option to which such reload option relates, and (ii) the
number of shares of the Company's Common Stock tendered as payment of the
amount to be withheld under income tax laws in connection with the exercise of
the option to which such reload option relates. Reload options may be granted
with respect to options granted under any stock option plan of the Company.
The holder of an SAR will be entitled to receive the excess of the fair
market value (calculated as of the exercise date or, if the Committee shall so
determine, as of any time during a specified period before or after the
exercise date) of a specified number of shares over the grant price of the
SAR.
The holder of restricted stock may have all of the rights of a stockholder
of the Company, including the right to vote the shares subject to the
restricted stock award and to receive any dividends with respect thereto, or
such rights may be restricted. Restricted stock may not be transferred by the
holder until the restrictions established by the Committee have lapsed.
Holders of restricted stock units shall have the right, subject to any
restrictions imposed by the Committee, to receive shares of Common Stock (or a
cash payment equal
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<PAGE>
to the fair market value of such shares) at some future date. Upon termination
of the holder's employment during the restriction period, restricted stock and
restricted stock units are forfeited, unless the Committee determines
otherwise.
Performance awards will provide the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such goals during such
performance periods as the Committee shall establish. A performance award
granted under the 1996 Plan may be denominated or payable in cash, shares of
Common Stock or restricted stock.
The Committee is also authorized to establish the terms and conditions of
other stock-based awards.
Non-Employee Director Participation--Under the 1996 Plan, Non-Employee
Directors will receive (or have received pursuant to the terms of the 1991
Plan) Nonqualified Stock Options to purchase 2,500 shares of the Company's
Common Stock upon first being elected to the Board of Directors and during the
term of the 1996 Plan will be granted, as of the date of each annual meeting
of stockholders commencing with the 1996 annual meeting of stockholders, if
such Director's term of office continues after such date, an option to
purchase 1,500 shares of Common Stock. Such options will be exercisable in
full as of the date of grant, will expire on the tenth anniversary of the date
of grant and will have an exercise price equal to the fair market value of the
Common Stock as of the date of grant. Additionally, the 1996 Plan will provide
for the grant of reload options to Non-Employee Directors, pursuant to which
such Directors would receive an option to purchase that number of shares of
Common Stock equal to the number of shares of Common Stock tendered as payment
upon the exercise of the option to which such reload option relates.
Miscellaneous--No award granted under the 1996 Plan may be assigned,
transferred, pledged or otherwise encumbered by the individual to whom it is
granted, otherwise than by will, by designation of a beneficiary, or by laws
of descent and distribution. Each award shall be exercisable, during such
individual's lifetime, only by such individual, or, if permissible under
applicable law, by such individual's guardian or legal representative.
If any dividend or other distribution, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-
off, combination, repurchase, or exchange of shares of Common Stock or other
securities of the Company or other similar corporate transaction or event
affecting the shares of Common Stock would be reasonably likely to result in
the diminution or enlargement of the benefits or potential benefits intended
to be made available under the 1996 Plan or under an award, the Committee (or,
in the case of options granted to Non-Employee Directors, the Board of
Directors) shall, in such manner as it deems equitable or appropriate in order
to prevent such diminution or enlargement of any such benefits or potential
benefits, adjust any or all of (a) the number and type of shares (or other
securities or property) which thereafter may be made the subject of awards,
(b) the number and type of shares (or other securities or property) subject to
outstanding awards, and (c) the purchase or exercise price with respect to any
award. The Committee (or, in the case of options granted to Non-Employee
Directors, the Board of Directors) may correct any defect, supply any
omission, or reconcile any inconsistency in the 1996 Plan or any award
agreement in the manner and to the extent it shall deem desirable to carry the
1996 Plan into effect.
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<PAGE>
The Board of Directors may amend, alter or discontinue the 1996 Plan at any
time, provided that stockholder approval must be obtained for any change that
(i) absent such stockholder approval, would cause Rule 16b-3 as promulgated by
the Securities and Exchange Commission under the 1934 Act, to become
unavailable with respect to the 1996 Plan; (ii) requires the approval of the
Company's stockholders under any rules or regulations of the National
Association of Securities Dealers, Inc., the New York Stock Exchange, or any
other securities exchange applicable to the Company; or (iii) requires the
approval of the Company's stockholders under the Code in order to permit
Incentive Stock Options to be granted under the 1996 Plan. Certain provisions
relating to the automatic grant of stock options to Non-Employee Directors may
not be amended more than once every six months other than to comport with
changes in the Code, the Employee Retirement Income Security Act or the rules
and regulations thereunder.
The closing price per share of the Company's Common Stock on March 1, 1996,
as reported by the New York Stock Exchange, was $58.625.
Tax Consequences--The following is a summary of the principal federal income
tax consequences generally applicable to awards under the 1996 Plan. The grant
of an option or SAR is not expected to result in any taxable income for the
recipient. The holder of an Incentive Stock Option generally will have no
taxable income upon exercising the Incentive Stock Option (except that a
liability may arise pursuant to the alternative minimum tax), and the Company
will not be entitled to a tax deduction when an Incentive Stock Option is
exercised. Upon exercising a Nonqualified Stock Option, the optionee must
recognize ordinary income equal to the excess of the fair market value of the
shares of Common Stock acquired on the date of exercise over the exercise
price, and the Company will be entitled at that time to a tax deduction for
the same amount. Upon exercising a SAR, the amount of any cash received and
the fair market value on the exercise date of any shares of Common Stock
received are taxable to the recipient as ordinary income and deductible by the
Company. The tax consequence to an optionee upon a disposition of shares
acquired through the exercise of an option will depend on how long the shares
have been held and upon whether such shares were acquired by exercising an
Incentive Stock Option or by exercising a Nonqualified Stock Option or SAR.
Generally, there will be no tax consequence to the Company in connection with
the disposition of shares acquired under an option, except that the Company
may be entitled to a tax deduction in the case of a disposition of shares
acquired under an Incentive Stock Option before the applicable Incentive Stock
Option holding periods set forth in the Code have been satisfied.
With respect to other awards granted under the 1996 Plan that are payable in
cash or shares of Common Stock that are either transferable or not subject to
substantial risk of forfeiture, the holder of such an award must recognize
ordinary income equal to the excess of (a) the cash or the fair market value
of the shares of Common Stock received (determined as of the date of such
receipt) over (b) the amount (if any) paid for such shares of Common Stock by
the holder of the award, and the Company will be entitled at that time to a
deduction for the same amount. With respect to an award that is payable in
shares of Common Stock that are restricted as to transferability and subject
to substantial risk of forfeiture, unless a special election is made pursuant
to the Code, the holder of the award must recognize ordinary income equal to
the excess of (i) the fair market value of the shares
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<PAGE>
of Common Stock received (determined as of the first time the shares become
transferable or not subject to substantial risk of forfeiture, whichever
occurs earlier) over (ii) the amount (if any) paid for such shares of Common
Stock by the holder, and the Company will be entitled at that time to a tax
deduction for the same amount.
Special rules may apply in the case of individuals subject to Section 16(b)
of the 1934 Act. In particular, unless a special election is made pursuant to
the Code, shares received pursuant to the exercise of a stock option or SAR
may be treated as restricted as to transferability and subject to a
substantial risk of forfeiture for a period of up to six months after the date
of exercise. Accordingly, the amount of any ordinary income recognized, and
the amount of the Company's tax deduction, are determined as of the end of
such period.
Under the 1996 Plan, the Committee may permit participants receiving or
exercising awards, subject to the discretion of the Committee and upon such
terms and conditions as it may impose, to surrender shares of Common Stock
(either shares received upon the receipt or exercise of the award of shares
previously owned by the optionee) to the Company to satisfy federal and state
withholding tax obligations.
Amendments to 1991 Plan and 1994 Plan--The 1996 Plan integrates the 1991
Plan and the 1994 Plan, which have been previously approved by the Company's
stockholders, together with the terms of the 1996 Plan, into one document and
thereby eliminates redundant provisions appearing in the plans and eases
administration of the plans. The 1996 Plan does not affect provisions relating
to outstanding awards under the 1991 Plan and the 1994 Plan. Subject to
stockholder approval, the 1996 Plan, as approved by the Board of Directors,
would amend the 1991 Plan and the 1994 Plan in the following material ways, as
more fully described above. The 1996 Plan would (i) authorize the issuance of
7,000,000 additional shares of the Company's Common Stock; (ii) provide that
shares used as full or partial payment of the purchase price relating to an
award or in accordance with provisions relating to tax withholding under the
1996 Plan would again be available for the granting of awards under the 1996
Plan (the 1991 Plan and the 1994 Plan currently do not permit such shares to
be used for grants of awards to officers or Directors of the Company for
purposes of Section 16 of the 1934 Act); (iii) limit the grant of any award or
awards the value of which awards are based solely on an increase in the value
of the Common Stock after the date of grant to 1,000,000 shares, in the
aggregate, in any calendar year (as compared to 500,000 shares over a three-
year period under the 1991 Plan and the 1994 Plan); and (iv) extend the date
through which awards could be granted under the 1996 Plan to April 2006 (as
compared to April 2001 in the case of the 1991 Plan and April 2004 in the case
of the 1994 Plan).
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock represented at the meeting and entitled to vote is
necessary for approval of the 1996 Plan (including the amendment and
restatement of the 1991 Plan and the 1994 Plan). Proxies will be voted in
favor of such proposal unless otherwise specified. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE 1996 PLAN (INCLUDING THE
AMENDMENT AND RESTATEMENT OF THE 1991 PLAN AND THE 1994 PLAN).
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III. PROPOSAL TO AMEND THE COMPANY'S AMENDED AND RESTATED EMPLOYEE STOCK
PURCHASE PLAN
In February 1996, the Board of Directors approved an amendment to the
Company's Amended and Restated Employee Stock Purchase Plan (the "Plan"),
subject to stockholder approval. The amendment provides for the issuance of an
additional 1,500,000 shares of Common Stock pursuant to the terms of the Plan.
The following summary description of the Plan is qualified in its entirety by
reference to the full text of the Plan, a copy of which will be available at
the meeting and may be obtained upon written request made to the Secretary of
the Company.
SUMMARY OF THE PLAN
The Plan was initially approved by the stockholders in 1989 and was amended
in 1991 with stockholder approval to provide that a total of 3,100,000 shares
(subject to proportional adjustments to reflect certain subsequent stock
changes, such as stock dividends, consolidations or other capital adjustments
or stock splits) of the Company's Common Stock may be sold thereunder. The
Plan permits the grant of rights to purchase shares until May 1, 2001. The
shares to be issued and sold under the Plan may be treasury shares or
authorized but unissued shares, or the Company may purchase shares in the
market for sale under the Plan. As of March 1, 1996, 2,629,536 shares of
Common Stock had been issued pursuant to the Plan, leaving a balance of
470,464 authorized but unissued shares which may be sold under the Plan. The
increase in the number of shares reserved under the Plan will allow the
Company to continue to offer the Plan to its employees and Non-Employee
Directors. Non-Employee Directors became eligible to participate in the Plan
pursuant to an amendment to the Plan approved by the stockholders in 1991. The
Plan is intended to provide employees and Non-Employee Directors with an
opportunity to share in the ownership of the Company by providing them with a
convenient means for regular and systematic purchases of the Company's Common
Stock and, thus, to develop a stronger interest in the continued success of
the Company. Without an increase in the number of shares reserved under the
Plan, the Company would be unable to continue to offer employees and Non-
Employee Directors the opportunity to purchase Common Stock under the Plan.
Eligibility--All full-time employees (as defined in the Plan) of the Company
who have been employed by the Company for at least one year and who own less
than 5% of the Company's Common Stock are eligible to participate in the Plan.
Employees of parent or subsidiary corporations of the Company may also
participate in the Plan if the Committee described below which administers the
Plan has designated the parent or subsidiary as a participating affiliate. The
Company estimates that approximately 13,000 persons will be eligible to
participate in the Plan during 1996. Additionally, each Non-Employee Director
is eligible to make a single election to participate in the Plan with respect
to all or a designated portion of his or her fees earned as a Director, which
election is irrevocable for as long as such person is a Non-Employee Director.
Right to Purchase Shares--Participants are granted the right to purchase up
to 5,000 shares of the Company's Common Stock on the last business day of a
period of at least six
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months in duration as may be designated by the Committee (a "Purchase
Period"), provided that no participant may purchase shares having a fair
market value greater than $25,000 during any calendar year. Non-Employee
Directors, following an election to participate, have the right to purchase
that number of shares of the Company's Common Stock that may be purchased with
the designated portion of his or her Director fees on the last business day of
a Purchase Period, without the limitations placed on other participants.
The Plan provides for early termination of a Purchase Period upon the
occurrence of certain defined acceleration events. The defined events include
the earlier of stockholder approval or approval by the Company's Board of
Directors of (a) any consolidation or merger in which the Company is not the
continuing or surviving corporation or pursuant to which the Company's Common
Stock would be converted into cash, securities or other property (with certain
exceptions), (b) any sale, lease, exchange or other transfer of all or
substantially all of the Company's assets, or (c) any plan of liquidation or
dissolution.
Purchase Price--The purchase price for any Purchase Period is that price as
announced by the Committee prior to the first business day of that Purchase
Period, which price may, in the discretion of the Committee, be a price which
is not fixed or determinable as of the first business day of the Purchase
Period. In no event shall the purchase price in any Purchase Period be less
than the lower of (a) 85% of the fair market value of the Company's Common
Stock on the first day of the Purchase Period or (b) 85% of the fair market
value of the Company's Common Stock on the last day of the Purchase Period.
The Committee determines the fair market value of the Company's Common Stock
as of a given date but such value must not be less than the last sale price of
such stock as reported by the New York Stock Exchange. The purchase price for
Non-Employee Directors is set at the lower of (a) 85% of the fair market value
of the Company's Common Stock on the first day of the Purchase Period or (b)
85% of the fair market value of the Company's Common Stock on the last day of
the Purchase Period. On March 1, 1996, the closing price of the Company's
Common Stock as reported by the New York Stock Exchange was $58.625.
Purchase by Payroll Deductions--The purchase of shares under the Plan is
funded through voluntary payroll deductions, with each participant electing to
deduct any whole dollar amount or whole percentage of current compensation for
each pay period, subject to such limitations as the Committee in its sole
discretion may impose. No interest will be paid upon payroll deductions. With
respect to Non-Employee Directors, the purchase of shares under the Plan is
funded from Director compensation, and no interest is paid upon deductions
from Director compensation.
Participants, other than Non-Employee Directors, may terminate their payroll
deductions at any time, but may reenter the Plan only at the beginning of a
Purchase Period. The rights of participants under the Plan are not
transferable.
