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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-K
(Mark One)
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-4170
Fourth Financial Corporation
(Exact name of registrant as specified in its charter)
Kansas 48-0761683
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 North Broadway
Wichita, Kansas 67202
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (316) 261-4444
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $5.00 per share
(Title of Class)
Depositary Shares, each representing a 1/16th interest in a share of Class A
7% Cumulative Convertible Preferred Stock, Par Value $100.00 per share,
Liquidation Preference $400.00 per share
(equivalent to $25.00 per Depositary Share)
(Title of Class)
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes_X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _X_
As of March 1, 1995, the aggregate market value of the voting stock of
Registrant held by nonaffiliates of Registrant was approximately $747,615,000.
Such value was computed by reference to the reported last sales price of such
stock on March 1, 1995. At March 1, 1995, 27,602,896 shares of Common Stock, par
value $5 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the April 20, 1995 Annual Meeting of
Stockholders of Registrant (the "1995 Proxy Statement") to be filed pursuant to
Regulation 14A are incorporated by reference into Part III of this report.
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TABLE OF CONTENTS
Item Page
PART I
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .
4. Submission of Matters to a Vote of Security Holders. . . . . . . .
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . .
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . .
8. Financial Statements and Supplementary Data. . . . . . . . . . . .
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . .
PART III
10. Directors and Executive Officers of the Registrant . . . . . . . .
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . .
12. Security Ownership of Certain Beneficial Owners and Management . .
13. Certain Relationships and Related Transactions . . . . . . . . . .
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Information. . . . . . . . . . . . . . . . . . . . . . . .. Appendix A
PART I
Item 1. Business.
General
Fourth Financial Corporation ("Registrant" or the "Company") is
a bank holding company headquartered in Wichita, Kansas, which offers
a broad range of bank and bank-related services through its
subsidiaries, BANK IV Kansas, National Association ("BANK IV Kansas"),
BANK IV Oklahoma, National Association ("BANK IV Oklahoma"), and BANK
IV Missouri, National Association ("BANK IV Missouri"). At September
30, 1994, the Company was the 71st largest, as measured by total
assets, among bank holding companies in the United States. The Company
is the largest bank holding company headquartered in Kansas and, at
December 31, 1994, had total consolidated assets of $7.73 billion,
total deposits of $5.65 billion, and stockholders' equity of
$602.1 million. BANK IV Kansas, whose predecessor was originally
organized in 1887, is the largest commercial bank in Kansas and, at
December 31, 1994, had approximately 12.0% of all insured deposits in
Kansas. BANK IV Kansas, the only major statewide bank in Kansas, has 87
offices in 36 communities. BANK IV Oklahoma has 56 offices in 23
communities. BANK IV Missouri, acquired in January, 1995, has three
offices in Independence, Missouri.
The three BANK IV banks provide a wide range of commercial and
retail banking services. Each separate BANK IV market-based unit is
under the management of a local president. Trust and customer
investments, mortgage banking, commercial finance and leasing, and bank
card services are each managed on a line-of-business basis. At
December 31, 1994, the BANK IV banks held total assets of $6.71 billion
in various fiduciary capacities and exercised investment authority over
$2.39 billion of these assets. Also on that date, the BANK IV banks
serviced a $1.46-billion residential mortgage loan portfolio, of which
$682.7 million was serviced for others. The BANK IV banks operate the
VIA system, a network of 340 automated teller machines located in
Kansas, Oklahoma, and Missouri at which approximately 12.7 million
electronic banking transactions were initiated during 1994.
In addition, Registrant owns several other subsidiaries which
perform various financially-related services. These subsidiaries
include a community development corporation, which makes loans and
investments to promote redevelopment in low- and moderate-income
neighborhoods of the communities served by the BANK IV banks and to
finance small and minority-owned businesses; a subsidiary of BANK IV
Kansas which offers non-deposit investment products and services at
offices of the BANK IV banks; and a company which reinsures credit life
and health insurance policies. Such subsidiaries in the aggregate do
not account for a material portion of the Company's revenues or
profits.
Recent Acquisitions
During 1994, the Company acquired two banks located in Kansas and
a bank and a federal savings bank located in Oklahoma. The Kansas banks
acquired were Emprise Bank, National Association, Hutchinson, Kansas
("Emprise"), and First National Bank and Trust Company in Dodge City,
Dodge City, Kansas ("Dodge"). The Oklahoma acquisitions included Equity
Bank for Savings, F.A., Oklahoma City, Oklahoma ("Equity"), and Metro
Bank of Broken Arrow, Broken Arrow, Oklahoma ("Metro").
The following table sets forth for each 1994 acquisition the
amount of assets of the acquired financial institution at the date of
acquisition, the amount paid by the Company, the number of shares of
common stock of the Company issued, and the accounting method used to
account for the acquisition.
Accounting
Bank Assets Cash Paid No. of Shares Method
---- ------ -------- ------------ ---------
(In thousands)
Equity $491,506 $90,720 - Purchase
Emprise 258,731 31,206 - Purchase
Dodge and Metro 144,999 - 590,710 Pooling
36(1) 70,300(1) Purchase
--------
(1) To acquire minority interests in Dodge and Metro.
During January and February 1995 three acquisitions were completed.
In Oklahoma, the Company acquired Stillwater Federal Savings Bank,
Stillwater, Oklahoma ("Stillwater"), and Security Bank and Trust
Company, Blackwell, Oklahoma ("Security"). The Missouri bank acquired
was Standard Bank & Trust Company, Independence, Missouri ("Standard").
For the 1995 acquisitions, the following table sets forth the amount
of assets of the acquired financial institution at December 31, 1994,
the amount paid by the Company, the number of shares of common stock of
the Company issued, and the accounting method used to account for the
acquisition.
<TABLE>
<CAPTION>
Accounting
Bank Assets Cash Paid No. of Shares Method
----- ------ ---------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Stillwater . . . . . . . . . . . . . . . $95,503 $ - 368,981 Purchase
Standard . . . . . . . . . . . . . . . . 85,190 - 315,000 Pooling
Security . . . . . . . . . . . . . . . . 46,851 8,197 - Purchase
</TABLE>
As of March 1, 1995, the Company has no binding commitments,
agreements, or understandings to acquire any additional financial
institutions, but additional acquisition agreements may be negotiated
or entered into at any time. Though the Company considers strategic
acquisitions which can be made on favorable terms, the Company's focus
has now shifted from growth by acquisition to internal growth,
enhancement of revenues, and greater efficiency.
Competition
BANK IV Kansas is the largest of approximately 460 commercial
banks in Kansas, and as of June 30, 1994 (the latest date for which
statewide information is available), held approximately 15.5% of the
total bank deposits in Kansas. As of June 30, 1994, BANK IV Kansas
ranked 120th largest, as measured by total assets, out of approximately
10,600 commercial banks in the United States. BANK IV Oklahoma is the
second-largest of approximately 350 banks in Oklahoma. BANK IV Missouri
is one of approximately 475 commercial banks in Missouri and is one of
over 30 commercial banks headquartered in the Missouri portion of the
metropolitan Kansas City market.
There are one or more other commercial banks located in each
BANK IV community, resulting in strong competition in all areas of bank
services. The principal methods of competition in the commercial
banking industry are price, service, and interest rates paid to
depositors and charged to credit customers. In addition, banks compete
for loans and deposits with other types of financial institutions such
as savings and loan associations, credit unions, money market mutual
funds, and finance companies. Increasingly, banks also compete for both
consumer and commercial loans and for deposits with large retail and
commercial enterprises. Among other things, this increased competition
has resulted in banks being required to accept lower interest rates on
loans and to pay interest on a larger percentage of their deposits.
Lines of Business and Reportable Segments
Registrant and its subsidiaries engage primarily in commercial
banking. Registrant and its subsidiaries, therefore, did not engage in
material operations in separate reportable industry segments for the
last three fiscal years.
Employees
As of March 1, 1995, Registrant and its subsidiaries had a total
of 3,520 full-time-equivalent employees. Registrant had 985
full-time-equivalent employees. BANK IV Kansas had 1,632, BANK IV
Oklahoma had 876, BANK IV Missouri had 25, and Fourth Financial
Insurance Company and BANK IV Community Development Corporation each
had one.
Regulation and Supervision
Federal Regulation. The Company is subject to the Bank Holding
Company Act of 1956, as amended (the "Act"), and to regulation by the
Board of Governors of the Federal Reserve System (the "Board"). The Act
limits the nonbanking activities which may be engaged in by the Company
and its subsidiaries to those so closely related to banking or managing
or controlling banks as to be a proper incident thereto. In determining
whether a particular activity is a proper incident to banking or
managing or controlling banks, the Board must consider whether
performance of an activity by an affiliate of a bank holding company
can reasonably be expected to produce benefits to the public, such as
greater convenience, increased competition, or gains in efficiency. The
benefits of the activity must also outweigh possible adverse effects,
such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices.
The Act also prohibits bank holding companies from acquiring
substantially all the assets of, or owning more than 5% of the voting
shares of, any bank which is not already majority-owned, or of any
nonbanking company, without the prior approval of the Board. The Board
may not approve an application to acquire before September 29, 1995,
shares or assets of a bank located outside the state in which the
operations of the applicant's banking subsidiaries are principally
conducted unless such acquisition is specifically authorized by a
statute of the state in which the bank whose shares or assets are to be
acquired is located. For a description of recently enacted changes in
federal law, see the section below captioned Recently Enacted Federal
Legislation.
The Company, its nonbanking subsidiaries, BANK IV Kansas, BANK IV
Oklahoma, and BANK IV Missouri are all affiliates of each other within
the meaning of the Federal Reserve Act. As such, they are subject to
certain restrictions on loans by the BANK IV banks to the Company or
such nonbanking subsidiaries and on investments in and loans secured by
their stock or other securities. The Company and its subsidiaries,
including the BANK IV banks, are also subject to certain restrictions
on the issuance, underwriting, and distribution of securities. In
addition, the Board may examine the Company or any of its subsidiaries.
As a bank holding company, the Company is a legal entity separate
and distinct from its subsidiaries. The principal sources of funds
available for dividends on the Company's common stock and its preferred
stock are dividends from the BANK IV banks and cash and other
investments held by the Company. The approval of the Comptroller of the
Currency (the "Comptroller") is required if total dividends declared by
a national bank in any one year exceed the bank's net profits for that
year plus the profits for the two preceding years retained by the bank.
In 1995, the BANK IV banks may pay an aggregate of approximately $39.9
million (in addition to their 1995 net profits) in dividends to the
Company without obtaining regulatory approval.
The Comptroller's approval was required and obtained for
dividends paid by BANK IV Oklahoma in 1994 and for some of the
dividends paid by BANK IV Kansas in 1994. Because of the financial
strength of Registrant and the banks' anticipated earnings capacity,
the BANK IV banks expect to be able to obtain permission, if required,
from the Comptroller to pay dividends in 1995 to the extent justified
by their respective financial conditions and subject to the capital
requirements described below.
Recently Enacted Federal Legislation. The recently enacted
federal Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 will increase the ability of Registrant and other bank holding
companies to make interstate acquisitions and to operate their
subsidiary banks. Commencing on September 29, 1995, adequately
capitalized and adequately managed bank holding companies will be
permitted to acquire banks located anywhere in the United States
without regard to the provisions of any state laws prohibiting such
acquisitions. Interstate acquisitions will not be permitted, however,
if the potential acquirer would control more than ten percent of the
insured deposits in the United States or more than 30 percent of
insured deposits in the home state of the bank to be acquired or in any
state in which such bank has a branch. States may enact statutes
increasing the 30 percent limit and may also lower such limit if they
do so on a non-discriminatory basis. States will also be permitted to
prohibit acquisitions of banks that have been established for fewer
than five years. The Board of Governors of the Federal Reserve System
is required to consider the applicant's record under the federal
Community Reinvestment Act in determining whether to approve an
interstate banking acquisition.
The new statute also permits, after June 1, 1997, interstate
branch banking in all states by adequately capitalized and adequately
managed banks, but a state may enact specific legislation before June
1, 1997 prohibiting interstate branch banking in that state, in which
event banks headquartered in the state will not be permitted to branch
into other states. A state may also enact legislation permitting non-
discriminatory interstate branch banking in such state before June 1,
1997. Applications for interstate branching authority will be subjected
to regulatory scrutiny of compliance with both federal and state
community reinvestment statutes with respect to all of the banks
involved in the proposed transaction.
Registrant is unable to predict the effect, if any, of such new
legislation on it.
Capital Guidelines. Bank holding companies, such as the
Company, and their bank subsidiaries are required to maintain three
capital ratios which measure capital adequacy. Capital is separated
into "Tier I capital" (as applied to the Company, common stockholders'
equity and Preferred Stock, less certain intangible assets) and
"Tier II capital" (as applied to the Company, the allowance for credit
losses limited to 1.25% of risk-weighted assets).
The first two ratios, which are based on the degree of credit
risk in the company's assets, provide for weighting assets based on
assigned risk factors and include off-balance-sheet items such as loan
commitments and stand-by letters of credit. The ratio of total capital
(Tier I capital plus Tier II capital) to risk-weighted assets and
off-balance-sheet commitments and contingencies must be at least 8.0%
and the ratio of Tier I capital to risk-weighted assets and
off-balance-sheet commitments must be at least 4.0%.
The capital leverage ratio supplements the risk-based capital
guidelines. Banks and bank holding companies are to maintain a minimum
ratio of Tier I capital to average adjusted total assets of 3.0%.
These ratio requirements are minimums. Any institution operating
at or near those levels would be expected by the regulators to have
well-diversified risk, including no undue interest rate risk exposures,
excellent asset quality, high liquidity, and good earnings and, in
general, would have to be considered a strong banking organization. All
other organizations and any institutions experiencing or anticipating
significant growth are expected to maintain capital ratios at least one
to two percent above the minimum levels, and higher capital ratios can
be required if warranted by particular circumstances or risk profile.
A bank's deposit insurance premium is based, in part, on the
bank's capital levels. The Federal Deposit Insurance Corporation is the
single insurer of deposits in financial institutions. Deposit insurance
premium rates range from 0.23% to 0.31% of a bank's assessment base (as
defined), depending on the bank's supervisory rating by the bank's
primary regulator and its capital level. (The Federal Deposit
Insurance Corporation has proposed, but not adopted, a reduction in
premium rates.) A bank is typically defined to be "well capitalized" if
it maintains a Tier I capital ratio of at least 6.0%, a total
risk-based capital ratio of at least 10.0%, and a leverage ratio of at
least 5.0%. It is the Company's intention to maintain sufficient
capital in each of its bank subsidiaries to permit them to maintain a
"well capitalized" designation. The capital ratios for both of the
Company's subsidiary banks exceeded the "well capitalized" regulatory
capital requirements at December 31, 1994.
Pending and Proposed Federal Legislation. There are various
pending and proposed bills in Congress that would restructure the
federal supervision of financial institutions. The Company is unable to
predict with any certainty the effect any such legislation would have
on the Company and its subsidiaries.
State Regulation. Each of the three states in which the Company's
banking subsidiaries are located has laws (described below) limiting
interstate acquisitions of banks headquartered in such state. Such
state laws will be for the most part pre-empted by the recent federal
legislation described above. One or more of such states may amend their
laws in response to the federal legislation before it takes effect, but
the Company is unable to predict the likelihood or nature of any such
amendments.
Kansas. A Kansas bank holding company is prohibited from
acquiring, directly or indirectly, any voting shares in any Kansas bank
if, after such acquisition, all of the Kansas banks in which such bank
holding company or any subsidiary of such bank holding company has
ownership or control of any voting shares would have, in the aggregate,
more than 15% of the total deposits of all banks domiciled in Kansas
plus the total deposits, savings deposits, shares and other accounts in
savings and loan associations, federal savings banks, and building and
loan associations in Kansas as determined by the Kansas bank
commissioner on the basis of the most recent reports to supervisory
authorities which are available at the time of the acquisition. The
statute contains an exception from the 15%-of-statewide-deposits
limitation in the case of an acquisition that the Kansas bank
commissioner determines would be in the public interest to prevent the
failure or probable failure of the acquired bank. As of December 31,
1994, BANK IV Kansas had approximately 12.0% of the total deposits of
all Kansas banks, savings and loan associations, federal savings banks,
and building and loan associations according to the most recent
information available to the Company.
Bank holding companies located in Nebraska, Missouri, Colorado,
Oklahoma, and Arkansas are permitted to acquire banks and bank holding
companies located in Kansas upon obtaining the approval of the Kansas
State Banking Board. Among the factors to be considered in granting
such approval are whether existing subsidiaries of the applicant are
operated in a safe, sound, and prudent manner, the adequacy of services
being provided by existing subsidiaries of the applicant, whether the
applicant proposes to provide adequate and appropriate services in the
communities served by the Kansas banks to be acquired, whether the
proposed acquisition will result in a Kansas bank or bank holding
company located in Kansas that has adequate capital and good earnings
prospects, and whether the proposed acquisition is in the interests of
the depositors and creditors of the bank or bank holding company which
is the subject of the proposed acquisition and in the public interest
generally. Such acquisitions are also subject to the deposits
limitation described above. No application can be approved unless the
state banking board finds that the laws of the state or jurisdiction in
which the applicant bank holding company is located permit a Kansas
bank holding company to acquire a bank located in that state or
jurisdiction on terms that are substantially no more restrictive than
those established under the Kansas statute. The Kansas statute would
also permit Iowa banks or bank holding companies to acquire Kansas
banks and bank holding companies if Iowa were to adopt appropriate
reciprocal legislation.
Oklahoma. The Company is permitted under Oklahoma law to acquire
additional banks, but such banks must have been in existence and
continuous operation for at least five years. Oklahoma prohibits a
multi-bank holding company from acquiring any additional banks if such
acquisition would result in the bank holding company having direct or
indirect ownership of banks located in Oklahoma that would have in
excess of 11% of the aggregate deposits of all financial institutions
located in Oklahoma which have deposits insured by the Federal Deposit
Insurance Corporation or National Credit Union Administration. As of
December 31, 1994, BANK IV Oklahoma had approximately 5.4% (5.6% on a
pro forma basis) of the total deposits of insured Oklahoma savings and
loans, credit unions, and banks. This restriction is not expected to
affect the Oklahoma acquisition activities of the Company in the near
future.
Missouri. The Company is also permitted under Missouri law to
acquire additional banks. Missouri law prohibits an adjoining-state
bank holding company from obtaining control of any bank if the total
deposits in that bank together with the total deposits in all banks
controlled by the adjoining-state bank holding company exceed 13% of
the total deposits in all depository financial institutions in Missouri
which have deposits insured by an agency of the federal government. As
of December 31, 1994, Standard Bank & Trust Company, the predecessor of
BANK IV Missouri, had only approximately 0.1% of the total deposits of
federally insured depository financial institutions in Missouri as of
June 30, 1994, the latest date for which information concerning
deposits in Missouri financial institutions is available to the
Company, so Missouri's 13% restriction is not expected to affect the
Missouri acquisition activities of the Company in the near future.
Government Monetary Policy and Economic Controls
The earnings of Registrant and the BANK IV banks are affected by
the policies of regulatory authorities. An important function of the
Federal Reserve System is to regulate the national supply of bank
credit in order to affect the level of economic activity. Among the
instruments used to implement these objectives are open market
operations in U.S. Government securities, changes in the discount rate
on member bank borrowings, and changes in reserve requirements. These
instruments are used in varying combinations to influence overall
growth and distribution of bank loans, investments and deposits, and
their use may also affect interest rates charged on loans or paid for
deposits.
Statistical Disclosure
The information required by Guide 3, "Statistical Disclosure by
Bank Holding Companies," has been integrated throughout the attached
Appendix under the captions "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," and such information is hereby incorporated
herein by reference.
Executive Officers of the Registrant
Listed below are the names and ages of all executive officers of
Registrant and offices held by them with Registrant (and, in the cases
of Mr. Knudson, Mr. Greer, and Mr. Keller, with the BANK IV banks).
<TABLE>
<CAPTION>
Name Age Positions and Offices
-------- ----- ----------------------
<S> <C> <C>
Darrell G. Knudson 57 Chairman of the Board, President, and Chief Executive
Officer of Registrant and Director of BANK IV Kansas and
BANK IV Oklahoma
K. Gordon Greer 58 Chairman of the Board, President, and Chief Executive
Officer of BANK IV Kansas
Edward F. Keller 54 Chairman of the Board, President, and Chief Executive
Officer of BANK IV Oklahoma
Michael R. Ritchey 55 President, Trust and Asset Management, and Senior Trust
Officer of Registrant
James J. Gartner 53 Executive Vice President, Risk Control Group, of
Registrant
John F. Guettler 49 Executive Vice President and Director of Human Resources
of Registrant
Clayton D. Pledger 49 Executive Vice President, Operations and Technology, of
Registrant
William J. Rainey 48 Executive Vice President, Secretary, and General Counsel
of Registrant
Michael J. Shonka 47 Executive Vice President and Chief Financial Officer of
Registrant
David L. Strohm 43 Executive Vice President and Treasurer of Registrant
</TABLE>
Mr. Knudson is a member of the Executive Committee of Registrant.
There is no family relationship between any of the executive
officers of Registrant.
Mr. Knudson was elected Vice Chairman of Registrant effective
December 31, 1990, Chairman of the Board on July 1, 1991, and President
on March 16, 1992. Mr. Knudson was Vice Chairman of First Bank
System, Inc., a Minnesota-based multi-bank holding company, from 1982
until his resignation in 1990 to join Registrant.
Mr. Greer has been Chairman of the Board of BANK IV Kansas since
December, 1992, and President of BANK IV Kansas (or its predecessor
BANK IV Wichita) since March, 1989. He was a director and President of
the Company from September, 1990 through March, 1992 and was also
Chairman of the Board of BANK IV Kansas (or its predecessor BANK IV
Wichita) from January, 1991 through December, 1991.
Mr. Keller has been Chairman of the Board of BANK IV Oklahoma
since December 31, 1992, and President of BANK IV Oklahoma since July,
1994. He was Chairman of the Board and Chief Executive Officer of The
Fourth National Bank of Tulsa prior to its acquisition by the Company
in December, 1992.
Mr. Ritchey has been the Senior Trust Officer of the Company and
its subsidiary banks and responsible for their trust operations for
more than five years. He was elected Executive Vice President of
Registrant in February, 1990, and was elected to his present position
in January, 1993.
Mr. Gartner was Senior Vice President and Senior Credit Officer
of First Bank South Dakota, N.A. (from July 1987) and Senior Credit
Officer of First Bank North Dakota, N.A. and First Bank East Grand
Forks, N.A. (from 1990) until he became employed by Registrant in
February, 1992.
Mr. Guettler was elected Senior Vice President of Registrant in
December, 1988, and Executive Vice President in January, 1995.
Mr. Pledger supervises the Registrant's operations and technology
functions. Mr. Pledger was Senior Vice President of NCNB Corporation
(and predecessor companies) with responsibilities in various operating
divisions (cash management, item processing, deposit operations,
electronic payments, corporate trust, commercial loan and depository
services) from 1981 until he was employed by Registrant in his present
capacity in June, 1991.
Mr. Rainey was Senior Vice President, General Counsel, and
Secretary of Valley National Corporation (Arizona bank holding company)
from 1987 to 1991 and Vice President and General Counsel of Cabot
Corporation, Boston, Massachusetts (specialty chemicals and energy)
from 1991 to 1993. He has been employed by Registrant in his present
position since February, 1994.
Mr. Shonka, Registrant's Chief Financial Officer, was elected
Senior Vice President of Registrant in January, 1988, and Executive
Vice President in December, 1994.
Mr. Strohm was elected Executive Vice President of Registrant in
September, 1990 and Treasurer in 1986. Mr. Strohm has been responsible
for supervising Registrant's funds management, treasury, and asset and
liability management functions since 1983, and mortgage, commercial
finance and leasing, and finance and accounting since 1993.
Directors of the Registrant
Listed below are the names and principal occupations of
Registrant's directors.
<TABLE>
<CAPTION>
Name Principal Occupation
----- -----------------------
<S> <C>
Lionel D. Alford President, Alford, Inc. (investments and consulting)
Thomas R. Clevenger Investments
Jordan L. Haines Chairman of the Board of Registrant until his retirement in
1991
Joseph M. Klein President, CCI Corporation (truck parts distributor)
Lawrence M. Jones Chairman and Chief Executive Officer, The Coleman
Company, Inc. (manufacturer of outdoor recreational
products) until his retirement in December, 1993
Darrell G. Knudson Chairman of the Board of Registrant
Fred L. Merrill, Sr. Chief Executive Officer, Cereal Food Processors, Inc. (flour
mills)
Russell W. Meyer, Jr. Chairman and Chief Executive Officer, The Cessna Aircraft
Company (general aviation aircraft manufacturer)
Laird G. Noller President, Noller Enterprises (automobile dealerships)
Patrick E. O'Shaughnessy Chairman and Chief Executive Officer, Lario Oil & Gas
Company (oil exploration)
Robert F. Vickers Trustee and Administrator, The Vickers Trusts
Ken Wagnon Owner, franchise restaurants and other investments, and
President, Capital Enterprises, Inc. (accounting and
management services)
</TABLE>
Item 2. Properties.
Kansas
The only significant real property owned by Registrant is a
building located in Wichita, Kansas, acquired in January, 1994 to be
remodeled for use as a data processing and operations facility. BANK IV
Kansas owns substantially all of its banking facilities, but the land
on which some of such facilities are located is leased and 13 branch
facilities, including five branches located in supermarkets, are leased
entirely. Registrant believes that all of such properties are well
maintained and suitable for their intended purposes. Described below
are the principal buildings operated by BANK IV Kansas.
Wichita
Registrant and BANK IV Kansas occupy a four-building complex
located in downtown Wichita, Kansas. The Fourth Financial Center is a
ten-level office building located at 100 North Broadway. The building
is located on an 88,450-square-foot tract of land and contains
approximately 396,000 square feet of gross area, which includes a
25,000-square-foot enclosed courtyard. The building contains
approximately 312,000 rentable square feet, of which BANK IV Kansas and
Registrant utilize approximately 170,000 square feet with the balance
being leased to tenants. The Operations Center is a five-level office
building located adjacent to Fourth Financial Center and connected by
an enclosed pedestrian walkway. The 63,000-square-foot building is
located on a 13,020-square-foot tract of land and houses operating
functions of Registrant and its subsidiaries. A 450-car, six-level
parking garage and walk-in bank facility is located just west of Fourth
Financial Center and is connected to it by an enclosed pedestrian
walkway.
Another building, Exchange Place, is located one block west of
the Fourth Financial Center. Exchange Place is located on five tracts
of land, two of which are owned by BANK IV Kansas and three of which
are leased. The leases on the three leased tracts expire on August 31,
2003, and on December 31, 2009. The building, constructed prior to 1903
with various additions to the basic structure being completed through
1957, is an eight-level structure plus a full basement, a mezzanine
floor, and an eighth floor mechanical area. The building contains
approximately 147,000 square feet of rentable space of which BANK IV
Kansas and Registrant are currently occupying approximately 123,500
square feet and the remaining 23,500 square feet are leased.
Topeka
BANK IV Kansas owns the BANK IV Tower, a 16-story office building
in downtown Topeka, Kansas containing 230,000 rentable square feet. At
February 1, 1995, BANK IV Kansas occupied approximately 83,000 square
feet of the building and approximately 121,500 of the remaining 147,000
square feet was leased. A 260-car, ten-level parking garage is attached
to the building.
Townsite Plaza Development, Inc., a subsidiary of BANK IV Kansas,
owns and operates three buildings located immediately east of the
BANK IV Tower above a municipal subsurface garage. The three buildings,
constructed between 1976 and 1981, contain an aggregate of
approximately 138,000 square feet of rentable space, of which a total
of approximately 116,000 square feet was leased as of February 1, 1995.
Oklahoma
BANK IV Oklahoma does not own any major building facilities.
Under a lease which expires in 2004, it leases 61,000 square feet in
the BANK IV Center Building in downtown Tulsa which is used as the
BANK IV Oklahoma headquarters. Under a lease which expires in 2004, it
also leases 33,000 square feet in the BANK IV Tower in Oklahoma City as
headquarters for its Oklahoma City activities. BANK IV Oklahoma owns 41
of its 60 banking facilities and leases the rest. BANK IV Oklahoma
believes its facilities are substantially all well-maintained and
generally suitable for their intended purposes.
Missouri
BANK IV Missouri owns all three of its banking facilities in
Independence, Missouri, which contain an aggregate of 20,000 square
feet, all of which is occupied by the bank.
Item 3. Legal Proceedings.
The Registrant and its subsidiaries are defendants in various
legal proceedings that arise in the ordinary course of business.
Claims in various amounts of up to approximately $20,000,000 have been
asserted in some of these proceedings. However, after consultation
with legal counsel, management believes that potential liabilities, if
any, arising from these claims would not have a material adverse effect
on the Registrant's business or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders.
No information is required in response to this Item as no matters
were submitted to a vote of Registrant's security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information. The Common Stock of Registrant is traded in
the national over-the-counter market. The NASDAQ symbol for the Common
Stock is FRTH.
Information concerning the high and low bid prices for the
Registrant's Common Stock for each full quarterly period within the two
most recent fiscal years is contained in the attached Appendix under
the caption "Quarterly Financial Data" and is hereby incorporated by
reference.
(b) Holders. There were approximately 6,056 holders of record of
Registrant's Common Stock at March 1, 1995.
(c) Dividends. The information concerning the payment of dividends
by Registrant during the past two fiscal years contained in the
attached Appendix under the caption "Quarterly Financial Data" is
hereby incorporated herein by reference. The information concerning
restrictions on the ability of Registrant's subsidiaries to transfer
funds to Registrant contained in Item 1 under the caption "Regulation
and Supervision," in Note 19 -- Restrictions on Intercompany Funds
Transfers of the Notes to Consolidated Financial Statements contained
in the attached Appendix, and under the caption "Parent Company Funding
Sources and Dividends" in the attached Appendix is hereby incorporated
by reference.
Item 6. Selected Financial Data.
The information required by Item 301 of Regulation S-K,
contained in the attached Appendix under the caption "Selected
Consolidated Financial Data," is hereby incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The information required by Item 303 of Regulation S-K, contained
in the attached Appendix under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations," is hereby
incorporated by reference.
Item 8. Financial Statements and Supplementary Data.
Set forth below are the consolidated financial statements of
Registrant and its subsidiaries, appearing in the attached Appendix,
which are hereby incorporated by reference:
a. Consolidated Statements of Condition
b. Consolidated Statements of Income
c. Consolidated Statements of Changes in Stockholders' Equity
d. Consolidated Statements of Cash Flows
e. Notes to Consolidated Financial Statements
f. Report of Independent Auditors
g. Reports of Other Auditors
The information required by Item 302 of Regulation S-K, contained
in the attached Appendix under the caption "Quarterly Financial Data,"
is hereby incorporated by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
No information is required in response to this Item.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by Item 401 of Regulation S-K will be
contained in the 1995 Proxy Statement under the caption "Election of
Directors" and is hereby incorporated by reference. The information
required by Item 405 of Regulation S-K will be contained in the 1995
Proxy Statement under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" and is hereby incorporated by
reference.
Information concerning the executive officers of Registrant is
contained in Item 1 of this report under the caption "Executive
Officers of the Registrant."
Item 11. Executive Compensation.
The information required by Item 402 of Regulation S-K will be
contained in the 1995 Proxy Statement under the captions "Compensation
of Directors and Executive Officers," "Compensation Committee
Interlocks and Insider Participation," "Report of Compensation
Committee on Executive Compensation," and "Company Performance" and is
hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required by Item 403 of Regulation S-K will be
contained in the 1995 Proxy Statement under the caption "Stock
Ownership" and is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 404 of Regulation S-K will
appear under the caption "Transactions with Management" in the 1995
Proxy Statement and is hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) The following documents are filed as part of this report:
(1) Financial statements: the financial statements,
notes, and independent auditors' reports described
in Item 8 to which reference is hereby made.
(2) Financial statement schedules: none.
(3) The following exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Description
---- -----------
<S> <C>
3.01 - Restated Articles of Incorporation and amendments (Exhibit 3.01 to Form
10-Q for the quarter ended June 30, 1992, previously filed by
Registrant).*
3.02 - Certificate of Designation (Exhibit 3.02 to Form 10-K for year ended
December 31, 1991, previously filed by Registrant (the "1991 10-K")).*
3.03 - Form of Deposit Agreement (Exhibit 3.03 to 1991 10-K).*
3.04 - Form of Depositary Receipt (Exhibit 3.04 to 1991 10-K).*
3.05 - Bylaws.
10.01 - Amended and Restated Fourth Financial Corporation 1981 Incentive Stock
Option Plan (Exhibit 4(a) to Post-Effective Amendment No. 2 to
Form S-8, Regis. No. 2-80907, previously filed by Registrant).*
10.02 - Amended and Restated Fourth Financial Corporation 1986 Incentive Stock
Option Plan (Exhibit 10.02 to Form 10-K for the year ended December 31,
1990, previously filed by Registrant).*
10.03 - Revolving Credit and Term Loan Agreement, dated as of July 1, 1987,
between Chemical Bank and Registrant (Exhibit 10.04 to Form 10-K for
the year ended December 31, 1987, previously filed by Registrant).*
10.04 - First Amendment dated as of July 1, 1989, to Revolving Credit and Term
Loan Agreement (Exhibit 10.04 to Form 10-K for the year ended
December 31, 1989, previously filed by Registrant).*
10.05 - Second Amendment dated as of November 15, 1989, to Revolving Credit and
Term Loan Agreement (Exhibit 10.05 to Form 10-K for the year ended
December 31, 1989, previously filed by Registrant).*
10.06 - Third Amendment, dated as of March 29, 1991, to Revolving Credit and
Term Loan Agreement (Exhibit 10.06 to 1991 10-K).*
10.07 - Fourth Financial Corporation 1993 Employee Stock Purchase Plan (Exhibit
10.07 to Form 10-K for year ended December 31, 1993, previously filed
by Registrant (the "1993 10-K")).*
10.08 - Fourth Financial Corporation 1993 Incentive Stock Option Plan (Exhibit
10.08 to 1993 10-K).*
10.09 - Fourth Financial Corporation Amended and Restated Non-Employee
Directors Deferred Fee Plan (Exhibit 10.09 to 1993 10-K).*
10.10 - Fourth Financial Corporation Non-Employee Directors Stock Option Plan
(Exhibit 10.10 to 1993 10-K).*
10.11 - Credit Agreement dated as of July 1, 1994, between Registrant and
Continental Bank N.A. (Exhibit 10.01 to Form 10-Q for the quarter ended
June 30, 1994).*
10.12 - Credit Agreement dated as of January 3, 1995, between Registrant and
Bank of America Illinois.
10.13 - Credit Agreement dated as of January 3, 1995, between Registrant and
NationsBank of Texas, N.A.
10.14 - Form of Severance Agreement.
10.15 - Fourth Financial Corporation Amended and Restated Executive Employees'
Deferred Compensation Plan (Exhibit 4(a) to Form S-8, Regis. No. 33-
55364, previously filed by Registrant).*
21 - Subsidiaries of Registrant.
23.01 - Consent of Ernst & Young LLP.
23.02 - Consent of Arthur Andersen LLP.
23.03 - Consent of Sartain Fischbein & Co.
23.04 - Consent of GRA, Thompson, White & Co., P.A.
27 - Article 9 of Regulation S-X Financial Data Schedule for the December
31, 1994 Form 10-K.
[Exhibits 10.01, 10.02, 10.07, 10.08, 10.09, 10.10, 10.14, and 10.15 are
compensation plans required to be filed as exhibits pursuant to Item 14(c).]
<FN>
___________
* Document has been previously filed with the Securities and Exchange Commission and
is incorporated by reference and made a part hereof.
</TABLE>
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
FOURTH FINANCIAL CORPORATION
By: /s/ Darrell G. Knudson
------------------
Darrell G. Knudson
Chairman of the Board
Date: March 13, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
---------- ------ ----
<S> <C> <C>
/s/ Darrell G. Knudson Chairman of the Board March 13, 1995
------------------
Darrell G. Knudson (Principal Executive Officer)
/s/ Michael J. Shonka Executive Vice President March 13, 1995
-----------------
Michael J. Shonka (Principal Financial Officer)
/s/ Barbara M. Noyes Vice President and Controller March 13, 1995
----------------
Barbara M. Noyes (Principal Accounting Officer)
/s/ Lionel D. Alford Director March 13, 1995
----------------
Lionel D. Alford
/s/ Thomas R. Clevenger Director March 13, 1995
-------------------
Thomas R. Clevenger
/s/ Jordan L. Haines Director March 13, 1995
----------------
Jordan L. Haines
/s/ Lawrence M. Jones Director March 13, 1995
-----------------
Lawrence M. Jones
/s/ Joseph M. Klein Director March 13, 1995
---------------
Joseph M. Klein
/s/ Darrell G. Knudson Director March 13, 1995
------------------
Darrell G. Knudson
/s/ Russell W. Meyer, Jr. Director March 13, 1995
--------------------
Russell W. Meyer, Jr.
/s/ Fred L. Merrill, Sr. Director March 13, 1995
-------------------
Fred L. Merrill, Sr.
/s/ Laird G. Noller Director March 13, 1995
---------------
Laird G. Noller
/s/ Patrick E. O'Shaughnessy Director March 13, 1995
------------------------
Patrick E. O'Shaughnessy
/s/ Robert F. Vickers Director March 13, 1995
-----------------
Robert F. Vickers
/s/ Ken Wagnon Director March 13, 1995
-----------
Ken Wagnon
</TABLE>
FOURTH FINANCIAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
Pages
-----
Management's Statement of Responsibility for
Financial Reporting . . . . . . . . . . . . . . . . . . . . . A-
Consolidated Statements of Condition. . . . . . . . . . . . . . A-
Consolidated Statements of Income . . . . . . . . . . . . . . . A-
Consolidated Statements of Changes in Stockholders' Equity. . . A-
Consolidated Statements of Cash Flows . . . . . . . . . . . . . A-
Notes to Consolidated Financial Statements . . . . . . . . . . A- - A-
Report of Independent Auditors. . . . . . . . . . . . . . . . . A-
Reports of Other Auditors . . . . . . . . . . . . . . . . . . . A- - A-
Selected Consolidated Financial Data . . . . . . . . . . . . . A-
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . A- - A-
FOURTH FINANCIAL CORPORATION
MANAGEMENT'S STATEMENT OF RESPONSIBILITY FOR
FINANCIAL REPORTING
FINANCIAL STATEMENTS
Management of Fourth Financial Corporation is responsible for the
preparation, integrity and fair presentation of the accompanying
consolidated financial statements. The consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles and, as such, include some amounts that are based
on judgements and estimates of management. The financial information
appearing elsewhere in this annual report on Form 10-K is consistent
with the information in the consolidated financial statements unless
otherwise stated.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining an
effective internal control system over financial reporting. The system
contains monitoring mechanisms, and actions are taken to correct
deficiencies identified.
There are inherent limitations in the effectiveness of any system
of internal control, including the possibility of human error and the
circumvention or overriding of controls. Accordingly, even an
effective internal control system can provide only reasonable assurance
with respect to financial statement preparation. Further, because of
changes in conditions, the effectiveness of an internal control system
may vary over time.
Management assessed the Company's internal control system
over financial reporting as of December 31, 1994. This assessment was
based on criteria for effective internal control over financial
reporting described in "Internal Control-Integrated Framework" issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management believes that, in all
material respects, Fourth Financial Corporation maintained an effective
internal control system over financial reporting as of December 31,
1994.
The Audit and Examination Committee of the Board of Directors is
comprised entirely of outside directors. The committee, among other
responsibilities, meets periodically with management, the independent
auditors, and the general auditor to ensure that they are carrying out
their respective responsibilities related to internal control systems,
auditing procedures and financial reporting matters. The independent
auditors and the general auditor have access to the committee, without
the presence of management, to discuss the adequacy of the internal
control system over financial reporting and any other auditing or
financial reporting matters which they believe should be brought to the
attention of the committee.
<TABLE>
<CAPTION>
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
December 31,
-------------------------
1994 1993
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Assets:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 435,879 $ 320,660
Interest-bearing deposits in other financial institutions . . . . . . . . . . . . 499 3,025
Federal funds sold and securities purchased under agreements to resell . . . . . 4,670 6,063
Securities:
Held-to-maturity (market value-$1,834,900 and $1,807,580, respectively) . . . . 1,944,614 1,805,819
Available-for-sale (at market value). . . . . . . . . . . . . . . . . . . . . . 939,080 1,117,776
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,436 39,107
Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719 474
Loans and leases:
Total loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,005,667 3,351,912
Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . (71,874) (67,617)
---------- ----------
Net loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,933,793 3,284,295
Bank premises and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . 156,318 145,719
Income receivable and other assets . . . . . . . . . . . . . . . . . . . . . . . 164,726 96,165
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,606 66,960
---------- ----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,729,340 $6,886,063
========== ==========
Liabilities And Stockholders' Equity:
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,032,913 $ 977,944
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,614,235 4,458,619
---------- ----------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,647,148 5,436,563
Federal funds purchased and securities sold under agreements to repurchase . . . 933,706 491,627
Federal Home Loan Bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . 441,097 250,000
Other borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,001 23,002
Accrued interest, taxes, and other liabilities . . . . . . . . . . . . . . . . . 57,636 56,603
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,685 20,283
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,127,273 6,278,078
---------- ----------
Minority interest in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . -- 1,135
Stockholders' Equity:
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 100,000
Common stock, par value $5 per share
Authorized: 50,000,000 shares
Issued: 27,251,225 and 27,165,962 shares . . . . . . . . . . . . . . . . . . 136,256 135,830
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,201 106,102
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292,962 244,810
Treasury stock at cost (355,466 and 111,518 shares) . . . . . . . . . . . . . . (10,018) (3,245)
Stock option loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,894) (1,795)
---------- ----------
Stockholders' equity before net unrealized gains (losses) on
available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . 624,507 581,702
Net unrealized gains (losses) on available-for-sale securities. . . . . . . . . (22,440) 25,148
---------- ----------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . . 602,067 606,850
---------- ----------
Total liabilities and stockholders' equity. . . . . . . . . . . . . . . . . . $7,729,340 $6,886,063
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
-----------------------------------
1994 1993 1992
--------- --------- ---------
(Dollars in thousands,
except per share amounts)
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans and leases . . . . . . . . . . . . . . . . . $304,609 $262,865 $269,259
Interest on short-term investments . . . . . . . . . . . . . . . . . . . 921 2,098 4,730
Interest and dividends on investment securities:
Taxable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,370 159,476 143,350
Tax-preferred. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,469 19,338 21,329
Interest and dividends on trading securities . . . . . . . . . . . . . . 105 136 220
-------- -------- --------
Total interest income. . . . . . . . . . . . . . . . . . . . . . . . 483,474 443,913 438,888
-------- -------- --------
Interest Expense:
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 157,524 158,079 183,460
Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 48,032 19,150 10,396
Interest on long-term debt . . . . . . . . . . . . . . . . . . . . . . . 998 2,273 3,675
-------- -------- --------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . 206,554 179,502 197,531
-------- -------- --------
Net Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 276,920 264,411 241,357
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . 275 6,965 21,358
-------- -------- --------
Net Interest Income After Provision For Credit Losses. . . . . . . . . . . 276,645 257,446 219,999
-------- -------- --------
Noninterest Income:
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,041 18,577 17,828
Service charges on deposit accounts. . . . . . . . . . . . . . . . . . . 38,306 33,575 27,628
Bank card fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,173 10,385 9,740
Investment securities gains. . . . . . . . . . . . . . . . . . . . . . . 3,632 1,486 2,904
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,683 22,259 22,694
-------- -------- --------
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . 97,835 86,282 80,794
-------- -------- --------
Noninterest Expense:
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . 126,279 117,291 103,008
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . 22,529 23,534 19,611
Net occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,729 16,699 15,444
FDIC insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,598 13,117 12,124
Bank card . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,273 3,295 1,224
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . 10,154 12,549 5,821
Merger and integration costs . . . . . . . . . . . . . . . . . . . . . . 2,847 7,634 4,798
Net costs of operation of other real estate and nonperforming assets . . (1,064) 3,339 2,497
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,090 56,884 54,022
-------- -------- --------
Total noninterest expense. . . . . . . . . . . . . . . . . . . . . . 250,435 254,342 218,549
-------- -------- --------
Income Before Income Taxes, Extraordinary Item and Cumulative
Effect of a Change in Accounting Principle . . . . . . . . . . . . . . . 124,045 89,386 82,244
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,923 22,676 19,548
-------- -------- --------
Income Before Extraordinary Item and Cumulative Effect of a Change
in Accounting Principle. . . . . . . . . . . . . . . . . . . . . . . . . 83,122 66,710 62,696
Extraordinary item -- tax benefit from utilization of net operating
loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 130
Cumulative effect of a change in accounting for income taxes . . . . . . -- 10,582 2,373
-------- -------- --------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,122 $ 77,292 $ 65,199
======== ======== ========
Net Income Applicable to Common and Common-Equivalent Shares . . . . . . . $ 76,122 $ 70,292 $ 59,248
======== ======== ========
Primary Earnings Per Common Share:
Income applicable to common and common-equivalent shares before
extraordinary item and cumulative effect of a change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . $2.83 $2.27 $2.18
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- .02
Cumulative effect of a change in accounting for income taxes . . . . . . -- .40 .09
----- ----- -----
Net income applicable to common and common-equivalent shares . . . . . . $2.83 $2.67 $2.29
===== ===== =====
Fully Diluted Earnings Per Common Share:
Income before extraordinary item and cumulative effect
of a change in accounting principle. . . . . . . . . . . . . . . . . . $2.74 $2.20 $2.12
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- .01
Cumulative effect of a change in accounting for income taxes . . . . . . -- .35 .08
----- ----- -----
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2.74 $2.55 $2.21
===== ===== =====
Dividends Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . $1.04 $ .98 $ .88
===== ===== =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Preferred Stock Common Stock Treasury Stock Stock Net Unrealized
--------------- --------------- --------------
Capital Retained Option Gains (Losses)
Shares Amount Shares Amount Surplus Earnings Shares Amount Loans on Securities Total
------ -------- ------ -------- -------- -------- ------ ------- ------ ------------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1991
As previously
reported . . . . . . 882 $ 3,087 24,903 $124,515 $101,603 $156,332 -- $ -- $(1,226) $ -- $384,311
Adjustment for
pooling of interests -- -- 591 2,954 197 3,373 -- -- -- -- 6,524
------ -------- ------ -------- -------- -------- ---- ------- ------- ------- --------
Adjusted balance. . 882 3,087 25,494 127,469 101,800 159,705 -- -- (1,226) -- 390,835
Net income. . . . . . -- -- -- -- -- 65,199 -- -- -- -- 65,199
Issuance of
preferred stock. . . 250 100,000 -- -- (3,080) -- -- -- -- -- 96,920
Issuance of common
stock under stock
option plans . . . . -- -- 163 813 1,657 -- -- -- -- -- 2,470
Cash dividends:
Preferred stock . . -- -- -- -- -- (5,951) -- -- -- -- (5,951)
Common stock. . . . -- -- -- -- -- (16,768) -- -- -- -- (16,768)
Pooled companies. . -- -- -- -- -- (2,305) -- -- -- -- (2,305)
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- (18) -- (18)
Capital transactions
of pooled companies. 90 554 152 763 1,537 -- -- -- 175 -- 3,029
------ -------- ------ -------- -------- -------- ---- ------- ------- -------- --------
Balance, December 31,
1992 . . . . . . . . . 1,222 103,641 25,809 129,045 101,914 199,880 -- -- (1,069) -- 533,411
Net income. . . . . . -- -- -- -- -- 77,292 -- -- -- -- 77,292
Purchase of stock
for treasury . . . . -- -- -- -- -- -- (112) (3,245) -- -- (3,245)
Issuance of common
stock:
Stock option plans. -- -- 199 993 2,414 -- -- -- -- -- 3,407
Acquisition . . . . -- -- 109 544 2,555 -- -- -- -- -- 3,099
Cash dividends:
Preferred stock . . -- -- -- -- -- (7,000) -- -- -- -- (7,000)
Common stock . . . -- -- -- -- -- (22,705) -- -- -- -- (22,705)
Pooled companies. . -- -- -- -- -- (2,657) -- -- -- -- (2,657)
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- (726) -- (726)
Capital transactions
of pooled companies. (972) (3,641) 1,049 5,248 (781) -- -- -- -- -- 826
Adjustment for
unrealized gains on
available-for-sale
securities . . . . . -- -- -- -- -- -- -- -- -- 25,148 25,148
------ -------- ------ -------- -------- -------- ---- ------- ------- -------- --------
Balance, December 31,
1993 . . . . . . . . . 250 100,000 27,166 135,830 106,102 244,810 (112) (3,245) (1,795) 25,148 606,850
Net income. . . . . . -- -- -- -- -- 83,122 -- -- -- -- 83,122
Purchase of stock
for treasury . . . . -- -- -- -- -- -- (355) (10,018) -- -- (10,018)
Issuance of common
stock:
Stock option plans. -- -- 81 407 968 -- 40 1,169 -- -- 2,544
Directors deferred
compensation plan. -- -- 4 19 90 -- 2 35 -- -- 144
Acquisition . . . . -- -- -- -- 41 -- 70 2,041 -- -- 2,082
Cash dividends:
Preferred stock . . -- -- -- -- -- (7,000) -- -- -- -- (7,000)
Common stock . . . -- -- -- -- -- (27,662) -- -- -- -- (27,662)
Pooled company. . . -- -- -- -- -- (308) -- -- -- -- (308)
Net change in stock
option loans . . . . -- -- -- -- -- -- -- -- (99) -- (99)
Capital transactions
of pooled company. . -- -- -- -- -- -- -- -- -- (198) (198)
Net change in
unrealized gains
(losses) on
available-for-sale
securities . . . . . -- -- -- -- -- -- -- -- -- (47,390) (47,390)
------ -------- ------ -------- -------- -------- ---- -------- ------- -------- --------
Balance, December 31,
1994 . . . . . . . . . 250 $100,000 27,251 $136,256 $107,201 $292,962 (355)$(10,018) $(1,894) $(22,440) $602,067
====== ======== ====== ======== ======== ======== ==== ======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
FOURTH FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------
1994 1993 1992
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Increase (Decrease) in Cash and Due from Banks
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,122 $ 77,292 $ 65,199
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Minority interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 84 355 426
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . 275 6,965 21,358
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . 27,552 29,075 20,065
Accretion of discounts on investment securities,
net of amortization of premiums . . . . . . . . . . . . . . . . . . . 12,577 15,901 9,447
Write-down of other real estate owned. . . . . . . . . . . . . . . . . 409 4,392 2,875
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . 6,473 (5,625) (958)
Investment securities gains. . . . . . . . . . . . . . . . . . . . . . (3,632) (1,486) (2,904)
Write-down of goodwill, core deposit intangibles, and premises
and equipment associated with pooling transactions, and other
asset write-downs . . . . . . . . . . . . . . . . . . . . . . . . . . 1,148 2,228 --
Gains on sales of premises and equipment, other real estate
owned, and other assets . . . . . . . . . . . . . . . . . . . . . . . (2,861) (2,587) (3,399)
Gain on sale of credit card loans. . . . . . . . . . . . . . . . . . . -- -- (169)
Provision for losses on other real estate owned. . . . . . . . . . . . -- -- 328
Change in assets and liabilities,
net of effects from purchase of acquired entities and branch sales:
Trading account. . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3,062 4,125
Loans held for sale. . . . . . . . . . . . . . . . . . . . . . . . . 109,926 (109,631) 2,087
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,775 317,242 (30,371)
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,408) (10,996) 14,704
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . (6,738) 3,737 4,092
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . 306 (3,014) (7,933)
---------- ---------- ----------
Net cash provided by operating activities . . . . . . . . . . . . 291,036 326,910 98,972
---------- ---------- ----------
Cash Flows From Investing Activities:
Purchase of banks, net of cash acquired . . . . . . . . . . . . . . . . (87,818) (2,468) (7,662)
Branch sales, including cash and cash equivalents sold . . . . . . . . . (36,271) -- --
Proceeds from settlement of sales of available-for-sale
investment securities . . . . . . . . . . . . . . . . . . . . . . . . . 603,458 -- --
Proceeds from maturities and prepayments of
available-for-sale investment securities. . . . . . . . . . . . . . . . 212,311 -- --
Purchases of available-for-sale investment securities. . . . . . . . . . (546,451) -- --
Proceeds from settlement of sales of held-to-maturity
investment securities . . . . . . . . . . . . . . . . . . . . . . . . . -- 14,443 81,680
Proceeds from maturities and prepayments
of held-to-maturity investment securities . . . . . . . . . . . . . . . 529,559 1,058,235 954,181
Purchases of held-to-maturity investment securities. . . . . . . . . . . (593,395) (1,503,082) (1,348,678)
Proceeds from sales of premises and equipment,
other real estate owned, and other assets . . . . . . . . . . . . . . . 14,335 16,495 29,227
Purchases of premises and equipment. . . . . . . . . . . . . . . . . . . (19,157) (35,039) (19,115)
Purchase of mortgage servicing rights. . . . . . . . . . . . . . . . . . (355) -- (1,247)
Purchase of consumer loans . . . . . . . . . . . . . . . . . . . . . . . -- -- (60,751)
Proceeds from sale of credit card loans. . . . . . . . . . . . . . . . . -- -- 4,038
Change in assets and liabilities, net of effects
from purchase of acquired entities and branch sales:
Interest-bearing deposits in other financial institutions. . . . . . . 2,538 4,321 5,579
Federal funds sold and securities purchased under
agreements to resell. . . . . . . . . . . . . . . . . . . . . . . . . 18,308 200,715 9,025
Loans and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . (465,129) (213,109) 132,075
---------- ---------- ----------
Net cash used in investing activities. . . . . . . . . . . . . . . (368,067) (459,489) (221,648)
---------- ---------- ----------
Cash Flows From Financing Activities:
Transfer associated with the assumption of deposits and
other liabilities, net of premium paid. . . . . . . . . . . . . . . . . $ -- $ 91,832 $ 75,411
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . . (15,598) (15,125) (17,560)
Purchase of minority stockholder interest. . . . . . . . . . . . . . . . (36) -- --
Acquisition of treasury stock. . . . . . . . . . . . . . . . . . . . . . (10,018) (3,245) --
Dividends on common stock. . . . . . . . . . . . . . . . . . . . . . . . (27,662) (22,705) (16,768)
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . . (7,000) (7,000) (5,368)
Proceeds from exercise of stock options. . . . . . . . . . . . . . . . . 2,544 3,407 2,470
Net change in stock option loans . . . . . . . . . . . . . . . . . . . . (99) (726) (18)
Proceeds from issuance of preferred stock, net of offering costs . . . . -- -- 96,920
Capital transactions of pooled companies . . . . . . . . . . . . . . . . (364) (2,405) (2,398)
Change in liabilities, net of effects from purchase of
acquired entities and branch sales:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (297,239) (414,665) (155,176)
Federal funds purchased and securities sold under
agreements to repurchase. . . . . . . . . . . . . . . . . . . . . . . 395,095 166,033 171,364
Federal Home Loan Bank borrowings. . . . . . . . . . . . . . . . . . . 132,800 250,000 --
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,827 (5,457) (18,471)
---------- ---------- ----------
Net cash provided by financing activities. . . . . . . . . . . . . 192,250 39,944 130,406
---------- ---------- ----------
Increase (decrease) in cash and due from banks . . . . . . . . . . . . . . 115,219 (92,635) 7,730
Cash and due from banks at beginning of period . . . . . . . . . . . . . . 320,660 413,295 399,871
Adjustment for pooling of interests. . . . . . . . . . . . . . . . . . . . -- -- 5,694
---------- ---------- ----------
Cash and due from banks at end of period . . . . . . . . . . . . . . . . . $ 435,879 $ 320,660 $ 413,295
========== ========== ==========
Supplemental Disclosures:
Cash payments for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 206,248 $ 182,162 $ 204,081
========== ========== ==========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,392 $ 32,317 $ 21,404
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
FOURTH FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 - Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of
Fourth Financial Corporation and its wholly-owned subsidiaries (the
"Company"). All significant intercompany balances and transactions
have been eliminated.
