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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CULLEN/FROST BANKERS, INC.
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(Name of Registrant as Specified in Its Charter)
DIANE JACK
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
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[CULLEN/FROST BANKERS, INC.]
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 17, 1994
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To the Shareholders of
CULLEN/FROST BANKERS, INC.:
The Annual Meeting of Shareholders of Cullen/Frost Bankers, Inc.
("Cullen/Frost") will be held in the Commanders Room at The Frost National Bank
of San Antonio, 100 West Houston Street, San Antonio, Texas, on Tuesday, May 17,
1994, at 10:00 a.m., San Antonio time, for the following purposes:
1. To elect 19 directors to serve during the ensuing year or until
their successors are elected and have qualified;
2. To consider and vote upon the selection of Ernst & Young to act as
independent auditors of Cullen/Frost for the fiscal year that commenced
January 1, 1994, and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on March 25, 1994, are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES MUST BE PRESENT EITHER IN
PERSON OR BY PROXY IN ORDER TO HOLD THE MEETING. TO ENSURE YOUR REPRESENTATION
AT THE ANNUAL MEETING, PLEASE PROMPTLY MARK, SIGN, DATE AND MAIL THE ENCLOSED
PROXY IN THE POSTAGE PREPAID ENVELOPE PROVIDED FOR THIS PURPOSE.
All shareholders are cordially invited to attend the annual meeting.
By Order of the Board of Directors
DIANE JACK
Corporate Secretary
Dated: April 4, 1994
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[CULLEN/FROST BANKERS, INC.]
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PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 17, 1994
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SOLICITATION AND REVOCATION OF PROXY
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Cullen/Frost Bankers, Inc. ("Cullen/Frost" or the
"Company") of proxies to be used at the Annual Meeting of Shareholders. The
meeting is scheduled to be held on May 17, 1994, in accordance with the attached
notice. This Proxy Statement and the accompanying proxy card are being mailed to
shareholders beginning on or about April 4, 1994.
Cullen/Frost will bear the cost of solicitation of proxies for the Annual
Meeting. In addition to solicitation by mail, the directors, officers and
employees of Cullen/Frost may solicit proxies by telephone, telegram or in
person. Cullen/Frost also has retained Georgeson & Co., Inc. to assist in the
solicitation of proxies, for a fee of approximately $6,500 plus out-of-pocket
expenses. Brokers, nominees, fiduciaries and other custodians have been
requested to forward proxy soliciting material to the beneficial owners of
Cullen/Frost Common Stock, and Cullen/Frost will reimburse them for their
out-of-pocket expenses.
All shares of Cullen/Frost Common Stock represented by properly executed
proxies, if returned in time, will be voted at the meeting in accordance with
the instructions indicated thereon. If no direction is given, proxies will be
voted for the election as directors of the nominees referred to in Item 1 of the
Proxy Statement; in favor of the proposal described in Item 2 of it, and in the
discretion of persons named on the proxy in connection with any other business
that may properly come before the meeting. Shares represented by properly
executed proxies, if returned in time, will be counted for purposes of
determining the number of shares present and voted at the meeting, even if
authority to vote on any particular matter is withheld. A shareholder may revoke
a proxy at any time before it is voted by delivering written revocation notice
at the Company's principal executive office to the Secretary of Cullen/Frost,
Ms. Diane Jack, 100 West Houston Street, San Antonio, Texas 78205. A shareholder
who attends the meeting may vote by ballot at the meeting if desired, and such
vote will cancel any proxy vote previously given.
VOTING OF SECURITIES
The only class of voting securities of Cullen/Frost outstanding and
entitled to vote at the meeting is Common Stock, par value $5.00 per share. On
March 25, 1994, the record date for determining shareholders of Cullen/Frost
entitled to vote at the meeting, there were outstanding 11,031,723, each
entitled to one vote. Action to be taken on the above items will be determined
by a majority of the shares of Common Stock present and voted. Proxies which are
marked "abstain" will not be counted in determining whether a majority vote was
obtained.
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ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
A total of 19 directors are to be elected at the Annual Meeting of
Shareholders, each to hold office until the next Annual Meeting or until his
successor is elected and qualified. Unless otherwise indicated, the proxies will
be voted for the election of the nominees listed below. Although Cullen/Frost
management does not contemplate that any nominee will be unable to serve, if
such a situation arises prior to or at the meeting, the persons named in the
accompanying proxy will vote in accordance with their best judgment unless
otherwise instructed. All nominees are currently members of the Board.
Below is biographical information about each nominee, including his age,
recent business experience and/or position with the Company. Also included is
information on the nominees' ownership of Cullen/Frost Common Stock.
<TABLE>
<CAPTION>
SHARES OWNED(1)
--------------------------
AMOUNT AND
NATURE
DIRECTOR OF BENEFICIAL PERCENT
NOMINEE AGE PRINCIPAL OCCUPATION SINCE OWNERSHIP OF CLASS
------- --- -------------------- ----- ------------- --------
<S> <C> <C> <C> <C> <C>
Isaac Arnold, Jr......... 58 Oil, real estate, investments 1977 25,178(5) .23
Henry E. Catto........... 63 Partner, Catto & Catto 1993 5,000 .05
Insurance; former Director,
U.S. Information Agency;
former U.S. Ambassador to
Great Britain, and former
Vice Chairman, H&C
Communications
Harry H. Cullen.......... 58 Oil, real estate, investments 1993(2) 70,986(6) .65
Roy H. Cullen............ 64 Oil, real estate, investments 1977 28,549(7) .26
Richard W. Evans, Jr..... 47 Chief Banking Officer of 1993 32,273(8) .29
Cullen/Frost; Chairman of the
Board and Chief Executive
Officer of Frost Bank, a
Cullen/Frost Subsidiary
W. N. Finnegan, III...... 68 Attorney, oil and gas 1977 12,945(9) .12
consultant, R. E. Smith
Interests, Inc.
