<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997 -- Commission File Number 1-6523
---------------
NationsBank Corporation
(Exact name of registrant as specified in its charter)
North Carolina 56-0906609
- - -------------------------------------- --------------------------------------
(State of incorporation) (IRS Employer Identification No.)
NationsBank Corporate Center
Charlotte, North Carolina 28255
- - -------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
704/386-5000
- - --------------------------------------
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
<S> <C>
Title of each class Name of each exchange on which registered
Common Stock New York Stock Exchange
London Stock Exchange
Pacific Stock Exchange
Tokyo Stock Exchange
7 3/4% Debentures, due 2002 American Stock Exchange
8 1/2% Subordinated Capital Notes, due 1999 New York Stock Exchange
9 7/8% Subordinated Notes, due 2001 New York Stock Exchange
8 1/2% Subordinated Notes, due 2007 New York Stock Exchange
10 7/8% Subordinated Notes, due 2003 New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934
during the preceding 12 months, 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 in any amendment to
this Form 10-K. [ ]
The aggregate market value of the registrant's common stock held by
non-affiliates is approximately $64,517,219,000 (based on the February 27,
1998, closing price of such common stock of $68.50 per share). As of March 6,
1998, there were 962,209,252 shares of the registrant's common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
<S> <C>
Document of the Registrant Form 10-K Reference Location
Portions of the 1998 Proxy Statement PART III
</TABLE>
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<PAGE>
NATIONSBANK CORPORATION
Form 10-K Index
<TABLE>
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Page
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<S> <C> <C>
PART I
Item 1. Business ..................................................................... 2
Primary Market Areas ......................................................... 2
Acquisition and Disposition Activity ......................................... 2
Government Supervision and Regulation ........................................ 2
Competition .................................................................. 5
Employees .................................................................... 6
Business Unit Operations ..................................................... 12-14
Net Interest Income .......................................................... 14-16
Securities ................................................................... 22, 51,
57-58
Loans, Leases and Factored Accounts Receivable ............................... 17, 22-23,
31-39, 52,
60-61
Deposits ..................................................................... 23
Short-Term Borrowings ........................................................ 23-24, 61
Market Risk Management ....................................................... 25-30
Selected Quarterly Operating Results ......................................... 41
Six-Year Consolidated Statistical Summary .................................... 80-81
Item 2. Properties ................................................................... 6
Item 3. Legal Proceedings ............................................................ 6
Item 4. Submission of Matters to a Vote of Security Holders .......................... 6
Item 4A. Executive Officers of the Registrant ......................................... 7
PART II
Item 5. Market for Registrant's Common Stock and Related Security Holder Matters ..... 7
Item 6. Selected Financial Data ...................................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
9
Operations ...................................................................
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ................... 45
Item 8. Financial Statements and Supplementary Data .................................. 45
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
82
Disclosure ...................................................................
PART III
Item 10. Directors and Executive Officers of the Registrant ........................... 82
Item 11. Executive Compensation ....................................................... 82
Item 12. Security Ownership of Certain Beneficial Owners and Management ............... 82
Item 13. Certain Relationships and Related Transactions ............................... 82
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .............. 83
</TABLE>
1
<PAGE>
PART I
Item 1. BUSINESS
NationsBank Corporation is a North Carolina corporation and a multi-bank
holding company registered under the Bank Holding Company Act of 1956, as
amended (the "Act"), with its principal assets being the stock of its
subsidiaries (the "Corporation"). The principal executive offices of the
Corporation are located at NationsBank Corporate Center in Charlotte, North
Carolina 28255.
On February 27, 1997, the Corporation completed a two-for-one split of its
common stock (the "Common Stock"). All financial data included in this Annual
Report on Form 10-K reflects the impact of the stock split.
For additional information about the Corporation and its operations, see
Table Two and the narrative comments under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Business Unit
Operations."
Primary Market Areas
Through its banking subsidiaries (the "Banks") and various non-banking
subsidiaries, the Corporation provides banking and banking-related services
primarily throughout the Mid-Atlantic (Maryland, Virginia and the District of
Columbia), the Midwest (Illinois, Iowa, Kansas and Missouri), the Southeast
(Florida, Georgia, Kentucky, North Carolina, South Carolina and Tennessee) and
the Southwest (Arkansas, New Mexico, Oklahoma and Texas). The Corporation
serves an aggregate of over 16 million households in these regions, and
management believes that these are dynamic regions in which to be located.
Personal income levels in these regions as a whole rose 5.4 percent between
1996 and 1997, and the population in these areas as a whole rose an estimated
1.2 percent between 1996 and 1997. The number of housing permits authorized
increased 2.6 percent between 1996 and 1997, ranging from a decrease of 3.05
percent in the Midwest to an increase of 5.67 percent in the Southwest. Between
1996 and 1997, the levels of unemployment in these regions as a whole fell by
approximately .06 percentage points, for an average unemployment rate of 4.7
percent in 1997. These states created more than one million new jobs in 1997,
2.2 percent above 1996.
The Corporation has the leading bank deposit market share position in
Florida, Georgia, Kansas, Maryland, New Mexico and Texas. In addition, the
Corporation ranks second in terms of bank deposit market share in Arkansas,
Missouri and South Carolina; third in the District of Columbia, Oklahoma and
Virginia; fifth in North Carolina and Tennessee; and seventh in Iowa. The
Corporation has less than 1.0 percent of the bank deposit market share in
Illinois and Kentucky.
Acquisition and Disposition Activity
As part of its operations, the Corporation regularly evaluates the
potential acquisition of, and holds discussions with, various financial
institutions and other businesses of a type eligible for bank holding company
ownership or control. In addition, the Corporation regularly analyzes the
values of, and submits bids for, the acquisition of customer-based funds and
other liabilities and assets of such financial institutions and other
businesses. The Corporation also regularly considers the potential disposition
of certain of its assets, branches, subsidiaries or lines of businesses. In
1997, the Corporation sold a number of business units acquired as a result of
its acquisition of Boatmen's Bancshares, Inc. ("Boatmen's"), including
Boatmen's corporate and institutional trust and stock transfer businesses,
relocation management business, insurance premium financing business and an
escrow services business. In addition, the Corporation has entered into an
agreement to sell Superior Federal Bank, F.S.B., its federal savings bank
headquartered in Fort Smith, Arkansas. The Corporation has also entered into an
agreement to sell NationsBank of Kentucky, N.A. As a general rule, the
Corporation publicly announces any material acquisitions or dispositions when a
definitive agreement has been reached.
For additional information regarding the Corporation's acquisition
activity, see Note Two of the Notes To Consolidated Financial Statements.
Government Supervision and Regulation
General
As a registered bank holding company, the Corporation is subject to the
supervision of, and to regular inspection by, the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). The Banks are
2
<PAGE>
organized as national banking associations, which are subject to regulation,
supervision and examination by the Office of the Comptroller of the Currency
(the "Comptroller"), and as state chartered banks, which are subject to
regulation, supervision and examination by the relevant state regulators. The
Banks are also subject to regulation by the Federal Deposit Insurance
Corporation (the "FDIC") and other federal regulatory agencies. The Corporation
also owns a federal savings bank which is subject to supervision, regulation
and examination by the Office of Thrift Supervision. In addition to banking
laws, regulations and regulatory agencies, the Corporation and its subsidiaries
and affiliates are subject to various other laws and regulations and
supervision and examination by other regulatory agencies, all of which directly
or indirectly affect the operations and management of the Corporation and its
ability to make distributions. The following discussion summarizes certain
aspects of those laws and regulations that affect the Corporation.
The activities of the Corporation, and those of companies which it
controls or in which it holds more than 5 percent of the voting stock, are
limited to banking or managing or controlling banks or furnishing services to
or performing services for its subsidiaries, or any other activity which the
Federal Reserve Board determines to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In making
such determinations, the Federal Reserve Board is required to consider whether
the performance of such activities by a bank holding company or its
subsidiaries can reasonably be expected to produce benefits to the public such
as greater convenience, increased competition or gains in efficiency that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices. Generally, bank holding companies, such as the Corporation, are
required to obtain prior approval of the Federal Reserve Board to engage in any
new activity or to acquire more than 5 percent of any class of voting stock of
any company.
Bank holding companies are also required to obtain the prior approval of
the Federal Reserve Board before acquiring more than 5 percent of any class of
voting stock of any bank which is not already majority-owned by the bank
holding company. Pursuant to the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking and Branching Act"), a bank
holding company became able to acquire banks in states other than its home
state, beginning September 29, 1995, without regard to the permissibility of
such acquisitions under state law, but subject to any state requirement that
the bank has been organized and operating for a minimum period of time, not to
exceed five years, and the requirement that the bank holding company, prior to
or following the proposed acquisition, controls no more than 10 percent of the
total amount of deposits of insured depository institutions in the United
States and no more than 30 percent of such deposits in that state (or such
lesser or greater amount set by state law).
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, thereby creating interstate branches. This provision, which
was effective June 1, 1997, allowed each state, prior to the effective date,
the opportunity to "opt out" of this provision, thereby prohibiting interstate
branching within that state. Of those states in which the Banks are located,
only Texas has adopted legislation to "opt out" of the interstate branching
provisions (which Texas law currently expires on September 2, 1999).
Furthermore, pursuant to the Interstate Banking and Branching Act, a bank is
now able to open new branches in a state in which it does not already have
banking operations if such state enacts a law permitting such de novo
branching. To the extent permitted under these laws, the Corporation plans to
consolidate its banking subsidiaries (with the exception of NationsBank of
Delaware, N.A.) into a single bank as soon as practicable. The Corporation
currently operates one interstate bank (i.e., a bank with banking centers in
more than one state) which is NationsBank, N.A., headquartered in Charlotte,
North Carolina, with offices in Arkansas, Florida, Georgia, Illinois, Iowa,
Kansas, Maryland, Missouri, New Mexico, North Carolina, Oklahoma, South
Carolina, Virginia, Texas and the District of Columbia. Separate banks continue
to operate in Delaware, Florida, Georgia, Kentucky (which it has agreed to
sell), Tennessee and Texas. In addition, the Corporation has a federal savings
bank headquartered in Arkansas which it has agreed to sell. As previously
described, the Corporation regularly evaluates merger and acquisition
opportunities, and it anticipates that it will continue to evaluate such
opportunities.
Proposals to change the laws and regulations governing the banking
industry are frequently introduced in Congress, in the state legislatures and
before the various bank regulatory agencies. The likelihood and timing of any
such proposals or bills and the impact they might have on the Corporation and
its subsidiaries cannot be determined at this time.
3
<PAGE>
Capital and Operational Requirements
The Federal Reserve Board, the Comptroller and the FDIC have issued
substantially similar risk-based and leverage capital guidelines applicable to
United States banking organizations. In addition, those regulatory agencies may
from time to time require that a banking organization maintain capital above
the minimum levels, whether because of its financial condition or actual or
anticipated growth. The Federal Reserve Board risk-based guidelines define a
two-tier capital framework. Tier 1 capital consists of common and qualifying
preferred shareholders' equity, less certain intangibles and other adjustments.
Tier 2 capital consists of subordinated and other qualifying debt, and the
allowance for credit losses up to 1.25 percent of risk-weighted assets. The sum
of Tier 1 and Tier 2 capital less investments in unconsolidated subsidiaries
represents qualifying total capital, at least 50 percent of which must consist
of Tier 1 capital. Risk-based capital ratios are calculated by dividing Tier 1
and total capital by risk-weighted assets. Assets and off-balance sheet
exposures are assigned to one of four categories of risk-weights, based
primarily on relative credit risk. The minimum Tier 1 capital ratio is 4
percent and the minimum total capital ratio is 8 percent. The Corporation's
Tier 1 and total risk-based capital ratios under these guidelines at December
31, 1997 were 6.50 percent and 10.89 percent, respectively.
The leverage ratio is determined by dividing Tier 1 capital by adjusted
average total assets. Although the stated minimum ratio is 3 percent, most
banking organizations are required to maintain ratios of at least 100 to 200
basis points above 3 percent. The Corporation's leverage ratio at December 31,
1997 was 5.57 percent. Management believes that the Corporation meets its
leverage ratio requirement.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective Federal regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines
could also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of 5 percent of the bank's assets at the time it became
"undercapitalized" or the amount needed to comply with the plan. Furthermore,
in the event of the bankruptcy of the parent holding company, such guarantee
would take priority over the parent's general unsecured creditors. In addition,
FDICIA requires the various regulatory agencies to prescribe certain
non-capital standards for safety and soundness relating generally to operations
and management, asset quality and executive compensation and permits regulatory
action against a financial institution that does not meet such standards.
The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage capital
ratios as the relevant capital measures. Such regulations establish various
degrees of corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 capital ratio of at least 6 percent, a total capital ratio of at
least 10 percent and a leverage ratio of at least 5 percent and not be subject
to a capital directive order. An "adequately capitalized" institution must have
a Tier 1 capital ratio of at least 4 percent, a total capital ratio of at least
8 percent and a leverage ratio of at least 4 percent, or 3 percent in some
cases. Under these guidelines, each of the Banks is considered well
capitalized.
Banking agencies have also adopted final regulations which mandate that
regulators take into consideration (i) concentrations of credit risk; (ii)
interest rate risk (when the interest rate sensitivity of an institution's
assets does not match the sensitivity of its liabilities or its
off-balance-sheet position); and (iii) risks from non-traditional activities,
as well as an institution's ability to manage those risks, when determining the
adequacy of an institution's capital. That evaluation will be made as a part of
the institution's regular safety and soundness examination. In addition, the
banking agencies have amended their regulatory capital guidelines to
incorporate a measure for market risk. In accordance with the amended
guidelines, the Corporation and any Bank with significant trading activity (as
defined in the amendment) must incorporate a measure for market risk in their
regulatory capital calculations effective for reporting periods after January
1, 1998. The revised guidelines are not expected to have a material impact on
the Corporation or the Banks' regulatory capital ratios or their well
capitalized status.
4
<PAGE>
Distributions
The Corporation's funds for cash distributions to its shareholders are
derived from a variety of sources, including cash and temporary investments.
The primary source of such funds, however, is dividends received from the
Banks. Each of the Banks is subject to various general regulatory policies and
requirements relating to the payment of dividends, including requirements to
maintain capital above regulatory minimums. The appropriate federal regulatory
authority is authorized to determine under certain circumstances relating to
the financial condition of the bank or bank holding company that the payment of
dividends would be an unsafe or unsound practice and to prohibit payment
thereof.
In addition to the foregoing, the ability of the Corporation and the Banks
to pay dividends may be affected by the various minimum capital requirements
and the capital and non-capital standards established under FDICIA, as
described above. The right of the Corporation, its shareholders and its
creditors to participate in any distribution of the assets or earnings of its
subsidiaries is further subject to the prior claims of creditors of the
respective subsidiaries.
Source of Strength
According to Federal Reserve Board policy, bank holding companies are
expected to act as a source of financial strength to each subsidiary bank and
to commit resources to support each such subsidiary. This support may be
required at times when a bank holding company may not be able to provide such
support. Similarly, under the cross-guarantee provisions of the Federal Deposit
Insurance Act, in the event of a loss suffered or anticipated by the FDIC --
either as a result of default of a banking or thrift subsidiary of the
registrant or related to FDIC assistance provided to a subsidiary in danger of
default -- the other Banks may be assessed for the FDIC's loss, subject to
certain exceptions.
Competition
The activities in which the Corporation and its three major business units
(the General Bank, Global Finance and Financial Services) engage are highly
competitive. Generally, the lines of activity and markets served involve
competition with other banks, savings and loan associations, credit unions and
other non-bank financial institutions, such as investment banking firms,
brokerage firms, mutual funds and insurance companies, as well as other
entities which offer financial services, located both within and without the
United States. The methods of competition center around various factors, such
as customer services, interest rates on loans and deposits, lending limits and
location of offices.
The commercial banking business in the various local markets served by the
Corporation's three major business units is highly competitive. The General
Bank, Global Finance and Financial Services compete with other commercial
banks, savings and loan associations, finance companies and other businesses
which provide similar services. The three major business units actively compete
in commercial lending activities with local, regional and international banks
and non-bank financial organizations, some of which are larger than certain of
the registrant's non-banking subsidiaries and the Banks. In its consumer
lending operations, the competitors of the three major business units include
other banks, savings and loan associations, credit unions, regulated small loan
companies and other non-bank organizations offering financial services. In the
investment banking, investment advisory and brokerage business, the
Corporation's non-banking subsidiaries compete with other banking and
investment banking firms, investment advisory firms, brokerage firms, mutual
funds and other organizations offering similar services. The Corporation's
mortgage banking subsidiary competes with commercial banks, savings and loan
associations, government agencies, mortgage brokers and other non-bank
organizations offering mortgage banking services. In the trust business, the
Banks compete with other banks, investment counselors and insurance companies
in national markets for institutional funds and corporate pension and profit
sharing accounts. The Banks also compete with other banks, trust companies,
insurance agents, financial counselors and other fiduciaries for personal trust
business. The Corporation and its three major business units also actively
compete for funds. A primary source of funds for the Banks is deposits, and
competition for deposits includes other deposit-taking organizations, such as
commercial banks, savings and loan associations and credit unions, as well as
money market mutual funds.
The Corporation's ability to expand into additional states remains subject
to various federal and state laws. See "Government Supervision and Regulation
- - -- General" for a more detailed discussion of interstate banking and branching
legislation and certain state legislation.
5
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Employees
As of December 31, 1997, the Corporation and its subsidiaries had 80,360
full-time equivalent employees. Of the foregoing employees, 48,998 were
employed by the General Bank, 6,882 were employed by Global Finance, 2,768 were
employed by Financial Services, 19,416 were employed by NationsBanc Services,
Inc. (a subsidiary providing operational support services to the Corporation
and its subsidiaries) and the remainder were employed by the Corporation and
its other subsidiaries. On January 9, 1998, the Corporation completed its
merger with Barnett Banks, Inc., which had 21,487 full-time equivalent
employees as of December 31, 1997. None of the Corporation's domestic employees
are covered by a collective bargaining agreement. Management considers its
employee relations to be good.
Item 2. PROPERTIES
The principal offices of the Corporation, as well as the General Bank and
Global Finance, are located in the 60-story NationsBank Corporate Center in
Charlotte, North Carolina, which is owned by a subsidiary of the Corporation.
The Corporation occupies approximately 589,000 square feet and leases
approximately 524,000 square feet to third parties at market rates, which
represents substantially all of the space in this facility. The principal
offices of Financial Services are located in two buildings in Jacksonville,
Florida, which are owned by a subsidiary of the Corporation. Financial Services
occupies substantially all of the approximately 307,000 square feet in these
facilities.
The Corporation also leases or owns a significant amount of space in
Atlanta, Georgia; Baltimore, Maryland; Dallas, Texas; Jacksonville and Tampa,
Florida; Richmond and Norfolk, Virginia; and St. Louis, Missouri; as well as
additional premises in Charlotte and throughout its franchise. As of January 9,
1998, the Corporation and its subsidiaries owned or leased approximately 5,300
locations in 46 states, the District of Columbia and 10 foreign countries.
Item 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Corporation and its subsidiaries
are routinely defendants in or parties to a number of pending and threatened
legal actions and proceedings, including several actions brought on behalf of
various classes of claimants. In certain of these actions and proceedings
substantial money damages are asserted against the Corporation and its
subsidiaries and certain of these actions and proceedings are based on alleged
violations of consumer protection, securities, environmental, banking and other
laws. Management believes, based upon the advice of counsel, that these actions
and proceedings and the losses, if any, resulting from the final outcome
thereof, will not be material in the aggregate to the Corporation's financial
position or results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of shareholders was held on December 19, 1997 (the
"Special Meeting"). The Corporation's Common Stock, 7% Cumulative Redeemable
Preferred Stock, Series B, and ESOP Convertible Preferred Stock, Series C,
voted together as a single class on the matters submitted to the shareholders
at the Special Meeting. The following are voting results on each of these
matters:
<TABLE>
<S> <C> <C> <C> <C>
Against
or Broker
For Withheld Abstentions Nonvotes
----------- ----------- --------- ---------
1. The issuance of shares of the Corporation's
Common Stock and $2.50 Cumulative
Convertible Preferred Stock, Series BB, in the
merger with Barnett Banks, Inc. .............. 502,572,758 7,359,802 3,251,244 0
2. The amendment and restatement of the
NationsBank Corporation Key Employee Stock
Plan ......................................... 395,758,669 109,390,495 8,034,640 0
</TABLE>
6
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Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to the Instructions to Form 10-K and Item 401(b) of Regulation
S-K, the name, age and position of each executive officer and the principal
accounting officer of the Corporation are listed below along with such
officer's business experience during the past five years. Officers are
appointed annually by the Board of Directors at the meeting of directors
immediately following the annual meeting of shareholders.
Andrew B. Craig, III, age 66, Chairman of the Board. Mr. Craig was
Chairman of the Board and Chief Executive Officer of Boatmen's Bancshares, Inc.
from 1989 until January 7, 1997 when Boatmen's Bancshares, Inc. was merged with
the Corporation at which time he was elected as Chairman of the Board and a
director of the Corporation. He also served as President of Boatmen's
Bancshares, Inc. from 1985 to 1994.
James H. Hance, Jr., age 53, Vice Chairman and Chief Financial Officer.
Mr. Hance was named Chief Financial Officer in August 1988, also served as
Executive Vice President from March 1987 to October 1993 and was named Vice
Chairman in October 1993. He first became an officer in 1987. He also serves as
Vice Chairman and a director of NationsBank, N.A., and as a director of the
Corporation, NationsBank of Tennessee, N.A. and various other subsidiaries of
the Corporation.
Kenneth D. Lewis, age 50, President. Mr. Lewis was named to his present
position in October 1993. Prior to that time, from June 1990 to October 1993 he
served as President of the Corporation's General Bank. He first became an
officer in 1971. Mr. Lewis also serves as President and a director of
NationsBank, N.A. and a director of NationsBank of Texas, N.A. and of the
Corporation.
Hugh L. McColl, Jr., age 62, Chief Executive Officer and Chief Executive
Officer of the Banks. Mr. McColl was Chairman of the Corporation from September
1983 until December 31, 1991, and from December 31, 1992 until January 7, 1997.
He first became an officer in 1962. He also serves as a director of the
Corporation.
Marc D. Oken, age 51, Executive Vice President and Principal Accounting
Officer. He first became an officer in 1989.
F. William Vandiver, Jr., age 56, Chairman, Corporate Risk Policy. Mr.
Vandiver was named to his present position in June 1997. Prior to that time,
from January 1996 to June 1997 he served as President of NationsBank Global
Finance and from July 1991 to January 1996 he served as President, Specialized
Finance Group. He has been an officer since 1968. He also serves as a director
of NationsBank, N.A.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
The principal market on which the Common Stock is traded is the New York
Stock Exchange. The Common Stock is also listed on the London Stock Exchange
and the Pacific Stock Exchange, and certain shares are listed on the Tokyo
Stock Exchange. The following table sets forth the high and low sales prices of
the Common Stock on the New York Stock Exchange Composite Transactions List for
the periods indicated:
<TABLE>
<CAPTION>
Quarter High Low
--------- ------------ -----------
<S> <C> <C> <C>
1996 first $40 11/16 $32 3/16
second 42 5/16 37 3/8
third 47 1/16 38 3/16
fourth 52 5/8 43 1/8
1997 first 65 48
second 70 54
third 71 11/16 56 5/8
fourth 66 3/8 55
</TABLE>
7
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As of January 9, 1998, there were 174,488 record holders of Common Stock.
During 1996 and 1997, the Corporation paid dividends on the Common Stock on a
quarterly basis. The following table sets forth dividends declared per share of
Common Stock for the periods indicated:
<TABLE>
<CAPTION>
Quarter Dividend
--------- ---------
<S> <C> <C>
1996 first $ .29
second .29
third .29
fourth .33
1997 first .33
second .33
third .33
fourth .38
</TABLE>
For additional information regarding the Corporation's ability to pay
dividends, see "Government Supervision and Regulation -- Distributions" and
Note Nine of the Notes To Consolidated Financial Statements.
On October 1, 1997, the Corporation completed the acquisition of
Montgomery Securities, an investment banking and institutional brokerage
partnership, for aggregate consideration of approximately $1.1 billion, of
which approximately $840 million was paid in cash and the remainder was paid
with 5.3 million unregistered shares of Common Stock. The issuance of the
shares in this transaction was deemed to be exempt from registration under the
Securities Act of 1933, as amended, in reliance on Section 4(2) as a
transaction by an issuer not involving any public offering.
8
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Item 6. SELECTED FINANCIAL DATA
See Table One for Selected Financial Data.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On February 27, 1997, the Corporation completed a two-for-one split of
common stock. All financial data included in this Annual Report on Form 10-K
reflects the impact of the stock split.
This report contains certain forward-looking statements which are subject
to risks and uncertainties that could cause actual results to differ materially
from those reflected in such forward-looking statements, which are
representative only on the date hereof. Readers of this report should not rely
solely on the forward-looking statements and should consider all uncertainties
and risks discussed throughout this report. The Corporation undertakes no
obligation to update any forward-looking statements contained herein.
The Corporation's loan growth is dependent on economic conditions as well
as various discretionary factors, such as decisions to securitize, sell, or
purchase certain loans or loan portfolios, syndications or participations of
loans, the retention of residential mortgage loans generated by the mortgage
subsidiary, the management of borrower, industry, product and geographic
concentrations and the mix of the loan portfolio. The rate of charge-offs and,
accordingly, provision expense can be affected by local, regional and
international economic conditions, concentrations of borrowers, industries,
products and geographic locations, the mix of the loan portfolio and
management's judgments regarding the collectibility of loans. Liquidity
requirements may change as a result of fluctuations in assets and liabilities
and off-balance sheet exposures, which will impact the capital and debt
financing needs of the Corporation and the mix of funding sources. Decisions to
purchase or sell securities are also dependent on liquidity requirements as
well as on- and off-balance sheet positions. Factors that may impact interest
rate risk include local, regional and international economic conditions,
levels, mix, maturities, yields or rates of assets and liabilities, utilization
and effectiveness of interest rate contracts and the wholesale and retail
funding sources of the Corporation. Factors that may cause actual noninterest
expense to differ from estimates include uncertainties relating to the
Corporation's efforts to prepare its systems and technology for the Year 2000,
as well as uncertainties relating to the ability of third parties with whom the
Corporation has business relationships to address the Year 2000 issue in a
timely and adequate manner.
In addition, the banking industry in general is subject to various
monetary and fiscal policies and regulations, which include those determined by
the Federal Reserve Board, the Office of the Comptroller of the Currency,
Federal Deposit Insurance Corporation, state regulators and the Office of
Thrift Supervision, which policies and regulations could affect the
Corporation's results. Other factors that may cause actual results to differ
from the forward-looking statements include competition with other local,
regional and international banks, savings and loan associations, credit unions
and other non-bank financial institutions, such as investment banking firms,
investment advisory firms, brokerage firms, mutual funds and insurance
companies, as well as other entities which offer financial services, located
both within and without the United States; interest rate, market and monetary
fluctuations; inflation; general economic conditions and economic conditions in
the geographic regions and industries in which the Corporation operates;
introduction and acceptance of new banking-related products, services and
enhancements; fee pricing strategies, mergers and acquisitions and their
integration into the Corporation, and management's ability to manage these and
other risks.
1997 Compared to 1996
Overview
The Corporation is a multi-bank holding company headquartered in
Charlotte, North Carolina, which provides a diversified range of banking and
certain non-banking financial services both domestically and internationally
through three major Business Units: the General Bank, Global Finance and
Financial Services. After the merger on January 9, 1998 with Barnett Banks,
Inc. (Barnett), headquartered in Jacksonville, Florida, the Corporation had
approximately $310 billion in assets, making it the third largest banking
company in the United States. The Corporation will account for this transaction
as a pooling of interests and, accordingly, the recorded assets, liabilities,
shareholders' equity, income and expenses of the Corporation and Barnett will
be combined and reflected at their historical amounts.
9
<PAGE>
On January 7, 1997, the Corporation completed its acquisition of Boatmen's
Bancshares, Inc. (Boatmen's), headquartered in St. Louis, Missouri. In
addition, on October 1, 1997, the Corporation acquired Montgomery Securities
(Montgomery), an investment banking and institutional brokerage firm
headquartered in San Francisco, California. The Corporation accounted for these
acquisitions as purchase business combinations; therefore, the results of
operations of Boatmen's and Montgomery are included in the financial statements
of the Corporation from their dates of acquisition, respectively.
The increases over the prior year in income, expense and balance sheet
categories were due largely to the Boatmen's acquisition; however, income and
most balance sheet categories were also impacted by internal growth. Other
significant changes in the Corporation's results of operations and financial
position are described in the following sections.
Refer to Table One and Table Nineteen for annual and quarterly selected
financial data, respectively.
Key performance highlights for 1997 were:
o Net income reflected growth of approximately 30 percent over 1996, amounting
to $3.08 billion for the year ended December 31, 1997 compared to $2.38
billion in 1996. Earnings per common share for 1997 increased 7 percent to
$4.27 from $4.00 in 1996 and diluted earnings per common share increased 6
percent to $4.17 from $3.92 in 1996. Excluding a merger-related charge of
$118 million ($77 million, net of tax), net income for 1996 was $2.5
billion and earnings per common share and diluted earnings per common share
were $4.13 and $4.05, respectively.
o Taxable-equivalent net interest income increased 25 percent to $8.0 billion
in 1997. Excluding the impact of the Boatmen's acquisition, loan sales and
securitizations, net interest income increased approximately 6 percent. The
net interest yield increased to 3.79 percent compared to 3.62 percent in
1996.
o The provision for credit losses covered net charge-offs and totaled $800
million in 1997 compared to $605 million in 1996. Net charge-offs as a
percentage of average loans, leases and factored accounts receivable
increased to .54 percent in 1997 compared to .48 percent in 1996, while net
charge-offs totaled $798 million in 1997 compared to $598 million in 1996.
Higher net charge-offs were largely the result of an increase in the
average loans, leases, and factored accounts receivable portfolio,
attributable to both the Boatmen's acquisition and internal growth as well
as deterioration in consumer credit quality experienced on an industry-wide
basis. Higher total consumer net charge-offs were partially offset by lower
net charge-offs in the commercial loan portfolio. Nonperforming assets were
$1.1 billion on December 31, 1997 compared to $1.0 billion on December 31,
1996, the result of the Boatmen's acquisition.
o Noninterest income increased 37 percent to $5.0 billion in 1997. This growth
was attributable to higher levels of income from virtually all areas,
including service charges on deposit accounts, investment banking income,
asset management and fiduciary service fees and brokerage income. Excluding
the acquisitions of Boatmen's and Montgomery, noninterest income increased
approximately 9 percent.
o Noninterest expense increased to $7.4 billion, but was essentially unchanged
if the Boatmen's and Montgomery acquisitions and related transition
expenses were excluded.
o Cash basis ratios, which measure operating performance excluding intangible
assets and the related amortization expense, improved with cash basis
diluted earnings per common share rising 15 percent to $4.76 in 1997
compared to $4.13 in 1996. For 1997, return on average tangible common
shareholders' equity increased 847 basis points to 30.6 percent compared to
22.1 percent in 1996. The cash basis efficiency ratio was 53.8 percent in
1997, an improvement of 120 basis points from 1996 levels due to successful
acquisition integration and expense management efforts.
The remainder of management's discussion and analysis of the consolidated
results of operations and financial condition of the Corporation should be read
together with the consolidated financial statements and related notes presented
on pages 45 through 79.