The consolidated financial statements for prior years have been
restated to reflect the poolings of interests detailed in Footnote 2 -
Acquisitions. Certain reclassifications of previously reported amounts
have been made to conform with current year presentation format.
Securities
The Company adopted Financial Accounting Standard ("FAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
on December 31, 1993. Management reviewed the December 31, 1993 debt
securities portfolio and classified the debt securities as either held-
to-maturity or available-for-sale. Debt securities acquired subsequent
to December 31, 1993 were similarly classified.
Debt securities are classified as "Held-to-maturity" when
management has the positive intent and the Company has the ability to
hold the debt securities to maturity. Held-to-maturity securities are
stated at cost, adjusted for amortization of premiums and accretion of
discounts, both computed on the constant yield method. The prepayment
history of each mortgage-backed security pool is used to recalculate
the yield for amortizing and accreting the premium and discount on
these securities. Amortization, accretion, and interest on held-to-
maturity securities are included in "Interest and dividends on
investment securities."
Marketable equity securities and debt securities that are deemed
to be available-for-sale for the implementation of asset and liability
management strategies, possible liquidity needs, and other purposes are
classified as "Available-for-sale." Available-for-sale securities are
carried at fair value, with the unrealized gains and losses, net of
tax, reported in a separate component of stockholders' equity. The
amortized cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity.
Amortization, accretion, and interest and dividends on securities
classified as available-for-sale are included in "Interest and
dividends on investment securities." Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-
sale securities are included in "Investment securities gains." The
cost of securities sold is based on the specific identification method.
Securities held for sale to customers and in anticipation of
short-term market movements are classified as "Trading securities."
Securities held for trading are stated at market value. Gains and
losses, both realized and unrealized, are reflected in "Other
noninterest income." The specific identification method is used to
determine the cost of securities sold.
"Other securities" include equity securities for which there is
no readily determinable fair value, and are carried at cost. Dividends
on these equity securities are included in "Interest and dividends on
investment securities."
Loans and Leases
Loans are reported at the principal amount outstanding, net of
unearned discount. Interest income on loans is accrued based on the
unpaid principal and the applicable rate. The net investment in direct
financing leases consists of the sum of all minimum lease payments and
estimated residual values, less unearned income. Unearned income on
discounted loans and leases is accreted and included in "Interest and
fees on loans and leases" on a basis approximating a level yield on the
net investment in the loans or leases.
Residential mortgage loans and educational loans held for sale
are stated at the lower of cost or market value. These loans are
analyzed on an aggregate basis to determine the lower of cost or market
value. Net gains or losses on the sale of these loans, including
adjustments to market value, are part of normal operations and are
reflected in "Other noninterest income." The specific identification
method is used to determine the cost of loans sold.
A loan is placed on nonaccrual status when principal or interest
is due and has remained unpaid for 90 days or more unless the loan is
both well secured and in the process of collection. A loan is also
placed on nonaccrual status when there is reasonable doubt as to the
ability of the borrower to continue to pay principal or interest. At
the time a loan is classified as nonaccrual, interest previously
recorded but not collected is reversed. Interest payments received on
such loans are generally recorded as a reduction in carrying value
unless such carrying value is deemed to be collectible. A loan is not
reclassified as accruing until all principal and interest payments are
brought current and the borrower has demonstrated the ability to
service the loan in accordance with its contractual terms.
Other Real Estate and Nonperforming Assets
Other real estate and nonperforming assets include assets
acquired from loan settlements and foreclosures. These assets are
carried at the lower of the loan carrying amount or fair value minus
estimated selling costs and are included in "Income receivable and
other assets" in the consolidated statements of condition. At the time
of acquisition or repossession, any write-down necessary to record an
asset at its fair value is charged to the allowance for credit losses.
A valuation allowance for estimated selling costs is recorded through
a charge to "Net costs of operation of other real estate and
nonperforming assets." Losses and gains as well as net costs
associated with these properties are also included in "Net costs of
operation of other real estate and nonperforming assets" in the
consolidated statements of income.
Allowance for Credit Losses
The allowance for credit losses is the amount deemed by
management to be reasonably necessary to provide for possible losses on
loans or leases that may become uncollectible. Additions to the
allowance are charged to expense as the provision for credit losses.
Loan and lease losses and recoveries are charged or credited directly
to the allowance. It is the Company's policy to charge off any loan or
portion of that loan when it is deemed to be uncollectible in the
ordinary course of business.
An evaluation of the overall quality of the portfolio is
performed to determine the necessary level of the allowance for credit
losses. This evaluation takes into consideration the classification of
loans and the application of loss estimates to these classifications.
It is the responsibility of management in each of the Company's markets
to classify its loans as pass, special mention, substandard, doubtful,
or loss. The classification criteria are established by the credit
administration function of the Company, which is independent of all
lending functions, and are intended to be consistent with the criteria
applied by federal banking system examiners. These classifications
take into consideration all sources of repayment, underlying
collateral, the value of such collateral, and current and anticipated
economic conditions, trends, and uncertainties. The Company has an
independent loan review function which reviews the loans periodically.
The Company's bank subsidiaries also are subjected to periodic
examinations by the Office of the Comptroller of the Currency.
Loss factors are developed by loan type and classification using
historical loss data and statistical modeling techniques. The
application of these loss factors to the portfolio classifications,
combined with analyses of general economic conditions, trends in
portfolio volume, maturity, and composition, and estimates of potential
future losses on specific large loans and those loans requiring special
attention, provide management with data essential to identify and
estimate the credit risk inherent in the portfolio. The allowance for
credit losses reflects the result of these estimates and is deemed to
be adequate at each balance sheet date.
Loan and Loan Commitment Fees
The Company generally recognizes loan and loan commitment fees as
revenue when received and related costs as expenses when incurred. FAS
No. 91, "Accounting for Nonrefundable Fees and Costs Associated with
Originating Loans," provides for the deferral of such fees and direct
loan origination costs and the amortization of such fees and costs over
the lives of the related loans as an adjustment of yield. However, the
adoption of FAS No. 91 would not have a material effect on operating
results.
Bank Premises and Equipment
Land is stated at cost, and buildings and equipment are stated at
cost less accumulated depreciation. For financial reporting purposes,
depreciation is included in operating expenses and is computed
principally on the straight-line method over the estimated useful lives
of the related assets. Accelerated methods are generally used for
income tax purposes with deferred income taxes provided for timing
differences. Additions, major replacements, and improvements to
buildings and equipment are added to the asset accounts at cost.
Maintenance, repairs, and minor replacements are charged directly to
operating expense.
The costs incidental to the operation and maintenance of
buildings, net of income received from tenants, are reflected as "Net
occupancy" expense in the accompanying consolidated statements of
income.
Income Taxes
Effective January 1, 1993, the Company adopted FAS No. 109,
"Accounting for Income Taxes." There are two components of the income
tax provision, current and deferred. The current income tax provisions
approximate taxes to be paid or refunded for the applicable period.
Deferred tax expense or benefit is recognized for the change in
deferred tax liabilities or assets between periods.
Deferred tax liabilities or assets are recognized on the
temporary differences between the bases of assets and liabilities as
measured by the tax laws and their bases as reported in the financial
statements. Recognition of deferred tax assets is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences, operating loss
carryforwards, and tax credits will be realized. A valuation allowance
is recorded for those deferred tax items for which it is more likely
than not that realization will not occur.
Prior to January 1, 1993, the Company accounted for income taxes
in accordance with Accounting Principles Board Opinion (APB) No. 11,
"Accounting For Income Taxes." Under APB 11, the income tax effects of
transactions were recognized in the years in which they entered into
the determination of reported income, regardless of when they were
recognized for tax return purposes. When income and expenses were
recognized in different periods for tax purposes, applicable deferred
taxes were provided in the financial statements.
Interest, Currency, and Financial Futures Contracts
In the normal course of business in meeting the investment and
financing needs of its customers and managing its own exposure to
fluctuations in interest rates, the Company is a party to various
interest rate, foreign currency, and financial futures contracts.
From time to time, interest rate swaps are used to modify the
interest sensitivity position inherent in the repricing characteristics
of specific assets or liabilities. The net interest received or paid
on the interest rate swaps is accounted for as an adjustment to the
interest income or interest expense on the assets or liabilities,
respectively, that the swap was intended to modify.
The Company enters into forward foreign currency contracts to
assist customers with their foreign currency needs related to foreign
manufacturing operations, exporting, or importing. These customer-
driven contracts are generally hedged with offsetting contracts. The
market value gains and losses relating to currency exchange contracts
are recorded at settlement in "Other noninterest income." Gains and
losses associated with futures contracts, entered into as trading
positions, are marked to market and recognized currently in "Other
noninterest income."
2 - Acquisitions
Purchase Transactions
During 1994 and 1993, a total of five business combinations
accounted for as purchases were completed. The following table
presents information regarding these purchase transactions.
<TABLE>
<CAPTION>
Acquisition Company Acquired Company Assets
Date Location Abbreviation Acquired Cash Paid
- ----------- --------------------------------------- --------------- ------------ -------------
(In thousands)
1994
- ----
<S> <C> <C> <C>
May 26 Equity Bank for Savings, F.A.
Oklahoma City, OK . . . . . . . . . . "Equity" $ 491,506 $ 90,720
May 31 Emprise Bank, National Association
Hutchinson, KS. . . . . . . . . . . . "Emprise" 258,731 31,206
---------- --------
750,237 121,926
---------- --------
1993
- ----
May 14 Guaranty Bancorporation
Tulsa, OK . . . . . . . . . . . . . . "GB" 82,606 4,386
May 28 Bancshares of Woodward, Inc.
Woodward and Waukomis, OK . . . . . . "BOW" 130,192 17,859
May 28 F&M Bank Services, Inc.
Derby, KS . . . . . . . . . . . . . . "FBS" 61,565 8,068
---------- --------
274,363 30,313
---------- --------
$1,024,600 $152,239
========== ========
</TABLE>
Supplementary information regarding the cash paid in these
purchase transactions is presented in the following table.
<TABLE>
<CAPTION>
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . $750,237 $274,363
Fair value of liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . (660,742) (253,378)
Cost in excess of net assets acquired . . . . . . . . . . . . . . . . . . . . . 32,431 9,328
-------- --------
Cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,926 30,313
Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,108 27,845
-------- --------
Net cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87,818 $ 2,468
======== ========
</TABLE>
For each of these transactions, the consolidated statements of
income include only the income and expenses of the acquired company
since acquisition. The purchase price has been allocated to the net
identifiable assets acquired based on their fair values with the excess
allocated to cost in excess of net assets acquired. The effect on
results of operations for 1994 and 1993, had the purchase transactions
occurred at the beginning of these years, was not material.
On November 10, 1994 the Company completed the sale of three
Equity branches which were identified at the time of acquisition as
potential sale targets. In these transactions the Company transferred
deposit liabilities and sold loans secured by these deposit liabilities
and bank premises. The sales price of these branches was utilized in
determining the fair value of assets and liabilities acquired in the
Equity business combination. The following table presents information
regarding these sales.
1994
------------
(In thousands)
Fair value of assets sold . . . . . . . . . . . . . $ (485)
Fair value of liabilities transferred . . . . . . . 38,048
Reduction of cost in excess of net assets acquired. (1,292)
--------
Net cash paid . . . . . . . . . . . . . . . . . . . $ 36,271
========
A fourth Equity branch was sold on January 6, 1995. The
following table presents information regarding this sale.
1995
------------
(In thousands)
Fair value of assets sold . . . . . . . . . . . . . . . $ (81)
Fair value of liabilities transferred . . . . . . . . . 6,629
Reduction of cost in excess of net assets acquired. . . . (132)
--------
Net cash paid . . . . . . . . . . . . . . . . . . . . . . $ 6,416
========
Poolings of Interests
On June 30, 1994, the Company issued 590,710 shares to acquire
First Dodge City Bancshares, Inc. ("First Dodge") in a business
combination accounted for as a pooling of interests. Total assets
acquired amounted to $144,999,000. The consolidated statements for the
prior periods have been restated as if the entities had been combined
at the beginning of the periods presented. Included in "Merger and
integration costs" for 1994 is a charge of $1,124,000 to conform the
amortization of intangible assets of First Dodge to the Company's
accounting policies. Other adjustments to conform the accounting
policies of First Dodge to the accounting policies of the Company were
immaterial. Also on June 30, 1994, the Company issued 70,300 shares
and paid $36,000 in cash to acquire the minority interests of two of
First Dodge's subsidiaries. As prescribed by APB 16, the acquisitions
of the minority interests were accounted for as purchases. The fair
market value of shares issued and cash paid totaled $2,118,000, which
exceeded the net assets acquired by $951,000.
The effect of the 1994 pooling of interests on previously
reported selected operating results is as follows:
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
----------------------
1994 1993 1992
------------------ -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $104,424 $433,467 $427,119
Pooled company . . . . . . . . . . . . . . . . . . 2,531 10,446 11,769
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $106,955 $443,913 $438,888
======== ======== ========
Net interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $ 62,797 $257,966 $234,722
Pooled company . . . . . . . . . . . . . . . . . . 1,576 6,445 6,635
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 64,373 $264,411 $241,357
======== ======== ========
Net income:
Company. . . . . . . . . . . . . . . . . . . . . . $ 20,201 $ 75,691 $ 63,306
Pooled company . . . . . . . . . . . . . . . . . . (1,672) 1,601 1,893
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 18,529 $ 77,292 $ 65,199
======== ======== ========
Net income applicable to common and
common-equivalent shares:
Company. . . . . . . . . . . . . . . . . . . . . . $ 18,451 $ 68,691 $ 57,355
Pooled company . . . . . . . . . . . . . . . . . . (1,672) 1,601 1,893
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 16,779 $ 70,292 $ 59,248
======== ======== ========
Primary earnings per common share:
Company. . . . . . . . . . . . . . . . . . . . . . $ .70 $ 2.67 $ 2.27
Pooled company . . . . . . . . . . . . . . . . . . (.08) -- .02
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ .62 $ 2.67 $ 2.29
======== ======== ========
Fully diluted earnings per common share:
Company. . . . . . . . . . . . . . . . . . . . . . $ .68 $ 2.54 $ 2.19
Pooled company . . . . . . . . . . . . . . . . . . (.08) .01 .02
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ .60 $ 2.55 $ 2.21
======== ======== ========
</TABLE>
The following table presents the five 1993 business combinations
accounted for as poolings of interests.
<TABLE>
<CAPTION>
Company Acquired/ Company Assets Shares
Date Location Abbreviation Acquired Issued
- ------------------ ------------------------------------- ------------ ------------ --------
(In thousands)
<S> <C> <C> <C> <C>
February 12, 1993 Southgate Banking Corporation, "SBC" $ 62,628 451,310
Prairie Village, KS
May 28, 1993 Nichols Hills Bancorporation, Inc., "NHB" 97,869 469,906
Nichols Hills (Oklahoma City), OK
September 17, 1993 Commercial Landmark Corporation, "CLC" 465,060 1,874,812
Muskogee, OK
December 3, 1993 Western National Bancorporation, Inc., "WNB" 206,288 1,110,695
Tulsa, OK
December 10, 1993 Ponca Bancshares, Inc., "PBI" 117,275 478,395
-------- ---------
Ponca City, OK
$949,120 4,385,118
======== =========
</TABLE>
In connection with the WNB transaction, the Company issued an
additional 108,748 shares to acquire the minority interest of Western
National Bank of Tulsa. This acquisition of a minority interest was
accounted for as a purchase as prescribed by APB 16. The fair market
value of shares issued totaled $3,099,000, which exceeded the net
assets acquired by $1,673,000.
Pending Acquisitions
Pending acquisitions as of December 31, 1994 are summarized in
the table below.
<TABLE>
<CAPTION>
Assets of Bank
Anticipated Subsidiary at Number of
Closing Company Acquired/ Company December 31, 1994 Cash Shares Accounting
Date Location Abbreviation (Unaudited) Paid Issued Method
- ---------- ---------------------------------- ------------ ----------------- ---------- --------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
1995
- ----
January 6 Oklahoma Savings, Inc.
Stillwater, OK . . . . . . . . . . "OSI" $ 95,503 $ -- 368,981 Purchase
January 27 Standard Bancorporation, Inc.
Independence, MO . . . . . . . . . "SBI" 85,190 -- 315,000 Pooling
February 3 Blackwell Security Bancshares, Inc.
Blackwell, OK. . . . . . . . . . . "BSB" 46,851 8,197 -- Purchase
-------- ------ -------
$227,544 $8,197 683,981
======== ====== =======
</TABLE>
The effect of the pending SBI acquisition on selected operating
results if it had been consummated prior to December 31, 1994 is as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1994 1993 1992
-------- -------- --------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $483,474 $443,913 $438,888
SBI. . . . . . . . . . . . . . . . . . . . . . . . 5,789 5,552 5,807
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $489,263 $449,465 $444,695
======== ======== ========
Net interest income:
Company. . . . . . . . . . . . . . . . . . . . . . $276,920 $264,411 $241,357
SBI. . . . . . . . . . . . . . . . . . . . . . . . 3,733 3,649 3,485
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $280,653 $268,060 $244,842
======== ======== ========
Net income:
Company. . . . . . . . . . . . . . . . . . . . . . $ 83,122 $ 77,292 $ 65,199
SBI. . . . . . . . . . . . . . . . . . . . . . . . 2 817 717
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 83,124 $ 78,109 $ 65,916
======== ======== ========
Net income applicable to common and
common-equivalent shares:
Company. . . . . . . . . . . . . . . . . . . . . . $ 76,122 $ 70,292 $ 59,248
SBI. . . . . . . . . . . . . . . . . . . . . . . . 2 817 717
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 76,124 $ 71,109 $ 59,965
======== ======== ========
Primary earnings per common share:
Company. . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.67 $ 2.29
SBI. . . . . . . . . . . . . . . . . . . . . . . . (.03) -- --
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 2.80 $ 2.67 $ 2.29
======== ======== ========
Fully diluted earnings per common share:
Company. . . . . . . . . . . . . . . . . . . . . . $ 2.74 $ 2.55 $ 2.21
SBI. . . . . . . . . . . . . . . . . . . . . . . . (.03) -- --
-------- -------- --------
Combined . . . . . . . . . . . . . . . . . . . . $ 2.71 $ 2.55 $ 2.21
======== ======== ========
</TABLE>
3 - Assumption of Deposits
On April 2, 1993, $99,399,000 of deposits and other liabilities
were assumed by the Kansas bank subsidiary from a failed bank in
Mission, Kansas. A premium of $1,141,000 was paid to the Federal
Deposit Insurance Corporation ("FDIC") to assume these deposits.
4 - Cash and Due from Banks
The subsidiary banks are required by federal law to maintain
reserves against their deposit liabilities. These reserves can be
maintained in the form of vault cash or balances at a Federal Reserve
Bank. The average cash and Federal Reserve balances maintained as
reserves were $145,158,000 for 1994 and $118,485,000 for 1993. Cash
and due from banks also includes checks in process of collection and
balances maintained at correspondent banks for services rendered.
5 - Securities
Debt securities classified as held-to-maturity are those
securities management has the positive intent and the Company has the
ability to hold until maturity. The available-for-sale securities
include marketable equity securities and those debt securities deemed
to be available-for-sale for the implementation of asset and liability
management strategies, possible liquidity needs, and other purposes.
The following table presents the amortized cost and estimated
fair value of debt securities classified as held-to-maturity and
carried at amortized cost.
Held-to-maturity
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------------------------ ------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
---------- ---------- ---------- --------- ---------- ---------- ---------- ---------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury obligations. $ 98,971 $ 2 $ (5,996) $ 92,977 $ 16,329 $ 155 $ (6) $ 16,478
Obligations of U.S.
government agencies
and corporations:
Mortgage-backed. . . . . 1,577,095 339 (89,622) 1,487,812 1,753,662 13,449 (12,239) 1,754,872
Other. . . . . . . . . . 262,469 33 (14,261) 248,241 4,259 106 (1) 4,364
Obligations of states and
political subdivisions. . 3,834 -- (207) 3,627 16,838 280 (76) 17,042
Other securities:
Collateralized auto
receivables . . . . . . -- -- -- -- 12,364 88 -- 12,452
Foreign debt securities. 2,050 -- (2) 2,048 2,155 5 -- 2,160
Money market mutual
funds . . . . . . . . . 195 -- -- 195 212 -- -- 212
---------- ------- --------- ---------- ---------- ------- -------- ----------
Total. . . . . . . . . $1,944,614 $ 374 $(110,088) $1,834,900 $1,805,819 $14,083 $(12,322) $1,807,580
========== ======= ========= ========== ========== ======= ======== ==========
</TABLE>
The amortized cost and estimated fair value of the held-to-
maturity debt securities at December 31, 1994 are shown below by
contractual maturity.
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------
Estimated
Amortized Fair
Cost Value
---------- ----------
(In thousands)
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . . . $ 1,961 $ 1,891
Due after one year through five years . . . . . . . 363,533 343,173
Due after five years through ten years. . . . . . . 2,025 2,024
---------- ----------
367,519 347,088
Mortgage-backed securities. . . . . . . . . . . . . 1,577,095 1,487,812
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $1,944,614 $1,834,900
========== ==========
</TABLE>
The following table presents the amortized cost and estimated
fair value of securities classified as available-for-sale and carried
at estimated fair value.
Available-for-sale
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------------------------ ------------------------------------------
Gross Gross Estimated Gross Gross Estimated
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
---------- ---------- ---------- --------- ---------- ---------- ---------- ---------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury obligations. $283,759 $ 102 $(16,869) $266,992 $ 297,891 $10,518 $ (78) $ 308,331
Obligations of U.S.
government agencies
and corporations:
Mortgage-backed. . . . . 136,482 1,190 (7,634) 130,038 215,889 4,530 (1,571) 218,848
Other. . . . . . . . . . 282,737 25 (13,890) 268,872 299,900 7,179 (803) 306,276
Obligations of states and
political subdivisions. . 167,811 7,883 (888) 174,806 222,130 21,266 (463) 242,933
Collateralized credit
card receivables. . . . . 62,579 -- (4,061) 58,518 -- -- -- --
Corporate notes and bonds. 41,208 19 (2,567) 38,660 39,567 710 (40) 40,237
-------- ------- -------- -------- ---------- ------- -------- ----------
Total debt securities. . 974,576 9,219 (45,909) 937,886 1,075,377 44,203 (2,955) 1,116,625
Equity securities. . . . . 1,290 68 (164) 1,194 1,172 -- (21) 1,151
-------- ------- -------- -------- ---------- ------- -------- ----------
Total. . . . . . . . . $975,866 $ 9,287 $(46,073) $939,080 $1,076,549 $44,203 $ (2,976) $1,117,776
======== ======= ======== ======== ========== ======= ======== ==========
</TABLE>
The amortized cost and estimated fair value of the available-for-
sale debt securities at December 31, 1994 are shown below by
contractual maturity.
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------
Estimated
Amortized Fair
Cost Value
---------- ----------
(In thousands)
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . . . $ 89,189 $ 90,036
Due after one year through five years . . . . . . . 636,866 606,205
Due after five years through ten years. . . . . . . 94,837 93,582
Due after ten years . . . . . . . . . . . . . . . . 17,202 18,025
-------- --------
838,094 807,848
Mortgage-backed securities. . . . . . . . . . . . . 136,482 130,038
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . $974,576 $937,886
======== ========
</TABLE>
The fair values of securities are based upon available market
data and estimates which often reflect transactions of relatively small
size and which are not necessarily indicative of prices at which larger
amounts of particular issues could be readily sold. Expected
maturities may differ from contractual maturities because borrowers
have the right to call or prepay obligations with or without call or
prepayment penalties.
The following table presents equity securities which do not have
a readily determinable fair value and are carried at cost.
Other securities
<TABLE>
<CAPTION>
December 31,
-------------------------------
1994 1993
---------- ----------
(In thousands)
<S> <C> <C>
Federal Home Loan Bank stock. . . . . . . . . . . . $ 37,645 $ 24,911
Federal Reserve Bank stock. . . . . . . . . . . . . 14,242 12,637
Other equity securities . . . . . . . . . . . . . . 1,549 1,559
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . $ 53,436 $ 39,107
======== ========
</TABLE>
The book value of securities pledged to secure public deposits
and for other purposes, as required or permitted by law, aggregated
$1,622,605,000 at December 31, 1994.
The sales price, gains, and losses realized from the sale of
available-for-sale investment securities are detailed in the following
table. This table does not include proceeds from nor realized gains
and losses attributable to prepayments of available-for-sale
securities.
<TABLE>
<CAPTION>
1994
-----------
(In thousands)
<S> <C>
Sales price of available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . $603,458
========
Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,485
Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,931
--------
Net gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,554
========
</TABLE>
The following table presents the sales price, gains, and losses
realized from the sale of securities, prior to the adoption of FAS 115
on December 31, 1993. This table does not include proceeds from nor
realized gains and losses attributable to prepayments of securities.
<TABLE>
<CAPTION>
1993 1992
------------ ------------
(In thousands)
<S> <C> <C>
Sales price of securities . . . . . . . . . . . . . . . . . . . . . . . . $ 14,443 $ 81,680
======== ========
Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . $ 230 $ 2,695
Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . 43 49
-------- --------
Net gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 187 $ 2,646
======== ========
</TABLE>
Not included in the table above are $299,685,000 of 1992 sales of
short-term Treasury Bills related to the restructuring of the
securities portfolio obtained with the assumption of deposits from a
Tulsa, Oklahoma savings and loan association ("S&L"). These securities
were sold within 14 days of maturity; thus the market risk had been
substantially eliminated as a pricing factor, and a gain of only $5,000
was realized.
On February 23, 1995, the Company sold approximately $424,000,000
of fixed-rate debt securities classified as available-for-sale,
resulting in a gross realized loss of $22,400,000. An income tax
benefit of approximately $8,000,000 will be recorded in connection with
these securities transactions. The debt securities sold consisted
primarily of U.S. Treasury obligations and obligations of U.S.
government agencies.
6 - Loans and Leases
The composition of the loan and lease portfolio was as follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
--------------------- ---------------------
Amount Percent Amount Percent
----------- --------- ----------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Commercial:
Commercial and industrial . . . . . . . . . . . . . . . . . . $1,018,753 25.4% $ 889,024 26.5%
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . 227,300 5.7 196,029 5.8
Energy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,742 3.2 77,962 2.3
Bank stock. . . . . . . . . . . . . . . . . . . . . . . . . . 25,173 .6 46,453 1.4
Real estate:
Construction. . . . . . . . . . . . . . . . . . . . . . . . 133,853 3.3 92,636 2.8
Permanent commercial real estate and other. . . . . . . . . 688,779 17.2 513,270 15.3
Lease financing . . . . . . . . . . . . . . . . . . . . . . . 86,098 2.2 40,195 1.2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,546 .7 35,964 1.1
---------- ------ ---------- ------
Total commercial loans. . . . . . . . . . . . . . . . . . . 2,337,244 58.3 1,891,533 56.4
---------- ------ ---------- ------
Consumer:
Secured by 1-4 family residences, less unearned discount. . . 979,847 24.4 786,637 23.5
Residential mortgage loans held for sale. . . . . . . . . . . 206 -- 110,132 3.3
Consumer, less unearned discount. . . . . . . . . . . . . . . 476,034 11.9 414,635 12.4
Credit card . . . . . . . . . . . . . . . . . . . . . . . . . 130,098 3.3 93,007 2.8
Educational . . . . . . . . . . . . . . . . . . . . . . . . . 82,238 2.1 55,968 1.6
---------- ------ ---------- ------
Total consumer loans. . . . . . . . . . . . . . . . . . . . 1,668,423 41.7 1,460,379 43.6
---------- ------ ---------- ------
Total loans and leases. . . . . . . . . . . . . . . . . . $4,005,667 100.0% $3,351,912 100.0%
========== ====== ========== ======
</TABLE>
The Company manages exposure to credit risk through loan
portfolio diversification by customer and market, as well as by type.
Although the aggregate legal lending limits of the Company's bank
subsidiaries totaled $84,958,000 at December 31, 1994, the Company had
no single lending relationship with an aggregate loan amount
outstanding in excess of $20,000,000. The Company principally lends to
businesses and individuals in Kansas, Oklahoma, and the contiguous
states and to Kansas and Oklahoma based customers that do business in
other states.
Nonaccrual loans and troubled debt restructurings are summarized
below:
<TABLE>
<CAPTION>
December 31,
---------------------
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . $29,097 $34,040
Troubled debt restructurings . . . . . . . . . . . . . . . . . . . . 503 290
------- -------
$29,600 $34,330
======= =======
</TABLE>
The effect of nonaccrual loans and troubled debt restructurings
on interest income was:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1994 1993 1992
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Interest income which would have been
recorded pursuant to the original terms . . . . . . . . . . $5,098 $4,060 $4,588
====== ====== ======
Interest income recorded . . . . . . . . . . . . . . . . . . $1,384 $1,504 $1,176
====== ====== ======
</TABLE>
In the ordinary course of business, the Company has made loans to
directors and executive officers of the Company and its significant
subsidiaries. Loans to these customers were transacted on the same
terms, including similar interest rates and collateral terms, as those
prevailing at the time for comparable transactions with unrelated
persons and, in management's opinion, did not involve more than a
normal risk of collectibility or present other unfavorable features at
the time they were made. An analysis of aggregate loan activity with
this group, including their immediate families, companies in which they
are principal owners, and trusts in which they are involved, follows:
<TABLE>
<CAPTION>
1994
--------------
(In thousands)
<S> <C>
Loans outstanding at December 31, 1993. . . . . . . . . . . . . . . . . . . $ 78,815
New loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,092
Repayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (123,700)
Other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,182)
--------
Loans outstanding at December 31, 1994. . . . . . . . . . . . . . . . . . . $ 74,025
========
</TABLE>
Other changes include loans outstanding at December 31, 1993 to
directors elected or retired in 1994, loans purchased or sold during
the current year, and any other loans outstanding at December 31, 1993
to related individuals or entities not considered to be related parties
at December 31, 1994.
7 - Allowance for Credit Losses
Changes in the allowance for credit losses are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Balance at January 1, as previously reported . . . . . . . . . . . . . . . . $66,368 $73,055 $70,669
Adjustment for pooling of interests. . . . . . . . . . . . . . . . . . . . 1,249 1,340 1,334
------- ------- -------
Balance at January 1, as restated. . . . . . . . . . . . . . . . . . . . . . 67,617 74,395 72,003
Allowance for credit losses of purchased banks . . . . . . . . . . . . . . 5,449 3,266 1,739
Allowance for purchased loans. . . . . . . . . . . . . . . . . . . . . . . -- -- 3,424
------- ------- -------
73,066 77,661 77,166
Provisions charged to operating expense. . . . . . . . . . . . . . . . . . 275 6,965 21,358
Recoveries on loans and leases previously charged off. . . . . . . . . . . 12,550 9,864 7,313
Loans and leases charged off . . . . . . . . . . . . . . . . . . . . . . . (14,017) (26,873) (31,442)
------- ------- -------
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . $71,874 $67,617 $74,395
======= ======= =======
</TABLE>
8 - Bank Premises and Equipment
A summary of land, buildings, and equipment appears below:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------------- --------------------------------
Accumulated Book Accumulated Book
Cost Depreciation Value Cost Depreciation Value
-------- ------------ ------- -------- ------------ --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Land . . . . . . . . . . . . . . . . . . $ 25,892 $ -- $ 25,892 $ 23,313 $ -- $ 23,313
Buildings and leasehold improvements . . 171,159 77,588 93,571 156,795 72,724 84,071
Furniture and equipment. . . . . . . . . 120,406 83,551 36,855 112,807 74,472 38,335
-------- -------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . $317,457 $161,139 $156,318 $292,915 $147,196 $145,719
======== ======== ======== ======== ======== ========
</TABLE>
Depreciation expense amounted to $17,634,000 in 1994, $16,029,000
in 1993, and $14,803,000 in 1992.
9 - Intangible Assets
Included in intangible assets are the following items:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------------- --------------------------------
Accumulated Book Accumulated Book
Cost Amortization Value Cost Amortization Value
-------- ------------ ------- -------- ------------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Cost in excess of net assets acquired . . $ 96,795 $24,813 $71,982 $ 68,250 $19,249 $49,001
Value of core deposits assumed. . . . . . 29,180 16,453 12,727 29,184 12,726 16,458
Purchased credit card relationships . . . 9,300 1,049 8,251 -- -- --
Purchased mortgage servicing rights . . . 7,886 5,240 2,646 5,749 4,248 1,501
-------- ------- ------- -------- ------- -------
$143,161 $47,555 $95,606 $103,183 $36,223 $66,960
======== ======= ======= ======== ======= =======
</TABLE>
The cost of purchased entities in excess of the fair value of net
assets acquired is being amortized on a straight-line basis over a
period of twenty years. The value of core deposits assumed, purchased
credit card relationships, and the purchased mortgage servicing rights
are being amortized using accelerated methods over the estimated
periods benefitted, not exceeding ten years.
10 - Deposits
The book values of deposits are presented below:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1994 1993
------------ ------------
(In thousands)
<S> <C> <C>
Noninterest-bearing deposits . . . . . . . . . . . . . . . . . . . . . $1,032,913 $ 977,944
Interest-bearing deposits:
Interest-bearing checking deposits . . . . . . . . . . . . . . . . . 959,755 937,937
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 1,123,208 1,261,008
Time deposits under $100,000 . . . . . . . . . . . . . . . . . . . . 2,127,815 1,896,743
Time deposits of $100,000 or more . . . . . . . . . . . . . . . . . . 403,457 362,931
---------- ----------
Total interest-bearing deposits . . . . . . . . . . . . . . . . . . 4,614,235 4,458,619
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,647,148 $5,436,563
========== ==========
</TABLE>
11 - Purchased Funds, Borrowings, and Long-Term Debt
The following schedules summarize, by category, purchased funds,
borrowings, and long-term debt.
Federal funds purchased and securities sold
under agreements to repurchase
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
-------------------- ---------------------
Amount Rate Amount Rate
-------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Federal funds purchased . . . . . . . . . . . . . . . . . . . . $391,970 5.85% $367,726 2.96%
Securities sold under agreements to repurchase. . . . . . . . . 541,736 5.66 123,901 3.27
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $933,706 5.74 $491,627 3.04
======== ========
</TABLE>
Federal funds purchased and securities sold under agreements to
repurchase generally mature daily or on demand.
Federal Home Loan Bank borrowings
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
-------------------- ---------------------
Amount Rate Amount Rate
-------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Federal Home Loan Bank borrowings . . . . . . . . . . . . . . . $441,097 5.72% $250,000 4.01%
======== ========
</TABLE>
At December 31, 1994, Federal Home Loan Bank ("FHLB") borrowings
included $291,800,000 with an average rate of 5.88% that matures in
1995. The remaining balance matures in 1996 ($100,000,000), 1997
($24,297,000) and 1998 ($25,000,000).
Other borrowings
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
-------------------- ---------------------
Amount Rate Amount Rate
-------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Treasury tax and loan . . . . . . . . . . . . . . . . . . . . . $23,001 5.20% $23,002 2.75%
Note payable. . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 6.19 -- --
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $43,001 5.66 $23,002 2.75
======= =======
</TABLE>
Treasury tax and loan borrowings generally mature daily or on
demand.
The $20,000,000 note payable at December 31, 1994 was borrowed
under the Company's committed line of credit from a correspondent bank.
Pursuant to this line of credit, the Company was required to maintain
capital ratios above the regulatory "Well Capitalized" standard and the
ratio of nonperforming assets to total loans plus other real estate
owned could not exceed 4.0%. At December 31, 1994 the Company was in
compliance with these covenants. This committed line of credit was
replaced by two new Credit Agreements, entered into on January 3, 1995.
The prior note was paid off and $20,000,000 was borrowed under the new
agreements. Under the new Credit Agreements, the Company may borrow up
to $100,000,000 on a revolving basis at any time prior to January 3,
1996.
Amounts borrowed under the Credit Agreements may have maturities
not to exceed 90 days. Interest rates based on, at the Company's
option, the lenders' published "reference rate" or rates tied to the
London Interbank Offered Rate exist. A facility fee is charged on
these commitments. The Company is required to maintain consolidated
stockholders' equity at a certain level and maintain specific ratios
related to leverage, risk-based capital, and nonperforming assets.
Long-term debt
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
----------------- -----------------
Amount Rate Amount Rate
---------- ------ ---------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,375 8.60% $13,125 8.60%
Mortgage indebtedness and other notes payable . . . . . . . . . . 310 10.85 6,926 5.83
Subordinated debentures . . . . . . . . . . . . . . . . . . . . . -- -- 232 6.38
------ -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,685 8.75 $20,283 7.63
====== =======
</TABLE>
The parent company's term loan with an unaffiliated bank requires
semiannual installments of $4,375,000, due the last day of March and
September through March 1995. The Company is required to maintain a
ratio of consolidated equity to consolidated assets above the level
required by the Federal Reserve Board of Governors; maintain
investments in subsidiaries below 140% of consolidated equity; and
maintain a level of consolidated tangible net worth exceeding
consolidated funded debt. At December 31, 1994 the Company was in
compliance with all of the terms of the agreement.
The mortgage indebtedness and other notes payable of $6,926,000
in 1993 includes $6,063,000 from the current year pooling-of-interests
acquisition. The acquired balance was paid off at the acquisition
date. Certain buildings and real estate have been pledged as
collateral on mortgage indebtedness and other notes payable.
Maturities of this long-term debt for years subsequent to December 31,
1994, are as follows:
Years ended December 31, (In thousands)
------------------------ --------------
1995 . . . . . . . . . . . . . $ 75
1996 . . . . . . . . . . . . . 29
1997 . . . . . . . . . . . . . 32
1998 . . . . . . . . . . . . . 14
1999 . . . . . . . . . . . . . 2
Thereafter . . . . . . . . . . 158
----
Total . . . . . . . . . . . . $310
====
The subordinated debentures were also obligations of a pooled
company. A variable interest rate based on the base rate per annum of
Commerce Bank, Kansas City, MO was required on the $188,000 of
debentures due July 31, 1994. The remaining $44,000 of debentures bore
a fixed interest rate of 8% and were due April 28, 1997. These
debentures were redeemed by the Company in 1994.
12 - Preferred Stock
<TABLE>
<CAPTION>
December 31,
-----------------------------
1994 1993
------------- -------------
(Dollars in thousands)
<S> <C> <C>
Class A cumulative convertible preferred stock,
par value $100 per share
Authorized: 250,000 shares
Issued: 250,000 shares (at liquidation preference) . . . . . . . $100,000 $100,000
Class B preferred stock, no par value
Authorized: 5,000,000 shares . . . . . . . . . . . . . . . . . . -- --
-------- --------
$100,000 $100,000
======== ========
</TABLE>
On February 24, 1992, the Company issued 250,000 shares of
nonvoting Class A Cumulative Convertible Preferred Stock. This
preferred stock was issued in the form of 4,000,000 depositary shares
each representing a 1/16 interest in a share of preferred stock and
each having a liquidation preference of $25.00. Dividends are payable
quarterly (beginning June 1, 1992) at an annual rate of $1.75 per
depositary share. The depositary shares are not redeemable by the
Company prior to March 1, 1997. However, they may be converted at the
election of shareholders into a total of 3,448,275 shares of the
Company's common stock at a conversion price of $29.00 per common
share.
At the Company's annual meeting in April 1992, the stockholders
authorized 5,000,000 shares of a new class of preferred stock,
designated Class B Preferred Stock. The Board of Directors has been
authorized to set the dividend, voting, conversion, redemption, and
other rights of this stock when and if issued.
13 - Merger and Integration Costs
The components of merger and integration costs related to the
1994, 1993, and 1992 pooling-of-interests transactions are detailed in
the following schedule.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Premises and equipment writedowns . . . . . . . . . . . . . . . $ 177 $1,252 $ 696
Severance and other compensation. . . . . . . . . . . . . . . . 821 2,970 886
Systems conversion costs. . . . . . . . . . . . . . . . . . . . 269 1,579 1,940
Legal, accounting, and other transaction costs. . . . . . . . . 306 829 522
Conform intangible asset amortization policies. . . . . . . . . 1,124 -- --
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 1,004 754
------ ------ ------
$2,847 $7,634 $4,798
====== ====== ======
</TABLE>
14 - Income Taxes
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability
method required by FAS No. 109, "Accounting for Income Taxes." Shown
separately in the 1993 Statement of Income is the cumulative effect of
adopting FAS No. 109 as of January 1, 1993 which increased net income
by $10,582,000. Two pooled companies elected early adoption of FAS No.
109 effective January 1, 1992, resulting in a $2,373,000 increase in
1992 earnings.
At December 31, 1994, the Company had net operating loss and
general business credit carryforwards of $61,446,000 and $330,000,
respectively, which can be carried forward to reduce future federal
income taxes payable. These carryforwards are principally related to
previous tax losses of banks and S&Ls acquired in 1994, 1993, and 1992.
Utilization of the carryforwards is limited by tax law to the future
earnings of and other limits on the use of tax attributes of acquired
companies. Net operating loss carryforwards expire in years 2000
through 2007 and general business credit carryforwards expire in years
1995 through 2002 if not utilized. For financial reporting purposes,
a valuation allowance of $12,608,000 has been recognized to offset the
deferred tax assets related to these carryforwards and other deferred
tax assets whose realization is uncertain. If realized, the tax
benefit of $11,794,000 associated with certain net operating loss
carryforwards to which this valuation allowance relates will be applied
to reduce "cost in excess of net assets acquired" recorded in
connection with acquisitions accounted for as purchases. The net
change in the valuation allowance for deferred tax assets for 1994 was
a decrease of $603,000.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
liabilities and assets as of December 31, 1994 and December 31, 1993
are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1994 1993
------------ ------------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards. . . . . . . . . . . . . . . . . . . $29,575 $ 8,159
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . 22,518 18,954
Securities fair value adjustment. . . . . . . . . . . . . . . . . . . 14,346 --
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . 2,584 2,043
Core deposit amortization . . . . . . . . . . . . . . . . . . . . . . 2,163 1,857
Write-down of other real estate owned . . . . . . . . . . . . . . . . 1,808 5,446
Merger and integration costs accrual. . . . . . . . . . . . . . . . . 1,175 1,132
Pension contribution. . . . . . . . . . . . . . . . . . . . . . . . . 1,093 1,018
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 345
------- -------
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . 75,262 38,954
Valuation allowance for deferred tax assets . . . . . . . . . . . . . (12,608) (13,211)
------- -------
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . 62,654 25,743
------- -------
Deferred tax liabilities:
Securities fair value adjustment. . . . . . . . . . . . . . . . . . . -- (16,078)
Purchase accounting adjustment. . . . . . . . . . . . . . . . . . . . (6,492) (4,173)
Discount accretion. . . . . . . . . . . . . . . . . . . . . . . . . . (4,518) (3,145)
Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,798) (2,121)
State taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,184) (2,343)
Depreciation expense. . . . . . . . . . . . . . . . . . . . . . . . . (2,535) (1,825)
Loan origination fees . . . . . . . . . . . . . . . . . . . . . . . . (1,226) --
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (735) --
------- -------
Total deferred tax liabilities. . . . . . . . . . . . . . . . . . . (22,488) (29,685)
------- -------
Net deferred tax asset (liability). . . . . . . . . . . . . . . . . $40,166 $(3,942)
======= =======
</TABLE>
Significant components of the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
Liability Liability Deferred
Method Method Method
------------ ------------ ------------
December 31, December 31, December 31,
1994 1993 1992
------------ ------------ ------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . $29,535 $24,297 $17,099
State . . . . . . . . . . . . . . . . . . . . . . . . . . 4,915 4,004 3,447
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 34,450 28,301 20,546
------- ------- -------
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . 7,123 (5,850) (239)
State . . . . . . . . . . . . . . . . . . . . . . . . . . (650) 225 (759)
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 6,473 (5,625) (998)
------- ------- -------
Total income tax expense. . . . . . . . . . . . . . . $40,923 $22,676 $19,548
======= ======= =======
</TABLE>
Tax effects of investment securities transactions included in the
above amounts are $1,271,000 in 1994, $520,000 in 1993, and $581,000 in
1992.
The components of the provision for deferred income taxes for the
period ended December 31, 1992 are as follows:
<TABLE>
<CAPTION>
December 31,
1992
------------
(In thousands)
<S> <C>
Provision for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,547)
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (944)
Write-down of other real estate owned. . . . . . . . . . . . . . . . . . . . . . . . . . . . 932
Bond discount accretion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Leasing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (385)
State taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318
-------
Provision for deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (998)
=======
</TABLE>
The effective income tax rates differ from the federal statutory
rates for the reasons shown in the following table.
<TABLE>
<CAPTION>
Liability Method Liability Method Deferred Method
------------------- ------------------- -------------------
December 31, 1994 December 31, 1993 December 31, 1992
------------------- ------------------- -------------------
Amount Rate Amount Rate Amount Rate
--------- -------- --------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at federal statutory rate . . . $43,416 35.0% $31,326 35.0% $28,031 34.0%
Tax-preferred income on obligations of states,
political subdivisions, and U.S. possessions. . . (5,695) (4.6) (6,552) (7.3) (7,080) (8.6)
Goodwill and purchase accounting amortization. . . 1,027 .8 1,271 1.4 986 1.2
State taxes, net of federal income tax benefit . . 2,697 2.2 2,737 3.1 1,693 2.1
General business credit. . . . . . . . . . . . . . -- -- -- -- (232) (.3)
Benefit of net operating losses and
alternative minimum tax credits . . . . . . . . . (927) (.7) (4,090) (4.6) (5,208) (6.3)
Other, net . . . . . . . . . . . . . . . . . . . . 405 .3 (2,016) (2.3) 1,358 1.6
------- ---- ------- ---- ------- -----
Actual income tax expense. . . . . . . . . . . $40,923 33.0% $22,676 25.3% $19,548 23.7%
======= ==== ======= ==== ======= ====
</TABLE>
15 - Employee Benefit Plans
The Company and its subsidiaries have two types of pension plans.
The Company's defined benefit plan covers substantially all employees.
The supplemental executive retirement plan provides for payments equal
to the benefit which would have been paid under the pension plan and
the savings and investment plan if certain Internal Revenue Code
limitations had not been imposed including Section 415, Section
401(a)(17), and the Section 401(a)(4) prohibition on deferred
compensation as eligible compensation under the pension plan.
The plans' funded status and amounts included in the consolidated
financial statements are presented below:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------- -------------------------
Supplemental Supplemental
Defined Executive Defined Executive
Benefit Retirement Benefit Retirement
Plan Plan Plan Plan
---------- ------------ ---------- ------------
(In thousands)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . . . . . . $(19,360) $ (838) $(20,425) $ (737)
======== ======= ======== =======
Accumulated benefit obligation. . . . . . . . . . . . . . $(20,765) $ (915) $(21,695) $ (799)
======== ======= ======== =======
Projected benefit obligation. . . . . . . . . . . . . . . $(27,223) $(1,120) $(28,234) $(1,169)
Plan assets, at fair value. . . . . . . . . . . . . . . . . 20,375 -- 20,086 --
-------- ------- -------- -------
Funded status . . . . . . . . . . . . . . . . . . . . . . . (6,848) (1,120) (8,148) (1,169)
Prior service benefit not yet recognized in periodic
pension cost, being amortized over 10 years. . . . . . . . (1,311) (7) (1,641) (1)
Unrecognized net (asset) obligation from date of
initial application, being amortized over 15 years . . . . (2,181) 89 (2,541) 104
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions. . 8,525 201 10,499 378
-------- ------- -------- -------
Accrued pension cost included in
consolidated statements of condition . . . . . . . . . . $ (1,815) $ (837) $ (1,831) $ (688)
======== ======= ======== =======
</TABLE>
Effective January 1, 1994, the pension plan was amended to reduce
the pension benefits by approximately 10%. Both the projected benefit
obligation and the prior service benefit reflected this change at
December 31, 1993. The accumulated benefit obligation at December 31,
1993 was not affected by this plan amendment.
The assets of the defined benefit plan are administered by the
trust division of a subsidiary bank and consist of a wide variety of
diversified securities including common stocks, corporate bonds, and
U.S. Treasury obligations. During 1994, the trust's investments in
commingled funds for qualified employee benefit accounts were converted
to the Funds IV equity and bond mutual funds. Contributions to the
plan are based upon the Projected Unit Credit Actuarial Funding method
and are limited to amounts that are currently deductible for tax
reporting purposes.
Net pension cost includes the following components:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Service cost-benefits earned during the year. . . . . . . . . . $2,968 $2,329 $1,441
Interest cost on the projected benefit obligation . . . . . . . 1,891 1,579 1,414
Actual (return) loss on plan assets . . . . . . . . . . . . . . 419 (2,119) (1,397)
Net amortization and deferrals. . . . . . . . . . . . . . . . . (2,167) 691 (314)
------ ------ ------
Net periodic pension cost . . . . . . . . . . . . . . . . . . $3,111 $2,480 $1,144
====== ====== ======
</TABLE>
Assumptions used in the accounting include:
<TABLE>
<CAPTION>
As of December 31,
------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Discount rates. . . . . . . . . . . . . . . . . . . . . . . . . 8.00% 7.00% 7.00%
Average rates of increase in compensation levels. . . . . . . . 4.70% 4.70% 4.70%
Expected long-term rate of return on assets . . . . . . . . . . 8.75% 8.75% 9.25%
</TABLE>
The Company and its subsidiaries also maintain a contributory
savings and investment plan for substantially all employees. The
savings and investment plan and related trust qualify under Section 401
of the Internal Revenue Code as a qualified profit-sharing plan and
trust. According to the plan, an employee may contribute from 2% to 4%
of base salary, which the employer then supplements with a contribution
of 50% of the employee's contributed amount. Employees may contribute
up to an additional 11% of base salary in pre-tax dollars, but without
further employer contributions. The plan also provides for an
additional matching contribution of up to an additional 2% of the
employee's eligible compensation based on the Company's achievement of
established earnings-per-share targets. Vesting in the employer
contributions ranges from 20% with three years to 100% with seven years
of service. During 1994, employees could elect to invest in one or
more of five investment funds, in 10% increments. These funds included
a Fourth Financial Corporation common stock fund, a fixed-income fund,
an equity fund, an international equity fund, and a money market fund.
Forfeitures are used to reduce the Company's contributions. The
expense for this plan plus similar plans of pooled companies which were
merged with this plan was $2,383,000 in 1994, $1,996,000 in 1993, and
$2,111,000 in 1992. This expense includes additional matching
contributions of $1,026,000, $629,000, and $625,000 for 1994, 1993, and
1992, respectively, attributable to the achievement of performance
goals.
The restatement of prior period financial statements for the
poolings of interests resulted in the inclusion of SBC's contributory
Employee Stock Ownership Plan ("ESOP") and PBI's noncontributory ESOP.
Both plans covered substantially all employees with one year of
service. Contributions to these plans were determined by the
respective Boards of Directors of SBC and PBI. In 1993 and 1992,
expense of the plans totaled $230,000 and $247,000, respectively. The
SBC ESOP was terminated February 12, 1993 and all stock was allocated
to the participants. The effective termination date of the PBI ESOP
was January 4, 1994.
The Company does not provide medical coverage for employees
subsequent to retirement. Approximately 67 employees who retired prior
to January 1, 1995, who were between age 55 and age 65 ("Early
retirees") at retirement and who had at least ten years' service have
continued participation in the Company's health plan until age 65, but
the plan requires that the full cost of providing coverage under the
plan be paid by the covered retirees. FAS No. 106, which establishes
accounting standards for "Employers' Accounting for Postretirement
Benefits Other Than Pensions," was not adopted as it would not have a
material effect on the Company's statement of condition and operating
results.
16 - Stock Option and Stock Purchase Plans
The Company grants options to key employees under incentive stock
option plans at prices equal to the market value on the date of grant.
Terms of the plans generally provide for the exercise of the options
for periods of up to ten years, as determined by the Board of
Directors.
The following schedule details the shares reserved for issuance
at December 31, 1994 under each of the plans, as well as the number of
shares under option and exercisable, both also at December 31, 1994.
<TABLE>
<CAPTION>
December 31, 1994
-----------------------------------------------------
Shares Shares
Reserved for Under Shares
Issuance Option Exercisable
------------ ------------ ------------
<S> <C> <C> <C>
1981 Stock Option Plan (1) . . . . . . . . . . . . . . 148,091 80,925 62,486
1986 Stock Option Plan . . . . . . . . . . . . . . . . 800,398 766,969 158,169
1993 Stock Option Plan . . . . . . . . . . . . . . . . 996,000 523,000 5,332
--------- --------- -------
1,944,489 1,370,894 225,987
========= ========= =======
</TABLE>
____________
(1) Options may no longer be granted under this plan.