Plan Administration--The Plan provides that it shall be administered by a
Committee consisting of three or more persons appointed by the Board of
Directors. The Plan is currently administered by the Compensation and Human
Resources Committee of the Board of Directors. The Plan provides that the
Board of Directors may terminate or amend
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<PAGE>
the Plan at any time, but may not, without stockholder approval, (a) increase
the number of shares available for purchase, (b) permit the issuance of stock
before payment thereof in full, or (c) reduce the price per share at which the
stock may be purchased.
Tax Consequences (Employees)--The Plan is structured so as to qualify as an
employee stock purchase plan under the Code with respect to participants other
than Non-Employee Directors. Purchases of shares of the Company's Common Stock
under the Plan are not taxable to the participant at the time of purchase, nor
is the Company entitled to a tax deduction at that time as a result thereof.
When a participant sells shares purchased under the Plan more than two years
after the first day of the Purchase Period and more than one year after the
last day of the Purchase Period, (a) the lesser of (i) the excess of the fair
market value of the shares on the date of sale over the purchase price of the
shares, or (ii) the excess of the fair market value of the shares on the first
day of the Purchase Period over the purchase price of the shares as of that
date, is taxed as ordinary income; and (b) the balance of the proceeds of the
sale is treated as long-term capital gain. When a participant sells shares
purchased under the Plan less than two years after the first day of the
Purchase Period or less than one year after the last day of the Purchase
Period, (a) the excess of the fair market value on the date of purchase over
the amount of the purchase price of the shares is taxed as ordinary income;
(b) the Company is allowed a tax deduction in the amount of the ordinary
income realized (subject to the usual rules on ordinary and reasonable
compensation deductions); and (c) the participant realizes long-term or short-
term capital gain with respect to the balance of any sale proceeds in excess
of the fair market value on the date of purchase. Special rules may apply with
respect to purchases in a Purchase Period terminated early upon the occurrence
of an acceleration event.
Tax Consequences (Non-Employee Directors)--Participants who are Non-Employee
Directors will recognize ordinary income equal to the fair market value of the
shares of the Company's Common Stock received pursuant to the Plan. In the
event that the receipt of the Company's Common Stock is not exempt from
Section 16(b) of the 1934 Act, Non-Employee Directors will not recognize
ordinary income at the end of a Purchase Period. Such a participant will,
however, recognize ordinary income six months after receipt of any shares of
the Company's Common Stock. The ordinary income recognized will be the fair
market value of the shares at that later date. Such a participant, however,
may make an election under Section 83(b) of the Code to be taxed at the time
the shares of Common Stock are first received pursuant to the Plan on the
basis of the fair market value of such shares as of that date rather than on
the basis of the fair market value at a date six months later. Such an
election must be made in the manner specified by Section 83(b) of the Code
within thirty days after the end of a Purchase Period.
Non-Employee Directors will have a basis in any shares received equal to the
fair market value thereof at the time the participant recognizes ordinary
income as a result of participation in the Plan, and any additional gain
recognized on a subsequent sale or exchange of the shares will be a long-term
or short-term capital gain depending upon the holding period. The holding
period for such shares acquired as a result of participation in the Plan by
Non-Employee Directors shall begin upon transfer of the shares at the end of a
Purchase Period (or in the case of such a Non-Employee Director who does not
make a
20
<PAGE>
Section 83(b) election, the date six months later when ordinary income is
recognized). Subject to the general rules concerning deductibility of
compensation for Non-Employee Directors, the Company will be allowed an income
tax deduction in the amount that, and for its taxable year in which, such a
participant recognizes ordinary income as a result of participation in the
Plan.
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock represented at the meeting and entitled to vote is
necessary for approval of the amendment to the Plan. Proxies will be voted in
favor of such proposal unless otherwise specified. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AMENDMENT TO THE PLAN.
IV. SELECTION OF AUDITORS
The Board of Directors of the Company has selected the firm of Ernst & Young
LLP as independent auditors of the Company for the fiscal year ending December
31, 1996. A proposal to ratify the appointment of Ernst & Young LLP will be
presented at the meeting. Representatives of Ernst & Young LLP are expected to
be present at the meeting, will have an opportunity to make a statement if
they desire to do so and will be available to answer appropriate questions
from stockholders. If the appointment of Ernst & Young LLP is not ratified by
the stockholders, the Board of Directors is not obligated to appoint other
auditors, but will give consideration to such unfavorable vote.
The Audit Committee of the Board of Directors has recommended to the full
Board the appointment of Ernst & Young LLP, after carefully considering the
qualifications of such firm. This included a review of its performance in
prior years as well as its reputation for integrity and competence in the
fields of auditing and accounting. The Audit Committee has expressed its
satisfaction with Ernst & Young LLP in all of these respects.
Proxies will be voted in favor of ratifying this selection unless otherwise
specified. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF
THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1996.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of February 26, 1996 the beneficial
ownership (as defined in the rules of the Securities and Exchange Commission)
of the Company's Common Stock by Directors, the executive officers named in
the Summary Compensation Table below and by all Directors and executive
officers as a group. Except as otherwise indicated, the named beneficial owner
has sole voting and investment power with respect to the shares held by such
beneficial owner.
<TABLE>
<CAPTION>
Shares
Beneficially
Owned(1)(2)
------------
<S> <C>
Arthur D. Collins, Jr. ...... 2,500
Peter H. Coors............... 2,601
John F. Grundhofer........... 662,038(3)(4)
Roger L. Hale................ 17,000
Delbert W. Johnson........... 6,858
Norman M. Jones.............. 278,816(5)
John H. Kareken.............. 5,114
Richard L. Knowlton.......... 12,089
Jerry W. Levin............... 3,500
Kenneth A. Macke............. 19,205(6)
Marilyn Carlson Nelson....... 35,923(7)
Edward J. Phillips........... 6,744
James J. Renier.............. 16,879
S. Walter Richey............. 15,697(8)
Richard L. Robinson.......... 12,348(9)
Richard L. Schall............ 26,851(10)
Lyle E. Schroeder............ 11,039
Richard A. Zona.............. 271,892(3)
Philip G. Heasley............ 215,735(3)
William F. Farley............ 216,273(3)(11)
Daniel C. Rohr............... 171,967(3)
All Directors and Executive
Officers as a Group (29 per-
sons)....................... 2,475,333(12)
</TABLE>
- --------
(1) No Director or named executive officer beneficially owns more than 1% of
the outstanding Common Stock of the Company and all Directors and
executive officers as a group beneficially own 1.7% of the outstanding
Common Stock.
(2) Includes the following shares subject to options exercisable within 60
days: Mr. Collins, 2,500 shares; Mr. Coors, 2,500 shares; Mr. Grundhofer,
427,636 shares; Mr. Hale, 5,000 shares; Mr. Johnson, 5,000 shares; Mr.
Jones, 4,000 shares; Dr. Kareken, 5,000 shares; Mr. Knowlton, 5,000
shares; Mr. Levin, 2,500 shares;Mr. Macke, 5,000 shares; Mrs. Nelson,
5,000 shares; Mr. Phillips, 5,000 shares; Dr. Renier, 5,000 shares; Mr.
Richey, 5,000 shares; Mr. Robinson, 5,000 shares; Mr. Schall, 5,000
shares; Mr. Schroeder, 2,500 shares; Mr. Zona, 142,707 shares;
Mr. Heasley, 79,659 shares; Mr. Farley, 113,952 shares; and Mr. Rohr,
71,288 shares.
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<PAGE>
Does not include the following shares subject to options which may become
exercisable on or after April 15, 1996 if it is determined that the
Company has met certain performance criteria with respect to the fiscal
year ended December 31, 1995: Mr. Grundhofer, 116,224 shares; Mr. Zona,
58,346 shares; Mr. Heasley, 43,343 shares; Mr. Farley, 43,343 shares;
Mr. Rohr, 36,674 shares; and all Directors and executive officers as a
group, 384,148 shares.
(3) Includes the following shares held in the CAP: Mr. Grundhofer, 1,670
shares; Mr. Zona, 219 shares; Mr. Heasley, 3,234 shares; Mr. Farley,
1,311 shares; and Mr. Rohr, 2,000 shares. Ownership information with
respect to shares held in the CAP is provided as of December 31, 1995,
the most recent date for which information is available. Voting of shares
held in the CAP is passed through to the participating employees;
however, if a proxy is not received with respect to such shares, such
shares will be voted by the trustee in accordance with the terms of the
CAP. See "Voting, Execution and Revocation of Proxies" above.
(4) Includes 130,359 shares held in a family trust of which Mr. Grundhofer is
the trustee and 6,153 shares held in a foundation created by
Mr. Grundhofer.
(5) Includes 23,497 shares held by Mr. Jones' wife and 2,992 shares held by
Mr. Jones' grandchildren.
(6) Includes 500 shares held in trust for the benefit of Mr. Macke's
children.
(7) Includes 29,979 shares held by two trusts of which Mrs. Nelson and
members of her family are beneficiaries.
(8) Includes 100 shares held by Mr. Richey's wife through her Individual
Retirement Account.
(9) Includes 129 shares held by a partnership of which Mr. Robinson is a
general partner, as to which Mr. Robinson shares voting and investment
power.
(10) Includes 12,000 shares held in a family trust of which Mr. Schall is a
trustee.
(11) Mr. Farley has resigned as an employee of the Company effective as of
April 30, 1996. See "Severance Agreements and Plans" below.
(12) Includes (i) 24,258 shares held in the CAP for the accounts of certain
executive officers as of December 31, 1995; and (ii) 1,199,895 shares
subject to options exercisable within 60 days. Does not include 384,148
shares subject to options which may become exercisable on or after April
15, 1996 if it is determined that the Company has met certain performance
criteria with respect to the fiscal year ended December 31, 1995.
SECTION 16(A) REPORTING
Section 16(a) of the 1934 Act requires the Company's Directors, executive
officers and all persons who beneficially own more than 10% of the outstanding
shares of the Company's Common Stock to file with the Securities and Exchange
Commission and the New York Stock Exchange initial reports of ownership and
reports of changes in ownership of such Common Stock. Directors, executive
officers and greater-than-10%-beneficial owners are also required to furnish
the Company with copies of all Section 16(a) reports they file. To the
Company's knowledge, based upon a review of the copies of such reports
23
<PAGE>
furnished to the Company during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to the Company's Directors,
executive officers and greater-than-10%-beneficial owners were complied with
except as follows: (i) Norman M. Jones, a Director of the Company, sold shares
of the Company's Common Stock in one transaction in May 1995, which sale
should have been timely reported on a Form 4; (ii) Lyle E. Schroeder, a
Director of the Company, sold shares of the Company's Common Stock in one
transaction in September 1995, which sale should have been timely reported on
a Form 4; and (iii) Michael J. O'Rourke, a former executive officer of the
Company, sold shares of the Company's Common Stock in six transactions in
October 1995, which sales should have been timely reported on a Form 4. These
transactions were reported on Form 5s filed by Mr. Jones, Mr. Schroeder and
Mr. O'Rourke, respectively, for the year ended December 31, 1995. Although
Section 16(a) reporting is ultimately the responsibility of the persons
subject to the filing requirements, all of the foregoing untimely filings
resulted directly from the Company's failure to properly advise such persons
of their filing obligations.
EXECUTIVE COMPENSATION
Report of the Compensation and Human Resources Committee
on Executive Compensation
TO OUR STOCKHOLDERS:
First Bank System, Inc.'s executive compensation philosophy emphasizes the
Company's commitment to long-term growth in stockholder value. In general:
. TARGETED TOTAL COMPENSATION will be approximately 20 percent above the
50th percentile of a group of comparable banking companies. The premium
in targeted pay over the 50th percentile will be primarily in the form
of stock options.
. BASE SALARIES will be targeted approximately 20 percent below the 50th
percentile of the comparator group to minimize fixed expense and
emphasize the relationship of pay to performance.
. ANNUAL INCENTIVES will be targeted above the 50th percentile of the
comparator group such that the total of targeted base salary plus
targeted annual incentive will be equal to the 50th percentile.
. LONG-TERM AWARDS will be targeted above the 50th percentile of the
comparator group and will be primarily in the form of stock options and,
to a lesser extent, restricted stock.
Actual pay will be influenced by both competitive practice and the
Compensation and Human Resources Committee's assessment of performance against
several criteria, including measures of profitability, growth consistent with
long-range strategy, risk management, the development and involvement of
people, a continuing commitment to cultural diversity, and succession
planning. No formal weightings have been assigned to these factors.
24
<PAGE>
ROLE OF THE COMMITTEE
The Compensation and Human Resources Committee of the Board of Directors
(the "Committee") seeks to maintain executive compensation policies which are
consistent with the Company's strategic business objectives and values. In
pursuing this goal, the Committee is guided by the following objectives:
. A significant portion of senior executives' compensation shall be
comprised of long-term, at-risk pay to focus management on the long-term
interests of stockholders.
. Executives' total compensation programs should emphasize pay that is
dependent upon meeting performance goals to strengthen the relationship
between pay and performance.
. Components of pay which are at risk should contain equity-based pay
opportunities to align executives' interests with those of stockholders.
. Executive compensation should be competitive to attract, retain, and
encourage the development of exceptionally knowledgeable and experienced
executives upon whom, in large part, the success of the Company depends.
The Committee is comprised of six Non-Employee Directors. The Committee
approves the design of executive compensation programs and assesses their
effectiveness in supporting the Company's compensation objectives. The
Committee also reviews and approves all salary arrangements and other
remuneration for executives, evaluates executive performance, and considers
related matters.
The Company obtains competitive market data from an independent compensation
consultant comparing the Company's compensation practices to those of a group
of comparator companies. The Committee reviews and approves the selection of
companies used for compensation comparison purposes. This comparator group is
comprised of companies in the banking industry which are comparable in size to
the Company, based on assets, net income, and total market value. While the
comparator group is not comprised of the same companies contained in the peer
group index under "Comparative Stock Performance" below, all of the comparator
companies are included in such peer group index. The Committee believes that
the companies used for compensation comparisons are a representative cross
section of the companies included in the peer group index.
ELEMENTS OF THE COMPENSATION PROGRAM
The key elements of the Company's executive compensation program are base
salary, annual incentives, and long-term incentives. In determining each
component of compensation, the Committee considers an executive's total
compensation package. Consistent with the Company's policy of aligning pay
with performance, a greater portion of total targeted compensation is placed
at risk than the total targeted compensation placed at risk by companies in
the comparator group. In determining the total compensation package for
executives, the Committee has considered the performance of the Company's
Common Stock. In this regard, the Committee considers the performance of the
Company's Common Stock to be a favorable factor; however, no formal weighting
has been assigned to this factor. "Comparative Stock Performance" below
includes the type of information considered by the Committee in this regard.