10
<PAGE>
Table One
Five-Year Summary of Selected Financial Data
(Dollars in Millions Except Per-Share Information)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Income statement
Interest income .................................................................. $ 16,579 $ 13,796
Interest expense ................................................................. 8,681 7,467
Net interest income (taxable-equivalent) ......................................... 8,014 6,423
Net interest income .............................................................. 7,898 6,329
Provision for credit losses ...................................................... 800 605
Gains (losses) on sales of securities ............................................ 153 67
Noninterest income ............................................................... 5,002 3,646
Foreclosed properties expense (income) ........................................... 10 20
Merger-related charge ............................................................ -- 118
Other noninterest expense ........................................................ 7,447 5,665
Income before taxes and effect of change in method of accounting for income
taxes ........................................................................... 4,796 3,634
Income tax expense ............................................................... 1,719 1,259
Income before effect of change in method of accounting for income taxes .......... 3,077 2,375
Effect of change in method of accounting for income taxes ........................ -- --
Net income ....................................................................... 3,077 2,375
Net income available to common shareholders ...................................... 3,066 2,360
Net income (excluding merger-related charge) ..................................... 3,077 2,452
Average common shares issued (in thousands) ...................................... 717,450 590,216
Per common share
Earnings before effect of change in method of accounting for income taxes ........ $ 4.27 $ 4.00
Earnings ......................................................................... 4.27 4.00
Earnings (excluding merger-related charge) ....................................... 4.27 4.13
Diluted earnings ................................................................. 4.17 3.92
Diluted earnings (excluding merger-related charge) ............................... 4.17 4.05
Cash dividends paid .............................................................. 1.37 1.20
Shareholders' equity (year-end) .................................................. 29.87 23.69
Balance sheet (year-end)
Total loans, leases and factored accounts receivable, net of unearned income ..... 143,792 122,630
Total assets ..................................................................... 264,562 185,794
Total deposits ................................................................... 138,194 106,498
Long-term debt ................................................................... 27,204 22,985
Common shareholders' equity ...................................................... 21,274 13,586
Total shareholders' equity ....................................................... 21,337 13,709
Performance ratios
Return on average assets ......................................................... 1.26% 1.18%
Return on average assets (excluding merger-related charge) ....................... 1.26 1.22
Return on average common shareholders' equity (1) ................................ 15.26 17.95
Return on average common shareholders' equity (excluding merger-related
charge) (1) ..................................................................... 15.26 18.53
Efficiency ratio ................................................................. 57.2 56.3
Total equity to total assets ..................................................... 8.07 7.38
Risk-based capital ratios (year-end)
Tier 1 ........................................................................... 6.50 7.76
Total ............................................................................ 10.89 12.66
Leverage capital ratio ........................................................... 5.57 7.09
Cash basis financial data (2)
Earnings per common share ........................................................ 4.89 4.21
Earnings per common share (excluding merger-related charge) ...................... 4.89 4.34
Diluted earnings per common share ................................................ 4.76 4.13
Diluted earnings per common share (excluding merger-related charge) .............. 4.76 4.26
Return on average tangible assets ................................................ 1.49 1.26
Return on average tangible assets (excluding merger-related charge) .............. 1.49 1.30
Return on average tangible common shareholders' equity (1) ....................... 30.59 22.12
Return on average tangible common shareholders' equity (excluding
merger-related charge) (1) ...................................................... 30.59 22.80
Efficiency ratio ................................................................. 53.8 55.0
Ending tangible equity to tangible assets ........................................ 4.69 6.36
Market price per share of common stock
Close at the end of the year ..................................................... $60 13/16 $ 48 7/8
High for the year ................................................................ 71 11/16 52 5/8
Low for the year ................................................................. 48 32 3/16
<CAPTION>
1995 1994 1993
------------ ----------- ------------
<S> <C> <C> <C>
Income statement
Interest income .................................................................. $ 13,220 $ 10,529 $ 8,327
Interest expense ................................................................. 7,773 5,318 3,690
Net interest income (taxable-equivalent) ......................................... 5,560 5,305 4,723
Net interest income .............................................................. 5,447 5,211 4,637
Provision for credit losses ...................................................... 382 310 430
Gains (losses) on sales of securities ............................................ 29 (13) 84
Noninterest income ............................................................... 3,078 2,597 2,101
Foreclosed properties expense (income) ........................................... 18 (12) 78
Merger-related charge ............................................................ -- -- 30
Other noninterest expense ........................................................ 5,163 4,942 4,293
Income before taxes and effect of change in method of accounting for income
taxes ........................................................................... 2,991 2,555 1,991
Income tax expense ............................................................... 1,041 865 690
Income before effect of change in method of accounting for income taxes .......... 1,950 1,690 1,301
Effect of change in method of accounting for income taxes ........................ -- -- 200
Net income ....................................................................... 1,950 1,690 1,501
Net income available to common shareholders ...................................... 1,942 1,680 1,491
Net income (excluding merger-related charge) ..................................... 1,950 1,690 1,521
Average common shares issued (in thousands) ...................................... 544,959 549,312 515,938
Per common share
Earnings before effect of change in method of accounting for income taxes ........ $ 3.56 $ 3.06 $ 2.50
Earnings ......................................................................... 3.56 3.06 2.89
Earnings (excluding merger-related charge) ....................................... 3.56 3.06 2.93
Diluted earnings ................................................................. 3.52 3.03 2.86
Diluted earnings (excluding merger-related charge) ............................... 3.52 3.03 2.90
Cash dividends paid .............................................................. 1.04 .94 .82
Shareholders' equity (year-end) .................................................. 23.26 19.85 18.20
Balance sheet (year-end)
Total loans, leases and factored accounts receivable, net of unearned income ..... 117,033 103,371 92,007
Total assets ..................................................................... 187,298 169,604 157,686
Total deposits ................................................................... 100,691 100,470 91,113
Long-term debt ................................................................... 17,775 8,488 8,352
Common shareholders' equity ...................................................... 12,759 10,976 9,859
Total shareholders' equity ....................................................... 12,801 11,011 9,979
Performance ratios
Return on average assets ......................................................... 1.03% 1.02% .97%
Return on average assets (excluding merger-related charge) ....................... 1.03 1.02 .98
Return on average common shareholders' equity (1) ................................ 17.01 16.10 15.00
Return on average common shareholders' equity (excluding merger-related
charge) (1) ..................................................................... 17.01 16.10 15.23
Efficiency ratio ................................................................. 59.8 62.5 62.9
Total equity to total assets ..................................................... 6.83 6.49 6.33
Risk-based capital ratios (year-end)
Tier 1 ........................................................................... 7.24 7.43 7.41
Total ............................................................................ 11.58 11.47 11.73
Leverage capital ratio ........................................................... 6.27 6.18 6.00
Cash basis financial data (2)
Earnings per common share ........................................................ 3.78 3.28 3.06
Earnings per common share (excluding merger-related charge) ...................... 3.78 3.28 3.10
Diluted earnings per common share ................................................ 3.73 3.25 3.03
Diluted earnings per common share (excluding merger-related charge) .............. 3.73 3.25 3.07
Return on average tangible assets ................................................ 1.11 1.10 1.04
Return on average tangible assets (excluding merger-related charge) .............. 1.11 1.10 1.06
Return on average tangible common shareholders' equity (1) ....................... 20.74 19.85 18.08
Return on average tangible common shareholders' equity (excluding
merger-related charge) (1) ...................................................... 20.74 19.85 18.34
Efficiency ratio ................................................................. 58.4 61.0 61.6
Ending tangible equity to tangible assets ........................................ 6.08 5.65 5.56
Market price per share of common stock
Close at the end of the year ..................................................... $34 13/16 $ 22 9/16 $ 24 1/2
High for the year ................................................................ 37 3/8 28 11/16 29
Low for the year ................................................................. 22 5/16 21 11/16 22 1/4
</TABLE>
(1) Average common shareholders' equity does not include the effect of market
value adjustments to securities available for sale and marketable equity
securities.
(2) Cash basis calculations exclude intangible assets and the related
amortization expense.
In 1993, return on average assets and return on equity after the tax benefit
from the impact of adopting a new income tax accounting
standard were 1.12% and 17.33%, respectively.
11
<PAGE>
Business Unit Operations
The Corporation provides a diversified range of banking and certain
nonbanking financial services and products through its various subsidiaries.
The Corporation manages its business activities through three major business
units: General Bank, Global Finance and Financial Services. The business units
are managed with a focus on numerous performance objectives as presented in
Table Two, including business unit earnings, return on average equity and the
efficiency ratio. The table also includes certain cash basis information, which
excludes the impact of intangible assets and the related amortization expense.
The net interest income of the business units reflects the results of a
funds transfer pricing process which derives net interest income by matching
assets and liabilities with similar interest rate sensitivity and maturity
characteristics. Equity capital is allocated to each business unit based on an
assessment of its inherent risk.
The General Bank and Global Finance business unit results reflect the
impact of the purchase of Boatmen's, which resulted in an increase in goodwill
of approximately $5.9 billion and approximately $234 million of related
amortization expense on a consolidated basis in 1997. This additional expense
had unfavorable impacts on the return on average equity and efficiency ratios
for both the General Bank and Global Finance in 1997. Global Finance's results
also reflect the impact of the purchase of Montgomery.
The General Bank provides comprehensive retail banking services for
individuals and businesses. Within the General Bank, the Banking Group is the
service provider to the consumer sector as well as small and medium-size
companies. Subsequent to the Barnett merger, the Banking Group's delivery
channels included approximately 3,000 banking centers and approximately 7,000
automated teller machines which provide fully-automated, 24-hour cash
dispensing and deposit services. These delivery channels are located throughout
the Corporation's franchise and serve 16 million households in 16 states and
the District of Columbia. Specialized services, such as the origination and
servicing of residential mortgage loans, the issuance and servicing of credit
cards, indirect lending, dealer finance and certain insurance services, are
provided throughout the Corporation's franchise. In addition, certain other
products are provided by the Financial Products Group on a nationwide basis.
The General Bank also contains the Asset Management Group, which includes
businesses that provide full-service and discount brokerage, investment
advisory and investment management services. The Asset Management Group also
advises the Nations Funds family of mutual funds. The Private Client Group is
part of the Asset Management Group and provides asset management, banking and
trust services for wealthy individuals, business owners, corporate executives
and the private foundations established by them.
The General Bank's earnings increased 21 percent to $1.9 billion in 1997.
The acquisition of Boatmen's accounted for a large portion of the General
Bank's increased earnings over 1996 with internal growth also contributing to
the increase. Taxable-equivalent net interest income in the General Bank
increased $1.3 billion, primarily reflecting the impact of the Boatmen's
acquisition, deposit pricing management efforts and core loan growth. The net
interest yield increased slightly in 1997, reflecting higher yields from the
loan portfolio and deposit pricing management efforts. Average loans increased
from $78.7 billion in 1996 to $94.7 billion in 1997 with the increase due to
the Boatmen's acquisition. Excluding the impact of the Boatmen's acquisition
and the $8.1-billion of securitizations that occurred mainly during the third
quarter of 1997, average loans and leases were essentially unchanged in 1997
compared to 1996 average levels.
Noninterest income in the General Bank rose 37 percent to $3.4 billion due
to higher service charges on deposit accounts, asset management and fiduciary
service fees, mortgage servicing and other mortgage-related income and credit
card income. The increase was attributable primarily to the acquisition of
Boatmen's but also reflected the impact of internal growth of approximately 12
percent for service charges on deposit accounts and approximately 5 percent for
credit card income. Higher deposit account service charges were the result of
changes in deposit pricing throughout the Corporation's franchise. Also
contributing to the increase was a gain on the sale of a $306-million
out-of-market credit card portfolio during the third quarter of 1997.
Noninterest expense increased 35 percent to $5.6 billion due to the acquisition
of Boatmen's, which resulted in an increase in full-time equivalent employees
and additional amortization expense, with the remaining increase spread across
most major expense categories. Excluding the acquisition of Boatmen's,
noninterest expense was virtually flat when compared to 1996. The cash basis
efficiency ratio was 56.5 percent, an improvement of 80 basis points over the
1996 ratio. The return on average tangible equity increased approximately 200
basis points to 29 percent, the result of revenue growth which offset an
increase in operating expenses and higher equity levels resulting from the
Boatmen's acquisition.
12
<PAGE>
Table Two
Business Unit Summary
For the Year Ended December 31
(Dollars in Millions)
<TABLE>
<CAPTION>
General Bank Global Finance Financial Services
----------------------- ------------------------------- ---------------------
1997 1996 1997 1996 1997 1996
----------- ----------- --------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net interest income (taxable-equivalent) ..... $ 5,878 $ 4,602 $ 1,416 $ 1,202 $ 583 $ 572
Noninterest income ........................... 3,421 2,500 1,430 1,019 151 122
-------- -------- ------- ------- ------ ------
Total revenue ............................... 9,299 7,102 2,846 2,221 734 694
Provision for credit losses .................. 580 438 74 43 146 124
Gains on sales of securities ................. 35 25 2 -- -- --
Foreclosed properties expense (income) ....... 9 16 (8) (5) 9 9
Noninterest expense .......................... 5,631 4,165 1,490 1,188 326 313
-------- -------- --------- --------- ------ ------
Income before income taxes ................... 3,114 2,508 1,292 995 253 248
Income tax expense ........................... 1,192 916 466 360 86 82
-------- -------- --------- --------- ------ ------
Net income (1) ............................... $ 1,922 $ 1,592 $ 826 $ 635 $ 167 $ 166
======== ======== ========= ========= ====== ======
Cash basis earnings (2) ...................... $ 2,296 $ 1,689 $ 879 $ 652 $ 180 $ 180
Net interest yield ........................... 4.71% 4.68% 3.01%(4) 3.09%(4) 6.71% 7.10%
Average equity to average assets ............. 8.5 6.8 5.5 4.9 14.4 14.1
Return on average equity ..................... 17 22 17 16 13 14
Return on average tangible equity (2) ........ 29 27 20 17 16 18
Efficiency ratio ............................. 60.6 58.6 52.4 53.5 44.4 45.1
Cash basis efficiency ratio (2) .............. 56.5 57.3 50.5 52.7 42.6 43.1
Average (3)
Total loans and leases, net of unearned
income .................................... $ 94,719 $ 78,708 $42,290 $36,117 $8,614 $8,022
Total deposits .............................. 114,578 87,904 9,992 8,212 -- --
Total assets ................................ 134,710 104,395 89,194 78,368 9,064 8,528
Period end (3)
Total loans and leases, net of unearned
income .................................... 92,275 76,815 41,802 36,763 9,090 8,279
Total deposits .............................. 112,962 90,080 11,458 8,321 -- --
</TABLE>
(1) Business Unit results are presented on a fully allocated basis but do not
include $162 million of net income for 1997 and $18 million of net
expenses for 1996, which represent the net impact of earnings associated
with unassigned capital, gains on sales of certain securities,
merger-related charges and other corporate activities.
(2) Cash basis calculations exclude intangible assets and the related
amortization expense.
(3) The sums of balance sheet amounts differ from consolidated amounts due to
activities between the Business Units.
(4) Global Finance's net interest yield excludes the impact of trading-related
activities. Including trading-related activities, the net interest yield
was 1.82 percent for 1997 and 1.78 percent for 1996.
Global Finance provides a broad array of banking, bank-related and
investment banking products and services to domestic and international
corporations, institutions and other customers through its Corporate Finance/
Capital Markets, Specialized Lending, Real Estate, and Transaction Products
units. The Global Finance group serves as a principal lender and investor, as
well as an advisor, and manages treasury and trade transactions for clients and
customers. Loan origination and syndication, asset-backed lending, leasing,
factoring, project finance and mergers and acquisitions consulting are
representative of the services provided. These services are provided through
various domestic and international offices. Through its Section 20 subsidiary,
NationsBanc Montgomery Securities LLC, Global Finance is a primary dealer of
U.S. Government Securities and underwrites, distributes and makes markets in
high-grade and high-yield debt securities and equity securities. Additionally,
Global Finance is a market maker in derivative products which include swap
agreements, option contracts, forward
13
<PAGE>
settlement contracts, financial futures and other derivative products in
certain interest rate, foreign exchange, commodity and equity markets. In
support of these activities, Global Finance takes positions to support client
demands and its own account. Major centers for the above activities are
Charlotte, Chicago, London, New York, San Francisco, Singapore and Tokyo.
Global Finance earned $826 million in 1997 compared to $635 million in
1996, the result of higher levels of net interest income and noninterest
income, which more than offset higher noninterest and provision expenses.
Taxable-equivalent net interest income for 1997 was $1.4 billion compared to
$1.2 billion in 1996 reflecting loan growth partially offset by increased
funding costs and competitive pressure on commercial loan pricing. The average
loans and leases portfolio increased to $42.3 billion in 1997 compared to $36.1
billion in 1996 as the result of core loan growth and the acquisition of
Boatmen's. This increase was net of a securitization of $4.2 billion of
commercial loans completed during the third quarter of 1997.
Noninterest income rose 40 percent over 1996, reflecting higher securities
underwriting and other investment banking income and brokerage income, due to
the impact of the Montgomery acquisition and continued growth. Noninterest
expense increased to $1.5 billion in 1997, due mainly to higher personnel and
amortization expenses associated with the Montgomery and Boatmen's
acquisitions. The cash basis efficiency ratio improved 220 basis points to 50.5
percent as revenue growth outpaced expense increases. The return on average
tangible equity increased 300 basis points to 20 percent, reflecting the impact
of higher earnings.
Financial Services is primarily comprised of a holding company,
NationsCredit Corporation, which includes NationsCredit Consumer Corporation
and NationsCredit Commercial Corporation. NationsCredit Consumer Corporation,
which has 268 branches in 41 states, provides personal, mortgage and automobile
loans to consumers, and retail finance programs to dealers. NationsCredit
Commercial Corporation consists of divisions that specialize in the following
commercial financing areas: equipment loans and leases; loans for debt
restructuring, mergers and acquisitions and working capital; real estate,
golf/recreational and health care financing; and inventory financing to
manufacturers, distributors and dealers. In addition, EquiCredit Corporation
and Oxford Resources are two businesses obtained through the Barnett merger.
EquiCredit Corporation provides sub-prime mortgage and home equity loans
directly and through correspondents and Oxford Resources provides lease
financing for purchasers of new and used cars.
Financial Services' earnings of $167 million were essentially flat in
comparison to 1996. Taxable-equivalent net interest income increased 2 percent
resulting from a 7 percent growth in average loans and leases, which was net of
securitizations of approximately $500 million. The net interest yield of 6.71
percent was down 39 basis points from 1996 due principally to increased
competitive pressure on loan pricing. Noninterest income rose 24 percent to
$151 million in 1997, reflecting gains associated with the sale of 29 branches
during the first quarter of 1997. Noninterest expense increased 4 percent to
$326 million while the cash basis efficiency ratio improved 50 basis points to
42.6 percent, the result of the gains on 1997 branch sales. The return on
average tangible equity in 1997 decreased to 16 percent compared to 18 percent
in 1996, the result of flat earnings on a higher equity base.
Results of Operations
Net Interest Income
An analysis of the Corporation's taxable-equivalent net interest income
and average balance sheet levels for the last three years and most recent five
quarters is presented in Tables Three and Twenty, respectively. The changes in
net interest income from year to year are analyzed in Table Four.
Taxable-equivalent net interest income increased approximately 25 percent
to $8.0 billion in 1997 compared to $6.4 billion in 1996 due primarily to the
acquisition of Boatmen's. Excluding the impact of the Boatmen's acquisition,
loan sales and securitizations, core net interest income increased
approximately 6 percent over 1996. This increase was the result of the improved
contribution of the securities portfolios, deposit pricing management efforts
and core loan growth, partially offset by the impact of the sale of certain
consumer loans in the third quarter of 1996 and an increased reliance on
long-term debt. While securitizations lowered net interest income by
approximately $324 million in 1997, they did not significantly affect the
Corporation's earnings. When the Corporation securitizes loans, its role
becomes that of a servicer and the income related to securitized loans is
reflected in noninterest income.
14
<PAGE>
Table Three
12-Month Taxable-Equivalent Data
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996
------------------------------- -------------------------------
Average Average
Balance Income Balance Income
Sheet or Yields/ Sheet or Yields/
Amounts Expense Rates Amounts Expense Rates
----------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans and leases, net of unearned income (1)
Commercial ........................................... $ 59,425 $ 4,969 8.36% $ 49,553 $ 4,042 8.16%
Real estate commercial ............................... 8,052 721 8.95 6,090 550 9.03
Real estate construction ............................. 3,781 339 8.98 3,165 281 8.89
-------- ------- ----- -------- ------- -----
Total commercial .................................... 71,258 6,029 8.46 58,808 4,873 8.29
-------- ------- ----- -------- ------- -----
Residential mortgage ................................. 31,404 2,445 7.79 27,813 2,169 7.80
Credit card .......................................... 6,911 823 11.90 6,228 733 11.77
Other consumer ....................................... 26,610 2,567 9.65 22,467 2,218 9.87
-------- ------- ----- -------- ------- -----
Total consumer ...................................... 64,925 5,835 8.99 56,508 5,120 9.06
-------- ------- ----- -------- ------- -----
Foreign .............................................. 3,427 244 7.13 2,664 183 6.87
Lease financing ...................................... 5,641 436 7.72 4,288 324 7.58
-------- ------- ----- -------- ------- -----
Total loans and leases, net ......................... 145,251 12,544 8.64 122,268 10,500 8.59
-------- ------- ----- -------- ------- -----
Securities
Held for investment .................................. 1,554 95 6.11 3,442 193 5.59
Available for sale (2) ............................... 26,364 1,810 6.87 17,295 1,146 6.63
-------- ------- ----- -------- ------- -----
Total securities .................................... 27,918 1,905 6.82 20,737 1,339 6.46
-------- ------- ----- -------- ------- -----
Loans held for sale ................................... 1,226 88 7.19 1,078 79 7.30
Federal funds sold and securities purchased
under agreements to resell ........................... 12,227 684 5.59 12,834 666 5.19
Time deposits placed and other short-term
investments .......................................... 2,114 123 5.82 1,436 80 5.54
Trading account securities (3) ........................ 22,490 1,351 6.01 19,047 1,226 6.44
-------- ------- ----- -------- ------- -----
Total earning assets (4) ............................. 211,226 16,695 7.90 177,400 13,890 7.83
Cash and cash equivalents .............................. 8,788 7,807
Factored accounts receivable ........................... 1,173 1,135
Other assets, less allowance for credit losses ......... 23,317 14,543
-------- --------
Total assets ........................................ $244,504 $200,885
======== ========
Interest-bearing liabilities
Savings ............................................... $ 9,885 199 2.02 $ 9,024 201 2.22
NOW and money market deposit accounts ................. 41,122 1,066 2.59 30,243 763 2.52
Consumer CDs and IRAs ................................. 38,096 1,989 5.22 30,034 1,585 5.28
Negotiated CDs, public funds and other time
deposits ............................................. 3,205 175 5.48 3,114 171 5.49
Foreign time deposits ................................. 9,776 526 5.38 11,180 602 5.38
Federal funds purchased, securities sold under
agreements to repurchase and other
short-term borrowings ................................ 41,605 2,264 5.44 39,521 2,155 5.45
Trading account liabilities (3) ....................... 10,274 678 6.60 10,137 653 6.44
Long-term debt (5) .................................... 27,340 1,784 6.52 20,603 1,337 6.51
-------- ------- ----- -------- ------- -----
Total interest-bearing liabilities (6) .............. 181,303 8,681 4.79 153,856 7,467 4.85
Noninterest-bearing sources
Noninterest-bearing deposits .......................... 31,577 23,990
Other liabilities ..................................... 11,437 9,776
Shareholders' equity .................................. 20,187 13,263
-------- --------
Total liabilities and shareholders' equity .......... $244,504 $200,885
======== ========
Net interest spread .................................... 3.11 2.98
Impact of noninterest-bearing sources .................. .68 .64
------- ----- ------- -----
Net interest income/yield on earning assets ............ $ 8,014 3.79% $ 6,423 3.62%
======= ===== ======= =====
<CAPTION>
1995
--------------------------------
Average
Balance Income
Sheet or Yields/
Amounts Expense Rates
----------- --------- ----------
<S> <C> <C> <C>
Earning assets
Loans and leases, net of unearned income (1)
Commercial ........................................... $ 46,358 $ 3,797 8.19%
Real estate commercial ............................... 7,195 669 9.30
Real estate construction ............................. 3,106 302 9.73
-------- ------- -----
Total commercial .................................... 56,659 4,768 8.42
-------- ------- -----
Residential mortgage ................................. 20,562 1,600 7.78
Credit card .......................................... 5,013 641 12.78
Other consumer ....................................... 21,940 2,209 10.07
-------- ------- -----
Total consumer ...................................... 47,515 4,450 9.37
-------- ------- -----
Foreign .............................................. 2,036 157 7.71
Lease financing ...................................... 3,277 249 7.59
-------- ------- -----
Total loans and leases, net ......................... 109,487 9,624 8.79
-------- ------- -----
Securities
Held for investment .................................. 15,521 864 5.57
Available for sale (2) ............................... 10,272 642 6.25
-------- ------- -----
Total securities .................................... 25,793 1,506 5.84
-------- ------- -----
Loans held for sale ................................... 322 24 7.47
Federal funds sold and securities purchased
under agreements to resell ........................... 15,159 937 6.18
Time deposits placed and other short-term
investments .......................................... 2,066 142 6.87
Trading account securities (3) ........................ 14,177 1,100 7.76
-------- ------- -----
Total earning assets (4) ............................. 167,004 13,333 7.98
Cash and cash equivalents .............................. 7,820
Factored accounts receivable ........................... 1,163
Other assets, less allowance for credit losses ......... 12,560
--------
Total assets ........................................ $188,547
========
Interest-bearing liabilities
Savings ............................................... $ 8,575 204 2.37
NOW and money market deposit accounts ................. 27,640 740 2.68
Consumer CDs and IRAs ................................. 24,840 1,290 5.19
Negotiated CDs, public funds and other time
deposits ............................................. 2,992 166 5.56
Foreign time deposits ................................. 14,103 881 6.25
Federal funds purchased, securities sold under
agreements to repurchase and other
short-term borrowings ................................ 44,285 2,710 6.12
Trading account liabilities (3) ....................... 12,025 896 7.45
Long-term debt (5) .................................... 12,652 886 7.00
-------- ------- -----
Total interest-bearing liabilities (6) .............. 147,112 7,773 5.28
Noninterest-bearing sources
Noninterest-bearing deposits .......................... 21,128
Other liabilities ..................................... 8,856
Shareholders' equity .................................. 11,451
--------
Total liabilities and shareholders' equity .......... $188,547
========
Net interest spread .................................... 2.70
Impact of noninterest-bearing sources .................. .63
------- -----
Net interest income/yield on earning assets ............ $ 5,560 3.33%
======= =====
</TABLE>
(1) Nonperforming loans are included in the respective average loan balances.
Income on such nonperforming loans is recognized on a cash basis.
(2) The average balance sheet amounts and yields on securities available for
sale are based on the average of historical amortized cost balances.
(3) The fair values of derivatives-dealer positions are reported in other
assets and liabilities, respectively.
(4) Interest income includes taxable-equivalent adjustments of $116, $94 and
$113 in 1997, 1996 and 1995, respectively. Interest income also includes
the impact of risk management interest rate contracts, which increased
(decreased) interest income on the underlying linked assets $133, $26 and
($209) in 1997, 1996 and 1995, respectively.
(5) Long-term debt includes trust preferred securities.
(6) Interest expense includes the impact of risk management interest rate
contracts, which (decreased) increased interest expense on the underlying
linked liabilities ($40), $54 and $30 in 1997, 1996 and 1995,
respectively.
15
<PAGE>
Table Four
Changes in Taxable-Equivalent Net Interest Income
(Dollars in Millions)
This table presents an analysis of the year-to-year changes in net
interest income on a fully taxable-equivalent basis for the years shown. The
changes for each category of income and expense are divided between the portion
of change attributable to the variance in average levels or yields/rates for
that category. The amount of change that cannot be separated is allocated to
each variance proportionately.
<TABLE>
<CAPTION>
From 1996 to 1997 From 1995 to 1996
---------------------------------------------- ----------------------------------------------
Increase (Decrease) Increase (Decrease)
in Income/Expense in Income/Expense
Due to Change in Due to Change in
--------------------- ----------------------
Percentage Percentage
Average Yields/ Increase Average Yields/ Increase
Levels Rates Total (Decrease) Levels Rates Total (Decrease)
--------- ----------- ----------- ------------ --------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income
Loans and leases, net of
unearned income
Commercial ....................... $ 823 $ 104 $ 927 22.9% $ 261 $ (16) $ 245 6.5%
Real estate commercial ........... 176 (5) 171 31.1 (100) (19) (119) (17.8)
Real estate construction ......... 55 3 58 20.6 6 (27) (21) ( 7.0)
------- ------
Total commercial ................ 1,051 105 1,156 23.7 179 (74) 105 2.2
------- ------
Residential mortgage ............. 280 (4) 276 12.7 565 4 569 35.6
Credit card ...................... 81 9 90 12.3 146 (54) 92 14.4
Other consumer ................... 401 (52) 349 15.7 52 (43) 9 .4
------- ------
Total consumer .................. 757 (42) 715 14.0 819 (149) 670 15.1
------- ------
Foreign .......................... 54 7 61 33.3 45 (19) 26 16.6
Lease financing .................. 104 8 112 34.6 76 (1) 75 30.1
------- ------
Total loans and leases, net ..... 1,985 59 2,044 19.5 1,102 (226) 876 9.1
------- ------
Securities
Held for investment .............. (114) 16 (98) (50.8) (677) 6 (671) (77.7)
Available for sale ............... 621 43 664 57.9 463 41 504 78.5
------- ------
Total securities ................ 486 80 566 42.3 (316) 149 (167) (11.1)
------- ------
Loans held for sale ............... 11 (2) 9 11.4 55 -- 55 229.2
Federal funds sold and
securities purchased under
agreements to resell ............. (32) 50 18 2.7 (132) (139) (271) (28.9)
Time deposits placed and other
short-term investments ........... 39 4 43 53.8 (38) (24) (62) (43.7)
Trading account securities ........ 211 (86) 125 10.2 335 (209) 126 11.5
------- ------
Total interest income ........... 2,672 133 2,805 20.2 818 (261) 557 4.2
------- ------
Interest expense
Savings ........................... 18 (20) (2) (1.0) 10 (13) (3) ( 1.5)
NOW and money market
deposit accounts ................. 281 22 303 39.7 67 (44) 23 3.1
Consumer CDs and IRAs ............. 421 (17) 404 25.5 274 21 295 22.9
Negotiated CDs, public funds
and other time deposits .......... 5 (1) 4 2.3 7 (2) 5 3.0
Foreign time deposits ............. (76) -- (76) (12.6) (167) (112) (279) (31.7)
Federal funds purchased,
securities sold under
agreements to repurchase and
other short-term borrowings ...... 113 (4) 109 5.1 (276) (279) (555) (20.5)
Trading account liabilities ....... 9 16 25 3.8 (130) (113) (243) (27.1)
Long-term debt .................... 440 7 447 33.4 520 (69) 451 50.9
------- --------
Total interest expense .......... 1,315 (101) 1,214 16.3 346 (652) (306) ( 3.9)
------- --------
Net interest income ................ 1,272 319 $1,591 24.8 359 504 $ 863 15.5
======= ========
</TABLE>
The net interest yield increased 17 basis points to 3.79 percent in 1997
compared to 3.62 percent in 1996, primarily reflecting the improved
contribution of the securities portfolios and deposit pricing management
efforts. The positive impact of the acquisition of Boatmen's on the net
interest yield was offset by additional funding costs related to the
acquisition.
Loan growth is dependent on economic conditions as well as various
discretionary factors, such as decisions to securitize certain loan portfolios,
the retention of residential mortgage loans generated by the Corporation's
mortgage subsidiary and the management of borrower, industry, product and
geographic concentrations.
16
<PAGE>
Provision for Credit Losses
The provision for credit losses was $800 million in 1997 compared to $605
million in 1996. The provision for credit losses for 1997 and 1996 covered net
charge-offs of $798 million and $598 million, respectively. Higher provision
expense in 1997 was due to higher net charge-offs resulting from an increase in
the average loans, leases, and factored accounts receivable portfolio,
attributable to both the Boatmen's acquisition and internal growth, as well as
deterioration in consumer credit quality experienced on an industry-wide basis.
Higher total consumer net charge-offs were partially offset by lower net
charge-offs in the commercial loan portfolio. For additional information on the
allowance for credit losses, certain credit quality ratios and credit quality
information on specific loan categories, see the Credit Risk Management and
Credit Portfolio Review section beginning on page 30.