The following table presents information regarding stock option
transactions and prices:
<TABLE>
<CAPTION>
Shares Under Option
-------------------------------------------------------------------------
1994 1993 1992
----------------------- ----------------------- -----------------------
Price Price Price
Number Per Share Number Per Share Number Per Share
---------- ------------ --------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1 . . . . . . . 798,038 $17.00-30.38 684,339 $14.80-29.88 518,297 $14.80-23.50
Granted. . . . . . . . . . . . . . 685,000 26.75-31.06 299,100 27.50-30.38 248,900 22.87-29.88
Exercised. . . . . . . . . . . . . (85,305) 17.00-28.75 (172,747) 14.80-23.20 (74,858) 14.80-23.20
Terminated or canceled . . . . . . (26,839) -- (12,654) -- (8,000) --
--------- -------- --------
Balance at December 31 . . . . . . 1,370,894 17.00-31.06 798,038 17.00-30.38 684,339 14.80-29.88
========= ======== ========
</TABLE>
An optionee may pay the option exercise price by tendering stock
of the Company having a market value equal to the exercise price. The
optionee must have held the tendered stock for at least six months
before it can be used to exercise an option. Transactions under this
program are accounted for as the purchase and reissuance of treasury
stock. The following is a summary of activity:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Shares tendered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,899 45,399 23,954
Shares issued under the stock option plans (including
reissued treasury stock). . . . . . . . . . . . . . . . . . . . . . . . 22,785 75,720 37,891
</TABLE>
An optionee also may borrow the amount of the option exercise
price from the Company. The loans under this program bear interest at
the Company's base rate adjusted quarterly and mature annually.
Although the Company reserves the right not to renew any loan at
maturity, it is the Company's present intention to allow each borrowing
for employees to be renewed for additional annual periods. At a
minimum, Company stock valued at 125% of the loan amount must
collateralize the loan. Such loans, which amounted to $1,894,000 and
$1,795,000 at December 31, 1994 and 1993, respectively, are reported as
a reduction of stockholders' equity.
The Fourth Financial Corporation 1993 Non-Employee Directors
Stock Option Plan (the "Directors Option Plan") was approved by
stockholders and adopted in 1993. The plan will terminate, for the
purposes of granting options, in ten years unless the plan is earlier
terminated by the Board of Directors.
The Directors Option Plan provides that each year, on the first
Monday following the Company's annual meeting of stockholders, each
non-employee director of the Company will automatically receive an
option to acquire 2,000 shares of the Company's common stock and each
non-employee director of the Company's subsidiaries will automatically
receive an option to acquire 1,000 shares of the Company's common
stock. Options issued under the plan are immediately exercisable and
will expire ten years from the date of grant. At December 31, 1994,
there were 499,700 shares reserved for issuance under the plan of which
81,700 were under option.
The following table presents information regarding stock option
transactions and prices under the Directors Option Plan:
<TABLE>
<CAPTION>
Shares Under Option
------------------------------------------------
1994 1993
----------------------- -----------------------
Price Price
Number Per Share Number Per Share
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Balance at January 1. . . . . . . . . . . . . . . . . . . 43,000 $29.50 -- $ --
Granted . . . . . . . . . . . . . . . . . . . . . . . . . 44,000 27.50 44,000 29.50
Exercised . . . . . . . . . . . . . . . . . . . . . . . . (300) 27.50 -- --
Terminated or canceled. . . . . . . . . . . . . . . . . . (5,000) -- (1,000) --
------- -------
Balance at December 31. . . . . . . . . . . . . . . . . . 81,700 27.50-29.50 43,000 29.50
======= =======
</TABLE>
Under the 1988 Employee Stock Purchase Plan, which expired in
April, 1993, and the 1993 Employee Stock Purchase Plan which replaced
it, employees are offered the option to purchase shares of the
Company's common stock at 85% of the lower of the fair market value of
such shares on the date granted or one year thereafter. Options issued
under the plan are exercisable one year from the date of grant. At
December 31, 1994, 696,247 shares were reserved for issuance, including
242,694 shares under option. No options under the plan were
exercisable at December 31, 1994. Additional data regarding the
Employee Stock Purchase Plan are as follows:
<TABLE>
<CAPTION>
Shares Under Option
-------------------------------------------------------------------------
1994 1993 1992
----------------------- ----------------------- -----------------------
Price Price Price
Number Per Share Number Per Share Number Per Share
---------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1. . . . . . . 180,597 $24.81 165,078 $23.06 214,611 $16.36
Granted . . . . . . . . . . . . . 268,384 23.74 192,109 24.81 178,534 23.06
Exercised . . . . . . . . . . . . (53,753) 23.74 (71,259) 23.06 (111,612) 16.36
Terminated or canceled. . . . . . (152,534) -- (105,331) -- (116,455) --
-------- -------- --------
Balance at December 31. . . . . . 242,694 23.74 180,597 24.81 165,078 23.06
======== ======== ========
</TABLE>
17 - Earnings Per Common Share
Earnings per common share are based on the following weighted
average numbers of shares outstanding.
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . 26,914,657 26,324,549 25,901,186
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . 30,362,932 30,355,263 29,488,679
</TABLE>
Primary earnings per common share were computed by dividing net
income applicable to common and common-equivalent shares by the
weighted average common and common-equivalent shares outstanding during
the period (common share equivalents include the preferred stock of
pooled companies). Fully diluted earnings per common share were
computed by adjusting net income for interest expense (net of income
taxes) associated with pooled companies' convertible debt. The
adjusted net income was then divided by the weighted average of common
and common-equivalent shares outstanding plus the number of shares
which would have been outstanding during the year had the Class A
convertible preferred stock and the pooled companies' convertible debt
and preferred stock been converted in accordance with their respective
governing instruments. Stock options outstanding have been excluded
from the computations as they were not materially dilutive.
The adjustment of net income for the pooled companies'
convertible debt interest expense (net of income taxes) was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Interest expense adjustment . . . . . . . . . . . . . . . . . . . $-- $4 $85
</TABLE>
18 - Dividends Per Common Share
Dividends per common share represent the Company's historical
dividends declared without adjustment for the poolings of interests.
The following table presents dividends declared by entities pooled
during 1994, 1993, and 1992 prior to their combinations with the
Company.
<TABLE>
<CAPTION>
1994 1993 1992
--------------------- --------------------- ---------------------
Per Per Per
Equivalent Equivalent Equivalent
Pooled Entity Historical Share Historical Share Historical Share
- --------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
First Dodge City Bancshares, Inc. . . . $58.46 $ .52 $132.00 $1.17 $142.73 $1.27
Southgate Banking Corporation . . . . . n/a n/a -- -- -- --
Nichols Hills Bancorporation, Inc. . . n/a n/a .43 .48 -- --
Commercial Landmark Corporation . . . . n/a n/a .93 .72 -- --
Western National Bancorporation, Inc. . n/a n/a -- -- -- --
Ponca Bancshares, Inc. . . . . . . . . n/a n/a .99 .81 .15 .12
KNB Bancshares, Inc. . . . . . . . . . n/a n/a n/a n/a 3.06 .22
Mission Hills Bancshares, Inc. . . . . n/a n/a n/a n/a 1.51 .44
United Bank of Kansas, Inc. . . . . . . n/a n/a n/a n/a 17.78 .61
Fourth National Corporation . . . . . . n/a n/a n/a n/a .25 .44
</TABLE>
19 - Restrictions on Intercompany Funds Transfers
Restrictions imposed by federal law limit the transfer of funds
to the Company and certain other affiliates from a subsidiary bank in
the form of loans or other extensions of credit, investments, and
purchases of assets. Transfers by a subsidiary bank to the Company or
any such single affiliate may not exceed 10% and transfers in the
aggregate may not exceed 20% of the bank's capital, surplus, and
undivided profits, after adding back the allowance for credit losses
and subtracting certain intangibles. Based on these limitations,
approximately $56,638,000 was available for transfer to the Company at
December 31, 1994. In addition, the approval of the Comptroller of the
Currency is required if dividends declared by any of the Company's
national bank subsidiaries in 1995 exceed the bank's net profits for
that year combined with its retained net profits for 1993 and 1994. In
1995, the subsidiary banks may distribute to the Company (in addition
to their 1995 net profits) an aggregate of approximately $39,944,000 in
dividends without approval from regulatory agencies.
20 - Derivatives and Other Financial Instruments with Off-Balance-Sheet
Risk
In the normal course of business in meeting the investment and
financing needs of its customers and managing its own exposure to
fluctuations in interest rates, the Company is a party to various
financial instruments. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount
recognized in the Statements of Condition.
Derivative financial instruments held for trading purposes:
The Company enters into forward foreign currency contracts to
primarily assist customers with their foreign currency needs related to
foreign manufacturing operations, exporting, or importing. These
customer-driven contracts are generally hedged with offsetting
contracts. The Company's net position in forward foreign currency
contracts plus due from bank accounts denominated in foreign currencies
cannot exceed $2,500,000 on a daily basis. The market value gains and
losses relating to forward foreign currency contracts are recorded at
settlement in "Other noninterest income." The contracts held at
December 31, 1993 all matured in January 1994. The contracts
outstanding at December 31, 1994 will all mature by March 15, 1995.
The Company maintains a trading account in which it takes
positions in the interest-rate futures markets based on expectations of
future market conditions. Interest rate futures contracts are
commitments to either purchase or sell designated financial instruments
at a future date for a specified price and may be settled in cash or
through delivery. Initial margin requirements are met in cash or other
instruments and changes in the contract value are settled daily and the
gains or losses recorded in "Other noninterest income." The interest
rate futures generally have contractual terms of up to six months,
although the instruments are rarely held that long. It is the
Company's policy to limit the contracts outstanding to $5,000,000.
The contract amounts of derivative financial instruments held for
trading purposes at December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
Contract Amount
-------------------------
December 31,
-------------------------
1994 1993
---------- ----------
(In thousands)
<S> <C> <C>
Forward foreign currency contracts
Commitments to purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $390 $1,506
Commitments to sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 211
Interest rate futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
</TABLE>
The following table presents the fair value of derivatives held
for trading purposes at December 31, 1994 and on average for 1994. As
permitted by FAS No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments," comparable
disclosures for December 31, 1993 and on average for 1993 have not been
presented.
<TABLE>
<CAPTION>
1994
--------------------
Fair Value
--------------------
Average
Year-end for year
--------- --------
(In thousands)
<S> <C> <C>
Forward foreign currency contracts
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 464 $ 1,989
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394 1,991
Interest rate futures contracts
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- *
____________
* Less than $1,000.
</TABLE>
The fair values of forward foreign currency and interest rate
futures contracts represent an estimate of the accounting loss the
Company would incur if any party to the financial instrument failed
completely to perform and any collateral proved to be of no value to
the Company. The net trading revenues arising from the Company's
derivative trading activities for 1994 were not significant.
Derivative financial instruments held for purposes other than trading:
From time to time, interest rate swaps are used to modify the
interest sensitivity position inherent in the repricing characteristics
of specific assets or liabilities. Interest rate swaps involve the
contractual exchange of fixed and floating rate interest payments based
on established notional amounts. The notional amounts do not represent
direct credit exposure. Credit exposure is limited to the net
difference between the calculated pay and receive amounts on each
transaction which is accrued as interest receivable or payable and
generally netted and settled quarterly. The net interest accrued and
received or paid on the interest rate swaps is accounted for as an
adjustment to the interest income or interest expense on the assets or
liabilities, respectively, that the swap was intended to modify. Net
interest income for 1994 includes $1,544,000 attributable to interest
rate swaps. The effect of interest rate swaps on 1993 was to increase
net interest income by $19,000.
At December 31, 1994 and 1993 interest rate swaps were as
follows:
<TABLE>
<CAPTION>
December 31, 1994
-----------------------------------------------------------------
Weighted
Notional Average Weighted Average Rate
--------------------------
Amount Term Received Paid
---------- -------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Receive fixed rate . . . . . . . . . . . . $151,000 18 months (1) 6.05% 5.90%
Pay fixed rate . . . . . . . . . . . . . . 100,000 4 months 5.79% 4.25%
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
-----------------------------------------------------------------
Weighted
Notional Average Weighted Average Rate
--------------------------
Amount Term Received Paid
---------- -------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Receive fixed rate . . . . . . . . . . . . $ 51,000 29 months (1) 5.89% 3.47%
Pay fixed rate . . . . . . . . . . . . . . 200,000 10 months 3.44% 3.94%
<FN>
- -------------
(1) The term of $50.0 million of these swaps may extend up to an additional 48 months after the initial term
depending on the variable rate index at the end of the initial term and each quarter thereafter as compared to
that same index when the swaps were initiated.
</TABLE>
Activity in interest rate swaps is summarized below:
<TABLE>
<CAPTION>
Receive Pay
Fixed Rate Fixed Rate
---------- ----------
(Notional amounts, in thousands)
<S> <C> <C>
Balance, January 1, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000 $ --
Additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 200,000
-------- --------
Balance, December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,000 200,000
Additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 --
Maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (100,000)
-------- --------
Balance, December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . $151,000 $100,000
======== ========
</TABLE>
At December 31, 1994, the Company was committed under agreements
with the Federal National Mortgage Association and Federal Home Loan
Mortgage Corporation to sell $4,080,000 of 10- to 30-year fixed-rate
residential mortgage loans with coupons ranging from 8.59% to 9.39%.
Residential mortgage loans held for sale included $206,000 of such
loans at December 31, 1994. These commitments were all met in January
1995.
Other financial instruments with off-balance-sheet risk:
Single-family mortgage loans which the Company's subsidiaries
originate for sale are sold without recourse. However, the Company is
obligated under recourse provisions related to $39,873,000 of loans
associated with its purchased mortgage servicing. The Company assesses
the credit risk of these and other loan commitments when evaluating the
adequacy of the allowance for credit losses.
Commitments to extend credit are agreements to lend to a customer
as long as the customer is in compliance with the conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a fee. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company uses the same credit
policies in making commitments as it does for direct extensions of
credit. The Company evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on
management's credit evaluation of the customer. Collateral held varies
but may include accounts receivable, inventory, real estate, equipment,
and income-producing commercial properties. Standby letters of credit
irrevocably obligate the issuing bank to pay a third-party beneficiary
when a customer fails to repay an outstanding debt instrument or fails
to perform some contractual non-financial obligation. Standby letters
of credit are primarily issued to secure bonds from insurance
companies, provide security for self-insured portions of workers
compensation insurance, and collateralize guaranties or secure loans to
other financial institutions. A commercial letter of credit is issued
to facilitate trade or commerce. Under the terms of a commercial
letter of credit, drafts will be drawn when the underlying transaction
is consummated as intended. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending
loans to customers. Substantially all letters of credit mature within
two years. The following table summarizes the contract amount of the
Company's commitments to extend credit.
<TABLE>
<CAPTION>
Contract Amount
-------------------------
December 31,
-------------------------
1994 1993
---------- ----------
(In thousands)
<S> <C> <C>
Commitments to extend credit:
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,440 $ 91,810
Commercial letters of credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 24,181 13,728
Credit card lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,809 329,183
Funding of 1-4 family residential mortgage loans. . . . . . . . . . . . . . . . . 51,192 117,151
Other loan commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,328,674 1,015,098
</TABLE>
21 - Fair Values of Financial Instruments
The following table presents the carrying amounts and fair values
of the Company's financial instruments at December 31, 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Trading instruments:
Debt securities . . . . . . . . . . . . . . . . . . $ 463 $ 463 $ 474 $ 474
Equity securities . . . . . . . . . . . . . . . . . 256 256 -- --
Foreign exchange contracts
Assets. . . . . . . . . . . . . . . . . . . . . . -- 464 -- 208
Liabilities . . . . . . . . . . . . . . . . . . . -- (394) -- (1,505)
Nontrading instruments:
Cash and due from banks . . . . . . . . . . . . . . 435,879 435,879 320,660 320,660
Interest-bearing deposits in other
financial institutions . . . . . . . . . . . . . . 499 501 3,025 3,072
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . . . . . 4,670 4,670 6,063 6,063
Securities. . . . . . . . . . . . . . . . . . . . . 2,937,130 2,827,416 2,962,702 2,964,463
Loans and leases. . . . . . . . . . . . . . . . . . 4,005,667 3,944,021 3,351,912 3,376,884
Deposits. . . . . . . . . . . . . . . . . . . . . . (5,647,148) (5,643,023) (5,436,563) (5,479,009)
Federal funds purchased, securities sold under
agreements to repurchase, and other borrowings . . (976,707) (976,707) (514,629) (514,629)
Federal Home Loan Bank borrowings . . . . . . . . . (441,097) (440,268) (250,000) (251,402)
Long-term debt. . . . . . . . . . . . . . . . . . . (4,685) (4,729) (20,283) (20,646)
Interest-rate swaps relating to:
Securities
Assets. . . . . . . . . . . . . . . . . . . . . -- -- -- 26
Liabilities . . . . . . . . . . . . . . . . . . -- (5,045) -- (24)
Loans
Liabilities . . . . . . . . . . . . . . . . . . -- (1,571) -- --
Deposits
Assets. . . . . . . . . . . . . . . . . . . . . -- 824 -- 154
Liabilities . . . . . . . . . . . . . . . . . . -- -- -- (721)
</TABLE>
The carrying amounts in the table are included in the Statements
of Condition under the indicated captions.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures in accordance with FAS No. 107,
"Disclosures About Fair Value of Financial Instruments." Because there
is no market for many of these financial instruments, the Company has
no basis to determine whether these estimated fair values would be
indicative of the value that could be obtained in an arm's-length sale.
Cash and due from banks: The carrying amounts reported in the
consolidated statements of condition for cash and due from banks
approximate those assets' fair values.
Interest-bearing deposits in other financial institutions: Fair
values of these fixed-rate certificates of deposit were estimated
using a discounted cash flow calculation that applies interest
rates currently being offered on certificates with similar
maturities.
Federal funds sold and securities purchased under agreements to
resell: The carrying amounts of federal funds sold and
securities purchased under agreements to resell approximate their
fair values.
Securities: Fair values for debt and equity securities were
based on quoted market prices, where available. If quoted market
prices were not available, fair values were based on quoted
market prices of comparable instruments.
Loans and leases: Except for variable-rate one-to-four-family
mortgage loans, the fair values of variable-rate loans that
reprice in accordance with indices were estimated to be equal to
carrying values. A significant portion of a credit card
portfolio's value results from the ongoing cardholder
relationship that generates receivables and fees over time. This
relationship value is not defined as a financial instrument and
therefore not disclosed under FAS No. 107. The carrying values
of the credit card receivables approximate their fair values.
The fair values for one-to-four- family variable-rate and fixed-
rate mortgage loans were based on quoted market prices of similar
loans, adjusted for differences in loan characteristics. The
fair values of other fixed-rate loans were estimated using
discounted cash flow analyses, using interest rates currently
being offered for loans with similar terms. Because the
allowance for credit losses provides for the credit risk inherent
in the loan and lease portfolio, neither the cash flows nor
discount rates were adjusted to reflect changes in credit risk
subsequent to when loans were originated. Nonperforming loans
have not been discounted.
Deposits: For deposits with no defined maturities, demand
deposits, interest-bearing checking deposits, and savings
deposits, FAS No. 107 defines fair value as the amount payable on
demand at the reporting date (i.e., their carrying amounts).
Included in "Intangible assets" at December 31, 1994 was
$12,727,000 (net of accumulated amortization) representing the
value of core deposits assumed in deposit assumption
transactions. The value of the core deposit relationships built
by the Company over time was neither considered in the fair value
amounts nor recorded as an intangible asset in the statements of
condition. The carrying amounts for variable-rate certificates
of deposit approximated their fair values at the reporting date.
Fair values for fixed-rate certificates of deposit were estimated
using a discounted cash flow calculation that applies interest
rates currently being offered on certificates with similar
maturities.
Federal funds purchased, securities sold under agreements to
repurchase, and other borrowings: The carrying amounts of
federal funds purchased, borrowings under repurchase agreements,
and other short-term borrowings approximate their fair values.
Federal Home Loan Bank borrowings: The carrying amounts of the
variable-rate FHLB borrowings approximate their fair values. A
discounted cash flow analysis, using the current rates on FHLB
borrowings of similar maturities, was used to estimate the fair
values of the fixed-rate borrowings.
Long-term debt: The fair value of the Company's long-term debt
was estimated using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types
of borrowing arrangements.
Off-balance-sheet instruments: No premium or discount was
ascribed to loan commitments because virtually all funding will
be at current market rates. The estimated fair values of the
interest rate swaps generally represent an estimate of the amount
the Company would receive or pay to terminate the agreement at
the reporting date. These values were based on dealer quotes
with respect to the amortizing swaps. For swaps with fixed
maturities, the estimated values represent the present value of
the cash flow stream discounted at current interest rate spreads.
Fair values of forward foreign currency and interest rate futures
contracts were based on quoted market prices.
22 - Commitments and Contingencies
At December 31, 1994, the Company was committed to make future
rental payments under several long-term lease agreements for land,
buildings, and equipment. There were no material capital leases.
Future minimum rental payments required under operating leases that
have initial or remaining non-cancelable lease terms in excess of one
year as of December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Years ending December 31, (In thousands)
------------------------- --------------
<S> <C>
1995 . . . . . . . . . . . . . $ 4,491
1996 . . . . . . . . . . . . . 4,021
1997 . . . . . . . . . . . . . 3,583
1998 . . . . . . . . . . . . . 3,392
1999 . . . . . . . . . . . . . 2,697
Later years . . . . . . . . . 13,089
-------
Total . . . . . . . . . . . $31,273
=======
</TABLE>
Total rental expense (net of sublease income, which is not
material) amounted to $5,214,000, $5,676,000, and $7,005,000 for 1994,
1993, and 1992, respectively.
The Company and its subsidiaries are defendants in various legal
proceedings that arise in the ordinary course of business. Claims in
various amounts of up to approximately $20,000,000 have been asserted
in some of these proceedings. However, after consultation with legal
counsel, management believes that potential liabilities, if any,
arising from these claims would not have a material adverse effect on
the Company's business or financial condition.
23 - Condensed Financial Information of Parent Corporation
In the following condensed financial information of Fourth
Financial Corporation (parent only), investments in subsidiaries are
recorded using the equity method of accounting.
Fourth Financial Corporation (Parent Only)
Condensed Statements Of Condition
<TABLE>
<CAPTION>
December 31,
------------------------
1994 1993
---------- ----------
(In thousands)
<S> <C> <C>
Assets:
Cash in subsidiary banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,954 $ 862
Interest-bearing deposits in subsidiary banks. . . . . . . . . . . . . . . . . . . 12,543 1,856
Securities repurchase agreement with subsidiary bank . . . . . . . . . . . . . . . 16,600 23,100
Investment securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,111 893
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 252
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,983 18,281
Investments in bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 490,688 492,195
Investments in other subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 31,544 46,615
Other assets (including receivables from subsidiaries
of $4,964 in 1994 and $4,718 in 1993) . . . . . . . . . . . . . . . . . . . . . . 11,789 9,803
Cost in excess of net assets acquired. . . . . . . . . . . . . . . . . . . . . . . 48,240 42,157
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $634,708 $636,014
======== ========
Liabilities And Stockholders' Equity:
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,000 $ --
Other liabilities (including amounts owed to subsidiaries
of $46 in 1994 and $314 in 1993). . . . . . . . . . . . . . . . . . . . . . . . . 8,266 9,744
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,375 19,420
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,641 29,164
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602,067 606,850
-------- --------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . $634,708 $636,014
======== ========
</TABLE>
Fourth Financial Corporation (Parent Only)
Condensed Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Dividends from subsidiaries:
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $126,245 $ 76,449 $ 57,580
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 470 250
Fee income (principally from subsidiaries) . . . . . . . . . . . . . . . . 59,636 57,382 39,370
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,587 1,775 3,555
Investment securities gains (losses) . . . . . . . . . . . . . . . . . . . (5) 161 --
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 315 --
-------- -------- --------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205,463 136,552 100,755
-------- -------- --------
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . 36,987 33,023 21,660
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . 9,699 11,532 8,204
Net occupancy (includes rent paid to bank subsidiaries
of $2,515 in 1994, $2,371 in 1993, and $1,632 in 1992). . . . . . . . . . 3,399 3,039 2,024
Professional fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,225 2,482 2,407
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,209 2,279 3,593
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,187 2,180 1,780
Fees paid to bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . 404 42 196
Amortization of cost in excess of net assets acquired. . . . . . . . . . . 3,300 2,765 2,713
Merger and integration costs . . . . . . . . . . . . . . . . . . . . . . . 1,886 1,936 2,386
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,205 12,655 6,766
-------- -------- --------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,501 71,933 51,729
-------- -------- --------
Income before income taxes, cumulative effect of a change in
accounting principle, and undistributed net income of subsidiaries. . . . 128,962 64,619 49,026
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,018 4,030 1,573
Cumulative effect of a change in accounting for income taxes . . . . . . . -- 681 384
Net income of subsidiaries in excess of (less than) dividends received . . (50,858) 7,962 14,216
-------- -------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,122 $ 77,292 $65,199
======== ======== =======
</TABLE>
Fourth Financial Corporation (Parent Only)
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1994 1993 1992
-------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents (In thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,122 $ 77,292 $ 65,199
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . 8,454 7,728 6,400
Write-down of goodwill associated with a
pooling transaction and other asset write-downs . . . . . . . . . . 1,061 1,250 --
Net income of subsidiaries (in excess of) less than
dividends received. . . . . . . . . . . . . . . . . . . . . . . . . 50,858 (7,962) (14,216)
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . (108) (889) (275)
Investment securities (gains) losses . . . . . . . . . . . . . . . . 5 (161) --
(Gain) loss on sale of equipment . . . . . . . . . . . . . . . . . . 25 (8) 377
Change in assets and liabilities, net of effects
from purchases of acquired entities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,308) (4,561) (707)
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . (1,299) 1,411 1,218
-------- -------- --------
Net cash provided by operating activities. . . . . . . . . . . . 140,810 74,100 57,996
--------- -------- --------
Cash Flows From Investing Activities:
Purchase of banks, net of cash acquired. . . . . . . . . . . . . . . . (90,720) (30,043) (9,951)
Purchases of premises and equipment. . . . . . . . . . . . . . . . . . (6,971) (11,001) (3,310)
Proceeds from sales of premises and equipment. . . . . . . . . . . . . 10 25 1,559
Purchase of available-for-sale securities. . . . . . . . . . . . . . . (368) (901) --
Proceeds from sales of available-for-sale securities . . . . . . . . . 5 -- --
Investments in subsidiaries. . . . . . . . . . . . . . . . . . . . . . (500) (15,290) (57,520)
Liquidation of subsidiaries. . . . . . . . . . . . . . . . . . . . . . 637 -- --
-------- -------- --------
Net cash used in investing activities. . . . . . . . . . . . . . (97,907) (57,210) (69,222)
-------- -------- --------
Cash Flows From Financing Activities:
Net change in commercial paper . . . . . . . . . . . . . . . . . . . . -- (425) (2,751)
Net change in other borrowings . . . . . . . . . . . . . . . . . . . . 20,000 (5,850) (7,256)
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . -- -- 1,028
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . (15,045) (14,065) (10,502)
Acquisition of treasury stock. . . . . . . . . . . . . . . . . . . . . (10,018) (3,245) --
Dividends on common stock. . . . . . . . . . . . . . . . . . . . . . . (27,662) (22,705) (16,768)
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . (7,000) (7,000) (5,368)
Proceeds from issuance of preferred stock, net of offering costs . . . -- -- 96,920
Proceeds from exercise of stock options. . . . . . . . . . . . . . . . 2,544 3,407 2,470
Purchase of minority stockholder interest. . . . . . . . . . . . . . . (36) -- --
Net change in stock option loans . . . . . . . . . . . . . . . . . . . (99) (726) (18)
Capital transactions of pooled companies . . . . . . . . . . . . . . . (308) (1,670) (2,263)
-------- -------- --------
Net cash provided by (used in) financing activities. . . . . . . (37,624) (52,279) 55,492
-------- -------- --------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . 5,279 (35,389) 44,266
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . 25,818 61,207 16,941
-------- -------- --------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . $ 31,097 $ 25,818 $ 61,207
======== ======== ========
Supplemental Disclosures:
Cash and cash equivalents:
Cash in subsidiary banks . . . . . . . . . . . . . . . . . . . . . . $ 1,954 $ 862 $ 642
Interest-bearing deposits in subsidiary banks. . . . . . . . . . . . 12,543 1,856 4,665
Securities repurchase agreements with subsidiary bank. . . . . . . . 16,600 23,100 55,900
-------- -------- --------
Total cash and cash equivalents. . . . . . . . . . . . . . . . . $ 31,097 $ 25,818 $ 61,207
======== ======== ========
Cash payments for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,165 $ 2,306 $ 3,786
======== ======== ========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,455 $ 21,689 $ 16,094
======== ======== ========
Detail of entities acquired:
Fair value of bank stock and other assets acquired . . . . . . . . . $ 77,629 $ 20,986 $ 7,784
Cost in excess of net assets acquired. . . . . . . . . . . . . . . . 13,091 9,328 2,167
-------- -------- --------
Cash paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,720 $ 30,314 $ 9,951
======== ======== ========
</TABLE>
FOURTH FINANCIAL CORPORATION
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Fourth Financial Corporation
We have audited the accompanying consolidated statements of
condition of Fourth Financial Corporation as of December 31, 1994 and
1993 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We did not audit the 1992 financial statements of Commercial Landmark
Corporation, Western National Bancorporation, Inc. or Ponca Bancshares,
Inc., which statements reflect interest income constituting 14% of
consolidated interest income. Those statements were audited by other
auditors and our opinion, insofar as it relates to data included for
these companies, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other
auditors, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Fourth
Financial Corporation at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
As discussed in Notes 1, 5 and 14 to the consolidated financial
statements, in 1993 the Company changed its method of accounting for
income taxes and investment securities.
/s/ Ernst & Young LLP
Ernst & Young LLP
Wichita, Kansas
January 17, 1995,
except for the last paragraph
of Note 5, as to which the
date is February 23, 1995
WESTERN NATIONAL BANCORPORATION, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Western National Bancorporation, Inc.:
We have audited the consolidated balance sheets of Western National
Bancorporation, Inc. (Western, an Oklahoma corporation) and subsidiary
as of December 31, 1992 and 1991, and the related consolidated
statements of income, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1992 (such financial
statements are not presented herein) prior to the pooling of Western
with Fourth Financial Corporation (see Note 2 to the consolidated
financial statements of Fourth Financial Corporation contained herein).
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Western
National Bancorporation, Inc. and subsidiary as of December 31, 1992
and 1991, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1992, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 11, 1993
COMMERCIAL LANDMARK CORPORATION AND SUBSIDIARIES
Independent Auditors' Report
The Board of Directors and Stockholders
Commercial Landmark Corporation and
Subsidiaries
Muskogee, Oklahoma
We have audited the accompanying consolidated balance sheets of
Commercial Landmark Corporation and Subsidiaries as of December 31,
1992 and 1991, and the related consolidated statements of income,
changes in stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Commercial Landmark Corporation and Subsidiaries as of December 31,
1992 and 1991, and the results of their operations and their cash
flows, for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Sartain Fischbein & Co.
February 19, 1993 SARTAIN FISCHBEIN & CO.
PONCA BANCSHARES, INC.
Independent Auditors' Report
The Board of Directors
Ponca Bancshares, Inc.
Ponca City, Oklahoma
We have audited the accompanying consolidated balance sheet of Ponca
Bancshares, Inc. and Subsidiary as of December 31, 1992 and the related
consolidated statements of earnings, stockholders' equity and cash
flows for the period from inception (February 4, 1992) to December 31,
1992. These financial statements are the responsibility of management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Ponca Bancshares, Inc. and Subsidiary as of December 31, 1992, and
the consolidated results of their operations and their cash flows for
the period then ended in conformity with generally accepted accounting
principles.
/S/ GRA, Thompson, White & Co., P.A.
GRA, THOMPSON, WHITE & CO., P.A.
September 16, 1993
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
----------------------------------------------------------
1994 1993(1) 1992(1) 1991(1) 1990(1)
---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Summary Income Statement Information:
Interest income . . . . . . . . . . . . . . . . . . $ 483,474 $ 443,913 $ 438,888 $ 492,036 $ 482,193
Interest expense. . . . . . . . . . . . . . . . . . 206,554 179,502 197,531 278,281 299,070
Net interest income . . . . . . . . . . . . . . . . 276,920 264,411 241,357 213,755 183,123
Net interest income (fully tax-equivalent)(2) . . . 285,706 274,630 252,664 226,929 198,123
Provision for credit losses . . . . . . . . . . . . 275 6,965 21,358 43,926 49,527
Noninterest income. . . . . . . . . . . . . . . . . 97,835 86,282 80,794 83,542 65,960
Noninterest expense(3). . . . . . . . . . . . . . . 250,435 254,342 218,549 211,376 188,258
Net income before extraordinary item and cumula-
tive effect of a change in accounting principle. . 83,122 66,710 62,696 31,766 5,304
Net income. . . . . . . . . . . . . . . . . . . . . 83,122 77,292 65,199 33,163 9,204
Net income applicable to common and common-
equivalent shares. . . . . . . . . . . . . . . . . 76,122 70,292 59,248 33,163 9,204
Per Common Share Data(4):
Earnings per common and common-equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . . $ 2.83 $ 2.67 $ 2.29 $ 1.33 $ .40
Fully diluted . . . . . . . . . . . . . . . . . . 2.74 2.55 2.21 1.30 .40
Fully diluted as originally reported(1) . . . . . 2.74 2.54 2.16 1.24 .98
Common dividend(5). . . . . . . . . . . . . . . . . 1.04 .98 .88 .88 .88
Book value(6) . . . . . . . . . . . . . . . . . . . 18.67 18.73 16.65 15.29 14.68
Average common and common-equivalent
shares outstanding (000s). . . . . . . . . . . . . 26,915 26,325 25,901 25,008 22,814
Year-end common shares outstanding (000s) . . . . . 26,896 27,054 25,809 25,016 24,795
Year-end common shares outstanding
assuming full dilution (000s). . . . . . . . . . . 30,344 30,503 30,169 26,032 25,453
Earnings Performance Ratios(7):
Return on assets. . . . . . . . . . . . . . . . . . 1.13% 1.16% 1.10% .57% .17%
Return on total stockholders' equity. . . . . . . . 13.94 13.72 13.06 8.78 2.61
Return on common stockholders' equity . . . . . . . 15.34 15.25 14.39 8.84 2.63
Summary Statement of Condition Information:
Year-end assets . . . . . . . . . . . . . . . . . . $7,729,340 $6,886,063 $6,712,696 $5,790,555 $5,899,188
Year-end loans and leases . . . . . . . . . . . . . 4,005,667 3,351,912 2,922,576 2,881,931 3,065,193
Year-end allowance for credit losses. . . . . . . . 71,874 67,617 74,395 70,814 64,065
Year-end long-term debt . . . . . . . . . . . . . . 4,685 20,283 35,935 53,348 23,887
Year-end common stockholders' equity. . . . . . . . 502,067 506,850 429,770 382,522 363,942
Year-end stockholders' equity . . . . . . . . . . . 602,067 606,850 533,411 385,609 366,453
Average assets. . . . . . . . . . . . . . . . . . . 7,331,210 6,681,439 5,917,051 5,780,064 5,329,309
Average loans and leases. . . . . . . . . . . . . . 3,584,022 3,038,112 2,899,130 2,996,076 2,904,427
Average investment securities . . . . . . . . . . . 3,035,350 2,937,396 2,308,543 1,952,698 1,452,593
Average deposits. . . . . . . . . . . . . . . . . . 5,564,070 5,443,857 5,026,398 5,061,336 4,616,020
Average common stockholders' equity . . . . . . . . 496,206 460,979 411,758 375,346 349,698
Average stockholders' equity. . . . . . . . . . . . 596,206 563,291 499,242 377,857 352,209
Asset Quality Ratios:
Allowance for credit losses/year-end loans
and leases . . . . . . . . . . . . . . . . . . . . 1.79% 2.02% 2.55% 2.46% 2.09%
Nonperforming assets/year-end loans plus other
real estate and nonperforming assets . . . . . . . .88 1.31 2.01 3.44 4.45
Allowance for credit losses/year-end
nonperforming loans. . . . . . . . . . . . . . . . 242.82 196.96 190.39 116.72 75.20
Net charge-offs/average loans and leases. . . . . . .04 .56 .83 1.26 1.17
Capital Ratios:
Stockholders' equity/assets(7). . . . . . . . . . . 8.13% 8.43% 8.44% 6.54% 6.61%
Leverage ratio(8)(9). . . . . . . . . . . . . . . . 7.16 7.52
Tier I risk-based capital(9)(10). . . . . . . . . . 11.05 12.68
Total risk-based capital(9)(10) . . . . . . . . . . 12.30 13.93
Common dividend payout ratio(11). . . . . . . . . . 36.75 36.70 38.43 66.17 220.00
<FN>
____________
(1) Prior year financial statements have been restated to reflect poolings of interests, refer to Notes 2 and 3 of the
Notes to Consolidated Financial Statements. Fully diluted earnings per share as originally reported represent
historical earnings per share as reported in the Company's annual report for the year indicated.
(2) Stated on a tax-equivalent basis assuming a marginal tax rate of 35% in 1994 and 1993 and 34% in the previous years.
(3) Noninterest expense included nonoperating charges of $2.8 million, $7.6 million, and $4.8 million for 1994, 1993,
and 1992, respectively.
(4) Adjusted for the five-for-four stock split effected as a 25% stock dividend on March 1, 1990.
(5) Dividends per common share represent historical dividends declared without adjustment for the poolings of interests.
(6) Refer to Note 1 of the Notes to Consolidated Financial Statements regarding the adoption of FAS No. 115 as of
December 31, 1993.
(7) Based on daily averages for all statement of condition items.
(8) Tier I capital/fourth quarter average assets less certain intangibles.
(9) Not computed for 1992, 1991, and 1990 to reflect poolings of interests.
(10) Tier I capital is composed of common stockholders' equity less certain intangibles plus preferred stockholders'
equity. Tier I capital does not include any unrealized gain or loss on securities available for sale. Total capital
is Tier I capital plus the allowance for credit losses (limited to 1.25% of risk-weighted assets). Both capital
amounts are divided by risk-weighted assets.
(11) Common dividend per share divided by primary earnings per share.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Performance Summary
Net income for 1994 was $83.1 million compared to $77.3 million
for 1993 and $65.2 million for 1992. Fully diluted earnings per share
were $2.74, $2.55, and $2.21 for 1994, 1993, and 1992, respectively.
For 1994, return on assets and return on common equity were 1.13% and
15.34%, respectively. Return on assets was 1.16% for 1993 and 1.10%
for 1992; return on common equity was 15.25% and 14.39% for the
respective prior periods.
These financial results reflect acquisitions accounted for as
poolings of interests for the entire three-year period, as prior
periods have been restated. However, acquisitions accounted for using
the purchase method of accounting are only included in the results of
operations for the periods subsequent to acquisition. The following
schedule details the acquisitions completed during 1992, 1993, and
1994.
<TABLE>
<CAPTION>
Number of
Acquisition Company Accounting Assets Cash Shares
Date Company Acquired/Location Abbreviation Method Acquired Paid Issued
- ------------- ------------------------------------ ------------ ---------- ---------- ---------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
1992 -
- -------
July 31 Farmers and Merchants Bank, "FMB" Purchase $ 66,827 $ 8,921 --
Colby, KS
September 9 KNB Bancshares, Inc., "KNB" Pooling 99,256 -- 267,390
Prairie Village, KS
October 30 Mission Hills Bancshares, Inc., "MHB" Pooling 94,762 -- 358,709
Mission Woods, KS
December 11 Southern Bancorp, Inc., "SBI" Purchase 64,510 9,951 --
Tulsa, OK
December 30 United Bank of Kansas, Inc., "UBK" Pooling 122,885 -- 663,739
Liberal, KS
December 31 Fourth National Corporation, "FNC" Pooling 368,325 -- 1,639,941
Tulsa, OK
1993 -
- -------
February 12 Southgate Banking Corporation, "SBC" Pooling 62,628 -- 451,310
Prairie Village, KS
May 14 Guaranty Bancorporation, "GB" Purchase 82,606 4,386 --
Tulsa, OK
May 28 Bancshares of Woodward, Inc., "BOW" Purchase 130,192 17,859 --
Woodward and Waukomis, OK
May 28 F&M Bank Services, Inc., "FBS" Purchase 61,565 8,068 --
Derby, KS
May 28 Nichols Hills Bancorporation, Inc., "NHB" Pooling 97,869 -- 469,906
Nichols Hills, OK
September 17 Commercial Landmark Corporation, "CLC" Pooling 465,060 -- 1,874,812
Muskogee, OK
December 3 Western National Bancorporation, Inc., "WNB" Pooling 206,288 -- 1,110,695(1)
Tulsa, OK
December 10 Ponca Bancshares, Inc., "PBI" Pooling 117,275 -- 478,395
Ponca City, OK
1994 -
- --------
May 26 Equity Bank for Savings, F.A. "Equity" Purchase 491,506 90,720 --
Oklahoma City, OK
May 31 Emprise Bank, National Association "Emprise" Purchase 258,731 31,206 --
Hutchinson, KS
June 30 First Dodge City Bancshares, Inc. "First Dodge" Pooling 144,999 -- 590,710(2)
---------- -------- ---------
Dodge City, KS
$2,935,284 $171,111 7,905,607
========== ======== =========
<FN>
____________
(1) An additional 108,748 shares were issued on December 3, 1993 to acquire the minority interest of WNB's bank
subsidiary.
(2) An additional 70,300 shares were issued and $36,000 cash paid on June 30, 1994 to acquire the minority interest
of First Dodge's two bank subsidiaries.
</TABLE>
Three deposit assumption transactions also were completed during
the three-year period ended December 31, 1994.
<TABLE>
<CAPTION>
Transaction Liabilities Cash
Date Location Assumed Paid
--------------- --------------------------- ------------- ------------
(In thousands)
<S> <C> <C> <C>
March 27, 1992 Hays, KS $ 46,484 $ 57
December 31, 1992 Tulsa, OK 349,355 14,856
April 2, 1993 Mission, KS 99,399 1,141
-------- -------
$495,238 $16,054
======== =======
</TABLE>
Net income for both 1993 and 1992 included cumulative effects of
a change in accounting principle or an extraordinary gain. A new
accounting standard, Financial Accounting Standard ("FAS") No. 109 -
Accounting for Income Taxes, was implemented effective January 1, 1993
and resulted in an addition to 1993 income of $10.6 million ($.35 per
fully diluted share). Two of the companies acquired in pooling-of-
interests transactions in 1993 had elected to adopt FAS No. 109 early,
resulting in the $2.4-million ($.08 per fully diluted share) income
item in 1992. An extraordinary item of $130,000 ($.01 per fully
diluted share) in 1992 reflects the utilization of a net operating loss
carryforward by First Dodge, a pooled company. Income before the
extraordinary item and the cumulative effect of the change in
accounting principle was $83.1 million, $66.7 million, and $62.7
million for 1994, 1993, and 1992, respectively.
Net interest income increased by $12.5 million to total $276.9
million for 1994 as compared to $264.4 million for 1993. The increase
in net interest income was principally related to the increased volume
of interest-earning assets from purchase acquisitions and internal loan
growth. Total average interest-earning assets were $6.6 billion for
1994, a $598.8-million, or 9.9%, increase over the prior year.
Comparing 1994 and 1993, average loans and leases increased $545.9
million. The increase in net interest income attributable to the
increased volume of interest-earning assets was partially offset by a
decrease in the net yield on earning assets to 4.30% in 1994 from 4.54%
in 1993. The decline in net yield reflects the impact that the
cyclical increase in interest rates has had on the Company's cost of
funds.
The provision for credit losses totaled $275,000 and $7.0 million
for 1994 and 1993, respectively. Pooled companies accounted for $4.6
million of the provision for 1993. The lower 1994 provision reflects
the strong allowance for credit losses and continued improvement in
credit quality as demonstrated by a lower level of nonperforming assets
and fewer net charge-offs.
Noninterest income was $97.8 million in 1994, a $11.5-million
increase over the 1993 noninterest income of $86.3 million. Investment
securities gains recognized during 1994 totaled $3.6 million compared
to $1.5 million for 1993. Fees collected in the normal course of
business increased $9.0 million or 10.7% to total $93.7 million for
1994 from $84.7 million for 1993. Approximately 63% of the increase in
fee income was attributable to business combinations accounted for as
purchases. Increases in trust fees, service charges on deposit
accounts, and bank card fees were also due to business development, the
larger customer base, and price changes.
Noninterest expense totaled $250.4 million in 1994, down $3.9
million as compared to 1993. For 1994 the gains on the sales of other
real estate and nonperforming assets exceeded the costs of operation of
such assets by $1.1 million. In 1993 the $3.3 million of net costs of
operations of other real estate and nonperforming assets was primarily
attributable to a pooled company. Merger and integration costs
associated with poolings of interests totaled $2.8 million and $7.6
million for 1994 and 1993, respectively.
Operating expenses (noninterest expense less merger and
integration costs and net costs of operations of other real estate and
nonperforming assets) increased 2.4% to total $248.6 million in 1994.
The Company's efficiency ratio (operating expense/fee income plus tax-
equivalent net interest income) was 65.51% for the current year
compared to 67.54% for the prior year. Operating expense in 1993
included $5.9 million of accelerated core deposit and purchased
mortgage servicing amortization, data processing hardware depreciation,
software amortization, and other unusual items.
Between 1993 and 1992 income before the extraordinary item and
the cumulative effect of the change in accounting for income taxes
increased $4.0 million to total $66.7 million for 1993 from $62.7
million for 1992. The $23.1-million increase in net interest income
was related to the increased volume of interest-earning assets
principally attributable to acquisitions. The larger customer base
plus aggressive sales efforts resulted in a larger volume of service
charge transactions, expanded brokerage and annuity sales activities,
and additional merchant and credit cardholder sales volumes which
contributed to the $5.5-million increase in noninterest income. The
$14.4-million decrease in the provision for credit losses between 1993
and 1992 reflected a strong allowance for credit losses and improvement
in credit quality as demonstrated by a lower level of nonperforming
assets and fewer net charge-offs in 1993 as compared to 1992. The
$35.8-million increase in noninterest expense principally reflects the
Company's substantial acquisition activity in 1993 and 1992.
Net Interest Income
For 1994, net interest income amounted to $276.9 million,
representing an increase of $12.5 million or 4.7% over the $264.4
million earned during 1993. On a fully tax-equivalent basis, net
interest income increased 4.0% to total $285.7 million in 1994 from
$274.6 million in 1993. The increase in net interest income was
attributable to the increase in earning assets associated with
acquisitions and loan growth. Total average interest-earning assets
were $6.6 billion for 1994, a $598.8-million or 9.9% increase over
1993. Purchase acquisitions completed in 1994 and 1993 account for
most of this increase. Comparing 1994 and 1993, average loans and
leases increased $545.9 million or 18.0%. Approximately 59% of the
increase was attributable to internal loan growth with the remainder
due to purchase acquisitions. Average investment securities only
increased $98.0 million or 3.3% as the proceeds from maturities and
prepayments were used to fund loan growth. Average deposits did not
increase significantly. The increased deposits from acquisitions were
offset by attrition, a reflection of increased bank and nonbank
competition. As a result, the increased earning assets were
principally funded by increases in federal funds purchased and
securities sold under agreements to repurchase of $242.7 million and
Federal Home Loan Bank borrowings of $251.1 million.
Average interest-earning assets of $6.0 billion in 1993 were
$704.7 million larger than the 1992 average interest-earning assets of
$5.3 billion. This increase, principally due to acquisitions, resulted
in the $23.1-million increase in net interest income for 1993 as
compared to 1992.
During both 1994 and 1993, the increase in net interest income
attributable to the increased volume of interest-earning assets was
partially offset by a decrease in the net yield on earning assets. The
1994 net yield of 4.30% declined from 4.54% for 1993 and 4.73% for
1992. The declining net yield reflects the difference in repricing
characteristics of the Company's assets and liabilities. Its deposits
and borrowed funds have a shorter duration than its loans and
securities. Consequently, as interest rates decreased in 1992,
interest-bearing liabilities repriced faster than interest-earning
assets resulting in a higher net yield during that period. However,
during 1993, as the proceeds from investment security maturities and
prepayments were reinvested at the lower rates which prevailed through
1993, the net yield declined. During 1994, the Board of Governors of
the Federal Reserve System increased the discount rate 175 basis
points. The resulting higher market interest rates were reflected in
the increasing cost of interest-bearing liabilities and a lower net
yield.
Loan fees included in net interest income amounted to $11.2
million, $11.5 million, and $8.5 million for 1994, 1993, and 1992,
respectively. The increase in loan fees between 1993 and 1992
reflected an increase in the volume of residential mortgage loan
originations associated with home purchases and the refinancing of
existing mortgages, both of which were stimulated by the relatively low
mortgage interest rates. The pace of residential mortgage loan
originations decreased during 1994 as mortgage interest rates
increased. Also during 1994, origination fees were waived on $47.8
million of loans (1,321 loans) originated under the Company's new
program for low-to-moderate income borrowers.
The following table provides the dollar volume and the number of
residential mortgage loan originations during each of the last three
years.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1994 1993 1992
---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Residential mortgage loan originations:
Dollar volume . . . . . . . . . . . . . . . . . . . . . . . $385,337 $451,966 $288,921
Number of loans . . . . . . . . . . . . . . . . . . . . . . 5,887 6,789 4,190
</TABLE>
The following table summarizes the changes in net interest income
on a fully tax-equivalent basis, by major category of interest-earning
assets and interest-bearing liabilities, identifying changes related to
volumes, to rates, and to both volumes and rates. Nonaccrual loans are
included in the loan volumes used to calculate the following analysis
of net interest income; however, interest collected on such loans is
usually recorded as a reduction in loans outstanding and is excluded
from interest income.
<TABLE>
<CAPTION>
1994 vs 1993
---------------------------------------------
Change
Total Attributable to
---------------------------------
Change Volume Yield/Rate Combination
-------- -------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Increase (decrease) in:
Interest income:
Loans and leases(1) . . . . . . . . . . . . . . . . . $ 41,758 $ 47,276 $ (4,557) $ (961)
Interest-bearing deposits in other
financial institutions . . . . . . . . . . . . . . . (136) (157) 62 (41)
Federal funds sold and securities
purchased under agreements to resell . . . . . . . . (1,041) (1,255) 648 (434)
Taxable investment securities . . . . . . . . . . . . 1,894 6,917 (4,881) (142)
Tax-preferred investment securities(1). . . . . . . . (4,294) (2,545) (1,920) 171
Trading account securities(1) . . . . . . . . . . . . (53) (60) 9 (2)
-------- -------- -------- --------
Total interest income change. . . . . . . . . . . . 38,128 50,176 (10,639) (1,409)
-------- -------- -------- --------
Interest expense:
Savings and interest checking . . . . . . . . . . . . (1,543) 1,564 (2,964) (143)
Time deposits . . . . . . . . . . . . . . . . . . . . 988 944 44 --
Federal funds purchased and securities
sold under agreements to repurchase. . . . . . . . . 15,311 7,329 4,941 3,041
Federal Home Loan Bank borrowings . . . . . . . . . . 12,357 9,920 959 1,478
Other borrowings. . . . . . . . . . . . . . . . . . . 1,214 748 241 225
Long-term debt. . . . . . . . . . . . . . . . . . . . (1,275) (1,104) (335) 164
-------- -------- -------- --------
Total interest expense change . . . . . . . . . . . 27,052 19,401 2,886 4,765
-------- -------- -------- --------
Increase (decrease) in net interest
income on a taxable equivalent basis(1) . . . . . . . 11,076 $ 30,775 $(13,525) $ (6,174)
-------- ======== ======== ========
Decrease in taxable equivalent adjustment. . . . . . . 1,433
--------
Net interest income change . . . . . . . . . . . . . . $ 12,509
========
</TABLE>
<TABLE>
<CAPTION>
1993 vs 1992
---------------------------------------------
Change
Total Attributable to
---------------------------------
Change Volume Yield/Rate Combination
-------- -------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Increase (decrease) in:
Interest income:
Loans and leases(1) . . . . . . . . . . . . . . . . . $ (6,450) $ 12,925 $(18,554) $ (821)
Interest-bearing deposits in other
financial institutions . . . . . . . . . . . . . . . (197) (156) (65) 24
Federal funds sold and securities
purchased under agreements to resell . . . . . . . . (2,435) (2,141) (586) 292
Taxable investment securities . . . . . . . . . . . . 16,126 43,940 (21,380) (6,434)
Tax-preferred investment securities(1). . . . . . . . (3,026) (973) (2,119) 66
Trading account securities(1) . . . . . . . . . . . . (81) (45) (48) 12
-------- -------- -------- --------
Total interest income change. . . . . . . . . . . . 3,937 53,550 (42,752) (6,861)
-------- -------- -------- --------
Interest expense:
Savings and interest checking . . . . . . . . . . . . (5,979) 8,462 (12,810) (1,631)
Time deposits . . . . . . . . . . . . . . . . . . . . (19,402) 3,780 (22,492) (690)
Federal funds purchased and securities
sold under agreements to repurchase. . . . . . . . . 3,019 4,614 (1,041) (554)
Federal Home Loan Bank borrowings . . . . . . . . . . 6,415 6,415 -- --
Other borrowings. . . . . . . . . . . . . . . . . . . (680) (350) (431) 101
Long-term debt. . . . . . . . . . . . . . . . . . . . (1,402) (1,530) 220 (92)
-------- -------- -------- --------
Total interest expense change . . . . . . . . . . . (18,029) 21,391 (36,554) (2,866)
-------- -------- -------- --------
Increase (decrease) in net interest
income on a taxable equivalent basis(1) . . . . . . . 21,966 $ 32,159 $ (6,198) $ (3,995)
-------- ======== ======== ========
Decrease in taxable equivalent adjustment. . . . . . . 1,088
--------
Net interest income change . . . . . . . . . . . . . . $ 23,054
========
<FN>
____________
(1) Computed on a tax-equivalent basis assuming a marginal tax rate of 35% in 1994 and 1993 and 34% in 1992.
</TABLE>
The following table presents average balances, income and
expense, and yields and rates for 1994, 1993 and 1992.