25
<PAGE>
Policy With Respect to Section 162(m)
Section 162(m) of the Code generally limits the corporate deduction for
compensation paid to executive officers named in the proxy to $1 million,
unless the compensation is performance-based. The Committee has carefully
considered the potential impact of this tax code provision on the Company and
has concluded that it is in the Company's and stockholders' best interest to
qualify certain of the Company's stock-based, long-term incentives as
performance-based compensation within the meaning of the Code and thereby
preserve the full deductibility of such long-term incentive payments. To this
end, the Company in 1994 requested and received stockholder approval of
modifications to the 1991 Plan and has included appropriate provisions in the
1996 Plan. The Company in 1995 also requested and received stockholder
approval of the Executive Incentive Plan in order to qualify payments under
the terms thereof as performance-based compensation within the meaning of the
Code, and the Company believes that payments made under that plan will so
qualify.
Base Salaries
Each executive's base salary is initially determined according to
competitive pay practices, his or her level of responsibility, prior
experience, and breadth of knowledge, as well as internal equity issues. The
Committee uses its discretion rather than a formal weighting system to
evaluate these factors and to determine individual base salary levels.
Thereafter, base salaries are reviewed on an annual basis, and increases are
made based on the Committee's subjective assessment of each executive's
performance, as well as the factors described above. In 1995, base salaries
were below the 50th percentile market level of the comparator group. This is
consistent with the Company's strategic objectives.
Each year, Mr. Grundhofer prepares a written self-appraisal of his
performance which is presented to the Board of Directors. Each Director is
invited to comment on Mr. Grundhofer's report and the Committee chairperson
prepares a formal response which serves as Mr. Grundhofer's appraisal. The
Committee recommends to the full Board Mr. Grundhofer's salary for the coming
year, and his base salary is adjusted accordingly. In determining Mr.
Grundhofer's base salary adjustment for 1995, the Committee considered Mr.
Grundhofer's execution of his overall responsibility for the Company's
financial performance, long-range strategy, capital allocation, and management
selection, retention, and succession. However, formal weightings have not been
assigned to these factors.
Pursuant to an employment agreement between Mr. Grundhofer and the Company,
Mr. Grundhofer has received the annual base salary reported in the Summary
Compensation Table since December 1, 1994 (see "Employment Contract" below).
Mr. Grundhofer's performance and market practices support a higher base
salary. However, consistent with the Company's philosophy, Mr. Grundhofer's
base salary has been held at this level in order to position his base salary
below the 50th percentile.
Annual Incentives
The Company provides annual incentives to executives under the Executive
Incentive Plan. Annual incentives are intended to promote the Company's pay-
for-performance
26
<PAGE>
philosophy by providing executives with annual cash bonus opportunities for
achieving corporate, business unit, and individual performance goals. No
formal weightings are assigned to these levels of performance.
Eligible executives are assigned target and maximum bonus levels, determined
as a percentage of base salary. The Committee sets the target bonus awards at
a level which, together with the amount of targeted base pay, provides total
direct compensation which is approximately equal to the 50th percentile level
among the Company's compensation comparator companies for total direct
compensation. The Committee considers the targets it establishes to be
achievable, but to require above-average performance from each of the
executives. Actual awards, if any, are determined by the Committee based on
its subjective assessment of each executive's business unit and individual
performance. The assessment focuses on achievement of profitability, growth,
risk management, and general management objectives; however, formal weightings
have not been assigned to these factors.
In 1995, the Company's targeted bonus level was above the 50th percentile
target level of the comparator group of companies, and overall total targeted
base pay plus bonus was equal to the 50th percentile. The Company's
performance in 1995 exceeded the target level of performance. Specifically,
with respect to profitability factors, the Company outperformed its goals for
return on assets, net income, net charge-offs, noninterest expense, and
efficiency ratio. In addition, in measuring the Company's performance relating
to growth goals, the Committee noted the Company's successful integration of
acquired financial institutions, the continued successful introduction of new
technology throughout the Company, the effective conversion of acquired banks'
services, the internal growth of key businesses, the development of people,
and strategic leadership. In analyzing the Company's risk management, the
Committee observed that the Company outperformed its goals with respect to
classified and nonperforming assets. As a result, actual bonus awards exceeded
the target level.
Mr. Grundhofer's targeted annual bonus is consistent with the Company's
policy of setting a targeted annual bonus sufficient to provide total direct
compensation which is approximately equal to the 50th percentile level of the
comparator group. Because the Company exceeded its target performance for 1995
based on the factors described in the preceding paragraph, Mr. Grundhofer's
actual bonus, as reported in the Summary Compensation Table, was significantly
above target, consistent with the goals of the Executive Incentive Plan.
Long-Term Incentives
The Committee has conducted a comprehensive review of the Company's total
compensation program to ensure it supports the Company's overall objectives
and stockholders' interests in the most effective manner. Based on this
review, the Committee concluded that long-term incentive compensation
opportunities should be dependent on stock-based measures to strengthen the
alignment between management's interests and those of the Company's
stockholders. Furthermore, in keeping with the policy of placing a significant
portion of executives' total pay at risk, the Committee sets targeted long-
term incentive compensation above the 50th percentile levels among the
Company's
27
<PAGE>
compensation comparator companies. During 1995, the Company granted reload
stock options to most executives, including all of the five named executive
officers. The following describes the Company's practices relative to each
vehicle.
Stock Options. Stock options, including reload stock options, are the
Company's primary long-term incentive vehicle. Under the 1991 Plan, options
are granted at an option price not less than the fair market value of the
Common Stock on the date of grant. Thus, stock options have value only if the
stock price appreciates from the date the options are granted. This design
focuses executives on the creation of stockholder value over the long term and
encourages equity ownership in the Company.
To emphasize the Company's pay-at-risk philosophy, as well as to further
enhance the alignment of management's interests with those of stockholders,
stock option awards for 1994, 1995, and 1996 were made in January 1994. In
determining the actual size of stock option awards, the Committee considers
the value of the stock on the date of grant, competitive practice, the amount
of options previously granted, individual contributions, and business unit
performance. However, formal weightings have not been assigned to these
factors.
Mr. Grundhofer in 1995 received reload stock options as set forth in the
Summary Compensation Table. All of the options granted to Mr. Grundhofer have
an exercise price equal to the fair market value on the date of grant. The
number of reload stock options granted to Mr. Grundhofer was equal to the
number of shares of the Company's Common Stock he tendered to the Company in
payment of the exercise price of options exercised during 1995, plus the
number of shares withheld by the Company in payment of the taxes arising from
the exercises.
Restricted Stock. The 1991 Plan also provides for the grant of restricted
stock to executives. However, as discussed previously, the Company's primary
form of long-term incentive is stock options. No grants of restricted stock
were made to the five named executive officers during 1995.
CONCLUSION
The Committee believes the Company's executive compensation policies and
programs effectively serve the interests of stockholders and the Company. The
Company's various pay vehicles are appropriately balanced to provide increased
motivation for executives to contribute to the Company's overall future
success and to enhance the Company's value for the stockholders' benefit.
Kenneth A. Macke (Chairperson)
Jerry W. Levin
Marilyn Carlson Nelson
James J. Renier
S. Walter Richey
Richard L. Robinson
28
<PAGE>
EMPLOYMENT CONTRACT
Effective January 30, 1995, the Company and Mr. Grundhofer entered into an
Employment Agreement (the "Employment Agreement") with a three-year term that,
subject to notice of termination, automatically extends by one year on each
anniversary of the agreement. Under the Employment Agreement, Mr. Grundhofer
is entitled to receive an annual salary of not less than $620,000 and is
entitled to participate in the Company's executive bonus program. Mr.
Grundhofer is entitled to participate in various benefit programs covering,
and to receive various personal benefits offered to, corporate executives of
the Company. The Company has agreed to provide Mr. Grundhofer with a $1
million life insurance policy during the term of the Employment Agreement.
Under the Employment Agreement, Mr. Grundhofer is entitled to receive from
the Company the remainder of the payments intended to compensate him for
payments and other benefits which he would have been eligible to receive had
he continued to be employed by Wells Fargo & Company, his previous employer.
Pursuant to the Employment Agreement and a separate agreement relating to
certain of such payments, such payments may be paid on a deferred basis over a
10-year period beginning in 2003 (with certain exceptions).
Mr. Grundhofer's Employment Agreement also provides severance benefits in
the event of termination of employment under certain circumstances. In the
event of termination of employment without "cause" or by Mr. Grundhofer with
"good reason" (as such terms are defined in the Employment Agreement), in
addition to compensation and benefits already earned, he will be entitled to
receive: (a) a lump sum payment equal to three-times annual salary plus target
bonus potential, (b) continuation of his participation in Company benefit and
retirement plans and continuation of the $1 million life insurance policy for
a three-year period, (c) continuation of personal benefits for a three-year
period, (d) immediate exercisability of all options and vesting of restricted
stock that would have become exercisable or vested during the remaining term
of the Employment Agreement if no such termination had occurred, (e) credit
for three additional years of service under the Company's Supplemental
Executive Retirement Plan, and (f) payment for individual outplacement
counseling services up to a maximum of $60,000. In the event the Company
terminates Mr. Grundhofer's employment with "cause," or he terminates
employment without "good reason," Mr. Grundhofer would forfeit all
compensation and benefits following such termination. In the event of
termination of employment without "cause" or by Mr. Grundhofer with "good
reason" within 24 months following a change in control (as such term is
defined in the Employment Agreement), the following additional provisions will
apply: (g) the bonus used to calculate the lump sum payment under (a) above
will be the greatest of Mr. Grundhofer's (i) target bonus potential available
on the date of termination, (ii) bonus earned in the last fiscal year prior to
the date of termination, or (iii) average bonus earned in the last three
fiscal years prior to the date of termination; (h) credit shall be given for
five (instead of three) additional years of service under (e) above; and (i)
the Company will pay Mr. Grundhofer the full amount of any long-term cash
incentive award for any plan periods then in progress to the extent not
provided for in any Company long-term cash incentive plan or plans.
29
<PAGE>
Mr. Grundhofer's Employment Agreement provides that the payments and
benefits which he is entitled to receive in the event of termination of his
employment will be reduced by certain amounts which he earns from other
employment or services during the three-year period following his termination
of employment with the Company. The Company has agreed to compensate Mr.
Grundhofer for certain taxes and penalties which may be imposed as a result of
payments and benefits which he receives in the event of termination of his
employment after a change in control.
SEVERANCE AGREEMENTS AND PLANS
The Company has entered into individual change in control severance
agreements with certain executive officers, including each of the executive
officers (other than Mr. Grundhofer) who are named in the Summary Compensation
Table below, providing for severance payments upon certain terminations of
employment during the two-year period following a change in control.
Termination of employment must be by the Company other than for "cause" or by
the individual for "good reason," as such terms are defined in the agreements.
The agreements provide for a lump sum payment equal to three times the
terminated individual's annual salary plus target bonus potential,
continuation of benefits for up to three years, credit for three additional
years of service under the Company's retirement plans and five additional
years of service under the Company's Supplemental Executive Retirement Plan,
the payment of long-term cash incentive awards and individual outplacement
services. The Company has agreed to compensate such officers for certain taxes
and penalties resulting from payments and benefits under the severance pay
agreement and other arrangements. Mr. Grundhofer's Employment Agreement, as
described above, sets forth the terms of payments and benefits in the event of
termination of Mr. Grundhofer's employment following a change in control. The
Company also maintains change in control severance plans covering a broad
range of salaried employees and providing for different levels of payments
based on job classification. In addition, the vesting of outstanding stock
options accelerates and restrictions on restricted stock lapse upon a change
in control of the Company.
Mr. Farley has resigned as an employee of the Company effective as of April
30, 1996. Pursuant to an agreement between the Company and Mr. Farley, he will
receive $513,000, representing one year's base salary and bonus compensation,
and $217,000 in lieu of continued welfare and retirement benefits and other
perquisites. Under the terms of an agreement reached with Mr. Farley in which
he has agreed to certain restrictions on his ability to compete with the
Company for one year, and under which he has released the Company from all
claims, he will receive an additional payment of $946,446 over a period of
twelve months.
30
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other highest paid executive officers of
the Company whose salary and bonus earned in 1995 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------
Annual Compensation Awards
-------------------------------- -----------------------
Other Restricted Securities All
Name and Annual Stock Underlying Other
Principal Position Year Salary Bonus Compensation Awards(1) Options/SARs Compensation
- ------------------------ ---- -------- ---------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John F. Grundhofer 1995 $620,000 $1,085,000 $124,342(2) $ 0 247,991 $ 49,189(3)
Chairman, President and 1994 601,667 1,085,000 97,110(2) 1,799,985 457,968 53,290
Chief Executive Officer 1993 587,500 630,000 97,089(2) 401,200 127,338 363,321
Richard A. Zona(4) 1995 340,000 595,000 --(5) 0 119,766 17,261(6)
Vice Chairman and 1994 280,416 595,000 --(5) 1,699,995 256,194 15,879
Chief Financial Officer 1993 270,834 265,000 --(5) 234,725 22,867 14,187
Philip G. Heasley 1995 305,000 480,000 --(5) 0 139,000 14,072(6)
Vice Chairman 1994 268,334 460,000 --(5) 1,300,002 170,170 13,056
1993 250,000 230,000 --(5) 120,225 26,515 11,144
William F. Farley(7) 1995 285,000 390,000 --(5) 0 111,425 14,578(6)
Vice Chairman 1994 266,667 390,000 1,825(5)(8) 799,986 205,628 14,377
1993 262,500 220,000 1,731(5)(8) 120,225 28,206 12,779
Daniel C. Rohr 1995 265,000 325,000 --(5) 0 133,745 12,857(6)
Executive Vice Presi-
dent 1994 242,083 325,000 --(5) 200,013 146,815 12,302
1993 237,500 220,000 --(5) 120,225 24,780 10,597
</TABLE>
- --------
(1) The value of the restricted stock awards was determined by multiplying the
market value of the Company's Common Stock on the date of grant by the
number of shares awarded. Recipients receive dividends on, and have the
right to vote, shares of the restricted stock. The named individuals held
shares of restricted stock as of December 31, 1995 with market values as
follows: Mr. Grundhofer, 95,545 shares valued at $4,741,421; Mr. Zona,
66,915 shares valued at $3,320,657; Mr. Heasley, 50,794 shares valued at
$2,520,652; Mr. Farley, 35,642 shares valued at $1,768,734; and Mr. Rohr,
17,461 shares valued at $866,502. Restricted stock grants in 1994 to the
named individuals vest in January 2002 or earlier if the Company has
achieved three years of targeted return on assets relative to a peer group
and three years of targeted growth in earnings per share. The following
number of shares were granted in 1994: Mr. Grundhofer, 54,545 shares; Mr.