Gains on Sales of Securities
Gains on the sales of securities were $153 million in 1997 compared to $67
million in 1996. The increase in 1997 reflects the Corporation's sale of a
significant portion of the Boatmen's portfolio subsequent to the acquisition
date as well as the sale of lower-yielding securities and the reinvestment of
the proceeds from such sales into higher-spread products.
Noninterest Income
As presented in Table Five, noninterest income increased 37 percent to
$5.0 billion in 1997, reflecting the acquisitions of Boatmen's and Montgomery.
Excluding these acquisitions, noninterest income increased approximately 9
percent in 1997.
Table Five
Noninterest Income
(Dollars in Millions)
<TABLE>
<CAPTION>
Change
-----------------------
1997 1996 Amount Percent
--------- --------- ------------ ----------
<S> <C> <C> <C> <C>
Service charges on deposit accounts ...................... $1,546 $1,121 $ 425 37.9%
Mortgage servicing and other mortgage-related income ..... 287 213 74 34.7
Investment banking income ................................ 627 356 271 76.1
Trading account profits and fees ......................... 265 274 (9) (3.3)
Brokerage income ......................................... 234 110 124 112.7
Other nondeposit-related service fees .................... 310 262 48 18.3
Asset management and fiduciary service fees .............. 648 432 216 50.0
Credit card income ....................................... 371 314 57 18.2
Other income ............................................. 714 564 150 26.6
------ ------ ------- -----
$5,002 $3,646 $1,356 37.2
====== ====== ======= =====
</TABLE>
o Service charges on deposit accounts amounted to $1.5 billion in 1997, an
increase of 38 percent over 1996, attributable to growth in number of
households served due principally to the acquisition of Boatmen's and the
impact of changes in deposit pricing throughout the Corporation's franchise.
Excluding the impact of the Boatmen's acquisition, service charges increased
approximately 12 percent for 1997.
o Mortgage servicing and other mortgage-related income grew 35 percent to $287
million in 1997 due to the acquisition of the Boatmen's mortgage portfolio.
The average portfolio of loans serviced increased 35 percent from $89.9
billion in 1996 to $121.2 billion in 1997. On December 31, 1997, the
servicing portfolio, which includes mortgage loans originated by the
Corporation's mortgage subsidiary as well as loans serviced on behalf of the
Corporation's banking subsidiaries, totaled $126.5 billion compared to $96.4
billion on December 31, 1996. Mortgage loan originations through the
Corporation's mortgage subsidiary increased to $15.2 billion in 1997
compared to $12.0 billion in 1996. The increase in loan originations
experienced in 1997 was due to the acquisition of Boatmen's and the
Corporation's efforts to maintain the mortgage servicing portfolio at target
levels. Origination volume in 1997 consisted of approximately $5.8 billion
of retail loan volume and $9.4 billion of correspondent and wholesale loan
volume.
17
<PAGE>
In conducting its mortgage production activities, the Corporation is
exposed to interest rate risk for the period between loan commitment date and
subsequent delivery date. To manage this risk, the Corporation enters into
various financial instruments including forward delivery and option contracts.
The notional amount of such contracts was approximately $2.7 billion on
December 31, 1997. Net unrealized losses associated with these contracts were
$15 million on December 31, 1997. These contracts have an average expected
maturity of less than 90 days.
o Investment banking income increased 76 percent to $627 million in 1997
reflecting increased levels of securities underwriting activity, syndication
fees and advisory fees. Higher syndication fees were the result of 725 deals
totaling $431.0 billion in 1997 compared to 566 deals totaling $346.0
billion in 1996. Securities underwriting and advisory services fees
increased in 1997 reflecting the impact of the Montgomery acquisition and
continued internal growth.
An analysis of investment banking income by major business activity
follows (in millions):
<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Investment Banking Income
Syndications ............................... $201 $119
Securities underwriting .................... 232 82
Principal investment activities ............ 70 79
Advisory services .......................... 69 9
Other ...................................... 55 67
---- ----
Total investment banking income ......... $627 $356
==== ====
</TABLE>
o Trading account profits and fees totaled $265 million in 1997, a decrease of
3 percent from $274 million in 1996. The fair values of the components of
the Corporation's trading account assets and liabilities on December 31,
1997 and 1996 as well as their average fair values for 1997 and 1996 are
disclosed in Note Four to the consolidated financial statements on page 59.
An analysis of trading account profits and fees by major business activity
follows (in millions):
<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Trading Account Profits and Fees
Interest rate contracts ............ $141 $136
Foreign exchange contracts ......... 55 4
Securities trading ................. 24 96
Other .............................. 45 38
---- ----
$265 $274
==== ====
</TABLE>
o Brokerage income increased 113 percent to $234 million in 1997, due mainly to
the acquisition of Montgomery as well as internal growth of approximately 35
percent.
18
<PAGE>
o Asset management and fiduciary service fees increased 50 percent to $648
million in 1997. An analysis of asset management and fiduciary service fees
by major business activity for 1997 and 1996 as well as the market values of
assets under management and administration on December 31 follows (in
millions):
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Asset Management and Fiduciary Service Fees
Private Client Group .................................. $ 430 $ 266
Consumer investing .................................... 39 29
Funds and business/institutional investment management 62 54
Retirement services, corporate trust and other ........ 117 83
-------- --------
Total asset management and fiduciary service fees ... $ 648 $ 432
======== ========
Market Value of Assets
Assets under management ............................... $103,834 $ 72,270
Assets under administration ........................... 173,135 180,269
</TABLE>
The Private Client Group provides asset management and banking and trust
services, primarily to individuals. Fees for these services increased $164
million in 1997 over 1996, due principally to the Boatmen's acquisition,
increased sales, and market appreciation associated with assets under
management. Consumer investing revenues reflect fees received as the
investment advisor to the Nations Funds family of mutual funds. Funds and
business/institutional investment management fees include revenues from Sovran
Capital Management and TradeStreet Investment Associates, Inc., which provide
institutional investors with investment management services. Retirement
services and corporate trust fees include investment advisory, administrative,
fiduciary, and record-keeping services for business and institutional
customers. Assets under management and administration in 1997 were impacted by
the Boatmen's acquisition and the third quarter 1997 sales of certain
corporate and institutional trust businesses, which included businesses that
provided administrative and record-keeping services for employee benefit
plans.
o Credit card income increased 18 percent to $371 million in 1997 due primarily
to the acquisition of Boatmen's and internal growth of approximately 5
percent. Credit card income includes $28 million and $47 million from credit
card securitizations in 1997 and 1996, respectively. This decrease in credit
card securitization income was mainly due to higher than expected charge-off
levels.
o Other income totaled $714 million in 1997, an increase of $150 million over
1996. Other income includes certain prepayment fees and other fees such as
net gains on sales of miscellaneous investments, business activities,
premises and other similar items as well as insurance commissions and
earnings and bankers' acceptances and letters of credit fees.
Noninterest Expense
Contributing to the Corporation's continued earnings growth was successful
acquisition integration and expense management efforts, which resulted in a 120
basis-point decrease in the cash basis efficiency ratio to 53.8 percent in 1997
compared to 55.0 percent in 1996. Excluding the impact of the Boatmen's and
Montgomery acquisitions, noninterest expense was essentially unchanged between
1997 and 1996.
19
<PAGE>
Table Six
Noninterest Expense
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996
----------------------- ----------------------
Percent Percent
of Taxable- of Taxable-
Equivalent Equivalent
Net Interest Net Interest
and and
Noninterest Noninterest Change
Amount Income Amount Income Amount Percent
-------- -------------- -------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Personnel .................................... $3,643 28.0% $2,731 27.1% $ 912 33.4%
Occupancy, net ............................... 634 4.9 523 5.2 111 21.2
Equipment .................................... 604 4.6 451 4.5 153 33.9
Marketing .................................... 300 2.3 252 2.5 48 19.0
Professional fees ............................ 312 2.4 256 2.5 56 21.9
Amortization of intangibles .................. 441 3.4 128 1.3 313 244.5
Data processing .............................. 283 2.2 237 2.4 46 19.4
Telecommunications ........................... 229 1.7 172 1.7 57 33.1
Other general operating ...................... 758 5.8 728 7.2 30 4.1
General administrative and miscellaneous ..... 243 1.9 187 1.9 56 29.9
------ ---- ------ ---- ------ -----
$7,447 57.2% $5,665 56.3% $1,782 31.5
====== ==== ====== ==== ====== =====
</TABLE>
Based on information in Table Six, a discussion of the significant
components and changes in noninterest expense in 1997 compared to 1996 levels
follows:
o Personnel expense increased $912 million over 1996, due primarily to the
impact of the Boatmen's and Montgomery acquisitions. On December 31, 1997,
the Corporation had approximately 80,000 full-time equivalent employees
compared to approximately 63,000 full-time equivalent employees on December
31, 1996. Excluding the impact of the Boatmen's and Montgomery acquisitions,
full-time equivalent employees at December 31, 1997 were essentially
unchanged compared to December 31, 1996 levels.
o Occupancy expense increased 21 percent to $634 million in 1997 compared to
$523 million in 1996 due to the acquisition of Boatmen's.
o Equipment expense amounted to $604 million in 1997, an increase of
approximately 34 percent over 1996, reflecting the Boatmen's acquisition as
well as enhancements to data delivery channels and product delivery systems
throughout the Corporation such as the Model Banking initiative, direct
banking (including PC Banking) and data base management.
o Professional fees increased $56 million over 1996 to $312 million, reflecting
the impact of the Boatmen's acquisition as well as higher consulting and
technical support fees for projects to enhance revenue growth, the
development and installation of infrastructure enhancements and
customer-related data delivery areas.
o Intangibles amortization expense increased to $441 million in 1997,
reflecting the impact of the Boatmen's acquisition.
o Other general operating expenses increased $30 million to $758 million in
1997 due to higher expenses associated with the acquisition of Boatmen's.
Noninterest expense includes the cost of projects to ensure accurate date
recognition and data processing with respect to the Year 2000 issue as it
relates to the Corporation's businesses, operations, customers and vendors. A
process of software inventory, analysis, modification, testing and verification
and implementation is underway. The Corporation expects to substantially
complete the Year 2000 software conversion projects by the end of 1998. The
related costs, which are expensed as incurred, are included in professional,
data processing, and equipment expenses. Year 2000 expenses incurred through the
end of 1997 amounted to approximately $25 million and the total cost of the Year
2000 project is estimated to be approximately $120 million.
20
<PAGE>
Management believes that its plans for dealing with the Year 2000 issue
will result in timely and adequate modifications of systems and technology.
Ultimately, the potential impact of the Year 2000 issue will depend not only on
the corrective measures the Corporation undertakes, but also on the way in
which the Year 2000 issue is addressed by governmental agencies, businesses,
and other entities who provide data to, or receive data from, the Corporation,
or whose financial condition or operational capability is important to the
Corporation as borrowers, vendors, customers or investment opportunities.
Therefore, communications with these parties have commenced to heighten their
awareness of the Year 2000 issue. Over the next two years, the plans of such
third parties to address the Year 2000 issue will be monitored and any
identified impact on the Corporation will be evaluated.
In addition, on January 1, 1999, several countries that are members of the
European Monetary Union plan to replace their respective currencies with one
common currency-the euro. Costs to prepare systems impacted by this currency
change are expected to be immaterial.
Income Taxes
The Corporation's income tax expense for 1997 and 1996 was $1.7 billion
and $1.3 billion, respectively, for an effective tax rate of 35.8 percent for
1997 and 34.6 percent for 1996.
Note Eleven to the consolidated financial statements on page 74 includes a
reconciliation of federal income tax expense computed using the federal
statutory rate of 35 percent to actual income tax expense.
Balance Sheet Review And Liquidity Risk Management
The Corporation utilizes an integrated approach in managing its balance
sheet which includes management of interest rate sensitivity, credit risk,
liquidity risk and its capital position. The average balances discussed below
can be derived from Table Three. The following discussion addresses changes in
average balances in 1997 compared to 1996.
Average customer-based funds increased $27.5 billion to $123.9 billion in
1997 due to deposits obtained in the Boatmen's acquisition. As a percentage of
total sources, average customer-based funds increased to 51 percent in 1997
from 48 percent in 1996.
Average market-based funds increased $817 million in 1997 to $61.7 billion
and comprised a smaller portion of total sources of funds at 25 percent in 1997
compared to 30 percent in 1996. The increase in average market-based funds was
due primarily to the Boatmen's acquisition. The $6.7 billion increase in
long-term debt was mainly the result of borrowings to fund repurchases of
shares issued in the January 7, 1997 Boatmen's acquisition.
Average loans and leases, the Corporation's primary use of funds,
increased $23.0 billion to $145.3 billion during 1997. As a percentage of total
uses of funds, average loans and leases decreased to 59 percent in 1997 from 61
percent in 1996. The increase in average loans and leases was due primarily to
the impact of the Boatmen's acquisition and core loan growth, partially offset
by the impact of $12.8 billion of securitizations, most of which occurred in
the third quarter of 1997. The ratio of average loans and leases to
customer-based funds was 117 percent in 1997 and 127 percent in 1996.
Average other assets and cash and cash equivalents increased $9.8 billion
to $32.1 billion in 1997 due largely to an increase in intangible assets
related to the acquisition of Boatmen's.
Cash and cash equivalents were $10.6 billion on December 31, 1997, an
increase of $1.7 billion from December 31, 1996. During 1997, net cash provided
by operating activities was $266 million, net cash used in investing activities
was $19.2 billion and net cash provided by financing activities was $20.5
billion. For further information on cash flows, see the Consolidated Statement
of Cash Flows on page 49 in the consolidated financial statements.
Liquidity is a measure of the Corporation's ability to fulfill its cash
requirements and is managed by the Corporation through its asset and liability
management process. The Corporation monitors its assets and liabilities and
modifies these positions as liquidity requirements change. This process,
coupled with the Corporation's ability to raise capital and debt financing, is
designed to cover the liquidity needs of the Corporation. Management believes
that the Corporation's sources of liquidity are more than adequate to meet its
cash requirements.
The following discussion provides an overview of significant on- and
off-balance sheet components.
21
<PAGE>
Securities
The securities portfolio serves a primary role in the overall context of
balance sheet management by the Corporation. The decision to purchase or sell
securities is based upon the current assessment of economic and financial
conditions, including the interest rate environment, liquidity requirements and
on- and off-balance sheet positions.
The securities portfolio on December 31, 1997 consisted of securities held
for investment totaling $1.2 billion and securities available for sale totaling
$46.0 billion compared to $2.1 billion and $12.3 billion, respectively, on
December 31, 1996. The increase in available for sale securities reflects
initiatives to invest excess capital in the securities portfolio and the impact
of approximately $7.5 billion of mortgage-backed securities obtained
principally through residential mortgage loans that were securitized and
retained primarily during the third quarter of 1997. Also contributing to the
increase in available for sale securities since December 31, 1996 was the
purchase of higher yielding mortgage-backed securities in the first quarter of
1997.
On December 31, 1997, the market value of the Corporation's securities
held for investment reflected net unrealized appreciation of $5 million. On
December 31, 1996, the market value of the Corporation's portfolio of
securities held for investment approximated the book value of the portfolio.
The valuation allowance for securities available for sale and marketable
equity securities increased shareholders' equity by $393 million on December
31, 1997, reflecting pretax appreciation of $115 million on marketable equity
securities and $476 million on debt securities. The valuation allowance
increased shareholders' equity by $86 million on December 31, 1996. The
increase in the valuation allowance was primarily attributable to a decrease in
interest rates when comparing December 31, 1997 to December 31, 1996, but also
reflected the impact of higher securities balances.
The estimated average maturities of securities held for investment and
securities available for sale portfolios were 1.48 years and 5.66 years,
respectively, on December 31, 1997 compared to 1.47 years and 6.91 years,
respectively, on December 31, 1996. The decrease in the average expected
maturity of the available for sale portfolio is attributable to purchases of
securities during 1997 with shorter average maturities than the weighted
average maturities of securities owned on December 31, 1996.
Loans and Leases
Total loans and leases increased approximately 17 percent to $142.7
billion on December 31, 1997 compared to $121.6 billion on December 31, 1996.
As presented in Table Three, average total loans and leases increased 19
percent to $145.3 billion in 1997 compared to $122.3 billion in 1996 due
primarily to the impact of the Boatmen's acquisition and core loan growth,
partially offset by the impact of $12.8 billion of securitizations, most of
which occurred during the third quarter of 1997.
Average commercial loans increased to $59.4 billion in 1997 compared to
$49.6 billion in 1996, due largely to the Boatmen's acquisition and core loan
growth, partially offset by the impact of a $4.2-billion commercial loan
securitization that occurred during the third quarter of 1997. Average real
estate commercial and construction loans increased to $11.8 billion in 1997 as
a result of the addition of Boatmen's. Excluding the Boatmen's acquisition,
real estate commercial and construction loans decreased, reflecting the
Corporation's efforts to lower its exposure to this line of business.
Average residential mortgage loans increased 13 percent to $31.4 billion
in 1997 compared to $27.8 billion in 1996, mainly the result of the Boatmen's
acquisition as well as core loan growth. The increase in mortgage loans was
partially offset by the impact of $8.1 billion of mortgage loan securitizations
which occurred primarily during the third quarter of 1997.
Average credit card and other consumer loans, including direct and
indirect consumer loans and home equity loans, increased $4.8 billion,
primarily the result of the Boatmen's acquisition. This increase was partially
offset by $500 million of other consumer loan securitizations.
22
<PAGE>
A significant source of liquidity for the Corporation is the repayment and
maturities of loans. Table Seven shows selected loan maturity data on December
31, 1997 and indicates that approximately 36 percent of the selected loans had
maturities of one year or less. The securitization and sale of certain loans
and the use of loans as collateral in asset-backed financing arrangements are
also sources of liquidity.
Table Seven
Selected Loan Maturity Data
December 31, 1997
(Dollars in Millions)
This table presents the maturity distribution and interest sensitivity of
seleced loan categories (excluding residential mortgage, credit card, other
consumer loans, lease financing and factored accounts receivable). Maturities
are presented on a contractual basis.
<TABLE>
<CAPTION>
Due after
Due in 1 1 year
year through Due after
or less 5 years 5 years Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Commercial .............................................................. $ 20,596 $ 29,297 $ 10,291 $ 60,184
Real estate commercial .................................................. 1,914 4,229 1,078 7,221
Real estate construction ................................................ 1,945 1,730 130 3,805
Foreign ................................................................. 2,887 586 370 3,843
-------- -------- -------- --------
Total selected loans, net of unearned income ........................... $ 27,342 $ 35,842 $ 11,869 $ 75,053
======== ======== ======== ========
Percent of total ........................................................ 36.4% 47.8% 15.8% 100.0%
Cumulative percent of total ............................................. 36.4 84.2 100.0
Sensitivity of loans to changes in interest rates-loans due after one
year
Predetermined interest rate ............................................ $ 9,018 $ 5,057 $ 14,075
Floating or adjustable interest rate ................................... 26,824 6,812 33,636
-------- -------- --------
$ 35,842 $ 11,869 $ 47,711
======== ======== ========
</TABLE>
Deposits
Table Three provides information on the average amounts of deposits and
the rates paid by deposit category. Through the Corporation's diverse retail
banking network, deposits remain a primary source of funds for the Corporation.
Average deposits increased 24 percent in 1997 over 1996 due to deposits
acquired in the Boatmen's transaction.
On December 31, 1997, the Corporation had domestic certificates of deposit
of $100 thousand or greater totaling $8.8 billion, with $4.0 billion maturing
within three months, $1.8 billion maturing within three to six months, $1.5
billion maturing within six to twelve months and $1.5 billion maturing after
twelve months. Additionally, on December 31, 1997, the Corporation had other
domestic time deposits of $100 thousand or greater totaling $506 million, with
$78 million maturing within three months, $41 million maturing within three to
six months, $78 million maturing within six to twelve months and $309 million
maturing after twelve months. Foreign office certificates of deposit and other
time deposits of $100 thousand or greater totaled $14.4 billion and $8.1
billion on December 31, 1997 and 1996, respectively.
Short-Term Borrowings and Trading Account Liabilities
The Corporation uses short-term borrowings as a funding source and in its
management of interest rate risk. Table Eight presents the categories of
short-term borrowings.
During 1997, total average short-term borrowings increased 5 percent to
$41.6 billion and trading account liabilities (excluding derivatives-dealer
positions) remained essentially unchanged from 1996 levels, amounting to $10.3
billion in 1997.
23
<PAGE>
Table Eight
Short-Term Borrowings
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- -------------------- --------------------
Amount Rate Amount Rate Amount Rate
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Federal funds purchased
On December 31 ............................. $ 4,376 5.75% $ 3,536 6.58% $ 5,940 5.26%
Average during year ........................ 4,111 5.56 4,694 5.35 5,455 5.91
Maximum month-end balance during year ...... 6,950 -- 8,585 -- 7,317 --
Securities sold under agreements to repurchase
On December 31 ............................. 39,506 5.24 15,842 5.40 23,034 5.66
Average during year ........................ 32,355 5.09 28,517 5.37 30,336 6.14
Maximum month-end balance during year ...... 39,506 -- 29,582 -- 38,926 --
Commercial paper
On December 31 ............................. 2,796 5.75 2,787 5.41 2,773 5.65
Average during year ........................ 2,966 5.67 2,966 5.57 2,804 6.10
Maximum month-end balance during year ...... 3,200 -- 3,276 -- 2,930 --
Other short-term borrowing
On December 31 ............................. 4,126 5.62 1,836 5.20 4,143 5.94
Average during year ........................ 2,173 5.62 3,344 6.22 5,690 6.20
Maximum month-end balance during year ...... 4,126 -- 4,954 -- 7,378 --
</TABLE>
Long-Term Debt
Long-term debt increased 18 percent from $23.0 billion at December 31,
1996 to $27.2 billion on December 31, 1997 mainly as a result of borrowings to
fund repurchases of shares issued in the January 7, 1997 Boatmen's acquisition.
During 1997, the Corporation issued $1.0 billion of trust preferred securities
and $1.0 billion of mortgage backed bonds. Also during 1997, the Corporation
issued approximately $5.1 billion in long-term senior and subordinated debt,
including $2.1 billion which was issued under its medium-term note program and
$2.5 billion under a bank note program. See Note Six to the consolidated
financial statements on page 61 for further details on long-term debt.
Other
The Corporation has commercial paper back-up lines totaling $1.5 billion
of which $1.0 billion expires in October 1998 and $500 million expires in
October 2002. No borrowings have been made under these lines.
The Corporation's financial position is reflected in the following debt
ratings, which include upgrades as applicable from December 31, 1996 ratings:
<TABLE>
<CAPTION>
Commercial Senior
Paper Debt
------------ -------
<S> <C> <C>
Moody's Investors Service ......... P-1 Aa3
Standard & Poor's Corporation ..... A-1 A+
Duff and Phelps, Inc. ............. D-1+ A+
Fitch IBCA, Inc. .................. F-1 A+
Thomson BankWatch ................. TBW-1 A+
</TABLE>
In managing liquidity, the Corporation takes into consideration the
ability of the subsidiary banks to pay dividends to the parent company. See
Note Nine to the consolidated financial statements on page 68 for further
details on dividend capabilities of the subsidiary banks.
Capital Resources And Capital Management
Shareholders' equity on December 31, 1997 was $21.3 billion compared to
$13.7 billion on December 31, 1996. The acquisition of Boatmen's resulted in
the issuance of approximately 195 million shares of common
24
<PAGE>
stock and an increase of $9.5 billion in total shareholders' equity. The
increase was partially offset by the repurchase of approximately 96 million
shares of common stock for $5.8 billion.
The Corporation's and its significant banking subsidiaries' regulatory
capital ratios, along with a description of the components of risk-based
capital, capital adequacy requirements and prompt corrective action provisions,
are included in Note Nine to the consolidated financial statements on page 68.
Market Risk Management
In the normal course of conducting its business activities, the
Corporation is exposed to market risk which includes both price and liquidity
risk. Price risk arises from fluctuations in interest rates, foreign exchange
rates and commodity and equity prices that may result in changes in the market
values of financial instruments. Liquidity risk arises from the possibility
that the Corporation may not be able to satisfy current and future financial
commitments or that the Corporation may not be able to liquidate financial
instruments at market prices. Risk management procedures and policies have been
established and are utilized to manage the Corporation's exposure to market
risk. The strategy of the Corporation with respect to market risk is to
maximize net income while maintaining an acceptable level of risk to changes in
market rates. While achievement of this goal requires a balance between
profitability, liquidity and market price risk, there are opportunities to
enhance revenues through controlled risks. In implementing strategies to manage
interest rate risk, the primary tools used by the Corporation are its
securities portfolio and interest rate contracts, and management of the mix,
yields or rates and maturities of assets and of the wholesale and retail
funding sources of the Corporation.
Market risk is managed by the Corporation's Finance Committee which
formulates policy based on desirable levels of market risk. In setting
desirable levels of market risk, the Finance Committee considers the impact on
both earnings and capital of the current outlook in market rates, potential
changes in market rates, world and regional economies, liquidity, business
strategies and other factors.
In January 1997, the Securities and Exchange Commission (SEC) adopted new
rules that require more comprehensive disclosures of accounting policies for
derivatives as well as enhanced quantitative and qualitative disclosures of
market risk for derivative and other financial instruments. The market risk
disclosures must be presented for most financial instruments, which must be
classified into two portfolios: financial instruments entered into for trading
purposes and all other covered financial instruments (non-trading portfolio).
For a discussion of non-trading, on-balance sheet financial instruments
see Table Nine in the following Market Risk Management section on page 27. For
information on market risk associated with Asset and Liability Management (ALM)
activities, see the following discussion on page 28 of the Market Risk
Management section and the mortgage banking section of Noninterest Income on
page 18 as well as the Mortgage Servicing Rights section in Note One to the
consolidated financial statements on page 53. Market risk associated with the
trading portfolio is discussed in the following Market Risk Management section
on page 30. The composition of the trading portfolio and related fair values
are included in Note Four to the consolidated financial statements on page 59.
Derivatives-dealer positions and related credit risk are presented in Note
Eight to the consolidated financial statements on page 67. Accounting policies
for ALM and trading derivatives are disclosed in Note One to the consolidated
financial statements in the Trading Instruments and Risk Management Instruments
sections on pages 51 and 54, respectively.
Non-Trading Portfolio
The Corporation's ALM process is used to manage interest rate risk through
the structuring of balance sheet and off-balance sheet portfolios and
identifying and linking such off-balance sheet positions to specific assets and
liabilities. Interest rate risk represents the only material market risk
exposure to the Corporation's non-trading on-balance sheet financial
instruments. To effectively measure and manage interest rate risk, the
Corporation uses computer simulations which determine the impact on net
interest income of numerous interest rate scenarios, balance sheet trends and
strategies. These simulations cover the following financial instruments:
short-term financial instruments, securities, loans, deposits, borrowings and
off-balance sheet financial instruments. These simulations incorporate
assumptions about balance sheet dynamics, such as loan and deposit growth and
pricing, changes in funding mix and asset and liability repricing and maturity
characteristics. Simulations are run under various interest rate scenarios to
determine the impact on net income and capital. From these scenarios, interest
rate risk is quantified and appropriate strategies are developed and
implemented. The overall interest rate risk position and strategies are
reviewed on an ongoing basis by executive management.
25
<PAGE>
Additionally, duration and market value sensitivity measures are
selectively utilized where they provide added value to the overall interest
rate risk management process.
On December 31, 1997, the interest rate risk position of the Corporation
was relatively neutral as the impact of a gradual parallel 100 basis-point rise
or fall in interest rates over the next 12 months when compared to stable rates
was estimated to be less than 2 percent of net income.
Table Nine summarizes the expected maturities, unrealized gains and losses
and weighted average effective yields and rates associated with the
Corporation's significant non-trading, on-balance sheet financial instruments.
Cash and cash equivalents, time deposits placed and other short-term
investments, fed funds sold and purchased, resale and repurchase agreements,
commercial paper, other short-term borrowings and foreign deposits, which are
similar in nature to other short-term borrowings, are excluded from Table Nine
as their respective carrying values approximate fair values. These financial
instruments generally expose the Corporation to insignificant market risk as
they have either no stated maturities or an average maturity of less than 30
days and interest rates that approximate market. However, these financial
instruments can expose the Corporation to interest rate risk by requiring more
or less reliance on alternative funding sources, such as long-term debt. Loans
held for sale are also excluded as their carrying values approximate their fair
values, generally exposing the Corporation to insignificant market risk. For
further information on the fair value of financial instruments, see Note Twelve
to the consolidated financial statements on page 75.
26
<PAGE>
Table Nine
Non-Trading On-Balance Sheet Financial Instruments
December 31, 1997
(Dollars in Millions)
<TABLE>
<CAPTION>
Unrealized
Total Gain/(Loss)
------------ -------------
<S> <C> <C>
Assets
Loans, net of unearned income (1)
Fixed Rate
Book value ............................. $ 58,209 $1,056
Weighted average effective yield ....... 8.77%
Variable Rate
Book value ............................. $ 78,592 1,343
Weighted average effective yield ....... 8.35%
Securities held for investment (2)
Fixed Rate
Book value ............................. $ 986 4
Weighted average effective yield ....... 5.94%
Variable Rate
Book value ............................. $ 170 1
Weighted average effective yield ....... 6.65%
Securities available for sale (2)
Fixed Rate
Book value ............................. $ 44,028 472
Weighted average effective yield ....... 6.41%
Variable Rate
Book value ............................. $ 2,019 4
Weighted average effective yield ....... 7.04%
Liabilities
Total Domestic Deposits (3)
Fixed Rate
Book value ............................. $ 92,071 $(304)
Weighted average effective rate ........ 2.48%
Variable Rate
Book value ............................. $ 31,730 (3)
Weighted average effective rate ........ 5.33%
Long-term debt (excluding obligations
under capital leases) (4) ..............
Fixed Rate
Book value ............................. $ 11,661 (540)
Weighted average effective rate ........ 7.18%
Variable Rate
Book value ............................. $ 15,489 (21)
Weighted average effective rate ........ 6.04%
Trust preferred securities (4)
Fixed Rate
Book value ............................. $ 1,462 (67)
Weighted average effective rate ........ 8.15%
Variable Rate
Book value ............................. $ 493 (9)
Weighted average effective rate ........ 6.62%
<CAPTION>
Expected Maturity
--------------------------------------------------------------
After
1998 1999 2000 2001 2002 2002
---------- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans, net of unearned income (1)
Fixed Rate
Book value ............................. $18,575 $10,227 $7,695 $4,756 $ 3,021 $13,935
Weighted average effective yield .......
Variable Rate
Book value ............................. 29,347 10,437 8,692 6,122 7,710 16,284
Weighted average effective yield .......
Securities held for investment (2)
Fixed Rate
Book value ............................. 445 458 16 13 9 45
Weighted average effective yield .......
Variable Rate
Book value ............................. 5 144 -- 21 -- --
Weighted average effective yield .......
Securities available for sale (2)
Fixed Rate
Book value ............................. 374 4,292 1,562 2,665 11,204 23,931
Weighted average effective yield .......
Variable Rate
Book value ............................. -- 3 94 1,127 213 582
Weighted average effective yield .......
Liabilities
Total Domestic Deposits (3)
Fixed Rate
Book value ............................. $23,165 $ 5,874 $2,090 $ 626 $ 580 $59,736
Weighted average effective rate ........
Variable Rate
Book value ............................. 5,074 3,919 3,240 2,773 2,373 14,351
Weighted average effective rate ........
Long-term debt (excluding obligations
under capital leases) (4) ..............
Fixed Rate
Book value ............................. 1,077 438 856 1,669 527 7,094
Weighted average effective rate ........
Variable Rate
Book value ............................. 3,411 3,031 4,193 923 1,670 2,261
Weighted average effective rate ........
Trust preferred securities (4)
Fixed Rate
Book value ............................. -- -- -- -- 600 862
Weighted average effective rate ........
Variable Rate
Book value ............................. -- -- -- -- -- 493
Weighted average effective rate ........
</TABLE>
(1) Expected maturities reflect the impact of prepayment assumptions.
(2) Expected maturities are based on contractual maturities.
(3) When measuring and managing market risk associated with domestic deposits,
the Corporation considers its long-term relationships with depositors. The
unrealized loss on domestic deposits in this table does not consider these
long-term relationships.