<TABLE>
<CAPTION>
1994 1993 1992
-------------------------- -------------------------- --------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
---------- -------- ------ ---------- -------- ------ ---------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-Earning Assets:
Loans and leases(1)(2). . . $3,584,022 $304,938 8.51% $3,038,112 $263,180 8.66% $2,899,130 $269,630 9.30%
Interest-bearing deposits
in other financial
institutions . . . . . . . 1,715 97 5.63 5,249 233 4.44 8,233 430 5.23
Federal funds sold and
securities purchased under
agreements to resell . . . 19,663 824 4.19 60,025 1,865 3.11 119,501 4,300 3.60
Investment securities:
Taxable . . . . . . . . . 2,829,210 161,370 5.70 2,711,570 159,476 5.88 2,075,687 143,350 6.91
Tax-preferred(1). . . . . 206,140 24,905 12.08 225,826 29,199 12.93 232,856 32,225 13.84
Trading securities(1) . . . 2,227 126 5.58 3,348 179 5.31 4,048 260 6.49
---------- -------- ---------- -------- --------- --------
Total interest-earning
assets(1). . . . . . . 6,642,977 492,260 7.41 6,044,130 454,132 7.51 5,339,455 450,195 8.43
Cash and due from banks . . . 382,247 346,361 311,646
Bank premises and
equipment, net . . . . . . . 153,245 134,400 115,932
Income receivable and
other assets . . . . . . . . 138,580 167,781 179,591
Intangible assets, net. . . . 85,194 63,086 44,498
Allowance for credit losses . (71,033) (74,319) (74,071)
---------- ---------- ----------
Total assets. . . . . . $7,331,210 $6,681,439 $5,917,051
========== ========== ==========
Liabilities And Stockholders'
Equity:
Interest-Bearing Liabilities:
Interest-bearing deposits:
Savings and interest
checking . . . . . . . . $2,178,052 $ 52,755 2.42% $2,116,957 $ 54,298 2.56% $1,856,594 $ 60,277 3.25%
Time under $100,000 . . . 2,014,562 87,907 4.36 1,986,635 89,796 4.52 1,874,455 106,945 5.71
Time of $100,000 or more. 386,044 16,862 4.37 392,341 13,985 3.56 433,702 16,238 3.74
---------- -------- ---------- -------- ---------- --------
Total interest-bearing
deposits . . . . . . . 4,578,658 157,524 3.44 4,495,933 158,079 3.52 4,164,751 183,460 4.41
Federal funds purchased
and securities sold under
agreements to repurchase . 637,956 27,245 4.27 395,290 11,934 3.02 260,364 8,915 3.42
Federal Home Loan Bank
borrowings . . . . . . . . 413,741 18,772 4.54 162,603 6,415 3.95 -- -- --
Other borrowings. . . . . . 42,433 2,015 4.75 21,946 801 3.65 28,737 1,481 5.15
Long-term debt. . . . . . . 9,427 998 10.58 18,320 2,273 12.41 31,390 3,675 11.71
---------- -------- ---------- -------- ---------- --------
Total interest-bearing
liabilities. . . . . . 5,682,215 206,554 3.64 5,094,092 179,502 3.52 4,485,242 197,531 4.40
-------- -------- --------
Noninterest-bearing deposits. 985,412 947,924 861,647
Other liabilities and
minority interest in
subsidiaries . . . . . . . . 67,377 76,132 70,920
---------- ---------- ----------
Total liabilities . . . 6,735,004 6,118,148 5,417,809
Preferred stockholders'
equity . . . . . . . . . . . 100,000 102,312 87,484
Common stockholders' equity . 496,206 460,979 411,758
---------- ---------- ----------
Total stockholders'
equity . . . . . . . . 596,206 563,291 499,242
---------- ---------- ----------
Total liabilities and
stockholders' equity . $7,331,210 $6,681,439 $5,917,051
========== ========== ==========
Net interest income(1). . . . . $285,706 $274,630 $252,664
======== ======== ========
Rate Analysis:
Interest income/
interest-earning assets(1). 7.41% 7.51% 8.43%
Interest expense/
interest-earning assets . . 3.11 2.97 3.70
----- ----- -----
Net yield on earning
assets(1) . . . . . . 4.30% 4.54% 4.73%
===== ===== =====
<FN>
___________
(1) Income and rates are stated on a tax-equivalent basis assuming a marginal tax rate of 35% in 1994 and 1993
and 34% in 1992.
(2) Nonaccrual loans are included in loans and leases.
</TABLE>
Provision for Credit Losses
The provisions for credit losses were $275,000, $7.0 million, and
$21.4 million for 1994, 1993, and 1992, respectively. The provisions
for 1993 and 1992 include $4.6 million and $5.8 million, respectively,
associated with the current and prior year poolings of interests. The
lower provision for credit losses in 1994 reflects the strong allowance
for credit losses and continued improvement in credit quality as
demonstrated by fewer net charge-offs and a lower level of
nonperforming assets. Net charge-offs for 1994 totaled $1.5 million or
.04% of average loans as compared to net charge-offs of $17.0 million
or .56% of average loans for 1993 and $24.1 million or .83% of average
loans for 1992. Nonperforming loans at December 31, 1994 were $29.6
million, down from $34.3 million at year-end 1993 and $39.1 million at
year-end 1992. The ratio of allowance for credit losses to
nonperforming loans increased to 242.82% at December 31, 1994, compared
with 196.96% at December 31, 1993 and 190.39% at December 31, 1992.
Noninterest Income
Total noninterest income was $97.8 million for 1994, representing
an increase of $11.5 million or 13.4% over the $86.3 million recorded
for 1993. Investment securities gains and unusual revenues increased
$2.5 million and fees collected in the normal course of business
increased $9.0 million or 10.7% to total $93.7 million for 1994 from
$84.7 million for 1993. Approximately 63% of the increase in fees
collected in the normal course of business was attributable to business
combinations accounted for as purchases.
Investment securities gains realized during 1994 totaled $3.6
million compared to $1.5 million in 1993. Substantially all of the
securities gains recognized in 1994 were recorded in the first quarter
when, in anticipation of rising interest rates, the Company elected to
sell $448.7 million of its available-for-sale securities. In addition
$151.2 million of investment securities principally acquired in the
Equity acquisition were sold with no gain or loss recognized. The $1.5
million of investment securities gains recognized in 1993 were due
principally to called bonds. During the second quarter of 1994 a gain
of $471,000 was realized on the sale of the Company's investment in a
data processing company which had been accumulated through various bank
acquisitions.
The most significant changes in fee income between 1994 and 1993
occurred in trust fees, service charges on deposit accounts, and bank
card fees. Trust fees increased $2.5 million or 13.3%, service charges
on deposit accounts increased $4.7 million or 14.1%, and bank card fees
increased $3.8 million or 36.5%. Exclusive of purchase transactions,
1994 trust fees, service charges, and bank card fees each increased
approximately 10% over the amounts earned in 1993. The increase in
trust fees was the result of increased sales efforts and the
introduction of Funds IV, a family of seven publicly traded no-load
mutual funds managed by the trust division. The increase in service
charges was attributable to both consumer and commercial customers.
These increased revenues were due to commercial and retail account
pricing changes, a reduction in waived fees, and a larger volume of
fee-based transactions. The increased bank card fees reflect internal
growth plus the acquisition of Equity, including its credit card
division that serviced approximately 77,000 customer accounts.
Brokerage and annuity sales commissions were $3.6 million for
1994 compared to $5.4 million for 1993. The $1.8-million decrease in
brokerage and annuity sales commissions reflects a reduced volume of
brokerage transactions associated with uncertain market conditions and
the impact of an internal reorganization on this business. Foreign
currency trading profits and foreign transaction fees increased 45.9%
to total $1.1 million for 1994. The Company enters into foreign
currency contracts primarily to assist customers with their foreign
currency needs related to their foreign manufacturing operations,
exporting, or importing.
Other fee income for 1994 included an $82,000 loss on the sale of
residential mortgage loans held for sale as compared with mortgage-
loan-sales gains of $584,000 realized for 1993. Also included in other
fee income were fees for providing data processing services to
correspondent banks of $120,000 and $666,000 for the years ended
December 31, 1994 and 1993, respectively. These services have been
substantially discontinued.
Total noninterest income was $86.3 million for 1993, as compared
to $80.8 million for 1992. Investment securities gains were $1.5
million in 1993 and $2.9 million in 1992. The 1992 lawsuit settlement
gain of $1.5 million was attributable to a pooled company. Fees
collected in the normal course of business increased 11.2% to $84.7
million for 1993 from $76.2 million for 1992. The increased fees were
principally due to increased service charges on deposit accounts and
brokerage and annuity sales fees. Real estate loan service fees
declined $883,000 between 1993 and 1992 due to accelerated prepayments
on serviced loans in 1993 caused by the high volume of mortgage loan
refinancings which was stimulated by low interest rates.
The following table provides an analysis of noninterest income
segregated between fees collected in the normal course of business and
other revenues for the past three years.
<TABLE>
<CAPTION>
Percent Change
---------------
Year Ended December 31, 1993- 1992-
--------------------------------
1994 1993 1992 1994 1993
-------- -------- -------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Fee income:
Trust fees . . . . . . . . . . . . . . . . . . . . . $21,041 $18,577 $17,828 13.3% 4.2%
Service charges on deposit accounts . . . . . . . . . 38,306 33,575 27,628 14.1 21.5
Bank card fees . . . . . . . . . . . . . . . . . . . 14,173 10,385 9,740 36.5 6.6
Brokerage and annuity sales commissions . . . . . . . 3,620 5,355 3,530 (32.4) 51.7
Trading account profits and commissions . . . . . . . 921 770 840 19.6 (8.3)
Real estate loan service fees . . . . . . . . . . . . 2,654 2,399 3,282 10.6 (26.9)
Safe deposit rent . . . . . . . . . . . . . . . . . . 1,611 1,443 1,273 11.6 13.4
Travelers and official check
fees and item handling charges . . . . . . . . . . . 2,442 2,205 2,335 10.7 (5.6)
Foreign currency trading profits and foreign
transaction fees . . . . . . . . . . . . . . . . . . 1,100 754 526 45.9 43.3
Insurance premiums. . . . . . . . . . . . . . . . . . 1,967 1,564 1,369 25.8 14.2
Other . . . . . . . . . . . . . . . . . . . . . . . . 5,897 7,662 7,802 (23.0) (1.8)
------- ------- -------
Total fee income . . . . . . . . . . . . . . . . . 93,732 84,689 76,153 10.7 11.2
Other revenues:
Investment securities gains . . . . . . . . . . . . . 3,632 1,486 2,904 1.4X (.5)
Gain on sale of credit card loans . . . . . . . . . . -- -- 169
Gain on sale of acquired stock. . . . . . . . . . . . 471 -- --
RTC reimbursements . . . . . . . . . . . . . . . . . -- 107 68 57.4
Lawsuit settlement. . . . . . . . . . . . . . . . . . -- -- 1,500
------- ------- -------
Total noninterest income. . . . . . . . . . . . . . $97,835 $86,282 $80,794 13.4 6.8
======= ======= =======
Fee income/average assets . . . . . . . . . . . . . . 1.28% 1.27% 1.29%
Noninterest income/average assets . . . . . . . . . . 1.33% 1.29% 1.37%
</TABLE>
Noninterest Expense
Noninterest expense amounted to $250.4 million, $254.3 million,
and $218.5 million for 1994, 1993, and 1992, respectively. Noninterest
expense for each of these years includes certain nonoperating items
such as net costs of operation of other real estate and nonperforming
assets, merger and integration costs, and other unusual items.
Gains from sales of other real estate and nonperforming assets
exceeded the costs of operation of such assets, resulting in a net gain
of $1.1 million in 1994 as compared to the net costs recorded in 1993
and 1992 of $3.3 million and $2.5 million, respectively. The costs of
nonperforming assets in 1993 were principally attributable to a pooled
company. As detailed in Note 13 of the Notes to Consolidated Financial
Statements, merger and integration costs for each of the years included
write-downs of excess facilities and equipment, severance and other
compensation, system conversion costs, legal, accounting, and other
costs all associated with the merger and integration of pooling-of-
interests acquisitions.
Operating expense amounted to $248.6 million and $242.7 million
for 1994 and 1993, respectively. The 1993 operating expense included
several unusual items: $1.2 million accelerated data processing
hardware depreciation and software amortization related to the
Company's commitment to improve its technology and systems; $2.8
million of additional core deposit intangibles amortization and
$768,000 of FDIC exit/entrance fee amortization both associated with
disintermediation of acquired deposits; and an acceleration of
purchased mortgage servicing rights amortization associated with a more
rapid pay-off of mortgage loans serviced for other investors.
Amortization of purchased mortgage servicing rights was $993,000 in
1994 as compared to $2.1 million for 1993. Exclusive of these unusual
items, operating expense increased $11.9 million, which was
attributable to business combinations accounted for as purchases. The
Company's efficiency ratio (operating expense/fee income plus tax-
equivalent net interest income) was 65.51% for 1994 as compared to
67.54% for 1993.
Operating expense increased $31.9 million or 15.1% to total
$242.7 million for 1993 from $210.8 million for 1992. The Company's
efficiency ratio was 67.54% for 1993 as compared to 64.12% for 1992.
In addition to the unusual 1993 expense items, the increased operating
expenses and efficiency ratio reflect operating expenses of purchased
business combinations subsequent to consummation (including intangible
asset amortization) and normal inflation-related and other cost
increases. The large number of acquisitions completed in 1992 and 1993
required a substantial commitment of resources for thorough assessment
of credit and other business risks; software systems conversion and
operations consolidation; and advertising, training, and other costs
associated with changing to the BANK IV sales and credit culture,
products, and services.
The following table presents an analysis of noninterest expense
for the past three years.
<TABLE>
<CAPTION>
Percent Change
---------------
Year Ended December 31, 1993- 1992-
--------------------------------
1994 1993 1992 1994 1993
-------- -------- -------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits . . . . . . . . . . . . $126,279 $117,291 $103,008 7.7% 13.9%
Furniture and equipment. . . . . . . . . . . . . . . . 22,529 23,534 19,611 (4.3) 20.0
Net occupancy. . . . . . . . . . . . . . . . . . . . . 17,729 16,699 15,444 6.2 8.1
FDIC insurance . . . . . . . . . . . . . . . . . . . . 12,598 13,117 12,124 (4.0) 8.2
Bank card. . . . . . . . . . . . . . . . . . . . . . . 3,273 3,295 1,224 (.7) 1.7X
Advertising and public relations . . . . . . . . . . . 9,436 8,481 6,429 11.3 31.9
Communication. . . . . . . . . . . . . . . . . . . . . 4,269 3,778 2,681 13.0 40.9
Postage and freight. . . . . . . . . . . . . . . . . . 6,764 6,259 5,474 8.1 14.3
Supplies, printed materials and forms. . . . . . . . . 4,906 5,241 5,371 (6.4) (2.4)
Federal Reserve service fees . . . . . . . . . . . . . 1,729 1,510 1,103 14.5 36.9
Loan acquisition and maintenance . . . . . . . . . . . 3,003 2,425 2,518 23.8 (3.7)
Outside service fees . . . . . . . . . . . . . . . . . 3,222 4,642 6,127 (30.6) (24.2)
Consulting fees. . . . . . . . . . . . . . . . . . . . 1,575 1,670 1,703 (5.7) (1.9)
Other professional fees and examinations . . . . . . . 5,111 5,725 6,159 (10.7) (7.0)
Amortization of intangible assets. . . . . . . . . . . 10,154 12,549 5,821 (19.1) 1.2X
Other . . . . . . . . . . . . . . . . . . . . . . . . 15,991 16,485 16,031 (3.0) 2.8
-------- -------- --------
Total operating expense . . . . . . . . . . . . . 248,568 242,701 210,828 2.4 15.1
Net costs of operation of other real
estate and nonperforming assets . . . . . . . . . . . (1,064) 3,339 2,497 33.7
Merger and integration costs . . . . . . . . . . . . . 2,847 7,634 4,798 (62.7) 59.1
Minority interest. . . . . . . . . . . . . . . . . . . 84 355 426 (76.3) (16.7)
Lawsuit settlement . . . . . . . . . . . . . . . . . . -- 313 --
-------- -------- --------
Total noninterest expense. . . . . . . . . . . . . $250,435 $254,342 $218,549 (1.5) 16.4
======== ======== ========
Noninterest expense/average assets . . . . . . . . . . 3.42% 3.81% 3.69%
Noninterest expense less noninterest
income/average assets . . . . . . . . . . . . . . . . 2.08% 2.52% 2.33%
Operating expense less fee
income/average assets . . . . . . . . . . . . . . . . 2.11% 2.36% 2.28%
Operating expense/fee income plus
tax-equivalent net interest income. . . . . . . . . . 65.51% 67.54% 64.12%
</TABLE>
Income Taxes
Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability
method required by FAS No. 109, "Accounting for Income Taxes." Shown
separately in the 1993 Statement of Income is the $10.6 million
cumulative effect of adopting FAS No. 109 as of January 1, 1993. Two
pooled companies elected early adoption of FAS No. 109, resulting in a
$2.4-million increase in 1992 earnings.
Income tax expense amounted to $40.9 million, $22.7 million, and
$19.5 million for 1994, 1993, and 1992, respectively. The higher tax
expense in 1994 was attributable to a higher level of income before
taxes. Income tax expense for 1993 was reduced by changes in the
valuation allowance for deferred tax assets principally associated with
net operating losses of pooled entities. In 1992, alternative minimum
tax ("AMT") credits were recognized, reducing the tax provision to the
amount which would have been recorded using the AMT provisions of the
tax law.
At December 31, 1994, the Company had net operating loss and
general business credit carryforwards of $61.4 million and $330,000,
respectively, which can be carried forward to reduce future federal
income taxes payable. These carryforwards are principally related to
previous tax losses of banks and S&Ls acquired in 1994, 1993, and 1992.
Utilization of the carryforwards is limited by tax law to the future
earnings of and other limits on the use of tax attributes of acquired
companies. Net operating loss carryforwards expire in years 2000
through 2007 and general business credit carryforwards expire in years
1995 through 2002 if not utilized. At December 31, 1994, for financial
reporting purposes, a valuation allowance of $12.6 million offset the
deferred tax assets related to these carryforwards and other deferred
tax assets whose realization is uncertain. If realized, the tax
benefit of $11.8 million associated with certain net operating loss
carryforwards to which this valuation allowance relates will be applied
to reduce "cost in excess of net assets acquired" recorded in
connection with acquisitions accounted for as purchases.
Statements of Condition
Total assets amounted to $7.7 billion, $6.9 billion, and $6.7
billion at December 31, 1994, 1993, and 1992, respectively. During
1994 and 1993, the Company completed five bank and S&L acquisitions
accounted for as purchases and one bank deposit assumption transaction.
Assets acquired in these six transactions totaled $1.1 billion. The
statements of condition for all of the periods presented include six
business combinations accounted for as poolings of interests. In
aggregate the pooled companies had assets of $1.1 billion. The
following sections describe the changes in the major Statement of
Condition categories.
Loans and Leases
Period-end loans and leases increased $653.8 million or 19.5% to
total $4.0 billion at December 31, 1994. Loans added through bank and
S&L purchase transactions totaled $296.5 million and net internal loan
growth was $357.3 million. Increases were realized in both commercial
and retail categories.
The commercial loan categories increased an aggregate of $445.7
million or 23.6% to total $2.3 billion at December 31, 1994. Retail
loan categories increased $208.0 million or 14.2% to total $1.7
billion. In addition to the effect of acquisitions, these increases
were attributable to a continued emphasis on business development
efforts and increasing credit demands associated with the strengthening
of the economy in Kansas and Oklahoma.
Total loans also increased between December 31, 1993 and 1992.
Loans added through bank purchase transactions totaled $121.7 million.
Net internal loan growth was $307.6 million.
During 1992 and 1991, both commercial and retail loan demand were
affected by an uncertain economic environment, and except for the
origination and refinancing activity in loans secured by 1-4 family
mortgages, most loan categories showed little change. Total loans
decreased $183.3 million or 6.0% to $2.9 billion at December 31, 1991
from $3.1 billion at year-end 1990. The decreases, which were realized
in almost all categories, were attributable to the lack of loan demand
and the effect of implementing enhanced underwriting standards which
emphasize cash flow rather than collateral-based lending. Credit card
loans decreased $16.3 million, or 16.9%, between year-ends 1991 and
1990 as an affinity group exercised its option to purchase its
portfolio from the Company.
The Company makes most of its loans within Kansas, Oklahoma, and
the contiguous states and to Kansas- and Oklahoma-based customers that
do business in other states. The Company's commercial and industrial
loans principally are made to middle market and small businesses. At
December 31, 1994, the Company had 15 lending relationships in which
the aggregate loan amount was $10.0 million or more. The Company had
no single lending relationship with an aggregate loan amount
outstanding in excess of $20 million. The Company had no industry
concentrations greater than 10.0% of total loans outstanding and no
foreign loans at December 31, 1994.
The following table shows the composition of loans and leases for
the past five years.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial:
Commercial and industrial . . . . . . . . . . . $1,018,753 $ 889,024 $ 752,956 $ 744,281 $ 846,321
Agriculture . . . . . . . . . . . . . . . . . . 227,300 196,029 169,742 176,812 162,392
Energy. . . . . . . . . . . . . . . . . . . . . 129,742 77,962 55,754 60,053 69,091
Bank stock. . . . . . . . . . . . . . . . . . . 25,173 46,453 51,967 52,994 65,076
Real estate:
Construction . . . . . . . . . . . . . . . . . 133,853 92,636 67,036 94,610 113,279
Permanent commercial real estate and other . . 688,779 513,270 450,494 438,571 453,539
Lease financing . . . . . . . . . . . . . . . . 86,098 40,195 29,490 27,166 25,235
Other . . . . . . . . . . . . . . . . . . . . . 27,546 35,964 40,685 62,526 80,760
---------- ---------- ---------- ---------- ----------
Total commercial loans. . . . . . . . . . . . 2,337,244 1,891,533 1,618,124 1,657,013 1,815,693
---------- ---------- ---------- ---------- ----------
Consumer:
Secured by 1-4 family residences,
less unearned discount . . . . . . . . . . . . 979,847 786,637 701,917 644,318 661,580
Residential mortgage loans held for sale. . . . 206 110,132 501 2,588 923
Consumer, less unearned discount. . . . . . . . 476,034 414,635 477,791 463,200 458,550
Credit card . . . . . . . . . . . . . . . . . . 130,098 93,007 82,354 80,126 96,405
Educational . . . . . . . . . . . . . . . . . . 82,238 55,968 41,889 34,686 32,042
---------- ---------- ---------- ---------- ----------
Total consumer loans. . . . . . . . . . . . . 1,668,423 1,460,379 1,304,452 1,224,918 1,249,500
---------- ---------- ---------- ---------- ----------
Total loans and leases. . . . . . . . . . . $4,005,667 $3,351,912 $2,922,576 $2,881,931 $3,065,193
========== ========== ========== ========== ==========
</TABLE>
Commercial and Industrial: The Company's commercial and
industrial portfolio includes loans to businesses engaged in services,
manufacturing, wholesaling, retailing, financial services, public
utilities, construction, mining, and agribusiness. The largest
industry concentrations are service businesses and manufacturing, each
representing approximately 5% of total loans.
Agriculture: Loans secured by feeder cattle and other livestock
accounted for approximately 65% of the agriculture portfolio at
December 31, 1994. The remainder of the agriculture portfolio is
secured by equipment, farm assets and accounts receivable and
inventory, none of which represent a significant concentration.
Energy: Loans secured by proven oil and gas reserves constitute
substantially all of the energy loan portfolio. Generally, the Company
will loan no more than 60% of the discounted value of such proven
reserves. Annual engineering reports are required on all production
loans of $250,000 or more. These reports include cash flow analyses on
all properties and provide estimates of remaining recoverable reserves,
rates of recovery, operating expenses, and taxes. There are no oil rig
acquisition loans, and loans to well-servicing companies and suppliers
are not material.
Bank Stock: Loans for the purpose of purchasing or holding a
material interest in a bank make up this portfolio.
Commercial Real Estate: At December 31, 1994, approximately 49%
of the portfolio was in the Kansas markets of Wichita, Topeka and
Kansas City. The Tulsa and Oklahoma City markets represented an
additional 34% of this portfolio.
Permanent commercial real estate loans include loans in the
Company's market for small office buildings/parks; neighborhood strip
shopping centers; small manufacturing machine shop buildings; office
warehouse properties; medical offices; apartment buildings; and loans
secured by farm land. Also included in this portfolio are loans for
purposes other than funding the acquisition of the collateral
properties and in which cash flows from the properties are not the
principal source of repayment. Approximately 68% of the loans in the
permanent commercial real estate portfolio are floating rate loans.
Most of the remainder of this portfolio are "mini-perms" with five-year
maturities.
Secured by 1-4 Family Residences: The 1-4 family residence
portfolio consists of loans secured by residences located primarily in
Kansas and Oklahoma. The majority of the loans are permanent first
mortgage loans with the remainder consisting of home equity credit
lines and other loans secured by second mortgages.
Residential Mortgage Loans Held For Sale: Residential mortgage
loans held for sale are carried at the lower of cost or market value
determined on an aggregate basis.
Maturity Distribution and Interest Sensitivity of Loans
The maturity distribution of loans outstanding as of December 31,
1994 (excluding real estate-secured by 1-4 family residences, consumer,
credit card, educational, and lease financing) by type and sensitivity
to changes in interest rates is as follows:
<TABLE>
<CAPTION>
Remaining Maturity
--------------------------------------------------
Over One
Year
One Year Through Over Five
or Less Five Years Years Total
---------- ---------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Commercial and industrial . . . . . . . . . . . . . . . $ 616,210 $328,479 $ 74,064 $1,018,753
Agriculture . . . . . . . . . . . . . . . . . . . . . . 194,422 29,407 3,471 227,300
Energy . . . . . . . . . . . . . . . . . . . . . . . . 79,892 36,227 13,623 129,742
Bank stock . . . . . . . . . . . . . . . . . . . . . . 25,058 50 65 25,173
Real estate-construction . . . . . . . . . . . . . . . 97,349 32,427 4,077 133,853
Real estate-permanent commercial and other . . . . . . 135,578 372,376 180,825 688,779
Other . . . . . . . . . . . . . . . . . . . . . . . . . 19,451 7,826 269 27,546
---------- -------- -------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $1,167,960 $806,792 $276,394 $2,251,146
========== ======== ======== ==========
Loans with fixed interest rates . . . . . . . . . . . . $ 328,624 $306,275 $ 58,291 $ 693,190
Loans with floating interest rates . . . . . . . . . . 839,336 500,517 218,103 1,557,956
---------- -------- -------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . $1,167,960 $806,792 $276,394 $2,251,146
========== ======== ======== ==========
</TABLE>
Nonperforming Assets
Nonperforming assets consist of nonaccrual loans, troubled debt
restructurings, and other real estate and nonperforming assets.
A loan is placed on nonaccrual status when principal or
interest is due and has remained unpaid for 90 days or more unless
the loan is both well secured and in the process of collection. A
currently performing loan also may be placed on nonaccrual
status when there is reasonable doubt as to the ability of the
borrower to continue to pay principal or interest. Nonaccrual
loans at December 31, 1994 included $7.9 million of these
"performing/nonperforming" loans. Troubled debt restructurings
are those loans for which the original contractual terms have
been modified to provide a concession because of a deterioration
in the borrower's financial condition. Other real estate and
nonperforming assets include assets acquired from loan settlements and
foreclosures.
Generally, principal and interest payments received on nonaccrual
loans are applied as reductions of principal. For this reason
and because of charge-offs, the book value of such loans
understates the remaining contractual obligation of the borrowers.
As of December 31, 1994, the carrying value of nonaccrual
loans had been charged down to 77.52% of the customers' contractual
principal obligations. Also, the carrying values of other real
estate and nonperforming assets have been written down to current
estimates of their fair values less a reserve for the estimated
costs to sell the properties.
Interest income of $1.4 million has been included in income
for the year ended December 31, 1994 on loans which at
year-end were considered nonaccrual loans or troubled debt
restructurings. Interest of $5.1 million would have been
recorded for the year if these loans had
been current in accordance with their original terms.
The following table presents nonperforming assets and those loans
which are contractually past due 90 days or more as to principal or
interest payments at December 31 for the past five years.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans . . . . . . . . . . . . . . . . . $29,097 $34,040 $37,169 $ 55,751 $ 80,613
Troubled debt restructurings . . . . . . . . . . . 503 290 1,906 4,918 4,576
------- ------- ------- -------- --------
Total nonperforming loans . . . . . . . . . . 29,600 34,330 39,075 60,669 85,189
Other real estate and nonperforming assets . . . . 5,679 9,787 20,097 39,963 53,695
------- ------- ------- -------- --------
Total nonperforming assets . . . . . . . . . . $35,279 $44,117 $59,172 $100,632 $138,884
======= ======= ======= ======== ========
Past due loans (90 days or more) . . . . . . . . . $13,194 $ 9,108 $10,863 $ 6,007 $ 7,547
======= ======= ======= ======== ========
Nonperforming assets/year-end loans plus
other real estate and nonperforming assets. . . . .88% 1.31% 2.01% 3.44% 4.45%
==== ==== ==== ==== ====
Nonperforming assets/year-end assets . . . . . . . .46% .64% .88% 1.74% 2.35%
==== ==== ==== ==== ====
</TABLE>
Nonperforming assets decreased $8.8 million or 20.0% between
December 31, 1994 and 1993. At December 31, 1994, total nonperforming
assets represented .88% of total loans plus other real estate owned and
nonperforming assets and .46% of total assets as compared to 1.31% of
total loans plus other real estate owned and nonperforming assets and
.64% of total assets at December 31, 1993. Banks and S&Ls purchased
during 1994 added $652,000 to the 1994 nonperforming asset total. The
1994, 1993, and 1992 pooling-of-interests combinations accounted for
$21.6 million, $34.4 million, $62.3 million, and $89.0 million of
nonperforming assets at year-end 1993, 1992, 1991, and 1990,
respectively.
Management continues to focus on asset quality. An emphasis is
placed on pro-active management of problem credits, early detection of
potential problems, and timely charge-offs. A due diligence team is
responsible for assessing potential problem loans in banks to be
acquired prior to the execution of a definitive agreement. A separate
work-out department is responsible for the resolution and collection of
problem assets. An analysis of nonperforming loans by type is provided
in the following table. There are no significant concentrations of
nonperforming assets in any one market or industry.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Commercial:
Commercial and industrial. . . . . . $14,674 $14,789 $13,330 $23,330 $38,088
Agriculture. . . . . . . . . . . . . 1,283 1,526 1,449 1,250 766
Energy . . . . . . . . . . . . . . . 1,221 510 184 402 2,508
Bank stock . . . . . . . . . . . . . -- -- -- 41 --
Real estate:
Construction . . . . . . . . . . . 905 1,343 1,883 7,029 5,756
Permanent commercial
real estate and other . . . . . . 8,422 11,741 16,316 22,246 30,391
Lease financing. . . . . . . . . . . 208 107 188 384 495
------- ------- ------- ------- -------
Total commercial loans . . . . . . 26,713 30,016 33,350 54,682 78,004
------- ------- ------- ------- -------
Consumer:
Secured by 1-4 family residences,
less unearned discount. . . . . . . 1,334 2,384 3,861 3,752 4,454
Consumer, less unearned discount . . 1,553 1,930 1,864 2,235 2,731
------- ------- ------- ------- -------
Total consumer loans . . . . . . . 2,887 4,314 5,725 5,987 7,185
------- ------- ------- ------- -------
Total nonperforming loans. . . . $29,600 $34,330 $39,075 $60,669 $85,189
======= ======= ======= ======= =======
Nonaccrual loans/nonaccrual
loans and prior charge-offs . . . . . 77.52%
======
</TABLE>
Potential Problem Loans
Certain loans classified for regulatory purposes as doubtful,
substandard, or special mention are included in the nonperforming loan
table. Also included in the classified loans are certain other loans
which are deemed to be potential problems.
Potential problem loans are those loans which are currently
performing but where known information about trends or uncertainties or
possible credit problems of the borrowers causes management to have
concerns as to the ability of such borrowers to comply with present
repayment terms, possibly resulting in the transfer of such loans to
nonperforming status. These loans totaled $12.2 million at
December 31, 1994.
Allowance for Credit Losses
The allowance for credit losses is the amount deemed by
management to be reasonably necessary to provide for possible losses on
loans that may become uncollectible. Additions to the allowance are
charged to expense as the provision for credit losses. Loan losses and
recoveries are charged or credited directly to the allowance. It is
the Company's policy to charge off any loan or portion of that loan
when it is deemed to be uncollectible in the ordinary course of
business.
An evaluation of the overall quality of the portfolio is
performed to determine the necessary level of the allowance for credit
losses. This evaluation takes into consideration the classification of
loans and the application of loss estimates to these classifications.
It is the responsibility of management in each of the Company's markets
to classify its loans as pass, special mention, substandard, doubtful,
or loss. The classification criteria are established by the credit
administration function of the Company, which is independent of all
lending functions, and are intended to be consistent with the criteria
applied by federal banking system examiners. These classifications
take into consideration all sources of repayment, underlying
collateral, the value of such collateral, and current and anticipated
economic conditions, trends, and uncertainties. The Company has an
independent loan review function which periodically reviews the loans
and the classifications. The Company's bank subsidiaries also are
subjected to periodic examinations by the Office of the Comptroller of
the Currency.
Loss factors are developed by loan type and classification using
historical loss data and statistical modeling techniques. The
application of these loss factors to the portfolio classifications
combined with analyses of general economic conditions, trends in
portfolio volume, maturity, and composition, and estimates of potential
future losses on specific large loans and those loans requiring special
attention provide management with data essential to identify and
estimate the credit risk inherent in the portfolio. The allowance for
credit losses reflects the result of these estimates, and is deemed to
be adequate at each balance sheet date.
As of December 31, 1994, the allowance for credit losses equaled
$71.9 million or 242.82% of nonperforming loans. Comparatively, the
allowance for credit losses amounted to $67.6 million or 196.96% of
nonperforming loans at December 31, 1993. The strong coverage ratio of
the allowance for credit losses to nonperforming loans at December 31,
1994 reflected the continuing emphasis management is placing on
resolving problem loans, managing the risk profile of the Company, and
prudently reserving for identifiable risks.
The following table summarizes the changes in the allowance for
credit losses for the past five years and presents selected related
ratios.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, as previously reported . . . $ 66,368 $ 73,055 $ 70,669 $ 62,721 $ 42,395
Adjustment for pooling of interests. . . . . . . . 1,249 1,340 1,334 1,344 1,363
---------- ---------- ---------- ---------- ----------
Balance at January 1, as restated . . . . . . . . 67,617 74,395 72,003 64,065 43,758
Allowance for credit losses of purchased banks . . 5,449 3,266 1,739 464 2,827
Allowance for purchased loans . . . . . . . . . . -- -- 3,424 -- 2,165
---------- ---------- ---------- ---------- ----------
73,066 77,661 77,166 64,529 48,750
Charge-offs:
Commercial and industrial . . . . . . . . . . . 3,921 15,465 16,379 22,578 15,814
Agriculture . . . . . . . . . . . . . . . . . . 68 214 121 215 503
Energy . . . . . . . . . . . . . . . . . . . . . 314 371 254 1,690 1,127
Bank stock . . . . . . . . . . . . . . . . . . . -- -- -- 852 250
Real estate construction . . . . . . . . . . . . 98 269 881 2,492 4,628
Permanent commercial real estate and other . . . 852 3,954 4,655 6,199 8,952
Lease financing . . . . . . . . . . . . . . . . 249 246 258 477 728
Other. . . . . . . . . . . . . . . . . . . . . . 87 71 293 420 741
Secured by 1-4 family residences . . . . . . . . 702 701 1,082 1,547 1,262
Consumer . . . . . . . . . . . . . . . . . . . . 3,915 3,971 5,255 5,918 3,375
Credit card . . . . . . . . . . . . . . . . . . 3,811 1,611 2,264 2,472 2,046
---------- ---------- ---------- ---------- ----------
Total charge-offs. . . . . . . . . . . . . . . 14,017 26,873 31,442 44,860 39,426
---------- ---------- ---------- ---------- ----------
Recoveries:
Commercial and industrial . . . . . . . . . . . 5,371 4,628 3,554 3,355 2,136
Agriculture . . . . . . . . . . . . . . . . . . 458 272 309 155 252
Energy . . . . . . . . . . . . . . . . . . . . . 74 206 230 936 1,319
Bank stock . . . . . . . . . . . . . . . . . . . 88 148 38 -- --
Real estate construction . . . . . . . . . . . . 872 220 112 132 388
Permanent commercial real estate and other . . . 2,072 1,377 409 463 296
Lease financing . . . . . . . . . . . . . . . . 59 91 232 87 34
Other. . . . . . . . . . . . . . . . . . . . . . 283 425 37 245 175
Secured by 1-4 family residences . . . . . . . . 547 304 179 243 48
Consumer . . . . . . . . . . . . . . . . . . . . 1,888 1,696 1,608 1,185 470
Credit card . . . . . . . . . . . . . . . . . . 838 497 605 418 300
---------- ---------- ---------- ---------- ----------
Total recoveries . . . . . . . . . . . . . . . 12,550 9,864 7,313 7,219 5,418
---------- ---------- ---------- ---------- ----------
Net loans and leases charged off . . . . . . . . . 1,467 17,009 24,129 37,641 34,008
Provision for credit losses . . . . . . . . . . . 275 6,965 21,358 43,926 49,323
---------- ---------- ---------- ---------- ----------
Balance at December 31 . . . . . . . . . . . . . . $ 71,874 $ 67,617 $ 74,395 $ 70,814 $ 64,065
========== ========== ========== ========== ==========
Loans and leases at year-end . . . . . . . . . . . $4,005,667 $3,351,912 $2,922,577 $2,881,931 $3,065,193
Average loans and leases . . . . . . . . . . . . . $3,584,022 $3,038,112 $2,899,130 $2,996,076 $2,904,427
Net charge-offs/average loans and leases . . . . . .04% .56% .83% 1.26% 1.17%
Allowance for credit losses/year-end
nonperforming loans . . . . . . . . . . . . . . . 242.82% 196.96% 190.39% 116.72% 75.20%
Allowance for credit losses/year-end
nonperforming assets. . . . . . . . . . . . . . . 203.73% 153.27% 125.73% 70.37% 46.13%
Allowance for credit losses/year-end
loans and leases. . . . . . . . . . . . . . . . . 1.79% 2.02% 2.55% 2.46% 2.09%
</TABLE>
The allowance for credit losses has been allocated by loan
category. It should be recognized that such allocations are not
necessarily indicative of future loan losses and that all of such
allowance, except for the $1.3-million allowance for purchased loans
included in the secured by 1-4 family residences and $3.3- million
allowance for purchased loans included in consumer, is available to
absorb losses on loans for any category. The allocation of the
allowance for credit losses by loan type is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial:
Commercial and industrial. . . . . . $23,178 $25,058 $29,499 $30,087 $21,850
Agriculture. . . . . . . . . . . . . 808 1,618 3,242 3,000 2,594
Energy . . . . . . . . . . . . . . . 1,232 973 1,105 1,386 2,490
Bank stock . . . . . . . . . . . . . 172 446 968 820 497
Real estate:
Construction . . . . . . . . . . . 2,923 1,409 1,929 2,189 5,289
Permanent commercial real estate
and other . . . . . . . . . . . . 16,311 17,680 17,602 17,760 15,436
Lease financing. . . . . . . . . . . 395 393 933 315 381
------- ------- ------- ------- -------
Total commercial . . . . . . . . . 45,019 47,577 55,278 55,557 48,537
------- ------- ------- ------- -------
Consumer:
Secured by 1-4 family residences . . 2,633 3,863 4,974 5,743 6,302
Consumer . . . . . . . . . . . . . . 10,589 9,376 7,768 5,281 4,668
Credit card. . . . . . . . . . . . . 4,596 2,479 3,699 2,243 2,517
Educational. . . . . . . . . . . . . -- -- -- -- --
------- ------- ------- ------- -------
Total consumer . . . . . . . . . . 17,818 15,718 16,441 13,267 13,487
------- ------- ------- ------- -------
Unallocated. . . . . . . . . . . . . . 9,037 4,322 2,676 1,990 2,041
------- ------- ------- ------- -------
Total. . . . . . . . . . . . . . $71,874 $67,617 $74,395 $70,814 $64,065
======= ======= ======= ======= =======
</TABLE>
The following table compares the allocation of the allowance for
credit losses by loan type expressed as a percentage of the total
allowance for credit losses to the percentage of loans in each loan
type to total loans:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------------------------
1994 1993 1992 1991 1990
-------------- -------------- -------------- -------------- --------------
(1) (2) (1) (2) (1) (2) (1) (2) (1) (2)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial:
Commercial and industrial. 32.2% 25.4% 37.4% 26.5% 39.7% 25.8% 42.5% 25.8% 34.1% 27.5%
Agriculture . . . . . . . 1.1 5.7 1.8 5.8 4.4 5.8 4.2 6.1 4.0 5.3
Energy . . . . . . . . . . 1.7 3.2 1.5 2.3 1.5 1.9 2.0 2.1 3.9 2.3
Bank stock . . . . . . . . .2 .6 .7 1.4 1.3 1.8 1.2 1.8 .8 2.1
Real estate:
Construction . . . . . . 4.1 3.3 2.1 2.8 2.6 2.3 3.1 3.3 8.3 3.7
Permanent commercial
real estate and other . 22.8 17.2 26.4 15.3 23.7 15.4 25.1 15.2 24.1 14.8
Lease financing . . . . . .5 2.2 .6 1.2 1.3 1.0 .4 .9 .6 .8
Other . . . . . . . . . . -- .7 -- 1.1 -- 1.4 -- 2.2 -- 2.6
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total commercial . . . . 62.6 58.3 70.5 56.4 74.5 55.4 78.5 57.4 75.8 59.1
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Consumer:
Secured by 1-4 family
residences. . . . . . . . 3.7 24.4 5.5 26.8 6.7 24.0 8.1 22.5 9.8 21.6
Consumer . . . . . . . . . 14.7 11.9 13.8 12.4 10.4 16.4 7.5 16.1 7.3 15.0
Credit card . . . . . . . 6.4 3.3 3.7 2.8 4.8 2.8 3.1 2.8 3.9 3.2
Educational . . . . . . . -- 2.1 -- 1.6 -- 1.4 -- 1.2 -- 1.1
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total consumer . . . . . 24.8 41.7 23.0 43.6 21.9 44.6 18.7 42.6 21.0 40.9
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Unallocated. . . . . . . . . 12.6 -- 6.5 -- 3.6 -- 2.8 -- 3.2 --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total. . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
<FN>
____________
(1) Allocation of allowance for credit losses by loan type as a percent of total allowance.
(2) Loans by type as a percent of total loans.
</TABLE>
Investment Portfolio
The year-end book values of investment securities for each of the
last three years is presented in the tables below.
<TABLE>
<CAPTION>
Held-to-maturity
December 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
U.S. Treasury obligations . . . . . . . . . . . . . . . . . . . . . $ 98,971 $ 16,329 $ 300,707
Obligations of U.S. government agencies and corporations:
Mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . 1,577,095 1,753,662 1,738,379
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262,469 4,259 293,626
Obligations of states and political subdivisions. . . . . . . . . . 3,834 16,838 222,335
Other securities:
Collateralized auto receivables . . . . . . . . . . . . . . . . . -- 12,364 28,935
Corporate notes and bonds . . . . . . . . . . . . . . . . . . . . -- -- 10,580
Foreign debt securities . . . . . . . . . . . . . . . . . . . . . 2,050 2,155 --
Money market mutual funds . . . . . . . . . . . . . . . . . . . . 195 212 220
---------- ---------- ----------
Total debt securities, at amortized cost. . . . . . . . . . . . $1,944,614 $1,805,819 $2,594,782
========== ========== ==========
Market value in excess of (less than) book value. . . . . . . . . . $ (109,714) $ 1,761 $ 45,842
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Available-for-sale
December 31,
-------------------------
1994 1993
----------- -----------
(In thousands)
<S> <C> <C>
U.S. Treasury obligations . . . . . . . . . . . . . . . . . . . . . $266,992 $ 308,331
Obligations of U.S. government agencies and corporations:
Mortgage-backed . . . . . . . . . . . . . . . . . . . . . . . . . 130,038 218,848
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268,872 306,276
Obligations of states and political subdivisions . . . . . . . . . 174,806 242,933
Other securities:
Collateralized credit card receivables. . . . . . . . . . . . . . 58,518 --
Corporate notes and bonds . . . . . . . . . . . . . . . . . . . . 38,660 40,237
-------- ----------
Total debt securities . . . . . . . . . . . . . . . . . . . . . 937,886 1,116,625
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . 1,194 1,151
-------- ----------
Total debt and equity securities, at estimated fair value . . $939,080 $1,117,776
======== ==========
</TABLE>
<TABLE>
<CAPTION>
Other securities(1)
December 31,
----------------------------------------
1994 1993 1992
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Federal Home Loan Bank stock. . . . . . . . . . . . . . . . . . . . $37,645 $24,911 $ 1,166
Federal Reserve Bank stock. . . . . . . . . . . . . . . . . . . . . 14,242 12,637 8,500
Other equity securities . . . . . . . . . . . . . . . . . . . . . . 1,549 1,559 3,665
------- ------- -------
Total other equity securities, at cost. . . . . . . . . . . . . $53,436 $39,107 $13,331
======= ======= =======
<FN>
____________
(1) Equity securities that do not have a readily determinable fair value.
</TABLE>
At December 31, 1993, the Company elected to adopt FAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." In
accordance with FAS No. 115, prior period financial statements were not
restated to reflect the change in accounting principle. Pursuant to
FAS No. 115 the securities classified as available-for-sale are carried
at fair value. The total carrying value of the available-for-sale
securities portfolio included unrealized losses of $36.8 million at
December 31, 1994 and unrealized gains of $41.2 million at December 31,
1993.
Exclusive of the adjustment to fair value for the available-for-
sale portfolio, total investment securities increased $52.4 million
between December 31, 1994 and 1993. Acquisition transactions accounted
for as purchases added $269.3 million of investment securities.
However, offsetting this increase was the use of the proceeds of
maturities and prepayments for loan growth. Between December 31, 1993
and 1992 the investment securities portfolio increased $313.4 million,
exclusive of the adjustment to fair value for the available-for-sale
portfolio. Acquisition transactions accounted for as purchases added
$112.0 million. The remainder of the increase was attributable to the
Company becoming more fully invested.
Excluding U.S. Treasury obligations and obligations of U.S.
government agencies and corporations, there were no security holdings
of any one issuer at December 31, 1994 that exceeded 10% of
consolidated stockholders' equity.
The tables below summarize the maturity and yield distribution of
debt securities in the investment portfolio at December 31, 1994.
<TABLE>
<CAPTION>
Held-to-maturity
Maturing
------------------------------------------------------------------------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
---------------- ---------------- ---------------- ---------------- ------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
-------- ------ -------- ------ -------- ------ -------- ------ ---------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
obligations . . . . $ 645 4.79% $ 98,326 5.95% $ -- --% $ -- --% $ 98,971 5.95%
Obligations of
U.S. government
agencies and
corporations:
Mortgage-backed(1) 237 6.76 291,742 6.47 85,051 5.56 1,200,065 5.75 1,577,095 5.87
Other. . . . . . . 122 4.50 262,347 6.08 -- -- -- -- 262,469 6.08
Obligations of
states and
political
subdivisions(2) . . 999 5.89 2,835 6.06 -- -- -- -- 3,834 6.02
Other securities:
Foreign debt
securities. . . . -- -- 25 8.45 2,025 11.54 -- -- 2,050 11.50
Money market
mutual funds. . . 195 5.00 -- -- -- -- -- -- 195 5.00
------ -------- -------- ---------- ----------
Total. . . . . . $2,198 5.50 $655,275 6.23 $ 87,076 5.70 $1,200,065 5.75 $1,944,614 5.91
====== ======== ======== ========== ==========
<FN>
____________
(1) Mortgage-backed securities have been included in the maturity tables based on their final maturities.
(2) Yields on tax-preferred securities are shown on a fully tax-equivalent basis assuming a marginal
tax rate of 35%.
</TABLE>
<TABLE>
<CAPTION>
Available-for-sale
Maturing
------------------------------------------------------------------------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years Total
---------------- ---------------- ---------------- ---------------- ------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
-------- ------ -------- ------ -------- ------ -------- ------ ---------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
obligations . . . . $27,789 5.33% $255,970 5.51% $ -- --% $ -- --% $283,759 5.49%
Obligations of
U.S. government
agencies and
corporations:
Mortgage-backed(1) -- -- 638 7.02 18,697 6.91 117,147 7.68 136,482 7.57
Other. . . . . . . 4,383 7.09 269,341 5.57 9,013 8.03 -- -- 282,737 5.67
Obligations of
states and
political
subdivisions(2) . . 56,517 13.00 61,348 12.82 32,744 12.66 17,202 14.16 167,811 12.99
Collateralized
credit card
receivables . . . . -- -- 9,713 6.39 52,866 6.09 -- -- 62,579 6.14
Corporate notes
and bonds . . . . . 500 7.35 40,494 6.49 214 9.13 -- -- 41,208 6.51
------- -------- -------- -------- --------
Total. . . . . . $89,189 10.28 $637,504 6.32 $113,534 8.28 $134,349 8.51 $974,576 7.21
======= ======== ======== ======== ========
<FN>
____________
(1) Mortgage-backed securities have been included in the maturity tables based on their final maturities.
(2) Yields on tax-preferred securities are shown on a fully tax-equivalent basis assuming a marginal
tax rate of 35%.
</TABLE>
At December 31, 1994 the held-to-maturity portfolio included
$637.9 million of floating-rate mortgage-backed securities guaranteed
by U.S. government agencies or corporations. The yields on these
securities float with various indices, principally the Federal Home
Loan Bank ("FHLB") Board 11th District average cost of funds index,
which reduces the interest rate risk associated with these investments
as the changes in these indices have historically correlated with the
changes in the Company's cost of funds. Also included in the held-to-
maturity portfolio at December 31, 1994 were $663.0 million of
collateralized mortgage obligations ("CMO"). These investments are
secured by mortgage-backed securities guaranteed by agencies or
corporations of the U.S. government. Of this CMO portfolio, $140.6
million also float on a monthly basis, most with the FHLB 11th District
average cost of funds. The remaining $522.4 million of fixed-rate CMOs
in the held-to-maturity portfolio are comprised of classes with an
anticipated average duration of two to three years.
The December 31, 1994 available-for-sale mortgage-backed
securities portfolio was comprised principally of securities issued by
U.S. government agencies and corporations with an estimated average
duration of up to three years.
In February 1995, the Company sold $424.0 million of fixed-rate
debt securities classified as available-for-sale, resulting in a gross
realized loss of $22.4 million. The debt securities sold consisted
primarily of U.S. treasury obligations and obligations of U.S.
government agencies.
Deposits
Total deposits increased $210.6 million or 3.9% between December
31, 1994 and 1993. During the second quarter of 1994, the Company
acquired $548.0 million of deposits through acquisitions accounted for
as purchases. The increased deposits from acquisitions were partially
offset by attrition associated with increased bank and nonbank
competition and the sale of three branches with deposits totaling $37.9
million. In response to the increased bank and nonbank competition,
time deposit products have been offered which provide the customer with
the opportunity to reprice the instruments during their term. At
December 31, 1994, $207.5 million of these adjustable-rate time
deposits were outstanding. In late December 1994, the Company
initiated a special time deposit promotion for deposits with 7-month
and 13-month maturities, and in January 1995, the Company introduced a
new money market savings product which has a rate that is tied to a
money market fund index. Core deposits (demand, interest checking,
savings, and time deposits under $100,000) represented 91.3% of total
deposits at December 31, 1994 compared to 92.8% at December 31, 1993.
The following table sets forth, by time remaining to maturity,
certificates and other time deposits of $100,000 or more:
<TABLE>
<CAPTION>
December 31, 1994
-----------------
(In thousands)
<S> <C>
Under three months . . . . . . . . . . . . . . . . . . . . . . . . . . $128,481
Over three through six months . . . . . . . . . . . . . . . . . . . . 58,259
Over six through twelve months . . . . . . . . . . . . . . . . . . . . 97,504
Over twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . 119,213
--------
$403,457
========
</TABLE>
Brokered deposits were immaterial at December 31, 1994.
The following table provides a breakdown of average deposits and
average rates paid, by type, for the past three years.
<TABLE>
<CAPTION>
1994 1993 1992
-------------------- -------------------- --------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
---------- -------- ---------- -------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits. . . . . . . . $ 985,412 -- $ 947,924 -- $ 861,647 --
Interest-bearing deposits:
Interest-bearing checking deposits. . . . 967,119 2.20% 900,333 2.47% 730,577 3.07%
Savings deposits . . . . . . . . . . . . 1,210,933 2.60 1,216,624 2.63 1,126,017 3.36
Time deposits under $100,000. . . . . . . 2,014,562 4.36 1,986,635 4.52 1,874,455 5.71
Time deposits of $100,000 or more . . . . 386,044 4.37 392,341 3.56 433,702 3.74
---------- ---------- ----------
Total interest-bearing deposits . . . . 4,578,658 3.44 4,495,933 3.52 4,164,751 4.41
---------- ---------- ----------
Total deposits . . . . . . . . . . . $5,564,070 $5,443,857 $5,026,398
========== ========== ==========
</TABLE>
Short-term Borrowings
Short-term borrowings include federal funds purchased, securities
sold under agreements to repurchase, Federal Home Loan Bank borrowings
with a maturity of less than one year, commercial paper, notes payable,
treasury tax and loan accounts and other borrowings. Amounts and
interest rates related to short-term borrowings for the last three
years were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Federal funds purchased:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $391,970 $367,726 $260,505
Average interest rate at year-end . . . . . . . . . . . . . . . . . 5.85% 2.96% 2.92%
Average outstanding during the year . . . . . . . . . . . . . . . . $471,437 $328,758 $199,433
Weighted average interest rate . . . . . . . . . . . . . . . . . . 4.21% 3.00% 3.38%
Highest outstanding balance at any month-end . . . . . . . . . . . $545,495 $474,856 $339,511
Securities sold under agreements to repurchase:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $541,736 $123,901 $ 65,089
Average interest rate at year-end . . . . . . . . . . . . . . . . . 5.66% 3.27% 3.49%
Average outstanding during the year . . . . . . . . . . . . . . . . $166,519 $ 66,532 $ 60,931
Weighted average interest rate . . . . . . . . . . . . . . . . . . 4.46% 3.10% 3.58%
Highest outstanding balance at any month-end . . . . . . . . . . . $541,736 $129,208 $112,345
Federal Home Loan Bank borrowings:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $291,800 $175,000 $ --
Average interest rate at year-end . . . . . . . . . . . . . . . . . 5.88% 3.76% --%
Average outstanding during the year . . . . . . . . . . . . . . . . $268,548 $ 77,534 $ --
Weighted average interest rate . . . . . . . . . . . . . . . . . . 5.63% 5.05% --%
Highest outstanding balance at any month-end . . . . . . . . . . . $341,800 $175,000 $ --
Commercial paper:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $ -- $ -- $ 425
Average interest rate at year-end . . . . . . . . . . . . . . . . . --% --% 2.80%
Average outstanding during the year . . . . . . . . . . . . . . . . $ -- $ 184 $ 1,118
Weighted average interest rate . . . . . . . . . . . . . . . . . . --% 2.85% 3.85%
Highest outstanding balance at any month-end . . . . . . . . . . . $ -- $ 625 $ 3,528
Notes payable:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $ 20,000 $ -- $ 5,961
Average interest rate at year-end . . . . . . . . . . . . . . . . . 6.19% --% 6.57%
Average outstanding during the year . . . . . . . . . . . . . . . . $ 22,965 $ 3,156 $ 10,276
Weighted average interest rate . . . . . . . . . . . . . . . . . . 5.44% 7.93% 8.06%
Highest outstanding balance at any month-end . . . . . . . . . . . $ 60,000 $ 5,884 $ 13,360
Treasury tax and loan and other borrowings:
Outstanding at year-end . . . . . . . . . . . . . . . . . . . . . . $ 23,001 $ 23,002 $ 17,306
Average interest rate at year-end . . . . . . . . . . . . . . . . . 5.20% 2.75% 2.67%
Average outstanding during the year . . . . . . . . . . . . . . . . $ 19,501 $ 18,361 $ 17,325
Weighted average interest rate . . . . . . . . . . . . . . . . . . 3.92% 2.97% 3.51%
Highest outstanding balance at any month-end . . . . . . . . . . . $ 23,344 $ 26,768 $ 25,397
</TABLE>
The increased volume of securities sold under agreements to
repurchase includes the effect of the Company's emphasis on a cash-
management service which sweeps customers' investable deposits into
over-night securities repurchase agreements. Some portion of these
funds were new funds for the Company and the remainder were previously
in interest-bearing deposit accounts with the Company.