Joseph H. Frost.......... 53 Investments 1980 39,696 .36
T. C. Frost.............. 66 Chairman of the Board and 1966 328,512(8) 2.98
Chief Executive Officer of
Cullen/Frost
James W. Gorman, Jr...... 63 Oil, real estate, and 1987 4,300 .04
investments
James L. Hayne........... 60 Managing partner of Catto & 1977 4,899 .04
Catto (insurance)
Harris L. Kempner, Jr.... 54 President of Kempner Capital 1983 73,557(10) .67
Management, Inc. (money
management services) and
Chairman Emeritus of the Board
of United States National Bank
of Galveston ("United States
National Bank," a Cullen/Frost
subsidiary)
</TABLE>
(Table continued on following page)
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2
<PAGE> 5
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<TABLE>
<CAPTION>
SHARES OWNED(1)
--------------------------
AMOUNT AND
NATURE
DIRECTOR OF BENEFICIAL PERCENT
NOMINEE AGE PRINCIPAL OCCUPATION SINCE OWNERSHIP OF CLASS
- ------------------------- --- ------------------------------ ---- ------------- --------
<S> <C> <C> <C> <C> <C>
Richard M. Kleberg III... 51 Investments 1992 1,100 .01
Quincy Lee............... 78 Real estate development and 1974(3) 256 .00
investments
Robert S. McClane........ 54 President and Chief 1985 32,100(8) .29
Administrative Officer of
Cullen/Frost
J. Gordon Muir, Jr....... 52 Vice Chairman of Cullen/Frost 1979 11,542(8) .11
William B. Osborn, Jr.... 74 Oil and gas producer 1977 5,562 .05
Robert G. Pope........... 58 Former Vice Chairman of 1993 500 .01
Southwestern Bell Corporation;
former President and Chief
Executive Officer of
Southwestern Bell Telephone
Company; former Director,
Boatmen's Bancshares
Herman J. Richter........ 76 Chairman of the Board of 1978(4) 10,723(11) .10
Richter's Bakery (wholesale
bakery)
Curtis Vaughan, Jr....... 66 Chairman of the Board of 1980 5,698 .05
Vaughan & Sons, Inc.
(manufacturer and distributor
of building materials and real
estate development)
</TABLE>
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(1) Unless otherwise indicated, beneficial ownership is as of December 31,
1993, and the owners have sole voting and investment power for the shares
of Cullen/Frost Common Stock reported. The number of shares of Cullen/Frost
Common Stock beneficially owned by all directors, nominees and named
executive officers as a group is disclosed on page 12 of this Proxy
Statement.
(2) Also served as a director of Cullen Bank, a former Cullen/Frost subsidiary,
from 1969 to 1993.
(3) Also served as a director from 1968 to 1972.
(4) Also served as a director from 1971 to 1972.
(5) Includes 21,186 shares for which Mr. Arnold has shared voting and
investment power with others.
(6) Includes 26,532 shares for which Mr. Harry Cullen has shared voting and
investment power with Mr. Roy Cullen and others.
(7) Includes 26,532 shares for which Mr. Roy Cullen has shared voting and
investment power with Mr. Harry Cullen and others. Also includes 1,304
shares for which Mr. Roy Cullen has shared voting and shared investment
power with others.
(8) Includes the following shares allocated under the 401(k) Stock Purchase
Plan for Employees of Cullen/Frost Bankers, Inc., for which the beneficial
owners have sole voting but no investment power -- Mr. T. C. Frost 9,106,
Mr. McClane 5,047, Mr. Evans 6,288, and Mr. Muir 4,669.
(9) Includes 1,932 shares for which Mr. Finnegan has shared voting and
investment power with others.
(10) Includes 73,557 shares for which Mr. Kempner, Jr. has shared voting and
investment power with others.
(11) Includes 5,162 shares for which Mr. Richter has shared voting and
investment power with others.
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3
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Except for the relationships noted in the preceding table or below, no
nominee has had any other principal occupation or employment with Cullen/Frost
or any of its subsidiaries within the last five years. Each nominee has been
engaged in the above principal occupations for at least five years.
The following are directorships held by nominees in companies (other than
Cullen/Frost) with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended, or subject to the requirements
of Section 15(d) of such Act or registered as an investment company under the
Investment Company Act of 1940, as amended: Mr. Arnold -- Nuevo Energy Company;
Mr. Harry Cullen -- Pennzoil Co.; Mr. T. C. Frost -- Southwestern Bell
Corporation; Mr. Kempner, Jr. -- American Indemnity Financial Corporation,
Imperial Holly Corporation and Texas-New Mexico Power Company; and Mr.
Kleberg -- Abraxas Petroleum Corporation.
Each Cullen/Frost director is scheduled to serve as such until the next
Annual Meeting of Shareholders or until his successor is elected and qualified.
There are no arrangements or understandings between any nominee or director of
Cullen/Frost and any other person pursuant to which he was or is to be selected
as a director nominee.
The only family relationships among the directors or executive officers of
Cullen/Frost which are first cousin or closer are those of Mr. Henry Catto and
Mrs. James L. Hayne, who are first cousins; Messrs. Harry Cullen and Roy Cullen,
who are brothers; and the Cullen brothers and Mr. Arnold, who are first cousins.
GENERAL INFORMATION ABOUT THE BOARD OF DIRECTORS
The Cullen/Frost Board of Directors has four regularly scheduled, quarterly
meetings each year. The Board has Executive, Audit, Compensation and Benefits,
and Strategic Planning Committees. The Committees' functions and current members
are:
Executive Committee: This Committee acts for the Board of Directors between
meetings of the Board, except to the extent limited by resolutions of the Board,
by the Bylaws of Cullen/Frost or Texas law. Current members are T. C. Frost,
Robert S. McClane, Richard W. Evans, Jr. and J. Gordon Muir, Jr.
Audit Committee: The Audit Committee is composed of outside (non-employee)
directors. It reviews the scope and results of the annual audit by the
independent auditors, Ernst & Young, and it also reviews their performance of
non-audit services and considers whether the performance of such services will
have any effect on their independence. The Committee recommends its choice for
independent auditors to the Board of Directors. The Committee also monitors
regulatory examinations, the level of criticized assets, adequacy of loan loss
reserves, and the reports of internal audit and loan review at each subsidiary
of Cullen/Frost. It also reviews the financial reporting practices and the
internal audit, loan review, compliance, and appraisal functions for
Cullen/Frost. Current members are W. N. Finnegan III, Isaac Arnold, Jr., Quincy
Lee, Richard M. Kleberg III, and Herman Richter.