(4) Expected maturities of long-term debt and trust preferred securities
reflect the Corporation's ability to redeem such debt prior to contractual
maturities.
27
<PAGE>
Risk management interest rate contracts are utilized in the ALM process.
Such contracts, which are generally non-leveraged generic interest rate and
basis swaps and options, allow the Corporation to effectively manage its
interest rate risk position. As reflected in Table Ten, the total gross
notional amount of the Corporation's ALM interest rate swaps on December 31,
1997 was $32.0 billion, with the Corporation receiving fixed on $28.2 billion,
primarily converting variable-rate commercial loans to fixed rate, and
receiving variable on $1.5 billion. The net receive fixed position of $26.8
billion on December 31, 1997 was essentially unchanged from December 31, 1996.
In addition, the Corporation has $2.3 billion of basis swaps linked primarily
to long-term debt.
Table Ten also summarizes the expected maturities, weighted average pay
and receive rates and the unrealized gains and losses on December 31, 1997 of
the Corporation's ALM interest rate contracts. Floating rates represent the
last repricing and will change in the future primarily based on movements in
one-, three- and six-month LIBOR rates.
The net unrealized appreciation of the ALM swap portfolio on December 31,
1997 was $280 million compared to net unrealized appreciation of $69 million on
December 31, 1996, reflecting a decrease in interest rates when comparing
December 31, 1997 to December 31, 1996. The amount of net realized deferred
gains associated with terminated ALM swaps was $34 million on December 31, 1997
compared to $48 million of net realized deferred losses on December 31, 1996.
To manage interest rate risk, the Corporation also utilizes interest rate
option products, primarily caps and floors. Interest rate caps and floors are
agreements where, for a fee, the purchaser obtains the right to receive
interest payments when a variable interest rate moves above or below a
specified cap or floor rate, respectively. On December 31, 1997, the
Corporation had a gross notional amount of $5.9 billion in outstanding interest
rate option contracts used for ALM purposes compared to $6.4 billion on
December 31, 1996. Such instruments are primarily linked to long-term debt,
short-term borrowings and pools of similar residential mortgages and consist
mainly of purchased options. On December 31, 1997, the net unrealized
depreciation of ALM option products was $7 million compared to net unrealized
appreciation of $2 million on December 31, 1996. The amount of net realized
deferred gains associated with terminated ALM options was $13 million on
December 31, 1997 compared to $4 million of net realized deferred gains on
December 31, 1996.
In addition, the Corporation uses foreign currency contracts to manage the
foreign exchange risk associated with foreign-denominated liabilities. Foreign
currency contracts involve the conversion of certain scheduled interest and
principal payments denominated in foreign currencies. On December 31, 1997,
these contracts had a notional value of $2.7 billion and a net market value of
negative $67 million.
The net unrealized appreciation in the estimated value of the ALM interest
rate and net negative market value in the ALM foreign exchange portfolios should
be viewed in the context of the overall balance sheet. The value of any single
component of the balance sheet or off-balance sheet positions should not be
viewed in isolation.
For a discussion of the Corporation's management of risk associated with
mortgage production activities, see the Noninterest Income section on page 18
and the Mortgage Servicing Rights section in Note One to the consolidated
financial statements on page 53.
28
<PAGE>
Table Ten
Asset and Liability Management Interest Rate Contracts
December 31, 1997
(Dollars in Millions, Average Expected Maturity in Years)
<TABLE>
<CAPTION>
Unrealized
Gain/(Loss)
-------------
<S> <C>
Asset Conversion Swaps
Receive fixed generic ................ $203
Notional amount .....................
Weighted average receive rate .......
Weighted average pay rate ...........
Pay fixed generic .................... (19)
----
Notional amount .....................
Weighted average pay rate ...........
Weighted average receive rate .......
Total asset conversion swaps ......... $184
====
Notional amount .....................
Liability Conversion Swaps
Receive fixed generic ................ $100
Notional amount .....................
Weighted average receive rate .......
Weighted average pay rate ...........
Pay fixed generic .................... (3)
-------
Notional amount .....................
Weighted average pay rate ...........
Weighted average receive rate .......
Total liability conversion swaps ..... $ 97
======
Notional amount .....................
=======================================================================================================
Total receive fixed swaps ............ $303
Notional amount .....................
Weighted average receive rate .......
Weighted average pay rate ...........
Total pay fixed swaps ................ (22)
Notional amount .....................
Weighted average pay rate ...........
Weighted average receive rate .......
Basis Swaps .......................... (1)
-------
Notional amount .....................
Weighted average receive rate .......
Weighted average pay rate ...........
Total Swaps .......................... $280
======
Notional amount .....................
========================================================================================================
Option Products
Notional amount ..................... (7)
Weighted average strike rate ........
=======================================================================================================
Total Interest Rate Contracts ........ $273
======
Notional amount .....................
<CAPTION>
Expected Maturity
----------------------------------------------------------------------------------
After
Total 1998 1999 2000 2001 2002 2002
------------ ----------- ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Conversion Swaps
Receive fixed generic ................
Notional amount ..................... $ 20,524 $ 1,000 $ 1,275 $ 6,325 $ 8,489 $ 3,435 $ --
Weighted average receive rate ....... 6.38% 5.67% 6.38% 6.40% 6.39% 6.54% --%
Weighted average pay rate ........... 5.91 5.94 5.89 5.87 5.91 5.95 --
Pay fixed generic ....................
Notional amount ..................... $ 1,371 $ -- $ 250 $ 1,000 $ 70 $ -- $ 51
Weighted average pay rate ........... 6.75% --% 6.46% 6.70% 7.41% --% 8.33%
Weighted average receive rate ....... 6.02 -- 5.91 5.81 7.99 -- 7.86
Total asset conversion swaps .........
Notional amount ..................... $ 21,895 $ 1,000 $ 1,525 $ 7,325 $ 8,559 $ 3,435 $ 51
Liability Conversion Swaps
Receive fixed generic ................
Notional amount ..................... $ 7,713 $ 1,687 $ 826 $ 308 $ 1,102 $ 495 $ 3,295
Weighted average receive rate ....... 6.77% 6.69% 7.26% 6.79% 6.08% 6.92% 6.89%
Weighted average pay rate ........... 6.24 6.57 7.51 6.13 5.97 5.85 5.92
Pay fixed generic ....................
Notional amount ..................... $ 116 $ 100 $ -- $ 8 $ -- $ 8 $ --
Weighted average pay rate ........... 8.86% 9.31% --% 6.01% --% 6.65% --%
Weighted average receive rate ....... 5.56 5.32 -- 5.84 -- 5.91 --
Total liability conversion swaps .....
Notional amount ..................... $ 7,829 $ 1,787 $ 826 $ 316 $ 1,102 $ 503 $ 3,295
=============================================================================================================================
Total receive fixed swaps ............
Notional amount ..................... $ 28,237 $ 2,687 $ 2,101 $ 6,633 $ 9,591 $ 3,930 $ 3,295
Weighted average receive rate ....... 6.49% 6.31% 6.73% 6.42% 6.36% 6.59% 6.89%
Weighted average pay rate ........... 6.00 6.34 6.52 5.88 5.92 5.94 5.92
Total pay fixed swaps ................
Notional amount ..................... $ 1,487 $ 100 $ 250 $ 1,008 $ 70 $ 8 $ 51
Weighted average pay rate ........... 6.92% 9.31% 6.46% 6.69% 7.41% 6.65% 8.33%
Weighted average receive rate ....... 5.97 5.32 5.91 5.81 7.99 5.91 7.86
Basis Swaps ..........................
Notional amount ..................... $ 2,308 $ 700 $ 1,125 $ 218 $ 96 $ 169 $ --
Weighted average receive rate ....... 5.86% 5.72% 5.80% 5.91% 7.23% 5.96% --%
Weighted average pay rate ........... 5.92 5.85 5.84 6.00 7.27 5.92 --
Total Swaps ..........................
Notional amount ..................... $ 32,032 $ 3,487 $ 3,476 $ 7,859 $ 9,757 $ 4,107 $ 3,346
=============================================================================================================================
Option Products
Notional amount ..................... $ 5,902 $ 2,450 $ 2,825 $ 143 $ 85 $ 163 $ 236
Weighted average strike rate ........ 6.77% 6.35% 6.64% 8.13% 9.43% 7.70% 10.29%
=============================================================================================================================
Total Interest Rate Contracts ........
Notional amount ..................... $ 37,934 $ 5,937 $ 6,301 $ 8,002 $ 9,842 $ 4,270 $ 3,582
<CAPTION>
Average
Expected
Maturity
---------
<S> <C>
Asset Conversion Swaps
Receive fixed generic ................ 3.12
Notional amount .....................
Weighted average receive rate .......
Weighted average pay rate ...........
Pay fixed generic .................... 2.46
Notional amount .....................
Weighted average pay rate ...........
Weighted average receive rate .......
Total asset conversion swaps .........
Notional amount .....................
Liability Conversion Swaps
Receive fixed generic ................ 5.03
Notional amount .....................
Weighted average receive rate .......
Weighted average pay rate ...........
Pay fixed generic .................... 1.27
Notional amount .....................
Weighted average pay rate ...........
Weighted average receive rate .......
Total liability conversion swaps .....
Notional amount .....................
============================================================================================================================
Total receive fixed swaps ............ 3.64
Notional amount .....................
Weighted average receive rate .......
Weighted average pay rate ...........
Total pay fixed swaps ................ 2.37
Notional amount .....................
Weighted average pay rate ...........
Weighted average receive rate .......
Basis Swaps .......................... 1.47
Notional amount .....................
Weighted average receive rate .......
Weighted average pay rate ...........
Total Swaps ..........................
Notional amount .....................
============================================================================================================================
Option Products
Notional amount .....................
Weighted average strike rate ........
============================================================================================================================
Total Interest Rate Contracts ........
Notional amount .....................
</TABLE>
29
<PAGE>
Trading Portfolio
The Corporation manages its exposure to market risk resulting from trading
activities through a risk management function which is independent of the
business units. Each major trading site is monitored by this risk management
unit. Risk limits have been approved by the Corporation's Finance Committee,
and daily earnings at risk limits are generally allocated to the business
units. In addition to limits placed on these individual business units, limits
are also imposed on the risks individual traders can take and on the amount of
risk that can be concentrated in a particular product or market. Risk positions
are monitored by business unit, risk management personnel and senior management
on a daily basis. Business unit and risk management personnel are responsible
for continual monitoring of the changing aggregate position of the portfolios
under their responsibility, including projection of the profit or loss levels
that could result from both normal and extreme market moves. If any market risk
limits are inadvertently exceeded, the risk management unit ensures that
actions are taken as necessary to bring portfolios within approved trading
limits.
To estimate potential losses that could result from adverse market
movements, the factor based scenario model is used to calculate daily earnings
at risk. This model breaks down yield curve movements into three underlying
factors to produce sixteen yield curve scenarios used to estimate hypothetical
profit or loss. Earnings at risk represents a one-day measurement of pretax
earnings at risk from movements in market prices using the assumption that
positions cannot be rehedged during the period of any prescribed price and
volatility change. A 99-percent confidence level is utilized, which indicates
that actual trading profits and losses may deviate from expected levels and
exceed estimates approximately one day out of every 100 days of trading
activity.
Earnings at risk estimates are measured on a daily basis at the individual
trading unit level, by type of trading activity and for all trading activities
in the aggregate. Daily reports of estimates compared to respective limits are
reviewed by senior management, and trading strategies are adjusted accordingly.
In addition to the earnings at risk analysis, portfolios which have significant
option positions are stress tested continually to simulate the potential loss
that might occur due to unexpected market movements.
Earnings at risk is measured on both a gross and uncorrelated basis. The
gross measure assumes that adverse market movements occur simultaneously across
all segments of the trading portfolio, an unlikely assumption. On December 31,
1997, the gross estimates for aggregate interest rate, foreign exchange and
equity and commodity trading activities were $52 million, $6 million and $3
million, respectively. Alternately, using a statistical measure which is more
likely to capture the effects of market movements, the uncorrelated estimate on
December 31, 1997 for aggregate trading activities was $22 million. Both
measures indicate that the Corporation's primary risk exposure is related to
its interest rate activities.
Average daily trading revenues in 1997 approximated $1 million. During
1997, the Corporation's trading activities resulted in positive daily revenues
for approximately 64 percent of total trading days. During 1997, the standard
deviation of trading revenues was $4 million. Using this data, one can conclude
that the aggregate trading activities should not result in exposure of more
than $8 million for any one day, assuming 99-percent confidence. When comparing
daily earnings at risk to trading revenues, daily earnings at risk will average
considerably more due to the assumption of no corrective actions as well as the
assumption that adverse market movements occur simultaneously across all
segments of the trading portfolio. Instruments included in the Corporation's
trading portfolio (including derivatives-dealer positions) and their fair
values are disclosed in Notes Four and Eight of the notes to the consolidated
financial statements on pages 59 and 67, respectively.
Credit Risk Management and Credit Portfolio Review
In conducting business activities, the Corporation is exposed to the
possibility that borrowers or counterparties may default on their obligations
to the Corporation. Credit risk arises through the extension of loans, leases,
factored accounts receivable, certain securities, letters of credit, financial
guarantees and through counterparty risk on trading and capital markets
transactions. To manage this risk, the Credit Policy group establishes policies
and procedures to manage both on- and off-balance sheet credit risk and
communicates and monitors the application of these policies and procedures
throughout the Corporation.
The Corporation's overall objective in managing credit risk is to minimize
the adverse impact of any single event or set of occurrences. To achieve this
objective, the Corporation strives to maintain a credit risk profile that is
diverse in terms of product type, industry concentration, geographic
distribution and borrower or counterparty concentration.
30
<PAGE>
The Credit Policy group works with lending officers, trading personnel and
various other line personnel in areas that conduct activities involving credit
risk and is involved in the implementation, refinement and monitoring of credit
policies and procedures.
The Corporation manages credit exposure to individual borrowers and
counterparties on an aggregate basis including loans, leases, factored accounts
receivable, securities, letters of credit, bankers' acceptances, derivatives
and unfunded commitments. The creditworthiness of a borrower or counterparty is
determined by experienced personnel, and limits are established for the total
credit exposure to any one borrower or counterparty. Credit limits are subject
to varying levels of approval by senior line and credit policy management.
Total exposure to a borrower or counterparty is aggregated and measured against
established limits.
The originating credit officer assigns borrowers or counterparties an
initial risk rating which is based on the amount of inherent credit risk and
reviewed for appropriateness by senior line and credit policy personnel.
Credits are monitored by line and credit policy personnel for deterioration in
a borrower's or counterparty's financial condition which would impact the
ability of the borrower or counterparty to perform under the contract. Risk
ratings are adjusted as necessary.
For consumer lending, credit scoring systems are utilized to provide
standards for extension of credit. Consumer portfolio credit risk is monitored
primarily using statistical models and actual payment experience to predict
portfolio behavior.
When required, the Corporation obtains collateral to support credit
extensions and commitments. Generally, such collateral is in the form of real
and personal property, cash on deposit or other highly liquid instruments. In
certain circumstances, the Corporation obtains real property as security for
some loans that are made on the general creditworthiness of the borrower and
whose proceeds were not used for real estate-related purposes.
The Corporation also manages exposure to a single borrower, industry,
product-type or other concentration through syndications of credits,
participations, loan sales and securitizations. Through Global Finance, the
Corporation is a major participant in the syndications market. In a syndicated
facility, each participating lender funds only its portion of the syndicated
facility, therefore limiting its exposure to the borrower. The Corporation also
identifies and reduces its exposure to funded borrower, product or industry
concentrations through loan sales. Generally, these sales are without recourse
to the Corporation.
In conducting derivatives activities in certain jurisdictions, the
Corporation reduces credit risk to any one counterparty through the use of
legally enforceable master netting agreements which allow the Corporation to
settle positive and negative positions with the same counterparty on a net
basis. For more information on the Corporation's off-balance sheet credit risk,
see Note Eight to the consolidated financial statements on page 65.
An independent credit review group conducts ongoing reviews of credit
activities and portfolios, reexamining on a regular basis risk assessments for
credit exposures and overall compliance with policy.
Loans, Leases and Factored Accounts Receivable Portfolio -- The
Corporation's credit exposure is focused in its loans, leases and factored
accounts receivable portfolio which totaled $143.8 billion on December 31,
1997. Table Fifteen presents a distribution of loans by category.
Allowance for Credit Losses -- The Corporation's allowance for credit
losses was $2.8 billion, or 1.94 percent of net loans, leases and factored
accounts receivable on December 31, 1997, compared to $2.3 billion, or 1.89
percent, on December 31, 1996, with the increase in the allowance attributable
to the acquisition of Boatmen's. Table Eleven provides an analysis of the
changes in the allowance for credit losses. Total net charge-offs increased
$200 million in 1997 to $798 million, or .54 percent of average loans, leases
and factored accounts receivable, compared to $598 million, or .48 percent, in
1996. Higher net charge-offs were largely the result of an increase in the
average loans, leases, and factored accounts receivable portfolio, attributable
to both the Boatmen's acquisition and internal growth as well as deterioration
in consumer credit quality experienced on an industry-wide basis. This resulted
in increases in total consumer net charge-offs, which were partially offset by
lower commercial net charge-offs during 1997.
31
<PAGE>
Table Eleven
Allowance For Credit Losses
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Balance on January 1 ..................................... $ 2,315 $ 2,163
-------- --------
Loans, leases and factored accounts receivable
charged off
Commercial .............................................. (149) (150)
Real estate commercial .................................. (24) (38)
Real estate construction ................................ (3) (5)
---------- ----------
Total commercial ...................................... (176) (193)
--------- ---------
Residential mortgage .................................... (15) (12)
Credit card ............................................. (474) (272)
Other consumer .......................................... (406) (329)
--------- ---------
Total consumer ........................................ (895) (613)
--------- ---------
Lease financing ......................................... (16) (4)
Factored accounts receivable ............................ (19) (26)
--------- ---------
Total loans, leases and factored accounts
receivable charged off ................................ (1,106) (836)
--------- ---------
Recoveries of loans, leases and factored accounts
receivable previously charged off
Commercial .............................................. 79 66
Real estate commercial .................................. 24 13
Real estate construction ................................ 6 2
--------- ---------
Total commercial ...................................... 109 81
--------- ---------
Residential mortgage .................................... 3 2
Credit card ............................................. 79 60
Other consumer .......................................... 108 85
--------- ---------
Total consumer ........................................ 190 147
--------- ---------
Foreign ................................................. -- --
Lease financing ......................................... 2 1
Factored accounts receivable ............................ 7 9
--------- ---------
Total recoveries of loans, leases and factored
accounts receivable previously charged off ............ 308 238
--------- ---------
Net charge-offs ......................................... (798) (598)
--------- ---------
Provision for credit losses .............................. 800 605
Allowance applicable to loans of purchased
companies and other ..................................... 465 145
--------- ---------
Balance on December 31 ................................... $ 2,782 $ 2,315
========= =========
Loans, leases and factored accounts receivable, net of
unearned income, outstanding on December 31 ............. $143,792 $122,630
Allowance for credit losses as a percentage of loans,
leases and factored accounts receivable, net of
unearned income, outstanding on December 31 ............. 1.94% 1.89%
Average loans, leases and factored accounts
receivable, net of unearned income, outstanding
during the year ......................................... $146,424 $123,403
Net charge-offs as a percentage of average loans,
leases and factored accounts receivable, net of
unearned income, outstanding during the year ............ .54% .48%
Ratio of the allowance for credit losses on
December 31 to net charge-offs .......................... 3.49 3.87
Allowance for credit losses as a percentage of
nonperforming loans ..................................... 273.34% 260.02%
<CAPTION>
1995 1994 1993
-------------- -------------- ------------
<S> <C> <C> <C>
Balance on January 1 ..................................... $ 2,186 $ 2,169 $ 1,454
-------- -------- --------
Loans, leases and factored accounts receivable
charged off
Commercial .............................................. (98) (113) (107)
Real estate commercial .................................. (25) (32) (84)
Real estate construction ................................ (17) (27) (17)
-------- -------- --------
Total commercial ...................................... (140) (172) (208)
-------- -------- --------
Residential mortgage .................................... (8) (7) (10)
Credit card ............................................. (189) (126) (184)
Other consumer .......................................... (263) (192) (172)
--------- --------- --------
Total consumer ........................................ (460) (325) (366)
--------- --------- --------
Lease financing ......................................... (2) (4) (5)
Factored accounts receivable ............................ (34) (32) (30)
--------- --------- ---------
Total loans, leases and factored accounts
receivable charged off ................................ (636) (533) (609)
--------- --------- ---------
Recoveries of loans, leases and factored accounts
receivable previously charged off
Commercial .............................................. 78 69 67
Real estate commercial .................................. 15 17 21
Real estate construction ................................ 9 26 12
--------- --------- ---------
Total commercial ...................................... 102 112 100
--------- --------- ---------
Residential mortgage .................................... 2 2 3
Credit card ............................................. 26 22 19
Other consumer .......................................... 72 67 65
--------- --------- ---------
Total consumer ........................................ 100 91 87
--------- --------- ---------
Foreign ................................................. -- -- 1
Lease financing ......................................... 1 3 2
Factored accounts receivable ............................ 12 11 7
--------- --------- ---------
Total recoveries of loans, leases and factored
accounts receivable previously charged off ............ 215 217 197
--------- --------- ---------
Net charge-offs ......................................... (421) (316) (412)
--------- --------- ---------
Provision for credit losses .............................. 382 310 430
Allowance applicable to loans of purchased
companies and other ..................................... 16 23 697
--------- --------- ---------
Balance on December 31 ................................... $ 2,163 $ 2,186 $ 2,169
========= ========= =========
Loans, leases and factored accounts receivable, net of
unearned income, outstanding on December 31 ............. $117,033 $103,371 $92,007
Allowance for credit losses as a percentage of loans,
leases and factored accounts receivable, net of
unearned income, outstanding on December 31 ............. 1.85% 2.11% 2.36%
Average loans, leases and factored accounts
receivable, net of unearned income, outstanding
during the year ......................................... $110,650 $96,258 $80,058
Net charge-offs as a percentage of average loans,
leases and factored accounts receivable, net of
unearned income, outstanding during the year ............ .38% .33% .51%
Ratio of the allowance for credit losses on
December 31 to net charge-offs .......................... 5.14 6.93 5.27
Allowance for credit losses as a percentage of
nonperforming loans ..................................... 306.49% 273.07% 193.38%
</TABLE>
32
<PAGE>
Excluding increases that resulted from the acquisition of Boatmen's,
management expects charge-offs in general to increase modestly in 1998, with
increases in the consumer loan categories anticipated as the Corporation
continues its efforts to shift the mix of the loan portfolio to a higher
consumer loan concentration. Furthermore, future economic conditions also will
impact credit quality and may result in increased net charge-offs and higher
provision for credit losses.
Portions of the allowance for credit losses are allocated to cover the
estimated losses inherent in particular risk categories of loans. The
allocation of the allowance for credit losses, as presented in Table Twelve, is
based upon the Corporation's loss experience over a period of years and is
adjusted for existing economic conditions as well as performance trends within
specific portfolio segments and individual concentrations of credit.
The nature of the process by which the Corporation determines the
appropriate allowance for credit losses requires the exercise of considerable
judgment. Management believes that the allowance for credit losses is
appropriate given its analysis of inherent credit losses on December 31, 1997.
Table Twelve
Allocation of the Allowance for Credit Losses
December 31
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------------------ ------------------ ------------------ ------------------ -------------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
-------- --------- -------- --------- -------- --------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial ............. $ 818 29.4% $ 665 28.7% $ 626 28.9% $ 569 26.0% $ 510 23.5%
Real estate
commercial ............ 369 13.3 267 11.5 311 14.4 397 18.2 403 18.6
Real estate
construction .......... 186 6.7 140 6.1 146 6.7 147 6.7 160 7.4
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total commercial ...... 1,373 49.4 1,072 46.3 1,083 50.0 1,113 50.9 1,073 49.5
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Residential
mortgage .............. 74 2.7 78 3.4 64 3.0 45 2.0 32 1.4
Credit card ............ 279 10.0 216 9.3 209 9.7 152 7.0 119 5.5
Other consumer ......... 369 13.3 281 12.1 291 13.4 211 9.7 199 9.2
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total consumer ........ 722 26.0 575 24.8 564 26.1 408 18.7 350 16.1
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Foreign ................ 31 1.1 23 1.0 21 1.0 19 .9 8 .4
Lease financing ........ 72 2.6 61 2.6 36 1.7 26 1.2 16 .7
Factored accounts
receivable ............ 22 .8 20 .9 20 .9 13 .6 13 .6
Unallocated ............ 562 20.1 564 24.4 439 20.3 607 27.7 709 32.7
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
$2,782 100.0% $2,315 100.0% $2,163 100.0% $2,186 100.0% $2,169 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
Nonperforming Assets -- On December 31, 1997, nonperforming assets were
$1.1 billion, or .79 percent of net loans, leases, factored accounts receivable
and foreclosed properties, compared to $1.0 billion, or .85 percent, on
December 31, 1996. As presented in Table Thirteen, nonperforming loans were
$1.0 billion at the end of 1997 compared to $890 million at the end of 1996.
The allowance coverage of nonperforming loans was 273 percent on December 31,
1997 compared to 260 percent at the end of 1996.
Foreclosed properties decreased to $117 million on December 31, 1997
compared to $153 million on December 31, 1996.
33
<PAGE>
Table Thirteen
Nonperforming Assets
December 31
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Commercial ............................................. $ 293 $ 342 $ 271 $ 362 $ 474
Real estate commercial ................................. 157 145 196 201 318
Real estate construction ............................... 18 28 16 66 142
------- ------- ------ ------- -------
Total commercial ..................................... 468 515 483 629 934
------- ------- ------ ------- -------
Residential mortgage ................................... 272 215 87 66 77
Other consumer ......................................... 245 135 130 94 93
------- ------- ------ ------- -------
Total consumer ................................... ... 517 350 217 160 170
------- ------- ------ ------- -------
Foreign ................................................ -- -- -- 3 8
Lease financing ........................................ 33 25 6 9 10
------- ------- ------ ------- -------
Total nonperforming loans .............................. 1,018 890 706 801 1,122
------- ------- ------ ------- -------
Foreclosed properties ................................... 117 153 147 337 661
------- ------- ------ ------- -------
Total nonperforming assets ............................. $ 1,135 $ 1,043 $ 853 $ 1,138 $ 1,783
======= ======= ====== ======= =======
Nonperforming assets as a percentage of
Total assets ........................................... .43% .56% .46% .67% 1.13%
Loans, leases and factored accounts receivable, net of
unearned income, and foreclosed properties ........... .79 .85 .73 1.10 1.92
</TABLE>
The loss of income associated with nonperforming loans on December 31 and
the cost of carrying foreclosed properties were:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income that would have been recorded in accordance
with original terms ................................. $ 128 $ 103 $ 102 $ 96 $ 80
Less income actually recorded ........................ (49) (35) (27) (31) (34)
----- ----- ----- ----- -----
Loss of income ....................................... $ 79 $ 68 $ 75 $ 65 $ 46
===== ===== ===== ===== =====
Cost of carrying foreclosed properties ............... $ 9 $ 8 $ 13 $ 24 $ 18
===== ===== ===== ===== =====
</TABLE>
On December 31, 1997, there were no material commitments to lend additional
funds with respect to nonperforming loans.
Internal loan workout units are devoted to the management and/or
collection of certain nonperforming assets as well as certain performing loans.
Management believes concerted collection strategies and a proactive approach to
managing overall credit risk have expedited the disposition, collection and
renegotiation of nonperforming and other lower-quality assets. As part of this
process, management routinely evaluates all reasonable alternatives, including
the sale of assets individually or in groups, and selects the optimal strategy.
34
<PAGE>
Loans Past Due 90 Days or More -- Table Fourteen presents total loans past
due 90 days or more and still accruing interest. On December 31, 1997, loans
past due 90 days or more and still accruing interest were $315 million, or .22
percent of net loans, leases and factored accounts receivable, compared to $245
million, or .20 percent, on December 31, 1996. The increase of $70 million was
the result of deterioration in consumer credit quality experienced on an
industry-wide basis and the Boatmen's acquisition.
Table Fourteen
Loans Past Due 90 Days or More and Still Accruing Interest
December 31
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996
------------------------ -----------------------
Amount Percent (1) Amount Percent (1)
-------- ------------- -------- ------------
<S> <C> <C> <C> <C>
Commercial ........................... $ 34 .06% $ 38 .08%
Real estate commercial ............... 10 .14 13 .24
Real estate construction ............. 4 .11 5 .17
---- ---- ---- ----
Total commercial .................... 48 .07 56 .10
---- ---- ---- ----
Residential mortgage ................. 64 .23 45 .16
Credit card .......................... 149 2.17 105 1.56
Other consumer ....................... 46 .17 30 .15
---- ---- ---- ----
Total consumer ...................... 259 .42 180 .33
---- ---- ---- ----
Factored accounts receivable ......... 8 .74 9 .86
---- ---- ---- ----
Total ............................. $315 .22 $245 .20
==== ==== ==== ====
</TABLE>
(1) Represents amounts past due 90 days or more and still accruing interest as
a percentage of net loans for each loan category and as a percentage of
net loans, leases and factored accounts receivable for total loans.
Concentrations of Credit Risk -- In an effort to minimize the adverse
impact of any single event or set of occurrences, the Corporation strives to
maintain a diverse credit portfolio as outlined in Tables Seventeen and
Eighteen. Table Fifteen presents the distribution of loans, leases and factored
accounts receivable by category.
35
<PAGE>
Table Fifteen
Distribution of Loans, Leases and Factored Accounts Receivable
December 31
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
Amount Percent Amount Percent
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Domestic
Commercial ...................... $ 60,184 41.9% $ 50,270 41.0%
Real estate commercial .......... 7,221 5.0 5,445 4.4
Real estate construction ........ 3,805 2.6 2,863 2.3
-------- ----- -------- -----
Total commercial ............... 71,210 49.5 58,578 47.7
-------- ----- -------- -----
Residential mortgage ............ 27,761 19.3 27,963 22.8
Credit card ..................... 6,866 4.8 6,747 5.5
Other consumer .................. 27,121 18.8 20,595 16.8
-------- ----- -------- -----
Total consumer ................. 61,748 42.9 55,305 45.1
-------- ----- -------- -----
Lease financing ................. 5,064 3.5 4,198 3.4
Factored accounts
receivable ..................... 1,074 .8 1,047 .9
-------- ----- -------- -----
139,096 96.7 119,128 97.1
-------- ----- -------- -----
Foreign
Commercial and industrial
companies ...................... 3,070 2.2 2,229 1.8
Banks and other financial
institutions ................... 773 .5 599 .5
Governments and official
institutions ................... -- -- -- --
Lease financing ................. 853 .6 674 .6
-------- ----- -------- -----
4,696 3.3 3,502 2.9
-------- ----- -------- -----
Total loans, leases and
factored accounts receivable,
net of unearned income .......... $143,792 100.0% $122,630 100.0%
======== ===== ======== =====
<CAPTION>
1995 1994 1993
-------------------- -------------------- ---------------------
Amount Percent Amount Percent Amount Percent
---------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Domestic
Commercial ...................... $ 47,989 41.0% $ 44,665 43.1% $40,808 44.3%
Real estate commercial .......... 6,183 5.3 7,349 7.1 8,239 9.0
Real estate construction ........ 2,976 2.5 2,981 2.9 3,256 3.5
-------- ----- -------- ----- ------- -----
Total commercial ............... 57,148 48.8 54,995 53.1 52,303 56.8
-------- ----- -------- ----- ------- -----
Residential mortgage ............ 24,026 20.6 17,244 16.7 12,689 13.8
Credit card ..................... 6,532 5.6 4,753 4.6 3,728 4.1
Other consumer .................. 22,287 19.0 20,511 19.9 19,326 21.0
-------- ----- -------- ----- ------- -----
Total consumer ................. 52,845 45.2 42,508 41.2 35,743 38.9
-------- ----- -------- ----- ------- -----
Lease financing ................. 3,264 2.8 2,440 2.4 1,729 1.9
Factored accounts
receivable ..................... 991 .8 1,004 1.0 1,001 1.1
-------- ----- -------- ----- ------- -----
114,248 97.6 100,947 97.7 90,776 98.7
-------- ----- -------- ----- ------- -----
Foreign
Commercial and industrial
companies ...................... 1,635 1.4 1,183 1.1 510 .5
Banks and other financial
institutions ................... 609 .5 795 .8 446 .5
Governments and official
institutions ................... 7 -- 6 -- 22 --
Lease financing ................. 534 .5 440 .4 253 .3
-------- ----- -------- ----- ------- -----
2,785 2.4 2,424 2.3 1,231 1.3
-------- ----- -------- ----- ------- -----
Total loans, leases and
factored accounts receivable,
net of unearned income .......... $117,033 100.0% $103,371 100.0% $92,007 100.0%
======== ===== ======== ===== ======= =====
</TABLE>
The following section discusses credit risk in the loan portfolio,
including net charge-offs by loan categories as presented in Table Sixteen.