Asset and Liability Management
Interest Rate Risk: The Company evaluates its interest rate risk
using various tools, including interest sensitivity simulation and gap
analysis. From time to time, interest rate swaps are used to modify
the interest sensitivity position inherent in the repricing
characteristics of specific assets or liabilities. The net interest
received or paid on the interest rate swaps is accounted for as an
adjustment to the interest income or interest expense on the assets or
liabilities, respectively, that the swap was intended to modify.
Additional information about the Company's interest rate swaps is
included in Note 20 of the Notes to Consolidated Financial Statements.
The following table presents the Company's interest sensitivity
gap position as of December 31, 1994. Most assets and liabilities have
been included in the table based on the timing of their contractual
maturities or repricing characteristics. Fixed-rate mortgage-backed
securities are included in repricing-maturity categories based upon
estimates of prepayments provided by a third-party market information
service. These estimates may vary depending upon both the volatility
and the level of market interest rates in relationship to the coupon
rates of the underlying mortgages. Interest-bearing checking and
savings deposits are included in the under-three-months category. This
table does not indicate the effect the repricing of assets and
liabilities would have on net interest income. Also, it does not
reflect interest rate exposures, such as basis risk (the changing
relationships between asset rates and liability rates of similar
maturity), prepayment risk, intra-period sensitivity, and the effect of
interest rate floors and ceilings.
<TABLE>
<CAPTION>
Repricing Maturity
----------------------------------------------------------------------------------
Over Three Over Six Over One
Under Through Through Through Over
Three Six Twelve Five Five Noninterest-
Months Months Months Years Years bearing Total
---------- ---------- ---------- --------- ---------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans and leases. . . . . . $2,054,228 $ 186,492 $ 333,239 $ 929,612 $463,008 $ 39,088 $4,005,667
Investment and
trading securities . . . . 712,211 158,854 242,679 1,574,368 249,737 -- 2,937,849
Other earning assets . . . 4,670 -- 100 399 -- -- 5,169
Nonearning assets . . . . . -- -- -- -- -- 780,655 780,655
---------- ---------- ---------- ---------- -------- ---------- ----------
Total assets . . . . . . $2,771,109 $ 345,346 $ 576,018 $2,504,379 $712,745 $ 819,743 $7,729,340
========== ========== ========== ========== ======== ========== ==========
Liabilities and
stockholders' equity:
Deposits. . . . . . . . . . $2,832,084 $ 346,542 $ 420,075 $1,011,139 $ 4,395 $1,032,913 $5,647,148
Federal funds purchased
and securities sold under
agreements to repurchase . 933,706 -- -- -- -- -- 933,706
Federal Home Loan Bank
borrowings . . . . . . . . 324,297 91,800 -- 25,000 -- -- 441,097
Other borrowings. . . . . . 43,001 -- -- -- -- -- 43,001
Long-term debt . . . . . . 4,412 12 26 204 31 -- 4,685
Other liabilities . . . . . -- -- -- -- -- 57,636 57,636
Stockholders' equity . . . -- -- -- -- -- 602,067 602,067
---------- ---------- ---------- ---------- -------- ---------- ----------
Total liabilities and
stockholders' equity . . $4,137,500 $ 438,354 $ 420,101 $1,036,343 $ 4,426 $1,692,616 $7,729,340
========== ========== ========== ========== ======== ========== ==========
Interest rate swaps . . . . . $ (51,000) $ (86,000) $ 14,000 $ 123,000 $ -- $ -- $ --
Repricing gap adjusted
for interest rate swaps. . . (1,417,311) (178,632) 168,482 1,620,067 717,053 (909,659) --
Cumulative adjusted
repricing gap. . . . . . . . (1,417,311) (1,595,943) (1,427,461) 192,606 909,659 -- --
Cumulative adjusted rate-
sensitive assets/
rate-sensitive liabilities . .67 .68 .74 (*) (*) (*)
<FN>
___________
(*) Not meaningful.
</TABLE>
The Company has a negative cumulative repricing gap in the one-
year horizon. Consequently, a rising rate environment would adversely
impact the net interest margin. Simulation modeling has demonstrated
that a sudden and large increase in rates or a dramatic narrowing in
the spread between asset yields and liability costs could result in a
significant adverse impact on the net interest margin; however, the
adverse impact is more moderate if interest rates increase gradually.
The adverse impact of rising rates could also be mitigated by loan
growth. As described in Note 5 of the Notes to Consolidated Financial
Statements, the Company sold $424.0 million of low-yielding, fixed-rate
securities in February 1995 to reposition its statement of condition to
reduce the Company's interest rate sensitivity. The proceeds of the
sale are being used to reduce short-term borrowings and reinvest in
variable rate or short-term instruments.
Liquidity: The Company's consolidated statements of cash flows
are presented elsewhere in this report. These statements distinguish
cash flows as operating, investing, and financing. They provide a
historical accounting of the Company's ability to generate cash
required to meet its customers' and creditors' demands. Certain
statement-of-condition items and ratios are indicative of the Company's
liquidity position at December 31, 1994. The loans-to-deposits and
loans-to-assets ratios averaged 64.4% and 48.9%, respectively, during
1994. Also during 1994, average core deposits (demand, interest
checking, savings, and time deposits under $100,000) represented 92.1%
of total deposits and 69.9% of average assets.
At December 31, 1994, federal funds purchased, securities sold
under agreements to repurchase, Federal Home Loan Bank borrowings, and
other borrowings totaled $1.4 billion. At that same date, additional
borrowing liquidity was available in the form of $763.6 million of
unpledged investment securities classified as either held-to-maturity
or available-for-sale which could secure short-term borrowing
requirements. In addition, the available-for-sale securities could be
sold. Regular maturities and prepayments of investment securities,
particularly the mortgage-backed securities, also generate significant
liquidity. Scheduled principal reductions and prepayments on the
mortgage-backed securities approximated $76.0 million during the fourth
quarter of 1994.
As disclosed in Note 20 of the Notes to Consolidated Financial
Statements, the Company had commitments to extend credit at December
31, 1994, including standby letters of credit of $101.4 million,
commercial letters of credit of $24.2 million, unused credit card lines
of $480.8 million, commitments to fund 1-4 family residential mortgage
loans of $51.2 million, and other loan commitments of $1.3 billion.
Some of these commitments will not be fully utilized, others will
expire without being drawn upon, and the commitments will not all be
used at the same time. Accordingly, management anticipates that the
Company has ample liquidity to meet these and other demands.
Capital Resources
At December 31, 1994, total stockholders' equity was $602.1
million or 7.79% of total assets compared to $606.9 million or 8.81% of
total assets at December 31, 1993. Exclusive of the net unrealized
gains or losses on available-for-sale securities, stockholders' equity
was $624.5 million and $581.7 million at December 31, 1994 and 1993,
respectively. For 1994, total stockholders' equity averaged $596.2
million or 8.13% of average assets. The prior year average equity was
$563.3 million or 8.43% of average assets.
Banking system regulators apply two measures of capital adequacy
to banking companies: the risk-based capital and leverage ratios. The
risk-based capital rules provide for the weighting of assets and
off-balance-sheet commitments and contingencies according to prescribed
risk categories ranging from 0 to 100%. Regulatory capital is then
divided by risk-weighted assets to determine the risk-adjusted capital
ratios. The leverage ratio supplements the risk-based capital
guidelines by placing a constraint on the degree to which a banking
company can leverage its equity capital, regardless of the balance
sheet composition. The leverage ratio is computed by dividing Tier I
capital by quarter-to-date average assets less certain intangibles.
The following table presents the Company's risk-based capital and
leverage ratios together with the required minimums. The ratios
exclude the net unrealized gains or losses on available-for-sale
securities as prescribed by the regulators.
<TABLE>
<CAPTION>
December 31,
-------------------------------
1994 1993
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Tier I capital:
Common stockholders' equity . . . . . . . . . . . . . . . . . . . . . . $ 527,529 $ 484,782
Preferred stockholders' equity. . . . . . . . . . . . . . . . . . . . . 96,920 96,920
Less intangible assets (1) . . . . . . . . . . . . . . . . . . . . . . (84,709) (65,458)
---------- ----------
Total Tier I capital . . . . . . . . . . . . . . . . . . . . . . . . 539,740 516,244
---------- ----------
Tier II capital:
Allowance for credit losses (2) . . . . . . . . . . . . . . . . . . . . 61,041 50,879
---------- ----------
Total regulatory capital. . . . . . . . . . . . . . . . . . . . . . $ 600,781 $ 567,123
========== ==========
Risk-weighted assets and off-balance-sheet
commitments and contingencies . . . . . . . . . . . . . . . . . . . . . $4,883,179 $4,070,170
========== ==========
Adjusted average assets (3) . . . . . . . . . . . . . . . . . . . . . . . $7,539,414 $6,860,492
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Regulatory
Minimums
----------
<S> <C> <C> <C>
Risk-based capital ratios:
Tier I . . . . . . . . . . . . . . . . . . . . . . . . 4.00% 11.05% 12.68%
Total . . . . . . . . . . . . . . . . . . . . . . . . . 8.00 12.30 13.93
Leverage ratio . . . . . . . . . . . . . . . . . . . . . 3.00 7.16 7.52
<FN>
____________
(1) All intangible assets except purchased mortgage servicing rights of $2.6 million and purchased credit card
relationships of $8.3 million are subtracted from capital.
(2) The allowance for credit losses is limited to 1.25% of risk-weighted assets.
(3) Quarter-to-date average assets excluding the net unrealized gains or losses on available-for-sale securities
and all intangibles except purchased mortgage servicing rights and purchased credit card relationships.
</TABLE>
Subsequent to December 31, 1994 the banking system regulators
amended the regulatory capital rules to limit the amount of deferred
tax assets that are allowable in computing the regulatory capital
ratios. If the amendment to the regulatory capital rules limiting net
deferred tax assets included in Tier I capital had been effective at
December 31, 1994, the Company's risk-based and leverage ratios would
have been as follows:
<TABLE>
<CAPTION>
December 31, 1994
-----------------
<S> <C>
Risk-based capital ratios:
Tier I . . . . . . . . . . . . . . . . . . . . . . . . . 10.90
Total. . . . . . . . . . . . . . . . . . . . . . . . . . 12.15
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . 7.06
</TABLE>
As indicated in the preceding tables, the Company's risk-based
and leverage capital ratios substantially exceed the minimums required
by banking system regulators.
Under regulations adopted by the Federal Deposit Insurance
Corporation, a bank is typically defined to be "well capitalized" if it
maintains a Tier I capital ratio of at least 6.0%, a total risk-based
capital ratio of at least 10.0% and a leverage ratio of at least 5.0%.
It is the Company's intention to maintain sufficient capital in each of
its bank subsidiaries to permit them to maintain a "well capitalized"
designation. The capital ratios for both of the Company's subsidiary
banks exceeded the "well capitalized" regulatory capital requirements
at December 31, 1994.
For 1993, the Company's board of directors had authorized the
purchase of up to 500,000 shares of the Company's common stock to be
used for general corporate purposes. A separate board of directors
action in December 1993 authorized the purchase of an additional 71,518
shares to be used to acquire the minority interests of the subsidiaries
of First Dodge City Bancshares, Inc., a 1994 acquisition. A total of
111,518 shares were purchased in 1993, 40,000 shares for general
corporate purposes and 71,518 shares specifically for the pending
acquisition. The purchase of up to 500,000 common shares, or the
equivalent in depositary shares representing interests in the Company's
Class A Cumulative Preferred Stock, or a combination of the two was
authorized for 1994. A board of directors action in April 1994
specifically reserved a portion of this previous authorization to be
used for the acquisition of Oklahoma Savings, Inc. ("OSI"). At
December 31, 1994, 355,466 shares of the Company's common stock had
been purchased to be used in the OSI acquisition, which was consummated
on January 6, 1995 and the shares were reissued. For 1995 the
Company's board of directors has authorized the purchase of up to
500,000 common shares, or the equivalent in depositary shares, or a
combination of the two.
Pending Acquisitions
A discussion of acquisitions pending at December 31, 1994 is
included in Item 1, "Business," of PART I of this Annual Report on Form
10-K. Shares of the Company's common stock will be used to consummate
the OSI and Standard Bancorporation, Inc. acquisitions. Funding for
the pending cash purchase acquisition will be provided by available
funds.
Parent Company Funding Sources and Dividends
The ability of the parent company to fund various operating
expenses and dividend requirements is dependent in part on its ability
to obtain funds from its bank subsidiaries. Historically, these funds
have been primarily provided by intercompany dividends. Intercompany
dividends amounted to $144.2 million, $76.9 million, and $57.8 million
for 1994, 1993, and 1992, respectively. The approval of the
Comptroller of the Currency ("Comptroller") is required if total
dividends declared by a national bank in any one year exceed the bank's
net profits for that year plus the profits for the two preceding years
retained by the bank. In 1995, the subsidiary banks may distribute to
the parent company (in addition to their 1995 net profits) an aggregate
of approximately $39.9 million in dividends without approval from
regulatory agencies.
Because of the financial strength of the parent company and the
anticipated earnings capacity of both the BANK IV banks, it is
anticipated that the banks will be able to obtain permission from the
Comptroller to pay additional dividends in 1995 to the extent justified
by their respective financial condition.
At December 31, 1994, the parent company had approximately $31.1
million of cash and short-term investments. The parent company's
borrowings at the same date totaled $24.4 million, composed of a $4.4-
million term loan which bears interest at 8.6% and matures in March
1995 and $20.0 million borrowed under its line of credit. On January
3, 1995 this line of credit was replaced by two new credit agreements.
These credit agreements provide the Company with a combined $100.0-
million line of credit for a one-year period. The credit agreements
subject the Company to certain restrictions and covenants related to,
among others, consolidated stockholders' equity and the maintenance of
specific ratios related to leverage, risk-based capital, and
nonperforming assets. The parent company is currently in compliance
with all restrictions and covenants under these agreements.
Recently Issued Accounting Standards
In May 1993, the Financial Accounting Standards Board issued FAS
No. 114, which addresses the accounting by creditors for impairment of
certain loans. It is applicable to all creditors and to all loans,
uncollateralized as well as collateralized, except large groups of
smaller-balance homogeneous loans that are collectively evaluated for
impairment, loans that are measured at fair value or at the lower of
cost or fair value, leases, and debt securities. It applies to all
loans that are restructured in a troubled debt restructuring involving
a modification of terms. The Statement requires that, when evaluating
the need for an allowance for credit losses on impaired loans that are
within the scope of this Statement, the loss accrual be measured based
on the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the
loan's observable market price or the fair value of the collateral if
the loan is collateral-dependent.
FAS No. 114 was amended by FAS No. 118 in October of 1994 to
allow a creditor to use existing methods for recognizing interest
income on an impaired loan. It also amended the disclosure
requirements of FAS No. 114 to require information about the recorded
investment in certain impaired loans and about how a creditor
recognizes interest income related to those impaired loans. FAS No.
114, as amended by FAS No. 118, is effective for fiscal years beginning
after December 15, 1994. The Company has not completed the analyses
required to estimate the impact of FAS 114; however, the Company does
not believe the adoption of the new rules will have a material adverse
effect on its financial condition.
Effects of Inflation and Changing Prices
Virtually all assets and liabilities of a banking organization
are monetary in nature. As such, they represent obligations to pay or
receive fixed and determinable amounts of money which are not affected
by future changes in prices. Changes in interest rates are the
greatest determinant of bank earnings. However, interest rates do not
necessarily move in the same direction or with the same magnitude as
prices of other goods and services. A financial institution can manage
the risk of changes in interest rates by matching the maturities of its
liabilities against the maturities of its interest-earning assets. How
well the institution copes with changing interest rates may then be
determined by examining its net yield on earning assets and analyzing
its asset and liability structure. Accordingly, reference to the
various supplementary schedules shown elsewhere in this report will
assist in the understanding of how the Company is positioned to react
to changing interest rates.
<TABLE>
<CAPTION>
Quarterly Financial Data (Unaudited)
1994
----------------------------------------------
4th 3rd 2nd 1st
------- ------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Summary Income Statement Information:
Interest income . . . . . . . . . . . . . . . . . . . . . $131,317 $127,336 $117,866 $106,955
Interest expense. . . . . . . . . . . . . . . . . . . . . 60,853 54,923 48,196 42,582
-------- -------- -------- --------
Net interest income . . . . . . . . . . . . . . . . . . . 70,464 72,413 69,670 64,373
Provision for credit losses . . . . . . . . . . . . . . . -- -- -- 275
-------- -------- -------- --------
Net interest income after provision for credit losses . . 70,464 72,413 69,670 64,098
Investment securities gains (losses). . . . . . . . . . . (50) 56 62 3,564
Other noninterest income. . . . . . . . . . . . . . . . . 24,911 24,107 22,508 22,677
Noninterest expense . . . . . . . . . . . . . . . . . . . (63,534) (64,163) (60,606) (62,132)
-------- -------- -------- --------
Income before income taxes. . . . . . . . . . . . . . . . 31,791 32,413 31,634 28,207
Income tax expense. . . . . . . . . . . . . . . . . . . . 9,735 10,691 10,819 9,678
-------- -------- -------- --------
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 22,056 $ 21,722 $ 20,815 $ 18,529
======== ======== ======== ========
Net income applicable to common
and common-equivalent shares . . . . . . . . . . . . . . $ 20,306 $ 19,972 $ 19,065 $ 16,779
======== ======== ======== ========
Per Common Share Data:
Earnings per common and common-equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . $ .76 $ .74 $ .71 $ .62
Fully diluted . . . . . . . . . . . . . . . . . . . . . .73 .72 .69 .60
Common dividend . . . . . . . . . . . . . . . . . . . . . .26 .26 .26 .26
Book value (period-end) . . . . . . . . . . . . . . . . . 18.67 18.51 18.36 18.50
Market value (period-end) bid . . . . . . . . . . . . . . 30 1/2 29 3/4 28 3/4 25 1/2
Market value (bid):
High . . . . . . . . . . . . . . . . . . . . . . . . . $ 32 1/2 $ 30 $ 31 1/4 $ 28 3/4
Low . . . . . . . . . . . . . . . . . . . . . . . . . . 29 1/4 27 3/4 26 25 1/4
As Previously Reported:
Net interest income . . . . . . . . . . . . . . . . . . . $ 70,464 $ 72,413 $ 69,670 $ 62,797
Net income. . . . . . . . . . . . . . . . . . . . . . . . 22,056 21,722 20,815 20,201
Net income applicable to common
and common-equivalent shares . . . . . . . . . . . . . . 20,306 19,972 19,065 18,451
Fully diluted earnings per common share . . . . . . . . . .73 .72 .69 .68
</TABLE>
<TABLE>
<CAPTION>
1993
----------------------------------------------
4th 3rd 2nd 1st
------- ------- ------- -------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Summary Income Statement Information:
Interest income . . . . . . . . . . . . . . . . . . . . . $112,614 $114,050 $110,678 $106,571
Interest expense. . . . . . . . . . . . . . . . . . . . . 44,662 46,835 45,222 42,783
-------- -------- -------- --------
Net interest income . . . . . . . . . . . . . . . . . . . 67,952 67,215 65,456 63,788
Provision for credit losses . . . . . . . . . . . . . . . 639 205 2,895 3,226
-------- -------- -------- --------
Net interest income after provision for credit losses . . 67,313 67,010 62,561 60,562
Investment securities gains . . . . . . . . . . . . . . . 355 168 208 755
Other noninterest income. . . . . . . . . . . . . . . . . 22,478 21,032 20,174 21,112
Noninterest expense . . . . . . . . . . . . . . . . . . . (61,353) (66,511) (62,920) (63,558)
-------- -------- -------- --------
Income before income taxes and cumulative
effect of a change in accounting principle . . . . . . . 28,793 21,699 20,023 18,871
Income tax expense. . . . . . . . . . . . . . . . . . . . 8,165 4,997 4,615 4,899
-------- -------- -------- --------
Income before cumulative effect
of a change in accounting principle. . . . . . . . . . . 20,628 16,702 15,408 13,972
Cumulative effect of a change in accounting principle . . -- -- (5) 10,587
-------- -------- -------- --------
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 20,628 $ 16,702 $ 15,403 $ 24,559
======== ======== ======== ========
Net income applicable to common
and common-equivalent shares . . . . . . . . . . . . . . $ 18,878 $ 14,952 $ 13,653 $ 22,809
======== ======== ======== ========
Per Common Share Data:
Earnings per common and common-equivalent share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . $ .71 $ .57 $ .52 $ .87
Fully diluted . . . . . . . . . . . . . . . . . . . . . .68 .55 .51 .81
Common dividend . . . . . . . . . . . . . . . . . . . . . .26 .24 .24 .24
Book value (period-end) . . . . . . . . . . . . . . . . . 18.73 17.82 17.61 17.28
Market value (period-end) bid . . . . . . . . . . . . . . 28 3/4 29 3/4 30 1/4 30 3/4
Market value (bid):
High. . . . . . . . . . . . . . . . . . . . . . . . . . $ 30 $ 31 $ 30 3/4 $ 31
Low . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3/4 28 1/2 26 3/4 28 1/2
As Previously Reported:
Net interest income . . . . . . . . . . . . . . . . . . . $ 66,267 $ 67,215 $ 65,456 $ 62,262
Net income. . . . . . . . . . . . . . . . . . . . . . . . 20,182 16,702 15,403 24,196
Net income applicable to common
and common-equivalent shares . . . . . . . . . . . . . . 18,432 14,952 13,653 22,446
Fully diluted earnings per common share . . . . . . . . . .68 .55 .51 .81
</TABLE>
The quarterly price range of the Company's common stock is the
closing bid price, as reported by the NASDAQ national market system.
Such over-the-counter market quotations reflect inter-dealer prices
without retail markup, markdown, or commission and may not necessarily
represent actual transactions.
Information for previously reported quarters has been restated to
reflect acquisitions accounted for as poolings of interests.
EXHIBIT 3.05
BY-LAWS
FOURTH FINANCIAL CORPORATION
Table of Contents
PART I - MEETINGS OF SHAREHOLDERS
Section 1.01 Annual Meetings
Section 1.02 Postponed Election of Directors
Section 1.03 Special Meetings
Section 1.04 Notice of Shareholders' Meetings
Section 1.05 Nomination for Election to the Board of
Directors
Section 1.06 Quorum
Section 1.07 Organization of Shareholders' Meetings
Section 1.08 Voting Rights at Shareholders' Meetings
Section 1.09 Proxies
Section 1.10 Records of Voting at Meetings
Section 1.11 Adjourned Meetings and Notice Thereof
PART II - DIRECTORS
Section 2.01 Powers of Board of Directors
Section 2.02 Number of Directors
Section 2.03 Term of Office
Section 2.04 Acceptance of Office
Section 2.05 Vacancies
Section 2.06 Organization Meeting of Board
Section 2.07 Regular Meetings
Section 2.08 Special Meetings
Section 2.09 Quorum
Section 2.10 Vote of Directors; Proxies
Section 2.11 Fees
PART III - OFFICERS AND EMPLOYEES
Section 3.01 Officers and Employees
Section 3.02 Terms of Office
Section 3.03 Surety Bonds
Section 3.04 The Chairman of the Board
Section 3.05 President
Section 3.06 Vice Presidents
Section 3.07 Treasurer
Section 3.08 Controller
Section 3.09 Secretary
Section 3.10 Officers Pro Tempore
Table of Contents (Continued)
PART IV - COMMITTEES
Section 4.01 Appointment and Organization of
Committees
Section 4.02 Executive Committee
Section 4.03 Audit and Examination Committee
Section 4.04 Compensation and Personnel Committee
Section 4.05 Asset, Liability and Investments Committee
PART V - SEAL
Section 5.01 Form
Section 5.02 Authority to Use Seal
PART VI - STOCK
Section 6.01 Form of Stock Certificates
Section 6.02 Transfer of Stock
Section 6.03 Determining Shareholders of Record
Section 6.04 Registered Stockholders
Section 6.05 Registrars and Transfer Agents
Section 6.06 General Authority
Section 6.07 Control Share Acquisitions
PART VII - MISCELLANEOUS
Section 7.01 Execution of Instruments
Section 7.02 Waiver of Notice
Section 7.03 Meeting by Conference Telephone
Section 7.04 Emergencies
Section 7.05 Action Without a Meeting
PART VIII - INDEMNIFICATION
Section 8.01 Indemnification
PART IX - CHANGES IN BY-LAWS
Section 9.01 Amendments
BY-LAWS
FOURTH FINANCIAL CORPORATION
PART I - MEETINGS OF SHAREHOLDERS
Section 1.01 Annual Meetings
- ----------------------------
The regular annual meeting of the shareholders of the Corporation
for determining the number and electing members of the Board of
Directors for the ensuing year, receiving and acting upon reports
of officers as to acts, appointments, and transactions during the
preceding year, and transacting such other business relative to
the management of the Corporation as may lawfully come before it,
shall be held at its main office on the third Thursday of April
each year, or on such other date or at such other place as the
Board of Directors may in any year or years designate.
Section 1.02 Postponed Election of Directors
- --------------------------------------------
If, for any cause, the annual election of directors is not held
on the date fixed by these By-Laws, the Board of Directors shall
order an election to be held on some other day, of which special
notice shall be given in accordance with the Articles of
Incorporation and these By-Laws.
Section 1.03 Special Meetings
- -----------------------------
Special meetings of the shareholders of the Corporation, for any
purpose or purposes, may be called by the Board of Directors.
Any call for a special meeting shall state the purpose of the
meeting. The business transacted at a special meeting shall be
limited to that stated in the call for the meeting, but the call
for the meeting may state that any proper corporate business may
be transacted at the meeting, in which case any proper corporate
business may be transacted.
Section 1.04 Notice of Shareholders' Meetings
- ---------------------------------------------
Except in specific instances where other notice is required by
law or by the Articles of Incorporation, notice of any annual or
special meeting of the shareholders, stating the time, place, and
purpose of the meeting, shall be sufficient if mailed by United
States mail, postage prepaid, to each shareholder of record at
the address shown upon the books of the Corporation, not less
than ten days nor more than 50 days prior to the date set for
such meeting.
Section 1.05 Nomination for Election to the Board of Directors
- --------------------------------------------------------------
No person shall be eligible for election to the Board of
Directors at any shareholders' meeting unless such person is
nominated as provided herein. Nominations for election to the
Board of Directors by shareholders may be made by the Board of
Directors or by any shareholder of any outstanding class of
capital stock of the Corporation entitled to vote for the
election of directors.
Nominations, other than those made by the Board of Directors,
shall be made in writing and shall be delivered or mailed to the
President of the Corporation not less than 14 days nor more than
50 days prior to any meeting of shareholders called for the
election of directors; provided, however, that if less than 21
days' notice of the meeting is given to shareholders, such
nomination shall be mailed or delivered to the President of the
Corporation not later than the close of business on the seventh
day following the day on which the notice of meeting was mailed.
Such notification shall contain the following information to the
extent known to the notifying shareholder:
1. The name and address of each proposed nominee.
2. The principal occupation of each proposed nominee.
3. The total number of shares of capital stock of the
Corporation that to the knowledge of the notifying
shareholder will be voted for each of the proposed
nominees.
4. The name and residence address of the notifying
shareholder.
5. The number of shares of capital stock of the Corporation
owned by the notifying shareholder.
In the event that any person so nominated shall at any time prior
to any such meeting become ineligible or unable to serve as a
director because of death, disability or incapacity, or shall
withdraw as a nominee, the Board of Directors or the shareholder
who nominated such nominee may nominate a substitute by
delivering a written nomination to the President of the
Corporation.
Nominations not made in accordance herewith may, in the
Chairman's discretion, be disregarded by the Chairman of the
meeting, and upon the Chairman's instructions, the vote tellers
may disregard all votes cast for each such nominee.
Section 1.06 Quorum
- -------------------
A majority of the outstanding capital stock represented in person
or by proxy shall constitute a quorum at any meeting of
shareholders unless otherwise provided by law. Less than a
quorum may adjourn any meeting from time to time.
Section 1.07 Organization of Shareholders' Meetings
- ---------------------------------------------------
The holders of a majority of the outstanding shares entitled to
vote and represented at any meeting of the shareholders may
choose persons to act as chairman and as secretary of the
meeting. However, in the absence of such choice the Chairman of
the Board of Directors, or in the Chairman's absence the
President of the Corporation, shall act as chairman of the
meeting. The Secretary of the Board of Directors, or in the
Secretary's absence a person appointed by the chairman of the
meeting, shall act as secretary of the meeting.
Section 1.08 Voting Rights at Shareholders' Meetings
- ----------------------------------------------------
In all elections of directors, each shareholder shall have the
right to vote the number of shares owned by such shareholder for
as many persons as there are directors to be elected, or to
cumulate such shares and give one candidate as many votes as the
number of directors multiplied by the number of such
shareholder's shares shall equal, or to distribute them on the
same principle among as many candidates as such shareholder shall
think fit. In deciding all other questions at meetings of the
shareholders, each shareholder shall be entitled to one vote on
each share of stock owned by such shareholder. A majority of the
votes cast shall decide every question or matter submitted to the
shareholders at any meeting at which a quorum is present, unless
otherwise provided by law or by the Articles of Incorporation.
Section 1.09 Proxies
- --------------------
Shareholders may vote at any meeting of the shareholders by
proxies duly authorized in writing, but no officer or employee of
the Corporation shall act as proxy. Proxies shall be valid only
for one meeting, to be specified therein, and any adjournments of
such meeting. Proxies shall be dated and shall be filed with the
records of the meeting.
Section 1.10 Records of Voting at Meetings
- ------------------------------------------
In the case of any meeting of the shareholders, a record shall be
made showing the names of the shareholders present and the number
of shares held by each, the names of shareholders represented by
proxy and the number of shares held by each, and the names of the
proxies. This record also shall show the number of shares voted
on each action taken, including the number of shares voted for
each candidate for director. This record shall be included in
the minute book of the Corporation.
Section 1.11 Adjourned Meetings and Notice Thereof
- --------------------------------------------------
Any meeting of the shareholders, whether or not a quorum is
present, may be adjourned from time to time by the vote of a
majority of the shares present in person or represented by proxy,
but in the absence of a quorum no other business may be
transacted by such meeting. If any meeting of the shareholders
is adjourned for more than 30 days, or if after the adjournment a
new record date is fixed for the adjourned meeting, notice of the
adjourned meeting shall be given as in the case of an original
meeting. Otherwise, it shall not be necessary to give any notice
of an adjournment or of the business to be transacted at an
adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
PART II - DIRECTORS
Section 2.01 Powers of Board of Directors
- -----------------------------------------
The Board of Directors shall have power to manage and administer
the business and affairs of the Corporation. Except as expressly
limited by law, all corporate powers of the Corporation shall be
vested in and may be exercised by the Board of Directors.
Section 2.02 Number of Directors
- --------------------------------
As prescribed by the Articles of Incorporation, the Board of
Directors shall consist of not less than three nor more than 25
persons, who need not be shareholders.
Section 2.03 Term of Office
- ---------------------------
As provided in the Articles of Incorporation, each director shall
serve for a term ending on the date of the third annual meeting
following the annual meeting at which such director was elected.
Section 2.04 Acceptance of Office
- ---------------------------------
Each person elected or appointed a director of the Corporation
must file with the Secretary a written acceptance of the office
before exercising the functions thereof.
Section 2.05 Vacancies
- ----------------------
Any vacancy occurring in the Board of Directors shall be filled
by the majority vote of the remaining directors of the class in
which such vacancy occurs or by the sole remaining director of
that class if only one such director remains, or by the majority
vote of the remaining members of the other two classes if there
be no remaining member of the class in which the vacancy occurs.
A director so elected to fill a vacancy shall serve for the
remainder of the then present term of office of the class to
which he or she was elected.
Section 2.06 Organization Meeting of Board
- ------------------------------------------
Following the annual meeting of the shareholders, the chairman or
the secretary of the meeting shall promptly notify the directors-
elect of their election, and they shall meet promptly for the
purpose of organizing the new Board of Directors, appointing
committees of the Board and officers, fixing salaries for the
ensuing year, and transacting such other business as may properly
come before the organization meeting.
Section 2.07 Regular Meetings
- -----------------------------
The regular meetings of the Board of Directors may be held on
call of the Chairman of the Board, the President, or the
Secretary at the main office of the Corporation on such dates as
the Board of Directors may from time to time by resolution
establish. When any regular meeting of the Board falls upon a
holiday, the meeting shall be held on the next business day
unless the Board designates some other day. Regular meetings of
the Board of Directors may also be held at such other times and
places, within or without the State of Kansas, as the Board
itself may from time to time determine. There shall be mailed to
each director at least ten days prior to any regular meeting a
written notice of the time and place thereof.
Section 2.08 Special Meetings
- -----------------------------
Special meetings of the Board of Directors may be called by the
Chairman of the Board or the President of the Corporation, or at
the request of three or more directors. Each director shall be
given at least two days' notice of the time, place, and purpose
of any special meeting, which notice may be given in person, by
telephone, by mail, by telegraph, or by any other effective
method.
Section 2.09 Quorum
- -------------------
A majority of the directors shall constitute a quorum at any
meeting unless otherwise provided by law. Less than a quorum may
adjourn any meeting, from time to time, and the meeting may be
held, as adjourned, without further notice.
Section 2.10 Vote of Directors; Proxies
- ---------------------------------------
A majority of those directors present and voting at any meeting
of the Board of Directors at which a quorum is present shall
decide each matter considered unless otherwise provided by law or
by the Articles of Incorporation. A director cannot vote by
proxy or otherwise act by proxy at a meeting of the Board of
Directors.
Section 2.11 Fees
- -----------------
Each director shall receive such annual fee, such fee for each
Board meeting attended, and such fee for each meeting of any
Board committee attended as the Board shall fix from time to
time.
PART III - OFFICERS AND EMPLOYEES
Section 3.01 Officers and Employees
- -----------------------------------
The officers of the Corporation shall be a Chairman of the Board
of Directors, a President, one or more Vice Presidents, a
Treasurer, a Controller, a Secretary, and such other officers as
from time to time in the judgment of the Board may be required
for the prompt and orderly transaction of the business of the
Corporation. The Chairman of the Board and the President shall
be members of the Board of Directors; other officers may, but
need not, be members of the Board of Directors. Two or more
offices may be held by the same individual, but no individual may
hold at the same time the offices of Vice President, Secretary,
and Treasurer. All officers shall be elected, appointed or
employed and their duties prescribed by the Board of Directors.
Nevertheless, the Board of Directors may delegate to the
President the authority to prescribe the duties of other officers
of the Corporation not inconsistent with law, the Articles of
Incorporation and these By-Laws, and to appoint other employees,
prescribe their duties and dismiss them.
Section 3.02 Terms of Office
- ----------------------------
The Chairman of the Board of Directors, the President, and any
other officer who is a member of the Board of Directors shall
hold office until the next organization meeting of the Board of
Directors unless in the meantime such officer shall resign, be
disqualified, or be removed from office. Any vacancy occurring
in the office of Chairman of the Board of Directors or President
shall be filled promptly by the remaining members of the Board of
Directors. Each other officer and employee shall hold office or
employment at the pleasure of the Board of Directors; provided,
however, that the Board of Directors may delegate to the
Chairman, the President, and such other officers as it deems
appropriate the Board's authority to remove and to dismiss such
other officers and employees.
Section 3.03 Surety Bonds
- -------------------------
Each officer and employee of the Corporation shall give bond of
suitable amount with security to be approved by the Board of
Directors, conditioned for the honest and faithful discharge of
such officer's or employee's duties. At the discretion of the
Board, such bonds may be schedule or blanket form and the
premiums shall be paid by the Corporation. The amount of such
bonds, the form of coverage, and the name of the company
providing the surety therefor shall be reviewed by the Board of
Directors annually.
Section 3.04 The Chairman of the Board
- --------------------------------------
The Chairman of the Board shall preside at all meetings of the
Board of Directors. The Chairman shall be the Chief Executive
Officer of the Corporation unless such duty is delegated to the
President. The Chairman shall have general executive powers as
well as the specific powers conferred by law, by the Articles of
Incorporation, and by these By-Laws, and shall supervise the
carrying out of the policies adopted or approved by the Board of
Directors. The Chairman shall also perform such other duties and
have such other powers as may be assigned from time to time by
the Board of Directors.
Section 3.05 President
- ----------------------
The President shall, in the absence of the Chairman of the Board,
preside at meetings of the Board of Directors. The President
shall have general executive powers as well as the specific
powers conferred by law, by the Articles of Incorporation, and by
these By-Laws, and shall have the powers and duties usually
incident to the office of President. The President shall also
perform such other duties and have such other powers as may be
assigned from time to time by the Board of Directors.
Section 3.06 Vice Presidents
- ----------------------------
Each Vice President shall have such powers and duties as may be
assigned by the Board of Directors.
Section 3.07 Treasurer
- ----------------------
The Treasurer shall be responsible for the funding of the
activities of the Corporation and its subsidiaries and for
managing the investment of the funds of the Corporation and its
subsidiaries.
Section 3.08 Controller
- -----------------------
The Controller shall keep proper records of all transactions of
the Corporation, cause all duly authorized expenses of the
Corporation to be paid, and prepare complete financial reports
for each regular meeting of the Board of Directors.
Section 3.09 Secretary
- ----------------------
The Secretary shall be responsible for the minute book of the
Corporation. In this minute book the Secretary shall record the
proceedings of all regular and special meetings of the Board of
Directors and the shareholders and the reports of the committees
and directors. The minutes of all meetings of the Corporation
shall be signed by the Secretary and the presiding officer. The
Secretary shall also maintain and properly preserve the
organization papers of the Corporation, the returns of elections,
the Articles of Incorporation, the By-Laws and any amendments
thereto. The Secretary shall also maintain proper records of all
contracts of the Corporation.
Section 3.10 Officers Pro Tempore
- ---------------------------------
The Board of Directors may, during the absence or disability of
any officer, or upon the refusal of any officer to act, delegate
such officer's powers and duties to any other officer, or to any
director, for the time being.
PART IV - COMMITTEES
Section 4.01 Appointment and Organization of Committees
- -------------------------------------------------------
The Board of Directors shall appoint, at its annual organization
meeting, the committees specifically provided for in these By-
Laws and shall designate the chairman of each committee. The
Board of Directors may appoint other committees from time to time
and assign them such powers and duties as it deems desirable.
The Chairman of the Board of Directors and the President of the
Corporation shall be ex-officio members of the Executive
Committee and may be members of such other committees (other than
the Audit and Examination Committee and the Compensation and
Personnel Committee) as the Board of Directors directs. Each
committee member shall serve until the next annual organization
meeting of the Board of Directors and until a successor is
appointed. The Board of Directors may increase or decrease the
membership of any committee and appoint additional members to any
committee. The Chairman of the Board of Directors may designate
a person to serve in place of any committee member who becomes
unable to serve because of death, resignation, incapacity, or
absence.
Unless these By-Laws otherwise require or the Board of Directors
otherwise specifies, each committee may adopt rules of procedure,
designate the time and place of its meetings, and specify the
number of members (not less than a majority) which constitutes a
quorum. Each committee shall keep minutes of its meetings and
shall make reports of its activities at each regular meeting of
the Board of Directors.
Section 4.02 Executive Committee
- --------------------------------
There shall be an Executive Committee consisting of at least five
directors. The committee's responsibilities shall include (1)
advising executive management as may be required on significant
matters of strategy, policy, and business direction and (2)
making recommendations to the Board of Directors as to the
payment of dividends on the Corporation's securities. In
addition, the committee may exercise, and by this By-Law is
granted authority to exercise, all powers of the Board of
Directors except those powers that the entire Board of Directors
alone may exercise.
Section 4.03 Audit and Examination Committee
- --------------------------------------------
There shall be an Audit and Examination Committee consisting of
at least four independent directors of the Corporation and at
least one independent director of each of the Corporation's
subsidiary banks. At least two members of the committee shall
have banking or related financial management experience. No
member of the committee shall be a large customer, as determined
by the Board of Directors, or shall be an active officer or
employee of the Corporation or of any of the Corporation's
subsidiaries. The committee's responsibilities shall include (1)
serving as, and performing all functions required to be performed
by, the Audit Committee of each of the Corporation's subsidiary
banks, (2) recommending to the Board of Directors the selection
of the Corporation's independent auditors and overseeing the
scope and performance of their services, (3) reviewing the
Corporation's accounting policies, significant accounting
estimates, and financial reporting, (4) reviewing the adequacy of
internal controls and reporting thereon as required by applicable
laws and regulations, (5) overseeing the Corporation's internal
audit and compliance activities, (6) monitoring compliance with
laws and regulations and reviewing reporting thereon, (7)
monitoring compliance with policies of the Board of Directors,
(8) regularly assessing the adequacy of the allowance for credit
losses at each of the Corporation's subsidiary banks, and (9)
reviewing the results of regulatory examinations, the responses
thereto, and the corrective actions taken. The committee shall
have access to outside legal counsel of its own choosing.
Section 4.04 Compensation and Personnel Committee
- -------------------------------------------------
There shall be a Compensation and Personnel Committee consisting
of at least five directors, none of whom shall be an active
officer or employee of the Corporation or of any of the
Corporation's subsidiaries. The Committee's responsibilities
shall include making recommendations to the Board of Directors
concerning (1) the election, promotion, and compensation of the
officers of the Corporation, (2) the nomination of candidates for
election to the Board of Directors, (3) management succession
planning, and (4) the Corporation's compensation and benefits
programs and policies. The Committee shall also perform the
functions prescribed for the administrative committee under such
employee benefit plans as the Corporation may from time to time
adopt.
Section 4.05 Asset, Liability and Investments Committee
- -------------------------------------------------------
There shall be an Asset, Liability and Investments Committee
consisting of at least four directors of the Corporation and at
least one director of each of the Corporation's subsidiary banks.
The Committee's responsibilities shall include (1) monitoring
compliance with the Asset and Liability Management and Investment
Policies of the Corporation and its subsidiary banks, (2)
reviewing the composition and performance of, and transactions
in, the investment portfolios of the Corporation and its
subsidiary banks, (3) monitoring the liquidity of the Corporation
and its subsidiary banks and reviewing their funding plans, and
(4) reviewing risks associated with interest-rate movements and
hedging activities.
PART V - SEAL
Section 5.01 Form
- -----------------
The following is an impression of the seal adopted by the Board
of Directors of this Corporation:
Section 5.02 Authority to Use Seal
- ----------------------------------
The President, any Vice President, the Secretary, and any other
officer designated by the Board of Directors shall have authority
to affix the seal to any document requiring it and to attest the
Corporation's execution of such document.
PART VI - STOCK
Section 6.01 Form of Stock Certificates
- ---------------------------------------
Certificates of stock of the Corporation shall be numbered and
shall be entered on the books of the Corporation and its
registrars and transfer agents as they are issued. They shall
exhibit the holder's name and number of shares, the name of the
Corporation and the state of its incorporation, the par value of
shares represented thereby, and the total number of shares of
stock which the Corporation is authorized to issue. They shall
bear the signature of the Chairman of the Board, President or
Vice President (which may be engraved, printed, or impressed) and
shall be signed manually or by facsimile process by the
Secretary, Treasurer, or any other officer appointed by the Board
of Directors for that purpose, to be known as an Authorized
Officer, and the seal of the Corporation shall be engraved
thereon. Each certificate shall recite on its face that the
stock represented thereby is transferable only upon the books of
the Corporation properly endorsed.
Section 6.02 Transfer of Stock
- ------------------------------
The stock of the Corporation shall be assignable and transferable
only on the books of the Corporation upon surrender of the
certificate representing such stock properly endorsed by the
holder named on such certificate or by an agent appointed in
writing by such holder. A transfer book shall be kept in which
all assignments and transfers of stock shall be made. Every
person becoming a shareholder by such transfer shall, in
proportion to such shares, succeed to all rights of the prior
holder of such shares.
Section 6.03 Determining Shareholders of Record
- -----------------------------------------------
The Board of Directors may close the stock transfer books of the
Corporation for a period of not less than ten days and not more
than 60 days preceding the date of any meeting of shareholders,
or the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change, conversion or
exchange of capital stock shall go into effect, or in connection
with obtaining the consent of shareholders for any purpose. As
an alternative, the Board of Directors may fix in advance a
record date, not less than ten days and not more than 60 days
preceding the date of any such event, for the purpose of
determining the shareholders entitled to receive notice of and to
vote at any such meeting, or to receive payment of any such
dividend, or to receive any such allotment of rights, or to
exercise rights in respect to any such change, conversion or
exchange of capital stock, or to give such consent,
notwithstanding any transfer of any stock on the books of the
Corporation after such record date. However, in no event shall
the record date fixed by the Board of Directors be prior to the
date of the meeting of the Board of Directors at which the record
date is fixed.
Section 6.04 Registered Stockholders
- ------------------------------------
The Corporation may treat the holder of record of any share or
shares of stock as the holder in fact thereof, and accordingly
shall not be bound to recognize any equitable or other claim to,
or interest in, such share or shares on the part of any other
person, whether or not the Corporation has express or other
notice thereof, except as expressly provided by law.
Section 6.05 Registrars and Transfer Agents
- -------------------------------------------
The Board of Directors may, by resolution, appoint such
registrars and transfer agents as it deems convenient for the
conduct of the affairs of the Corporation and may prescribe the
powers and duties of such registrars and transfer agents. The
Board of Directors may change such registrars and transfer agents
at its pleasure.
Section 6.06 General Authority
- ------------------------------
The Board of Directors may make all such rules and regulations as
it may deem expedient concerning the issue, transfer, and
registration of certificates for shares of the capital stock of
the Corporation and concerning the replacement of lost, stolen,
or destroyed certificates.
Section 6.07 Control Share Acquisitions
- ---------------------------------------
The Kansas Control Share Acquisition Act (Chapter 93, 1988
Session Laws of Kansas) shall not apply to control share acqui-
sitions of shares of the Corporation, nor shall the Corporation
have the right provided by Section 10 of such act to call for
redemption shares acquired in a control share acquisition, nor
shall an objecting stockholder have the dissenters' rights
provided for by Section 11 of such act.
PART VII - MISCELLANEOUS
Section 7.01 Execution of Instruments
- -------------------------------------
All agreements, indentures, mortgages, deeds, conveyances,
transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies, and other
instruments or documents may be signed, executed, acknowledged,
verified, delivered or accepted in behalf of the Corporation by
the Chairman of the Board, the President, any Vice President,
the Treasurer, the Controller, or the Secretary. Any such
instruments may also be signed, executed, acknowledged, verified,
delivered, or accepted in behalf of the Corporation in such other
manner and by such other officers or employees as the Board of
Directors may from time to time direct.
Section 7.02 Waiver of Notice
- -----------------------------
Whenever these By-Laws require or permit notice to be given to
any director, officer, or shareholder, such person may sign a
written waiver of such notice which shall be in all respects
tantamount to notice.
Section 7.03 Meeting by Conference Telephone
- --------------------------------------------
Any meeting of the Board of Directors or of any committee may be
held by conference telephone or similar communications equipment
by means of which all persons participating in the meeting can
hear each other simultaneously. Participating in any meeting so
conducted shall constitute presence at the meeting in person by
all persons so participating.
Section 7.04 Emergencies
- ------------------------
In the event of an emergency declared by the President of the
United States or the person performing the functions of the
President of the United States, the officers and employees of the
Corporation will, to the extent possible and subject to
applicable governmental directives during the emergency, continue
to conduct the affairs of the Corporation under such guidance
from the directors as may be available, except as to matters
which by statute require specific approval of the Board of
Directors.
In the event of a state of emergency or disaster of sufficient
severity to prevent the conduct and management of the affairs and
business of the Corporation by its directors and officers as
contemplated by these By-Laws, any two available members of the
then incumbent Executive Committee shall constitute a quorum of
that committee for the full conduct and management of the affairs
and business of the Corporation. In the event of the
unavailability, at such time, of a minimum of two members of the
then incumbent Executive Committee, any three available directors
shall constitute the Executive Committee for the full conduct and
management of the affairs and business of the Corporation, in
accordance with the foregoing provisions of this section. This
By-Law shall be subject to implementation by resolutions of the
Board of Directors passed from time to time for that purpose, and
any provisions of these By-Laws (other than this section) and any
resolutions which are contrary to the provisions of this section
or to the provisions of any such implementing resolutions shall
be suspended until it is determined by the interim Executive
Committee acting under this section that it is to the advantage
of the Corporation to resume the conduct and management of its
affairs and business under all the provisions of these By-Laws.
Section 7.05 Action Without a Meeting
- -------------------------------------
Any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken
without notice and without a meeting if all members of the Board
of Directors or committee, as the case may be, consent in writing
to the proposed action and if such written consent is filed in
the minutes of proceedings of the Board of Directors or
committee, as the case may be. Any action so taken by unanimous
written consent shall have the same force and effect as action
taken at a meeting of the Board of Directors or committee, as the
case may be, by unanimous vote of all members.
PART VIII - INDEMNIFICATION
Section 8.01 Indemnification
- ----------------------------
The Corporation shall (a) indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, or employee of the
Corporation or of a subsidiary of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
or employee of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit, and (b)
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was a director,
officer, or employee of the Corporation or of a subsidiary of the
Corporation or is or was serving at the request of the
Corporation as a director, officer, or employee of another
corporation, partnership, joint venture, trust, or other
enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with any such action,
suit or proceeding. Indemnification shall be afforded to the
fullest extent permissible under the Kansas General Corporation
Code or the indemnification provisions of any successor statute,
and not further, and shall be subject to any applicable
procedural requirements and standards of conduct on the part of
the persons to be indemnified prescribed by that statute. The
foregoing right of indemnification shall in no way be exclusive
of any other rights of indemnification to which any such person
may be entitled under any by-law, agreement, vote of stockholders
or disinterested directors or otherwise, and shall inure to the
benefit of the heirs, executors, and administrators of such a
person. The Corporation may, but shall not be required to,
purchase liability insurance indemnifying the directors,
officers, and employees of the Corporation and its subsidiaries.
PART IX - CHANGES IN BY-LAWS
Section 9.01 Amendments
- -----------------------
These By-Laws may be amended upon vote of the holders of a
majority of the shares of stock of the Corporation represented at
a meeting of the shareholders at which a quorum is present.
These By-Laws may also be amended upon vote of a majority of the
entire Board of Directors at any meeting of the Board, provided
ten days' notice of the proposed amendment has been given to each
member of the Board of Directors, but the authority of the Board
of Directors to amend these By-Laws shall at all times be subject
to the superior authority of the shareholders. In the case of
any By-Law the provisions of which are prescribed by law or by
the Articles of Incorporation, no amendment may be made unless
the By-Law, as amended, is consistent with the requirements of
law and of the Articles of Incorporation.