Zona, 51,515 shares; Mr. Heasley, 39,394 shares; Mr. Farley, 24,242
shares; and Mr. Rohr, 6,061 shares. The term of the restrictions with
respect to grants in 1993 varies from three to seven years from the
beginning of the performance period, based upon the Company's return on
equity and total stockholder return relative to the Company's peer bank
holding companies.
(2) Benefits received by Mr. Grundhofer include transportation-related
expenses of $41,711 in 1995, $39,571 in 1994 and $42,216 in 1993.
(3) Includes (a) imputed income in the amount of $14,910 arising from premiums
paid by the Company with respect to life insurance for the benefit of Mr.
Grundhofer; (b) amounts paid pursuant to the Company's flexible
compensation program (net of
31
<PAGE>
amounts used to purchase benefits), $9,240 of which was applied to Mr.
Grundhofer's account in the CAP, and $20,539 of which was paid in cash; and
(c) a matching contribution made by the Company to Mr. Grundhofer's CAP
account in the amount of $4,500.
(4) Mr. Zona became Vice Chairman--Finance in February 1996.
(5) The Company's incremental cost with respect to personal benefits of the
named individuals is not reported because the cost thereof is below the
amount required to be reported pursuant to Securities and Exchange
Commission rules.
(6) Includes (a) amounts paid pursuant to the Company's flexible compensation
program (net of amounts used to purchase benefits), of which the following
amounts were applied to the individual's account in the CAP: Mr. Zona,
$9,240, Mr. Heasley, $9,240, Mr. Farley, $9,240, and Mr. Rohr, $8,357; and
the following amounts were paid in cash: Mr. Zona, $3,521, Mr. Heasley,
$332, Mr. Farley, $838; and (b) matching contributions made by the Company
to each of the named individuals' CAP accounts in the amount of $4,500.
(7) Mr. Farley has resigned as an employee of the Company effective as of
April 30, 1996. As a result, he will not receive restricted stock awards
shown in the table.
(8) Represents interest earned on deferred compensation to the extent that the
interest rate exceeded 120% of the applicable federal long-term rate.
STOCK OPTIONS
The following tables summarize stock option grants and exercises during 1995
to or by the Chief Executive Officer and the executive officers named in the
Summary Compensation Table above, and the values of options granted during
1995 and held by such persons at the end of 1995.
32
<PAGE>
OPTION/SAR GRANTS IN YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed
Annual Rates of Stock
Price Appreciation for Option Term
------------------------------------
Individual Grants 5%($) 10%($)
------------------------------------------------ ----------------- ------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees In or Base Expiration Stock Stock
Name and Principal Position Granted(1) Fiscal Year Price($/Sh) Date Price Value Price Value
- --------------------------- ------------ ------------ ----------- ---------- ------ ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John F. Grundhofer...... 14,865 $40.875 1/15/02 $56.82 $ 237,022 $ 77.78 $ 548,593
Chairman, President and 35,127 40.875 1/19/03 59.69 660,915 85.64 1,572,460
Chief Executive Officer 55,363 40.875 1/19/04 62.67 1,206,637 94.20 2,952,232
12,402 51.875 2/20/01 67.35 191,921 86.38 427,931
130,234 51.875 1/19/04 77.62 3,352,874 113.99 8,089,485
-------
247,991 11.9%
Richard A. Zona......... 6,106 40.875 2/19/02 57.07 98,887 78.45 229,433
Vice Chairman and 3,455 40.875 2/16/03 59.92 65,800 86.29 156,909
Chief Financial Officer 42,144 40.875 1/19/04 62.67 918,528 94.20 2,247,329
1,103 40.625 1/19/04 62.20 23,797 93.36 58,167
4,392 51.875 4/24/00 64.67 56,196 79.81 122,691
9,935 51.875 2/19/01 67.35 153,744 86.38 342,807
1,535 51.875 9/17/01 69.25 26,671 91.20 60,364
49,376 51.875 1/19/04 77.62 1,271,185 113.99 3,066,990
397 51.875 9/19/99 62.84 4,353 75.45 9,359
476 49.625 2/19/01 64.33 7,000 82.40 15,601
847 49.625 9/17/01 66.15 13,997 87.00 31,657
-------
119,766 5.7%
Philip G. Heasley....... 6,827 39.375 2/19/01 52.36 88,649 68.70 200,202
Vice Chairman 12,249 39.375 2/19/02 54.97 191,023 75.57 443,353
6,594 39.375 2/16/03 57.69 120,769 83.05 287,993
37,771 39.375 1/19/04 60.34 791,869 90.66 1,937,086
2,019 40.625 4/24/00 51.82 22,603 65.36 49,940
7,138 40.625 2/19/01 53.97 95,257 70.75 215,032
402 40.625 2/16/03 59.47 7,576 85.52 18,048
1,943 51.875 4/24/00 64.64 24,802 79.73 54,122
6,531 51.875 2/19/01 67.31 100,806 86.30 224,830
10,749 51.875 2/19/02 70.68 202,135 94.93 462,798
5,760 51.875 2/16/03 74.18 128,477 104.32 302,083
40,797 51.875 1/19/04 77.58 1,048,687 113.88 2,529,618
220 51.875 4/22/04 78.57 5,873 116.74 14,270
-------
139,000 6.7%
William F. Farley....... 75 40.250 4/24/00 51.42 838 64.95 1,853
Vice Chairman 458 40.250 2/19/01 53.52 6,078 70.23 13,731
6,090 40.250 2/19/02 56.20 97,136 77.25 225,330
3,478 40.250 2/16/03 58.98 65,143 84.89 155,258
26,668 40.250 1/19/04 61.71 572,295 92.76 1,400,337
432 40.625 2/16/03 59.47 8,141 85.52 19,395
10,686 40.625 1/19/04 62.20 230,550 93.36 563,526
7,500 51.625 4/24/00 64.36 95,513 79.42 208,463
7,959 51.625 2/19/01 66.99 122,290 85.88 272,636
10,769 51.625 2/19/02 70.34 201,542 94.47 461,398
2,694 51.625 2/16/03 73.82 59,793 103.82 140,613
29,233 51.625 1/19/04 77.21 747,926 113.33 1,803,822
67 49.625 4/24/00 61.81 816 76.20 1,781
413 49.625 2/19/01 64.33 6,073 82.40 13,536
937 49.625 2/19/02 67.55 16,796 90.64 38,431
3,966 49.625 1/19/04 74.15 97,266 108.73 234,410
-------
111,425 5.3%
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed
Annual Rates of Stock
Price Appreciation for Option Term
----------------------------------
Individual Grants 5%($) 10%($)
------------------------------------------------ --------------- ------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Name and Principal Options/SARs Employees In or Base Expiration Stock Stock
Position Granted(1) Fiscal Year Price($/Sh) Date Price Value Price Value
------------------ ------------ ------------ ----------- ---------- ------ -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel C. Rohr.......... 6,921 $39.875 5/20/00 $51.12 $ 77,827 $ 64.77 $ 172,298
Executive Vice 10,549 39.875 2/19/01 53.02 138,667 69.57 313,253
President 11,575 39.875 2/19/02 55.67 182,827 76.53 424,282
6,965 39.875 2/16/03 58.43 129,236 84.10 308,027
34,605 39.875 1/19/04 61.11 734,837 91.81 1,797,211
6,094 51.625 5/20/00 64.58 78,948 79.96 172,673
6,009 51.625 2/19/01 66.99 92,328 85.88 205,838
9,901 51.625 2/19/02 70.34 185,297 94.47 424,208
6,132 51.625 2/16/03 73.82 136,100 103.82 320,060
34,994 51.625 1/19/04 77.21 895,321 113.33 2,159,305
-------
133,745 6.4%
</TABLE>
- -------
(1) Optionees may tender previously acquired shares of the Company's Common
Stock in payment of the exercise price of a stock option and may tender
previously acquired shares or request the Company to withhold sufficient
shares to pay the taxes arising from the exercise. The Company currently
grants reload stock options to purchase the number of shares thus tendered
and/or withheld. The reload option will have an exercise price equal to
the closing price of the Common Stock on the date of the transaction, will
be exercisable six months from the date of grant and will expire on the
scheduled expiration date of the exercised option. All such options become
fully vested upon a change in control of the Company. All of the
identified options were reload stock options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at 12/31/95 at 12/31/95
Name and Principal Acquired Value (Exercisable/ (Exercisable/
Position On Exercise Realized (1) Unexercisable) Unexercisable) (1)
- ------------------ ----------- ------------ -------------------- ---------------------
<S> <C> <C> <C> <C>
John F. Grundhofer 307,737 $5,514,812 264,434/279,426 $3,741,439/$2,723,842
Chairman, President and
Chief Executive Officer
Richard A. Zona 143,340 2,138,090 71,649/129,404 720,372/1,245,726
Vice Chairman and
Chief Financial Officer
Philip G. Heasley 158,373 1,696,502 9,559/113,443 86,031/947,542
Vice Chairman
William F. Farley 136,112 1,842,390 46,314/110,981 430,024/947,542
Vice Chairman
Daniel C. Rohr 150,901 1,500,397 4,058/103,904 39,565/814,995
Executive Vice Presi-
dent
</TABLE>
- -------
(1) "Value" has been determined based upon the difference between the per-
share option exercise price and the market value of the Common Stock at
the applicable measurement date.
34
<PAGE>
PERSONAL RETIREMENT ACCOUNT
Effective July 1, 1986, the Company adopted a career average pay defined
benefit pension plan known as the "Personal Retirement Account" ("PRA").
Essentially all full-time employees of the Company and its subsidiaries are
eligible to participate in PRA. As of December 31, 1995, 10,894 employees were
participating in PRA. Under the terms of PRA, a separate "account" is
maintained for each employee participating in the plan. Each year,
contributions of from 3% to 6% of the participant's total compensation for
that year plus 3% of the participant's total compensation in excess of $5,000
for that year are made to the account for the participant. The basic
percentage varies depending upon the participant's number of years of service.
If the participant has less than ten years of service, the percentage is 3%.
If the participant has ten but less than twenty years of service, the
percentage is 4%. If the participant has twenty but less than twenty-five
years of service, the percentage is 5%. If the participant has twenty-five or
more years of service, the percentage is 6%. Interest is credited to such
accounts. In addition, the plan provides certain special additional credits
for the accounts of participants who had at least five years of service as of
January 1, 1986 and had a total age plus years of service equal to fifty or
greater. At the time of normal or early retirement, the accumulated account of
the participant is converted into one of several available forms of lifetime
annuities or is distributed in a single lump sum to the participant. In the
event of the death of the participant, the account balance is payable to
survivors of the participant. Plan benefits become 100% vested after five
years of service.
The Company maintains an unfunded deferred compensation plan known as the
Defined Benefit Excess Plan to provide retirement benefits which would have
been provided under the normal formulas of the PRA but for limitations
established under the Code. Such plans are recognized and authorized under
provisions of the Employee Retirement Income Security Act of 1974, as amended.
Based upon a number of assumptions, including retirement at age 65, the
following estimated annual payments would be made upon retirement pursuant to
PRA and the Defined Benefit Excess Plan to the following individuals: Mr.
Grundhofer, $202,000; Mr. Zona, $194,000; Mr. Heasley, $291,000; and Mr. Rohr,
$135,000.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company's Supplemental Executive Retirement Plan ("SERP") is available
to certain executives with not less than five years of service at the time of
termination of employment or death. The SERP generally provides retirement
benefits at age 65 equal to 55% of an executive's average base salary and
annual incentive awards during his or her last three years of employment.
Executives will receive credit for an additional five years of service at age
60 and may receive retirement benefits after age 60 which are equal to the
actuarial equivalent present value of the retirement benefit which would be
payable at age 65. Payments under the SERP are reduced by other sources of
retirement income, including benefits under the PRA, the Defined Benefit
Excess Plan, a portion of social security benefits and estimated benefits
provided by other employers. Lesser benefits are available
35
<PAGE>
in the event of termination prior to age 65. The SERP provides for payment of
benefits in the form of a single lump sum or annuity payments. A participant
who has not yet begun to receive payments or benefits under the SERP may elect
to receive a distribution of his or her entire SERP benefit if a change in
control has occurred, subject to a 5% forfeiture of benefits to be received
thereunder.
Based upon a number of assumptions, including retirement at age 65, the
following estimated annual payments would be made upon retirement pursuant to
the SERP to the following individuals: Mr. Grundhofer, $438,000; Mr. Zona,
$321,000; Mr. Heasley, $296,000; and Mr. Rohr, $227,000.
COMPENSATION AND HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the following individuals served as members of the Compensation
and Human Resources Committee: Kenneth A. Macke (Chairperson), Coleman
Bloomfield, Jerry W. Levin, Marilyn Carlson Nelson, James J. Renier, S. Walter
Richey, and Richard L. Robinson.
Coleman Bloomfield served as a member of the Company's Board of Directors and
the Compensation and Human Resources Committee. Prior to his death in 1995, Mr.
Bloomfield was an executive officer of Minnesota Mutual Life Insurance Company;
Mr. Grundhofer is a member of the Board of Trustees of such company.
During 1995, banking subsidiaries of the Company had loan transactions with
members of the Compensation and Human Resources Committee and one or more of
their affiliates. Such loans were made in the ordinary course of business, were
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other persons
and did not involve more than the normal risk of collectibility or present
other unfavorable features.
36
<PAGE>
COMPARATIVE STOCK PERFORMANCE
Set forth below are line graphs comparing the cumulative total stockholder
return on the Company's Common Stock over a five-year and a six-year period,
based on the market price of the Common Stock and assuming reinvestment of
dividends, with the cumulative total return on the Standard and Poor's 500
Stock Index and the Keefe, Bruyette & Woods 50 Bank Index. The first graph
provides a five-year history of stockholder return. The Company believes that
the second graph, which provides a six-year history, is useful in evaluating
the Company's performance during the tenure of Mr. Grundhofer and his senior
management team.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG FIRST BANK SYSTEM, S&P 500 INDEX AND KBW 50 BANK INDEX
<CAPTION>
Measurement Period FIRST BANK S&P KBW 50
(Fiscal Year Covered) SYSTEM 500 INDEX BANK INDEX
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-
1990 $100 $100 $100
1991 $192 $130 $158
1992 $233 $140 $202
1993 $263 $155 $213
1994 $294 $157 $202
1995 $454 $215 $324
</TABLE>
----- First Bank System -- -- S&P 500 - - - - KBW 50 Bank Index
The Keefe, Bruyette & Woods 50 Bank Index is a market-capitalization-
weighted total return index of 50 bank stocks published by Keefe, Bruyette &
Woods, Inc.