Compensation and Benefits Committee: The Compensation and Benefits
Committee is composed of outside (non-employee) directors. It makes
recommendations to the Board of Directors about compensation for certain
officers of Cullen/Frost. (See the "Report of the Compensation and Benefits
Committee on Annual Compensation" on page 5). In addition, to ensure consistent
administration of company-wide employee benefit plans, the Committee functions
as the administrative committee of (i) the Retirement Plan, (ii) the 1983 and
1988 Nonqualified Stock Option Plans, (iii) the Restricted Stock Plan, (iv) the
401(k) Stock Purchase Plan, (v) the 1991 Stock Purchase Plan, and (vi) the 1992
Stock Plan, (vii) the Pre-Tax Benefit Plan, and (viii) the Group Medical and
Life Insurance Plan. Current members are Roy H. Cullen, James L. Hayne, James W.
Gorman, Jr., and Curtis Vaughan, Jr., John C. Korbell, an Advisory Director of
Cullen/Frost, also serves as an Advisory Director to the Compensation and
Benefits Committee.
Strategic Planning Committee: The Strategic Planning Committee was
appointed to analyze strategic directions for Cullen/Frost in light of
competitive conditions; to monitor the corporate mission statement and
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4
<PAGE> 7
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capital planning, and to review short-and long-term goals. Current members are
T. C. Frost, Isaac Arnold, Jr., Harris L. Kempner, Jr., Quincy Lee, and Curtis
Vaughan, Jr.
Directors' fees are paid by Cullen/Frost on the basis of an annual retainer
of $6,000 per calendar year, plus $750 for each meeting attended. Cullen/Frost
also pays a fee of $750 per director for participation in any meeting of a
committee to which he has been appointed, except for the Chairman of the Audit
Committee, who receives $1,500 for each Audit Committee meeting he attends.
Directors of Cullen/Frost who also are officers of Cullen/Frost or any of its
subsidiaries receive no fees for serving on the Board of Directors or any of its
committees.
During 1993, there were six meetings of the Board of Directors, one meeting
of the Executive Committee, four meetings of the Audit Committee, three meetings
of the Compensation and Benefits Committee, and six meetings of the Strategic
Planning Committee. During 1993, all of the directors attended at least 75
percent of the aggregate of the meetings of the Board of Directors and the
committees on which they served except for Messrs. Henry Catto, Harry Cullen,
Roy Cullen, Joseph Frost, Richard Kleberg, and A. Frank Smith.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
1. BOARD COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee of the Board of Directors (the
"Committee") is committed to implementing a compensation program which furthers
the Company's mission. We, therefore, adhere to the following compensation
policies which are intended to facilitate the achievement of the Company's
business strategies:
- Compensation levels for each element of pay should be targeted at rates
that are reflective of current market practices prevalent in comparable
financial organizations. Offering market-comparable pay opportunities
allows the Company to attract and maintain a stable, successful
management team.
- Executives' total compensation packages should strengthen the
relationship between pay and performance with variable, at-risk
compensation that is dependent upon the level of success in meeting
specified Company and individual performance goals.
- Ownership of the Company's Common Stock by executives should be
encouraged to further align executives' interests with those of
shareholders and the Company and to promote a continuing focus on
building profitability and shareholder value.
- Sustained superior performance by individual executives over a period of
years including actions to increase revenues, reduce expenses, enhance
service and product quality, improve market share and thereby enhance
shareholder value should be rewarded.
To preserve objectivity in the achievement of its goals, the Committee is
comprised of four independent, non-employee directors and one independent,
non-employee advisory director. It is the Committee's overall goal to develop
compensation policies that are consistent with and linked to strategic business
objectives and Company values. The Committee approves the design of, assesses
the effectiveness of, and administers executive compensation programs in support
of compensation policies. The Committee also reviews all salary arrangements and
other remuneration for a limited group of executives, including those named in
the Summary Compensation table on page 9.
Each year Comprehensive analysis of competitive market data is provided by
an independent compensation consultant engaged by and responsible to the
Committee. The data provided compare the Company's compensation practices and
programs to a group of comparator companies. This group of comparator companies
is comprised of companies who have business operations, total assets, market
capitalizations and
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<PAGE> 8
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lines of business similar to those of the Company. The Committee reviews the
selection of companies used for compensation comparison purposes.
These comparator companies include but are not limited to the companies
included in the Standard & Poor's Major Regional Bank Index. The Standard &
Poor's Major Regional Bank Index was also used for the comparison of total
shareholder return shown in the Performance Graph on page 13.
The key elements of the Company's executive compensation are base salary
and long-term compensation. These key elements are addressed separately below.
In determining compensation, the Committee considers all elements of an
executive's total compensation package, including severance plans, insurance,
and other benefits.
BASE SALARIES
Base salaries constituted approximately 86% of total executive compensation
for 1993. The Committee believes that the demonstration of superior abilities
and performance by individual employees should be rewarded, in part, through
salary reviews. The Committee reviews the base salary of each of the five
highest-paid executives on an annual basis.
Base salaries may be adjusted after an evaluation of each executive's
performance in conjunction with a review of the median base pay received by
other individuals holding similar positions in the Company's comparator group.
Following the determination of the market-based pay, each officer's individual
performance, achievements, and contributions to the growth of the Company are
evaluated subjectively in determining the individual's salary. Finally, the
overall performance and needs of the Company are examined and salaries may be
adjusted in response to the need to attract and retain appropriate officers. The
Company places no specific weights on the factors used in determining base
salary levels.
Based on the factors listed above, base salaries approximated median market
levels of comparator companies in 1993, and merit increases were made at a rate
comparable to the increases provided at other companies. The Company made
limited bonus awards in 1993, which resulted in the level of total cash
compensation being below the median for comparable companies.
In determining Mr. Frost's base salary for 1993, the Committee considered
the Company's overall financial performance for the year, Mr. Frost's individual
performance and long-term contributions to the success of the Company, and base
salaries of CEOs at comparator companies. Mr. Frost's base salary was increased
for 1993 by $32,500 (8.8%) to $400,000. Overall, Mr. Frost's salary was
increased at a rate comparable to increases provided at other companies and
maintains his salary at an appropriate market level.
ANNUAL INCENTIVES
In 1993, the Company did not maintain a formal annual incentive plan for
executives and, as discussed below, elected to emphasize long-term incentives as
the means of providing compensation which is "at risk." Selected executives may
receive cash payments in lieu of base salary adjustments or in recognition of
outstanding contributions, and during 1993 three senior executives received such
a payment. The largest of these awards was 10.7% of the individual's base
salary.