EXHIBIT 10.12
==================================================================
CREDIT AGREEMENT
Dated as of January 3, 1995
between
FOURTH FINANCIAL CORPORATION
and
BANK OF AMERICA ILLINOIS
================================================================
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . 1
1.2 Other Interpretive Provisions . . . . . . . . . . . . . . 14
1.3 Accounting Principles . . . . . . . . . . . . . . . . . . 15
ARTICLE II
THE CREDITS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1 Amounts and Terms of Commitment . . . . . . . . . . . . . 15
2.2 Note. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3 Procedure for Borrowing.. . . . . . . . . . . . . . . . . 15
2.4 Conversion and Continuation Elections . . . . . . . . . . 16
2.5 Voluntary Termination or Reduction of Commitment. . . . . 17
2.6 Optional Prepayments. . . . . . . . . . . . . . . . . . . 17
2.7 Repayment . . . . . . . . . . . . . . . . . . . . . . . . 18
2.8 Termination Date. . . . . . . . . . . . . . . . . . . . . 18
2.9 Interest. . . . . . . . . . . . . . . . . . . . . . . . . 18
2.10 Facility Fees. . . . . . . . . . . . . . . . . . . . . . 19
2.11 Computation of Fees and Interest . . . . . . . . . . . . 19
2.12 Payments by the Company. . . . . . . . . . . . . . . . . 19
2.13 NationsBank Agreement. . . . . . . . . . . . . . . . . . 20
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . . . . . . . 20
3.1 Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.2 Illegality. . . . . . . . . . . . . . . . . . . . . . . . 21
3.3 Increased Costs and Reduction of Return . . . . . . . . . 22
3.4 Funding Losses. . . . . . . . . . . . . . . . . . . . . . 22
3.5 Inability to Determine Rates. . . . . . . . . . . . . . . 23
3.6 Survival. . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 23
4.1 Conditions of Initial Loans . . . . . . . . . . . . . . . 23
(a) Credit Agreement and Note . . . . . . . . . . . . 23
(b) Resolutions; Incumbency . . . . . . . . . . . . . 23
(c) Organization Documents; Good Standing . . . . . . 24
(d) Legal Opinion . . . . . . . . . . . . . . . . . . 24
(e) Payment of Fees . . . . . . . . . . . . . . . . . 24
(f) Certificate . . . . . . . . . . . . . . . . . . . 24
(g) Other Documents . . . . . . . . . . . . . . . . . 25
4.2 Conditions to All Borrowings. . . . . . . . . . . . . . . 25
(a) Notice of Borrowing . . . . . . . . . . . . . . . 25
(b) Continuation of Representations and Warranties. . 25
(c) No Existing Default . . . . . . . . . . . . . . . 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 25
5.1 Corporate Existence and Power . . . . . . . . . . . . . . 25
5.2 Corporate Authorization; No Contravention . . . . . . . . 26
5.3 Governmental Authorization. . . . . . . . . . . . . . . . 26
5.4 Binding Effect. . . . . . . . . . . . . . . . . . . . . . 26
5.5 Litigation. . . . . . . . . . . . . . . . . . . . . . . . 26
5.6 No Default. . . . . . . . . . . . . . . . . . . . . . . . 27
5.7 ERISA Compliance. . . . . . . . . . . . . . . . . . . . . 27
5.8 Use of Proceeds; Margin Regulations . . . . . . . . . . . 28
5.9 Title to Properties . . . . . . . . . . . . . . . . . . . 28
5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.11 Financial Condition. . . . . . . . . . . . . . . . . . . 28
5.12 Environmental Matters. . . . . . . . . . . . . . . . . . 29
5.13 Regulated Entities . . . . . . . . . . . . . . . . . . . 29
5.14 No Burdensome Restrictions . . . . . . . . . . . . . . . 29
5.15 Copyrights, Patents, Trademarks and Licenses, etc. . . . 29
5.16 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 30
5.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 30
5.18 Full Disclosure. . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI
AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 30
6.1 Financial Statements. . . . . . . . . . . . . . . . . . . 30
6.2 Certificates; Other Information . . . . . . . . . . . . . 32
6.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.4 Preservation of Corporate Existence, Etc. . . . . . . . . 33
6.5 Maintenance of Property . . . . . . . . . . . . . . . . . 33
6.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 33
6.7 Payment of Obligations. . . . . . . . . . . . . . . . . . 34
6.8 Compliance with Laws. . . . . . . . . . . . . . . . . . . 34
6.9 Compliance with ERISA . . . . . . . . . . . . . . . . . . 34
6.10 Inspection of Property and Books and Records . . . . . . 34
6.11 Environmental Laws . . . . . . . . . . . . . . . . . . . 35
6.12 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 35
7.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2 Consolidation, Merger, etc . . . . . . . . . . . . . . . 36
7.3 Asset Dispositions, etc. . . . . . . . . . . . . . . . . 37
7.4 Transactions with Affiliates . . . . . . . . . . . . . . 37
7.5 Negative Pledges, Restrictive Agreements, etc. . . . . . 37
7.6 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.7 Change in Business . . . . . . . . . . . . . . . . . . . 38
7.8 Accounting Changes . . . . . . . . . . . . . . . . . . . 38
7.9 Financial Covenants. . . . . . . . . . . . . . . . . . . 38
ARTICLE VIII
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 38
8.1 Event of Default. . . . . . . . . . . . . . . . . . . . . 38
(a) Non-Payment . . . . . . . . . . . . . . . . . . . 38
(b) Representation or Warranty. . . . . . . . . . . . 39
(c) Other Defaults. . . . . . . . . . . . . . . . . . 39
(d) Cross-Default . . . . . . . . . . . . . . . . . . 39
(e) Insolvency; Voluntary Proceedings . . . . . . . . 39
(f) Involuntary Proceedings . . . . . . . . . . . . . 40
(g) ERISA . . . . . . . . . . . . . . . . . . . . . . 40
(h) Monetary Judgments. . . . . . . . . . . . . . . . 40
(i) Non-Monetary Judgments. . . . . . . . . . . . . . 40
(j) Change of Control . . . . . . . . . . . . . . . . 41
8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . 41
8.3 Rights Not Exclusive. . . . . . . . . . . . . . . . . . . 41
ARTICLE IX
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 41
9.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . 41
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . 42
9.4 Costs and Expenses. . . . . . . . . . . . . . . . . . . . 42
9.5 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 43
9.6 Successors and Assigns. . . . . . . . . . . . . . . . . . 43
9.7 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.8 Automatic Debits of Fees. . . . . . . . . . . . . . . . . 44
9.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 44
9.10 Severability . . . . . . . . . . . . . . . . . . . . . . 44
9.11 No Third Parties Benefited . . . . . . . . . . . . . . . 44
9.12 Governing Law and Jurisdiction . . . . . . . . . . . . . 44
9.13 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . 45
9.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . 45
SCHEDULES [OMITTED]
Schedule 5.7 ERISA Compliance
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.15 Copyrights, etc.
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.17 Insurance Matters
Schedule 9.2 Lending Office; Addresses for Notices
EXHIBITS [OMITTED]
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Borrower's Counsel
Exhibit E Form of Promissory Note
Exhibit F Form of Commitment Termination Extension Date
Request
Exhibit G Form of Quarterly Compliance Certificate
CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT is entered into as of January 3, 1995,
between FOURTH FINANCIAL CORPORATION, a Kansas corporation (the
"Company"), and BANK OF AMERICA ILLINOIS, an Illinois banking
corporation (the "Bank").
WHEREAS, the Bank has agreed to make available to the Company
a revolving credit facility upon the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as
follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Defined Terms. The following terms have the
following meanings:
"Adjusted Total Assets" shall have the meaning set forth
on the date hereof under applicable regulations of any
regulatory agency having authority on the date hereof as such
regulations are applicable to the Company, or if such
regulations are amended hereafter to define Adjusted Total
Assets more restrictively, as set forth in such later amended
regulations.
"Affiliate" means, as to any Person, any other Person
which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. A Person
shall be deemed to control another Person if the controlling
Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of the
other Person, whether through the ownership of voting
securities, by contract, or otherwise.
"Agreement" means this Credit Agreement.
"Applicable Margin" means
(i) with respect to Base Rate Loans, 0%;
(ii) with respect to Offshore Rate Loans at such
time as the Company is Well Capitalized, 0.375%; and
(iii) with respect to Offshore Rate Loans at such
time as the Company is not Well Capitalized, 0.50% at any
time that the principal amount of the Loans outstanding
is less than 50% of the Commitment or 0.625% at any other
time.
"Attorney Costs" means and includes all fees and
disbursements of any law firm or other external counsel, the
allocated cost of internal legal services and all
disbursements of internal counsel.
"Available Commitment" means $25,000,000 on the date
hereof and thereafter until such date as the outstanding
principal amount of the Loans exceeds $25,000,000; and from
the date the outstanding principal amount of the Loans exceeds
$25,000,000 and thereafter, the Available Commitment shall
equal the Commitment.
"Bank" has the meaning specified in the introductory
clause hereto.
"Bank's Payment Office" means the address for payments
set forth on the signature page hereto in relation to the
Bank, or such other address as the Bank may from time to time
specify.
"Bank Subsidiaries" mean Bank IV Kansas N.A., Bank IV
Oklahoma N.A. and any other banking institution which may be
a Subsidiary of the Company from time to time.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act
of 1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of: (a)
0.50% per annum above the latest Federal Funds Rate; and (b)
the rate of interest in effect for such day as publicly
announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The "reference rate" is
a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing
some loans, which may be priced at, above, or below such
announced rate.)
Any change in the reference rate announced by BofA shall
take effect at the opening of business on the day specified in
the public announcement of such change.
"Base Rate Loan" means a Loan that bears interest based
on the Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing Date" means any date on which a Borrowing
occurs under Section 2.3.
"Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banks in Chicago or
San Francisco are authorized or required by law to close and,
if the applicable Business Day relates to any Offshore Rate
Loan, means such a day on which dealings are carried on in the
applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline,
request or directive of any central bank or other Governmental
Authority, or any other law, rule or regulation, of general
application, whether or not having the force of law, in each
case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Change of Control" means the acquisition by any Person,
or two or more Persons acting in concert, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of
1934) of 20% or more of the outstanding shares of voting stock
of the Company.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.1 are satisfied or waived by
the Bank (or, in the case of subsection 4.1(e), waived by the
Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment" has the meaning specified in Section 2.1.
"Commitment Termination Date Extension Request" means a
request substantially in the form of Exhibit F attached
hereto, duly executed by a Responsible Officer of the Company.
"Compliance Certificate" means a certificate
substantially in the form of Exhibit C.
"Contingent Liability" - means any agreement, undertaking
or arrangement by which any Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or
indirect agreement, contingent or otherwise, to provide funds
for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other
Person (other than by endorsements of instruments in the
course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent
Liability shall (subject to any limitation set forth therein)
be deemed to be the outstanding principal amount (or maximum
principal amount, if larger) of the debt, obligation or other
liability guaranteed thereby.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed of
trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is
bound.
"Conversion/Continuation Date" means any date on which,
under Section 2.4, the Company (a) converts Loans of one Type
to another Type, or (b) continues as Loans of the same Type,
but with a new Interest Period, Loans having Interest Periods
expiring on such date.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not
cured or otherwise remedied during such time) constitute an
Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of
the United States.
"Double Leverage Ratio" means the ratio of
(a) equity investments of the Company in its
Subsidiaries
to
(b) total equity capital of the Company;
in each case as reported in the Company's FRY-9LP financial
statements.
"Environmental Claims" means all claims, however
asserted, by any Governmental Authority or other Person
alleging potential liability or responsibility for violation
of any Environmental Law, or for release or injury to the
environment.
"Environmental Laws" means all federal, state or local
laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative orders,
directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities,
in each case relating to environmental, health, safety and
land use matters.
"ERISA" means the Employee Retirement Income Security Act
of 1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) under common control with the Company within
the meaning of Section 414(b) or (c) of the Code (and Sections
414(m) and (o) of the Code for purposes of provisions relating
to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect
to a Pension Plan; (b) the failure to make a required
contribution to a Pension Plan if such failure is sufficient
to give rise to a Lien under Section 302(f) of ERISA; (c) a
withdrawal by the Company or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in
Section 4001(a)(2) of ERISA) or a cessation of operations
which is treated as such a withdrawal under Section 4062(e) of
ERISA; (d) a complete or partial withdrawal by the Company or
any ERISA Affiliate from a Multiemployer Plan or notification
that a Multiemployer Plan is in reorganization; (e) the filing
of a notice of intent to terminate, the treatment of a Plan
amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (f) an event
or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan
or Multiemployer Plan; or (g) the imposition of any liability
under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or
any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified
in the definition of "Offshore Rate".
"Event of Default" means any of the events or
circumstances specified in Section 8.1.
"Exchange Act" means the Securities and Exchange Act of
1934, and regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation,
and any Governmental Authority succeeding to any of its
principal functions.
"Federal Funds Rate" means, for any day, the rate set
forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the
Federal Reserve Bank of New York (including any such
successor, "H.15(519)") on the preceding Business Day opposite
the caption "Federal Funds (Effective)"; or, if for any
relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Bank of the rates for the
last transaction in overnight Federal funds arranged prior to
9:00 a.m. (New York City time) on that day by each of three
leading brokers of Federal funds transactions in New York City
selected by the Bank.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of
its principal functions.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within
the U.S. accounting profession), which are applicable to the
circumstances as of the Closing Date.
"Governmental Authority" means any nation or government,
any state or other political subdivision thereof, any central
bank (or similar monetary or regulatory authority) thereof,
any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise,
by any of the foregoing.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money
and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative
to the face amount of all letters of credit, whether or not
drawn, and banker's acceptances issued for the account of such
Person;
(c) all obligations of such Person as lessee under
leases which have been or should be, in accordance with GAAP,
recorded as capitalized lease liabilities;
(d) all other items which, in accordance with GAAP,
would be included as liabilities on the liability side of the
balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay
the deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon) secured by
a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; and
(f) all Contingent Liabilities of such Person in respect
of any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any
Person shall include the Indebtedness of any partnership or
joint venture in which such Person is a general partner or a
joint venturer.
"Indemnified Liabilities" has the meaning specified in
Section 9.5.
"Indemnified Person" has the meaning specified in Section
9.5.
"Independent Auditor" has the meaning specified in
subsection 6.1(a).
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority
relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief
of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors;
undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
"Interest Payment Date" means, as to any Offshore Loan,
the last day of each Interest Period applicable to such Loan
and, as to any Base Rate Loan, the last Business Day of each
month, provided, however, that if any Interest Period for an
Offshore Rate Loan exceeds three months, the date that falls
three months after the beginning of such Interest Period and
after each Interest Payment Date thereafter is also an
Interest Payment Date.
"Interest Period" means as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted
into or continued as an Offshore Rate Loan, and ending on the
date one, two, three or six months thereafter as selected by
the Company in its Notice of Borrowing or Notice of
Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on
a day that is not a Business Day, that Interest Period
shall be extended to the following Business Day unless
the result of such extension would be to carry such
Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of
such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Revolving Termination Date.
"IRS" means the Internal Revenue Service, and any
Governmental Authority succeeding to any of its principal
functions under the Code.
"Lending Office" means the office or offices of the Bank
specified as its "Lending Office" or "Domestic Lending Office"
or "Offshore Lending Office", as the case may be, on Schedule
9.2 ("Lending Offices, etc."), or such other office or offices
as the Bank may from time to time notify the Company.
"Leverage Ratio" means with respect to the Company and
its Subsidiaries on a consolidated basis, at any time, the
ratio of its Tier One Capital to its Adjusted Total Assets.
"Lien" means any security interest, mortgage, deed of
trust, pledge, hypothecation, assignment, charge or deposit
arrangement, encumbrance, lien (statutory or other) or
preferential arrangement of any kind or nature whatsoever in
respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a capital
lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any
financing statement naming the owner of the asset to which
such lien relates as debtor, under the Uniform Commercial Code
or any comparable law) and any contingent or other agreement
to provide any of the foregoing, but not including the
interest of a lessor under an operating lease.
"Loan" means an extension of credit by the Bank to the
Company under Article II, and may be a Base Rate Loan or an
Offshore Rate Loan (each, a "Type" of Loan).
"Loan Documents" means this Agreement, the Note and all
other documents delivered to the Bank in connection herewith.
"Loans Outstanding" means, for any Person, the sum of
loans and direct lease financings, net of unearned income, by
such Person and its Subsidiaries on a consolidated basis.
"Margin Stock" means "margin stock" as such term is
defined in Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means a material adverse change
in, or a material adverse effect upon, the operations,
business, properties, condition (financial or otherwise) or
prospects of the Company or the Company and its Subsidiaries
taken as a whole; for the purposes of this definition, an
adverse effect or adverse change will be deemed material if
there is a reasonable likelihood that it would reduce the
Company's equity as of any date of determination by 10% or
more below the Company's equity as of the end of its most
recent fiscal year.
"Multiemployer Plan" means a "multiemployer plan", within
the meaning of Section 4001(a)(3) of ERISA, with respect to
which the Company or any ERISA Affiliate may have any
liability.
"NationsBank Agreement" is defined in Section 2.13.
"Non-Performing Assets" means, as applied to Loans
Outstanding of a Person, (i) Loans Outstanding that are not
accruing interest, have been classified as renegotiated
pursuant to guidelines established by the Federal Financial
Institutions Council or are 90 days or more past due in the
payment of principal or interest plus (ii) Other Real Estate
Owned by such Person minus (iii) student loan obligations
which are serviced by a third party servicer and which are
backed by the full faith and credit of the United States
Government or any agency thereof, whether such guaranty is for
the benefit of such third party servicer or such Person or any
of its Subsidiaries, provided, however, that this exclusion
shall not apply to any student loan with respect to which a
third party servicer has failed to perform the terms and
conditions of its servicing agreement with such Person or any
of its Subsidiaries.
"Non-Performing Ratio" means, for any Person, the ratio
of such Person's
(a) Non-Performing Assets outstanding
to
(b) Loans Outstanding plus Other Real Estate Owned.
"Note" means a promissory note executed by the Company in
favor of the Bank pursuant to subsection 2.2, in substantially
the form of Exhibit E.
"Notice of Borrowing" means the Company's irrevocable
telephonic notice of borrowing together with (if requested by
the Bank) prompt confirmation thereof in writing in
substantially the form of Exhibit A.
"Notice of Conversion/Continuation" means the Company's
irrevocable telephonic notice of conversion or continuation
together with (if required by the Bank) prompt confirmation
thereof in writing in substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan
Document owing by the Company to the Bank, or any Indemnified
Person, whether direct or indirect (including those acquired
by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising.
"Offshore Rate" means, for any Interest Period, with
respect to Offshore Rate Loans comprising part of the same
Borrowing, the rate of interest per annum (rounded upward to
the next 1/16th of 1%) determined by the Bank as follows:
Offshore Rate = LIBOR
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day
for any Interest Period the maximum reserve percentage
(expressed as a decimal, rounded upward to the next
1/100th of 1%) in effect on such day (whether or not
applicable to the Bank) under regulations issued from
time to time by the FRB for determining the maximum
reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum
determined by the Bank to be the arithmetic mean (rounded
upward to the next 1/16th of 1%) of the rates of interest
per annum notified to the Bank as the rate of interest at
which dollar deposits in the approximate amount of the
amount of the Loan to be made or continued as, or
converted into, an Offshore Rate Loan by the Bank and
having a maturity comparable to such Interest Period
would be offered to major banks in the London interbank
market at their request at approximately 11:00 a.m.
(London time) two Business Days prior to the commencement
of such Interest Period.
"Offshore Rate Loan" means a Loan that bears interest
based on the Offshore Rate.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any
certificate of determination or instrument relating to the
rights of preferred shareholders of such corporation, any
shareholder rights agreement, and all applicable resolutions
of the board of directors (or any committee thereof) of such
corporation.
"Other Real Estate Owned" of a Person means "other real
estate owned" as shown in the financial statements of such
Person prepared in accordance with GAAP.
"Other Taxes" means any present or future stamp or
documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan
Documents.
"PBGC" means the Pension Benefit Guaranty Corporation, or
any Governmental Authority succeeding to any of its principal
functions under ERISA.
"Pension Plan" means a pension plan (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA, other
than a Multiemployer Plan, with respect to which the Company
or any ERISA Affiliate may have any liability.
"Permitted Liens" has the meaning specified in Section
7.1.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which the Company sponsors or maintains
or to which the Company makes, is making, or is obligated to
make contributions and includes any Pension Plan.
"Quarterly Compliance Certificate" means a certificate
substantially in the form of Exhibit G.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other
than any such event for which the 30-day notice requirement
under ERISA has been waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or
determination of an arbitrator or of a Governmental Authority,
in each case applicable to or binding upon the Person or any
of its property or to which the Person or any of its property
is subject.
"Reserve Commitment" means on the date hereof $25,000,000
and thereafter an amount equal to the Commitment minus the
Available Commitment.
"Responsible Officer" means relative to the Company,
those of its officers whose signatures and incumbency shall
have been certified to the Bank pursuant to Section 4.1.
"Revolving Termination Date" means the earlier to occur
of:
(a) January 2, 1996, as such date may be extended
pursuant to Section 2.8 hereof; and
(b) the date on which the Commitment terminates in
accordance with the provisions of this Agreement.
"Risk Weighted Assets" means, for any Person, the value
of the assets of such Person and its Subsidiaries, including
adjusted off-balance sheet items, all as calculated pursuant
to risk based capital guidelines in effect from time to time
with the applicable regulatory agency.
"SEC" means the Securities and Exchange Commission, or
any Governmental Authority succeeding to any of its principal
functions.
"Subsidiary" of a Person means any corporation,
association, partnership, joint venture or other business
entity of which more than 50% of the voting stock or other
equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly
by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Company.
"Taxes" means any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of
the Bank, such taxes (including income taxes or franchise
taxes) as are imposed on or measured by the Bank's net income
by the jurisdiction (or any political subdivision thereof)
under the laws of which the Bank is organized or maintains a
lending office.
"Tier One Capital" shall have the meaning set forth on
the date hereof under applicable regulations of any regulatory
agency having authority on the date hereof as such regulations
are applicable to the Company, or if such regulations are
amended hereafter to define Tier One Capital more
restrictively, as set forth in such later definition.
"Tier Two Capital" shall have the meaning set forth on
the date hereof under applicable regulations of any regulatory
agency having authority on the date hereof as such regulations
are applicable to the Company, or if such regulations are
amended hereafter to define Tier Two Capital more
restrictively, as set forth in such later definition.
"Type" has the meaning specified in the definition of
"Loan."
"Unfunded Pension Liability" means the excess of a Plan's
accumulated benefit obligations (as defined by GAAP), over the
current fair value of that Plan's assets.
"United States" and "U.S." each means the United States
of America.
"Well-Capitalized" shall have the meaning promulgated by
any regulatory agency having authority on the date hereof, as
applicable to the Company, or if not applicable to the Company
per se, as applicable to the Bank Subsidiaries applied to the
Company as if so applicable; provided, however, that if at any
time requirements of the designation "Well-Capitalized"
promulgated by such regulatory authority shall be modified so
as to define the requirements for such designation more
restrictively than the existing requirements, then such
requirements set forth herein shall be changed to reflect such
later modification; provided, further, if at any time such
regulatory authority shall determine that such Person is not
"Well Capitalized", (within the meaning of the regulations
promulgated by such authority then in effect), such Person
shall be deemed not to be Well-Capitalized for purposes of
this Agreement, without regard to whether such Person shall
meet the requirements of the definition of such term set forth
in this Agreement as in effect at such time.
1.2 Other Interpretive Provisions. (a) The meanings of
defined terms are equally applicable to the singular and plural
forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and
similar words refer to this Agreement as a whole and not to any
particular provision of this Agreement; and subsection, Section,
Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures,
notices and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from"
means "from and including"; the words "to" and "until" each
mean "to but excluding", and the word "through" means "to and
including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other
contractual instruments shall be deemed to include all subsequent
amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the
terms of any Loan Document, and (ii) references to any statute or
regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the
interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate
the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in
accordance with their terms.
(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to
the Bank and the Company and are the products of all parties.
Accordingly, they shall not be construed against the Bank merely
because of the Bank's involvement in their preparation.
1.3 Accounting Principles. (a) Unless the context otherwise
clearly requires, all accounting terms not expressly defined herein
shall be construed, and all financial computations required under
this Agreement shall be made, in accordance with GAAP, consistently
applied.
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
-----------
2.1 Amounts and Terms of Commitment. The Bank agrees, on the
terms and conditions set forth herein, to make loans to the Company
(each such loan, a "Revolving Loan") from time to time on any
Business Day during the period from the Closing Date to the
Revolving Termination Date, in an aggregate amount not to exceed at
any time outstanding $50,000,000, (such amount, as the same may be
reduced under Section 2.5, the Bank's "Commitment"); provided,
however, that, after giving effect to any borrowing of a Revolving
Loan, the aggregate principal amount of all outstanding Revolving
Loans shall not at any time exceed the Commitment. Within the
limits of the Commitment, and subject to the other terms and
conditions hereof, the Company may borrow under this Section 2.1,
prepay under Section 2.6 and reborrow under this Section 2.1.
2.2 Note. The Loans made by the Bank shall be evidenced by
a Note. The Bank shall endorse on the schedules annexed to the
Note the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Company with
respect thereto. The Bank is irrevocably authorized by the Company
to endorse the Note and the Bank's record shall be conclusive
absent manifest error; provided, however, that the failure of the
Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the
obligations of the Company hereunder or under the Note to the Bank.
2.3 Procedure for Borrowing. Each borrowing shall be made
upon receipt of a Notice of Borrowing by the Bank (which notice
must be received by the Bank prior to 10:00 a.m. (Chicago time) (i)
three Business Days prior to the requested Borrowing Date, in the
case of Offshore Rate Loans; and (ii) on the requested Borrowing
Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in
an aggregate minimum amount of $5,000,000 or any multiple
of $1,000,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a
Business Day;
(C) the Type of Loans comprising the Borrowing; and
(D) the duration of the Interest Period applicable
to such Loans included in such notice. If the Notice of
Borrowing fails to specify the duration of the Interest
Period for any Borrowing comprised of Offshore Rate
Loans, such Interest Period shall be three months.
2.4 Conversion and Continuation Elections. (a) The Company
may, by delivering a Notice of Conversion/Continuation to the Bank
in accordance with subsection 2.4(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable
Interest Period, in the case of any other Type of Loans, to
convert any such Loans (or any part thereof in an amount not
less than $5,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof) into Loans of any other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Loans having Interest Periods
expiring on such day (or any part thereof in an amount not
less than $5,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate
Loans in respect of any borrowing is reduced, by payment,
prepayment, or conversion of part thereof to be less than
$1,000,000, such Offshore Rate Loans shall automatically convert
into Base Rate Loans.
(b) The Company shall deliver a Notice of Conversion/
Continuation to be received by the Bank not later than 10:00 a.m.
(Chicago time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into
or continued as Offshore Rate Loans; and (ii) on the Conversion/
Continuation Date, if the Loans are to be converted into Base Rate
Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be
converted or renewed;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of conversions into
Base Rate Loans, the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Loans, the Company has failed to select
timely a new Interest Period to be applicable to such Offshore Rate
Loans, or if any Default or Event of Default then exists, the
Company shall be deemed to have elected to convert such Offshore
Rate Loans into Base Rate Loans effective as of the expiration date
of such Interest Period.
(d) Unless the Bank otherwise agrees, during the
existence of a Default or Event of Default, the Company may not
elect to have a Loan converted into or continued as an Offshore
Rate Loan.
2.5 Voluntary Termination or Reduction of Commitment. The
Company may, upon not less than five Business Days' prior notice
to the Bank, terminate the Commitment, or permanently reduce the
Commitment by an aggregate minimum amount of $5,000,000 or any
multiple of $5,000,000 in excess thereof; unless, after giving
effect thereto and to any prepayments of Loans made on the
effective date thereof, the then-outstanding principal amount of
the Loans would exceed the amount of the Commitment then in
effect. Once reduced in accordance with this Section , the
Commitment may not be increased. All accrued facility fees to,
but not including the effective date of any reduction or
termination of the Commitment, shall be paid on the effective date
of such reduction or termination.
2.6 Optional Prepayments. Subject to Section 3.4, the
Company may, at any time or from time to time, upon notice to the
Bank, ratably prepay Loans in whole or in part, in minimum amounts
of $5,000,000 and an integral multiple of $1,000,000. Such notice
of prepayment shall specify the date and amount of such prepayment
and the Types of Loans to be prepaid. If such notice is given by
the Company, the Company shall make such prepayment and the
payment amount specified in such notice shall be due and payable
on the date specified therein, together with accrued interest to
each such date on the amount prepaid and any amounts required
pursuant to Section 3.4.
2.7 Repayment. The Company shall repay to the Bank on the
Revolving Termination Date the aggregate principal amount of Loans
outstanding on such date.
2.8 Termination Date. The Commitment shall terminate and the
Bank shall be relieved of its obligations to make any Loan on the
Revolving Termination Date. The Company may from time to time
request an extension of the Revolving Termination Date by
executing and delivering to the Bank a Commitment Termination Date
Extension Request at least 30 but not more than 40 days prior to
the then current Revolving Termination Date. The Revolving
Termination Date shall be so extended if the Company shall have
received from the Bank on or prior to the 10th day preceding the
then current Revolving Termination Date a duly executed
counterpart of such Commitment Termination Date Extension Request;
provided, that any such extension shall take effect as of the date
on which the Bank shall have notified the Company of the approval
thereof and the Revolving Termination Date shall be extended to a
date 364 days from said effectiveness. The Bank may in its sole
and absolute discretion withhold its consent to any such
Commitment Termination Date Extension Request.
2.9 Interest. (a) Each Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing
Date at a rate per annum equal to the Offshore Rate or the Base
Rate, as the case may be (and subject to the Company's right to
convert to other Types of Loans under Section 2.4), plus the
Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on
each Interest Payment Date. Interest shall also be paid on the
date of any prepayment of Loans under Section 2.6 for the portion
of the Loans so prepaid and upon payment (including prepayment) in
full thereof and, during the existence of any Event of Default,
interest shall be paid on demand of the Bank.
(c) Notwithstanding subsection (a) of this Section,
while any Event of Default exists or after acceleration, the
Company shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal
amount of all outstanding Loans, at a rate per annum which is
determined by adding 2% per annum to the Applicable Margin then in
effect for such Loans; provided, however, that, on and after the
expiration of any Interest Period applicable to any Offshore Rate
Loan outstanding on the date of occurrence of such Event of
Default or acceleration, the principal amount of such Loan shall,
during the continuation of such Event of Default or after
acceleration, bear interest at a rate per annum equal to the Base
Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to the Bank hereunder shall be subject
to the limitation that payments of interest shall not be required
for any period for which interest is computed hereunder, to the
extent (but only to the extent) that contracting for or receiving
such payment by the Bank would be contrary to the provisions of
any law applicable to the Bank limiting the highest rate of
interest that may be lawfully contracted for, charged or received
by the Bank, and in such event the Company shall pay the Bank
interest at the highest rate permitted by applicable law.
2.10 Facility Fees. The Company shall pay to the Bank a
facility fee on the average daily amount of the Commitment,
computed on a quarterly basis in arrears on the last Business Day
of each calendar quarter equal to 0.125% per annum on the
Available Commitment and 0.0625% per annum on the Reserve
Commitment. Such facility fee shall accrue from the date hereof
to the Revolving Termination Date and shall be due and payable
quarterly in arrears on the last Business Day of each March, June,
September and December through the Revolving Termination Date,
with the final payment to be made on the Revolving Termination
Date; provided that, in connection with any reduction or
termination of the Commitment under Section 2.5, the accrued
facility fee calculated for the period ending on such date shall
also be paid on the date of such reduction or termination, with
the following quarterly payment being calculated on the basis of
the period from such reduction or termination date to such
quarterly payment date; and provided, further, that upon the
increase of the Available Commitment, an amount equal to 0.0625%
per annum from the date hereof through the date of such increase
on the amount of such increase shall be paid. The facility fee
provided in this section shall accrue at all times after the
above-mentioned commencement date, including at any time during
which one or more conditions in Article IV are not met.
2.11 Computation of Fees and Interest. (a) All computations
of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed (which results in more interest being paid
than if computed on the basis of a 365-day year). Interest and
fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day
thereof.
(b) Each determination of an interest rate by the Bank
shall be conclusive and binding on the Company in the absence of
manifest error.
2.12 Payments by the Company. (a) All payments to be made
by the Company shall be made without set-off, recoupment or
counterclaim. Except as otherwise expressly provided herein, all
payments by the Company shall be made to the Bank, and shall be
made in dollars and in immediately available funds, no later than
11:00 a.m. (Chicago time) on the date specified herein. Any
payment received by the Bank later than 11:00 a.m. (Chicago time)
shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the
definition of "Interest Period" herein, whenever any payment is
due on a day other than a Business Day, such payment shall be made
on the following Business Day, and such extension of time shall in
such case be included in the computation of interest or fees, as
the case may be.
2.13 NationsBank Agreement. The Company is entering into a
credit agreement (the "NationsBank Agreement") with NationsBank of
Texas, N.A. concurrently with the effectiveness of this Agreement
on terms substantially the same as this Agreement. The Company
agrees that all borrowings, payments and reductions and
terminations of the Commitment shall be made concurrently with
equivalent borrowings, payments and reductions and termination of
the commitment under the NationsBank Agreement. The Company shall
provide a summary statement quarterly to the Bank of all activity
on the NationsBank Agreement and of any amendments thereto.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
3.1 Taxes. (a) Any and all payments by the Company to the
Bank under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for
any Taxes. In addition, the Company shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless
the Bank for the full amount of Taxes or Other Taxes (including
any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by the Bank and any liability
(including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. Payment
under this indemnification shall be made within 30 days after the
date the Bank makes written demand therefor.
(c) If the Company shall be required by law to deduct
or withhold any Taxes or Other Taxes from or in respect of any sum
payable hereunder to the Bank, then:
(i) the sum payable shall be increased as
necessary so that after making all required deductions and
withholdings (including deductions and withholdings applicable
to additional sums payable under this Section) the Bank
receives an amount equal to the sum it would have received had
no such deductions or withholdings been made;
(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount
deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) the Company shall also pay to the Bank, at
the time interest is paid, all additional amounts which the
Bank specifies as necessary to preserve the after-tax yield
the Bank would have received if such Taxes or Other Taxes had
not been imposed.
(d) Within 30 days after the date of any payment by
the Company of Taxes or Other Taxes, the Company shall furnish the
Bank the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to the
Bank.
(e) If the Company is required to pay additional
amounts to the Bank pursuant to subsection (c) of this Section,
then the Bank shall use reasonable efforts (consistent with legal
and regulatory restrictions) to change the jurisdiction of its
Lending Office so as to eliminate any such additional payment by
the Company which may thereafter accrue, if such change in the
judgment of the Bank is not otherwise disadvantageous to the Bank.
3.2 Illegality. (a) If the Bank determines that the
introduction of any Requirement of Law, or any change in any
Requirement of Law, or in the interpretation or administration of
any Requirement of Law, has made it unlawful, or that any central
bank or other Governmental Authority has asserted that it is
unlawful, for the Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the
Company, any obligation of the Bank to make Offshore Rate Loans
shall be suspended until the Bank notifies the Company that the
circumstances giving rise to such determination no longer exist.
(b) If the Bank determines that it is unlawful to
maintain any Offshore Rate Loan, the Company shall, upon its
receipt of notice of such fact and demand from the Bank, prepay in
full such Offshore Rate Loans of the Bank then outstanding,
together with interest accrued thereon and amounts required under
Section 3.4, either on the last day of the Interest Period
thereof, if the Bank may lawfully continue to maintain such
Offshore Rate Loans to such day, or immediately, if the Bank may
not lawfully continue to maintain such Offshore Rate Loan. If the
Company is required to so prepay any Offshore Rate Loan, then
concurrently with such prepayment, the Company shall borrow from
the Bank, in the amount of such repayment, a Base Rate Loan.
3.3 Increased Costs and Reduction of Return. (a) If the
Bank determines that, due to either (i) the introduction of or any
change (other than any change by way of imposition of or increase
in reserve requirements included in the calculation of the
Offshore Rate) in or in the interpretation of any law or
regulation or (ii) the compliance by the Bank with any guideline
or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any
increase in the cost to the Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Loans then the Company
shall be liable for, and shall from time to time, upon demand, pay
to the Bank, additional amounts as are sufficient to compensate
the Bank for such increased costs.
(b) If the Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change
in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Lending Office) or any corporation
controlling the Bank with any Capital Adequacy Regulation, affects
or would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank and
(taking into consideration the Bank's or such corporation's
policies with respect to capital adequacy and the Bank's desired
return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or
obligations under this Agreement, then, upon demand of the Bank to
the Company, the Company shall pay to the Bank, from time to time
as specified by the Bank, additional amounts sufficient to
compensate the Bank for such increase.
3.4 Funding Losses. The Company shall reimburse the Bank and
hold the Bank harmless from any loss or expense which the Bank may
sustain or incur as a consequence of:
(a) the failure of the Company to make on a timely
basis any payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have
given) a Notice of Borrowing or a Notice of Conversion/
Continuation;
(c) the failure of the Company to make any prepayment
in accordance with any notice delivered under Section 2.6;
(d) the prepayment or other payment (including after
acceleration thereof) of an Offshore Rate Loan on a day that is
not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the
last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate
Loans or from fees payable to terminate the deposits from which
such funds were obtained.
3.5 Inability to Determine Rates. If the Bank determines
that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period
with respect to a proposed Offshore Rate Loan, or that the
Offshore Rate applicable pursuant to subsection 2.9(a) for any
requested Interest Period with respect to a proposed Offshore Rate
Loan does not adequately and fairly reflect the cost to the Bank
of funding such Loan, the Bank will promptly so notify the
Company. Thereafter, the obligation of the Bank to make or
maintain Offshore Rate Loans hereunder shall be suspended until
the Bank revokes such notice in writing. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice
of Conversion/Continuation then submitted by it. If the Company
does not revoke such Notice, the Bank shall make, convert or
continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but
such Loans shall be made, converted or continued as Base Rate
Loans instead of Offshore Rate Loans.
3.6 Survival. The agreements and obligations of the Company
in this Article III shall survive the payment of all other
Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
4.1 Conditions of Initial Loans. The obligation of the Bank
to make its initial Loan hereunder is subject to the condition
that the Bank have received on or before the initial borrowing
date all of the following, in form and substance satisfactory to
the Bank:
(a) Credit Agreement and Note. This Agreement and the
Note executed by each party thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company authorizing the transactions
contemplated hereby, certified as of the Closing Date by the
Secretary or an Assistant Secretary of the Company; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to
execute, deliver and perform, as applicable, this Agreement,
and all other Loan Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation
and the bylaws of the Company as in effect on the Closing
Date, certified by the Secretary or Assistant Secretary of the
Company as of the Closing Date; and
(ii) a good standing certificate for the Company
from the Secretary of State (or similar, applicable
Governmental Authority) of its state of incorporation and each
state where the Company is qualified to do business as a
foreign corporation as of a recent date, together with a
bring-down certificate for the Company from such Secretary of
State (or similar, applicable Governmental Authority) by
facsimile, dated the Closing Date;
(d) Legal Opinion. An opinion of John C. Maloney,
Senior Associate General Counsel to the Company and addressed to
the Bank, substantially in the form of Exhibit D;
(e) Payment of Fees. Evidence of payment by the
Company of all accrued and unpaid fees, costs and expenses to the
extent then due and payable on the Closing Date;
(f) Certificate. A certificate signed by a
Responsible Officer, dated as of the Closing Date, stating that:
(i) the representations and warranties contained
in Article V are true and correct on and as of such date, as
though made on and as of such date;
(ii) no Default or Event of Default exists or
would result from the initial Borrowing; and
(iii) there has occurred since December 31, 1993,
no event or circumstance that has resulted or could reasonably
be expected to result in a Material Adverse Effect; and
(g) Other Documents. Such other approvals, opinions,
documents or materials as the Bank may request.
4.2 Conditions to All Borrowings. The obligation of the Bank
to make any Loan to be made by it (including its initial Loan) is
subject to the satisfaction of the following conditions precedent
on the relevant Borrowing Date:
(a) Notice of Borrowing. The Bank shall have
received, (i) in the case of the initial Loan, a Notice of
Borrowing, and (ii) for all other Loans, a Notice of Borrowing
and/or a Notice of Conversion/Continuation, as applicable;
(b) Continuation of Representations and Warranties.
The representations and warranties in Article V shall be true and
correct on and as of such Borrowing Date with the same effect as
if made on and as of such Borrowing Date (except to the extent
such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such
earlier date); and
(c) No Existing Default. No Default or Event of
Default shall exist or shall result from such Borrowing.
Each Notice of Borrowing submitted by the Company hereunder shall
constitute a representation and warranty by the Company hereunder,
as of the date of each such notice and as of each Borrowing Date,
that the conditions in Section 4.2 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Bank that:
5.1 Corporate Existence and Power. The Company and each of
its Subsidiaries:
(a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its
assets, carry on its business and to execute, deliver, and perform
its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct
of its business requires such qualification or license; and
(d) is in compliance with all Requirements of Law.
5.2 Corporate Authorization; No Contravention. The
execution, delivery and performance by the Company of this
Agreement and each other Loan Document to which the Company is
party, have been duly authorized by all necessary corporate
action, and do not and will not:
(a) contravene the terms of any of the Company's
Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document
evidencing any Contractual Obligation to which the Company is a
party or any order, injunction, writ or decree of any Governmental
Authority to which the Company or its property is subject; or
(c) violate any Requirement of Law.
5.3 Governmental Authorization. No approval, consent,
exemption, authorization, or other action by, or notice to, or
filing with, any Governmental Authority is necessary or required
in connection with the execution, delivery or performance by, or
enforcement against, the Company or any of its Subsidiaries of the
Agreement or any other Loan Document.
5.4 Binding Effect. This Agreement and each other Loan
Document to which the Company is a party constitute the legal,
valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
5.5 Litigation. There are no actions, suits, proceedings,
claims or disputes pending, or to the best knowledge of the
Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the
Company, or its Subsidiaries or any of their respective properties
which:
(a) purport to affect or pertain to this Agreement or
any other Loan Document, or any of the transactions contemplated
hereby or thereby; or
(b) would reasonably be expected to have a Material
Adverse Effect. No injunction, writ, temporary restraining order
or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for
herein or therein not be consummated as herein or therein
provided.
5.6 No Default. No Default or Event of Default exists or
would result from the incurring of any Obligations by the Company.
As of the Closing Date, neither the Company nor any Subsidiary is
in default under or with respect to any Contractual Obligation in
any respect which, individually or together with all such
defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the
Closing Date, create an Event of Default under subsection 8.1(e).
5.7 ERISA Compliance.
(a) Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and
other federal or state law. Each Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of the
Company, nothing has occurred which would cause the loss of such
qualification. The Company and each ERISA Affiliate has made all
required contributions to any Plan subject to Section 412 of the
Code, and no application for a funding waiver or an extension of
any amortization period pursuant to Section 412 of the Code has
been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Company, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has
resulted or could reasonably be expected to result in a Material
Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) except as specifically disclosed on
Schedule 5.7 ("ERISA Compliance"), no Pension Plan has any
Unfunded Pension Liability; (iii) neither the Company nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Company nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under Section
4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
5.8 Use of Proceeds; Margin Regulations. The proceeds of the
Loans are to be used solely for the purposes set forth in and
permitted by Section 6.12. The Company is not engaged in the
business of purchasing or selling Margin Stock.
5.9 Title to Properties. The Company and each Subsidiary
have good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the
ordinary conduct of their respective businesses, except for such
defects in title as could not, individually or in the aggregate,
have a Material Adverse Effect. As of the Closing Date, the
property of the Company and its Subsidiaries is subject to no
Liens, other than Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed all
Federal and other material tax returns and reports required to be
filed, and have paid all Federal and other material taxes,
assessments, fees and other governmental charges levied or imposed
upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by
appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax
assessment against the Company or any Subsidiary that would, if
made, have a Material Adverse Effect.
5.11 Financial Condition. (a) The consolidated financial
statements of the Company and its Subsidiaries dated December 31,
1993 and September 30, 1994, and the related consolidated
statements of income or operations, shareholders' equity and cash
flows for the fiscal year or nine month period ended on that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein, subject, in the
case of the September 30, 1994 statements, to ordinary, good
faith year end audit adjustments;
(ii) fairly present the financial condition of
the Company and its Subsidiaries as of the date thereof and
results of operations for the period covered thereby; and
(iii) except as specifically disclosed in
Schedule 5.11 ("Permitted Liabilities"), show all material
indebtedness and other liabilities, direct or contingent, of
the Company and its consolidated Subsidiaries as of the date
thereof, including liabilities for taxes, material commitments
and Contingent Obligations.
(b) Since December 31, 1993, there has been no
Material Adverse Effect.
5.12 Environmental Matters. The Company conducts in the
ordinary course of business a review of the effect of existing
Environmental Laws and existing Environmental Claims on its
business, operations and properties, and as a result thereof the
Company has reasonably concluded that, except as specifically
disclosed in Schedule 5.12 ("Environmental Matters"), such
Environmental Laws and Environmental Claims could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
5.13 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary, is an "Investment
Company" within the meaning of the Investment Company Act of 1940.
The Company is not subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act, any state public utilities code, or any other
Federal or state statute or regulation limiting its ability to
incur Indebtedness.
5.14 No Burdensome Restrictions. Neither the Company nor any
Subsidiary is a party to or bound by any Contractual Obligation,
or subject to any restriction in any Organization Document, or any
Requirement of Law, which could reasonably be expected to have a
Material Adverse Effect.
5.15 Copyrights, Patents, Trademarks and Licenses, etc. The
Company or its Subsidiaries own or are licensed or otherwise have
the right to use all of the patents, trademarks, service marks,
trade names, copyrights, contractual franchises, authorizations
and other rights that are reasonably necessary for the operation
of their respective businesses, without conflict with the rights
of any other Person. To the best knowledge of the Company, no
slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now
contemplated to be employed, by the Company or any Subsidiary
infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 5.15 ("Copyrights, etc."), no
claim or litigation regarding any of the foregoing is pending or
threatened, and no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which,
in either case, could reasonably be expected to have a Material
Adverse Effect.
5.16 Subsidiaries. As of the Closing Date, the Company has
no Subsidiaries other than those specifically disclosed in part
(a) of Schedule 5.16 ("Subsidiaries and Minority Interests")
hereto and has no equity investments in any other corporation or
entity other than those specifically disclosed in part (b) of
Schedule 5.16.
5.17 Insurance. Except as specifically disclosed in Schedule
5.17 ("Insurance Matters"), the properties of the Company and its
Subsidiaries are insured with financially sound and reputable
insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and
owning similar properties in localities where the Company or such
Subsidiary operates.
5.18 Full Disclosure. None of the representations or
warranties made by the Company or any Subsidiary in the Loan
Documents as of the date such representations and warranties are
made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on
behalf of the Company or any Subsidiary in connection with the
Loan Documents (including the offering and disclosure materials
delivered by or on behalf of the Company to the Bank prior to the
Closing Date), contains any untrue statement of a material fact or
omits any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made
or delivered.
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
So long as the Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
unless the Bank waives compliance in writing:
6.1 Financial Statements. The Company shall deliver to the
Bank, in form and detail satisfactory to the Bank:
(a) as soon as available, but not later than 120 days
after the end of each fiscal year, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as
at the end of such year and the related consolidated statements of
income or operations, shareholders' equity and cash flows for such
year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of
Ernst & Young or another nationally-recognized independent public
accounting firm ("Independent Auditor") which report shall state
that such consolidated financial statements present fairly the
financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years. Such opinion
shall not be qualified or limited because of a restricted or
limited examination by the Independent Auditor of any material
portion of the Company's or any Subsidiary's records and shall be
delivered to the Bank pursuant to a reliance agreement between the
Bank and such Independent Auditor in form and substance
satisfactory to the Bank;
(b) as soon as available, but not later than 60 days
after the end of each of the first three fiscal quarters of each
fiscal year, a copy of the unaudited consolidated balance sheet of
the Company and its Subsidiaries as of the end of such quarter and
the related consolidated statements of income, shareholders'
equity and cash flows for the period commencing at the end of the
previous fiscal year and ending on the last day of such quarter,
and certified by the chief financial officer or the controller as
fairly presenting, in accordance with GAAP (subject to ordinary,
good faith year-end audit adjustments), the financial position and
the results of operations of the Company and the Subsidiaries;
(c) as soon as available and in any event within 60
days after the end of each Fiscal Quarter, either (i) at any time
when the Company is not Well-Capitalized, a Compliance
Certificate, or (ii) at any time when the Company is Well-
Capitalized, a Quarterly Compliance Certificate, in each case
executed by the chief financial officer or the controller of the
Company;
(d) as soon as possible and in any event within ten
Business Days after (i) the occurrence of each Default or (ii) the
Company ceases to be Well-Capitalized, a statement of the chief
financial officer or the controller of the Company setting forth
details of such event and the action which the Company has taken
and proposes to take with respect thereto;
(e) at any time when the Company is not Well-
Capitalized, simultaneously with delivery to the Comptroller of
the Currency, any Federal Reserve Bank or the FDIC, as the case
may be, and in any event within 60 days after the end of each
Fiscal Quarter, call reports for each Subsidiary required to
deliver a call report, as at the end of such fiscal quarter, each
certified by the respective cashier or other authorized officer of
such Subsidiary and reports filed on Form FRY9-C and Form FRY9-LP;
(f) promptly after the sending or filing thereof,
copies of all reports which the Company sends to any of its
securityholders, and all reports and registration statements which
the Company or any of its Subsidiaries files with the Securities
and Exchange Commission or any national securities exchange; and
(g) such other information respecting the condition or
operations, financial or otherwise, of the Company or any of its
Subsidiaries as the Bank may from time to time reasonably request.
6.2 Certificates; Other Information. The Company shall
furnish to the Bank concurrently with the delivery of the
financial statements referred to in subsection 6.1(a), a
certificate of the Independent Auditor stating that in making the
examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such
certificate.
6.3 Notices. The Company shall promptly notify the Bank:
(a) of the occurrence of any Default or Event of
Default, and of the occurrence or existence of any event or
circumstance that foreseeably will become a Default or Event of
Default;
(b) of any matter that has resulted or may result in
a Material Adverse Effect, including (i) breach or non-performance
of, or any default under, a Contractual Obligation of the Company
or any Subsidiary; (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and
any Governmental Authority; or (iii) the commencement of, or any
material development in, any litigation or proceeding affecting
the Company or any Subsidiary; including pursuant to any
applicable Environmental Laws;
(c) of the occurrence of any of the following events
affecting the Company or any ERISA Affiliate (but in no event more
than 10 days after such event), and deliver to the Bank a copy of
any notice with respect to such event that is filed with a
Governmental Authority and any notice delivered by a Governmental
Authority to the Company or any ERISA Affiliate with respect to
such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code
by the Company or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment results
in a material increase in contributions or Unfunded Pension
Liability.
(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its
consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details
of the occurrence referred to therein, and stating what action the
Company or any affected Subsidiary proposes to take with respect
thereto and at what time. Each notice under subsection 6.3(a)
shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been
(or foreseeably will be) breached or violated.
6.4 Preservation of Corporate Existence, Etc. The Company
shall, and shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state
or jurisdiction of incorporation, except as permitted by Section
7.2;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses
and franchises necessary or desirable in the normal conduct of its
business except in connection with transactions permitted by
Section 7.2 and sales of assets permitted by Section 7.3;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of
which could reasonably be expected to have a Material Adverse
Effect.
6.5 Maintenance of Property. The Company shall maintain, and
shall cause each Subsidiary to maintain, and preserve all its
property which is used or useful in its business in good working
order and condition, ordinary wear and tear excepted and make all
necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect.
6.6 Insurance. The Company shall maintain, and shall cause
each Subsidiary to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured
against by Persons engaged in the same or similar business, of
such types and in such amounts as are customarily carried under
similar circumstances by such other Persons.
6.7 Payment of Obligations. The Company shall, and shall
cause each Subsidiary to, pay and discharge as the same shall
become due and payable, all their respective obligations and
liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the
same are being contested in good faith by appropriate proceedings
and adequate reserves in accordance with GAAP are being maintained
by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property; and
(c) all Indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness.
6.8 Compliance with Laws. The Company shall comply, and
shall cause each Subsidiary to comply, in all material respects
with all Requirements of Law of any Governmental Authority having
jurisdiction over it or its business (including the Federal Fair
Labor Standards Act), except such as may be contested in good
faith or as to which a bona fide dispute may exist.
6.9 Compliance with ERISA. The Company shall, and shall
cause each of its ERISA Affiliates to: (a) maintain each Plan in
compliance in all material respects with the applicable provisions
of ERISA, the Code and other federal or state law; (b) cause each
Plan which is qualified under Section 401(a) of the Code to
maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
6.10 Inspection of Property and Books and Records. The
Company shall maintain and shall cause each Subsidiary to maintain
proper books of record and account, in which full, true and
correct entries in conformity with GAAP consistently applied shall
be made of all financial transactions and matters involving the
assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit,
representatives and independent contractors of the Bank to visit
and inspect any of their respective properties, to examine their
respective corporate, financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, all at
the expense of the Company and at such reasonable times during
normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to the Company; provided, however,
when an Event of Default exists the Bank may do any of the
foregoing at the expense of the Company at any time during normal
business hours and without advance notice.
6.11 Environmental Laws. The Company shall, and shall cause
each Subsidiary to, conduct its operations and keep and maintain
its property in compliance with all Environmental Laws.
6.12 Use of Proceeds. The Company shall use the proceeds of
the Loans for working capital and other general corporate purposes
not in contravention of any Requirement of Law or of any Loan
Document; provided, however, that none of such proceeds shall be
applied to acquire a controlling interest in the stock of any
Person, unless such Person's Board of Directors (or equivalent
board) shall approve such acquisition, unless the Bank shall
otherwise consent.
ARTICLE VII
NEGATIVE COVENANTS
------------------
So long as the Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
unless the Bank waives compliance in writing:
7.1 Liens. The Company will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any properties, assets or revenues of the Company or any
of its Subsidiaries or any capital stock of any Subsidiary of the
Company, whether now owned or hereafter acquired, except:
(a) Liens created or assumed in the ordinary course of
the banking, trust, commercial finance and leasing business of any
Subsidiary or the business of the Company;
(b) Liens for taxes not yet payable or being contested
in good faith by appropriate proceedings and for which reserves in
conformity with GAAP with respect thereto have been provided on
the books of the Company or its Subsidiaries, as the case may be;
(c) deposits or pledges to secure the payment of
workmen's compensation, unemployment insurance, old age pensions
or other social security benefits or obligations;
(d) deposits or pledges to secure statutory obligations
or to secure or in lieu of surety, penalty or appeal bonds;
(e) mechanics', materialmen's, warehousemen's, carriers
or other like Liens arising in the ordinary course of its business
which are not overdue for a period longer than 30 days, or which
are being contested in good faith by appropriate proceedings;
(f) Liens securing indebtedness incurred after the date
hereof to finance the cost of acquisition, construction or
improvement of any property useful and intended to be used in
carrying out the business of the Company or a Subsidiary;
provided, that the Lien shall attach solely to the property
acquired, constructed or improved or to substantially unimproved
real property on which property so acquired, constructed or
improved is located;
(g) Liens on property useful and intended to be used in
carrying out the business of the Company or a Subsidiary which
were existing at the time of acquisition of such property, or at
the time of acquisition by the Company or a Subsidiary of any
business entity then owning such property, so long as such Liens
were not incurred, extended or renewed in the contemplation of or
in connection with such acquisition by the Company or a
Subsidiary; provided, that such Lien shall attach solely to the
property acquired; and
(h) extensions or renewals of Liens permitted by clauses
(f) and (g) above so long as, at the time of such transaction and
after giving effect thereto and to the application of the proceeds
thereof, (x) the aggregate unpaid principal amount of indebtedness
of the Company and its Subsidiaries which is secured pursuant to
this clause (h) and clauses (f) and (g) hereof shall be no greater
than the aggregate unpaid principal amount of such indebtedness
secured pursuant to such clauses immediately preceding such
transaction and (y) such Lien shall attach solely to the property
which was subject thereto immediately preceding such transaction.
Notwithstanding the foregoing provisions of this Section 7.1
the Company will not permit, and will not permit any Subsidiary to
cause or permit any Lien on capital stock issued by a Subsidiary
and held by the Company or another Subsidiary except for Liens on
capital stock of a corporation acquired after the effective date
of the Agreement which corporation, after such acquisition, would
become a Subsidiary; provided that such Liens were existing at the
time of such acquisition and were not incurred, extended or
renewed in contemplation of, or in connection with, such
acquisition.