Table Sixteen
Net Charge-offs in Dollars and as a Percentage of Average Loans Outstanding
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------------------- ---------------- ---------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial ......................... $70 .12% $ 84 .17% $ 20 .04% $ 44 .11% $40 .11%
Real estate commercial and
construction ..................... (3) n/m 28 .30 18 .17 16 .15 68 .71
------ ---- ---- ---- ---- ---- ---- ---- ----- ----
Total commercial ................. 67 .09 112 .19 38 .07 60 .11 108 .24
----- ---- ---- ---- ---- ---- ---- ---- ----- ----
Residential mortgage ............... 12 .04 10 .03 6 .03 5 .03 7 .06
Credit card ........................ 395 6.02 212 3.58 163 3.40 104 2.76 165 3.99
Other consumer ..................... 298 1.12 244 1.09 191 .87 125 .63 107 .65
----- ---- ---- ---- ---- ---- ---- ---- ----- ----
Total consumer ................... 705 1.09 466 .82 360 .76 234 .60 279 .88
----- ---- ---- ---- ---- ---- ---- ---- ----- ----
Foreign ............................ -- -- -- -- -- -- -- -- (1) n/m
Lease financing .................... 14 .24 3 .08 1 .03 1 .04 3 .18
Factored accounts receivable ....... 12 1.00 17 1.45 22 1.91 21 1.68 23 2.14
----- ---- ---- ---- ---- ---- ---- ---- ----- ----
Total net charge-offs ............ $798 .54 $598 .48 $421 .38 $316 .33 $412 .51
===== ==== ==== ==== ==== ==== ==== ==== ===== ====
Selected managed net charge-offs
and ratios (1):
Managed credit cards ............... $591 6.49% $370 4.54% $242 3.95% $183 3.59% $174 4.00%
Managed other consumer loans ....... 332 1.14 264 1.07 191 .87 125 .63 107 .65
</TABLE>
n/m = not meaningful
(1) Includes both on-balance sheet and securitized loans.
Net charge-offs for each loan type are calculated as a percentage of
average outstanding or managed loans for each loan category. Total net
charge-offs are calculated based on total average outstanding loans, leases
and factored accounts receivable.
36
<PAGE>
Real Estate -- Total nonresidential real estate commercial and
construction loans, the portion of such loans which are nonperforming,
foreclosed properties and other credit exposures are presented in Table
Seventeen. The exposures presented represent credit extensions for real
estate-related purposes to borrowers or counterparties who are primarily in the
real estate development or investment business and for which the ultimate
repayment of the credit is dependent on the sale, lease, rental or refinancing
of the real estate.
Total nonresidential real estate commercial and construction loans totaled
$11.0 billion, or 8 percent of net loans, leases and factored accounts
receivable, on December 31, 1997 compared to $8.3 billion, or 7 percent, at the
end of 1996 with the increase due to the acquisition of Boatmen's. Excluding
the Boatmen's acquisition, real estate commercial and construction loans
decreased as a result of the Corporation's efforts to lower its exposure to
this line of business. Real estate loans past due 90 days or more and still
accruing interest were $14 million, or .13 percent of total real estate loans,
on December 31, 1997 compared to $18 million, or .22 percent, on December 31,
1996.
The exposures included in Table Seventeen do not include credit extensions
which were made on the general creditworthiness of the borrower for which real
estate was obtained as security and for which the ultimate repayment of the
credit is not dependent on the sale, lease, rental or refinancing of the real
estate. Accordingly, the exposures presented do not include commercial loans
secured by owner-occupied real estate, except where the borrower is a real
estate developer. In addition to the amounts presented in the tables, on
December 31, 1997, the Corporation had approximately $9.4 billion of commercial
loans which were not real estate dependent but for which the Corporation had
obtained real estate as secondary repayment security.
37
<PAGE>
Table Seventeen
Real Estate Commercial and Construction Loans, Foreclosed Properties and Other
Real Estate Credit Exposures
December 31, 1997
(Dollars in Millions)
<TABLE>
<CAPTION>
Loans (1) Other
----------------------------- Foreclosed Credit
Outstanding Nonperforming Properties Exposures (2)
------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
By Geographic Region (3):
Missouri, Kansas, Illinois, Iowa and Arkansas ..... $ 2,364 $ 38 $ 6 $ 156
Florida and Georgia ............................... 2,260 38 19 464
Texas, Oklahoma and New Mexico .................... 1,500 21 5 353
Maryland, District of Columbia and Virginia ....... 1,249 22 14 366
North Carolina and South Carolina ................. 1,209 26 6 164
Other states ...................................... 2,444 30 7 624
------- ---- --- ------
$11,026 $175 $57 $2,127
======= ==== === ======
By Property Type:
Apartments ........................................ $ 1,742 $ 7 $-- $ 835
Office buildings .................................. 1,720 15 7 121
Residential ....................................... 1,565 24 4 75
Shopping centers/retail ........................... 1,430 44 3 461
Hotels ............................................ 935 14 1 117
Industrial/warehouse .............................. 832 14 1 22
Land and land development ......................... 713 19 31 95
Resorts/golf courses .............................. 412 -- -- 3
Commercial-other .................................. 343 10 4 141
Unsecured ......................................... 232 2 -- 41
Multiple use ...................................... 111 4 1 2
Other ............................................. 991 22 5 214
------- ---- --- ------
$11,026 $175 $57 $2,127
======= ==== === ======
</TABLE>
(1) On December 31, 1997, the Corporation had unfunded binding real estate
commercial and construction loan commitments.
(2) Other credit exposures include letters of credit and loans held for sale.
(3) Distribution based on geographic location of collateral.
Other Industries -- Table Eighteen presents selected industry credit
exposures, commercial loans, factored accounts receivable and lease financings.
Commercial loan outstandings totaled $60.2 billion and $50.3 billion on
December 31, 1997 and 1996, respectively, or 42 percent and 41 percent of net
loans, leases and factored accounts receivable, respectively. This increase,
due largely to the addition of Boatmen's and core loan growth, was partially
offset by the impact of the $4.2-billion commercial loan securitization in the
third quarter of 1997. The Corporation had commercial loan net charge-offs in
1997 of $70 million, or .12 percent of average commercial loans, compared to
$84 million, or .17 percent of average commercial loans, in 1996. Excluding a
$40-million charge-off of one large retail credit, commercial loan net
charge-offs were $30 million, or .05 percent of average commercial loans, in
1997. Commercial loans past due 90 days or more and still accruing interest
were $34 million, or .06 percent of commercial loans, on December 31, 1997
compared to $38 million, or .08 percent, on December 31, 1996. Nonperforming
commercial loans were $293 million, or .49 percent of commercial loans, on
December 31, 1997, compared to $342 million, or .68 percent, on December 31,
1996.
38
<PAGE>
Table Eighteen
Selected Industry Loans, Leases and Factored Accounts Receivable, Net of
Unearned Income
December 31, 1997
(Dollars in Millions)
<TABLE>
<CAPTION>
Outstanding
------------
<S> <C>
Health care .......................... $4,222
Food, including agribusiness ......... 3,657
Machinery and equipment, excluding defense 3,180
Automotive, excluding trucking ....... 3,154
Oil and gas .......................... 3,086
Leisure and sports ................... 3,059
Media ................................ 2,976
Textiles and apparel, excluding retail 2,930
Retail ............................... 2,539
Telecommunications ................... 2,185
</TABLE>
Consumer -- On December 31, 1997 and 1996, total consumer loan
outstandings totaled $61.7 billion and $55.3 billion, respectively,
representing 43 percent of net loans, leases and factored accounts receivable
on December 31, 1997. This increase, due mainly to the addition of Boatmen's
and core loan growth, was net of mortgage and other consumer loan
securitizations of $8.1 billion and $500 million, respectively, during 1997.
Credit card net charge-offs during 1997 caused most of the increase in total
consumer net charge-offs and were due mainly to deterioration in consumer
credit quality experienced on an industry-wide basis. A secondary factor
causing the higher levels of net charge-offs during 1997 was an increase in
other consumer net charge-offs, primarily the result of the Boatmen's
acquisition. In addition to the credit card and other consumer loans reported
in the financial statements, the Corporation manages credit card and consumer
receivables which have been securitized and is continuing its efforts to shift
the loan portfolio mix to a higher consumer concentration.
Average credit card receivables managed by the Card Services group
(excluding private label credit cards) increased to $9.1 billion in 1997
compared to $8.1 billion in 1996. Average securitized credit card loans totaled
$2.6 billion during 1997 compared to $2.2 billion during 1996.
Average managed other consumer loans, which includes direct and indirect
consumer loans and home equity lines, as well as indirect auto loan and
consumer finance securitizations, were $29.2 billion in 1997, compared to $24.6
billion in 1996. Both the increase in loans and higher net charge-offs during
1997 were due primarily to the acquisition of Boatmen's.
Total consumer loans past due 90 days or more and still accruing interest
were $259 million, or .42 percent of total consumer loans, on December 31, 1997
compared to $180 million, or .33 percent, at the end of 1996. Total consumer
nonperforming loans were $517 million, or .84 percent of total consumer loans,
on December 31, 1997 compared to $350 million, or .63 percent, on December 31,
1996. The increases in these categories were due to the previously mentioned
deterioration in consumer credit quality experienced on an industry-wide basis
and the acquisition of Boatmen's.
Foreign -- Foreign outstandings include loans and leases, interest-bearing
deposits with foreign banks, bankers' acceptances and other investments. The
Corporation's foreign commercial outstandings totaled $17.0 billion, $8.1
billion and $3.8 billion on December 31, 1997, 1996 and 1995, respectively. The
Corporation had foreign outstandings of $2.3 billion with Germany, $2.4 billion
with countries in Asia (primarily Japan), $3.3 billion with France and $3.8
billion with Canada on December 31, 1997. There were no foreign outstandings to
any country greater than 1 percent of total assets on December 31, 1996 and
1995.
39
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
40
<PAGE>
Table Nineteen
Selected Quarterly Operating Results
(Dollars in Millions Except Per-Share Information)
<TABLE>
<CAPTION>
1997 Quarters
------------------------------------------------------
Fourth Third Second First
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Interest income ........................................ $ 4,288 $ 4,155 $ 4,109 $ 4,027
Interest expense ....................................... 2,300 2,183 2,121 2,077
Net interest income (taxable-equivalent) ............... 2,018 2,001 2,017 1,978
Net interest income .................................... 1,988 1,972 1,988 1,950
Provision for credit losses ............................ 230 190 190 190
Gains (losses) on sales of securities .................. 62 19 29 43
Noninterest income ..................................... 1,500 1,224 1,165 1,113
Foreclosed properties expense (income) ................. 3 5 4 (2)
Merger-related charge .................................. -- -- -- --
Other noninterest expense .............................. 2,051 1,788 1,798 1,810
Income before income taxes ............................. 1,266 1,232 1,190 1,108
Income tax expense ..................................... 448 444 428 399
Net income ............................................. 818 788 762 709
Net income (excluding merger-related charge) ........... 818 788 762 709
Earnings per common share .............................. 1.15 1.11 1.05 .97
Earnings per common share (excluding
merger-related charge) ................................ 1.15 1.11 1.05 .97
Diluted earnings per common share ...................... 1.12 1.08 1.02 .94
Diluted earnings per common share (excluding
merger-related charge) ................................ 1.12 1.08 1.02 .94
Dividends per common share ............................. .38 .33 .33 .33
Yield on average earning assets ........................ 7.87% 7.93% 7.97% 7.85%
Rate on average interest-bearing liabilities ........... 4.89 4.83 4.76 4.68
Net interest spread .................................... 2.98 3.10 3.21 3.17
Net interest yield ..................................... 3.68 3.80 3.89 3.83
Average total assets .................................. $ 253,342 $ 241,867 $240,508 $242,206
Average total deposits ................................. 132,394 132,651 134,661 134,976
Average total shareholders' equity ..................... 20,366 19,678 20,057 20,654
Return on average assets ............................... 1.28% 1.29% 1.27% 1.19%
Return on average assets (excluding merger-related
charge) ............................................... 1.28 1.29 1.27 1.19
Return on average common shareholders'
equity (1) ............................................ 15.93 15.91 15.25 13.96
Return on average common shareholders'
equity (excluding merger-related charge) (1) .......... 15.93 15.91 15.25 13.96
Cash basis financial data (2)
Earnings per common share ............................. $ 1.31 $ 1.27 $ 1.21 $ 1.10
Earnings per common share (excluding
merger-related charge) ............................... 1.31 1.27 1.21 1.10
Diluted earnings per common share ..................... 1.28 1.23 1.17 1.07
Diluted earnings per common share (excluding
merger-related charge) ............................... 1.28 1.23 1.17 1.07
Return on average tangible assets ..................... 1.52% 1.53% 1.51% 1.40%
Return on average tangible assets (excluding
merger-related charge) ............................... 1.52 1.53 1.51 1.40
Return on average tangible common shareholders'
equity (1) ........................................... 33.86 31.96 30.59 26.38
Return on average tangible common shareholders'
equity (excluding merger-related charge) (1) ......... 33.86 31.96 30.59 26.38
Market price per share of common stock
High for the period ................................... $ 66 3/8 $71 11/16 $ 70 $ 65
Low for the period .................................... 55 56 5/8 54 48
Closing price ......................................... 60 13/16 61 7/8 64 9/16 55 1/2
Tier 1 capital ratio ................................... 6.50% 7.00% 6.83% 7.06%
Total capital ratio .................................... 10.89 11.56 11.32 11.58
<CAPTION>
1996 Quarters
------------------------------------------------------
Fourth Third Second First
------------ ------------ -------------- -------------
<S> <C> <C> <C> <C>
Interest income ........................................ $ 3,358 $ 3,423 $ 3,442 $ 3,573
Interest expense ....................................... 1,768 1,828 1,855 2,016
Net interest income (taxable-equivalent) ............... 1,612 1,616 1,611 1,584
Net interest income .................................... 1,590 1,595 1,587 1,557
Provision for credit losses ............................ 150 145 155 155
Gains (losses) on sales of securities .................. 33 26 (6) 14
Noninterest income ..................................... 958 886 917 885
Foreclosed properties expense (income) ................. 7 6 7 --
Merger-related charge .................................. -- -- -- 118
Other noninterest expense .............................. 1,466 1,400 1,405 1,394
Income before income taxes ............................. 958 956 931 789
Income tax expense ..................................... 326 331 326 276
Net income ............................................. 632 625 605 513
Net income (excluding merger-related charge) ........... 632 625 605 590
Earnings per common share .............................. 1.09 1.06 1.00 .85
Earnings per common share (excluding
merger-related charge) ................................ 1.09 1.06 1.00 .98
Diluted earnings per common share ...................... 1.07 1.05 .99 .84
Diluted earnings per common share (excluding
merger-related charge) ................................ 1.07 1.05 .99 .96
Dividends per common share ............................. .33 .29 .29 .29
Yield on average earning assets ........................ 7.86% 7.87% 7.80% 7.80%
Rate on average interest-bearing liabilities ........... 4.77 4.84 4.83 4.97
Net interest spread .................................... 3.09 3.03 2.97 2.83
Net interest yield ..................................... 3.75 3.69 3.62 3.43
Average total assets ................................... $194,321 $197,923 $202,796 $ 208,617
Average total deposits ................................. 105,765 107,715 109,988 106,906
Average total shareholders' equity ..................... 13,224 13,133 13,552 13,144
Return on average assets ............................... 1.29% 1.26% 1.20% .99%
Return on average assets (excluding merger-related
charge) ............................................... 1.29 1.26 1.20 1.14
Return on average common shareholders'
equity (1) ............................................ 19.06 19.00 18.00 15.71
Return on average common shareholders'
equity (excluding merger-related charge) (1) .......... 19.06 19.00 18.00 18.07
Cash basis financial data (2)
Earnings per common share ............................. $ 1.16 $ 1.12 $ 1.05 $ .89
Earnings per common share (excluding
merger-related charge) ............................... 1.16 1.12 1.05 1.02
Diluted earnings per common share ..................... 1.14 1.11 1.04 .88
Diluted earnings per common share (excluding
merger-related charge) ............................... 1.14 1.11 1.04 1.00
Return on average tangible assets ..................... 1.38% 1.34% 1.28% 1.05%
Return on average tangible assets (excluding
merger-related charge) ............................... 1.38 1.34 1.28 1.20
Return on average tangible common shareholders'
equity (1) ........................................... 23.81 23.56 22.00 19.14
Return on average tangible common shareholders'
equity (excluding merger-related charge) (1) ......... 23.81 23.56 22.00 21.85
Market price per share of common stock
High for the period ................................... $ 52 5/8 $47 1/16 $42 5/16 $40 11/16
Low for the period .................................... 43 1/8 38 3/16 37 3/8 32 3/16
Closing price ......................................... 48 7/8 43 7/16 41 5/16 40 1/16
Tier 1 capital ratio ................................... 7.76% 7.05% 7.58% 7.35%
Total capital ratio .................................... 12.66 12.05 11.93 11.71
</TABLE>
(1) Average common shareholders' equity does not include the effect of market
value adjustments to securities available for sale and marketable equity
securities.
(2) Cash basis calculations exclude intangible assets and the related
amortization expense.
41
<PAGE>
Table Twenty
Quarterly Taxable-Equivalent Data
(Dollars in Millions)
<TABLE>
<CAPTION>
Fourth Quarter 1997 Third Quarter 1997
------------------------------- --------------------------------
Average Average
Balance Income Balance Income
Sheet or Yields/ Sheet or Yields/
Amounts Expense Rates Amounts Expense Rates
----------- --------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Loans and leases, net of unearned income (1)
Commercial .................................................... $ 58,210 $1,216 8.30% $ 59,826 $1,258 8.34%
Real estate commercial ........................................ 7,385 168 8.99 7,747 172 8.82
Real estate construction ...................................... 3,850 85 8.71 3,731 83 8.81
-------- ------ ----- -------- ------ -----
Total commercial ............................................. 69,445 1,469 8.40 71,304 1,513 8.42
-------- ------ ----- -------- ------ -----
Residential mortgage .......................................... 27,419 531 7.73 32,318 635 7.84
Credit card ................................................... 6,541 198 12.00 6,841 209 12.10
Other consumer ................................................ 26,929 667 9.83 26,482 640 9.60
-------- ------ ----- -------- ------ -----
Total consumer ............................................... 60,889 1,396 9.11 65,641 1,484 9.00
-------- ------ ----- -------- ------ -----
Foreign ....................................................... 3,530 67 7.50 3,770 66 6.89
Lease financing ............................................... 5,873 113 7.74 5,821 112 7.68
-------- ------ ----- -------- ------ -----
Total loans and leases, net .................................. 139,737 3,045 8.66 146,536 3,175 8.61
-------- ------ ----- -------- ------ -----
Securities
Held for investment ........................................... 1,231 20 6.26 1,424 22 6.23
Available for sale (2) ........................................ 39,059 666 6.81 24,625 427 6.92
-------- ------ ----- -------- ------ -----
Total securities ............................................. 40,290 686 6.79 26,049 449 6.88
-------- ------ ----- -------- ------ -----
Loans held for sale ............................................ 1,762 31 7.08 1,253 24 7.40
Federal funds sold and securities purchased under
agreements to resell .......................................... 12,610 168 5.29 11,468 158 5.47
Time deposits placed and other short-term investments .......... 2,175 38 6.93 1,755 26 5.93
Trading account securities (3) ................................. 21,715 350 6.41 22,617 352 6.21
-------- ------ ----- -------- ------ -----
Total earning assets (4) ..................................... 218,289 4,318 7.87 209,678 4,184 7.93
Cash and cash equivalents ....................................... 8,793 8,552
Factored accounts receivable .................................... 1,227 1,199
Other assets, less allowance for credit losses .................. 25,033 22,438
-------- --------
Total assets ................................................. $253,342 $241,867
======== ========
Interest-bearing liabilities
Savings ........................................................ $ 9,479 48 1.98 $ 9,754 49 1.98
NOW and money market deposit accounts .......................... 39,922 258 2.58 40,665 262 2.55
Consumer CDs and IRAs .......................................... 36,930 488 5.24 37,549 493 5.21
Negotiated CDs, public funds and other time deposits ........... 2,701 39 5.63 3,114 43 5.54
Foreign time deposits .......................................... 10,622 150 5.60 9,668 133 5.43
Federal funds purchased, securities sold under agreements to
repurchase and other short-term borrowings .................... 47,433 659 5.51 40,304 571 5.62
Trading account liabilities (3) ................................ 11,522 190 6.54 10,231 163 6.30
Long-term debt (5) ............................................. 28,392 468 6.59 28,416 469 6.60
-------- ------ ----- -------- ------ -----
Total interest-bearing liabilities (6) ....................... 187,001 2,300 4.89 179,701 2,183 4.83
-------- ------ ----- -------- ------ -----
Noninterest-bearing sources
Noninterest-bearing deposits ................................... 32,740 31,901
Other liabilities .............................................. 13,235 10,587
Shareholders' equity ........................................... 20,366 19,678
-------- --------
Total liabilities and shareholders' equity ................... $253,342 $241,867
======== ========
Net interest spread ............................................. 2.98 3.10
Impact of noninterest-bearing sources ........................... .70 .70
------ ----- ------ -----
Net interest income/yield on earning assets ..................... $2,018 3.68% $2,001 3.80%
====== ===== ====== =====
</TABLE>
(1) Nonperforming loans are included in the respective average loan balances.
Income on such nonperforming loans is recognized on a cash basis.
(2) The average balance sheet amounts and yields on securities available for
sale are based on the average of historical amortized cost balances.
(3) The fair values of derivatives-dealer positions are reported in other
assets and liabilities, respectively.
(4) Interest income includes taxable-equivalent adjustments of $30, $29, $29
and $28 in the fourth, third, second and first quarters of 1997,
respectively, and $22 in the fourth quarter of 1996. Interest income also
includes the impact of risk management interest rate contracts, which
increased interest income on the underlying linked assets $26, $25, $34
and $48 in the fourth, third, second and first quarters of 1997,
respectively, and $31 in the fourth quarter of 1996.
(5) Long-term debt includes trust preferred securities.
(6) Interest expense includes the impact of risk management interest rate
contracts, which decreased interest expense on the underlying linked
liabilities $11, $8, $11 and $10 in the fourth, third, second and first
quarters of 1997, respectively, and $1 in the fourth quarter of 1996.
42
<PAGE>
<TABLE>
<CAPTION>
Second Quarter 1997 First Quarter 1997 Fourth Quarter 1996
- - ----------------------------------- ----------------------------------- ------------------------------------
Average Average Average
Balance Income Balance Income Balance Income
Sheet or Yields/ Sheet or Yields/ Sheet or Yields/
Amounts Expense Rates Amounts Expense Rates Amounts Expense Rates
- - ----------- --------- --------- ----------- --------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 60,133 $1,265 8.43% $ 59,542 $1,229 8.38% $ 49,987 $1,044 8.30%
8,446 191 9.09 8,646 190 8.90 5,388 122 9.00
3,765 88 9.43 3,778 84 8.98 3,084 67 8.74
-------- ------ ----- -------- ------ ----- -------- ------ -----
72,344 1,544 8.56 71,966 1,503 8.47 58,459 1,233 8.39
-------- ------ ----- -------- ------ ----- -------- ------ -----
33,848 658 7.79 32,072 621 7.78 28,174 548 7.77
7,102 211 11.93 7,170 205 11.60 6,363 185 11.58
26,154 628 9.61 26,872 632 9.54 20,581 503 9.69
-------- ------ ----- -------- ------ ----- -------- ------ -----
67,104 1,497 8.94 66,114 1,458 8.91 55,118 1,236 8.93
-------- ------ ----- -------- ------ ----- -------- ------ -----
3,119 56 7.29 3,283 56 6.86 2,701 47 6.89
5,546 107 7.69 5,316 103 7.79 4,614 87 7.66
-------- ------ ----- -------- ------ ----- -------- ------ -----
148,113 3,204 8.67 146,679 3,120 8.61 120,892 2,603 8.57
-------- ------ ----- -------- ------ ----- -------- ------ -----
1,647 24 5.94 1,920 29 6.05 2,585 36 5.55
20,851 361 6.93 20,740 356 6.89 11,540 205 7.10
-------- ------ ----- -------- ------ ----- -------- ------ -----
22,498 385 6.86 22,660 385 6.82 14,125 241 6.82
-------- ------ ----- -------- ------ ----- -------- ------ -----
819 16 7.91 1,062 17 6.49 802 15 7.31
11,478 169 5.91 13,370 188 5.70 12,291 162 5.24
2,303 31 5.36 2,228 28 5.11 1,991 25 4.86
22,793 333 5.84 22,848 317 5.60 21,148 334 6.32
-------- ------ ----- -------- ------ ----- -------- ------ -----
208,004 4,138 7.97 208,847 4,055 7.85 171,249 3,380 7.86
8,637 9,178 7,720
1,188 1,078 1,256
22,679 23,103 14,096
-------- -------- --------
$240,508 $242,206 $194,321
======== ======== ========
$ 10,096 50 2.00 $ 10,220 53 2.10 $ 8,607 46 2.12
41,792 272 2.60 42,138 273 2.64 30,634 191 2.47
38,481 501 5.22 39,458 507 5.21 30,870 405 5.22
3,459 47 5.47 3,555 47 5.31 2,544 35 5.53
9,523 125 5.30 9,278 118 5.14 9,139 117 5.10
38,793 524 5.42 39,828 509 5.18 33,928 455 5.34
9,376 160 6.85 9,949 165 6.73 9,314 152 6.48
27,260 442 6.49 25,244 405 6.50 22,702 367 6.53
-------- ------ ----- -------- ------ ----- -------- ------ -----
178,780 2,121 4.76 179,670 2,077 4.68 147,738 1,768 4.77
-------- ------ ----- -------- ------ ----- -------- ------ -----
31,310 30,327 23,971
10,361 11,555 9,388
20,057 20,654 13,224
-------- -------- --------
$240,508 $242,206 $194,321
======== ======== ========
3.21 3.17 3.09
.68 .66 .66
------ ----- ------ ----- ------ -----
$2,017 3.89% $1,978 3.83% $1,612 3.75%
====== ===== ====== ===== ====== =====
</TABLE>
43
<PAGE>
1996 Compared to 1995
The following discussion and analysis provides a comparison of the
Corporation's results of operations for the years ended December 31, 1996 and
1995. This discussion should be read in conjunction with the consolidated
financial statements and related notes on pages 45 through 79.
Overview
The Corporation's continued earnings momentum was demonstrated through a
26-percent increase in operating net income to $2.45 billion in 1996 compared
to $1.95 billion in 1995. Operating earnings per common share for 1996
increased 16 percent to $4.13 from $3.56 in 1995. Including a merger-related
charge of $118 million ($77 million, net of tax), net income increased 22
percent to $2.38 billion while earnings per common share rose 12 percent to
$4.00 and diluted earnings per common share increased 11 percent to $3.92,
respectively.
Business Unit Operations
The General Bank's 1996 earnings increased 35 percent to $1.6 billion.
Return on average equity increased approximately 300 basis points to 22 percent
in 1996. Revenue growth and expense control led to a 520-basis point
improvement in the efficiency ratio in 1996 to 58.6 percent.
Global Finance's earnings rose to $635 million in 1996. Return on average
equity remained constant at 16 percent in 1996. The efficiency ratio improved
slightly to 53.5 percent.
Financial Services' earnings rose 29 percent to $166 million in 1996.
Return on average equity remained constant at 14 percent in 1996. The
efficiency ratio was 45.1 percent in 1996 compared to 42.1 percent in 1995 due
primarily to office consolidation costs in 1996.
Net Interest Income
Taxable-equivalent net interest income increased 16 percent to $6.4
billion in 1996 compared to $5.6 billion in 1995 due to acquisitions of several
banking operations, higher spreads in the securities portfolio, core loan
growth and increased noninterest-bearing deposits, partially offset by the
impact of securitizations and a shift in funding to long-term debt.
The net interest yield increased 29 basis points to 3.62 percent in 1996
compared to 3.33 percent in 1995 due to the sale of low-yielding securities and
the reinvestment of proceeds into higher-spread products.
Provision for Credit Losses
The provision for credit losses covered net charge-offs and was $605
million in 1996 compared to $382 million in the prior year, reflecting the
continuation of a return to more normalized levels of credit losses following
periods of unusually low credit losses. Net charge-offs increased $177 million
to $598 million in 1996 over 1995 due primarily to increases in commercial,
other consumer and credit card net charge-offs.
The allowance for credit losses was $2.3 billion, or 1.89 percent of net
loans, leases and factored accounts receivable, on December 31, 1996 compared
to $2.2 billion, or 1.85 percent, at the end of 1995. The allowance for credit
losses was 260 percent of nonperforming loans on December 31, 1996 compared to
306 percent on December 31, 1995.
Noninterest Income
Noninterest income increased 19 percent to $3.6 billion in 1996, driven
primarily by higher deposit account service charges, investment banking income
and mortgage servicing and other mortgage-related income.
Noninterest Expense
Noninterest expense increased 10 percent to $5.7 billion. Excluding the
impact of acquisitions, noninterest expense increased only 4 percent, the
result of increased expenditures in selected areas to support revenue growth
through enhancing customer sales and optimizing product and data delivery
channels. Higher marketing expenses associated with the 1996 Summer Olympics
also contributed to the increase in 1996 expenses.
Income Taxes
The Corporation's income tax expense for 1996 was $1.3 billion, for an
effective tax rate of 34.6 percent of pretax income. Income tax expense for
1995 was $1.0 billion, for an effective tax rate of 34.8 percent.
44
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Market Risk Management" for Quantitative and
Qualitative Disclosures about Market Risk.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Management
The management of NationsBank Corporation is responsible for the
preparation, integrity and objectivity of the consolidated financial statements
of the Corporation. The consolidated financial statements and notes have been
prepared by the Corporation in accordance with generally accepted accounting
principles and, in the judgment of management, present fairly the Corporation's
financial position and results of operations. The financial information
contained elsewhere in this report is consistent with that in the financial
statements. The financial statements and other financial information in this
report include amounts that are based on management's best estimates and
judgments and give due consideration to materiality.
The Corporation maintains a system of internal accounting controls to
provide reasonable assurance that assets are safe-guarded and that transactions
are executed in accordance with management's authorization and recorded
properly to permit the preparation of financial statements in accordance with
generally accepted accounting principles. Management recognizes that even a
highly effective internal control system has inherent risks, including the
possibility of human error and the circumvention or overriding of controls, and
that the effectiveness of an internal control system can change with
circumstances. However, management believes that the internal control system
provides reasonable assurance that errors or irregularities that could be
material to the financial statements are prevented or would be detected on a
timely basis and corrected through the normal course of business. As of
December 31, 1997, management believes that the internal controls are in place
and operating effectively.
The Internal Audit Division of the Corporation reviews, evaluates,
monitors and makes recommendations on both administrative and accounting
control, which acts as an integral, but independent, part of the system of
internal controls.
The independent accountants were engaged to perform an independent audit
of the consolidated financial statements. In determining the nature and extent
of their auditing procedures, they have evaluated the Corporation's accounting
policies and procedures and the effectiveness of the related internal control
system. An independent audit provides an objective review of management's
responsibility to report operating results and financial condition. Their
report appears on page 46.
The Board of Directors discharges its responsibility for the Corporation's
financial statements through its Audit Committee. The Audit Committee meets
periodically with the independent accountants, internal auditors and
management. Both the independent accountants and internal auditors have direct
access to the Audit Committee to discuss the scope and results of their work,
the adequacy of internal accounting controls and the quality of financial
reporting.