LONG-TERM INCENTIVES
The Committee believes that executive compensation should be dependent upon
the performance of the Company as a whole as well as the performance of
individual executives. Long-term incentives are provided pursuant to the
Company's 1992 Stock Plan approved by the shareholders.
In keeping with the Company's commitment to provide a total compensation
package which includes at-risk components of pay, long-term incentives
constituted approximately 14% of an executive's total compensation package in
1993.
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<PAGE> 9
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When awarding long-term incentives, the Committee considers executives'
levels of responsibility, prior experience, historical award data, individual
performance, and compensation practices at comparator companies. The Committee's
objective is to provide executives with targeted long-term incentive award
opportunities that approximate median levels at comparator companies.
STOCK OPTIONS
Non-qualified stock options are granted at an option price not less than
the fair market value of the Common Stock on the date of grant. Accordingly, the
value of stock options is tied to appreciation in the stock price from the date
the options are granted. This design focuses executives on the creation of
shareholder value over the long term and encourages equity ownership in the
Company. Stock options are used as the primary long-term incentive vehicle.
The size of stock option grants is determined based on a percentage of
annualized base salary. The size of the award can be adjusted based on the
Committee's subjective valuation of individual factors and historical award
data. The Compensation and Benefits Committee's objective is to deliver a
competitive award opportunity based on the dollar value of the award granted. As
a result, the number of stock options awarded varies from year to year and is
dependent on the stock price on the date of grant.
In 1993, Mr. Frost received options to purchase 14,300 shares with an
exercise price of $35.50 as is detailed in the table on page 10. The grant
approximated the median level of comparator companies. Mr. Frost now has
beneficial ownership of 328,512 shares of the Company's common stock and with
the 1993 grant holds options to purchase an additional 51,001 shares. Mr.
Frost's stock option grant was in keeping with the Committee's intent to place
emphasis on long-term compensation which is tied directly to the success of the
Company and, correspondingly, that of shareholders.
RESTRICTED STOCK
Restricted stock provides executives with an immediate link to shareholder
interests and, due to vesting requirements, enhances the Company's ability to
maintain a stable executive team, focused on the Company's long-term success.
In 1993, the Company granted 4,988 restricted stock shares to executive
officers which included 1,560 restricted stock shares to Mr. Frost. This is
representative of awards in previous years as evidenced by the Summary Table on
page 9 and is consistent with compensation practices at comparator companies.
TAXATION PHILOSOPHY
Recently enacted Section 162(m) of the Internal Revenue Code generally
limits the corporate deduction for compensation paid to the Chief Executive
Officer and the four other most highly compensated executive officers unless the
compensation is performance-based. One condition to qualify compensation as
performance-based is to establish the amount of the award on an objective
formula that precludes any discretion.
The Committee has carefully considered the impact of this new tax code
provision on the Company's incentive plans and has determined that Section
162(m) is currently inapplicable because no named executive officer receives
compensation in excess of $1 million. Thus, the Committee believes it is in the
Company's and shareholder's best interests to retain the Committee's
discretionary evaluation of individual performance at this time.
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<PAGE> 10
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CONCLUSION
The Committee believes these executive compensation policies and programs
serve the interests of shareholders and the Company effectively. The various pay
vehicles offered are appropriately balanced to provide increased motivation for
executives to contribute to the Company's overall future successes, thereby
enhancing the value of the Company for the shareholder's benefit.
The Committee will continue to monitor the effectiveness of the Company's
total compensation program to meet the current needs of the Company.
Roy H. Cullen
James W. Gorman, Jr.
James L. Hayne
John C. Korbell (Advisory Director)
Curtis Vaughan, Jr.
2. COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
During 1993, Cullen/Frost and some of its subsidiary banks had customary
business and banking transactions, including outstanding loans, with certain of
the Company's directors serving on the Compensation and Benefits Committee.
These transactions include the following:
1. The principal offices of Frost National Bank's Cullen Center branch are
leased on a long-term basis from Cullen Center, Inc., and its motor bank
and convenience center are leased on a long-term basis from
Dresser-Cullen Venture, a Texas joint venture. During 1993, lease
payments of $1,501,020 and $171,286 were made to Cullen Center, Inc. and
Dresser-Cullen Venture, respectively. Cullen Center, Inc. is a 50
percent participant in Dresser-Cullen Venture. Mr. Roy Cullen, a
Cullen/Frost director, owns capital stock, of approximately 13 percent,
and is a director of Cullen Center, Inc.
2. Cullen/Frost and some of its subsidiaries have policies of insurance
written through Catto & Catto, an insurance agency of which Mr. Hayne, a
Cullen/Frost director, is a partner. Fees paid by Cullen/Frost and its
subsidiaries aggregated less then five percent of the total gross
revenues of Catto & Catto for its fiscal year ended December 31, 1993.
All of the above transactions were on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than normal
risk of collectibility or present other unfavorable features. Additional
transactions in the future may be expected to take place with the subsidiary
banks in the ordinary course of business.
Also, a loan originally established in the ordinary course of business with
a subsidiary bank and related to a director since has been reclassified as other
assets. Summit Joint Venture II, of which Mr. Vaughan, a Cullen/Frost director,
is a limited partner, has debt to Frost Bank which was originated to finance the
purchase and development of real estate. The largest amount outstanding during
1993 was $3,894,936, and the balance was $3,239,218 as of March 2, 1994.
Interest is being charged at a floating prime rate plus one percent.
In the opinion of management all of the above described transactions were
effected on terms comparable to those available to unaffiliated parties.