7.2 Consolidation, Merger, etc. The Company will not, and
will not permit any of its Subsidiaries to, liquidate or dissolve,
consolidate with, or merge into or with, any other corporation, or
purchase or otherwise acquire all or substantially all of the
assets of any Person (or of any division thereof) except
(a) any such Subsidiary may liquidate or dissolve
voluntarily into, and may merge with and into, the Company or any
other Subsidiary, and the assets or stock of any Subsidiary may be
purchased or otherwise acquired by the Company or any other
Subsidiary; and
(b) so long as no Default has occurred and is
continuing or would occur after giving effect thereto, the Company
or any of its Subsidiaries may purchase all or substantially all
of the assets of any Person, or acquire such Person by merger.
7.3 Asset Dispositions, etc. The Company will not, and will
not permit any of its Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, or grant options, warrants or
other rights with respect to, all or any substantial part of its
assets (including accounts receivable and capital stock of
Subsidiaries) to any Person, unless such sale, transfer, lease,
contribution or conveyance is in the ordinary course of its
business or is permitted by Section 7.2.
7.4 Transactions with Affiliates. The Company will not, and
will not permit any of its Subsidiaries to, enter into, or cause,
suffer or permit to exist any arrangement or contract with any of
its other Affiliates unless such arrangement or contract is fair
and equitable to the Company or such Subsidiary and is an
arrangement or contract of the kind which would be entered into by
a prudent Person in the position of the Company or such Subsidiary
with a Person which is not one of its Affiliates.
7.5 Negative Pledges, Restrictive Agreements, etc. The
Company will not, and will not permit any of its Subsidiaries to,
enter into any agreement (excluding this Agreement, any other Loan
Document, the NationsBank Agreement or any other loan document
executed in connection therewith) prohibiting
(a) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter
acquired, or the ability of the Company to amend or otherwise
modify this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any
payments, directly or indirectly, to the Company by way of
dividends (except as may be required by law), advances, repayments
of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts
the ability of any such Subsidiary to make any payment, directly
or indirectly, to the Company.
7.6 ERISA. The Company shall not, and shall not suffer or
permit any of its ERISA Affiliates to: (a) engage in a prohibited
transaction or violation of the fiduciary responsibility rules
with respect to any Plan which has resulted or could reasonably
expected to result in liability of the Company in an aggregate
amount in excess of $10,000,000; or (b) engage in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
7.7 Change in Business. The Company shall not, and shall not
suffer or permit any Subsidiary to, engage in any material line of
business substantially different from those lines of business
carried on by the Company and its Subsidiaries on the date hereof.
7.8 Accounting Changes. The Company shall not, and shall not
suffer or permit any Subsidiary to, make any significant change in
accounting treatment or reporting practices, except as required by
GAAP, or change the fiscal year of the Company or of any
Subsidiary.
7.9 Financial Covenants. The Company shall not, at any time,
that it is not classified as Well-Capitalized, permit:
(a) its Leverage Ratio to be less than 4.75%;
(b) the ratio of its Tier One Capital to Risk Weighted
Assets to be less than 5.50%;
(c) the ratio of its Tier One Capital plus Tier Two
Capital to Risk Weighted Assets to be less than 9.00%;
(d) its consolidated total stockholders' equity to be
less than $518,000,000 plus 50% of its net income for every
quarter commencing after September 30, 1994 (but without giving
effect to any quarterly loss) plus the net proceeds of any new
equity issue after the date hereof;
(e) its Non-Performing Ratio to exceed 3%; and
(f) its Double Leverage Ratio to be more than 1.20 to
1.0.
ARTICLE VIII
EVENTS OF DEFAULT
-----------------
8.1 Event of Default. Any of the following shall constitute
an "Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when
and as required to be paid herein, any amount of principal of any
Loan, or (ii) within 7 days after the same becomes due, any
interest, fee or any other amount payable hereunder or under any
other Loan Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company or any Subsidiary made or deemed made
herein, in any other Loan Document, or which is contained in any
certificate, document or financial or other statement by the
Company, any Subsidiary, or any Responsible Officer, furnished at
any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the
date made or deemed made; or
(c) Other Defaults. The Company fails to perform or
observe any other term or covenant contained in this Agreement or
any other Loan Document, and such default shall continue
unremedied for a period of 30 days after the earlier of (i) the
date upon which a Responsible Officer knew or reasonably should
have known of such failure or (ii) the date upon which written
notice thereof is given to the Company by the Bank; or
(d) Cross-Default. The Company or any Subsidiary (i)
fails to make any payment in respect of any Indebtedness or
Contingent Liability having an aggregate principal amount
(including undrawn committed or available amounts and including
amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $5,000,000 when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise) and such failure continues after the applicable grace
or notice period, if any, specified in the relevant document on
the date of such failure; or (ii) fails to perform or observe any
other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any
such Indebtedness or Contingent Liability, and such failure
continues after the applicable grace or notice period, if any,
specified in the relevant document on the date of such failure if
the effect of such failure, event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary
or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries)
to cause such Indebtedness to be declared to be due and payable
prior to its stated maturity, or such Contingent Liability to
become payable or cash collateral in respect thereof to be
demanded; or
(e) Insolvency; Voluntary Proceedings. The Company or
any Subsidiary (i) ceases or fails to be solvent, or generally
fails to pay, or admits in writing its inability to pay, its debts
as they become due, subject to applicable grace periods, if any,
whether at stated maturity or otherwise; (ii) voluntarily ceases
to conduct its business in the ordinary course; (iii) commences
any Insolvency Proceeding with respect to itself; or (iv) takes
any action to effectuate or authorize any of the foregoing; or
(f) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company or
any Subsidiary, or any writ, judgment, warrant of attachment,
execution or similar process, is issued or levied against a
substantial part of the Company's or any Subsidiary's properties,
and any such proceeding or petition shall not be dismissed, or
such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60
days after commencement, filing or levy; (ii) the Company or any
Subsidiary admits the material allegations of a petition against
it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency
Proceeding; or (iii) the Company or any Subsidiary acquiesces in
the appointment of a receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its property
or business; or
(g) ERISA. (i) An ERISA Event shall occur with
respect to a Pension Plan or Multiemployer Plan which has resulted
or could reasonably be expected to result in liability of the
Company under Title IV of ERISA to the Pension Plan, Multiemployer
Plan or the PBGC in an aggregate amount in excess of $10,000,000;
unless the ERISA Event is a contribution failure sufficient to
give rise to a Lien under Section 302(f) of ERISA in which case
the dollar liability threshold does not apply; (ii) the aggregate
amount of Unfunded Pension Liability among all Pension Plans at
any time exceeds $10,000,000; or (iii) the Company or any ERISA
Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to
its withdrawal liability under Section 4201 of ERISA under a
Multiemployer Plan in an aggregate amount in excess of
$10,000,000; or
judgments, non-interlocutory orders, decrees or
arbitration awards
is entered against the Company or any Subsidiary involving in the
aggregate a liability (to the extent not covered by independent
third-party insurance as to which the insurer does not dispute
coverage) as to any single or related series of transactions,
incidents or conditions, of $10,000,000 or more, and the same
shall remain unsatisfied, unvacated and unstayed pending appeal
for a period of 10 days after the entry thereof; or
(i) Non-Monetary Judgments. Any non-monetary
judgment, order or decree is entered against the Company or any
Subsidiary which does or would reasonably be expected to have a
Material Adverse Effect, and there shall be any period of 10
consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(j) Change of Control. There occurs any Change of
Control.
8.2 Remedies. If any Event of Default occurs, the Bank may,
(a) declare the commitment of the Bank to make Loans
to be terminated, whereupon such commitment shall be terminated;
(b) declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and
all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company; and
(c) exercise all rights and remedies available to it
under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified
in subsection (e) or (f) of Section 8.1 (in the case of clause (i)
of subsection (f), upon the expiration of the 60-day period
mentioned therein), the obligation of the Bank to make Loans shall
automatically terminate and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable without further act of
the Bank.
8.3 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not
exclusive of any other rights, powers, privileges or remedies
provided by law or in equity, or under any other instrument,
document or agreement now existing or hereafter arising.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no
consent with respect to any departure by the Company therefrom,
shall be effective unless the same shall be in writing and signed
by the Bank.
9.2 Notices. (a) Except as specifically set forth in this
Agreement, all notices, requests and other communications shall be
in writing (including, unless the context expressly otherwise
provides, by facsimile transmission, provided that any matter
transmitted by facsimile (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on
Schedule 9.2, and (ii) shall be followed promptly by delivery of
a hard copy original thereof) and mailed, faxed or delivered, to
the address or facsimile number specified for notices on Schedule
9.2; or, as directed by the Company or the Bank, to such other
address as shall be designated by such party in a written notice
to the other party.
(b) All such notices, requests and communications
shall, when transmitted by overnight delivery, or faxed, be
effective when delivered for overnight (next-day) delivery, or
transmitted in legible form by facsimile machine, respectively, or
if mailed, upon the third Business Day after the date deposited
into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX shall not be effective until
actually received by Bank.
(c) Any agreement of the Bank herein to receive
certain notices by telephone or facsimile is solely for the
convenience and at the request of the Company. The Bank shall be
entitled to rely on the authority of any Person purporting to be
a Person authorized by the Company to give such notice and the
Bank shall not have any liability to the Company or other Person
on account of any action taken or not taken by the Bank in
reliance upon such telephonic or facsimile notice. The obligation
of the Company to repay the Loans shall not be affected in any way
or to any extent by any failure by the Bank to receive written
confirmation of any telephonic or facsimile notice or the receipt
by the Bank of a confirmation which is at variance with the terms
understood by the Bank to be contained in the telephonic or
facsimile notice.
9.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Bank, any right,
remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power
or privilege.
9.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated
hereby are consummated, pay or reimburse the Bank within five
Business Days after demand in connection with the development,
preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case,
whether or not consummated), this Agreement, any Loan Document and
any other documents prepared in connection herewith or therewith,
and the consummation of the transactions contemplated hereby and
thereby, including reasonable Attorney Costs incurred by the Bank
with respect thereto; and
(b) pay or reimburse the Bank within five Business
Days after demand for all costs and expenses (including Attorney
Costs) incurred by them in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the
existence of an Event of Default or after acceleration of the
Loans (including in connection with any "workout" or restructuring
regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding).
9.5 Indemnity. Whether or not the transactions contemplated
hereby are consummated, the Company shall indemnify and hold the
Bank and each of its officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of
any kind or nature whatsoever which may at any time (including at
any time following repayment of the Loans) be imposed on, incurred
by or asserted against any such Person in any way relating to or
arising out of this Agreement or any document contemplated by or
referred to herein, or the transactions contemplated hereby, or
any action taken or omitted by any such Person under or in
connection with any of the foregoing, including with respect to
any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to or
arising out of this Agreement or the Loans or the use of the
proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Company shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified
Liabilities resulting solely from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this
Section shall survive payment of all other Obligations.
9.6 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that
the Company may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent
of the Bank.
9.7 Set-off. In addition to any rights and remedies of the
Bank provided by law, if an Event of Default exists or the Loans
have been accelerated, the Bank is authorized at any time and from
time to time, without prior notice to the Company, any such notice
being waived by the Company to the fullest extent permitted by
law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held
by, and other indebtedness at any time owing by, the Bank to or
for the credit or the account of the Company against any and all
Obligations owing to the Bank, now or hereafter existing,
irrespective of whether or not the Bank shall have made demand
under this Agreement or any Loan Document and although such
Obligations may be contingent or unmatured. The Bank agrees
promptly to notify the Company after any such set-off and
application made by the Bank; provided, however, that the failure
to give such notice shall not affect the validity of such set-off
and application.
9.8 Automatic Debits of Fees. With respect to any fee, or
any other cost or expense (including Attorney Costs) due and
payable to the Bank under the Loan Documents, the Company hereby
irrevocably authorizes the Bank to debit any deposit account of
the Company with the Bank in an amount such that the aggregate
amount debited from all such deposit accounts does not exceed such
fee or other cost or expense. If there are insufficient funds in
such deposit accounts to cover the amount of the fee or other cost
or expense then due, such debits will be reversed (in whole or in
part, in the Bank's sole discretion) and such amount not debited
shall be deemed to be unpaid. No such debit under this Section
shall be deemed a set-off.
9.9 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which, when so executed,
shall be deemed an original, and all of said counterparts taken
together shall be deemed to constitute but one and the same
instrument.
9.10 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the
legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.
9.11 No Third Parties Benefited. This Agreement is made and
entered into for the sole protection and legal benefit of the
Company and the Bank, and their permitted successors and assigns
and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan
Documents.
9.12 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND
THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF ILLINOIS; PROVIDED THAT THE BANK SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF ILLINOIS OF THE UNITED STATES FOR THE
NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH OF THE COMPANY AND THE BANK CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY AND THE BANK
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR
ANY DOCUMENT RELATED HERETO. THE COMPANY AND THE BANK EACH WAIVE
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
9.13 Waiver of Jury Trial. THE COMPANY AND THE BANK EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY
OTHER PARTY, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY AND THE
BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT
TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
9.14 Entire Agreement. This Agreement, together with the
other Loan Documents, embodies the entire agreement and
understanding between the Company and the Bank, and supersedes all
prior or contemporaneous agreements and understandings of such
Persons, verbal or written, relating to the subject matter hereof
and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in Chicago, Illinois
by their proper and duly authorized officers as of the day and
year first above written.
FOURTH FINANCIAL CORPORATION
By:
---------------------------
Title: Executive Vice President -
Finance and Chief Financial
Officer
BANK OF AMERICA ILLINOIS
By:
----------------------------
Title:
-------------------------
EXHIBIT 10.13
=================================================================
CREDIT AGREEMENT
Dated as of January 3, 1995
between
FOURTH FINANCIAL CORPORATION
and
NATIONSBANK OF TEXAS, N.A.
=================================================================
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . 1
1.2 Other Interpretive Provisions . . . . . . . . . . . . . 14
1.3 Accounting Principles . . . . . . . . . . . . . . . . . 15
ARTICLE II
THE CREDITS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1 Amounts and Terms of Commitment . . . . . . . . . . . . 15
2.2 Note. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3 Procedure for Borrowing.. . . . . . . . . . . . . . . . 16
2.4 Conversion and Continuation Elections . . . . . . . . . 16
2.5 Voluntary Termination or Reduction of Commitment. . . . 17
2.6 Optional Prepayments. . . . . . . . . . . . . . . . . . 17
2.7 Repayment . . . . . . . . . . . . . . . . . . . . . . . 18
2.8 Termination Date. . . . . . . . . . . . . . . . . . . . 18
2.9 Interest. . . . . . . . . . . . . . . . . . . . . . . . 18
2.10 Facility Fees. . . . . . . . . . . . . . . . . . . . . 19
2.11 Computation of Fees and Interest . . . . . . . . . . . 19
2.12 Payments by the Company. . . . . . . . . . . . . . . . 20
2.13 Bank of America Agreement. . . . . . . . . . . . . . . 20
2.14 Maximum Interest . . . . . . . . . . . . . . . . . . . 20
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . . . . . . . 22
3.1 Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2 Illegality. . . . . . . . . . . . . . . . . . . . . . . 23
3.3 Increased Costs and Reduction of Return . . . . . . . . 23
3.4 Funding Losses. . . . . . . . . . . . . . . . . . . . . 24
3.5 Inability to Determine Rates. . . . . . . . . . . . . . 24
3.6 Survival. . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 25
4.1 Conditions of Initial Loans . . . . . . . . . . . . . . 25
(a) Credit Agreement and Note . . . . . . . . . . . . 25
(b) Resolutions; Incumbency . . . . . . . . . . . . . 25
(c) Organization Documents; Good Standing . . . . . . 25
(d) Legal Opinion . . . . . . . . . . . . . . . . . . 26
(e) Payment of Fees . . . . . . . . . . . . . . . . . 26
(f) Certificate . . . . . . . . . . . . . . . . . . . 26
(g) Other Documents . . . . . . . . . . . . . . . . . 26
4.2 Conditions to All Borrowings. . . . . . . . . . . . . . 26
(a) Notice of Borrowing . . . . . . . . . . . . . . . 26
(b) Continuation of Representations and Warranties. . 27
(c) No Existing Default . . . . . . . . . . . . . . . 27
ARTICLE V
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 27
5.1 Corporate Existence and Power . . . . . . . . . . . . . 27
5.2 Corporate Authorization; No Contravention . . . . . . . 27
5.3 Governmental Authorization. . . . . . . . . . . . . . . 28
5.4 Binding Effect. . . . . . . . . . . . . . . . . . . . . 28
5.5 Litigation. . . . . . . . . . . . . . . . . . . . . . . 28
5.6 No Default. . . . . . . . . . . . . . . . . . . . . . . 28
5.7 ERISA Compliance. . . . . . . . . . . . . . . . . . . . 29
5.8 Use of Proceeds; Margin Regulations . . . . . . . . . . 29
5.9 Title to Properties . . . . . . . . . . . . . . . . . . 29
5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11 Financial Condition. . . . . . . . . . . . . . . . . . 30
5.12 Environmental Matters. . . . . . . . . . . . . . . . . 30
5.13 Regulated Entities . . . . . . . . . . . . . . . . . . 31
5.14 No Burdensome Restrictions . . . . . . . . . . . . . . 31
5.15 Copyrights, Patents, Trademarks and Licenses, etc. . . 31
5.16 Subsidiaries . . . . . . . . . . . . . . . . . . . . . 31
5.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . 31
5.18 Full Disclosure. . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI
AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 32
6.1 Financial Statements. . . . . . . . . . . . . . . . . . 32
6.2 Certificates; Other Information . . . . . . . . . . . . 33
6.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 Preservation of Corporate Existence, Etc. . . . . . . . 35
6.5 Maintenance of Property . . . . . . . . . . . . . . . . 35
6.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . 35
6.7 Payment of Obligations. . . . . . . . . . . . . . . . . 35
6.8 Compliance with Laws. . . . . . . . . . . . . . . . . . 36
6.9 Compliance with ERISA . . . . . . . . . . . . . . . . . 36
6.10 Inspection of Property and Books and Records . . . . . 36
6.11 Environmental Laws . . . . . . . . . . . . . . . . . . 36
6.12 Use of Proceeds. . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 37
7.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2 Consolidation, Merger, etc . . . . . . . . . . . . . . 38
7.3 Asset Dispositions, etc. . . . . . . . . . . . . . . . 38
7.4 Transactions with Affiliates . . . . . . . . . . . . . 39
7.5 Negative Pledges, Restrictive Agreements, etc. . . . . 39
7.6 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . 39
7.7 Change in Business . . . . . . . . . . . . . . . . . . 39
7.8 Accounting Changes . . . . . . . . . . . . . . . . . . 39
7.9 Financial Covenants. . . . . . . . . . . . . . . . . . 40
ARTICLE VIII
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 40
8.1 Event of Default. . . . . . . . . . . . . . . . . . . . 40
(a) Non-Payment . . . . . . . . . . . . . . . . . . . 40
(b) Representation or Warranty. . . . . . . . . . . . 40
(c) Other Defaults. . . . . . . . . . . . . . . . . . 40
(d) Cross-Default . . . . . . . . . . . . . . . . . . 41
(e) Insolvency; Voluntary Proceedings . . . . . . . . 41
(f) Involuntary Proceedings . . . . . . . . . . . . . 41
(g) ERISA . . . . . . . . . . . . . . . . . . . . . . 42
(h) Monetary Judgments. . . . . . . . . . . . . . . . 42
(i) Non-Monetary Judgments. . . . . . . . . . . . . . 42
(j) Change of Control . . . . . . . . . . . . . . . . 42
8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . 42
8.3 Rights Not Exclusive. . . . . . . . . . . . . . . . . . 43
ARTICLE IX
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 43
9.1 Amendments and Waivers. . . . . . . . . . . . . . . . . 43
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . 44
9.4 Costs and Expenses. . . . . . . . . . . . . . . . . . . 44
9.5 Indemnity . . . . . . . . . . . . . . . . . . . . . . . 44
9.6 Successors and Assigns. . . . . . . . . . . . . . . . . 45
9.7 Set-off . . . . . . . . . . . . . . . . . . . . . . . . 45
9.8 Automatic Debits of Fees. . . . . . . . . . . . . . . . 45
9.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . 46
9.10 Severability . . . . . . . . . . . . . . . . . . . . . 46
9.11 No Third Parties Benefited . . . . . . . . . . . . . . 46
9.12 Governing Law and Jurisdiction . . . . . . . . . . . . 46
9.13 Waiver of Jury Trial . . . . . . . . . . . . . . . . . 46
9.14 Entire Agreement . . . . . . . . . . . . . . . . . . . 47
SCHEDULES [OMITTED]
Schedule 5.7 ERISA Compliance
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.15 Copyrights, etc.
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.17 Insurance Matters
Schedule 9.2 Lending Office; Addresses for Notices
EXHIBITS [OMITTED]
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Borrower's Counsel
Exhibit E Form of Promissory Note
Exhibit F Form of Commitment Termination Extension Date
Request
Exhibit G Form of Quarterly Compliance Certificate
CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT is entered into as of January 3, 1995,
between FOURTH FINANCIAL CORPORATION, a Kansas corporation (the
"Company"), and NATIONSBANK OF TEXAS, N.A., a _________________
corporation (the "Bank").
WHEREAS, the Bank has agreed to make available to the Company
a revolving credit facility upon the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as
follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Defined Terms. The following terms have the
following meanings:
"Adjusted Total Assets" shall have the meaning set forth
on the date hereof under applicable regulations of any
regulatory agency having authority on the date hereof as such
regulations are applicable to the Company, or if such
regulations are amended hereafter to define Adjusted Total
Assets more restrictively, as set forth in such later amended
regulations.
"Affiliate" means, as to any Person, any other Person
which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. A Person
shall be deemed to control another Person if the controlling
Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of the
other Person, whether through the ownership of voting
securities, by contract, or otherwise.
"Agreement" means this Credit Agreement.
"Applicable Margin" means
(i) with respect to Base Rate Loans, 0%;
(ii) with respect to Offshore Rate Loans at such
time as the Company is Well Capitalized, 0.375%; and
(iii) with respect to Offshore Rate Loans at such
time as the Company is not Well Capitalized, 0.50% at any
time that the principal amount of the Loans outstanding
is less than 50% of the Commitment or 0.625% at any other
time.
"Attorney Costs" means and includes all fees and
disbursements of any law firm or other external counsel, the
allocated cost of internal legal services and all
disbursements of internal counsel.
"Available Commitment" means $25,000,000 on the date
hereof and thereafter until such date as the outstanding
principal amount of the Loans exceeds $25,000,000; and from
the date the outstanding principal amount of the Loans exceeds
$25,000,000 and thereafter, the Available Commitment shall
equal the Commitment.
"Bank" has the meaning specified in the introductory
clause hereto.
"Bank of America Agreement" is defined in Section 2.13.
"Bank's Payment Office" means the address for payments
set forth on the signature page hereto in relation to the
Bank, or such other address as the Bank may from time to time
specify.
"Bank Subsidiaries" mean Bank IV Kansas N.A., Bank IV
Oklahoma N.A. and any other banking institution which may be
a Subsidiary of the Company from time to time.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act
of 1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of: (a)
0.50% per annum above the latest Federal Funds Rate; and (b)
the rate of interest in effect for such day as publicly
announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The "reference rate" is
a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing
some loans, which may be priced at, above, or below such
announced rate.)
Any change in the reference rate announced by BofA shall
take effect at the opening of business on the day specified in
the public announcement of such change.
"Base Rate Loan" means a Loan that bears interest based
on the Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing Date" means any date on which a Borrowing
occurs under Section 2.3.
"Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banks in Chicago or
San Francisco are authorized or required by law to close and,
if the applicable Business Day relates to any Offshore Rate
Loan, means such a day on which dealings are carried on in the
applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline,
request or directive of any central bank or other Governmental
Authority, or any other law, rule or regulation, of general
application, whether or not having the force of law, in each
case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Change of Control" means the acquisition by any Person,
or two or more Persons acting in concert, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of
1934) of 20% or more of the outstanding shares of voting stock
of the Company.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.1 are satisfied or waived by
the Bank (or, in the case of subsection 4.1(e), waived by the
Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment" has the meaning specified in Section 2.1.
"Commitment Termination Date Extension Request" means a
request substantially in the form of Exhibit F attached
hereto, duly executed by a Responsible Officer of the Company.
"Compliance Certificate" means a certificate
substantially in the form of Exhibit C.
"Contingent Liability" - means any agreement, undertaking
or arrangement by which any Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or
indirect agreement, contingent or otherwise, to provide funds
for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other
Person (other than by endorsements of instruments in the
course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent
Liability shall (subject to any limitation set forth therein)
be deemed to be the outstanding principal amount (or maximum
principal amount, if larger) of the debt, obligation or other
liability guaranteed thereby.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed of
trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is
bound.
"Conversion/Continuation Date" means any date on which,
under Section 2.4, the Company (a) converts Loans of one Type
to another Type, or (b) continues as Loans of the same Type,
but with a new Interest Period, Loans having Interest Periods
expiring on such date.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not
cured or otherwise remedied during such time) constitute an
Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of
the United States.
"Double Leverage Ratio" means the ratio of
(a) equity investments of the Company in its
Subsidiaries
to
(b) total equity capital of the Company;
in each case as reported in the Company's FRY-9LP financial
statements.
"Environmental Claims" means all claims, however
asserted, by any Governmental Authority or other Person
alleging potential liability or responsibility for violation
of any Environmental Law, or for release or injury to the
environment.
"Environmental Laws" means all federal, state or local
laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative orders,
directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities,
in each case relating to environmental, health, safety and
land use matters.
"ERISA" means the Employee Retirement Income Security Act
of 1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) under common control with the Company within
the meaning of Section 414(b) or (c) of the Code (and Sections
414(m) and (o) of the Code for purposes of provisions relating
to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect
to a Pension Plan; (b) the failure to make a required
contribution to a Pension Plan if such failure is sufficient
to give rise to a Lien under Section 302(f) of ERISA; (c) a
withdrawal by the Company or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in
Section 4001(a)(2) of ERISA) or a cessation of operations
which is treated as such a withdrawal under Section 4062(e) of
ERISA; (d) a complete or partial withdrawal by the Company or
any ERISA Affiliate from a Multiemployer Plan or notification
that a Multiemployer Plan is in reorganization; (e) the filing
of a notice of intent to terminate, the treatment of a Plan
amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (f) an event
or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan
or Multiemployer Plan; or (g) the imposition of any liability
under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or
any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified
in the definition of "Offshore Rate".
"Event of Default" means any of the events or
circumstances specified in Section 8.1.
"Exchange Act" means the Securities and Exchange Act of
1934, and regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation,
and any Governmental Authority succeeding to any of its
principal functions.
"Federal Funds Rate" means, for any day, the rate set
forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the
Federal Reserve Bank of New York (including any such
successor, "H.15(519)") on the preceding Business Day opposite
the caption "Federal Funds (Effective)"; or, if for any
relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Bank of the rates for the
last transaction in overnight Federal funds arranged prior to
9:00 a.m. (New York City time) on that day by each of three
leading brokers of Federal funds transactions in New York City
selected by the Bank.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of
its principal functions.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within
the U.S. accounting profession), which are applicable to the
circumstances as of the Closing Date.
"Governmental Authority" means any nation or government,
any state or other political subdivision thereof, any central
bank (or similar monetary or regulatory authority) thereof,
any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise,
by any of the foregoing.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money
and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative
to the face amount of all letters of credit, whether or not
drawn, and banker's acceptances issued for the account of such
Person;
(c) all obligations of such Person as lessee under
leases which have been or should be, in accordance with GAAP,
recorded as capitalized lease liabilities;
(d) all other items which, in accordance with GAAP,
would be included as liabilities on the liability side of the
balance sheet of such Person as of the date at which
Indebtedness is to be determined;
(e) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay
the deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon) secured by
a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; and
(f) all Contingent Liabilities of such Person in respect
of any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any
Person shall include the Indebtedness of any partnership or
joint venture in which such Person is a general partner or a
joint venturer.
"Indemnified Liabilities" has the meaning specified in
Section 9.5.
"Indemnified Person" has the meaning specified in Section
9.5.
"Independent Auditor" has the meaning specified in
subsection 6.1(a).
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority
relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief
of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors;
undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
"Interest Payment Date" means, as to any Offshore Loan,
the last day of each Interest Period applicable to such Loan
and, as to any Base Rate Loan, the last Business Day of each
month, provided, however, that if any Interest Period for an
Offshore Rate Loan exceeds three months, the date that falls
three months after the beginning of such Interest Period and
after each Interest Payment Date thereafter is also an
Interest Payment Date.
"Interest Period" means as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted
into or continued as an Offshore Rate Loan, and ending on the
date one, two, three or six months thereafter as selected by
the Company in its Notice of Borrowing or Notice of
Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on
a day that is not a Business Day, that Interest Period
shall be extended to the following Business Day unless
the result of such extension would be to carry such
Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of
such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Revolving Termination Date.
"IRS" means the Internal Revenue Service, and any
Governmental Authority succeeding to any of its principal
functions under the Code.
"Lending Office" means the office or offices of the Bank
specified as its "Lending Office" or "Domestic Lending Office"
or "Offshore Lending Office", as the case may be, on Schedule
9.2 ("Lending Offices, etc."), or such other office or offices
as the Bank may from time to time notify the Company.
"Leverage Ratio" means with respect to the Company and
its Subsidiaries on a consolidated basis, at any time, the
ratio of its Tier One Capital to its Adjusted Total Assets.
"Lien" means any security interest, mortgage, deed of
trust, pledge, hypothecation, assignment, charge or deposit
arrangement, encumbrance, lien (statutory or other) or
preferential arrangement of any kind or nature whatsoever in
respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a capital
lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any
financing statement naming the owner of the asset to which
such lien relates as debtor, under the Uniform Commercial Code
or any comparable law) and any contingent or other agreement
to provide any of the foregoing, but not including the
interest of a lessor under an operating lease.
"Loan" means an extension of credit by the Bank to the
Company under Article II, and may be a Base Rate Loan or an
Offshore Rate Loan (each, a "Type" of Loan).
"Loan Documents" means this Agreement, the Note and all
other documents delivered to the Bank in connection herewith.
"Loans Outstanding" means, for any Person, the sum of
loans and direct lease financings, net of unearned income, by
such Person and its Subsidiaries on a consolidated basis.
"Margin Stock" means "margin stock" as such term is
defined in Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means a material adverse change
in, or a material adverse effect upon, the operations,
business, properties, condition (financial or otherwise) or
prospects of the Company or the Company and its Subsidiaries
taken as a whole; for the purposes of this definition, an
adverse effect or adverse change will be deemed material if
there is a reasonable likelihood that it would reduce the
Company's equity as of any date of determination by 10% or
more below the Company's equity as of the end of its most
recent fiscal year.
"Multiemployer Plan" means a "multiemployer plan", within
the meaning of Section 4001(a)(3) of ERISA, with respect to
which the Company or any ERISA Affiliate may have any
liability.
"Non-Performing Assets" means, as applied to Loans
Outstanding of a Person, (i) Loans Outstanding that are not
accruing interest, have been classified as renegotiated
pursuant to guidelines established by the Federal Financial
Institutions Council or are 90 days or more past due in the
payment of principal or interest plus (ii) Other Real Estate
Owned by such Person minus (iii) student loan obligations
which are serviced by a third party servicer and which are
backed by the full faith and credit of the United States
Government or any agency thereof, whether such guaranty is for
the benefit of such third party servicer or such Person or any
of its Subsidiaries, provided, however, that this exclusion
shall not apply to any student loan with respect to which a
third party servicer has failed to perform the terms and
conditions of its servicing agreement with such Person or any
of its Subsidiaries.
"Non-Performing Ratio" means, for any Person, the ratio
of such Person's
(a) Non-Performing Assets outstanding
to
(b) Loans Outstanding plus Other Real Estate Owned.
"Note" means a promissory note executed by the Company in
favor of the Bank pursuant to subsection 2.2, in substantially
the form of Exhibit E.
"Notice of Borrowing" means the Company's irrevocable
telephonic notice of borrowing together with (if requested by
the Bank) prompt confirmation thereof in writing in
substantially the form of Exhibit A.
"Notice of Conversion/Continuation" means the Company's
irrevocable telephonic notice of conversion or continuation
together with (if required by the Bank) prompt confirmation
thereof in writing in substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan
Document owing by the Company to the Bank, or any Indemnified
Person, whether direct or indirect (including those acquired
by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising.
"Offshore Rate" means, for any Interest Period, with
respect to Offshore Rate Loans comprising part of the same
Borrowing, the rate of interest per annum (rounded upward to
the next 1/16th of 1%) determined by the Bank as follows:
Offshore Rate = LIBOR
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day
for any Interest Period the maximum reserve percentage
(expressed as a decimal, rounded upward to the next
1/100th of 1%) in effect on such day (whether or not
applicable to the Bank) under regulations issued from
time to time by the FRB for determining the maximum
reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum
determined by the Bank to be the arithmetic mean (rounded
upward to the next 1/16th of 1%) of the rates of interest
per annum notified to the Bank as the rate of interest at
which dollar deposits in the approximate amount of the
amount of the Loan to be made or continued as, or
converted into, an Offshore Rate Loan by the Bank and
having a maturity comparable to such Interest Period
would be offered to major banks in the London interbank
market at their request at approximately 11:00 a.m.
(London time) two Business Days prior to the commencement
of such Interest Period.
"Offshore Rate Loan" means a Loan that bears interest
based on the Offshore Rate.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any
certificate of determination or instrument relating to the
rights of preferred shareholders of such corporation, any
shareholder rights agreement, and all applicable resolutions
of the board of directors (or any committee thereof) of such
corporation.
"Other Real Estate Owned" of a Person means "other real
estate owned" as shown in the financial statements of such
Person prepared in accordance with GAAP.
"Other Taxes" means any present or future stamp or
documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made
hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan
Documents.
"PBGC" means the Pension Benefit Guaranty Corporation, or
any Governmental Authority succeeding to any of its principal
functions under ERISA.
"Pension Plan" means a pension plan (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA, other
than a Multiemployer Plan, with respect to which the Company
or any ERISA Affiliate may have any liability.
"Permitted Liens" has the meaning specified in Section
7.1.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which the Company sponsors or maintains
or to which the Company makes, is making, or is obligated to
make contributions and includes any Pension Plan.
"Quarterly Compliance Certificate" means a certificate
substantially in the form of Exhibit G.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other
than any such event for which the 30-day notice requirement
under ERISA has been waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or
determination of an arbitrator or of a Governmental Authority,
in each case applicable to or binding upon the Person or any
of its property or to which the Person or any of its property
is subject.
"Reserve Commitment" means on the date hereof $25,000,000
and thereafter an amount equal to the Commitment minus the
Available Commitment.
"Responsible Officer" means relative to the Company,
those of its officers whose signatures and incumbency shall
have been certified to the Bank pursuant to Section 4.1.
"Revolving Termination Date" means the earlier to occur
of:
(a) January 2, 1996, as such date may be extended
pursuant to Section 2.8 hereof; and
(b) the date on which the Commitment terminates in
accordance with the provisions of this Agreement.
"Risk Weighted Assets" means, for any Person, the value
of the assets of such Person and its Subsidiaries, including
adjusted off-balance sheet items, all as calculated pursuant
to risk based capital guidelines in effect from time to time
with the applicable regulatory agency.
"SEC" means the Securities and Exchange Commission, or
any Governmental Authority succeeding to any of its principal
functions.
"Subsidiary" of a Person means any corporation,
association, partnership, joint venture or other business
entity of which more than 50% of the voting stock or other
equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly
by the Person, or one or more of the Subsidiaries of the
Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Company.
"Taxes" means any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of
the Bank, such taxes (including income taxes or franchise
taxes) as are imposed on or measured by the Bank's net income
by the jurisdiction (or any political subdivision thereof)
under the laws of which the Bank is organized or maintains a
lending office.
"Tier One Capital" shall have the meaning set forth on
the date hereof under applicable regulations of any regulatory
agency having authority on the date hereof as such regulations
are applicable to the Company, or if such regulations are
amended hereafter to define Tier One Capital more
restrictively, as set forth in such later definition.
"Tier Two Capital" shall have the meaning set forth on
the date hereof under applicable regulations of any regulatory
agency having authority on the date hereof as such regulations
are applicable to the Company, or if such regulations are
amended hereafter to define Tier Two Capital more
restrictively, as set forth in such later definition.
"Type" has the meaning specified in the definition of
"Loan."
"Unfunded Pension Liability" means the excess of a Plan's
accumulated benefit obligations (as defined by GAAP), over the
current fair value of that Plan's assets.
"United States" and "U.S." each means the United States
of America.
"Well-Capitalized" shall have the meaning promulgated by
any regulatory agency having authority on the date hereof, as
applicable to the Company, or if not applicable to the Company
per se, as applicable to the Bank Subsidiaries applied to the
Company as if so applicable; provided, however, that if at any
time requirements of the designation "Well-Capitalized"
promulgated by such regulatory authority shall be modified so
as to define the requirements for such designation more
restrictively than the existing requirements, then such
requirements set forth herein shall be changed to reflect such
later modification; provided, further, if at any time such
regulatory authority shall determine that such Person is not
"Well Capitalized", (within the meaning of the regulations
promulgated by such authority then in effect), such Person
shall be deemed not to be Well-Capitalized for purposes of
this Agreement, without regard to whether such Person shall
meet the requirements of the definition of such term set forth
in this Agreement as in effect at such time.
1.2 Other Interpretive Provisions. (a) The meanings of
defined terms are equally applicable to the singular and plural
forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and
similar words refer to this Agreement as a whole and not to any
particular provision of this Agreement; and subsection, Section,
Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures,
notices and other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from"
means "from and including"; the words "to" and "until" each
mean "to but excluding", and the word "through" means "to and
including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other
contractual instruments shall be deemed to include all subsequent
amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the
terms of any Loan Document, and (ii) references to any statute or
regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the
interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate
the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in
accordance with their terms.
(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to
the Bank and the Company and are the products of all parties.
Accordingly, they shall not be construed against the Bank merely
because of the Bank's involvement in their preparation.
1.3 Accounting Principles. (a) Unless the context otherwise
clearly requires, all accounting terms not expressly defined herein
shall be construed, and all financial computations required under
this Agreement shall be made, in accordance with GAAP, consistently
applied.
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
-----------
2.1 Amounts and Terms of Commitment. The Bank agrees, on the
terms and conditions set forth herein, to make loans to the Company
(each such loan, a "Revolving Loan") from time to time on any
Business Day during the period from the Closing Date to the
Revolving Termination Date, in an aggregate amount not to exceed at
any time outstanding $50,000,000, (such amount, as the same may be
reduced under Section 2.5, the Bank's "Commitment"); provided,
however, that, after giving effect to any borrowing of a Revolving
Loan, the aggregate principal amount of all outstanding Revolving
Loans shall not at any time exceed the Commitment. Within the
limits of the Commitment, and subject to the other terms and
conditions hereof, the Company may borrow under this Section 2.1,
prepay under Section 2.6 and reborrow under this Section 2.1.
2.2 Note. The Loans made by the Bank shall be evidenced by
a Note. The Bank shall endorse on the schedules annexed to the
Note the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Company with
respect thereto. The Bank is irrevocably authorized by the Company
to endorse the Note and the Bank's record shall be conclusive
absent manifest error; provided, however, that the failure of the
Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the
obligations of the Company hereunder or under the Note to the Bank.
2.3 Procedure for Borrowing. Each borrowing shall be made
upon receipt of a Notice of Borrowing by the Bank (which notice
must be received by the Bank prior to 10:00 a.m. (Chicago time) (i)
three Business Days prior to the requested Borrowing Date, in the
case of Offshore Rate Loans; and (ii) on the requested Borrowing
Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in
an aggregate minimum amount of $5,000,000 or any multiple
of $1,000,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a
Business Day;
(C) the Type of Loans comprising the Borrowing; and
(D) the duration of the Interest Period applicable
to such Loans included in such notice. If the Notice of
Borrowing fails to specify the duration of the Interest
Period for any Borrowing comprised of Offshore Rate
Loans, such Interest Period shall be three months.
2.4 Conversion and Continuation Elections. (a) The Company
may, by delivering a Notice of Conversion/Continuation to the Bank
in accordance with subsection 2.4(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable
Interest Period, in the case of any other Type of Loans, to
convert any such Loans (or any part thereof in an amount not
less than $5,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof) into Loans of any other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Loans having Interest Periods
expiring on such day (or any part thereof in an amount not
less than $5,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate
Loans in respect of any borrowing is reduced, by payment,
prepayment, or conversion of part thereof to be less than
$1,000,000, such Offshore Rate Loans shall automatically convert
into Base Rate Loans.
(b) The Company shall deliver a Notice of Conversion/
Continuation to be received by the Bank not later than 10:00 a.m.
(Chicago time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into
or continued as Offshore Rate Loans; and (ii) on the Conversion/
Continuation Date, if the Loans are to be converted into Base Rate
Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be
converted or renewed;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of conversions into
Base Rate Loans, the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Loans, the Company has failed to select
timely a new Interest Period to be applicable to such Offshore Rate
Loans, or if any Default or Event of Default then exists, the
Company shall be deemed to have elected to convert such Offshore
Rate Loans into Base Rate Loans effective as of the expiration date
of such Interest Period.
(d) Unless the Bank otherwise agrees, during the
existence of a Default or Event of Default, the Company may not
elect to have a Loan converted into or continued as an Offshore
Rate Loan.
2.5 Voluntary Termination or Reduction of Commitment. The
Company may, upon not less than five Business Days' prior notice
to the Bank, terminate the Commitment, or permanently reduce the
Commitment by an aggregate minimum amount of $5,000,000 or any
multiple of $5,000,000 in excess thereof; unless, after giving
effect thereto and to any prepayments of Loans made on the
effective date thereof, the then-outstanding principal amount of
the Loans would exceed the amount of the Commitment then in
effect. Once reduced in accordance with this Section , the
Commitment may not be increased. All accrued facility fees to,
but not including the effective date of any reduction or
termination of the Commitment, shall be paid on the effective date
of such reduction or termination.
2.6 Optional Prepayments. Subject to Section 3.4, the
Company may, at any time or from time to time, upon notice to the
Bank, ratably prepay Loans in whole or in part, in minimum amounts
of $5,000,000 and an integral multiple of $1,000,000. Such notice
of prepayment shall specify the date and amount of such prepayment
and the Types of Loans to be prepaid. If such notice is given by
the Company, the Company shall make such prepayment and the
payment amount specified in such notice shall be due and payable
on the date specified therein, together with accrued interest to
each such date on the amount prepaid and any amounts required
pursuant to Section 3.4.
2.7 Repayment. The Company shall repay to the Bank on the
Revolving Termination Date the aggregate principal amount of Loans
outstanding on such date.
2.8 Termination Date. The Commitment shall terminate and the
Bank shall be relieved of its obligations to make any Loan on the
Revolving Termination Date. The Company may from time to time
request an extension of the Revolving Termination Date by
executing and delivering to the Bank a Commitment Termination Date
Extension Request at least 30 but not more than 40 days prior to
the then current Revolving Termination Date. The Revolving
Termination Date shall be so extended if the Company shall have
received from the Bank on or prior to the 10th day preceding the
then current Revolving Termination Date a duly executed
counterpart of such Commitment Termination Date Extension Request;
provided, that any such extension shall take effect as of the date
on which the Bank shall have notified the Company of the approval
thereof and the Revolving Termination Date shall be extended to a
date 364 days from said effectiveness. The Bank may in its sole
and absolute discretion withhold its consent to any such
Commitment Termination Date Extension Request.
2.9 Interest. (a) Each Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing
Date at a rate per annum equal to the Offshore Rate or the Base
Rate, as the case may be (and subject to the Company's right to
convert to other Types of Loans under Section 2.4), plus the
Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on
each Interest Payment Date. Interest shall also be paid on the
date of any prepayment of Loans under Section 2.6 for the portion
of the Loans so prepaid and upon payment (including prepayment) in
full thereof and, during the existence of any Event of Default,
interest shall be paid on demand of the Bank.
(c) Notwithstanding subsection (a) of this Section,
while any Event of Default exists or after acceleration, the
Company shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal
amount of all outstanding Loans, at a rate per annum which is
determined by adding 2% per annum to the Applicable Margin then in
effect for such Loans; provided, however, that, on and after the
expiration of any Interest Period applicable to any Offshore Rate
Loan outstanding on the date of occurrence of such Event of
Default or acceleration, the principal amount of such Loan shall,
during the continuation of such Event of Default or after
acceleration, bear interest at a rate per annum equal to the Base
Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to the Bank hereunder shall be subject
to the limitation that payments of interest shall not be required
for any period for which interest is computed hereunder, to the
extent (but only to the extent) that contracting for or receiving
such payment by the Bank would be contrary to the provisions of
any law applicable to the Bank limiting the highest rate of
interest that may be lawfully contracted for, charged or received
by the Bank, and in such event the Company shall pay the Bank
interest at the highest rate permitted by applicable law.
2.10 Facility Fees. The Company shall pay to the Bank a
facility fee on the average daily amount of the Commitment,
computed on a quarterly basis in arrears on the last Business Day
of each calendar quarter equal to 0.125% per annum on the
Available Commitment and 0.0625% per annum on the Reserve
Commitment. Such facility fee shall accrue from the date hereof
to the Revolving Termination Date and shall be due and payable
quarterly in arrears on the last Business Day of each March, June,
September and December through the Revolving Termination Date,
with the final payment to be made on the Revolving Termination
Date; provided that, in connection with any reduction or
termination of the Commitment under Section 2.5, the accrued
facility fee calculated for the period ending on such date shall
also be paid on the date of such reduction or termination, with
the following quarterly payment being calculated on the basis of
the period from such reduction or termination date to such
quarterly payment date; and provided, further, that upon the
increase of the Available Commitment, an amount equal to 0.0625%
per annum from the date hereof through the date of such increase
on the amount of such increase shall be paid. The facility fee
provided in this section shall accrue at all times after the
above-mentioned commencement date, including at any time during
which one or more conditions in Article IV are not met.
2.11 Computation of Fees and Interest. (a) All computations
of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed (which results in more interest being paid
than if computed on the basis of a 365-day year). Interest and
fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day
thereof.
(b) Each determination of an interest rate by the Bank
shall be conclusive and binding on the Company in the absence of
manifest error.
2.12 Payments by the Company. (a) All payments to be made
by the Company shall be made without set-off, recoupment or
counterclaim. Except as otherwise expressly provided herein, all
payments by the Company shall be made to the Bank, and shall be
made in dollars and in immediately available funds, no later than
11:00 a.m. (Chicago time) on the date specified herein. Any
payment received by the Bank later than 11:00 a.m. (Chicago time)
shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the
definition of "Interest Period" herein, whenever any payment is
due on a day other than a Business Day, such payment shall be made
on the following Business Day, and such extension of time shall in
such case be included in the computation of interest or fees, as
the case may be.
2.13 Bank of America Agreement. The Company is entering into
a credit agreement (the "Bank of America Agreement") with Bank of
America Illinois concurrently with the effectiveness of this
Agreement on terms substantially the same as this Agreement. The
Company agrees that all borrowings, payments and reductions and
terminations of the Commitment shall be made concurrently with
equivalent borrowings, payments and reductions and termination of
the commitment under the Bank of America Agreement. The Company
shall provide a summary statement quarterly to the Bank of all
activity on the Bank of America Agreement and of any amendments
thereto.
2.14 Maximum Interest. It is the intention of the parties
hereto to conform strictly to applicable usury laws and, anything
herein to the contrary notwithstanding, the obligations of the
Company to the Bank under this Agreement shall be subject to the
limitation that payments of interest shall not be required to the
extent that receipt thereof would be contrary to provisions of law
applicable to the Bank limiting rates of interest which may be
charged or collected by the Bank. Accordingly, if the
transactions contemplated hereby would be usurious under
applicable law (including the Federal and state laws of the United
States of America, or of any other jurisdiction whose laws may be
mandatorily applicable) with respect to the Bank then, in that
event, notwithstanding anything to the contrary in this Agreement,
it is agreed as follows:
(i) the provisions of this Section 2.14 shall govern
and control;
(ii) the aggregate of all consideration which
constitutes interest under applicable law that
is contracted for, charged or received under
this Agreement, or under any of the other
aforesaid agreements or otherwise in connection
with this Agreement by the Bank shall under no
circumstances exceed the maximum amount of
interest allowed by applicable law (such maximum
lawful interest rate, if any, with respect to
the Bank herein called the "Highest Lawful
Rate"), and any excess shall be credited to the
Company by the Bank (or, if such consideration
shall have been paid in full, such excess re-
funded to the Company);
(iii) all sums paid, or agreed to be paid, to the Bank
for the use, forbearance and detention of the
indebtedness of the Company to the Bank here-
under shall, to the extent permitted by
applicable law, be amortized, prorated,
allocated and spread throughout the full term of
such indebtedness until payment in full so that
the actual rate of interest is uniform
throughout the full term thereof;
(iv) if at any time the interest provided pursuant to
Section 2.9 together with any other fees payable
pursuant to this Agreement and deemed interest
under applicable law, exceeds that amount which
would have accrued at the Highest Lawful Rate,
the amount of interest and any such fees to
accrue to the Bank pursuant to this Agreement
shall be limited, notwithstanding anything to
the contrary in this Agreement to that amount
which would have accrued at the Highest Lawful
Rate, but any subsequent reductions, as
applicable, shall not reduce the interest to ac-
crue to the Bank pursuant to this Agreement
below the Highest Lawful Rate until the total
amount of interest accrued pursuant to this
Agreement and such fees deemed to be interest
equals the amount of interest which would have
accrued to the Bank if a varying rate per annum
equal to the interest provided pursuant to
Section 2.9 had at all times been in effect,
plus the amount of fees which would have been
received but for the effect of this Sec-
tion 2.14.
For purposes of Article 5069-1.04, Vernon's Texas Civil Statutes,
as amended, to the extent, if any, applicable to the Bank, the
Company agrees that the Highest Lawful Rate shall be the
"indicated (weekly) rate ceiling" as defined in said Article,
provided that the Bank may also rely, to the extent permitted by
applicable laws, on alternative maximum rates of interest under
other laws applicable to such Lender if greater.
Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15 (which regulates
certain revolving credit loan accounts and revolving tri-party
accounts) shall not apply to this Agreement or the Note.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
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3.1 Taxes. (a) Any and all payments by the Company to the
Bank under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for
any Taxes. In addition, the Company shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless
the Bank for the full amount of Taxes or Other Taxes (including
any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by the Bank and any liability
(including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. Payment
under this indemnification shall be made within 30 days after the
date the Bank makes written demand therefor.
(c) If the Company shall be required by law to deduct
or withhold any Taxes or Other Taxes from or in respect of any sum
payable hereunder to the Bank, then:
(i) the sum payable shall be increased as
necessary so that after making all required deductions and
withholdings (including deductions and withholdings
applicable to additional sums payable under this Section) the
Bank receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;
(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount
deducted or withheld to the relevant taxing authority or
other authority in accordance with applicable law; and
(iv) the Company shall also pay to the Bank, at
the time interest is paid, all additional amounts which the
Bank specifies as necessary to preserve the after-tax yield
the Bank would have received if such Taxes or Other Taxes had
not been imposed.
(d) Within 30 days after the date of any payment by the
Company of Taxes or Other Taxes, the Company shall furnish the
Bank the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to the
Bank.
(e) If the Company is required to pay additional
amounts to the Bank pursuant to subsection (c) of this Section,
then the Bank shall use reasonable efforts (consistent with legal
and regulatory restrictions) to change the jurisdiction of its
Lending Office so as to eliminate any such additional payment by
the Company which may thereafter accrue, if such change in the
judgment of the Bank is not otherwise disadvantageous to the Bank.
3.2 Illegality. (a) If the Bank determines that the
introduction of any Requirement of Law, or any change in any
Requirement of Law, or in the interpretation or administration of
any Requirement of Law, has made it unlawful, or that any central
bank or other Governmental Authority has asserted that it is
unlawful, for the Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the
Company, any obligation of the Bank to make Offshore Rate Loans
shall be suspended until the Bank notifies the Company that the
circumstances giving rise to such determination no longer exist.
(b) If the Bank determines that it is unlawful to
maintain any Offshore Rate Loan, the Company shall, upon its
receipt of notice of such fact and demand from the Bank, prepay in
full such Offshore Rate Loans of the Bank then outstanding,
together with interest accrued thereon and amounts required under
Section 3.4, either on the last day of the Interest Period
thereof, if the Bank may lawfully continue to maintain such
Offshore Rate Loans to such day, or immediately, if the Bank may
not lawfully continue to maintain such Offshore Rate Loan. If the
Company is required to so prepay any Offshore Rate Loan, then
concurrently with such prepayment, the Company shall borrow from
the Bank, in the amount of such repayment, a Base Rate Loan.
3.3 Increased Costs and Reduction of Return. (a) If the
Bank determines that, due to either (i) the introduction of or any
change (other than any change by way of imposition of or increase
in reserve requirements included in the calculation of the
Offshore Rate) in or in the interpretation of any law or
regulation or (ii) the compliance by the Bank with any guideline
or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any
increase in the cost to the Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Loans then the Company
shall be liable for, and shall from time to time, upon demand, pay
to the Bank, additional amounts as are sufficient to compensate
the Bank for such increased costs.
(b) If the Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change
in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Lending Office) or any corporation
controlling the Bank with any Capital Adequacy Regulation, affects
or would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank and
(taking into consideration the Bank's or such corporation's
policies with respect to capital adequacy and the Bank's desired
return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or
obligations under this Agreement, then, upon demand of the Bank to
the Company, the Company shall pay to the Bank, from time to time
as specified by the Bank, additional amounts sufficient to
compensate the Bank for such increase.
3.4 Funding Losses. The Company shall reimburse the Bank
and hold the Bank harmless from any loss or expense which the Bank
may sustain or incur as a consequence of:
(a) the failure of the Company to make on a timely
basis any payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have
given) a Notice of Borrowing or a Notice of Conversion/
Continuation;
(c) the failure of the Company to make any prepayment
in accordance with any notice delivered under Section 2.6;
(d) the prepayment or other payment (including after
acceleration thereof) of an Offshore Rate Loan on a day that is
not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the
last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate
Loans or from fees payable to terminate the deposits from which
such funds were obtained.
3.5 Inability to Determine Rates. If the Bank determines
that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period
with respect to a proposed Offshore Rate Loan, or that the
Offshore Rate applicable pursuant to subsection 2.9(a) for any
requested Interest Period with respect to a proposed Offshore Rate
Loan does not adequately and fairly reflect the cost to the Bank
of funding such Loan, the Bank will promptly so notify the
Company. Thereafter, the obligation of the Bank to make or
maintain Offshore Rate Loans hereunder shall be suspended until
the Bank revokes such notice in writing. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice
of Conversion/Continuation then submitted by it. If the Company
does not revoke such Notice, the Bank shall make, convert or
continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but
such Loans shall be made, converted or continued as Base Rate
Loans instead of Offshore Rate Loans.