/s/ Hugh L. McColl Jr.
HUGH L. MCCOLL JR.
Chief Executive Officer
/s/ James H. Hance Jr.
JAMES H. HANCE JR.
Vice Chairman and
Chief Financial Officer
45
<PAGE>
Report Of Independent Accountants
To The Board Of Directors And Shareholders Of NationsBank Corporation
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in shareholders' equity
and of cash flows present fairly, in all material respects, the financial
position of NationsBank Corporation and its subsidiaries at December 31, 1997
and 1996, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Corporation's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
[GRAPHIC OMITTED]
Charlotte, North Carolina
January 9, 1998
46
<PAGE>
NationsBank Corporation and Subsidiaries
Consolidated Statement of Income
(Dollars in Millions Except Per-Share Information)
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Interest income
Interest and fees on loans and leases ...................................... $ 12,481 $ 10,440 $ 9,552
Interest and dividends on securities ....................................... 1,855 1,306 1,468
Federal funds sold and securities purchased under agreements to resell ..... 683 666 937
Trading account securities ................................................. 1,349 1,225 1,097
Other interest income ...................................................... 211 159 166
--------- --------- --------
Total interest income .............................................. ...... 16,579 13,796 13,220
--------- --------- --------
Interest expense
Deposits ................................................................... 3,955 3,322 3,281
Borrowed funds ............................................................. 2,264 2,155 2,710
Trading account liabilities ................................................ 678 653 896
Long-term debt ............................................................. 1,784 1,337 886
--------- --------- --------
Total interest expense .................................................... 8,681 7,467 7,773
--------- --------- --------
Net interest income ......................................................... 7,898 6,329 5,447
Provision for credit losses ................................................. 800 605 382
--------- --------- --------
Net credit income ........................................................... 7,098 5,724 5,065
Gains on sales of securities ................................................ 153 67 29
Noninterest income
Service charges on deposit accounts ........................................ 1,546 1,121 884
Mortgage servicing and other mortgage-related income ....................... 287 213 138
Investment banking income .................................................. 627 356 192
Trading account profits and fees ........................................... 265 274 306
Brokerage income ........................................................... 234 110 114
Other nondeposit-related service fees ...................................... 310 262 224
Asset management and fiduciary service fees ................................ 648 432 444
Credit card income ......................................................... 371 314 277
Other income ............................................................... 714 564 499
--------- --------- --------
Total noninterest income .................................................. 5,002 3,646 3,078
--------- --------- --------
Foreclosed properties expense ............................................... 10 20 18
Merger-related charge ....................................................... -- 118 --
Other noninterest expense
Personnel .................................................................. 3,643 2,731 2,491
Occupancy, net ............................................................. 634 523 495
Equipment .................................................................. 604 451 397
Marketing .................................................................. 300 252 217
Professional fees .......................................................... 312 256 182
Amortization of intangibles ................................................ 441 128 119
Data processing ............................................................ 283 237 229
Telecommunications ......................................................... 229 172 150
Other general operating .................................................... 758 728 719
General administrative and miscellaneous ................................... 243 187 164
--------- --------- --------
Total other noninterest expense .................................... ...... 7,447 5,665 5,163
--------- --------- --------
Income before income taxes .................................................. 4,796 3,634 2,991
Income tax expense .......................................................... 1,719 1,259 1,041
--------- --------- --------
Net income .................................................................. $ 3,077 $ 2,375 $ 1,950
========= ========= ========
Net income available to common shareholders ................................. $ 3,066 $ 2,360 $ 1,942
========= ========= ========
Per-share information (1)
Earnings per common share .................................................. $ 4.27 $ 4.00 $ 3.56
========= ========= ========
Diluted earnings per common share .......................................... $ 4.17 $ 3.92 $ 3.52
========= ========= ========
Dividends per common share ................................................. $ 1.37 $ 1.20 $ 1.04
========= ========= ========
Average common shares issued (in thousands) (1) ............................. 717,450 590,216 544,959
========= ========= ========
(1) Shares and per-share data reflect a 2-for-1 stock split on February 27, 1997.
</TABLE>
See accompanying notes to consolidated financial statements.
47
<PAGE>
NationsBank Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in Millions)
<TABLE>
<CAPTION>
December 31
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
Assets
Cash and cash equivalents ............................................................... $ 10,586 $ 8,933
Time deposits placed and other short-term investments ................................... 2,395 1,843
Securities
Held for investment, at cost (market value -- $1,161 and $2,110)........................ 1,156 2,110
Available for sale ..................................................................... 46,047 12,277
-------- --------
Total securities ..................................................................... 47,203 14,387
-------- --------
Loans held for sale ..................................................................... 2,911 1,215
Federal funds sold and securities purchased under agreements to resell .................. 10,022 6,959
Trading account assets .................................................................. 23,678 18,689
Loans and leases, net of unearned income ................................................ 142,718 121,583
Factored accounts receivable ............................................................ 1,074 1,047
Allowance for credit losses ............................................................. (2,782) (2,315)
-------- --------
Loans, leases and factored accounts receivable, net of unearned income
and allowance for credit losses ...................................................... 141,010 120,315
-------- --------
Premises and equipment, net ............................................................. 3,225 2,712
Customers' acceptance liability ......................................................... 1,154 858
Interest receivable ..................................................................... 1,721 1,159
Mortgage servicing rights ............................................................... 1,282 946
Goodwill ................................................................................ 8,625 1,640
Core deposit and other intangibles ...................................................... 755 390
Other assets ............................................................................ 9,995 5,748
-------- --------
$264,562 $185,794
======== ========
Liabilities
Deposits
Noninterest-bearing .................................................................... $ 34,674 $ 25,738
Savings ................................................................................ 9,385 8,498
NOW and money market deposit accounts .................................................. 40,611 31,128
Time ................................................................................... 39,131 33,081
Foreign time ........................................................................... 14,393 8,053
-------- --------
Total deposits ................................................................... ... 138,194 106,498
-------- --------
Federal funds purchased and securities sold under agreements to repurchase .............. 43,882 19,378
Trading account liabilities ............................................................. 15,207 11,752
Commercial paper ........................................................................ 2,796 2,787
Other short-term borrowings ............................................................. 4,126 1,836
Liability to factoring clients .......................................................... 591 597
Acceptances outstanding ................................................................. 1,154 858
Accrued expenses and other liabilities .................................................. 8,116 4,429
Trust preferred securities .............................................................. 1,955 965
Long-term debt .......................................................................... 27,204 22,985
-------- --------
Total liabilities ...................................................................... 243,225 172,085
-------- --------
Contingent liabilities and other financial commitments (Notes Eight and Ten)
Shareholders' Equity
Preferred stock: authorized -- 45,000,000 shares; issued -- 2,201,728 and 5,220,459 94 171
shares
Common stock: authorized -- 1,250,000,000 shares; issued -- 712,188,008 and 573,492,308 9,168 3,855
shares
Retained earnings ....................................................................... 11,754 9,673
Other, including loan to ESOP trust ..................................................... 321 10
-------- --------
Total shareholders' equity ............................................................. 21,337 13,709
-------- --------
$264,562 $185,794
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
48
<PAGE>
NationsBank Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(Dollars in Millions)
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities
Net income ............................................................................ $ 3,077 $ 2,375 $ 1,950
Reconciliation of net income to net cash provided by (used in) operating activities
Provision for credit losses .......................................................... 800 605 382
Gains on sales of securities ......................................................... (153) (67) (29)
Depreciation and premises improvements amortization .................................. 424 314 280
Amortization of intangibles .......................................................... 441 128 119
Deferred income tax expense .......................................................... 414 346 159
Net change in trading instruments .................................................... (1,252) (3,280) (5,175)
Net (increase) decrease in interest receivable ....................................... (270) 518 (182)
Net increase (decrease) in interest payable .......................................... 88 (545) 208
Net (increase) decrease in loans held for sale ....................................... (1,696) 449 (1,345)
Other operating activities ........................................................... (1,607) 961 (1,300)
--------- --------- ---------
Net cash provided by (used in) operating activities ................................. 266 1,804 (4,933)
--------- --------- ---------
Investing Activities
Proceeds from maturities of securities held for investment ............................ 987 2,329 5,547
Purchases of securities held for investment ........................................... (128) (14) (545)
Proceeds from sales and maturities of securities available for sale ................... 34,603 28,998 25,556
Purchases of securities available for sale ............................................ (48,727) (12,708) (27,594)
Net (increase) decrease in federal funds sold and securities
purchased under agreements to resell ................................................. (800) (424) 4,931
Net (increase) decrease in time deposits placed and other short-term investments ...... (756) (565) 863
Purchases and net originations of loans and leases .................................... (20,613) (13,822) (18,331)
Proceeds from sales and securitizations of loans and leases ........................... 15,180 12,286 4,681
Purchases and originations of mortgage servicing rights ............................... (397) (366) (598)
Purchases of factored accounts receivable ............................................. (7,919) (7,738) (7,856)
Collections of factored accounts receivable ........................................... 7,873 7,656 7,834
Net purchases of premises and equipment ............................................... (125) (348) (307)
Proceeds from sales of foreclosed properties .......................................... 190 174 204
Sales and acquisitions of business activities, net of cash ............................ 1,478 416 (567)
--------- --------- ---------
Net cash (used in) provided by investing activities ................................. (19,154) 15,874 (6,182)
--------- --------- ---------
Financing Activities
Net decrease in deposits .............................................................. (58) (6,573) (158)
Net increase (decrease) in federal funds purchased and securities
sold under agreements to repurchase .................................................. 20,357 (10,601) 2,909
Net increase (decrease) in other short-term borrowings and commercial paper ........... 1,010 (3,171) (1,244)
Proceeds from issuance of trust preferred securities .................................. 990 965 --
Proceeds from issuance of long-term debt .............................................. 6,127 7,230 11,393
Retirement of long-term debt .......................................................... (2,275) (3,093) (2,061)
Proceeds from issuance of common stock ................................................ 1,242 136 239
Cash dividends paid ................................................................... (996) (722) (575)
Common stock repurchased .............................................................. (5,769) (1,503) (522)
Other financing activities ............................................................ (87) 139 --
--------- --------- ---------
Net cash provided by (used in) financing activities ................................. 20,541 (17,193) 9,981
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ................................... 1,653 485 (1,134)
Cash and cash equivalents on January 1 ................................................. 8,933 8,448 9,582
--------- --------- ---------
Cash and cash equivalents on December 31 ............................................... $ 10,586 $ 8,933 $ 8,448
========= ========= =========
Supplemental cash flow disclosure:
Cash paid for interest ................................................................ $ 8,593 $ 7,974 $ 7,565
Cash paid for income taxes ............................................................ 563 786 675
</TABLE>
Loans transferred to foreclosed properties amounted to $150, $160 and $98 in
1997, 1996 and 1995, respectively.
Loans securitized and retained in the available for sale securities portfolio
amounted to $7,532 and $4,302 in 1997 and 1996, respectively.
The fair values of noncash assets acquired and liabilities assumed in
acquisitions during 1997 were approximately $49,355 and $40,992, respectively,
net of cash acquired.
See accompanying notes to consolidated financial statements.
49
<PAGE>
NationsBank Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
(Dollars in Millions, Shares in Thousands)
<TABLE>
<CAPTION>
Total
Common Stock Share-
Preferred -------------------------- Retained holders'
Stock Shares Amount Earnings Other Equity
----------- ------------ ------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance on December 31, 1994 ...................... $111 552,904 $ 4,740 $6,451 $ (291) $11,011
Net income ....................................... 1,950 1,950
Cash dividends
Common ......................................... (567) (567)
Preferred ...................................... (8) (8)
Common stock issued under dividend
reinvestment and employee plans ................ 8,878 214 25 239
Common stock issued in acquisitions .............. 5,996 217 217
Common stock repurchased ......................... (19,466) (522) (522)
Net change in unrealized gains (losses) on
securities available for sale and marketable
equity securities .............................. 460 460
Other ............................................ (6) 226 6 21 21
------- ------- ------- ------ ------ ---------
Balance on December 31, 1995 ...................... 105 548,538 4,655 7,826 215 12,801
Net income ....................................... 2,375 2,375
Cash dividends
Common ......................................... (707) (707)
Preferred ...................................... (15) (15)
Common stock issued under employee plans ......... 3,456 109 27 136
Stock issued in acquisitions ..................... 73 55,436 586 192 2 853
Common stock repurchased ......................... (34,196) (1,503) (1,503)
Net change in unrealized gains (losses) on
securities available for sale and marketable
equity securities .............................. (240) (240)
Other ............................................ (7) 258 8 2 6 9
------- ------- ------- -------- ------ ---------
Balance on December 31, 1996 ...................... 171 573,492 3,855 9,673 10 13,709
Net income ....................................... 3,077 3,077
Cash dividends
Common ......................................... (985) (985)
Preferred ...................................... (11) (11)
Common stock issued under employee plans ......... 27,725 1,255 (13) 1,242
Stock issued in acquisitions ..................... 82 202,966 9,746 9,828
Common stock repurchased ......................... (95,862) (5,769) (5,769)
Redemption of preferred stock .................... (73) (73)
Conversion of preferred stock .................... (86) 3,857 86
Net change in unrealized gains (losses) on
securities available for sale and marketable
equity securities .............................. 307 307
Other ............................................ 10 (5) 17 12
------ ------- ---------- -------- ------ ---------
Balance on December 31, 1997 ...................... $ 94 712,188 $ 9,168 $11,754 $ 321 $21,337
====== ======= ========= ======== ====== =========
</TABLE>
See accompanying notes to consolidated financial statements.
50
<PAGE>
NationsBank Corporation (the Corporation) is a multi-bank holding company
organized under the laws of North Carolina in 1968 and registered under the
Bank Holding Company Act of 1956, as amended. Through its banking subsidiaries
and its various nonbanking subsidiaries, the Corporation provides banking and
banking-related services, primarily throughout the Southeast, Mid-Atlantic,
Midwestern and Southwestern states.
Note One -- Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the
Corporation and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Results of operations of
companies purchased are included from the dates of acquisition. Certain prior
period amounts have been reclassified to conform to current year
classifications.
Assets held in an agency or fiduciary capacity are not included in the
consolidated financial statements.
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts and disclosures. Actual
results could differ from those estimates. Significant estimates made by
management are discussed in these footnotes as applicable.
On February 27, 1997, the Corporation completed a 2-for-1 split of its
common stock. Accordingly, the consolidated financial statements for all years
presented reflect the impact of the stock split.
Cash and Cash Equivalents
Cash on hand, cash items in the process of collection and amounts due from
correspondent banks and the Federal Reserve Bank are included in cash and cash
equivalents.
Securities
Securities are classified based on management's intention on the date of
purchase. Securities which management has the intent and ability to hold to
maturity are classified as held for investment and reported at amortized cost.
Other securities, except those used in trading activities, are classified as
available for sale and carried at fair value with net unrealized gains and
losses included in shareholders' equity on an after-tax basis. Marketable
equity securities are carried at fair value with net unrealized gains and
losses included in shareholders' equity, net of tax.
Interest and dividends on securities, including amortization of premiums
and accretion of discounts, are included in interest income. Realized gains and
losses from the sales of securities are determined using the specific
identification method.
Loans Held for Sale
Loans held for sale include residential mortgage, commercial real estate
and other loans and are carried at the lower of aggregate cost or market value.
Generally, such loans are originated with the intent of sale.
Securities Purchased Under Agreements To Resell And Securities Sold Under
Agreements To Repurchase
Securities purchased under agreements to resell and securities sold under
agreements to repurchase are treated as collateralized financing transactions
and are recorded at the amounts at which the securities were acquired or sold
plus accrued interest. The Corporation's policy is to obtain the use of
securities purchased under agreements to resell. The market value of the
underlying securities which collateralize the related receivable on agreements
to resell is monitored, including accrued interest, and additional collateral
is requested when deemed appropriate.
Trading Instruments
Instruments utilized in trading activities include both securities and
derivatives and are stated at fair value. Fair value is generally based on
quoted market prices. If quoted market prices are not available, fair values
are
51
<PAGE>
estimated based on dealer quotes, pricing models or quoted prices for
instruments with similar characteristics. Gross unrealized gains and losses on
trading derivative positions with the same counterparty are generally presented
on a net basis for balance sheet reporting purposes where legally enforceable
master netting agreements have been executed. Realized and unrealized gains and
losses are recognized as trading account profits and fees.
Loans
Loans are reported at their outstanding principal balances net of any
charge-offs, unamortized deferred fees and costs on originated loans and
premiums or discounts on purchased loans. Loan origination fees and certain
direct origination costs are deferred and recognized as adjustments to income
over the lives of the related loans. Discounts and premiums are amortized to
income using methods that approximate the interest method.
Allowance for Credit Losses
The allowance for credit losses is primarily available to absorb losses
inherent in the loans, leases and factored accounts receivable portfolios.
Credit exposures deemed to be uncollectible are charged against the allowance
for credit losses. Recoveries of previously charged-off amounts are credited to
the allowance for credit losses.
Individually identified impaired loans are measured based on the present
value of payments expected to be received, observable market prices, or for
loans that are solely dependent on the collateral for repayment, the estimated
fair value of the collateral. If the recorded investment in the impaired loan
exceeds the measure of estimated fair value, a valuation allowance is
established as a component of the allowance for credit losses.
The Corporation's process for determining an appropriate allowance for
credit losses includes management's judgment and use of estimates. The adequacy
of the allowance for credit losses is reviewed regularly by management. On a
quarterly basis, a comprehensive review of the adequacy of the allowance for
credit losses is performed. This assessment is made in the context of
historical losses as well as existing economic conditions and performance
trends within specific portfolio segments and individual concentrations of
credit. Additions to the allowance for credit losses are made by charges to the
provision for credit losses.
Nonperforming Loans
Commercial loans and leases that are past due 90 days or more as to
principal or interest, or where reasonable doubt exists as to timely
collection, including loans that are individually identified as being impaired,
are generally classified as nonperforming loans unless well secured and in the
process of collection. Loans whose contractual terms have been restructured in
a manner which grants a concession to a borrower experiencing financial
difficulties are classified as nonperforming until such time as the loan is not
impaired based on the terms of the restructured agreement and the interest rate
is a market rate as measured at the restructuring date. Impaired loans are
included in nonperforming loans. Generally, loans which are past due 180 days
or more as to principal or interest are classified as nonperforming regardless
of collateral or collection status. Generally, interest accrued but not
collected is reversed when a loan or lease is classified as nonperforming.
Interest collections on nonperforming loans and leases for which the
ultimate collectibility of principal is uncertain are applied as principal
reductions. Otherwise, such collections are credited to income when received.
Credit card loans that are 180 days past due are charged off and not
classified as nonperforming. All other consumer loans and residential mortgages
are generally charged off at 120 days past due or placed on nonperforming
status upon repossession or the inception of foreclosure proceedings.
Ordinarily, interest accrued but not collected is charged off along with the
principal.
Foreclosed Properties
Assets are classified as foreclosed properties upon actual foreclosure or
when physical possession of the collateral is taken regardless of whether
foreclosure proceedings have taken place.
Foreclosed properties are carried at the lower of the recorded amount of
the loan or lease for which the property previously served as collateral, or
the fair value of the property less estimated costs to sell. Prior to
foreclosure, the recorded amount of the loan or lease is reduced, if necessary,
to the fair value, less estimated costs to sell, of the real estate to be
acquired by charging the allowance for credit losses.
52
<PAGE>
Subsequent to foreclosure, gains or losses on the sale of and losses on
the periodic revaluation of foreclosed properties are credited or charged to
expense. Net costs of maintaining and operating foreclosed properties are
expensed as incurred.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are recognized principally
using the straight-line method over the estimated useful lives of the assets.
Mortgage Servicing Rights
The total cost of mortgage loans originated or purchased is allocated
between the cost of the loans and the mortgage servicing rights (MSRs) based on
the relative fair values of the loans and the MSRs. MSRs acquired separately
are capitalized at cost. During 1997, the Corporation capitalized $397 million
of MSRs. The cost of the MSRs is amortized in proportion to and over the
estimated period of net servicing revenues. During 1997, amortization was $188
million.
The fair value on December 31, 1997 of capitalized MSRs approximated the
carrying value of $1.3 billion. Total loans serviced approximated $126.5
billion on December 31, 1997, including loans serviced on behalf of the
Corporation's banking subsidiaries. The predominant characteristics used as the
basis for stratifying MSRs are loan type and interest rate. The MSRs strata are
evaluated for impairment by estimating the fair value based on anticipated
future net cash flows, taking into consideration prepayment predictions. If the
carrying value of the MSRs exceeds the estimated fair value, a valuation
allowance is established. Changes to the valuation allowance are charged
against or credited to mortgage servicing income and fees. The valuation
allowance on December 31, 1997, 1996 and 1995 and changes in the valuation
allowance during 1997, 1996 and 1995 were insignificant.
To manage risk associated with changes in prepayment rates, the
Corporation uses various financial instruments including options and interest
rate swaps. The notional amount on December 31, 1997 was $8.7 billion and the
unrealized gain on such contracts was $57 million.
Goodwill and Other Intangibles
Net assets of companies acquired in purchase transactions are recorded at
fair value at the date of acquisition. Identified intangibles are amortized on
an accelerated or straight-line basis over the period benefited. Goodwill is
amortized on a straight-line basis over a period not to exceed 25 years. The
recoverability of goodwill and other intangibles is evaluated if events or
circumstances indicate a possible inability to realize the carrying amount.
Such evaluation is based on various analyses, including undiscounted cash flow
projections.
Income Taxes
There are two components of income tax provision: current and deferred.
Current income tax expense approximates taxes to be paid or refunded for the
applicable period. Balance sheet amounts of deferred taxes are recognized on
the temporary differences between the bases of assets and liabilities as
measured by tax laws and their bases as reported in the financial statements.
Deferred tax expense or benefit is then recognized for the change in deferred
tax liabilities or assets between periods.
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, tax 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.
Retirement Benefits
The Corporation has established qualified retirement plans covering
full-time, salaried employees and certain part-time employees. Pension expense
under these plans is charged to current operations and consists of several
components of net pension cost based on various actuarial assumptions regarding
future experience under the plans.
53
<PAGE>
In addition, the Corporation and its subsidiaries have established
unfunded supplemental benefit plans providing any benefits that could not be
paid from a qualified retirement plan because of Internal Revenue Code
restrictions and supplemental executive retirement plans for selected officers
of the Corporation and its subsidiaries. These plans are nonqualified and,
therefore, in general, a participant's or beneficiary's claim to benefits is as
a general creditor.
The Corporation and its subsidiaries have established several
postretirement medical benefit plans which are not funded.
Risk Management Instruments
Risk management instruments are utilized to modify the interest rate
characteristics of related assets or liabilities or hedge against fluctuations
in interest rates, currency exchange rates or other such exposures as part of
the Corporation's asset and liability management process. Instruments must be
designated as hedges and must be effective throughout the hedge period. To
qualify as hedges, risk management instruments must be linked to specific
assets or liabilities or pools of similar assets or liabilities.
Swaps, principally interest rate, used in the asset and liability
management process are accounted for on the accrual basis with revenues or
expenses recognized as adjustments to income or expense on the underlying
linked assets or liabilities. In addition, gains or losses on foreign currency
contracts are a component of the revaluation of the underlying
foreign-denominated liabilities. Risk management swaps generally are not
terminated. When terminations do occur, gains or losses are recorded as
adjustments to the carrying value of the underlying assets or liabilities and
recognized as income or expense over the shorter of either the remaining
expected lives of such underlying assets or liabilities or the remaining life
of the swap. In circumstances where the underlying assets or liabilities are
sold, any remaining carrying value adjustments and the cumulative change in
value of any open positions are recognized immediately as a component of the
gain or loss on disposition of such underlying assets or liabilities.
Gains and losses associated with interest rate futures and forward
contracts used as effective hedges of existing risk positions or anticipated
transactions are deferred as an adjustment to the carrying value of the related
asset or liability and recognized in income over the remaining term of the
related asset or liability.
Risk management instruments used to hedge or modify the interest rate
characteristics of debt securities classified as available for sale are carried
at fair value with unrealized gains or losses deferred as a component of
shareholders' equity.
To manage interest rate risk, the Corporation also uses interest rate
option products, primarily caps and floors. Interest rate caps and floors are
agreements where, for a fee, the purchaser obtains the right to receive
interest payments when a variable interest rate moves above or below a
specified cap or floor rate, respectively. Such instruments are primarily
linked to long-term debt, short-term borrowings and pools of similar
residential mortgages and consist mainly of purchased options. The Corporation
also purchases options in the interest rate market to protect the value of
certain assets, principally MSRs, against changes in prepayment rates. Option
premiums are amortized over the option life on a straight-line basis. Such
contracts are designated as hedges, and gains or losses are recorded as
adjustments to the carrying value of the MSRs, which are subjected to
impairment valuations as described in the MSRs accounting policy.
The Corporation also utilizes forward delivery contracts and options to
reduce the interest rate risk inherent in mortgage loans held for sale and the
commitments made to borrowers for mortgage loans which have not been funded.
These financial instruments are considered in the Corporation's lower of cost
or market valuation of its mortgage loans held for sale.
Earnings Per Common Share
Earnings per common share for all periods presented is computed by
dividing net income, reduced by dividends on preferred stock, by the weighted
average number of common shares outstanding. Diluted earnings per common share
is computed by dividing net income available to common shareholders, adjusted
for the effect of assumed conversions, by the weighted average number of common
shares outstanding and dilutive potential common shares, which include
convertible preferred stock and stock options. Dilutive potential common shares
are calculated using the treasury stock method.
54
<PAGE>
Recently Issued Accounting Pronouncements
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130) and SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131). SFAS 130 establishes standards for the reporting and
displaying of comprehensive income and its components in financial statements.
SFAS 131 supersedes SFAS 14, "Financial Reporting for Segments of a Business
Enterprise," and specifies new disclosure requirements for operating segment
financial information. In February 1998, SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" (SFAS 132) was issued. SFAS
132 revises and standardizes employers' disclosures about pension and other
postretirement benefit plans. These standards are effective for fiscal years
beginning after December 15, 1997. The Corporation will adopt the provisions of
these standards during the first quarter of 1998.
Note Two -- Merger-Related Activity
On January 9, 1998, the Corporation completed its merger with Barnett
Banks, Inc. (Barnett), a multi-bank holding company headquartered in
Jacksonville, Florida (the Merger). Barnett's total assets, total deposits and
total shareholders' equity on the date of the Merger amounted to approximately
$46.0 billion, $35.4 billion and $3.4 billion, respectively. Each outstanding
share of Barnett common stock was converted into 1.1875 shares of the
Corporation's common stock, resulting in the net issuance of approximately 233
million common shares to the former Barnett shareholders. In addition,
approximately 11 million options to purchase the Corporation's stock were
issued to convert similar stock options granted to certain Barnett employees.
This transaction will be accounted for as a pooling of interests. Under this
method of accounting, the recorded assets, liabilities, shareholders' equity,
income and expenses of the Corporation and Barnett will be combined and
reflected at their historical amounts.
In connection with the Merger, the Corporation expects to incur pretax
merger-related costs during the first quarter of 1998 of approximately $900
million ($642 million after-tax), which will include approximately $375 million
in severance, relocation and change in control payments, $300 million of
conversion costs and occupancy and equipment expenses (primarily lease exit
costs and the elimination of duplicate facilities and other capitalized
assets), $125 million of exit costs related to contract terminations and $100
million of other Merger costs (including legal and investment banking fees).
In compliance with certain requirements of the Federal Reserve Board, the
Department of Justice and certain Florida authorities in connection with the
Merger, the Corporation and Barnett have entered into agreements to divest
certain branches of Barnett with loans and deposits aggregating approximately
$2.5 billion and $4.0 billion, respectively, in various markets in Florida.
The following table presents pro forma condensed combined results of
operations of the Corporation and Barnett for the three years ended December
31, 1997, 1996 and 1995 as if the Merger had been effective at the beginning of
each year presented. The Corporation and Barnett are still in the process of
conforming their respective accounting policies. In management's opinion, any
resulting changes will not be material.
55
<PAGE>
Unaudited Pro Forma Results of Operations
(Dollars in millions, except per-share information)
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Reported amounts:
Net interest income ..................................... $ 9,717 $ 8,228 $ 7,189
Net income .............................................. 3,332 2,939 2,483
Net income available to common shareholders ............. 3,321 2,922 2,459
Earnings per common share ............................... 3.53 3.56 3.18
Diluted earnings per common share ....................... 3.44 3.50 3.10
Operating amounts (excluding merger-related charges):
Net income .............................................. $ 3,596 $ 3,016 $ 2,483
Net income available to common shareholders ............. 3,585 2,999 2,459
Earnings per common share ............................... 3.81 3.65 3.18
Diluted earnings per common share ....................... 3.71 3.59 3.10
</TABLE>
On October 1, 1997, the Corporation completed the acquisition of
Montgomery Securities (Montgomery), an investment banking and institutional
brokerage firm headquartered in San Francisco, California. The purchase price
consisted of $840 million in cash and approximately 5.3 million unregistered
shares of the Corporation's common stock for an aggregate amount of
approximately $1.1 billion. Montgomery had 1996 revenues of approximately $600
million and assets of approximately $3.0 billion on the date of acquisition.
The Corporation accounted for this acquisition as a purchase.
On January 7, 1997, the Corporation completed the acquisition of Boatmen's
Bancshares, Inc. (Boatmen's), headquartered in St. Louis, Missouri, resulting
in the issuance of approximately 195 million shares of the Corporation's common
stock valued at $9.4 billion on the date of the acquisition and aggregate cash
payments of $371 million to Boatmen's shareholders. On the date of the
acquisition, Boatmen's total assets and total deposits were approximately $41.2
billion and $32.0 billion, respectively. The Corporation accounted for this
acquisition as a purchase.
The following table presents condensed pro forma consolidated results of
operations for the year ended December 31, 1996 as if the acquisition of
Boatmen's had occurred on January 1, 1996. This information combines the
historical results of operations of the Corporation and Boatmen's after the
effect of purchase accounting adjustments. The cash portion of the purchase
price is 35 percent, which reflects the actual cash election of 4 percent paid
at closing plus share repurchases completed prior to the initiation of the
Barnett merger. The pro forma information does not purport to be indicative of
the results that would have been obtained if the operations had actually been
combined during the periods presented and is not necessarily indicative of
operating results to be expected in future periods.
Unaudited Pro Forma Results of Operations
(Dollars in millions, except per-share information)
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Net interest income ........................... 7,588
Net income .................................... 2,400
Net income available to common shareholders ... 2,378
Earnings per common share ..................... 3.29
Diluted earnings per common share ............. 3.26
</TABLE>
The Corporation consummated the acquisition of First Federal Savings Bank
of Brunswick, Georgia (Brunswick) on April 15, 1997. As of the acquisition
date, Brunswick had assets of approximately $249 million and deposits of
approximately $219 million. The Corporation issued approximately 2.4 million
shares of its common stock in this acquisition. The Corporation accounted for
this acquisition as a purchase.
On June 1, 1997, the branching provisions of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 took effect, allowing banking
companies to consolidate their subsidiary bank operations across state lines.
On December 31, 1997, the Corporation operated its banking activities primarily
under three charters: NationsBank, N.A., NationsBank of Texas, N.A., and
NationsBank of Delaware, N.A., which operates the Corporation's credit card
business. The Corporation expects to continue the consolidation of other
banking subsidiaries throughout 1998, including Barnett Bank, N.A.