37
<PAGE>
COMPARISON OF SIX-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG FIRST BANK SYSTEM, S&P 500 INDEX AND KBW 50 BANK INDEX
<CAPTION>
Measurement Period FIRST BANK S&P KBW 50
(Fiscal Year Covered) SYSTEM 500 INDEX BANK INDEX
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-
1989 $100 $100 $100
1990 $ 83 $ 97 $ 72
1991 $159 $126 $114
1992 $193 $136 $145
1993 $217 $150 $153
1994 $243 $152 $145
1995 $375 $209 $232
</TABLE>
----- First Bank System -- -- S&P 500 - - - - KBW 50 Bank Index
The Keefe, Bruyette & Woods 50 Bank Index is a market-capitalization-
weighted total return index of 50 bank stocks published by Keefe, Bruyette &
Woods, Inc.
CERTAIN TRANSACTIONS
During 1995, banking subsidiaries of the Company had loan transactions with
some of the Company's Directors, executive officers and one or more of their
affiliates. Such loans were made in the ordinary course of business, were made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons
and did not involve more than the normal risk of collectibility or present
other unfavorable features.
In 1995, an affiliate of the Company paid 4900, Inc., a corporation 52%
owned by Nicholas R. Petry, a former Director of the Company who retired from
the Board at the 1995 annual meeting of stockholders, $118,899 for rent on
premises leased by the affiliate. In addition, N.G. Petry Construction
Company, of which Mr. Petry is the managing partner, leased approximately 550
square feet of office space from an affiliate of the Company at competitive
rates.
38
<PAGE>
In 1995, an affiliate of the Company paid $67,000 in rent under a long-term
ground lease to a partnership of which Mr. Will F. Nicholson, Jr., a former
Director of the Company who retired from the Board at the 1995 annual meeting
of stockholders, is a general partner and the beneficial interest of which is
in his immediate family. The lease, executed in 1965, covers property used by
a bank affiliated with the Company.
During 1995 and as part of its authorized stock repurchase program, the
Company purchased shares of its Common Stock held by certain Directors and
executive officers of the Company and by Corporate Advisors, L.P., a 5%
stockholder of the Company, as follows: (i) on April 17, 1995, the Company
purchased 12,983 shares from Norman M. Jones, a Director, for an aggregate
purchase price of $530,680; (ii) on June 8, 1995, the Company purchased 16,827
shares from Will F. Nicholson, Jr., a former Director, for an aggregate
purchase price of $727,768; (iii) on August 8, 1995 the Company purchased
3,000 shares from Philip G. Heasley, an executive officer, for an aggregate
purchase price of $131,625; (iv) on October 13 and 18, 1995, the Company
purchased 9,737 and 3,274 shares, respectively, from Michael J. O'Rourke, a
former executive officer, for aggregate purchase prices of $489,284 and
$164,519, respectively; and (v) the Company purchased an aggregate of
3,000,000 shares from Corporate Advisors, L.P., either in its capacity as
general partner of Corporate Partners, L.P., as general partner of Corporate
Offshore Partners, L.P. or as investment manager for The State Board of
Administration of Florida, in nine transactions in 1995 for an aggregate
purchase price of $126,375,000. Shares repurchased in the foregoing
transactions were purchased at fair market value based on the respective
closing prices of the Common Stock on the New York Stock Exchange on the date
of the applicable transaction.
LOANS TO MANAGEMENT
In accordance with the Company's policies regarding loans to employees,
certain Directors and executive officers of the Company have borrowed money
from FBS Mortgage Corporation, a mortgage banking subsidiary of the Company.
These loans are evidenced by notes secured by first mortgages on their
residences and either have been, or are in the process of being, sold to
investors in the secondary real estate mortgage market. In addition, pursuant
to the Company's Stock Option Loan program, Directors and active employees
holding stock options are eligible to receive loans from the Company to be
used for the exercise of stock options. Loans bear interest at the applicable
federal rates in effect under Section 1274(d) of the Code at the time the loan
is made. The following tables show as to the Company's Directors and executive
officers: (i) the outstanding balances of mortgages held by FBS or one of its
affiliates and stock option loans, if any, as of December 31, 1995, (ii) the
largest outstanding balances of such loans at any time during 1995, and (iii)
the rate of interest applicable to such loans.
39
<PAGE>
MORTGAGE LOANS
<TABLE>
<CAPTION>
Mortgage Balance Maximum Balance Mortgage
at December 31, of Mortgage Interest
1995 During 1995 Rate
---------------- --------------- --------
<S> <C> <C> <C>
William F. Farley.................... $562,688 $569,923 7.750%*
Norman M. Jones...................... 60,419 62,785 5.750%*
Susan E. Lester...................... 449,658 450,000 7.375%*
John M. Murphy, Jr. ................. 120,169 125,633 7.000%
John M. Murphy, Jr. ................. 478,898 480,000 7.375%*
Michael J. O'Rourke.................. 197,443 199,711 7.125%
</TABLE>
- --------
*Adjustable Rate Mortgage
STOCK OPTION LOANS
<TABLE>
<CAPTION>
Stock Option Loan Maximum Balance Stock Option
Balance at of Loan Loan Interest
December 31, 1995 During 1995 Rate
----------------- --------------- -------------
<S> <C> <C> <C>
William F. Farley............... $ 438,255 $ 438,255 5.47%
William F. Farley............... 172,458 172,458 7.21%
Philip G. Heasley............... 440,724 440,724 5.47%
Philip G. Heasley............... 1,173,198 1,173,198 6.98%
John M. Murphy, Jr. ............ 91,576 102,008 5.47%
Michael J. O'Rourke............. 0 74,420 5.47%
Daniel C. Rohr.................. 613,458 613,458 4.94%
Daniel C. Rohr.................. 972,739 972,739 6.98%
Robert H. Sayre................. 144,350 144,350 5.47%
Robert H. Sayre................. 172,286 172,286 7.21%
Richard A. Zona................. 595,790 605,523 5.47%
</TABLE>
POLICY ON CONFIDENTIAL VOTING
The Company has procedures to ensure that (i) all proxies, ballots and
voting tabulations that identify stockholders are kept permanently
confidential, except as disclosure may be required by federal or state law or
expressly requested by a stockholder; and (ii) the receipt and tabulation of
proxy cards are performed by an independent third party.
1997 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1997 annual meeting of
stockholders to be eligible for inclusion in the Company's Proxy Statement,
they must be received by the Company at its principal office in Minneapolis,
Minnesota on or before November 11, 1996.
40
<PAGE>
AVAILABILITY OF FORM 10-K
The Company's Annual Report on Form 10-K detailing its activities and
financial results during 1995 is included as a part of the Company's 1995
Annual Report to Stockholders. If a stockholder requests copies of any
exhibits to such Form 10-K, the Company will require the payment of a fee
covering its reasonable expenses in furnishing such exhibits. Any such
requests should be addressed to Investor Relations Department, First Bank
System, Inc., P.O. Box 522, Minneapolis, Minnesota 55480.
By Order of the Board of Directors
LOGO
Lee R. Mitau
Secretary
Dated: March 11, 1996
41
<PAGE>
EXHIBIT A
FIRST BANK SYSTEM, INC.
1996 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; EFFECT ON PRIOR PLANS.
(a) Purpose. The purpose of the First Bank System, Inc. 1996 Stock Incentive
Plan (the "Plan") is to aid in attracting and retaining management personnel
and members of the Board of Directors who are not also employees ("Non-
Employee Directors") of First Bank System, Inc. (the "Company") capable of
assuring the future success of the Company, to offer such personnel and Non-
Employee Directors incentives to put forth maximum efforts for the success of
the Company's business and to afford such personnel and Non-Employee Directors
an opportunity to acquire a proprietary interest in the Company.
(b) Effect on Prior Plans. The Company hereby adopts these proposed
amendments and restatements of the 1991 Stock Incentive Plan and the 1994
Stock Incentive Plan, subject to stockholder approval. As so amended,
restated, established and approved, the Plan shall be known as the 1996 Stock
Incentive Plan. All outstanding options issued, restricted stock issued and
other awards issued under other plans of the Company shall remain subject to
the terms and conditions of the plans under which they were issued, but shares
of stock relating to outstanding options, restricted stock or other awards
under the 1991 Stock Incentive Plan and the 1994 Stock Incentive Plan are
considered as shares of stock subject to the Plan under Section 4 of the Plan.
SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii)
any entity in which the Company has a significant equity interest, as
determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award or other Stock-Based Award
granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the Board of Directors of the
Company designated by such Board to administer the Plan and composed of not
less than three directors, each of whom is a "disinterested person" within
the meaning of Rule 16b-3. Each member of the Committee shall be an
"outside director" within the meaning of Section 162(m) of the Code.
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(f) "Eligible Person" shall mean any employee, officer, consultant or
independent contractor providing services to the Company or any Affiliate
who the Committee determines to be an Eligible Person. Eligible Person
shall not include any Non-Employee Director, who shall receive Awards only
pursuant to Section 6(g) of the Plan.
(g) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair
market value of such property determined by such methods or procedures as
shall be established from time to time by the Committee or, in the case of
grants pursuant to Section 6(g), the Board of Directors. Notwithstanding
the foregoing, for purposes of the Plan, the Fair Market Value of Shares on
a given date shall be the closing price of the Shares as reported on the
New York Stock Exchange on such date, if the Shares are then quoted on the
New York Stock Exchange.
(h) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422
of the Code or any successor provision.
(i) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan, or Section 6(g) of the Plan in the case of grants
to Non-Employee Directors, that is not intended to be an Incentive Stock
Option.
(j) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
(k) "Other Stock-Based Award" shall mean any right granted under Section
6(e) of the Plan.
(l) "Participant" shall mean an Eligible Person designated to be granted
an Award under the Plan.
(m) "Performance Award" shall mean any right granted under Section 6(d)
of the Plan.
(n) "Person" shall mean any individual, corporation, partnership,
association or trust.
(o) "Restricted Stock" shall mean any Share granted under Section 6(c) of
the Plan.
(p) "Restricted Stock Unit" shall mean any unit granted under Section
6(c) of the Plan evidencing the right to receive a Share (or a cash payment
equal to the Fair Market Value of a Share) at some future date.
(q) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
(r) "Shares" shall mean shares of Common Stock, $1.25 par value, of the
Company or such other securities or property as may become subject to
Awards pursuant to an adjustment made under Section 7(c) of the Plan.
(s) "Stock Appreciation Right" shall mean any right granted under Section
6(b) of the Plan.
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SECTION 3. ADMINISTRATION.
The Plan shall be administered by the Committee; provided, however, that
Section 6(g) of the Plan shall not be administered by the Committee but rather
by the Board of Directors subject to the provisions and restrictions of such
Section 6(g). Subject to the terms of the Plan and applicable law, and except
with respect to Section 6(g) of the Plan, the Committee shall have full power
and authority to: (i) designate Participants; (ii) determine the type or types
of Awards to be granted to each Participant under the Plan; (iii) determine
the number of Shares to be covered by (or with respect to which payments,
rights or other matters are to be calculated in connection with) each Award;
(iv) determine the terms and conditions of any Award or Award Agreement; (v)
amend the terms and conditions of any Award or Award Agreement and accelerate
the exercisability of Options or the lapse of restrictions relating to
Restricted Stock or Restricted Stock Units; (vi) determine whether, to what
extent and under what circumstances Awards may be exercised in cash, Shares,
other securities, other Awards or other property, or canceled, forfeited or
suspended; (vii) determine whether, to what extent and under what
circumstances cash, Shares, other securities, other Awards, other property and
other amounts payable with respect to an Award under the Plan shall be
deferred either automatically or at the election of the holder thereof or the
Committee; (viii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (ix) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; and (x) make
any other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan. Unless otherwise
expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive and binding upon any Participant, any
holder or beneficiary of any Award and any employee of the Company or any
Affiliate.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) Shares Available. Subject to adjustment as provided in Section 7(c), the
number of Shares available for granting Awards under the Plan shall be
17,000,000 (5,000,000 of which were previously authorized under the 1991 Stock
Incentive Plan, 5,000,000 of which were previously authorized under the 1994
Stock Incentive Plan and 7,000,000 of which will be authorized upon
stockholder approval of the Plan). Not more than 1,000,000 of such Shares will
be available for grant of additional Awards of Restricted Stock following the
effective date of the Plan determined in accordance with Section 10 of the
Plan. If any Shares covered by an Award or to which an Award relates are not
purchased or are forfeited, or if an Award otherwise terminates without
delivery of any Shares, then the number of Shares counted against the
aggregate number of Shares available under the Plan with respect to such
Award, to the extent of any such forfeiture or termination, shall again be
available for granting Awards under the Plan. In addition, any Shares that are
used by a Participant as full or partial payment to the Company of the
purchase price relating to an Award, or in connection with satisfaction of tax
obligations relating to an Award in accordance with the provisions of Section
8 of the Plan, shall again be available for granting Awards under the Plan.
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(b) Accounting for Awards. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the number of
Shares covered by such Award or to which such Award relates shall be counted
on the date of grant of such Award against the aggregate number of Shares
available for granting Awards under the Plan.
(c) Incentive Stock Options. Notwithstanding the foregoing, the number of
Shares available for granting Incentive Stock Options under the Plan shall not
exceed 7,000,000, subject to adjustment as provided in the Plan and Section
422 or 424 of the Code or any successor provisions.
(d) Award Limitations Under the Plan. No Eligible Person may be granted any
Award or Awards, the value of which Awards are based solely on an increase in
the value of the Shares after the date of grant of such Awards, for more than
1,000,000 Shares, in the aggregate, in any calendar year beginning with the
year commencing January 1, 1996. The foregoing limitation specifically
includes the grant of any "performance-based" Awards within the meaning of
(S)162(m) of the Code.
SECTION 5. ELIGIBILITY.
Any Eligible Person, including any Eligible Person who is an officer or
director of the Company or any Affiliate, shall be eligible to be designated a
Participant; provided, however, that an Incentive Stock Option may only be
granted to full or part-time employees (which term as used herein includes,
without limitation, officers and directors who are also employees) and an
Incentive Stock Option shall not be granted to an employee of an Affiliate
unless such Affiliate is also a "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code or any successor provision. Non-
Employee Directors shall receive Awards of Non-Qualified Stock Options as
provided in Section 6(g) of the Plan.
SECTION 6. AWARDS.
(a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee; provided, however, that such
purchase price shall not be less than 100% of the Fair Market Value of a
Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee.