3.6 Survival. The agreements and obligations of the Company
in this Article III shall survive the payment of all other
Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
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4.1 Conditions of Initial Loans. The obligation of the Bank
to make its initial Loan hereunder is subject to the condition
that the Bank have received on or before the initial borrowing
date all of the following, in form and substance satisfactory to
the Bank:
(a) Credit Agreement and Note. This Agreement and the
Note executed by each party thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company authorizing the transactions
contemplated hereby, certified as of the Closing Date by the
Secretary or an Assistant Secretary of the Company; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to
execute, deliver and perform, as applicable, this Agreement,
and all other Loan Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation
and the bylaws of the Company as in effect on the Closing
Date, certified by the Secretary or Assistant Secretary of
the Company as of the Closing Date; and
(ii) a good standing certificate for the Company
from the Secretary of State (or similar, applicable
Governmental Authority) of its state of incorporation and
each state where the Company is qualified to do business as
a foreign corporation as of a recent date, together with a
bring-down certificate for the Company from such Secretary of
State (or similar, applicable Governmental Authority) by
facsimile, dated the Closing Date;
(d) Legal Opinion. An opinion of John C. Maloney,
Senior Associate General Counsel to the Company and addressed to
the Bank, substantially in the form of Exhibit D;
(e) Payment of Fees. Evidence of payment by the
Company of all accrued and unpaid fees, costs and expenses to the
extent then due and payable on the Closing Date;
(f) Certificate. A certificate signed by a Responsible
Officer, dated as of the Closing Date, stating that:
(i) the representations and warranties contained
in Article V are true and correct on and as of such date, as
though made on and as of such date;
(ii) no Default or Event of Default exists or
would result from the initial Borrowing; and
(iii) there has occurred since December 31, 1993,
no event or circumstance that has resulted or could
reasonably be expected to result in a Material Adverse
Effect; and
(g) Other Documents. Such other approvals, opinions,
documents or materials as the Bank may request.
4.2 Conditions to All Borrowings. The obligation of the
Bank to make any Loan to be made by it (including its initial
Loan) is subject to the satisfaction of the following conditions
precedent on the relevant Borrowing Date:
(a) Notice of Borrowing. The Bank shall have received
(i) in the case of the initial Loan, a Notice of Borrowing, and
(ii) for all other Loans, a Notice of Borrowing and/or a Notice of
Conversion/Continuation, as applicable;
(b) Continuation of Representations and Warranties.
The representations and warranties in Article V shall be true and
correct on and as of such Borrowing Date with the same effect as
if made on and as of such Borrowing Date (except to the extent
such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such
earlier date); and
(c) No Existing Default. No Default or Event of
Default shall exist or shall result from such Borrowing.
Each Notice of Borrowing submitted by the Company hereunder shall
constitute a representation and warranty by the Company hereunder,
as of the date of each such notice and as of each Borrowing Date,
that the conditions in Section 4.2 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Bank that:
5.1 Corporate Existence and Power. The Company and each of
its Subsidiaries:
(a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its
assets, carry on its business and to execute, deliver, and perform
its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct
of its business requires such qualification or license; and
(d) is in compliance with all Requirements of Law.
5.2 Corporate Authorization; No Contravention. The
execution, delivery and performance by the Company of this
Agreement and each other Loan Document to which the Company is
party, have been duly authorized by all necessary corporate
action, and do not and will not:
EM contravene the terms of any of the Company's
Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document
evidencing any Contractual Obligation to which the Company is a
party or any order, injunction, writ or decree of any Governmental
Authority to which the Company or its property is subject; or
(c) violate any Requirement of Law.
5.3 Governmental Authorization. No approval, consent,
exemption, authorization, or other action by, or notice to, or
filing with, any Governmental Authority is necessary or required
in connection with the execution, delivery or performance by, or
enforcement against, the Company or any of its Subsidiaries of the
Agreement or any other Loan Document.
5.4 Binding Effect. This Agreement and each other Loan
Document to which the Company is a party constitute the legal,
valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
5.5 Litigation. There are no actions, suits, proceedings,
claims or disputes pending, or to the best knowledge of the
Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the
Company, or its Subsidiaries or any of their respective properties
which:
(a) purport to affect or pertain to this Agreement or
any other Loan Document, or any of the transactions contemplated
hereby or thereby; or
(b) would reasonably be expected to have a Material
Adverse Effect. No injunction, writ, temporary restraining order
or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for
herein or therein not be consummated as herein or therein
provided.
5.6 No Default. No Default or Event of Default exists or
would result from the incurring of any Obligations by the Company.
As of the Closing Date, neither the Company nor any Subsidiary is
in default under or with respect to any Contractual Obligation in
any respect which, individually or together with all such
defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the
Closing Date, create an Event of Default under subsection 8.1(e).
5.7 ERISA Compliance.
(a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other
federal or state law. Each Plan which is intended to qualify
under Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of the
Company, nothing has occurred which would cause the loss of such
qualification. The Company and each ERISA Affiliate has made all
required contributions to any Plan subject to Section 412 of the
Code, and no application for a funding waiver or an extension of
any amortization period pursuant to Section 412 of the Code has
been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Company, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has
resulted or could reasonably be expected to result in a Material
Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) except as specifically disclosed on
Schedule 5.7 ("ERISA Compliance"), no Pension Plan has any
Unfunded Pension Liability; (iii) neither the Company nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Company nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under Section
4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
5.8 Use of Proceeds; Margin Regulations. The proceeds of
the Loans are to be used solely for the purposes set forth in and
permitted by Section 6.12. The Company is not engaged in the
business of purchasing or selling Margin Stock.
5.9 Title to Properties. The Company and each Subsidiary
have good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the
ordinary conduct of their respective businesses, except for such
defects in title as could not, individually or in the aggregate,
have a Material Adverse Effect. As of the Closing Date, the
property of the Company and its Subsidiaries is subject to no
Liens, other than Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed all
Federal and other material tax returns and reports required to be
filed, and have paid all Federal and other material taxes,
assessments, fees and other governmental charges levied or imposed
upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by
appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax
assessment against the Company or any Subsidiary that would, if
made, have a Material Adverse Effect.
5.11 Financial Condition. (a) The consolidated financial
statements of the Company and its Subsidiaries dated December 31,
1993 and September 30, 1994, and the related consolidated
statements of income or operations, shareholders' equity and cash
flows for the fiscal year or nine month period ended on that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein, subject, in the
case of the September 30, 1994 statements, to ordinary, good
faith year end audit adjustments;
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and
results of operations for the period covered thereby; and
(iii) except as specifically disclosed in Schedule
5.11 ("Permitted Liabilities"), show all material
indebtedness and other liabilities, direct or contingent, of
the Company and its consolidated Subsidiaries as of the date
thereof, including liabilities for taxes, material
commitments and Contingent Obligations.
(b) Since December 31, 1993, there has been no Material
Adverse Effect.
5.12 Environmental Matters. The Company conducts in the
ordinary course of business a review of the effect of existing
Environmental Laws and existing Environmental Claims on its
business, operations and properties, and as a result thereof the
Company has reasonably concluded that, except as specifically
disclosed in Schedule 5.12 ("Environmental Matters"), such
Environmental Laws and Environmental Claims could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
5.13 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary, is an "Investment
Company" within the meaning of the Investment Company Act of 1940.
The Company is not subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act, any state public utilities code, or any other
Federal or state statute or regulation limiting its ability to
incur Indebtedness.
5.14 No Burdensome Restrictions. Neither the Company nor
any Subsidiary is a party to or bound by any Contractual
Obligation, or subject to any restriction in any Organization
Document, or any Requirement of Law, which could reasonably be
expected to have a Material Adverse Effect.
5.15 Copyrights, Patents, Trademarks and Licenses, etc. The
Company or its Subsidiaries own or are licensed or otherwise have
the right to use all of the patents, trademarks, service marks,
trade names, copyrights, contractual franchises, authorizations
and other rights that are reasonably necessary for the operation
of their respective businesses, without conflict with the rights
of any other Person. To the best knowledge of the Company, no
slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now
contemplated to be employed, by the Company or any Subsidiary
infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 5.15 ("Copyrights, etc."), no
claim or litigation regarding any of the foregoing is pending or
threatened, and no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which,
in either case, could reasonably be expected to have a Material
Adverse Effect.
5.16 Subsidiaries. As of the Closing Date, the Company has
no Subsidiaries other than those specifically disclosed in part
(a) of Schedule 5.16 ("Subsidiaries and Minority Interests")
hereto and has no equity investments in any other corporation or
entity other than those specifically disclosed in part (b) of
Schedule 5.16.
5.17 Insurance. Except as specifically disclosed in
Schedule 5.17 ("Insurance Matters"), the properties of the Company
and its Subsidiaries are insured with financially sound and
reputable insurance companies not Affiliates of the Company, in
such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and
owning similar properties in localities where the Company or such
Subsidiary operates.
5.18 Full Disclosure. None of the representations or
warranties made by the Company or any Subsidiary in the Loan
Documents as of the date such representations and warranties are
made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on
behalf of the Company or any Subsidiary in connection with the
Loan Documents (including the offering and disclosure materials
delivered by or on behalf of the Company to the Bank prior to the
Closing Date), contains any untrue statement of a material fact or
omits any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made
or delivered.
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
So long as the Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
unless the Bank waives compliance in writing:
6.1 Financial Statements. The Company shall deliver to the
Bank, in form and detail satisfactory to the Bank:
(a) as soon as available, but not later than 120 days
after the end of each fiscal year, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as
at the end of such year and the related consolidated statements of
income or operations, shareholders' equity and cash flows for such
year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of
Ernst & Young or another nationally-recognized independent public
accounting firm ("Independent Auditor") which report shall state
that such consolidated financial statements present fairly the
financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years. Such opinion
shall not be qualified or limited because of a restricted or
limited examination by the Independent Auditor of any material
portion of the Company's or any Subsidiary's records and shall be
delivered to the Bank pursuant to a reliance agreement between the
Bank and such Independent Auditor in form and substance
satisfactory to the Bank;
(b) as soon as available, but not later than 60 days
after the end of each of the first three fiscal quarters of each
fiscal year, a copy of the unaudited consolidated balance sheet of
the Company and its Subsidiaries as of the end of such quarter and
the related consolidated statements of income, shareholders'
equity and cash flows for the period commencing at the end of the
previous fiscal year and ending on the last day of such quarter,
and certified by the chief financial officer or the controller as
fairly presenting, in accordance with GAAP (subject to ordinary,
good faith year-end audit adjustments), the financial position and
the results of operations of the Company and the Subsidiaries;
(c) as soon as available and in any event within 60
days after the end of each Fiscal Quarter, either (i) at any time
when the Company is not Well-Capitalized, a Compliance
Certificate, or (ii) at any time when the Company is Well-
Capitalized, a Quarterly Compliance Certificate, in each case
executed by the chief financial officer or the controller of the
Company;
(d) as soon as possible and in any event within ten
Business Days after (i) the occurrence of each Default or (ii) the
Company ceases to be Well-Capitalized, a statement of the chief
financial officer or the controller of the Company setting forth
details of such event and the action which the Company has taken
and proposes to take with respect thereto;
(e) at any time when the Company is not Well-
Capitalized, simultaneously with delivery to the Comptroller of
the Currency, any Federal Reserve Bank or the FDIC, as the case
may be, and in any event within 60 days after the end of each
Fiscal Quarter, call reports for each Subsidiary required to
deliver a call report, as at the end of such fiscal quarter, each
certified by the respective cashier or other authorized officer of
such Subsidiary and reports filed on Form FRY9-C and Form FRY9-LP;
(f) promptly after the sending or filing thereof,
copies of all reports which the Company sends to any of its
securityholders, and all reports and registration statements which
the Company or any of its Subsidiaries files with the Securities
and Exchange Commission or any national securities exchange; and
(g) such other information respecting the condition or
operations, financial or otherwise, of the Company or any of its
Subsidiaries as the Bank may from time to time reasonably request.
6.2 Certificates; Other Information. The Company shall
furnish to the Bank concurrently with the delivery of the
financial statements referred to in subsection 6.1(a), a
certificate of the Independent Auditor stating that in making the
examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such
certificate.
6.3 Notices. The Company shall promptly notify the Bank:
(a) of the occurrence of any Default or Event of
Default, and of the occurrence or existence of any event or
circumstance that foreseeably will become a Default or Event of
Default;
(b) of any matter that has resulted or may result in a
Material Adverse Effect, including (i) breach or non-performance
of, or any default under, a Contractual Obligation of the Company
or any Subsidiary; (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary and
any Governmental Authority; or (iii) the commencement of, or any
material development in, any litigation or proceeding affecting
the Company or any Subsidiary; including pursuant to any
applicable Environmental Laws;
(c) of the occurrence of any of the following events
affecting the Company or any ERISA Affiliate (but in no event more
than 10 days after such event), and deliver to the Bank a copy of
any notice with respect to such event that is filed with a
Governmental Authority and any notice delivered by a Governmental
Authority to the Company or any ERISA Affiliate with respect to
such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code
by the Company or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment results
in a material increase in contributions or Unfunded Pension
Liability.
(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its
consolidated Subsidiaries.
Each notice under this Section shall be accompanied by
a written statement by a Responsible Officer setting forth details
of the occurrence referred to therein, and stating what action the
Company or any affected Subsidiary proposes to take with respect
thereto and at what time. Each notice under subsection 6.3(a)
shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been
(or foreseeably will be) breached or violated.
6.4 Preservation of Corporate Existence, Etc. The Company
shall, and shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state
or jurisdiction of incorporation, except as permitted by Section
7.2;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses
and franchises necessary or desirable in the normal conduct of its
business except in connection with transactions permitted by
Section 7.2 and sales of assets permitted by Section 7.3;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of
which could reasonably be expected to have a Material Adverse
Effect.
6.5 Maintenance of Property. The Company shall maintain,
and shall cause each Subsidiary to maintain, and preserve all its
property which is used or useful in its business in good working
order and condition, ordinary wear and tear excepted and make all
necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be expected
to have a Material Adverse Effect.
6.6 Insurance. The Company shall maintain, and shall cause
each Subsidiary to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured
against by Persons engaged in the same or similar business, of
such types and in such amounts as are customarily carried under
similar circumstances by such other Persons.
6.7 Payment of Obligations. The Company shall, and shall
cause each Subsidiary to, pay and discharge as the same shall
become due and payable, all their respective obligations and
liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the
same are being contested in good faith by appropriate proceedings
and adequate reserves in accordance with GAAP are being maintained
by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property; and
(c) all Indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness.
6.8 Compliance with Laws. The Company shall comply, and
shall cause each Subsidiary to comply, in all material respects
with all Requirements of Law of any Governmental Authority having
jurisdiction over it or its business (including the Federal Fair
Labor Standards Act), except such as may be contested in good
faith or as to which a bona fide dispute may exist.
6.9 Compliance with ERISA. The Company shall, and shall
cause each of its ERISA Affiliates to: (a) maintain each Plan in
compliance in all material respects with the applicable provisions
of ERISA, the Code and other federal or state law; (b) cause each
Plan which is qualified under Section 401(a) of the Code to
maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
6.10 Inspection of Property and Books and Records. The
Company shall maintain and shall cause each Subsidiary to maintain
proper books of record and account, in which full, true and
correct entries in conformity with GAAP consistently applied shall
be made of all financial transactions and matters involving the
assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit,
representatives and independent contractors of the Bank to visit
and inspect any of their respective properties, to examine their
respective corporate, financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, all at
the expense of the Company and at such reasonable times during
normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to the Company; provided, however,
when an Event of Default exists the Bank may do any of the
foregoing at the expense of the Company at any time during normal
business hours and without advance notice.
6.11 Environmental Laws. The Company shall, and shall cause
each Subsidiary to, conduct its operations and keep and maintain
its property in compliance with all Environmental Laws.
6.12 Use of Proceeds. The Company shall use the proceeds of
the Loans for working capital and other general corporate purposes
not in contravention of any Requirement of Law or of any Loan
Document; provided, however, that none of such proceeds shall be
applied to acquire a controlling interest in the stock of any
Person, unless such Person's Board of Directors (or equivalent
board) shall approve such acquisition, unless the Bank shall
otherwise consent.
ARTICLE VII
NEGATIVE COVENANTS
------------------
So long as the Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
unless the Bank waives compliance in writing:
7.1 Liens. The Company will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any properties, assets or revenues of the Company or any
of its Subsidiaries or any capital stock of any Subsidiary of the
Company, whether now owned or hereafter acquired, except:
(a) Liens created or assumed in the ordinary course of
the banking, trust, commercial finance and leasing business of any
Subsidiary or the business of the Company;
(b) Liens for taxes not yet payable or being contested
in good faith by appropriate proceedings and for which reserves in
conformity with GAAP with respect thereto have been provided on
the books of the Company or its Subsidiaries, as the case may be;
(c) deposits or pledges to secure the payment of
workmen's compensation, unemployment insurance, old age pensions
or other social security benefits or obligations;
(d) deposits or pledges to secure statutory obligations
or to secure or in lieu of surety, penalty or appeal bonds;
(e) mechanics', materialmen's, warehousemen's, carriers
or other like Liens arising in the ordinary course of its business
which are not overdue for a period longer than 30 days, or which
are being contested in good faith by appropriate proceedings;
(f) Liens securing indebtedness incurred after the date
hereof to finance the cost of acquisition, construction or
improvement of any property useful and intended to be used in
carrying out the business of the Company or a Subsidiary;
provided, that the Lien shall attach solely to the property
acquired, constructed or improved or to substantially unimproved
real property on which property so acquired, constructed or
improved is located;
(g) Liens on property useful and intended to be used in
carrying out the business of the Company or a Subsidiary which
were existing at the time of acquisition of such property, or at
the time of acquisition by the Company or a Subsidiary of any
business entity then owning such property, so long as such Liens
were not incurred, extended or renewed in the contemplation of or
in connection with such acquisition by the Company or a
Subsidiary; provided, that such Lien shall attach solely to the
property acquired; and
(h) extensions or renewals of Liens permitted by
clauses (f) and (g) above so long as, at the time of such
transaction and after giving effect thereto and to the application
of the proceeds thereof, (x) the aggregate unpaid principal amount
of indebtedness of the Company and its Subsidiaries which is
secured pursuant to this clause (h) and clauses (f) and (g) hereof
shall be no greater than the aggregate unpaid principal amount of
such indebtedness secured pursuant to such clauses immediately
preceding such transaction and (y) such Lien shall attach solely
to the property which was subject thereto immediately preceding
such transaction.
Notwithstanding the foregoing provisions of this Section 7.1
the Company will not permit, and will not permit any Subsidiary to
cause or permit any Lien on capital stock issued by a Subsidiary
and held by the Company or another Subsidiary except for Liens on
capital stock of a corporation acquired after the effective date
of the Agreement which corporation, after such acquisition, would
become a Subsidiary; provided that such Liens were existing at the
time of such acquisition and were not incurred, extended or
renewed in contemplation of, or in connection with, such
acquisition.
7.2 Consolidation, Merger, etc. The Company will not, and
will not permit any of its Subsidiaries to, liquidate or dissolve,
consolidate with, or merge into or with, any other corporation, or
purchase or otherwise acquire all or substantially all of the
assets of any Person (or of any division thereof) except
(a) any such Subsidiary may liquidate or dissolve
voluntarily into, and may merge with and into, the Company or any
other Subsidiary, and the assets or stock of any Subsidiary may be
purchased or otherwise acquired by the Company or any other
Subsidiary; and
(b) so long as no Default has occurred and is
continuing or would occur after giving effect thereto, the Company
or any of its Subsidiaries may purchase all or substantially all
of the assets of any Person, or acquire such Person by merger.
7.3 Asset Dispositions, etc. The Company will not, and will
not permit any of its Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, or grant options, warrants or
other rights with respect to, all or any substantial part of its
assets (including accounts receivable and capital stock of
Subsidiaries) to any Person, unless such sale, transfer, lease,
contribution or conveyance is in the ordinary course of its
business or is permitted by Section 7.2.
7.4 Transactions with Affiliates. The Company will not, and
will not permit any of its Subsidiaries to, enter into, or cause,
suffer or permit to exist any arrangement or contract with any of
its other Affiliates unless such arrangement or contract is fair
and equitable to the Company or such Subsidiary and is an
arrangement or contract of the kind which would be entered into by
a prudent Person in the position of the Company or such Subsidiary
with a Person which is not one of its Affiliates.
7.5 Negative Pledges, Restrictive Agreements, etc. The
Company will not, and will not permit any of its Subsidiaries to,
enter into any agreement (excluding this Agreement, any other Loan
Document, the Bank of America Agreement or any other loan document
executed in connection therewith) prohibiting
(a) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or hereafter
acquired, or the ability of the Company to amend or otherwise
modify this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments,
directly or indirectly, to the Company by way of dividends (except
as may be required by law), advances, repayments of loans or
advances, reimbursements of management and other intercompany
charges, expenses and accruals or other returns on investments, or
any other agreement or arrangement which restricts the ability of
any such Subsidiary to make any payment, directly or indirectly,
to the Company.
7.6 ERISA. The Company shall not, and shall not suffer or
permit any of its ERISA Affiliates to: (a) engage in a prohibited
transaction or violation of the fiduciary responsibility rules
with respect to any Plan which has resulted or could reasonably
expected to result in liability of the Company in an aggregate
amount in excess of $10,000,000; or (b) engage in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
7.7 Change in Business. The Company shall not, and shall
not suffer or permit any Subsidiary to, engage in any material
line of business substantially different from those lines of
business carried on by the Company and its Subsidiaries on the
date hereof.
7.8 Accounting Changes. The Company shall not, and shall
not suffer or permit any Subsidiary to, make any significant
change in accounting treatment or reporting practices, except as
required by GAAP, or change the fiscal year of the Company or of
any Subsidiary.
7.9 Financial Covenants. The Company shall not, at any
time, that it is not classified as Well-Capitalized, permit:
(a) its Leverage Ratio to be less than 4.75%;
(b) the ratio of its Tier One Capital to Risk Weighted
Assets to be less than 5.50%;
(c) the ratio of its Tier One Capital plus Tier Two
Capital to Risk Weighted Assets to be less than 9.00%;
(d) its consolidated total stockholders' equity to be
less than $518,000,000 plus 50% of its net income for every
quarter commencing after September 30, 1994 (but without giving
effect to any quarterly loss) plus the net proceeds of any new
equity issue after the date hereof;
(e) its Non-Performing Ratio to exceed 3%; and
(f) its Double Leverage Ratio to be more than 1.20 to
1.0.
ARTICLE VIII
EVENTS OF DEFAULT
-----------------
8.1 Event of Default. Any of the following shall constitute
an "Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when
and as required to be paid herein, any amount of principal of any
Loan, or (ii) within 7 days after the same becomes due, any
interest, fee or any other amount payable hereunder or under any
other Loan Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company or any Subsidiary made or deemed made
herein, in any other Loan Document, or which is contained in any
certificate, document or financial or other statement by the
Company, any Subsidiary, or any Responsible Officer, furnished at
any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the
date made or deemed made; or
(c) Other Defaults. The Company fails to perform or
observe any other term or covenant contained in this Agreement or
any other Loan Document, and such default shall continue
unremedied for a period of 30 days after the earlier of (i) the
date upon which a Responsible Officer knew or reasonably should
have known of such failure or (ii) the date upon which written
notice thereof is given to the Company by the Bank; or
(d) Cross-Default. The Company or any Subsidiary (i)
fails to make any payment in respect of any Indebtedness or
Contingent Liability having an aggregate principal amount
(including undrawn committed or available amounts and including
amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $5,000,000 when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise) and such failure continues after the applicable grace
or notice period, if any, specified in the relevant document on
the date of such failure; or (ii) fails to perform or observe any
other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any
such Indebtedness or Contingent Liability, and such failure
continues after the applicable grace or notice period, if any,
specified in the relevant document on the date of such failure if
the effect of such failure, event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary
or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries)
to cause such Indebtedness to be declared to be due and payable
prior to its stated maturity, or such Contingent Liability to
become payable or cash collateral in respect thereof to be
demanded; or
(e) Insolvency; Voluntary Proceedings. The Company or
any Subsidiary (i) ceases or fails to be solvent, or generally
fails to pay, or admits in writing its inability to pay, its debts
as they become due, subject to applicable grace periods, if any,
whether at stated maturity or otherwise; (ii) voluntarily ceases
to conduct its business in the ordinary course; (iii) commences
any Insolvency Proceeding with respect to itself; or (iv) takes
any action to effectuate or authorize any of the foregoing; or
(f) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company or
any Subsidiary, or any writ, judgment, warrant of attachment,
execution or similar process, is issued or levied against a
substantial part of the Company's or any Subsidiary's properties,
and any such proceeding or petition shall not be dismissed, or
such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60
days after commencement, filing or levy; (ii) the Company or any
Subsidiary admits the material allegations of a petition against
it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency
Proceeding; or (iii) the Company or any Subsidiary acquiesces in
the appointment of a receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its property
or business; or
(g) ERISA. (i) An ERISA Event shall occur with respect
to a Pension Plan or Multiemployer Plan which has resulted or
could reasonably be expected to result in liability of the Company
under Title IV of ERISA to the Pension Plan, Multiemployer Plan or
the PBGC in an aggregate amount in excess of $10,000,000; unless
the ERISA Event is a contribution failure sufficient to give rise
to a Lien under Section 302(f) of ERISA in which case the dollar
liability threshold does not apply; (ii) the aggregate amount of
Unfunded Pension Liability among all Pension Plans at any time
exceeds $10,000,000; or (iii) the Company or any ERISA Affiliate
shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its
withdrawal liability under Section 4201 of ERISA under a
Multiemployer Plan in an aggregate amount in excess of
$10,000,000; or
(h) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards
is entered against the Company or any Subsidiary involving in the
aggregate a liability (to the extent not covered by independent
third-party insurance as to which the insurer does not dispute
coverage) as to any single or related series of transactions,
incidents or conditions, of $10,000,000 or more, and the same
shall remain unsatisfied, unvacated and unstayed pending appeal
for a period of 10 days after the entry thereof; or
(i) Non-Monetary Judgments. Any non-monetary judgment,
order or decree is entered against the Company or any Subsidiary
which does or would reasonably be expected to have a Material
Adverse Effect, and there shall be any period of 10 consecutive
days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in
effect; or
(j) Change of Control. There occurs any Change of
Control.
8.2 Remedies. If any Event of Default occurs, the Bank may,
(a) declare the commitment of the Bank to make Loans to
be terminated, whereupon such commitment shall be terminated;
(b) declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and
all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company; and
(c) exercise all rights and remedies available to it
under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified
in subsection (e) or (f) of Section 8.1 (in the case of clause (i)
of subsection (f), upon the expiration of the 60-day period
mentioned therein), the obligation of the Bank to make Loans shall
automatically terminate and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable without further act of
the Bank.
8.3 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not
exclusive of any other rights, powers, privileges or remedies
provided by law or in equity, or under any other instrument,
document or agreement now existing or hereafter arising.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no
consent with respect to any departure by the Company therefrom,
shall be effective unless the same shall be in writing and signed
by the Bank.
9.2 Notices. (a) Except as specifically set forth in this
Agreement, all notices, requests and other communications shall be
in writing (including, unless the context expressly otherwise
provides, by facsimile transmission, provided that any matter
transmitted by facsimile (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on
Schedule 9.2, and (ii) shall be followed promptly by delivery of
a hard copy original thereof) and mailed, faxed or delivered, to
the address or facsimile number specified for notices on Schedule
9.2; or, as directed by the Company or the Bank, to such other
address as shall be designated by such party in a written notice
to the other party.
(b) All such notices, requests and communications
shall, when transmitted by overnight delivery, or faxed, be
effective when delivered for overnight (next-day) delivery, or
transmitted in legible form by facsimile machine, respectively, or
if mailed, upon the third Business Day after the date deposited
into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX shall not be effective until
actually received by Bank.
(c) Any agreement of the Bank herein to receive certain
notices by telephone or facsimile is solely for the convenience
and at the request of the Company. The Bank shall be entitled to
rely on the authority of any Person purporting to be a Person
authorized by the Company to give such notice and the Bank shall
not have any liability to the Company or other Person on account
of any action taken or not taken by the Bank in reliance upon such
telephonic or facsimile notice. The obligation of the Company to
repay the Loans shall not be affected in any way or to any extent
by any failure by the Bank to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Bank of a
confirmation which is at variance with the terms understood by the
Bank to be contained in the telephonic or facsimile notice.
9.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Bank, any right,
remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power
or privilege.
9.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby
are consummated, pay or reimburse the Bank within five Business
Days after demand in connection with the development, preparation,
delivery, administration and execution of, and any amendment,
supplement, waiver or modification to (in each case, whether or
not consummated), this Agreement, any Loan Document and any other
documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby,
including reasonable Attorney Costs incurred by the Bank with
respect thereto; and
(b) pay or reimburse the Bank within five Business Days
after demand for all costs and expenses (including Attorney Costs)
incurred by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this
Agreement or any other Loan Document during the existence of an
Event of Default or after acceleration of the Loans (including in
connection with any "workout" or restructuring regarding the
Loans, and including in any Insolvency Proceeding or appellate
proceeding).
9.5 Indemnity. Whether or not the transactions contemplated
hereby are consummated, the Company shall indemnify and hold the
Bank and each of its officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of
any kind or nature whatsoever which may at any time (including at
any time following repayment of the Loans) be imposed on, incurred
by or asserted against any such Person in any way relating to or
arising out of this Agreement or any document contemplated by or
referred to herein, or the transactions contemplated hereby, or
any action taken or omitted by any such Person under or in
connection with any of the foregoing, including with respect to
any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to or
arising out of this Agreement or the Loans or the use of the
proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Company shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified
Liabilities resulting solely from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this
Section shall survive payment of all other Obligations.
9.6 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except
that the Company may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent
of the Bank.
9.7 Set-off. In addition to any rights and remedies of the
Bank provided by law, if an Event of Default exists or the Loans
have been accelerated, the Bank is authorized at any time and from
time to time, without prior notice to the Company, any such notice
being waived by the Company to the fullest extent permitted by
law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held
by, and other indebtedness at any time owing by, the Bank to or
for the credit or the account of the Company against any and all
Obligations owing to the Bank, now or hereafter existing,
irrespective of whether or not the Bank shall have made demand
under this Agreement or any Loan Document and although such
Obligations may be contingent or unmatured. The Bank agrees
promptly to notify the Company after any such set-off and
application made by the Bank; provided, however, that the failure
to give such notice shall not affect the validity of such set-off
and application.
9.8 Automatic Debits of Fees. With respect to any fee, or
any other cost or expense (including Attorney Costs) due and
payable to the Bank under the Loan Documents, the Company hereby
irrevocably authorizes the Bank to debit any deposit account of
the Company with the Bank in an amount such that the aggregate
amount debited from all such deposit accounts does not exceed such
fee or other cost or expense. If there are insufficient funds in
such deposit accounts to cover the amount of the fee or other cost
or expense then due, such debits will be reversed (in whole or in
part, in the Bank's sole discretion) and such amount not debited
shall be deemed to be unpaid. No such debit under this Section
shall be deemed a set-off.
9.9 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which, when so executed,
shall be deemed an original, and all of said counterparts taken
together shall be deemed to constitute but one and the same
instrument.
9.10 Severability. The illegality or unenforceability of
any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the
legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.
9.11 No Third Parties Benefited. This Agreement is made and
entered into for the sole protection and legal benefit of the
Company and the Bank, and their permitted successors and assigns
and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan
Documents.
9.12 Governing Law and Jurisdiction. (a) THIS AGREEMENT
AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF TEXAS; PROVIDED THAT THE BANK SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF TEXAS OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF TEXAS, AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE COMPANY AND THE BANK CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION
OF THOSE COURTS. EACH OF THE COMPANY AND THE BANK IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR
ANY DOCUMENT RELATED HERETO. THE COMPANY AND THE BANK EACH WAIVE
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY TEXAS LAW.
9.13 Waiver of Jury Trial. THE COMPANY AND THE BANK EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY
OTHER PARTY, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY AND THE
BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT
TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
9.14 Entire Agreement. This Agreement, together with the
other Loan Documents, embodies the entire agreement and
understanding between the Company and the Bank, and supersedes all
prior or contemporaneous agreements and understandings of such
Persons, verbal or written, relating to the subject matter hereof
and thereof.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in Dallas, Texas by
their proper and duly authorized officers as of the day and year
first above written.
FOURTH FINANCIAL CORPORATION
By:
---------------------------
Title: Executive Vice President -
Finance and Chief Financial
Officer
NATIONSBANK OF TEXAS, N.A.
By:
----------------------------
Title:
-------------------------
EXHIBIT 10.14
SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into as of this
____day of _______________, 1994 by and between Fourth
Financial Corporation, a Kansas corporation (the "Company")
and ________________ (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company has
approved the Company entering into severance agreements with
certain key executives of the Company; and
WHEREAS, the Executive is a key executive of the
Company; and
WHEREAS, the Company desires assurance that it
will have the continued dedication of the Executive and the
availability of his advice and counsel notwithstanding any
possibility or occurrence of a change in control of the
Company; and
WHEREAS, the Executive desires to continue working
for the Company upon the terms and conditions set forth
herein;
NOW THEREFORE, in consideration of the mutual
covenants contained herein, and other good and valuable
consideration, the receipt of which is acknowledged, the
parties hereto agree as follows:
1. Agreement to Provide Services; Right to
Terminate.
(i) Except as otherwise provided in paragraph
(ii) below, the Company or the Executive may terminate
Executive's employment at any time, subject to the Company's
providing the benefits hereinafter specified in accordance
with the terms hereof.
(ii) In the event a tender offer or exchange offer
is made by a Person (as hereinafter defined) for more than
25% of the combined voting power of the Company's out-
standing securities ordinarily having the right to vote at
elections of directors ("Voting Securities"), including
shares of Fourth Financial Common Stock of the Company (the
"Company Shares"), or in the event of the execution by the
Company of a merger agreement, Executive agrees that he will
not leave the employ of the Company (other than as a result
of Disability or upon Retirement, as such terms are
hereinafter defined) and will render the services
contemplated in the recitals to this Agreement until such
tender offer, exchange offer or merger agreement has been
abandoned or terminated or a change in control of the
Company, as defined in Section 3 hereof, has occurred. For
purposes of this Agreement, the term "Person" shall mean and
include any individual, corporation, partnership, group,
association or other "person", as such term is used in Sec-
tion 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), other than the Company, a wholly owned
subsidiary of the Company or any employee benefit plan(s)
sponsored by the Company or a subsidiary of the Company.
2. Term of Agreement. This Agreement shall
commence on the date hereof (the "Effective Date") and shall
continue until the date that is the second anniversary of
the Effective Date; provided, however, that the term of this
Agreement shall automatically be extended for one additional
year unless at least 90 days prior to such anniversary, the
Company or Executive shall have given notice that this
Agreement shall not be extended; and provided, further,
that, notwithstanding the delivery of any such notice, this
Agreement shall continue in effect for a period of twenty-
four (24) months after a change in control of the Company,
as defined in Section 3 hereof, if such change in control
shall have occurred during the term of this Agreement, as it
may be extended by the first proviso set forth above.
Notwithstanding anything in this Section 2 to the contrary,
this Agreement shall terminate if Executive or the Company
terminates Executive's employment prior to a change in
control of the Company.
3. Change in Control. For purposes of this
Agreement, a "change in control" of the Company shall be
deemed to occur if (A) any "person" (as such term is defined
in Section 3(a)(9) and as used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding securities
under an employee benefit plan of the Company or any of its
subsidiaries, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation
owned, directly or indirectly, by stockholders of the
Company in substantially the same proportion as their
ownership of the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the
Company's then outstanding securities ("Voting Securities");
or (B) during any period of not more than two years,
individuals who constitute the Board as of the beginning of
the period and any new director (other than a director
designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause
(A) or (C) of this sentence) whose election by the Board or
nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
such time or whose election or nomination for election was
previously so approved, cease for any reason to constitute a
majority thereof; or (C) the shareholders of the Company
approve a merger, consolidation or share exchange of or by
the Company with any other corporation, other than a merger,
consolidation or share exchange which would result in the
Voting Securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of
the surviving entity) at least 60% of the combined voting
power of the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger,
consolidation or share exchange or the shareholders of the
Company approve a plan of complete liquidation of the
Company or any agreement for the sale or disposition by the
Company or all or substantially all of the Company's assets.
4. Termination Following Change in Control. If
any of the events described in Section 3 hereof constituting
a change in control of the Company shall have occurred,
Executive shall be entitled to the benefits provided in
Section 5 hereof upon the termination of Executive's
employment with the Company (whether by the Company or by
Executive for Good Reason) within twenty-four (24) months
after such event, unless such termination is (a) because of
the death of Executive or Retirement, (b) by the Company for
Cause or Disability or (c) by Executive other than for Good
Reason (as all such capitalized terms are hereinafter
defined).
(i) Disability. Termination by the Company of
Executive's employment based on "Disability" shall mean
termination because of Executive's absence from his duties
with the Company on a full time basis for ninety (90)
consecutive days as a result of Executive's incapacity due
to physical or mental illness, unless within thirty (30)
days after Notice of Termination (as hereinafter defined) is
given to Executive following such absence Executive shall
have returned to the full time performance of his duties.
(ii) Retirement. Termination by Executive of
Executive's employment based on "Retirement" shall mean
termination on or after Executive's normal retirement date
under the terms of the Company's Pension Plan (or any
successor or substitute plan or plans of the Company put
into effect prior to a change in control) (the "Pension
Plan").
(iii) Cause. Termination by the Company of
Executive's employment for "Cause" shall mean termination
upon (a) the willful and continued failure by Executive to
perform substantially his duties with the Company (other
than any such failure resulting from Executive's incapacity
due to physical or mental illness) after a demand for
substantial performance is delivered to Executive by the
Chairman of the Board or President of the Company which
specifically identifies the manner in which Executive has
not substantially performed his duties, or (b) the willful
engaging by Executive in illegal conduct which is materially
and demonstrably injurious to the Company. For purposes of
this paragraph (iii), no act, or failure to act, on the part
of Executive shall be considered "willful" unless done, or
omitted to be done, in bad faith and without reasonable
belief that Executive's action or omission was in, or not
opposed to, the best interests of the Company. Any act, or
failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or based upon the
advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by Executive in
good faith and in the best interests of the Company. It is
also expressly understood that Executive's attention to
matters not directly related to the business of the Company
shall not provide a basis for termination for Cause so long
as the Board has granted prior written approval of
Executive's engagement in such activities. Notwithstanding
the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted
by the affirmative vote of not less than a majority of the
entire membership of the Board at a meeting of the Board
called for such purpose (after reasonable notice to you and
an opportunity for you, together with your counsel, to be
heard before the Board), finding that in the good faith
opinion of the Board Executive was guilty of the conduct set
forth above in (a) or (b) of this paragraph (iii) and
specifying the particulars thereof in detail.
(iv) Good Reason. Termination by Executive of his
employment for "Good Reason" shall mean termination based
on:
(a) a determination by Executive, in his
reasonable judgment, that there has been an adverse
change in his status or position(s) as an officer of
the Company as in effect immediately prior to the
change in control, including, without limitation, any
substantial adverse change in Executive's status or
position as a result of a diminution in Executive's
duties or responsibilities (other than, if applicable,
any such change directly attributable to the fact that
the Company is no longer publicly owned) or the
assignment to Executive of any duties or
responsibilities which are inconsistent with such
status or position(s), or any removal of Executive from
or any failure to reappoint or reelect Executive to
such position(s) (except in connection with the
termination of Executive's employment for Cause,
Disability or Retirement or as a result of Executive's
death or by Executive other than for Good Reason);
(b) a reduction by the Company in Executive's
base salary or annual target bonus as in effect
immediately prior to the change in control;
(c) the failure by the Company to continue in
effect any Plan (as hereinafter defined) in which
Executive participates at the time of the change in
control of the Company (or Plans providing Executive
with at least substantially similar benefits) other
than as a result of the normal expiration of any such
Plan in accordance with its terms as in effect at the
time of the change in control;
(d) the failure by the Company to provide and
credit Executive with the number of paid vacation days
to which Executive is then entitled in accordance with
the Company's normal vacation policy as in effect
immediately prior to the change in control;
(e) the Company's requiring Executive to be based
at an office that is greater than 50 miles from where
Executive's office is located immediately prior to the
change in control except for required travel on the
Company's business;
(f) the failure by the Company to obtain from any
Successor (as hereinafter defined) the assent to this
Agreement contemplated by Section 6 hereof; or
(g) any purported termination by the Company of
Executive's employment which is not effected pursuant
to a Notice of Termination satisfying the requirements
of paragraph (v) below (and, if applicable, paragraph
(iii) above); and for purposes of this Agreement, no
such purported termination shall be effective.
For purposes of this Agreement, "Plan" shall mean any
compensation plan such as an incentive, stock option or
restricted stock plan or any employee benefit plan such as a
thrift, pension, profit sharing, medical, disability, acci-
dent, life insurance plan or a relocation plan or policy or
any other material plan, program or policy of the Company
intended to benefit employees.
(v) Notice of Termination. Any purported termi-
nation by the Company or by Executive following a change in
control shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in
this Agreement relied upon.
(vi) Date of Termination. "Date of Termination"
following a change in control shall mean (a) if Executive's
employment is to be terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that
Executive shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day
period), (b) if Executive's employment is to be terminated
by the Company for Cause or by Executive for Good Reason,
the date specified in the Notice of Termination, or (c) if
Executive's employment is to be terminated by the Company
for any reason other than Cause, the date specified in the
Notice of Termination, which in no event shall be a date
earlier than ninety (90) days after the date on which a
Notice of Termination is given, unless an earlier date has
been expressly agreed to by Executive in writing.
5. Compensation Upon Termination; Other
Agreements.
(i) If Executive's employment shall be terminated
for Disability following a change in control of the Company,
the Company shall pay Executive's salary through the Date of
Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards
under any Plans which pursuant to the terms of any Plans
have been earned or become payable, but which have not been
paid to Executive. Thereafter, benefits shall be determined
in accordance with the Plans then in effect.
(ii) If Executive's employment shall be terminated
for Cause following a change in control of the Company, the
Company shall pay Executive's salary through the Date of
Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards
(including both the cash and stock components) which pur-
suant to the terms of any Plans have been earned or become
payable, but which have not yet been paid to Executive.
Thereupon the Company shall have no further obligations to
Executive under this Agreement.
(iii) Subject to Section 8 hereof, if, within
twenty-four (24) months after a change in control of the
Company, as defined in Section 3 above, shall have occurred,
Executive's employment by the Company shall be terminated
(a) by the Company other than for Cause, Disability or
Retirement or (b) by Executive for Good Reason, then the
Company shall pay or provide to Executive, without regard to
any contrary provisions of any Plan, the following:
(A) _____________________ times (A) the
Executive's highest base salary during the 12-month
period prior to the change in control of the Company
and (B) Executive's three year average bonus percentage
multiplied by Executive's target bonus in effect
immediately prior to the change in control of the
Company. For purposes of this Agreement, the bonus
percentage is the ratio of actual bonuses paid to
Executive as a percent of Executive's Base Salary to
Executive's target bonuses as a percent of Executive's
Base salary;
(B) for a period of _____________________ years
after the Date of Termination continuation of all
insured and self-insured medical, life insurance and
disability benefit Plans in which Executive
participated immediately prior to the Date of
Termination, at no cost to Executive. In the event
that Executive's participation in any such Plan is
barred, the Company, at its sole cost and expense,
shall arrange to have issued for the benefit of
Executive and his dependents individual policies of
insurance providing benefits substantially similar (on
an after-tax basis) to those which Executive otherwise
would have been entitled to receive under such Plans
pursuant to this paragraph (iv) or, if such insurance
is not available at a reasonable cost to the Company,
the Company shall otherwise provide you and your
dependents with equivalent benefits (on an after-tax
basis);
(C) full and immediate vesting of Executive's
outstanding stock options which shall be purchased by
the Company for a price equal to the fair market value
of such options; provided, however, that at the option
of Executive, the Company shall purchase any
outstanding stock options which have been granted to
Executive within the six-month period immediately prior
to the Date of Termination no earlier than six months
following the date of grant. For purposes of this
Agreement, fair market value shall mean the average of
the high and low trading price of the common stock of
the Company on the Date of Termination, less the
exercise price of the options;
(D) the present value, in a lump sum, equal to
Executive's enhanced benefit under the Company's
Supplemental Executive Retirement Plan, calculated
under the terms of the plan but increasing Executive's
attained age and credited service by ________________
_____years;
(E) a lump sum payment of Executive's accrued
vacation pay; and
(F) the value of any unvested employer
contributions with respect to all defined contribution
plans in which Executive participates.
(iv) The amount of any payment provided for in
this Section 5 shall not be reduced, offset or subject to
recovery by the Company by reason of any compensation earned
by Executive as the result of employment by another employer
after the Date of Termination, or otherwise.
6. Successors; Binding Agreement.
(i) The Company will seek, by written request at
least five business days prior to the time a Person becomes
a Successor (as hereinafter defined), to have such Person
assent to the fulfillment of the Company's obligations under
this Agreement. Failure of such Person to furnish such
assent by the later of (A) three business days prior to the
time such Person becomes a Successor or (B) two business
days after such Person receives a written request to so
assent shall constitute Good Reason for termination by
Executive of his employment if a change in control of the
Company occurs or has occurred. For purposes of this
Agreement, "Successor" shall mean any Person that succeeds
to, or has the practical ability to control (either
immediately or with the passage of time), the Company's
business directly, by merger or consolidation, or
indirectly, by purchase of the Company's Voting Securities
or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Executive
dies while any amount is still payable to Executive
hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee
or, if there be no such designee, to Executive's estate.
(iii) For purposes of this Agreement, the "Company"
shall include any corporation or other entity which is the
surviving or continuing entity in respect of any merger,
consolidation or form of business combination in which the
Company ceases to exist.
7. Fees and Expenses. The Company shall
reimburse Executive, on a current basis, for all reasonable
legal fees and related expenses incurred by Executive in
connection with the Agreement following a change in control
of the Company, including, without limitation, (a) all such
fees and expenses, if any, incurred in contesting or
disputing any termination of employment or incurred by
Executive in seeking advice with respect to the matters set
forth in Section 8 hereof or (b) Executive's seeking to
obtain or enforce any right or benefit provided by this
Agreement, in each case, regardless of whether or not
Executive's claim is upheld by a court of competent
jurisdiction.
8. Taxes.
(i) All payments to be made to Executive under
this Agreement will be subject to required withholding of
federal, state and local income and employment taxes.
(ii) Notwithstanding anything in the foregoing to
the contrary, if any of the payments provided for in this
Agreement, together with any other payments which Executive
has the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in
Section 1504(a) of the Code without regard to
Section 1504(b) of the Code) of which the Company is a
member, would constitute a "parachute payment" (as defined
in Section 280G(b)(2) of the Code), the payments pursuant to
this Agreement shall be reduced to the largest amount as
will result in no portion of such payments being subject to
the excise tax imposed by Section 4999 of the Code;
provided, however, that the determination as to whether any
reduction in the payments under this Agreement pursuant to
this proviso is necessary shall be made by Executive in good
faith, and such determination shall be conclusive and
binding on the Company with respect to its treatment of the
payment for tax reporting purposes and, provided further
that Executive may determine in his discretion what payment
or payments provided for herein shall be reduced.
9. Survival. The respective obligations of, and
benefits afforded to, the Company and Executive as provided
in Sections 5, 6, 7, 8, 13 and 14 of this Agreement shall
survive termination of this Agreement.
10. Notice. For purposes of this Agreement,
notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid
and addressed, in the case of the Company, to the address
set forth on the first page of this Agreement or, in the
case of the Executive, to the address set forth below his
signature, provided that all notices to the Company shall be
directed to the attention of the Chairman of the Board or
President of the Company, with a copy to the Secretary of
the Company, or to such other address as either party may
have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon receipt.
11. Miscellaneous. No provision of this Agreement
may be modified, waived or discharged unless such modifi-
cation, waiver or discharge is agreed to in a writing signed
by Executive and the Chairman of the Board or President of
the Company. No waiver by either party hereto at any time
of any breach by the other party hereto of, or of compliance
with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by
either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws
of the State of Kansas.
12. Severability. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full
force and effect.
13. Arbitration. Any dispute or controversy
arising under or in connection with this Agreement shall be
settled by arbitration, conducted by a panel of three
arbitrators in a location selected by Executive within fifty
(50) miles from the location of his job with the Company, in
accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the
arbitrators' award in any court having jurisdiction;
provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid until the Date
of Termination during the pendency of any dispute or
controversy arising under or in connection with this
Agreement.
14. Employee's Commitment. Executive agrees that
subsequent to his period of employment with the Company,
Executive will not at any time communicate or disclose to
any unauthorized person, without the written consent of the
Company, any proprietary processes of the Company or any
subsidiary or other confidential information concerning
their business, affairs, products, suppliers or customers
which, if disclosed, would have a material adverse effect
upon the business or operations of the Company and its
subsidiaries, taken as a whole; it being understood,
however, that the obligations of this Section 14 shall not
apply to the extent that the aforesaid matters (a) are
disclosed in circumstances where you are legally required to
do so or (b) become generally known to and available for use
by the public otherwise than by your wrongful act or
omission.
15. Counterparts. This Agreement may be executed
in several counterparts, each of which shall be deemed to be
an original but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed
this Agreement as of the date first written above.
FOURTH FINANCIAL CORPORATION
By:___________________________
Darrell G. Knudson
______________________________
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
---------------------------
Listed below are the names and states of incorporation or
jurisdiction of organization of each of Registrant's subsidiaries.
Each subsidiary does business only under its official name or an
abbreviated form of its official name, except BANK IV Kansas,
National Association, carries on its credit card and debit card
activities under the names "KBC Card Services" and Fourth Financial
Card Company" and carries on its residential mortgage origination
and servicing activities under the name "BANK IV Mortgage Company".
Name State or Jurisdiction
---- ---------------------
Subsidiaries of Registrant
--------------------------
BANK IV Kansas, National Association United States
BANK IV Oklahoma, National Association United States
BANK IV Missouri, National Association United States
IV Commercial Acquisition, Inc. Kansas
Fourth Financial Insurance Company Arizona
Southgate Trust Company Kansas
Fourth Investment Advisors, Inc. Oklahoma
BANK IV Community Development Corporation Kansas
Blackwell Security Bancshares, Inc. Oklahoma
Subsidiaries of BANK IV Kansas
------------------------------
OA Management, Inc. Kansas
CSI Holdings, Inc. Kansas
Townsite Plaza Development, Inc. Kansas
BANC IV Investments, Inc. Kansas
BANK IV Securities, Inc. Kansas
Subsidiaries of BANK IV Oklahoma
--------------------------------
Quatro I, Inc. Oklahoma
Health Concepts Recovery Centers, Inc. Oklahoma
Subsidiaries of IV Commercial Acquisition, Inc.
-----------------------------------------------
IV CB&T-Tulsa Holdings, Inc. Oklahoma
Exhibit 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 2-80907, No. 33-34455, No. 33-61456, No. 33-53857, No. 33-55364,
and No. 33-37477) pertaining to the Amended and Restated Fourth Financial
Corporation 1981 Incentive Stock Option Plan, Amended and Restated Fourth
Financial Corporation 1986 Incentive Stock Option Plan, Fourth Financial
Corporation 1993 Employee Stock Purchase Plan, Fourth Financial Corporation 1993
Incentive Stock Option Plan, the Fourth Financial Corporation Amended and
Restated Executive Employees' Deferred Compensation Plan, and Fourth Financial
Corporation Savings and Investment Plan of our report dated January 17, 1995,
except for the last paragraph of Note 5, as to which the date is February 23,
1995, with respect to the consolidated financial statements of Fourth Financial
Corporation included in this Annual Report on Form 10-K for the year ended
December 31, 1994.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Wichita, Kansas
March 10, 1995
Exhibit 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Fourth Financial Corporation Form 10-K, into Fourth
Financial Corporation's previously filed Registration Statements on Form S-8
(Reg. No. 2-80907, No. 33-34455, No. 33-61456, No. 33-53857, No. 33-55364, and
No. 33-37477).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 13, 1995
Exhibit 23.03
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements(Form
S-8 No. 2-80907, No. 33-34455, No. 33-61456, No. 33-53857, No. 33-55364, and No.
33-37477) pertaining to the Amended and Restated 1981 Incentive Stock Option
Plan, the Amended and Restated 1986 Incentive Stock Option Plan, the 1993
Employee Stock Purchase Plan of Fourth Financial Corporation, the Fourth
Financial Corporation 1993 Incentive Stock Option Plan, the Fourth Financial
Corporation Amended and Restated Executive Employees' Deferred Compensation
Plan, and the Fourth Financial Corporation Savings and Investment Plan of our
report dated February 19, 1993, with respect to the consolidated financial
statements of Commercial Landmark Corporation included in this Annual Report on
Form 10-K for the year ended December 31, 1994.
/s/ Sartain Fischbein & Co.
SARTAIN FISCHBEIN & CO.
March 10, 1995
Exhibit 23.04
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 2-80907, No. 33-34455, No. 33-61456, No. 33-53857, No. 33-37477,
and No. 33-55364) pertaining to the Amended and Restated Fourth Financial
Corporation 1981 Incentive Stock Option Plan, the Amended and Restated Fourth
Financial Corporation 1986 Incentive Stock Option Plan, the Fourth Financial
Corporation 1993 Employee Stock Purchase Plan, the Fourth Financial Corporation
1993 Incentive Stock Option Plan, the Fourth Financial Corporation Savings and
Investment Plan, and the Fourth Financial Corporation Amended and Restated
Executive Employees' Deferred Compensation Plan of our reports dated September
16, 1993, with respect to the consolidated financial statements of Ponca
Bancshares, Inc. and Subsidiary and of Security Bank & Trust Company of Ponca
City, Oklahoma and Subsidiaries as of December 31, 1992 and for the periods then
ended included in Fourth Financial Corporation's Annual Report on Form 10-K for
the year ended December 31, 1994.
/s/ GRA, Thompson, White & Co., P.A.
GRA, Thompson, White & Co., P.A.
Merriam, Kansas
March 10, 1994
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE DECEMBER 31, 1994 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
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<OTHER-SE> 365811
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