56
<PAGE>
Note Three -- Securities
The amortized costs and market values of securities held for investment
and securities available for sale on December 31 were (dollars in millions):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Securities Held for Investment Cost Gains Losses Value
- - ----------------------------------------------- ------------ ------------- ---------------- ---------
<S> <C> <C> <C> <C>
1997
U.S. Treasury securities and agency debentures $ 500 $ 1 $ (1) $ 500
Foreign sovereign securities .................. 32 -- -- 32
Mortgage-backed securities .................... 532 2 (1) 533
Other taxable securities ...................... 5 -- -- 5
---------- ----------- ------------ -------
Total taxable ................................ 1,069 3 (2) 1,070
Tax-exempt securities ......................... 87 4 -- 91
---------- ----------- ------------ -------
Total ........................................ $ 1,156 $ 7 $ (2) $ 1,161
========== =========== ============ =======
1996
U.S. Treasury securities and agency debentures $ 862 $ -- $ (3) $ 859
Foreign sovereign securities .................. 25 -- -- 25
Mortgage-backed securities .................... 1,101 3 (4) 1,100
Other taxable securities ...................... 5 -- -- 5
---------- ----------- ------------ -------
Total taxable ................................ 1,993 3 (7) 1,989
Tax-exempt securities ......................... 117 4 -- 121
---------- ----------- ------------ -------
Total ........................................ $ 2,110 $ 7 $ (7) $ 2,110
========== =========== ============ =======
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Securities Available for Sale Cost Gains Losses Value
- - ----------------------------------------------- --------- ---------- ------------ ------
1997
<S> <C> <C> <C> <C>
U.S. Treasury securities and agency debentures $ 7,937 $ 86 $ (4) $ 8,019
Foreign sovereign securities .................. 6,397 16 (20) 6,393
Mortgage-backed securities .................... 28,668 359 (25) 29,002
Other taxable securities ...................... 1,064 8 -- 1,072
---------- ----------- ------------ -------
Total taxable ................................ 44,066 469 (49) 44,486
Tax-exempt securities ......................... 1,505 56 -- 1,561
---------- ----------- ------------ -------
Total ........................................ $ 45,571 $ 525 $ (49) $46,047
========== =========== ============ =======
1996
U.S. Treasury securities and agency debentures $ 1,437 $ 5 $ (26) $ 1,416
Foreign sovereign securities .................. 952 2 (8) 946
Mortgage-backed securities .................... 8,805 58 (45) 8,818
Other taxable securities ...................... 484 5 (1) 488
---------- ----------- ------------- -------
Total taxable ................................ 11,678 70 (80) 11,668
Tax-exempt securities ......................... 591 20 (2) 609
---------- ----------- ------------- -------
Total ........................................ $ 12,269 $ 90 $ (82) $12,277
========== =========== ============ =======
</TABLE>
The components, expected maturity distribution and yields (computed on a
taxable-equivalent basis) of the Corporation's securities portfolio on December
31, 1997 are summarized below (dollars in millions). Actual maturities may
differ from contractual maturities or maturities shown below since borrowers
may have the right to prepay obligations with or without prepayment penalties.
57
<PAGE>
<TABLE>
<CAPTION>
Due after 1
Due in 1 year through 5
or less years
------------------- ---------------------
Amount Yield Amount Yield
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Amortized cost of securities held for
investment
U.S. Treasury securities
and agency debentures ............... $101 4.94% $ 399 5.86%
Foreign sovereign securities .......... 8 5.86 13 7.60
Mortgage-backed securities ............ 313 5.97 216 6.73
Other taxable securities .............. 3 8.01 -- --
---- ----- ------- -----
Total taxable ....................... 425 5.74 628 6.19
Tax-exempt securities ................. 25 9.62 33 9.36
---- ----- ------- -----
Total ............................... $450 5.96 $ 661 6.35
==== ===== ======= =====
Market value of securities
held for investment .................... $448 $ 665
==== =======
Market value of securities available
for sale
U.S. Treasury securities and
agency debentures ................... $157 5.82% $ 4,113 5.95%
Foreign sovereign securities .......... 67 20.13 4,444 4.87
Mortgage-backed securities ............ 45 6.59 12,043 7.29
Other taxable securities .............. 14 6.49 283 17.06
---- ----- ------- -----
Total taxable ....................... 283 9.38 20,883 6.64
Tax-exempt securities ................. 91 5.81 277 6.64
---- ----- ------- -----
Total ............................... $374 8.51 $21,160 6.64
==== ===== ======= =====
Amortized cost of securities
available for sale ..................... $373 $20,958
==== =======
<CAPTION>
Due after 5
through 10 Due after
years 10 years Total
-------------------- ------------------ ---------------------
Amount Yield Amount Yield Amount Yield
---------- --------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Amortized cost of securities held for
investment
U.S. Treasury securities
and agency debentures ............... $ -- --% $ -- --% $ 500 5.68%
Foreign sovereign securities .......... 10 6.59 1 6.62 32 6.84
Mortgage-backed securities ............ 3 5.63 -- -- 532 6.28
Other taxable securities .............. -- -- 2 6.56 5 7.18
------- ---- ------ ---- ------- -----
Total taxable ....................... 13 6.40 3 6.74 1,069 6.02
Tax-exempt securities ................. 10 9.34 19 9.29 87 9.42
------- ---- ------ ---- ------- -----
Total ............................... $ 23 7.70 $ 22 8.89 $ 1,156 6.27
======= ==== ====== ==== ======= =====
Market value of securities
held for investment .................... $ 24 $ 24 $ 1,161
======= ====== =======
Market value of securities available
for sale
U.S. Treasury securities and
agency debentures ................... $ 3,500 6.03% $ 249 6.31% $ 8,019 5.99%
Foreign sovereign securities .......... 808 5.76 1,074 5.63 6,393 5.27
Mortgage-backed securities ............ 14,972 6.82 1,942 6.99 29,002 7.03
Other taxable securities .............. 163 7.01 612 5.78 1,072 8.97
------- ---- ------ ---- ------- -----
Total taxable ....................... 19,443 6.64 3,877 6.38 44,486 6.63
Tax-exempt securities ................. 407 7.47 786 8.25 1,561 7.61
------- ---- ------ ---- ------- -----
Total ............................... $19,850 6.66 $4,663 6.68 $46,047 6.66
======= ==== ====== ==== ======= =====
Amortized cost of securities
available for sale ..................... $19,632 $4,608 $45,571
======= ====== =======
</TABLE>
The components of gains and losses on sales of available for sale
securities for the years ended December 31 were (dollars in millions):
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- --------
<S> <C> <C> <C>
Gross gains on sales of securities .......... $160 $ 200 $ 74
Gross losses on sales of securities ......... (7) (133) (45)
------ ------ -----
Net gains on sales of securities ............ $153 $ 67 $ 29
===== ====== =====
</TABLE>
There were no sales of securities held for investment in 1997, 1996 or
1995.
Excluding securities issued by the U.S. government and its agencies and
corporations, there were no investments in securities from one issuer that
exceeded 10 percent of consolidated shareholders' equity on December 31, 1997
or 1996.
The income tax expense attributable to realized net gains on securities
sales was $54 million, $23 million and $10 million in 1997, 1996 and 1995,
respectively.
Securities are pledged or assigned to secure borrowed funds, government
and trust deposits and for other purposes. The carrying value of pledged
securities was $39.6 billion and $12.6 billion on December 31, 1997 and 1996,
respectively.
On December 31, 1997, the valuation allowance for securities available for
sale and marketable equity securities increased shareholders' equity by $393
million, reflecting $476 million of pretax appreciation on securities available
for sale and $115 million of pretax appreciation on marketable equity
securities.
58
<PAGE>
Note Four -- Trading Account Assets and Liabilities
The fair values on December 31 and the average fair values for the years
ended December 31 of the components of trading account assets and liabilities
were (dollars in millions):
<TABLE>
<CAPTION>
Average Balances
---------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Securities owned
U.S. Treasury securities .......................................... $ 8,697 $ 6,914 $10,251 $13,168
Securities of other U.S. Government agencies and corporations ..... 1,375 2,096 1,585 1,843
Certificates of deposit, bankers' acceptances and commercial
paper ........................................................... 517 501 645 553
Corporate debt .................................................... 1,808 1,552 1,686 1,410
Foreign sovereign debt ............................................ 4,939 3,396 6,270 1,044
Mortgage-backed securities ........................................ 2,299 502 1,698 358
Other securities .................................................. 403 430 355 671
------- ------- ------- -------
Total securities owned ................................... ...... 20,038 15,391 22,490 19,047
Derivatives-dealer positions ....................................... 3,640 3,298 4,261 3,791
------- ------- ------- -------
Total trading account assets ............................. ...... $23,678 $18,689 $26,751 $22,838
======= ======= ======= =======
Short sales
U.S. Treasury securities .......................................... $ 8,970 $ 7,143 $ 8,308 $ 9,287
Corporate debt .................................................... 140 452 232 535
Foreign sovereign debt ............................................ 1,825 -- 968 --
Other securities .................................................. 904 309 766 315
------- ------- ------- -------
Total short sales ........................................ ...... 11,839 7,904 10,274 10,137
Derivatives-dealer positions ....................................... 3,368 3,848 3,848 3,170
------- ------- ------- -------
Total trading account liabilities ........................ ...... $15,207 $11,752 $14,122 $13,307
======= ======= ======= =======
</TABLE>
The net change in the unrealized gain or loss on trading securities held
on December 31, 1997 and 1996 was included in trading account profits and fees
and amounted to a loss of $31 million for 1997 and a gain of $68 million for
1996.
Interest rate and foreign exchange contract trading activities generated
most of the Corporation's trading account profits and fees.
Derivatives-dealer positions presented in the table above represent the
fair values of interest rate, foreign exchange, equity and commodity-related
products including financial futures, forward settlement and option contracts
and swap agreements associated with the Corporation's derivatives trading
activities. See Note Eight for additional information on derivatives-dealer
positions, including credit risk.
59
<PAGE>
Note Five -- Loans, Leases and Factored Accounts Receivable
Loans, leases and factored accounts receivable on December 31 were
(dollars in millions):
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
Loans
Commercial ................................................................. $ 60,416 $ 50,488
Real estate commercial ..................................................... 7,221 5,445
Real estate construction ................................................... 3,805 2,863
-------- --------
Total commercial .......................................................... 71,442 58,796
-------- --------
Residential mortgage ....................................................... 27,831 27,948
Credit card ................................................................ 6,866 6,747
Other consumer ............................................................. 27,398 20,993
-------- --------
Total consumer ............................................................ 62,095 55,688
-------- --------
Foreign .................................................................... 3,844 2,829
Factored accounts receivable ............................................... 1,074 1,047
-------- --------
Total loans and factored accounts receivable .............................. 138,455 118,360
Less unearned income ...................................................... (580) (602)
-------- --------
Loans and factored accounts receivable, net of unearned income ............ 137,875 117,758
-------- --------
Leases
Lease receivables .......................................................... 6,175 5,134
Estimated residual value ................................................... 1,787 1,537
Less unearned income ....................................................... (2,045) (1,799)
-------- --------
Leases, net of unearned income ............................................ 5,917 4,872
-------- --------
Loans, leases and factored accounts receivable, net of unearned income .... $143,792 $122,630
======== ========
</TABLE>
Transactions in the allowance for credit losses were (dollars in
millions):
<TABLE>
<CAPTION>
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Balance on January 1 .......................................... $ 2,315 $2,163 $2,186
-------- ------ ------
Loans, leases and factored accounts receivable charged off .... (1,106) (836) (636)
Recoveries of loans, leases and factored accounts receivable
previously charged off ....................................... 308 238 215
-------- ------ ------
Net charge offs ........................................... . (798) (598) (421)
Provision for credit losses ................................... 800 605 382
Allowance applicable to loans of purchased companies and other 465 145 16
-------- ------ ------
Balance on December 31 ........................................ $ 2,782 $2,315 $2,163
======== ====== ======
</TABLE>
The following table presents the recorded investment in loans that were
considered to be impaired, all of which were classified as nonperforming, on
December 31 (dollars in millions):
<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Commercial ....................... $293 $342
Real estate commercial ........... 157 145
Real estate construction ......... 18 28
---- ----
Total impaired loans .......... $468 $515
==== ====
</TABLE>
The average recorded investment in certain impaired loans for the years
ended December 31, 1997, 1996 and 1995 was approximately $594 million, $542
million and $598 million, respectively. For the years ended December 31, 1997,
1996 and 1995, interest income recognized on impaired loans totaled $20 million
for 1997 and $26 million for both 1996 and 1995, all of which was recognized on
a cash basis.
On December 31, 1997, 1996 and 1995, nonperforming loans, including
certain loans which are considered impaired, totaled $1.0 billion, $890 million
and $706 million, respectively.
60
<PAGE>
The net amount of interest recorded during each year on loans that were
classified as nonperforming or restructured on December 31, 1997, 1996 and 1995
was $49 million, $35 million and $27 million, respectively. If these loans had
been accruing interest at their originally contracted rates, related income
would have been $128 million, $103 million and $102 million in 1997, 1996 and
1995, respectively.
Foreclosed properties amounted to $117 million, $153 million and $147
million on December 31, 1997, 1996 and 1995, respectively. The cost of carrying
foreclosed properties amounted to $9 million, $8 million and $13 million in
1997, 1996 and 1995, respectively.
Note Six -- Short-Term Borrowings and Long-Term Debt
NationsBank, N.A. and NationsBank of Texas, N.A. maintain a program to
offer up to $9.0 billion of bank notes from time to time with fixed or floating
rates and maturities from 30 days to 15 years from date of issue. On December
31, 1997 and 1996, there were short-term bank notes outstanding of $304 million
and $872 million, respectively. In addition, there were bank notes outstanding
on December 31, 1997 and 1996 totaling $5.1 billion and $3.5 billion,
respectively, which were classified as long-term debt.
On December 31, 1997, the Corporation had unused commercial paper back-up
lines of credit totaling $1.5 billion of which $1.0 billion expires in October
1998 and $500 million expires in October 2002. These lines were supported by
fees paid to unaffiliated banks.
61
<PAGE>
The contractual maturities of long-term debt on December 31 were (dollars in
millions):
<TABLE>
<CAPTION>
1997
-------------------------------------------
Various Various
Fixed-Rate Floating-Rate 1996
Debt Debt Amount Amount
Obligations Obligations Outstanding Outstanding
------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Parent company
Senior debt
Due in 1997 ....................................... $ -- $ -- $ -- $ 742
Due in 1998 ....................................... 924 1,065 1,989 1,414
Due in 1999 ....................................... 126 1,648 1,774 1,325
Due in 2000 ....................................... 472 1,118 1,590 1,566
Due in 2001 ....................................... 499 1,103 1,602 1,602
Due in 2002 ....................................... 20 1,455 1,475 1,268
Thereafter ........................................ 622 1,842 2,464 1,512
------ ------- ------- -------
2,663 8,231 10,894 9,429
------ ------- ------- -------
Subordinated debt
Due in 1997 ....................................... -- -- -- 75
Due in 1999 ....................................... 130 -- 130 130
Due in 2001 ....................................... 449 -- 449 299
Due in 2002 ....................................... 350 -- 350 349
Thereafter ........................................ 4,259 1,275 5,534 4,968
------ ------- ------- -------
5,188 1,275 6,463 5,821
------ ------- ------- -------
Total parent company long-term debt ............... 7,851 9,506 17,357 15,250
------ ------- ------- -------
Banking and nonbanking subsidiaries
Senior debt
Due in 1997 ....................................... -- -- -- 1,302
Due in 1998 ....................................... 660 2,977 3,637 2,886
Due in 1999 ....................................... 99 1,410 1,509 224
Due in 2000 ....................................... 354 2,932 3,286 1,928
Due in 2001 ....................................... 178 277 455 347
Due in 2002 ....................................... 17 284 301 35
Thereafter ........................................ 125 172 297 404
------ ------- ------- -------
1,433 8,052 9,485 7,126
------ ------- ------- -------
Subordinated debt
Due in 1997 ....................................... -- -- -- 5
Due in 2004 and thereafter ........................ 300 8 308 308
------ ------- ------- -------
300 8 308 313
------ ------- ------- -------
Total banking and nonbanking subsidiaries long-term
debt ............................................. 1,733 8,060 9,793 7,439
------ ------- ------- -------
$9,584 $17,566 27,150 22,689
====== ======= ------- -------
Obligations under capital leases .................. 54 296
------- -------
Total long-term debt .............................. $27,204 $22,985
======= =======
</TABLE>
As part of its interest rate risk management activities, the Corporation
enters into risk management interest rate contracts for certain long-term debt
issuances. Through the use of interest rate swaps, $2.2 billion of fixed-rate
debt with rates ranging from 5.60 percent to 8.57 percent have been effectively
converted to floating rates primarily at spreads over LIBOR.
On December 31, 1997, including the effects of interest rate contracts for
certain long-term debt issuances, the weighted average effective interest rates
for total long-term debt, total fixed-rate debt and total floating-rate debt
(based on the rates in effect on December 31, 1997) were 6.45 percent, 7.30
percent and 5.98 percent, respectively.
62
<PAGE>
As described below, certain debt obligations outstanding on December 31,
1997 may be redeemed prior to maturity at the option of the Corporation
(dollars in millions):
<TABLE>
<CAPTION>
Amount
Year Redeemable Year of Maturities Outstanding
- - --------------------------------- -------------------- ------------
<S> <C> <C>
Currently redeemable 2002 $ 28
1998 2000 500
1999 - 2000 2005 - 2011 716
2001 - 2005 2006 - 2024 455
</TABLE>
Main Place Real Estate Investment Trust (MPREIT), a limited purpose
subsidiary of NationsBank, N.A., had $4.0 billion of mortgage-backed bonds
outstanding on December 31, 1997. Of this amount, $1.0 billion was issued
during March 1997. MPREIT had outstanding mortgage loans of $16.6 billion on
December 31, 1997, of which $6.0 billion served as collateral for the
outstanding mortgage-backed bonds.
Under its Euro medium-term note program, the Corporation may offer up to
$4.5 billion of senior or subordinated notes exclusively to non-United States
residents. The notes bear interest at fixed or floating rates and may be
denominated in U.S. dollars or foreign currencies. The Corporation uses foreign
currency contracts to convert foreign-denominated debt into U.S. dollars. On
December 31, 1997, $2.3 billion of notes was outstanding under this program.
Since October 1996, the Corporation formed four wholly owned grantor
trusts (Capital Trusts I, II, III and IV) to issue preferred securities and to
invest the proceeds of such preferred securities into notes of the Corporation.
Certain of the preferred securities were issued at a discount. Such preferred
securities may be redeemed prior to maturity at the option of the Corporation.
The sole assets of each of the Capital Trusts are the Junior Subordinated Notes
of the Corporation (the Notes) held by such Capital Trusts. Such securities
qualify as Tier 1 Capital for regulatory purposes.
Payment of periodic cash distributions and payment upon liquidation or
redemption with respect to preferred securities is guaranteed by the
Corporation to the extent of funds held by the Trusts (the Preferred Securities
Guarantee). The Preferred Securities Guarantee, when taken together with the
Corporation's other obligations including its obligations under the Notes, will
constitute a full and unconditional guarantee, on a subordinated basis, by the
Corporation of payments due on the preferred securities.
The terms of the preferred securities are summarized as follows (dollars
in millions):
<TABLE>
<CAPTION>
Capital Trust I Capital Trust II Capital Trust III Capital Trust IV
(Issued (Issued (Issued (Issued
December 1996) December 1996) February 1997) April 1997)
----------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C>
Face amount issued .............................. $600 $365 $500 $500
Aggregate principal amount of the Notes ......... 619 376 516 516
Interest rate ................................... 7.84% 7.83% 3-mo. LIBOR 8.25%
+55 bps
Redeemable ...................................... December 2001 December 2006 January 2007 April 2007
Maturity ........................................ December 2026 December 2026 January 2027 April 2027
</TABLE>
As of March 6, 1998, the Corporation had the authority to issue
approximately $2.9 billion of corporate debt securities and preferred and
common stock under its existing shelf registration statements and $2.1 billion
of corporate debt securities under the Euro medium-term note program.
63
<PAGE>
Note Seven -- Shareholders' Equity and Earnings Per Common Share
As of December 31, 1997, the Corporation had issued 2.2 million shares of
ESOP Convertible Preferred Stock, Series C (ESOP Preferred Stock). The ESOP
Preferred Stock has a stated and liquidation value of $42.50 per share,
provides for an annual cumulative dividend of $3.30 per share and each share is
convertible into 1.68 shares of the Corporation's common stock. ESOP Preferred
Stock in the amount of $86 million, $7 million and $6 million in 1997, 1996,
and 1995, respectively, was converted into the Corporation's common stock.
As consideration in the merger of NationsBank, N.A. (South) and
NationsBank, N.A. during the second quarter of 1997, NationsBank, N.A.
exchanged approximately $73 million for preferred stock issued by NationsBank,
N.A. (South) in the 1996 acquisition of Citizens Federal Bank, F.S.B. Such
preferred stock consisted of approximately .5 million shares of NationsBank,
N.A. (South) 8.50% Series H Noncumulative Preferred Stock and approximately 2.4
million shares of NationsBank, N.A. (South) 8.75% Series 1993A Noncumulative
Preferred Stock.
During 1997 and 1996, the Corporation repurchased approximately 96 million
shares of common stock and approximately 34 million shares of common stock,
respectively, under various stock repurchase programs authorized by the Board
of Directors.
Other shareholders' equity on December 31 was comprised of the following
(dollars in millions):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Restricted stock award plan deferred compensation .... $ (23) $ (10)
Net unrealized gains (losses)
on available for sale securities
and marketable equity securities, net of tax.......... 393 86
Loan to ESOP trust ................................... (31) (48)
Foreign exchange translation adjustments and other ... (18) (18)
----- -----
$ 321 $ 10
===== =====
</TABLE>
64
<PAGE>
In accordance with SFAS No. 128, "Earnings per Share," the calculation of
earnings per common share and diluted earnings per common share is presented
below (dollars in millions, except per share information, shares in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Earnings per common share computation
Net income .......................................................... $ 3,077 $ 2,375 $ 1,950
Total preferred stock dividends ..................................... (11) (15) (8)
--------- --------- ----------
Income available to common shareholders ............................. $ 3,066 $ 2,360 $ 1,942
--------- --------- ----------
Average common shares issued ........................................ 717,450 590,216 544,959
--------- --------- ----------
Earnings per common share ........................................... $ 4.27 $ 4.00 $ 3.56
========= ========= ==========
Diluted earnings per common share computation
Income available to common shareholders ............................. $ 3,066 $ 2,360 $ 1,942
Total preferred stock dividends ..................................... 11 15 8
Preferred stock dividends on nonconvertible stock ................... (4) (8) --
---------- ---------- ----------
Effect of assumed conversions ....................................... 7 7 8
--------- --------- ----------
Income available to common shareholders and assumed conversions ..... $ 3,073 $ 2,367 $ 1,950
--------- --------- ----------
Average common shares issued ........................................ 717,450 590,216 544,959
Incremental shares from assumed conversions:
Convertible preferred stock ........................................ 3,683 3,896 4,582
Stock options ...................................................... 16,658 9,235 4,726
--------- --------- ----------
Dilutive potential common shares .................................... 20,341 13,131 9,308
--------- --------- ----------
Total dilutive average common shares issued ......................... 737,791 603,347 554,267
--------- --------- ----------
Diluted earnings per common share ................................... $ 4.17 $ 3.92 $ 3.52
========= ========= ==========
</TABLE>
Note Eight -- Commitments and Contingencies and Off-Balance Sheet Financial
Instruments
In the normal course of business, the Corporation enters into a number of
off-balance sheet commitments. These commitments expose the Corporation to
varying degrees of credit and market risk and are subject to the same credit
and risk limitation reviews as those recorded on the balance sheet.
Credit Extension Commitments
The Corporation enters into commitments to extend credit, standby letters
of credit and commercial letters of credit to meet the financing needs of its
customers. The commitments shown below have been reduced by amounts
collateralized by cash and amounts participated to other financial
institutions. The following summarizes commitments outstanding on December 31
(dollars in millions):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Commitments to extend credit
Credit card commitments ................................. $ 27,480 $24,255
Other loan commitments .................................. 100,405 82,506
Standby letters of credit and financial guarantees ........ 11,663 10,060
Commercial letters of credit .............................. 903 761
</TABLE>
Commitments to extend credit are legally binding, generally have specified
rates and maturities and are for specified purposes. The Corporation manages the
credit risk on these commitments by subjecting these commitments to normal
credit approval and monitoring processes and protecting against deterioration in
the borrowers' ability to pay through adverse-change clauses which require
borrowers to maintain various credit and liquidity measures. There were no
unfunded commitments to any industry or country greater than 10 percent of total
65
<PAGE>
unfunded commitments to lend. Credit card lines are unsecured commitments which
are reviewed at least annually by management. Upon evaluation of the customers'
creditworthiness, the Corporation has the right to terminate or change the
terms of the credit card lines. Of the December 31, 1997 other loan
commitments, $37.4 billion is scheduled to expire in less than one year, $44.6
billion in one to five years and $18.4 billion after five years.
Standby letters of credit (SBLC) and financial guarantees are issued to
support the debt obligations of customers. If a SBLC or financial guarantee is
drawn upon, the Corporation looks to its customer for payment. SBLCs and
financial guarantees are subject to the same approval and collateral policies
as other extensions of credit. Of the December 31, 1997 SBLCs and financial
guarantees, $7.8 billion is scheduled to expire in less than one year, $3.6
billion in one to five years and $269 million after five years.
Commercial letters of credit, issued primarily to facilitate customer
trade finance activities, are collateralized by the underlying goods being
shipped by the customer and are generally short term.
For each of these types of instruments, the Corporation's maximum exposure
to credit loss is represented by the contractual amount of these instruments.
Many of the commitments are collateralized or are expected to expire without
being drawn upon; therefore, the total commitment amounts do not necessarily
represent risk of loss or future cash requirements.
Derivatives
Derivatives utilized by the Corporation include interest rate swaps,
financial futures and forward settlement contracts and option contracts. A swap
agreement is a contract between two parties to exchange cash flows based on
specified underlying notional amounts and indices. Financial futures and
forward settlement contracts are agreements to buy or sell a quantity of a
financial instrument, currency or commodity at a predetermined future date and
rate or price. An option contract is an agreement that conveys to the purchaser
the right, but not the obligation, to buy or sell a quantity of a financial
instrument, index, currency or commodity at a predetermined rate or price at a
time or during a period in the future. These option agreements can be
transacted on organized exchanges or directly between parties.
Asset and Liability Management Activities
Risk management uses interest rate contracts in the asset and liability
management (ALM) process. Such contracts, which are generally non-leveraged
generic interest rate and basis swaps and options, allow the Corporation to
effectively manage its interest rate risk position.
Generic interest rate swaps involve the exchange of fixed-rate and
variable-rate interest payments based on the contractual underlying notional
amounts. Basis swaps involve the exchange of interest payments based on the
contractual underlying notional amounts, where both the pay rate and the
receive rate are floating rates based on different indices. Option products
primarily consist of caps and floors.
The following table outlines the Corporation's ALM contracts on December
31, 1997 (dollars in millions):
<TABLE>
<CAPTION>
Weighted
Weighted Average
Notional Average Receive Unrealized
Amount Pay Rate Rate Gain/(Loss)
---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Generic receive fixed ......... $28,237 6.00% 6.49% $303
Generic pay fixed ............. 1,487 6.92 5.97 (22)
Basis swaps ................... 2,308 5.92 5.86 (1)
Option products ............... 5,902 (7)
------- -------
Total ...................... $37,934 $273
======= ======
</TABLE>
In addition to the contracts in the table above, the Corporation uses
foreign currency contracts to manage the foreign exchange risk associated with
certain foreign-denominated liabilities. Foreign currency swaps involve the
conversion of certain scheduled interest and principal payments denominated in
foreign currencies. On December 31, 1997, these contracts had a notional value
of $2.7 billion and a net market value of negative $67 million.
66
<PAGE>
The net unrealized appreciation in the estimated value of the ALM interest
rate and net negative market value in the ALM foreign exchange contract
portfolio should be viewed in the context of the overall balance sheet. The
value of any single component of the balance sheet or off-balance sheet
positions should not be viewed in isolation.
Credit Risk Associated with Derivatives Activities
Credit risk associated with ALM and trading derivatives is measured as the
net replacement cost should the counterparties with contracts in a gain
position completely fail to perform under the terms of those contracts and any
collateral underlying the contracts proves to be of no value. In managing
derivatives credit risk, both the current exposure, which is the replacement
cost of contracts on the measurement date, as well as an estimate of the
potential change in value of contracts over their remaining lives are
considered. In managing credit risk associated with its derivatives activities,
the Corporation deals with creditworthy counterparties, primarily U.S. and
foreign commercial banks, broker-dealers and corporates. On December 31, 1997,
credit risk associated with ALM activities was not significant.
During 1997, there were no material credit losses associated with ALM or
trading derivatives transactions. In addition, on December 31, 1997, there were
no material nonperforming derivatives positions. To minimize credit risk, the
Corporation enters into legally enforceable master netting agreements, which
reduce risk by permitting the close out and netting of transactions upon the
occurrence of certain events.
A portion of the derivatives-dealer activity involves exchange-traded
instruments. Because exchange-traded instruments conform to standard terms and
are subject to policies set by the exchange involved, including counterparty
approval, margin requirements and security deposit requirements, the credit
risk is minimal.
The table below presents the notional or contract amounts on December 31,
1997 and 1996 and the current credit risk amounts (the net replacement cost of
contracts in a gain position on December 31, 1997 and 1996) of the
Corporation's derivatives-dealer positions which are primarily executed in the
over-the-counter market for trading purposes. The notional or contract amounts
indicate the total volume of transactions and significantly exceed the amount
of the Corporation's credit or market risk associated with these instruments.
The credit risk amounts presented in the following table do not consider the
value of any collateral, but generally take into consideration the effects of
legally enforceable master netting agreements.
Derivatives-Dealer Positions
(Dollars in Millions)
<TABLE>
<CAPTION>
1997 1996
------------------------- ------------------------
Contract/ Credit Risk Contract/ Credit Risk
Notional Amount (1) Notional Amount (1)
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Interest Rate Contracts
Swaps ............................... $408,254 $1,580 $252,187 $ 927
Futures and forwards ................ 213,520 1 186,333 5
Written options ..................... 449,810 -- 298,594 --
Purchased options ................... 413,196 683 294,591 561
Foreign Exchange Contracts
Swaps ............................... 1,980 127 1,303 24
Spot, futures and forwards .......... 53,438 685 94,028 1,137
Written options ..................... 49,146 -- 63,081 --
Purchased options ................... 46,063 450 61,716 352
Commodity and Other Contracts
Swaps ............................... 852 49 812 81
Futures and forwards ................ 2,739 -- 2,728 --
Written options ..................... 13,023 -- 14,064 --
Purchased options ................... 13,011 346 13,828 357
------ ------
Total before cross product netting . 3,921 3,444
------ ------
Cross product netting .............. 368 286
------ ------
Net replacement cost ............... $3,553 $3,158
====== ======
</TABLE>
(1) Represents the net replacement cost the Corporation could incur should
counterparties with contracts in a gain position to the Corporation
completely fail to perform under the terms of those contracts. Amounts
include accrued interest.
67
<PAGE>
The table above includes both long and short derivatives-dealer positions.
The fair value of dealer positions on December 31, 1997 and 1996, as well as
their average fair values for 1997 and 1996 are disclosed in Note Four.
Securities Lending
During 1997, the Corporation sold substantially all of its securities
lending business. This transaction did not have a material impact on the
Corporation's results of operations or financial position.
When Issued Securities
When issued securities are commitments to purchase or sell securities in
the time period between the announcement of a securities offering and the
issuance of those securities. On December 31, 1997, the Corporation had
commitments to purchase and sell when issued securities of $6.5 billion and
$5.7 billion, respectively. On December 31, 1996, commitments to purchase and
sell when issued securities were $7.4 billion each.
Litigation
In the ordinary course of business, the Corporation and its subsidiaries
are routinely defendants in or parties to a number of pending and threatened
legal actions and proceedings, including several actions brought on behalf of
various classes of claimants. In certain of these actions and proceedings,
substantial money damages are asserted against the Corporation and its
subsidiaries and certain of these actions and proceedings are based on alleged
violations of consumer protection, securities, environmental, banking and other
laws. Management believes, based upon the advice of counsel, that the actions
and proceedings and losses, if any, resulting from the final outcome thereof,
will not be material in the aggregate to the Corporation's financial position
or results of operations.
Note Nine -- Regulatory Requirements And Restrictions
The Corporation's banking subsidiaries are required to maintain average
reserve balances with the Federal Reserve Bank (FRB) based on a percentage of
certain deposits. Average reserve balances held with the FRB to meet these
requirements amounted to $184 million and $554 million for 1997 and 1996,
respectively.