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3. SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
Shown below is information about annual and long-term compensation for the
past three fiscal years for services in all capacities to Cullen/Frost and its
subsidiaries of the Chief Executive Officer and the other five most highly
compensated executive officers (the "named executive officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------- ------------------------------------
SECURITIES
UNDERLYING ALL
OTHER RESTRICTED OPTIONS OTHER
ANNUAL STOCK /SARS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) (SHARES)(3) SATION(4)
--------------------------- ---- -------- ------- --------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
T. C. Frost 1993 $400,000 $ 0 $10,570 $55,380 14,300 $56,976
Chairman and CEO of 1992 $372,917 $ 0 $10,876 $ 0 8,706 $55,351
Cullen/Frost 1991 $352,917 $ 0 -- $73,500 33,075 --
Robert S. McClane 1993 $280,000 $30,000 $ 6,389 $39,050 9,300 $21,983
President and Chief Administrative 1992 $247,917 $ 0 $ 6,152 $ 0 6,204 $19,478
Officer of Cullen/Frost 1991 $231,917 $ 0 -- $48,300 19,561 --
Richard W. Evans, Jr. 1993 $257,083 $30,000 $ 5,647 $39,050 9,300 $18,435
Chief Banking Officer of Cullen/Frost 1992 $226,250 $ 0 $ 5,393 $ 0 4,191 $16,244
Chairman and CEO of Frost Bank 1991 $211,750 $ 0 -- $30,072 15,876 --
J. Gordon Muir, Jr. 1993 $220,000 $ 0 $ 4,574 $ 0 2,500 $17,285
Vice Chairman of Cullen/Frost 1992 $203,333 $20,000 $ 5,333 $ 0 2,541 $17,180
1991 $200,000 $20,000 -- $30,000 14,399 --
Kenneth A. Trapp 1993 $190,000 $15,000 $ 3,667 $ 0 4,000 $15,060
Executive Vice President, 1992 $180,417 $ 0 $ 3,933 $ 0 2,513 $14,192
Retail Banking of Frost Bank 1991 $171,417 $ 0 -- $26,772 11,245 --
Phillip D. Green 1993 $150,000 $15,000 $ 2,305 $15,620 3,180 $ 9,920
Executive Vice President and Treasurer 1992 $133,333 $ 0 $ 2,420 $ 0 1,980 $ 8,850
of Cullen/Frost 1991 $120,000 $ 0 -- $19,500 5,849 --
</TABLE>
- ------------
(1) Represents reimbursement for income taxes on contributions to Cullen/Frost's
1991 Thrift Incentive Stock Purchase Plan (1991 Thrift Plan). The 1991
Thrift Plan was established to provide a comparable benefit to the Company's
401(k) Plan for those executives whose participation in the 401(k) is
limited by IRS rules.
(2) Represents the dollar value of restricted stock awards, based on closing
market price of Cullen/Frost stock on grant date. The total number of
restricted shares held and their aggregate market value at December 31, 1993
were: Mr. Frost, 4,929 shares valued at $173,747; Mr. McClane 3,313 shares
valued at $116,783; Mr. Evans, 2,614 shares valued at $92,144; Mr. Muir,
1,374 shares valued at $48,434; Mr. Trapp, 1,225 shares valued at $43,181;
and Mr. Green, 1,333 shares valued at $46,988. Aggregate market value is
based on a fair market value of $35.25 at December 31, 1993. Dividends are
paid on the restricted shares at the same time and at the same rate as
dividends paid to shareholders of unrestricted shares. Stock awarded in 1991
and 1993 vests over a four-year period, at 25 percent per year.
(3) 1992 and 1991 awards are adjusted, pursuant to the terms of the respective
applicable stock plan, to reflect a 10% stock dividend in 1993.
(4) Represents the total and/or inputed income from certain insurance premiums
paid by Cullen/Frost and the Company's contribution to the 1991 Thrift Plan.
1993 and 1992 amounts for insurance premiums were $45,315 and $43,810,
respectively. The Company's contribution to the 1991 Thrift Plan was $94,344
in 1993 and $87,485 in 1992.
- --------------------------------------------------------------------------------
9
<PAGE> 12
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Cullen/Frost has employee stock option plans under which options to
purchase Common Stock are granted to executive officers and other key employees.
The table below shows grants during the past year of stock options under the
Cullen/Frost Bankers, Inc. 1992 Stock Plan to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
% OF
TOTAL
OPTIONS/SARS
GRANTED POTENTIAL REALIZABLE VALUE
NUMBER OF TO AT ASSUMED ANNUAL RATES OF
SECURITIES EMPLOYEES STOCK PRICE APPRECIATION
UNDERLYING IN FOR OPTION TERM
OPTIONS/SARS FISCAL EXERCISE EXPIRATION ---------------------------------
NAME GRANTED YEAR(1) PRICE DATE 0% 5% 10%
---- ------------ ----------- -------- ---------- --- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
T.C. Frost............ 14,300 12.3% $35.50(3) 10/18/2003 $ 0 $ 319,258 $ 809,063
Robert S. McClane..... 9,300 8.0% $35.50 10/18/2003 $ 0 $ 207,630 $ 526,174
Richard W. Evans, Jr. 9,300 8.0% $35.50 10/18/2003 $ 0 $ 207,630 $ 526,174
J. Gordon Muir, Jr. .. 2,500 2.1% $35.50 10/18/2003 $ 0 $ 55,814 $ 141,445
Kenneth A. Trapp...... 4,000 3.4% $35.50 10/18/2003 $ 0 $ 89,303 $ 226,311
Phillip D. Green...... 3,180 2.7% $35.50 10/18/2003 $ 0 $ 70,996 $ 179,918
All Shareholders(2)... N/A N/A $35.50 N/A $ 0 $245,788,704 $622,876,834
</TABLE>
- ---------------
(1) Based on 116,660 options granted to all employees in 1993.
(2) Shows potential realizable value at assumed annual rates for all
shareholders.
(3) Gains on "All Shareholders" assume a base price of $35.50, the market price
of the options issued to the named officers.
Shown below is information on stock options exercised during 1993 by each
of the named executive officers and the market value at fiscal year-end for
remaining options:
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
TOTAL NUMBER OF SECURITIES TOTAL VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
SHARES OPTIONS/SARS AT HELD AT FISCAL YEAR-
ACQUIRED FISCAL YEAR-END(#)(1) END($)(2)
ON VALUE -------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
T.C. Frost.................... -- -- 9,000 42,001 $ 196,299 $ 575,528
Robert S. McClane............. -- -- 6,004 26,995 $ 131,898 $ 362,338
Richard W. Evans, Jr. ........ -- -- 4,229 22,512 $ 91,517 $ 273,595
J. Gordon Muir, Jr. .......... -- -- 3,899 13,789 $ 89,749 $ 247,449
Kenneth A. Trapp.............. 574 $18,500 2,794 13,458 $ 60,692 $ 203,798
Phillip D. Green.............. -- -- 1,874 8,624 $ 41,254 $ 110,874
</TABLE>
- ---------------
(1) Reflects adjustment for 10% stock dividend in 1993.