(iii) Time and Method of Exercise. The Committee shall determine the time
or times at which an Option may be exercised in whole or in part and the
method or methods by which, and the form or forms (including, without
limitation, cash, Shares, other securities, other Awards or other property,
or any combination thereof, having a Fair Market Value on the exercise date
equal to the relevant exercise price) in which, payment of the exercise
price with respect thereto may be made or deemed to have been made.
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(iv) Reload Options. The Committee may grant "reload" options, separately
or together with another Option, pursuant to which, subject to the terms
and conditions established by the Committee and any applicable requirements
of Rule 16b-3 or any other applicable law, the Participant would be granted
a new Option when the payment of the exercise price of a previously granted
option is made by the delivery of shares of the Company's Common Stock
owned by the Participant pursuant to Section 6(a)(iii) hereof or the
relevant provisions of another plan of the Company, and/or when shares of
the Company's Common Stock are tendered or forfeited as payment of the
amount to be withheld under applicable income tax laws in connection with
the exercise of an option, which new Option would be an option to purchase
the number of Shares not exceeding the sum of (A) the number of shares of
the Company's Common Stock provided as consideration upon the exercise of
the previously granted option to which such "reload" option relates and (B)
the number of shares of the Company's Common Stock tendered or forfeited as
payment of the amount to be withheld under applicable income tax laws in
connection with the exercise of the option to which such "reload" option
relates. "Reload" options may be granted with respect to options granted
under this Plan or any other stock option plan of the Company. Such
"reload" options shall have a per share exercise price equal to the Fair
Market Value as of the date of grant of the new Option.
(b) Stock Appreciation Rights. The Committee is hereby authorized to grant
Stock Appreciation Rights to Participants subject to the terms of the Plan and
any applicable Award Agreement. A Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise
thereof the excess of (i) the Fair Market Value of one Share on the date of
exercise (or, if the Committee shall so determine, at any time during a
specified period before or after the date of exercise) over (ii) the grant
price of the Stock Appreciation Right as specified by the Committee, which
price shall not be less than 100% of the Fair Market Value of one Share on the
date of grant of the Stock Appreciation Right. Subject to the terms of the Plan
and any applicable Award Agreement, the grant price, term, methods of exercise,
dates of exercise, methods of settlement and any other terms and conditions of
any Stock Appreciation Right shall be as determined by the Committee. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units. The Committee is hereby
authorized to grant Awards of Restricted Stock and Restricted Stock Units to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Restrictions. Shares of Restricted Stock and Restricted Stock Units
shall be subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote a Share
of Restricted Stock or the right to receive any dividend or other right or
property with respect thereto), which restrictions may lapse separately or
in combination at such time or times, in such installments or otherwise as
the Committee may deem appropriate.
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(ii) Stock Certificates. Any Restricted Stock granted under the Plan
shall be evidenced by issuance of a stock certificate or certificates,
which certificate or certificates shall be held by the Company. Such
certificate or certificates shall be registered in the name of the
Participant and shall bear an appropriate legend referring to the
restrictions applicable to such Restricted Stock. In the case of Restricted
Stock Units, no Shares shall be issued at the time such Awards are granted.
(iii) Forfeiture; Delivery of Shares. Except as otherwise determined by
the Committee, upon termination of employment (as determined under criteria
established by the Committee) during the applicable restriction period, all
Shares of Restricted Stock and all Restricted Stock Units at such time
subject to restriction shall be forfeited and reacquired by the Company;
provided, however, that the Committee may, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in part any
or all remaining restrictions with respect to Shares of Restricted Stock or
Restricted Stock Units. Shares representing Restricted Stock that is no
longer subject to restrictions shall be delivered to the holder thereof
promptly after the applicable restrictions lapse or are waived. Upon the
lapse or waiver of restrictions and the restricted period relating to
Restricted Stock Units evidencing the right to receive Shares, such Shares
shall be issued and delivered to the holders of the Restricted Stock Units.
(d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or
in part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted and the amount of any payment or transfer to be made
pursuant to any Performance Award shall be determined by the Committee.
(e) Other Stock-Based Awards. The Committee is hereby authorized to grant to
Participants such other Awards that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purpose of the Plan;
provided, however, that such grants must comply with Rule 16b-3 and applicable
law. Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of such Awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(e) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including without limitation,
cash, Shares, other securities, other Awards or other property or any
combination thereof), as the Committee shall determine, the value of which
consideration, as established by the Committee, shall not be less than 100% of
the Fair Market Value of such Shares or other securities as of the date such
purchase right is granted.
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(f) General. Except as otherwise specified with respect to Awards to Non-
Employee Directors pursuant to Section 6(g) of the Plan:
(i) No Cash Consideration for Awards. Awards shall be granted for no cash
consideration or for such minimal cash consideration as may be required by
applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted
under any plan of the Company or any Affiliate other than the Plan. Awards
granted in addition to or in tandem with other Awards or in addition to or
in tandem with awards granted under any such other plan of the Company or
any Affiliate may be granted either at the same time as or at a different
time from the grant of such other Awards or awards.
(iii) Forms of Payment under Awards. Subject to the terms of the Plan and
of any applicable Award Agreement, payments or transfers to be made by the
Company or an Affiliate upon the grant, exercise or payment of an Award may
be made in such form or forms as the Committee shall determine (including,
without limitation, cash, Shares, other securities, other Awards or other
property or any combination thereof), and may be made in a single payment
or transfer, in installments or on a deferred basis, in each case in
accordance with rules and procedures established by the Committee. Such
rules and procedures may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or deferred
payments.
(iv) Limits on Transfer of Awards. No Award and no right under any such
Award shall be transferable by a Participant otherwise than by will or by
the laws of descent and distribution; provided, however, that, if so
determined by the Committee, a Participant may, in the manner established
by the Committee, designate a beneficiary or beneficiaries to exercise the
rights of the Participant and receive any property distributable with
respect to any Award upon the death of the Participant. Each Award or right
under any Award shall be exercisable during the Participant's lifetime only
by the Participant or, if permissible under applicable law, by the
Participant's guardian or legal representative. No Award or right under any
such Award may be pledged, alienated, attached or otherwise encumbered, and
any purported pledge, alienation, attachment or encumbrance thereof shall
be void and unenforceable against the Company or any Affiliate.
(v) Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee.
(vi) Restrictions; Securities Exchange Listing. All certificates for
Shares or other securities delivered under the Plan pursuant to any Award
or the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee (or, in the case of grants under
Section 6(g) of the Plan, the Board of Directors) may deem advisable under
the Plan or the rules, regulations and other requirements of the Securities
and Exchange Commission and any applicable federal or state securities
laws, and the Committee (or, in the case of grants under Section 6(g) of
the Plan, the Board of Directors) may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions. If the Shares or other
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securities are traded on a securities exchange, the Company shall not be
required to deliver any Shares or other securities covered by an Award
unless and until such Shares or other securities have been admitted for
trading on such securities exchange.
(g) Non-Qualified Stock Options to Non-Employee Directors. The Board of
Directors shall issue Non-Qualified Stock Options to Non-Employee Directors in
accordance with this Section 6(g).
Each Non-Employee Director serving on the Company's Board of Directors
immediately prior to the 1996 Annual Meeting of Stockholders of the Company was
granted an Option to purchase 2,500 Shares (subject to adjustment pursuant to
Section 7(c) of the Plan) pursuant to the terms of the 1991 Stock Incentive
Plan. Each Non-Employee Director first elected or appointed to the Company's
Board of Directors after the 1996 Annual Meeting of Stockholders and during the
term of the Plan shall be granted, as of the date of such Director's first
election or appointment to the Board of Directors, a Non-Qualified Stock Option
to purchase 2,500 Shares (subject to adjustment pursuant to Section 7(c) of the
Plan). After the initial grant to each Non-Employee Director as set forth above
in this Section 6(g), each such Director shall be granted during the term of
the Plan, as of the date of each Annual Meeting of Stockholders of the Company
commencing with the 1996 Annual Meeting of Stockholders of the Company, if such
Director's term of office continues after such date, a Non-Qualified Stock
Option to purchase 1,500 Shares (subject to adjustment pursuant to Section 7(c)
of the Plan).
Each Non-Qualified Stock Option granted to a Non-Employee Director pursuant
to this Section 6(g) shall be exercisable in full as of the date of grant,
shall have an exercise price equal to the Fair Market Value of a Share on the
date of grant and shall expire on the tenth anniversary of the date of grant,
except as provided below. This Section 6(g) shall not be amended more than once
every six months other than to comport with changes in the Code, the Employee
Retirement Income Security Act or the rules and regulations thereunder.
Except as hereinafter provided, each Option granted pursuant to this Section
6(g) (including those Options granted pursuant to Section 6(h) of the 1991
Stock Incentive Plan as provided therein) shall include a provision entitling
the optionee to a further Non-Qualified Stock Option (a "Non-Employee Director
Reload Option") in the event the optionee exercises such an Option, in whole or
in part, by surrendering other Shares in accordance with this Section 6(g) and
the terms of the Option. Any such Non-Employee Director Reload Option (i) shall
be for a number of Shares equal to the number of Shares surrendered as part or
all of the exercise price of the Option to which it relates; (ii) shall have an
expiration date which is the same as the expiration date of the Option to which
it relates; (iii) shall have an exercise price equal to the Fair Market Value
of a Share on the date of exercise of the Option to which it relates; and (iv)
shall be exercisable in full as of the date of grant. A Non-Employee Director
Reload Option may be reloaded under the same terms, provided that the original
Option to which such series of Non-Employee Director Reload Options relates may
be reloaded a maximum of three times. Non-Employee Director Reload Options
shall only be granted to a Director during such Director's term as a Non-
Employee Director. Any such Non-Employee Director Reload Option shall be
subject to availability of sufficient shares for
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grant under the Plan. Shares surrendered as part or all of the exercise price
of the Option to which it relates that have been owned by the optionee less
than six months will not be counted for purposes of determining the number of
Shares that may be purchased pursuant to a Non-Employee Director Reload Option.
All grants of Non-Qualified Stock Options pursuant to this Section 6(g) shall
be automatic and non-discretionary and shall be made strictly in accordance
with the foregoing terms and the following additional provisions:
(i) Non-Qualified Stock Options granted to a Non-Employee Director
hereunder shall terminate and may no longer be exercised if such Director
ceases to be a Non-Employee Director of the Company, except that:
(A) If such Director's term shall be terminated for any reason other
than gross and willful misconduct, death, disability, or retirement,
such Director may at any time within a period of three months after
such termination, but not after the termination date of the Option,
exercise the Option.
(B) If such Director's term shall be terminated by reason of gross
and willful misconduct during the course of the term, including but not
limited to, wrongful appropriation of funds of the Company or the
commission of a gross misdemeanor or felony, the Option shall be
terminated as of the date of the misconduct.
(C) If such Director's term shall be terminated by reason of
disability or retirement, such Director may exercise the Option in
accordance with the terms thereof as though such termination had never
occurred. If such Director shall die following any such termination,
the Option may be exercised in accordance with its terms by the
personal representatives or administrators of such Director or by any
person or persons to whom the Option has been transferred by will or
the applicable laws of descent and distribution.
(D) If such Director shall die while a Director of the Company or
within three months after termination of such Director's term for any
reason other than disability or retirement or gross and willful
misconduct, the Option may be exercised in accordance with its terms by
the personal representatives or administrators of such Director or by
any person or persons to whom the Option has been transferred by will
or the applicable laws of descent and distribution.
(ii) Non-Qualified Stock Options granted to Non-Employee Directors may be
exercised in whole or in part from time to time by serving written notice
of exercise on the Company at its principal executive offices, to the
attention of the Company's Secretary. The notice shall state the number of
shares as to which the Option is being exercised and be accompanied by
payment of the purchase price. A Non-Employee Director may, at such
Director's election, pay the purchase price by check payable to the
Company, by promissory note, or in shares of the Company's Common Stock, or
in any combination thereof having a Fair Market Value on the exercise date
equal to the applicable exercise price. If payment or partial payment is
made by promissory note, such note shall be a full recourse note and shall
(A) be secured by the Shares to be delivered upon exercise of such Option,
(B) be limited in principal amount to the maximum amount permitted under
applicable laws, rules and regulations, (C) be for a term of six years and
(D) bear interest at the applicable federal rate (as determined in
accordance with Section 1274(d) of the Code), compounded semi-annually.
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SECTION 7. AMENDMENT AND TERMINATION; ADJUSTMENTS.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may
amend, alter, suspend, discontinue or terminate the Plan; provided,
however, that, notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the stockholders of the Company, no such
amendment, alteration, suspension, discontinuation or termination shall be
made that, absent such approval:
(i) would cause Rule 16b-3 to become unavailable with respect to the
Plan;
(ii) would violate the rules or regulations of the New York Stock
Exchange, any other securities exchange or the National Association of
Securities Dealers, Inc. that are applicable to the Company; or
(iii) would cause the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan.
(b) Amendments to Awards. Except with respect to Awards granted pursuant
to Section 6(g) of the Plan, the Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively. The Committee may not amend, alter, suspend, discontinue or
terminate any outstanding Award, prospectively or retroactively, without
the consent of the Participant or holder or beneficiary thereof, except as
otherwise herein provided.
(c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Shares, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of
Shares or other securities of the Company or other similar corporate
transaction or event affecting the Shares would be reasonably likely to
result in the diminution or enlargement of any of the benefits or potential
benefits intended to be made available under the Plan or under an Award
(including, without limitation, the benefits or potential benefits of
provisions relating to the term, vesting or exercisability of any Option,
the availability of any tandem stock appreciation rights or "reload" option
rights, if any, contained in any Option Award, and any "change in control"
or similar provisions of any Award), the Committee (or, in the case of
grants under Section 6(g) of the Plan, the Board of Directors) shall, in
such manner as it shall deem equitable or appropriate in order to prevent
such diminution or enlargement of any such benefits or potential benefits,
adjust any or all of (i) the number and type of Shares (or other securities
or other property) which thereafter may be made the subject of Awards, (ii)
the number and type of Shares (or other securities or other property)
subject to outstanding Awards and (iii) the purchase or exercise price with
respect to any Award; provided, however, that the number of Shares covered
by any Award or to which such Award relates shall always be a whole number.
(d) Correction of Defects, Omissions and Inconsistencies. The Committee
(or, in the case of grants under Section 6(g) of the Plan, the Board of
Directors) may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it
shall deem desirable to carry the Plan into effect.
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SECTION 8. INCOME TAX WITHHOLDING.