(2) Total value of options based on a fair market value of Company Stock of
$35.25 as of December 31, 1993.
4. OTHER PLANS AND AGREEMENTS
Retirement Plan and Restoration Plan:
Cullen/Frost has a non-contributory Retirement Plan and Trust for Employees
of Cullen/Frost Bankers, Inc. and Its Affiliates for eligible employees which is
designed to comply with the requirements of the Employee Retirement Income
Security Act of 1974. It also has a Restoration Plan which provides benefits in
excess of the limits under Section 415 of the Internal Revenue Code and in
excess of limits on eligible
- --------------------------------------------------------------------------------
10
<PAGE> 13
- --------------------------------------------------------------------------------
earnings set by the Tax Reform Act of 1986; benefits are provided in connection
with both the Retirement Plan and a previous employee stock ownership plan. The
entire cost of the Retirement and Restoration Plans is provided by Cullen/Frost
and its subsidiaries.
The table below shows the anticipated annual benefit, computed on a
straight line basis, payable under the Retirement Plan and Restoration Plan upon
the normal retirement of a vested executive officer of Cullen/Frost at age 65
after 15, 20, 25, 30, and 35 years of credited service at specified annual
compensation levels.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $ 48,673 $ 54,081 $ 57,327 $ 61,195 $ 71,395
150,000 59,301 65,940 69,923 74,320 86,707
175,000 69,928 77,798 82,520 87,445 102,020
200,000 80,556 89,657 95,117 100,570 117,332
225,000 81,184 101,515 107,714 113,695 132,645
250,000 101,812 113,374 120,311 126,820 147,957
300,000 123,067 137,090 145,504 153,070 178,582
400,000 165,578 184,524 195,891 205,570 239,832
450,000 186,834 208,241 221,085 231,820 270,457
500,000 208,090 231,958 246,279 258,070 301,082
</TABLE>
The Retirement Plan was revised effective January 1, 1993 to provide a
monthly benefit based on a percentage of an eligible employee's final average
Compensation and years of service. An eligible employee's Retirement Benefit
will be the greater of the employee's benefit accrued under the prior provisions
of the plan up to December 31, 1992 or the benefits determined by the new
formula effective January 1, 1993. Included in "Compensation" according to the
Retirement Plan are Salary, Overtime, Bonuses, Commissions and wages deferred
for the Company 401(k) Plan or used to pay medical premiums and expenses under
the company Pre Tax Plan (IRS section 125 Plan). Participants in the Plan are
fully vested in their accrued benefits under the Plan upon attaining age 65 or
after five years of service, whichever occurs first. Death benefits are provided
to married participants who have completed five years of service. Normal
retirement is at age 65 but early retirement is available starting at age 55.
Early Retirement benefits are reduced on an actuarial basis. The benefit amounts
listed in the table represent amounts payable from the plans and are not subject
to any additional deduction for social security benefits or other offset
amounts.
The years of credited service under the Retirement Plan as of December 31,
1993 for each person named in the Summary Compensation Table on page 9 are: Mr.
T. C. Frost -- 44 years; Mr. McClane -- 31 years (41 -- years at age 65); Mr.
Evans -- 23 years (40 years at age 65); Mr. Muir -- 19 years (32 years at age
65); Mr. Trapp -- 25 years (38 years at age 65); and Mr. Green -- 13 years (39
years at age 65).
Effective January 1, 1994, the Company adopted a supplemental executive
retirement plan (SERP). The plan provides for target retirement benefits, as a
percentage of pay, beginning at age 55. The target percentage is 45% of pay at
age 55, increasing to 60% at age 60 and later. Benefits under the SERP are
reduced, dollar-for-dollar, by benefits received under the Retirement and
Restoration Plans, described above, and any social security benefits. Current
participants in the SERP are Messrs. McClane and Evans. At current salary
levels, at age 60, Mr. McClane would receive $68,000 annually and Mr. Evans
would receive $54,000 annually.
Change-in-Control Agreements
Cullen/Frost has entered into change-in-control agreements with the six
named executives above and other key employees. The main purposes of these
agreements are (i) to help executives evaluate objectively
- --------------------------------------------------------------------------------
11
<PAGE> 14
- --------------------------------------------------------------------------------
whether a potential change-in-control is in the best interests of shareholders,
(ii) to help protect against the departure of executives, thus assuring
continuity of management, in the event of an actual or threatened merger or
change in control, and (iii) to maintain compensation and benefits comparable to
those available from competing employers. "Change-in-control" is defined as an
acquisition of 20 percent or more of Cullen/Frost Common Stock by an individual,
corporation, partnership, group, association or other person; certain changes in
the composition of the Board of Directors by 50 percent or more; or certain
changes in control which must be reported to the Securities and Exchange
Commission.
Under these agreements, each of the six named executives could receive in
the event of a change-of-control 50 percent of their annualized base pay
(utilizing the calendar year immediately preceding the consummation of a
change-in-control) upon the effectiveness of the change-in-control. Furthermore,
five of the six executives could receive 2.49 times their average annual
compensation during the previous five years and the sixth executive could
receive 1.5 times his average annual compensation during the previous five years
if their position is terminated within two years following the change-in-control
either by Cullen/Frost, if the termination is for reasons other than cause,
disability or retirement, or by the covered person if the termination is for
good reason. "Good reason" is defined as a significant reduction or change in
responsibility, involuntary transfer to a new location, a reduction in
compensation or benefits, the failure of any successor to Cullen/Frost to assent
to such change-in-control agreement, any purported termination by Cullen/Frost
of the covered person without providing such person a proper written notice of
termination or, in the case of five of the six executives, their good faith
determination, within 90 days of a change-in-control, that as a result of the
change-in-control they are not able to discharge their duties effectively. The
agreements also provide for a continuation of certain employee benefits for
qualifying executives upon a change-in-control.
Assuming that a change-in-control of Cullen/Frost had occurred effective
December 31, 1993 and that termination of employment also had occurred on that
date, the maximum amounts that would be payable to the named executives are: Mr.
T. C. Frost $1,921,048; Mr. McClane $1,172,579; Mr. Evans $1,111,512; Mr. Muir
$957,240; Mr. Trapp $697,475; and Mr. Green $344,858; all named executive
officers as a group $6,204,712.
5. EXECUTIVE OWNERSHIP
The following table lists the number of shares of Cullen/Frost Common Stock
beneficially owned by each of the named executive officers and by all directors,
nominees and executive officers of Cullen/Frost as a group:
<TABLE>
<CAPTION>
SHARES OWNED(1)
---------------------
AMOUNT
AND
NATURE
OF PERCENT
BENEFICIAL OF
OWNERSHIP(2) CLASS
-------- ----
<S> <C> <C>
T. C. Frost.................................................... 328,512 2.98%
Robert S. McClane.............................................. 32,100 .29
Richard W. Evans, Jr........................................... 32,273 .29
J. Gordon Muir, Jr............................................. 11,542 .11
Kenneth A. Trapp............................................... 8,838 .08
Phillip D. Green............................................... 9,902 .09
All directors, nominees and executive officers
as group (23 persons)........................................ 721,982(3) 6.56%
</TABLE>
- ---------------
(1) Beneficial ownership is as of December 31, 1993.
(Notes continued on following page)
- --------------------------------------------------------------------------------
12
<PAGE> 15
- --------------------------------------------------------------------------------
(2) Includes the following shares allocated under the 401(k) Stock Purchase Plan
for which the beneficial owners have sole voting but no investment power --
Mr. T. C. Frost 9,106, Mr. McClane 5,047, Mr. Evans 6,288, Mr. Muir 4,669,
Mr. Trapp 3,664, and Mr. Green 2,919.
(3) Includes 31,693 shares for which directors, nominees and named executive
officers have sole voting but no investment power, 128,370 shares with
shared voting and shared investment power with others, and 7,937 shares
owned by an advisory director.
PERFORMANCE GRAPH
Below is a performance graph comparing the cumulative total shareholder
return on Cullen/Frost Common Stock with the cumulative total return of
companies on the Standard & Poor's 500 Stock Index and the Standard & Poor's
Major Regional Banks Index.
<TABLE>
<CAPTION>
S&P Major
Measurement Period Cullen/Frost Regional Bank
(Fiscal Year Covered) Bankers, Inc. S&P 500 Index
<S> <C> <C> <C>
1988 100 100 100
1989 89 132 122
1990 52 127 87
1991 122 166 156
1992 251 179 199
1993 315 197 210
</TABLE>
ASSUMES $100 INVESTED ON 12/31/88. DIVIDENDS ARE REINVESTED.
- --------------------------------------------------------------------------------
13
<PAGE> 16
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PRINCIPAL SHAREHOLDERS
At December 31, 1993, the only shareholders known by the management of
Cullen/Frost to own beneficially more than five percent of the outstanding
shares of Cullen/Frost Common Stock were:
<TABLE>
<CAPTION>
AMOUNT, NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------------------------ -------------- --------
<S> <C> <C>
Cullen/Frost Bankers, Inc.
P. O. Box 1600
San Antonio, Texas 78296................................... 1,175,025(1) 10.67%
GeoCapital Corporation
655 Madison Avenue
New York, New York 10021................................... 911,610(2) 8.28%
Trustees of General Electric Pension Trust
3003 Summer Street
Stamford, Connecticut 06904................................ 616,960(3) 5.60%
</TABLE>
- ---------------
(1) On December 31, 1994, Cullen/Frost owned no securities of Cullen/Frost for
its own account. However, Frost Bank and other Cullen/Frost subsidiary banks
held of record in various fiduciary capacities an aggregate of 1,175,025
shares. Frost Bank and these other subsidiaries had sole voting power for
85,045 shares and 68,290 shares, respectively, and shared voting power for
43,013 shares and 1,272 shares, respectively. Frost Bank and the other
subsidiaries had sole investment power for 86,677 shares and 65,341 shares,
respectively, and shared investment power for 12,062 shares and 3,803
shares, respectively. Frost Bank and the other subsidiaries had both sole
voting and investment power for 72,983 shares and 65,121 shares,
respectively. All of the shares are held by Cullen/Frost subsidiary banks,
each of which has reported that the securities, registered in its name as
fiduciary or in the names of various of its nominees, are owned by many
separate accounts, each of which is governed by a separate instrument which
sets forth the powers of the fiduciary with regard to the securities held.
(2) On December 31, 1993, GeoCapital Corporation held of record an aggregate of
911,610 shares of Cullen/Frost Common Stock with no voting power for any
shares and sole investment power for all the shares. GeoCapital has reported
that all the securities are held on behalf of its clients who are the actual
owners of the shares. (GeoCapital also has reported that, by virtue of their
ownership interest in GeoCapital, Messrs. Irwin Lieber and Barry Fingerhut,
Officers of GeoCapital, may be deemed to be indirect beneficial owners of
the shares which GeoCapital is deemed to own beneficially.)
(3) As of December 31, 1993, the trustees of General Electric Pension Trust
(GEPT) held of record an aggregate of 616,960 shares of Cullen/Frost Common
Stock with sole voting power and dispositive power. GEPT is a pension fund
which is subject to the provisions of the Employee Retirement Income
Security Act of 1974.
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14
<PAGE> 17
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TRANSACTIONS WITH MANAGEMENT AND OTHERS
Since January 1, 1993, some of the executive officers and directors of
Cullen/Frost, and some of their associates, are and have been customers of one
or more of the Cullen/Frost subsidiary banks and have had transactions with
these banks in the ordinary course of business. Transactions involving Messrs.
Roy Cullen, Hayne and Vaughan are described on page 8, "Compensation and
Benefits Committee Interlocks and Insider Participation in Compensation
Decisions." Other transactions have included, in addition to borrowings from the
subsidiary banks, the following:
1. The principal offices of Frost National Bank's Cullen Center branch
are leased on a long-term basis from Cullen Center, Inc., and its motor
bank and convenience center are leased on a long-term basis from
Dresser-Cullen Venture, a Texas joint venture. During 1993, lease payments
of $1,501,020 and $171,286 were made to Cullen Center, Inc. and
Dresser-Cullen Venture, respectively. Cullen Center, Inc. is a 50 percent
participant in Dresser-Cullen Venture. Mr. Arnold and Mr. Harry Cullen,
Cullen/Frost directors, own capital stock, approximately 38, and 13 percent
respectively, and are directors of Cullen Center, Inc.