In order to comply with all applicable federal or state income tax laws or
regulations, the Company may take such action as it deems appropriate to ensure
that all applicable federal or state payroll, withholding, income or other
taxes, which are the sole and absolute responsibility of a Participant, are
withheld or collected from such Participant. In order to assist a Participant
in paying all federal and state taxes to be withheld or collected upon exercise
or receipt of (or the lapse of restrictions relating to) an Award, the
Committee, in its discretion and subject to such additional terms and
conditions as it may adopt, may permit the Participant to satisfy such tax
obligation by (i) electing to have the Company withhold a portion of the Shares
otherwise to be delivered upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes or (ii) delivering to the Company Shares other than Shares
issuable upon exercise or receipt of (or the lapse of restrictions relating to)
such Award with a Fair Market Value equal to the amount of such taxes. The
election, if any, must be made on or before the date that the amount of tax to
be withheld is determined.
SECTION 9. GENERAL PROVISIONS.
(a) No Rights to Awards. Except as otherwise provided in Section 6(g) of the
Plan, no Eligible Person, Participant or other Person shall have any claim to
be granted any Award under the Plan, and there is no obligation for uniformity
of treatment of Eligible Persons, Participants or holders or beneficiaries of
Awards under the Plan. The terms and conditions of Awards need not be the same
with respect to different Participants.
(b) Delegation. The Committee may delegate to one or more officers of the
Company or any Affiliate or a committee of such officers the authority, subject
to such terms and limitations as the Committee shall determine, to grant Awards
to Eligible Persons who are not officers or directors of the Company for
purposes of Section 16 of the Securities Exchange Act of 1934, as amended.
(c) Award Agreements. No Participant will have rights under an Award granted
to such Participant unless and until an Award Agreement shall have been duly
executed on behalf of the Company.
(d) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
(e) No Right to Employment, Etc. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ, or as giving a
Non-Employee Director the right to continue as a Director, of the Company or
any Affiliate. In addition, the Company or an Affiliate may at any time dismiss
a Participant from employment, or terminate the term of a Non-Employee
Director, free from any liability or any claim under the Plan, unless otherwise
expressly provided in the Plan or in any Award Agreement.
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(f) Governing Law. The validity, construction and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Minnesota.
(g) Severability. If any provision of the Plan or any Award is or becomes or
is deemed to be invalid, illegal or unenforceable in any jurisdiction or would
disqualify the Plan or any Award under any law deemed applicable by the
Committee (or, in the case of grants under Section 6(g) of the Plan, the Board
of Directors), such provision shall be construed or deemed amended to conform
to applicable laws, or if it cannot be so construed or deemed amended without,
in the determination of the Committee (or, in the case of grants under Section
6(g) of the Plan, the Board of Directors), materially altering the purpose or
intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect.
(h) No Trust or Fund Created. Neither the Plan nor any Award shall create or
be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any
other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(i) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee (or, in the case of grants
under Section 6(g) of the Plan, the Board of Directors) shall determine whether
cash shall be paid in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated or otherwise
eliminated.
(j) Headings. Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
(k) Section 16 Compliance. The Plan is intended to comply in all respects
with Rule 16b-3 or any successor provision, as in effect from time to time and
in all events the Plan shall be construed in accordance with the requirements
of Rule 16b-3. If any Plan provision does not comply with Rule 16b-3 as
hereafter amended or interpreted, the provision shall be deemed inoperative.
The Board of Directors, in its absolute discretion, may bifurcate the Plan so
as to restrict, limit or condition the use of any provision of the Plan with
respect to persons who are officers or directors subject to Section 16 of the
Securities and Exchange Act of 1934, as amended, without so restricting,
limiting or conditioning the Plan with respect to other Participants.
SECTION 10. EFFECTIVE DATE OF THE PLAN.
The Plan shall be effective as of the date of its approval by the
stockholders of the Company.
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SECTION 11. TERM OF THE PLAN.
Awards shall only be granted under the Plan during a 10-year period beginning
on the effective date of the Plan. However, unless otherwise expressly provided
in the Plan or in an applicable Award Agreement, any Award theretofore granted
may extend beyond the end of such 10-year period, and the authority of the
Committee provided for hereunder with respect to the Plan and any Awards, and
the authority of the Board of Directors of the Company to amend the Plan, shall
extend beyond the end of such period.
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[INSERT MAP ART]
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FIRST BANK SYSTEM, INC.
EMPLOYEE STOCK PURCHASE PLAN 1984
(As Amended and Restated February 15, 1989,
As Amended and Restated April 24, 1991 and As Proposed to be
Amended at the 1996 Annual Meeting of Stockholders)
ARTICLE I. INTRODUCTION
Section 1.01 Purpose. The purpose of this 1984 Employee Stock Purchase
Plan (amended and restated as of February 15, 1989) (the "Plan") is to provide
employees of First Bank System, Inc., a Delaware corporation (the "Company"),
and certain related corporations with an opportunity to share in the ownership
of the Company by providing them with a convenient means for regular and
systematic purchases of the Company's Common Stock, par value $1.25 per share,
and, thus, to develop a stronger incentive to work for the continued success of
the Company. The Plan shall constitute an amendment and restatement of the
Company's existing 1984 Employee Stock Purchase Plan (as amended January 31,
1987) (the "Former Plan") and as such shall supersede and replace the Former
Plan. No additional offers to purchase shares of the Company's Common Stock or
any other rights or benefits shall be provided or granted under the Former Plan;
provided, however, that the Former Plan shall deem to be outstanding to the
extent necessary solely for the purpose of determining the terms and conditions
of any such purchase offer or other rights previously granted under the Former
Plan.
Section 1.02 Rules of Interpretation. It is intended that the Plan be an
"employee stock purchase plan" as defined in Section 423(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations
promulgated thereunder, if approved by the Company's shareholders. Accordingly,
the Plan will be interpreted and administered in a manner consistent therewith
if so approved. All Participants in the Plan will have the same rights and
privileges consistent with the provisions of the Plan.
Section 1.03 Definitions. For purposes of the Plan, the following terms
will have the meanings set forth below:
(a) "Acceleration Date" means the earlier of the date of shareholder
approval or approval by the Company's Board of Directors of (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company
Stock would be converted into cash, securities or other property, other
than a merger of the Company in which shareholders immediately prior to the
merger have the same proportionate ownership of stock in the surviving
corporation immediately after the merger; (ii) 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; or (iii) any plan
of liquidation or dissolution of the Company.
<PAGE>
(b) "Affiliate" means any parent or subsidiary corporation of the
Company, as defined in Sections 425(e) and 425(f) of the Code, whether now
or hereafter acquired or established.
(c) "Committee" means the committee appointed under Section 10.01.
(d) "Company" means First Bank System, Inc., a Delaware corporation,
and its successors by merger or consolidation as contemplated by Article XI
herein.
(e) "Current Compensation" means all gross cash compensation
(including wage, salary, incentive, bonus and overtime earnings) paid by
the Company or an Affiliate to a Participant, but excluding all expense
allowances or reimbursements, stock options and compensation or income
payable in a form other than cash, but including amounts which would have
constituted compensation but for a Participant's election to defer or
reduce compensation pursuant to any deferred compensation, cafeteria,
capital accumulation or any other similar plan provided by the Company.
(f) "Fair Market Value" as of a given date means such value of the
Common Stock as reasonably determined by the Committee but which is not
less than the last sale price as reported by the New York Stock Exchange.
(g) "Participant" means a Permanent Full-Time Employee who is
eligible to participate in the Plan under Section 2.01 and who has elected
to participate in the Plan.
(h) "Participating Affiliate" means an Affiliate which has been
designated by the Committee in advance of the Purchase Period in question
as a corporation whose eligible Permanent Full-Time Employees may
participate in the Plan.
(i) "Permanent Full-Time Employee" means an employee of the Company
or a Participating Affiliate as of the first day of a Purchase Period,
including an officer or director who is also an employee, except an
employee whose customary employment is less than 20 hours per week or any
employee who has not been employed by the Company or its Affiliates for
more than one (1) year.
(j) "Plan" means the First Bank System, Inc. 1984 Employee Stock
Purchase Plan (as amended and restated as of February 15, 1989), the
provisions of which are set forth herein.
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(k) "Purchase Period" means a period beginning on such business day
as may be designated by the Committee prior thereto and ending on the
earlier of such business day as may be designated by the Committee prior to
the first business day of such Purchase Period or any Acceleration Date;
provided, however, that in no event shall the Committee designate a
Purchase Period which is less than six (6) months in duration.
(l) "Stock" means the Company's Common Stock, $1.25 par value, as
such stock may be adjusted for changes in the stock or the Company as
contemplated by Article XI herein.
(m) "Stock Purchase Account" means the account maintained on the
books and records of the Company recording the amount received from each
Participant through payroll deductions made under the Plan.
ARTICLE 11. ELIGIBILITY AND PARTICIPATION
Section 2.01 Eligible Employees. All Permanent Full-Time Employees shall
be eligible to participate in the Plan beginning on the first day of the first
Purchase Period to commence after such person becomes a Permanent Full-Time
Employee. Subject to the provisions of Article VI, each such employee will
continue to be eligible to participate in the Plan so long as he or she remains
a Permanent Full-Time Employee.
Section 2.02 Election to Participate. An eligible Permanent Full-Time
Employee may elect to participate in the Plan for a given Purchase Period by
filing with the Company, in advance of that Purchase Period and in accordance
with such terms and conditions as the Committee in its sole discretion may
impose, a form provided by the Company for such purpose (which authorizes
regular payroll deductions from Current Compensation beginning with the first
payday in that Purchase Period and continuing until the employee withdraws from
the Plan or ceases to be eligible to participate in the Plan).
Section 2.03 Limits on Stock Purchase. No employee shall be granted any
right to purchase Stock hereunder if such employee, immediately after such a
right to purchase is granted, would own, directly or indirectly, within the
meaning of Section 423(b)(3) and Section 425(d) of the Code, stock possessing 5%
or more of the total combined voting power or value of all the then classes of
the capital stock of the Company or of all Affiliates.
Section 2.04 Voluntary Participation. Participation in the Plan on the
part of the Participant is voluntary and such participation is not a condition
of
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employment nor does participation in the Plan entitle a Participant to be
retained as an employee.
ARTICLE III. PAYROLL DEDUCTIONS AND
STOCK PURCHASE ACCOUNT
Section 3.01 Deduction from Pay. The form described in Section 2.02 will
permit a Participant to elect payroll deductions of any whole dollar amount or
whole percentage of Current Compensation for each pay period, subject to such
limitations as the Committee in its sole discretion may impose. A Participant
may cease making payroll deductions at any time, as provided in Section 6.01.
Section 3.02 Credit to Account. Payroll deductions will be credited to the
Participant's Stock Purchase Account on each payday.
Section 3.03 Interest. No interest will be paid upon payroll deductions or
on any amount credited to, or on deposit in, a Participant's Stock Purchase
Account.
Section 3.04 Nature of Account. The Stock Purchase Account is established
solely for accounting purposes, and all amounts credited to the Stock Purchase
Account will remain part of the general assets of the Company or the
Participating Affiliate (as the case may be).
Section 3.05 No Additional Contributions. A Participant may not make any
payment into the Stock Purchase Account other than the payroll deductions made
pursuant to the Plan.
ARTICLE IV. RIGHT TO PURCHASE SHARES
Section 4.01 Number of Shares. Each Participant will have the right to
purchase on the last business day of the Purchase Period all, but not less than
all, of the largest number of whole shares of Stock that can be purchased at the
price specified in Section 4.02 with the entire credit balance in the
Participant's Stock Purchase Account, subject to the limitations that (a) no
more than 5,000 shares of Stock may be purchased under the Plan by any one
Participant for a given Purchase Period and (b) in accordance with Section
423(b)(8) of the Code, no more than $25,000 in Fair Market Value (determined at
the beginning of each Purchase Period) of Stock and other stock may be purchased
under the Plan and all other employee stock purchase plans (if any) of the
Company and the Affiliates by any one Participant for each calendar year. If the
purchases for all Participants would otherwise cause the aggregate number of
shares of Stock to be sold under the Plan to exceed the number specified in
Section 10.03, however, each Participant shall be allocated a pro rata portion
of the Stock to be sold.
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Section 4.02 Purchase Price. The purchase price for any Purchase Period
shall be that price as announced by the Committee prior to the first business
day of that Purchase Period, which price may, in the discretion of the
Committee, be a price which is not fixed or determinable as of the first
business day of that Purchase Period; provided, however, that in no event shall
the purchase price for any Purchase Period be less than (a) 85% of the Fair
Market Value of the Stock on the first business day of that Purchase Period or
(b) 85% of the Fair Market Value of the Stock on the last business day of that
Purchase Period, in each case rounded up to the next higher full cent, whichever
is lower.
ARTICLE V. EXERCISE OF RIGHT
Section 5.01 Purchase of Stock. On the last business day of a Purchase
Period, the entire credit balance in each Participant's Stock Purchase Account
will be used to purchase the largest number of whole shares of Stock purchasable
with such amount (subject to the limitations of Section 4.01), unless the
Participant has filed with the Company, in advance of that date and subject to
such terms and conditions as the Committee in its sole discretion may impose, a
form provided by the Company (which elects to receive the entire credit balance
in cash).
Section 5.02 Cash Distributions. Any amount remaining in a Participant's
Stock Purchase Account after the last business day of a Purchase Period will be
paid to the Participant in cash within 30 days after the end of that Purchase
Period.
Section 5.03 Notice of Acceleration Date. The Company shall use its best
efforts to notify each Participant in writing at least ten days prior to any
Acceleration Date that the then current Purchase Period will end on such
Acceleration Date.
ARTICLE VI. WITHDRAWAL FROM PLAN
Section 6.01 Voluntary Withdrawal. A Participant may, in accordance with
such terms and conditions as the Committee in its sole discretion may impose,
withdraw from the Plan and cease making payroll deductions by filing with the
Company a form provided for this purpose. In such event, the entire credit
balance in the Participant's Stock Purchase Account will be paid to the
Participant in cash within 30 days. A Participant who withdraws from the Plan
will not be eligible to reenter the Plan until the beginning of the next
Purchase Period.
Section 6.02 Death. Subject to such terms and conditions as the Committee
in its sole discretion may impose, upon the death of a Participant, no further
amounts shall be credited to the Participant's Stock Purchase Account.
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Thereafter, on the last business day of the Purchase Period during which such
Participant's death occurred and in accordance with Section 5.01, the entire
credit balance in such Participant's Stock Purchase Account will be used to
purchase Stock, unless Participant's estate has filed with the Company, in
advance of that day and subject to such terms and conditions as the Committee in
its sole discretion may impose, a form provided by the Company which elects to
have the entire credit balance in such Participant's Stock Account distributed
in cash, in accordance with Section 5.02 or at such earlier time as the
Committee in its sole discretion may decide. Each Participant, however, may
designate one or more beneficiaries who, upon death, are to receive the stock or
the amount that otherwise would have been distributed or paid to the
Participant's estate and may change or revoke any such designation from time to
time. No such designation, change or revocation will be effective unless made by
the Participant in writing and filed with the Company during the Participant's
lifetime. Unless the Participant has otherwise specified in the beneficiary
designation, the beneficiary or beneficiaries so designated will become fixed as
of death so that, if a beneficiary survives the Participant but dies before the
receipt of the payment due such beneficiary, the payment will be made to such
beneficiary's estate.