2. Frost Bank leases its principal office building, known as Frost
Bank Tower, from Tower Investors, Ltd., the general partner of which is
controlled by Mr. Steve Lee. Also, Frost Bank leases office space in a
related parking garage from LSK Partners, Ltd., which is wholly-owned and
controlled by Mr. Steve Lee and his associates. During 1993, lease payments
of $4,243,666, including subleased space, and $443,954 were made to Tower
Investors, Ltd. and LSK Partners, Ltd. respectively. Mr. Steve Lee is the
son of Mr. Quincy Lee, a Cullen/Frost director, who has no financial
interest in the transactions.
3. Frost Bank's North Frost Center leases its banking premises from
Joint Venture Realty, a joint venture of which Mr. Osborn, a Cullen/Frost
director, and members of his family are co-venturers. The lease is for a
15-year term and the bank has options to extend the lease for up to three
additional five-year periods and options to lease additional space. During
1993, lease payments of $493,804 were made to Joint Venture Realty.
4. Cullen/Frost and some of its subsidiaries have policies of
insurance written through Catto & Catto, an insurance agency of which Mr.
Catto, a Cullen/Frost director, is a partner. Fees paid by Cullen/Frost and
its subsidiaries aggregated less than five percent of the total gross
revenues of Catto & Catto for its fiscal year ended December 31, 1993.
5. During 1993, United States National Bank paid to Kempner Capital
Management, Inc., an aggregate of $1,482,971 for investment advisory
service. Mr. Kempner, Jr., a Cullen/Frost director, is President of Kempner
Capital Management, Inc. and Chairman Emeritus and Advisor to the Board of
United States National Bank.
All of the above transactions were on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than normal
risk of collectibility or present other unfavorable features. Additional
transactions in the future may be expected to take place with the subsidiary
banks in the ordinary course of business.
Also, a loan originally established in the ordinary course of business with
a subsidiary bank and related to a director since been reclassified as other
assets. This transaction is described on page 8, "Compensation and Benefits
Committee Interlocks and Insider Participation in Compensation Decisions."
In the opinion of management all of the above described transactions were
effected on terms comparable to those available to unaffiliated parties.
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15
<PAGE> 18
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SELECTION OF AUDITORS
(ITEM 2 ON PROXY CARD)
The Board of Directors desires to obtain from the shareholders an
indication of their approval of the selection of Ernst & Young, certified public
accountants, as independent auditors of Cullen/Frost. Accordingly, upon the
affirmative vote of a majority of the shares of Cullen/Frost Common Stock
present and voted at the meeting, the Board of Directors will adopt a resolution
naming Ernst & Young as independent auditors of Cullen/Frost for the fiscal year
which commenced January 1, 1994. Ernst & Young has audited the financial
statements of Cullen/Frost since 1969.
In the opinion of Cullen/Frost management, the presence of Ernst & Young at
the meeting is not necessary to present properly the results of operations of
Cullen/Frost. However, if any shareholder desires to submit a question to the
independent auditors, management will ensure that the question is transmitted to
them and that a prompt written response is made directly to the shareholder.
SHAREHOLDER PROPOSALS
With respect to the 1995 Annual Meeting of Shareholders, any shareholder's
proposal for inclusion in the Proxy Statement for that meeting must be received
by Cullen/Frost at its principal offices not later than January 31, 1995.
OTHER MATTERS
Management of Cullen/Frost knows of no other business to be presented at
the meeting, but if other matters do properly come before the meeting, unless
otherwise instructed, it is intended that the persons named in the proxy will
vote shares according to their best judgment.
By Order of the Board of Directors
DIANE JACK
Corporate Secretary
Dated: April 4, 1994
- --------------------------------------------------------------------------------
16
<PAGE> 19
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING
OF CULLEN/FROST BANKERS, INC.
The undersigned hereby revoking all proxies previously granted, appoints
ROY H. CULLEN, T. C. FROST and ROBERT S. McCLANE, and each of them, with power
of subsitution, as proxy of the undersigned, to attend the Annual Meeting of
Shareholders of Cullen/Frost Bankers, Inc. on May 17, 1994, and any
adjournments thereof, and to vote the number of shares the undersigned would be
entitled to vote if personally present as designated on the reverse.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND IN
THE DISCRETION OF THE PROXIES UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
(Continued and to be dated and signed on the reverse.)
<PAGE> 20
<TABLE>
<S> <C> <C> <C>
(1) ELECTION OF DIRECTORS FOR all nominees [X] WITHHOLD AUTHORITY to vote [X] *EXCEPTIONS [X]
listed below for any nominees listed below
</TABLE>
I. Arnold, Jr., H. E. Catto, H. H. Cullen, R. H. Cullen, R. W.
Evans, Jr., W. N. Finnegan III, J. H. Frost, T. C. Frost, J. W. Gorman,
Jr., J. L. Hayne, H. L. Kempner, Jr., Richard M. Kleberg, III, Q. Lee,
R. S. McClane, J. G. Muir, Jr., W. B. Osborn, Jr., R. G. Pope, H. J.
Richter, C. Vaughan, Jr. INSTRUCTIONS: To withhold authority to vote for
any individual nominee mark the "EXCEPTIONS" box, and write the nominee's
name in the space below. *Exceptions
________________________________________________________________
(2) The approval of the selection of (3) Upon such other business as may
Ernst & Young as independent properly come before the Annual
auditors of Cullen/Frost for the Meeting.
fiscal year that commenced
January 1, 1994.
FOR [X] AGAINST [X] ABSTAIN [X] FOR [X] AGAINST [X] ABSTAIN [X]
Address Change and/or Comments Mark Here [X]
PROXY DEPARTMENT
SAN ANTONIO, TEXAS 78296-9987
Signature should correspond
with the printed name appearing
hereon. When signing in a
fiduciary or representative
capacity, give full title as
such, or when more than one
owner, each should sign.
Date:__________________, 1994
______________________________
(Signature of Shareholder)
______________________________
(Signature of Shareholder)
Votes must be indicated
[X] in Black or Blue Ink. [X]
PLEASE BE CERTAIN THAT YOU HAVE DATED AND SIGNED THIS PROXY.
RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