Section 6.03 Termination of Employment. Subject to such terms and
conditions as the Committee in its sole discretion may impose, upon a
Participant's normal or early retirement with the consent of the Company under
any pension or retirement plan of the Company or Participating Affiliate, no
further amounts shall be credited to the Participant's Stock Purchase Account.
Thereafter, on the last business day of the Purchase Period during which such
Participant's approved retirement occurred and in accordance with Section 5.01,
the entire credit balance in such Participant's Stock Purchase Account will be
used to purchase Stock, unless such Participant has filed with the Company, in
advance of that day and subject to such terms and conditions as the Committee in
its sole discretion may impose, a form provided by the Company which elects to
receive the entire credit balance in such Participant's Stock Purchase Account
in cash, in accordance with Section 5.02; provided, however, that such
Participant shall have no right to purchase Stock in the event that the last day
of such a Purchase Period occurs more than three (3) months following the
termination of such Participant's employment with the Company by reason of such
an approved retirement. In the event of any other termination of employment
(other than death) with the Company or a Participatory Affiliate by a
Participant, participation in the Plan will cease on the date the Participant
ceases to be a Permanent Full-Time Employee for any reason. In such event, the
entire credit balance in such Participant's Stock Purchase Account will be paid
to the Participant in cash within 30 days. For purposes of this Section, a
transfer of employment to any Affiliate, or a leave of absence which has been
approved by the Committee, will not be deemed a termination of employment as a
Permanent Full-Time Employee.
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ARTICLE VII. NONTRANSFERABILITY
Section 7.01 Nontransferable Right to Purchase. The right to purchase
Stock hereunder may not be assigned, transferred, pledged or hypothecated
(whether by operation of law or otherwise), except as provided in Section 6.02,
and will not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition or
levy of attachment or similar process upon the right to purchase will be null
and void and without effect.
Section 7.02 Nontransferable Account. Except as provided in Section 6.02,
the amounts credited to a Stock Purchase Account may not be assigned,
transferred, pledged or hypothecated in any way, and any attempted assignment,
transfer, pledge, hypothecation or other disposition of such amounts will be
null and void and without effect.
ARTICLE VIII. STOCK CERTIFICATES
Section 8.01 Delivery. Promptly after the last day of each Purchase Period
and subject to such terms and conditions as the Committee in its sole discretion
may impose, the Company will cause to be delivered to or for the benefit of the
Participant a certificate representing the Stock purchased on the last business
day of such Purchase Period.
Section 8.02 Securities Laws. The Company shall not be required to issue
or deliver any certificate representing Stock prior to registration under the
Securities Act of 1933, as amended, or registration or qualification under any
state law if such registration is required. The Company will use its best
efforts to accomplish such registration (if and to the extent required) not
later than a reasonable time following the Purchase Period, and delivery of
certificates may be deferred until such registration is accomplished.
Section 8.03 Completion of Purchase. A Participant will have no interest
in the Stock purchased until a certificate representing the same is issued to or
for the benefit of the Participant.
Section 8.04 Form of Ownership. The certificates representing Stock issued
under the Plan will be registered in the name of the Participant or jointly in
the name of the Participant and another person, as the Participant may direct on
a form provided by the Company.
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ARTICLE IX. EFFECTIVE DATE AND AMENDMENT OR
TERMINATION OF PLAN
Section 9.01 Effective Date. The Plan will become effective on February
15, 1989, but only if the Plan is approved by the Company's shareholders at
their 1989 annual meeting.
Section 9.02 Powers of Board. The Board of Directors of the Company may at
any time amend or terminate the Plan, except that no amendment will be made
without prior approval of the shareholders which would (a) authorize an increase
in the number of shares of Stock which may be purchased under the Plan, except
as provided in Section 11.01, (b) permit the issuance of Stock before payment
therefor in full, or (c) reduce the price per share at which the Stock may be
purchased.
Section 9.03 Automatic Termination. No Purchase Period shall begin after
May 1, 2001.
ARTICLE X. ADMINISTRATION
Section 10.01 Appointment of Committee. The Board of Directors of the
Company shall appoint a Committee to administer the Plan consisting of three or
more persons (who may, but need not be, directors of the Company or of a
Participating Affiliate). The Board will determine the size of the Committee
from time to time and will have the power to remove and replace the members
thereof.
Section 10.02 Powers of Committee. Subject to the provisions of the Plan,
the Committee will have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan, to establish
deadlines by which the various administrative forms must be received in order to
be effective, and to adopt such other rules and regulations for administering
the Plan as it may deem appropriate. The Committee shall have full and complete
authority to determine whether all or any part of the Stock acquired pursuant to
the Plan shall be subject to restrictions on the transferability thereof or any
other restrictions affecting in any manner a Participant's rights with respect
thereto but any such restrictions shall be contained in the form by which a
participant elects to participate in the Plan pursuant to Section 2.02.
Decisions of the Committee will be final and binding on all parties who have an
interest in the Plan.
Section 10.03 Stock to be Sold. The Stock to be issued and sold under the
Plan may be treasury stock or authorized but unissued Stock, or the Company may
purchase Stock in the market for sale under the Plan. Except as provided in
Section 11.01, the aggregate number of shares of Stock to be sold under the Plan
will not exceed 4,600,000 shares.
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Section 10.04 Notices. Notices to the Committee should be addressed
as follows:
First Bank System, Inc.
1200 First Bank Place East
Minneapolis, Minnesota 55480
Attn: Employee Stock Purchase Plan Committee
ARTICLE XI. ADJUSTMENT FOR CHANGES
IN STOCK OR COMPANY
Section 11.01 Stock Dividend or Reclassification. If the outstanding
shares of Stock are increased, decreased, changed into or exchanged for a
different number or kind of securities of the Company, or shares of a different
par value or without par value, through reorganization, recapitalization,
reclassification, stock dividend, stock split, amendment to the Company's
Articles of Incorporation, reverse stock split or otherwise, an appropriate
adjustment shall be made in the maximum numbers and/or kind of securities to be
sold under this Plan with a corresponding adjustment in the purchase price to be
paid therefor.
Section 11.02 Merger or Consolidation. If the Company is merged into or
consolidated with one or more corporations during the term of the Plan,
appropriate adjustments will be made to give effect thereto on an equitable
basis in terms of issuance of shares of the corporation surviving the merger or
of the consolidated corporation, as the case may be.
ARTICLE XII. APPLICABLE LAW
Rights to purchase Stock granted under this Plan shall be construed and
shall take effect in accordance with the laws of the State of Minnesota.
ARTICLE XIII. PARTICIPATION OF NON-EMPLOYEE DIRECTORS
Section 13.01 Eligible Directors. Each director of the Company is eligible
to participate in the Plan pursuant to this Article XIII unless such director is
an employee of the Company or Affiliate. An eligible director is herein referred
to as a "Non-employee Director." A Non-employee Director shall be eligible to
participate in the Plan beginning on the first day of the first Purchase Period
to commence after such person becomes a Non-employee Director. Subject to the
provisions of this Article XIII, each such Non-employee Director will continue
to be eligible to participate in the Plan so long as he or she remains a Non-
employee Director.
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Section 13.02 Election to Participate. A Non-employee Director may elect
to participate in the Plan by filing with the Company, in advance of the first
succeeding Purchase Period following adoption of this Article XIII or, in the
case of a newly appointed or elected Non-employee Director, following such
appointment or election, a form provided by the Company for such purpose (which
authorizes the Company to deduct for the purchase of Stock hereunder all or a
portion of the Director Compensation (as defined below) that such Non-employee
Director is entitled to receive for the period beginning with the first day in
that Purchase Period and continuing until the Non-employee Director ceases to
be eligible to participate in the Plan). "Director Compensation" shall mean all
amounts which the director would be entitled to receive for serving as a
director in the relevant Purchase Periods, including fees for attendance at
meetings of the Board of Directors or any committee of the Board of Directors or
for any other services as a director of the Company.
Section 13.03 Deduction from Director Compensation. The form described in
Section 13.02 will permit a Non-employee Director to elect deductions of any
whole dollar amount or whole percentage of Director Compensation to be used to
purchase Stock hereunder. Director Compensation will be credited to the
Non-employee Director's Stock Purchase Account on each day that Director
Compensation would otherwise be paid to such Non-employee Director, subject to
Section 3.04.
Section 13.04 Interest. No interest will be paid upon deductions from
Director Compensation or on any amount credited to, or on deposit in, a
Non-employee Director's Stock Purchase Account.
Section 13.05 No Additional Contributions. A Non-employee Director may not
make any payment into the Stock Purchase Account other than the deductions from
Director Compensation made pursuant to the Plan.
Section 13.06 Purchase of Shares; Purchase Price.
(a) Each Non-employee Director will automatically purchase on the last
day of the Purchase Period all of the largest number of whole shares of stock
that can be purchased at the purchase price specified in Section 13.06(b) with
the entire credit balance in the Non-employee Director's Stock Purchase Account.
Any amount remaining in a Non-employee Director's Stock Purchase Account after
the last business day of a Purchase Period will remain in the Non-employee
Director's Stock Purchase Account, except that for the Purchase Period in which
the Non-employee Director ceases to be eligible to participate in the Plan, any
amount remaining in such account after giving effect to the purchase for such
period will be paid to the Non-employee Director in cash within 30 days.
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(b) The purchase price for Non-employee Directors for any Purchase Period
shall be the lower of (i) 85% of the Fair Market Value of the Stock on the first
business day of that Purchase Period or (b) 85% of the Fair Market Value of the
Stock on the last business day of that Purchase Period, in each case rounded up
to the next higher full cent.
Section 13.07 No Voluntary Withdrawal. A Non-employee Director may not
voluntarily withdraw from the Plan.
Section 13.08 Death. Upon the death of a Non-employee Director, no further
amounts shall be credited to the Non-employee Director's Stock Purchase Account.
Thereafter, on the last business day of the Purchase Period during which such
Non-employee Director's death occurred and in accordance with Section 13.06, the
entire credit balance in such Non-employee Director's Stock Purchase Account
will be used to purchase Stock. Each Non-employee Director, however, may
designate one or more beneficiaries who, upon death, are to receive the stock
and any amount that otherwise would have been distributed or paid to the Non-
employee Director's estate and may change or revoke any such designation from
time to time. No such designation, change or revocation will be effective unless
made by the Non-employee Director in writing and filed with the Company during
the Non-employee Director's lifetime. Unless the Non-employee Director has
otherwise specified in the beneficiary designation, the beneficiary or
beneficiaries so designated will become fixed as of death so that, if a
beneficiary survives the Non-employee Director but dies before the receipt of
the payment due such beneficiary, the payment will be made to such beneficiary's
estate.
Section 13.10 Termination as a Director. Participation in the Plan will
cease on the date the Non-employee Director ceases to be eligible to participate
in the Plan pursuant to Section 13.01. In such event, on the last business day
of the Purchase Period during which such Non-employee Director ceased to be
eligible under Section 13.01 and in accordance with Section 13.06 the entire
credit balance in such Non-employee Director's Stock Purchase Account will be
used to purchase Stock.
Section 13.11 Nontransferable Right to Purchase. The right to purchase
Stock hereunder may not be assigned, transferred, pledged or hypothecated
(whether by operation of law or otherwise), except as provided in Section 13.08
and will not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition or
levy of attachment or similar process upon the right to purchase will be null
and void and without effect.
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Section 13.12 Nontransferable Account. Except as provided in Section
13.08 the amounts credited to a Stock Purchase Account may not be assigned,
transferred, pledged or hypothecated in any way, and any attempted assignment,
transfer, pledge, hypothecation or other disposition of such amounts will be
null and void and without effect.
Section 13.13 Stock Certificates. All matters pertaining to the issuance
and delivery of and the Non-employee Director's interest in the Stock purchased
pursuant to this Plan and the certificates representing such Stock shall be
governed by Article VIII.
Section 13.14 Tax Matters. This Article XIII is not subject to Section
423 of the Code or any other provision of the Plan which refers to, or is based
upon, such section. For tax purposes, this Article XIII shall be treated as
separate and apart from the balance of the Plan.
-12-
<PAGE>
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[LOGO]
First Bank
System
This Proxy is solicited on behalf of the Board of Directors of
First Bank System, Inc.
Annual Meeting of Stockholders - April 17, 1996
The undersigned hereby appoints Susan E. Lester, Lee R. Mitau and Richard A.
Zona as proxies (each with power to act alone and with power of substitution) to
vote as designated herein, all shares of stock the undersigned is entitled to
vote at the Annual Meeting of Stockholders of First Bank System, Inc. to be held
on April 17, 1996, and at any adjournments thereof, on those matters referred to
in the Proxy Statement. The Proxies are authorized in their discretion to vote
upon such other business as may properly come before the meeting.
This Proxy cannot be voted unless it is properly signed and returned. If
properly signed and returned, this Proxy will be voted as designated by the
stockholder. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF ALL NOMINEES FOR DIRECTOR, AND FOR PROPOSALS 2, 3 AND 4.
The nominees for Director are Roger L. Hale, Richard L. Knowlton, Edward J.
Phillips, James J. Renier and Richard L. Schall.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
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. FOLD AND DETACH HERE .
<PAGE>
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[X] Please mark your 7216
vote as in this
example.
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The Board of Directors recommends a vote "FOR" proposals 1, 2, 3, and 4.
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FOR WITHHELD
1. Election of Directors (See Reverse) [_] [_]
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approve the proposal to approve the 1996 [_] [_] [_]
Stock Incentive Plan (and thereby amend
and restate the Company's 1991 Stock
Incentive Plan and 1994 Stock Incentive
Plan)
FOR AGAINST ABSTAIN
3. Approve the proposal to amend the [_] [_] [_]
Company's Amended and Restated Employee
Stock Purchase Plan
4. Ratify the selection of the firm of [_] [_] [_]
Ernst & Young LLP as independent
auditors.
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears on this Proxy Card. Joint owners should each
sign. Executors, administrators, trustees, etc. should so indicate when signing
and where more than one is named, a majority should sign. Please sign, date and
return this Proxy Card promptly using the enclosed envelope.
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SIGNATURE(S) DATE
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. FOLD AND DETACH HERE .