The primary source of funds for cash distributions by the Corporation to
its shareholders is dividends received from its banking subsidiaries. The
subsidiary banks, including those acquired through the Barnett merger, can
initiate aggregate dividend payments in 1998, without prior regulatory
approval, of $1.7 billion plus an additional amount equal to their net profits
for 1998, as defined by statute, up to the date of any such dividend
declaration. The amount of dividends that each subsidiary bank may declare in a
calendar year without approval by the Office of the Comptroller of the Currency
(OCC) is the bank's net profits for that year combined with its net retained
profits, as defined, for the preceding two years.
Regulations also restrict banking subsidiaries in lending funds to
affiliates. On December 31, 1997, the total amount which could be loaned to the
Corporation by its banking subsidiaries, including those acquired through the
Barnett merger, was approximately $1.8 billion. On December 31, 1997, no loans
to the Corporation from its banking subsidiaries were outstanding.
The Federal Reserve Board, the OCC and the Federal Deposit Insurance
Corporation (collectively, the Agencies) have issued regulatory capital
guidelines for U.S. banking organizations. As of December 31, 1997, the
Corporation and each of its banking subsidiaries were well capitalized under
this regulatory framework. There are no conditions or events since December 31,
1997 that management believes have changed either the Corporation's or its
banking subsidiaries' capital classifications. Failure to meet the capital
requirements can initiate certain mandatory and discretionary actions by
regulators that could have a material effect on the Corporation's financial
statements.
The regulatory capital guidelines measure capital in relation to the credit
risk of both on- and off-balance sheet items using various risk weights. Under
the regulatory capital guidelines, Total Capital consists of two tiers of
capital. Tier 1 Capital includes common shareholders' equity and qualifying
preferred stock, less goodwill and other adjustments. Tier 2 Capital consists of
preferred stock not qualifying as Tier 1 Capital, mandatory convertible debt,
limited amounts of subordinated debt, other qualifying term debt and the
allowance for credit losses up to 1.25 percent of risk-weighted assets. In
accordance with the FRB's amendment to its capital
68
<PAGE>
adequacy guidelines effective for periods beginning December 31, 1997, the
Corporation is now required to include its broker-dealer subsidiary, NationsBanc
Montgomery Securities LLC, when calculating regulatory capital ratios.
Previously, the Corporation had been required to exclude the equity, assets and
off-balance sheet exposures of its broker-dealer subsidiary.
A well-capitalized institution must maintain a Tier 1 Capital ratio of six
percent and a Total Capital ratio of ten percent. In order to meet minimum
regulatory capital requirements, an institution must maintain a Tier 1 Capital
ratio of four percent and a Total Capital ratio of eight percent.
The leverage ratio guidelines establish a minimum ratio of Tier 1 Capital
to quarterly average assets, excluding goodwill and certain other items, of
three to four percent. Banking organizations must maintain a leverage capital
ratio of at least five percent to be classified as well capitalized.
On September 12, 1996, the Agencies amended their regulatory capital
guidelines to incorporate a measure for market risk. In accordance with the
amended guidelines, the Corporation and any of its banking subsidiaries with
significant trading activity, as defined in the amendment, must incorporate a
measure for market risk in their regulatory capital calculations effective for
reporting periods after January 1, 1998. The revised guidelines are not
expected to have a material impact on the Corporation or its subsidiaries'
regulatory capital ratios or their well capitalized status.
The following table presents the actual capital ratios and amounts and
minimum required capital amounts for the Corporation and its significant
banking subsidiaries on December 31 (dollars in millions):
<TABLE>
<CAPTION>
1997 1996
--------------------------------------- --------------------------------------
Amount Required Amount Required
Actual for Minimum Actual for Minimum
--------------------- Capital --------------------- Capital
Ratio Amount Adequacy Ratio Amount Adequacy
---------- ---------- ----------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Capital
NationsBank Corporation ........ 6.50% $13,593 $ 8,371 7.76% $12,384 $ 6,384
NationsBank, N.A. .............. 7.58 10,537 5,557 7.54 5,137 2,725
NationsBank of Texas, N.A. ..... 7.36 3,221 1,751 6.78 2,468 1,456
Total Capital
NationsBank Corporation ........ 10.89 22,787 16,742 12.66 20,208 12,770
NationsBank, N.A. .............. 10.98 15,256 11,113 10.41 7,093 5,451
NationsBank of Texas, N.A. ..... 10.13 4,434 3,502 10.19 3,706 2,910
Leverage Capital
NationsBank Corporation ........ 5.57 13,593 7,321 7.09 12,384 6,987
NationsBank, N.A. .............. 5.68 10,537 5,568 6.21 5,137 3,309
NationsBank of Texas, N.A. ..... 5.63 3,221 1,715 6.23 2,468 1,585
</TABLE>
During 1997, several subsidiaries including NationsBank, N.A. (South) and
various subsidiaries acquired in the purchase of Boatmen's were merged with and
into NationsBank, N.A. The capital ratios and amounts for NationsBank, N.A. as
of December 31, 1996 have not been restated to reflect the impact of such
mergers. In addition, the capital ratios and amounts for NationsBank
Corporation have not been restated at December 31, 1996 for amendments to the
regulatory capital guidelines during 1997.
Note Ten -- Employee Benefit Plans
The Corporation sponsors noncontributory trusteed pension plans that cover
substantially all officers and employees. The plans provide defined benefits
based on an employee's compensation, age at retirement and years of service. It
is the policy of the Corporation to fund not less than the minimum funding
amount required by the Employee Retirement Income Security Act.
69
<PAGE>
The following table sets forth the plans' estimated status on December 31
(dollars in millions):
<TABLE>
<CAPTION>
1997 1996
-------------- ----------
<S> <C> <C>
Actuarial present value of benefit obligation
Accumulated benefit obligation, including vested benefits of $1,241 and $813........... $(1,277) $ (840)
======= ======
Projected benefit obligation for service rendered to date ............................. $(1,301) $ (997)
Plan assets at fair value, primarily listed stocks, fixed income securities
and real estate......................................................................... 1,646 1,202
------- -------
Plan assets in excess of projected benefit obligation .................................. 345 205
Unrecognized net loss .................................................................. 264 187
Unrecognized net transition asset being amortized ...................................... (9) (12)
Unrecognized prior service benefit being amortized ..................................... (138) (33)
Deferred investment gain ............................................................... (39) (39)
--------- ------
Prepaid pension cost .................................................................. $ 423 $ 308
========= ======
</TABLE>
Net periodic pension expense (benefit) for the years ended December 31
included the following components (dollars in millions):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost-benefits earned during the period ........ $ 45 $ 43 $ 35
Interest cost on projected benefit obligation ......... 95 77 74
Actual return on plan assets .......................... (185) (148) (199)
Net amortization and deferral ......................... 29 39 95
------ ------ ------
Net periodic pension expense (benefit) ............... $ (16) $ 11 $ 5
====== ====== ======
</TABLE>
For December 31, 1997, the weighted average discount rate and rate of
increase in future compensation used in determining the actuarial present value
of the projected benefit obligation were 7.5 percent and 4.0 percent,
respectively. The related expected long-term rate of return on plan assets was
10.0 percent. For December 31, 1996, the weighted average discount rate, rate
of increase in future compensation and expected long-term rate of return on
plan assets were 8.0 percent, 4.0 percent and 10.0 percent, respectively.
Health and Life Benefit Plans
In addition to providing retirement benefits, the Corporation provides
health care and life insurance benefits for active and retired employees.
Substantially all of the Corporation's employees, including certain employees
in foreign countries, may become eligible for postretirement benefits if they
reach early retirement age while employed by the Corporation and they have the
required number of years of service. Under the Corporation's current plan,
eligible retirees are entitled to a fixed dollar amount for each year of
service. Additionally, certain current retirees are eligible for different
benefits attributable to prior plans.
All of the Corporation's accrued postretirement benefit liability was
unfunded at December 31, 1997. The "projected unit credit" actuarial method was
used to determine the normal cost and actuarial liability.
A reconciliation of the estimated status of the postretirement benefit
obligation on December 31 is as follows (dollars in millions):
<TABLE>
<CAPTION>
1997 1996
---------- ------------
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees ......................................... $ (196) $(148)
Fully eligible active participants ............... (11) (3)
Other active plan participants ................... (59) (42)
------ -------
(266) (193)
Unamortized transition obligation ................. 109 116
Unamortized service cost .......................... 1 1
Unrecognized net loss (gain) ...................... 10 (1)
------ --------
Accrued postretirement benefit liability ......... $ (146) $ (77)
====== =======
</TABLE>
70
<PAGE>
Net periodic postretirement expense (benefit) for the years ended December
31 included the following (dollars in millions):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost ....................................................... $ 3 $ 3 $ 2
Interest cost on accumulated postretirement benefit obligation ..... 20 15 15
Amortization of transition obligation over 20 years ................ 7 7 7
Amortization of gains .............................................. (3) (1) (5)
------ ------ ------
Net periodic postretirement expense .............................. $27 $24 $19
===== ===== =====
</TABLE>
The health care cost trend rates used in determining the accumulated
postretirement benefit obligation were 6.50 percent for pre-65 benefits and
4.75 percent for post-65 benefits. A one-percent change in the average health
care cost trend rates would increase the accumulated postretirement benefit
obligation by 6 percent and the aggregate of the service cost and interest cost
components of net periodic postretirement benefit cost by 5 percent. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5 percent and 8.0 percent at December
31, 1997 and 1996, respectively.
Savings and Profit Sharing Plans
In addition to the retirement plans, the Corporation maintains several
defined contribution savings and profit sharing plans, one of which features a
leveraged employee stock ownership (ESOP) provision.
For 1997, 1996 and 1995, the Corporation contributed approximately $45
million, $39 million and $43 million, respectively, in cash which was utilized
primarily to purchase the Corporation's common stock under the terms of these
plans. On December 31, 1997, an aggregate of 21,405,686 shares of the
Corporation's common stock and 2,192,387 shares of ESOP preferred stock were
held by the Corporation's various savings and profit sharing plans.
Under the terms of the ESOP provision, payments to the plan for dividends
on the ESOP Preferred Stock were $7 million for both 1997 and 1996 and $8
million for 1995. Interest incurred to service the ESOP debt amounted to $2
million, $3 million and $4 million for 1997, 1996 and 1995, respectively.
Stock Option and Award Plans
At December 31, 1997, the Corporation had certain stock-based compensation
plans (the Plans) which are described below. The Corporation applies the
provisions of Accounting Principles Board Opinion No. 25 in accounting for its
stock option and award plans and has elected to provide SFAS 123 disclosures as
if the Corporation had adopted the fair-value based method of measuring
outstanding employee stock options in 1997 and 1996 as indicated below (dollars
in millions except per share data):
<TABLE>
<CAPTION>
As Reported Pro Forma
----------------------- -----------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income ....................................... $ 3,077 $ 2,375 $ 2,901 $ 2,282
Net income available to common shareholders ...... 3,066 2,360 2,890 2,267
Earnings per common share ........................ 4.27 4.00 4.03 3.84
Diluted earnings per common share ................ 4.17 3.92 3.93 3.77
</TABLE>
71
<PAGE>
In determining the pro forma disclosures above, the fair value of options
granted was estimated on the date of grant using the Black-Scholes
option-pricing model. The Black-Scholes model was developed to estimate the
fair value of traded options, which have different characteristics than
employee stock options, and changes to the subjective assumptions used in the
model can result in materially different fair value estimates. The weighted
average grant-date fair values of the options granted during 1997 and 1996 were
based on the following assumptions:
<TABLE>
<CAPTION>
Risk-Free Dividend
Interest Rates Yield Expected Lives Volatility
--------------------- --------------------- ------------------- ---------------------
1997 1996 1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 Associates Stock Option Award Plan ... 6.31% 6.44% 3.50% 3.55% 3 years 4 years 21.4% 20.8%
Key Employee Stock Plan ................... 6.29 5.52 3.50 3.55 7 years 7 years 27.8 24.6
</TABLE>
Compensation expense under the fair-value based method is recognized over
the vesting period of the related stock options. Accordingly, the pro forma
results of applying SFAS 123 in 1997 and 1996 may not be indicative of future
amounts.
1996 Associates Stock Option Award Plan:
Under the 1996 Associates Stock Option Award Plan (ASOP), as amended, the
Corporation has granted to certain full- and part-time employees options to
purchase an aggregate of approximately 47 million shares of the Corporation's
common stock. Under the ASOP, options generally become vested once the
Corporation's common stock attains certain predetermined closing market prices
for at least ten consecutive trading days. Approximately 42 million of the
options granted under the ASOP have vested, 32 million of which have an
exercise price of $42 1/8 per share and 10 million of which have an exercise
price of $49 7/16 per share. Approximately 5 million of the remaining options
granted under the ASOP have an exercise price of $56 1/8 per share and, in
general, become 50% vested after the Corporation's common stock closes at or
above $68 per share for ten consecutive trading days and become fully (100%)
vested after the Corporation's common stock closes at or above $80 per share
for ten consecutive trading days, provided that such options may not vest prior
to April 1, 1998. Notwithstanding the price, any outstanding unvested options
generally vest and become exercisable on July 1, 2000. All options granted
under the ASOP expire on June 29, 2001.
Key Employee Stock Plan:
The Key Employee Stock Plan (KEYSOP), as amended and restated, provides
for different types of awards including stock options, restricted stock and
performance shares. Under the KEYSOP, ten-year options to purchase
approximately 19 million shares of common stock have been granted to certain
employees at the closing market price on the respective grant dates. Options
granted under the KEYSOP generally vest in three or four equal annual
installments. Additionally, 645 thousand shares of restricted stock were
granted during 1997. These shares generally vest in three substantially equal
installments beginning January 1998.
On January 2, 1998, ten-year options to purchase approximately 3.8 million
shares of common stock at $60 3/4 per share were granted to certain employees.
On February 2, 1998, ten-year options to purchase approximately 900 thousand
shares of common stock at $61 7/16 per share were granted to certain employees.
For both grants, options vest and become exercisable in three equal annual
installments beginning one year from the date of grant. Additionally, on
January 9, 1998, approximately 1.3 million shares of restricted stock and
ten-year options to purchase 495 thousand shares of common stock were granted
to certain former Barnett executives in connection with their employment with
the Corporation. These shares of restricted stock generally vest in two or
three equal annual installments. These options were granted at $59 and become
fully vested and exercisable two years from date of grant.
Other Plans:
Additional options and restricted stock under former plans and stock
options assumed in connection with various acquisitions remain outstanding and
are included in the tables below. No further awards may be granted under these
plans.
72
<PAGE>
The following tables present the status of the Plans as of December 31,
1997, 1996 and 1995, and changes during the years then ended:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- --------------------------- --------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Employee Stock Options Shares Price Shares Price Shares Price
- - ------------------------------- ---------------- ----------- --------------- ----------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year ........................ 44,540,150 $ 37.22 12,788,762 $ 23.52 12,741,502 $ 20.34
Shares due to acquisitions ... 5,869,602 22.72 1,098,580 17.26 264,446 19.55
Granted ...................... 20,953,823 53.31 38,259,496 41.08 7,920,000 26.82
Exercised .................... (27,378,510) 39.53 (3,783,170) 20.69 (7,691,186) 21.39
Forfeited .................... (2,421,652) 49.34 (3,823,518) 40.57 (446,000) 25.43
----------- -------- ---------- -------- ---------- --------
Outstanding at end of year ... 41,563,413 41.05 44,540,150 37.22 12,788,762 23.52
=========== ======== ========== ======== ========== ========
Options exercisable at year
end ......................... 28,810,939 37.37 7,591,598 24.38 6,805,944 20.66
Weighted-average fair value
of options granted during
the year .................... $ 10.93 $ 7.82 $ 6.91
============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
------------------------- --------------------------- --------------------------
Weighted- Weighted- Weighted-
Average Average Average
Restricted Stock Awards Grant Grant Grant
(includes KEYSOP) Shares Price Shares Price Shares Price
- - -------------------------------------- ------------- ----------- --------------- ----------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding unvested grants at
beginning of year .................. 1,341,550 $ 23.55 2,520,892 $ 23.23 3,633,704 $ 22.93
Granted .............................. 645,000 51.20 -- -- 125,000 24.50
Vested ............................... (876,830) 22.45 (1,106,062) 22.76 (1,136,732) 22.39
Canceled ............................. (13,020) 24.58 (73,280) 24.36 (101,080) 22.75
--------- -------- ---------- -------- ---------- --------
Outstanding unvested grants at end
of year ............................ 1,096,700 40.68 1,341,550 23.55 2,520,892 23.23
========= ======== ========== ======== ========== ========
</TABLE>
The following table summarizes information about stock options outstanding
on December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------ ----------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at December 31 Contractual Life Exercise Price at December 31 Exercise Price
- - ------------------- ---------------- ------------------ ------------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 4.00-$30.00 9,385,277 6.4 years $ 23.43 7,773,277 $ 22.73
$ 30.01-$46.50 18,805,751 4.8 years 40.00 16,359,651 40.78
$ 46.51-$65.50 13,372,385 6.6 years 54.91 4,678,011 49.74
---------- ----------
$ 4.00-$65.50 41,563,413 5.7 years 41.05 28,810,939 37.37
========== ==========
</TABLE>
73
<PAGE>
Note Eleven -- Income Taxes
The components of income tax expense for the years ended December 31 were
(dollars in millions):
<TABLE>
<CAPTION>
1997 1996 1995
--------- ------------ ---------
<S> <C> <C> <C>
Current portion -- expense
Federal ............................ $1,228 $ 862 $ 814
State .............................. 60 37 55
Foreign ............................ 17 14 13
------ ----- ------
1,305 913 882
------ ----- ------
Deferred portion -- expense (benefit)
Federal ............................ 399 340 147
State .............................. 13 13 12
Foreign ............................ 2 (7) --
------ -------- ------
414 346 159
------ ------- ------
Total income tax expense .......... $1,719 $1,259 $1,041
====== ======= ======
</TABLE>
The preceding table does not reflect the tax effects of unrealized gains
and losses on securities available for sale and marketable equity securities
that are included in shareholders' equity and certain tax benefits associated
with the Corporation's employee stock plans. As a result of these tax effects,
shareholders' equity increased (decreased) by $60 million, $193 million and
($250) million in 1997, 1996 and 1995, respectively.
The Corporation's current income tax expense approximates the amounts
payable for those years.
Deferred income tax expense represents the change in the deferred tax
asset or liability and is discussed further below.
A reconciliation of the expected federal income tax expense to the actual
consolidated income tax expense for the years ended December 31 was as follows
(dollars in millions):
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Expected federal tax expense ....................... $1,679 $1,272 $1,047
Increase (decrease) in taxes resulting from
Tax-exempt income ................................. (55) (37) (32)
State tax expense, net of federal benefit ......... 52 37 55
Goodwill amortization ............................. 121 21 12
Other ............................................. (78) (34) (41)
------ ------ ------
Total income tax expense ............. .......... $1,719 $1,259 $1,041
====== ====== ======
</TABLE>
74
<PAGE>
Significant components of the Corporation's deferred tax (liabilities)
assets on December 31 were as follows (dollars in millions):
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Deferred tax liabilities
Securities available for sale ......................... $ (198) $ (45)
Equipment lease financing ............................. (1,290) (982)
Depreciation .......................................... (181) (150)
Intangibles ........................................... (122) (88)
Employee retirement benefits .......................... (65) (88)
Other, net ............................................ (296) (216)
-------- --------
Gross deferred tax liabilities ....................... (2,152) (1,569)
-------- --------
Deferred tax assets
Employee benefits ..................................... 122 90
Net operating loss carryforwards ...................... 58 47
Allowance for credit losses ........................... 953 791
Foreclosed properties ................................. 24 13
Loan fees and expenses ................................ 44 34
General business credit carryforwards ................. 6 10
Other, net ............................................ 267 156
-------- --------
Gross deferred tax assets ............................ 1,474 1,141
Valuation allowance .................................. (44) (50)
-------- --------
Gross deferred tax assets, net of valuation allowance 1,430 1,091
-------- --------
Net deferred tax liabilities ............................ $ (722) $ (478)
======== ========
</TABLE>
The Corporation's deferred tax assets on December 31, 1997 include a
valuation allowance of $44 million representing primarily net operating loss
carryforwards for which it is more likely than not that realization will not
occur. The net change in the valuation allowance for deferred tax assets was a
decrease of $6 million due to the realization of certain state deferred tax
assets.
Note Twelve -- Fair Values of Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments"
(SFAS 107), requires the disclosure of the estimated fair values of financial
instruments. The fair value of a financial instrument is the amount at which
the instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. Quoted market prices, if
available, are utilized as estimates of the fair values of financial
instruments. Because no quoted market prices exist for a significant part of
the Corporation's financial instruments, the fair values of such instruments
have been derived based on management's assumptions, the amount and timing of
future cash flows and estimated discount rates. The estimation methods for
individual classifications of financial instruments are described more fully
below. Different assumptions could significantly affect these estimates.
Accordingly, the net realizable values could be materially different from the
estimates presented below.
In addition, the estimates are only indicative of the value of individual
financial instruments and should not be considered an indication of the fair
value of the combined Corporation.
The provisions of SFAS 107 do not require the disclosure of nonfinancial
instruments, including intangible assets. The value of the Corporation's
intangibles such as goodwill, franchise, credit card and trust relationships
and MSRs, is significant.
75
<PAGE>
Short-Term Financial Instruments
The carrying values of short-term financial instruments, including cash
and cash equivalents, federal funds sold and purchased, resale and repurchase
agreements, and commercial paper and short-term borrowings, approximate the
fair values of these instruments. These financial instruments generally expose
the Corporation to limited credit risk and have no stated maturities, or have
an average maturity of less than 30 days and carry interest rates which
approximate market.
Financial Instruments Traded in the Secondary Market
Securities held for investment, securities available for sale, loans held
for sale, trading account instruments, long-term debt and trust preferred
securities traded actively in the secondary market have been valued using
quoted market prices.
Loans
Fair values were estimated for groups of similar loans based upon type of
loan, credit quality and maturity. The fair value of loans was determined by
discounting estimated cash flows using interest rates approximating the
Corporation's December 31 origination rates for similar loans. Where quoted
market prices were available, primarily for certain residential mortgage loans,
such market prices were utilized as estimates for fair values. Contractual cash
flows for residential mortgage loans were adjusted for estimated prepayments
using published industry data. Where credit deterioration has occurred,
estimated cash flows for fixed- and variable-rate loans have been reduced to
incorporate estimated losses.
Deposits
The fair value for deposits with stated maturities was calculated by
discounting contractual cash flows using current market rates for instruments
with similar maturities. For deposits with no stated maturities, the carrying
amount was considered to approximate fair value and does not take into account
the Corporation's long-term relationships with depositors.
The book and fair values of financial instruments for which book and fair
value differed on December 31 were (dollars in millions):
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
Book Fair Book Fair
Value Value Value Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets
Loans, net of unearned income ................................ $136,801 $139,200 $116,711 $117,525
Allowance for credit losses .................................. (2,782) -- (2,315) --
Financial liabilities
Deposits ..................................................... 138,194 138,563 106,498 106,512
Trust preferred securities ................................... 1,955 2,031 965 965
Long-term debt (excluding obligations under capital leases) .. 27,150 27,711 22,689 22,739
</TABLE>
For all other financial instruments, book value approximates fair value.
Off-Balance Sheet Financial Instruments
The fair value of the Corporation's ALM and other derivatives contracts is
presented in the Derivatives section in Note Eight and the MSRs section of Note
One to the consolidated financial statements.
The fair value of liabilities on binding commitments to lend is based on
the present value of cash flow streams using fee rates currently charged for
similar agreements versus original contractual fee rates, taking into account
the creditworthiness of the borrowers. The fair values were liabilities of
approximately $113 million and $190 million on December 31, 1997 and 1996,
respectively.
76
<PAGE>
Note Thirteen -- NationsBank Corporation (Parent Company)
The following tables present consolidated parent company financial
information (dollars in millions):
Condensed Consolidated Statement of Income
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Income
Dividends from consolidated
Subsidiary banks and bank holding companies ......... $3,332 $2,309 $ 999
Other subsidiaries .................................. 34 210 7
Interest from consolidated subsidiaries ............... 907 799 635
Other income .......................................... 563 593 547
------ ------ ------
4,836 3,911 2,188
------ ------ ------
Expenses
Interest on borrowed funds ............................ 1,363 1,051 835
Noninterest expense ................................... 483 519 462
------ ------ ------
1,846 1,570 1,297
------ ------ ------
Earnings
Income before equity in undistributed earnings of
consolidated subsidiaries and taxes ................. 2,990 2,341 891
------ ------ ------
Equity in undistributed earnings of consolidated
Subsidiary banks and bank holding companies ......... (365) (63) 830
Other subsidiaries .................................. 262 34 208
------ ------ ------
(103) (29) 1,038
------ ------ ------
Income before income taxes ............................. 2,887 2,312 1,929
Income tax benefit ..................................... (190) (63) (21)
------ ------ ------
Net income ............................................. $3,077 $2,375 $1,950
====== ====== ======
Net income available to common shareholders ............ $3,066 $2,360 $1,942
====== ====== ======
</TABLE>
Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Assets
Cash held at subsidiary banks ......................... $ 8 $ 8
Temporary investments ................................. 572 4,250
Receivables from consolidated
Subsidiary banks and bank holding companies ......... 4,937 2,936
Other subsidiaries .................................. 11,169 8,851
Investment in consolidated
Subsidiary banks and bank holding companies ......... 24,126 13,985
Other subsidiaries .................................. 2,431 1,705
Other assets .......................................... 1,769 1,176
------- -------
$45,012 $32,911
======= =======
Liabilities and Shareholders' Equity
Commercial paper and other notes payable .............. $ 2,869 $ 2,344
Accrued expenses and other liabilities ................ 1,434 613
Payables to consolidated subsidiaries ................. 2,015 995
Long-term debt ........................................ 17,357 15,250
Shareholders' equity .................................. 21,337 13,709
------- -------
$45,012 $32,911
======= =======
</TABLE>
77
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
78
<PAGE>
Condensed Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities
Net income .................................................................. $ 3,077 $ 2,375 $ 1,950
Reconciliation of net income to net cash provided by operating activities
Equity in undistributed earnings of consolidated subsidiaries ............. 103 29 (1,038)
Other operating activities ................................................ 4 802 (380)
-------- -------- --------
Net cash provided by operating activities ................................ 3,184 3,206 532
-------- -------- --------
Investing Activities
Net decrease (increase) in temporary investments ............................ 3,678 (3,854) 187
Net increase in receivables from consolidated subsidiaries .................. (4,319) (38) (3,155)
Additional capital investment in subsidiaries ............................... (267) (424) (384)
Acquisitions of subsidiaries, net of cash ................................... 61 (726) --
-------- -------- --------
Net cash used in investing activities .................................... (847) (5,042) (3,352)
-------- -------- --------
Financing Activities
Net increase (decrease) in commercial paper and other notes payable ......... 525 (150) 68
Proceeds from issuance of long-term debt .................................... 3,492 5,560 4,606
Retirement of long-term debt ................................................ (836) (1,509) (1,005)
Proceeds from issuance of common stock ...................................... 1,242 136 239
Common stock repurchased .................................................... (5,769) (1,503) (522)
Cash dividends paid ......................................................... (996) (715) (575)
Other financing activities .................................................. 5 17 13
-------- -------- --------
Net cash (used in) provided by financing activities ...................... (2,337) 1,836 2,824
-------- -------- --------
Net increase in cash held at subsidiary banks ................................ -- -- 4
Cash held at subsidiary banks on January 1 ................................... 8 8 4
-------- -------- --------
Cash held at subsidiary banks on December 31 ................................. $ 8 $ 8 $ 8
======== ======== ========
</TABLE>
79
<PAGE>
NationsBank Corporation and Subsidiaries
Six-Year Consolidated Statistical Summary
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Taxable-Equivalent Yields Earned
Loans and leases, net of unearned income
Commercial .............................................. 8.36% 8.16%
Real estate commercial .................................. 8.95 9.03
Real estate construction ................................ 8.98 8.89
Total commercial ....................................... 8.46 8.29
Residential mortgage .................................... 7.79 7.80
Credit card ............................................. 11.90 11.77
Other consumer .......................................... 9.65 9.87
Total consumer ......................................... 8.99 9.06
Foreign ................................................. 7.13 6.87
Lease financing ......................................... 7.72 7.58
Total loans and leases, net ............................ 8.64 8.59
Securities
Held for investment ..................................... 6.11 5.59
Available for sale ...................................... 6.87 6.63
Total securities ....................................... 6.82 6.46
Loans held for sale ...................................... 7.19 7.30
Federal funds sold and securities purchased under
agreements to resell .................................... 5.59 5.19
Time deposits placed and other short-term
investments ............................................. 5.82 5.54
Trading account securities ............................... 6.01 6.44
Total earning assets ................................... 7.90 7.83
Rates Paid
Savings .................................................. 2.02 2.22
NOW and money market deposit accounts .................... 2.59 2.52
Consumer CDs and IRAs .................................... 5.22 5.28
Negotiated CDs, public funds and other time
deposits ................................................ 5.48 5.49
Foreign time deposits .................................... 5.38 5.38
Borrowed funds and trading account liabilities ........... 5.67 5.65
Long-term debt ........................................... 6.52 6.51
Total interest-bearing liabilities ..................... 4.79 4.85
Profit Margins
Net interest spread ...................................... 3.11 2.98
Net interest yield ....................................... 3.79 3.62
Year-End Data
(Dollars in millions)
Loans, leases and factored accounts receivable, net of
unearned income ......................................... $143,792 $122,630
Securities held for investment ........................... 1,156 2,110
Securities available for sale ............................ 46,047 12,277
Loans held for sale ...................................... 2,911 1,215
Time deposits placed and other short-term
investments ............................................. 2,395 1,843
Total earning assets ..................................... 228,927 164,676
Total assets ............................................. 264,562 185,794
Noninterest-bearing deposits ............................. 34,674 25,738
Domestic savings and time deposits ....................... 89,127 72,707
Foreign time deposits .................................... 14,393 8,053
Total savings and time deposits .......................... 103,520 80,760
Total deposits ........................................... 138,194 106,498
Borrowed funds and trading account liabilities ........... 66,011 35,753
Long-term debt ........................................... 27,204 22,985
Total shareholders' equity ............................... 21,337 13,709
<CAPTION>
1995 1994 1993 1992
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Taxable-Equivalent Yields Earned
Loans and leases, net of unearned income
Commercial .............................................. 8.19% 7.56% 6.96% 7.08%
Real estate commercial .................................. 9.30 8.18 7.59 7.78
Real estate construction ................................ 9.73 8.49 7.50 7.17
Total commercial ....................................... 8.42 7.71 7.09 7.20
Residential mortgage .................................... 7.78 7.62 8.27 9.33
Credit card ............................................. 12.78 12.84 13.62 14.45
Other consumer .......................................... 10.07 9.26 9.24 10.07
Total consumer ......................................... 9.37 8.99 9.51 10.50
Foreign ................................................. 7.71 6.10 5.49 6.63
Lease financing ......................................... 7.59 7.50 7.96 8.25
Total loans and leases, net ............................ 8.79 8.20 8.06 8.49
Securities
Held for investment ..................................... 5.57 5.06 5.54 6.84
Available for sale ...................................... 6.25 5.20 4.80 5.77
Total securities ....................................... 5.84 5.12 5.51 6.76
Loans held for sale ...................................... 7.47 6.63 6.73 7.22
Federal funds sold and securities purchased under
agreements to resell .................................... 6.18 4.09 3.21 3.77
Time deposits placed and other short-term
investments ............................................. 6.87 5.12 3.91 5.09
Trading account securities ............................... 7.76 7.32 5.43 4.64
Total earning assets ................................... 7.98 7.16 7.06 7.70
Rates Paid
Savings .................................................. 2.37 2.33 2.38 2.86
NOW and money market deposit accounts .................... 2.68 2.34 2.24 2.82
Consumer CDs and IRAs .................................... 5.19 4.17 4.52 5.58
Negotiated CDs, public funds and other time
deposits ................................................ 5.56 4.02 3.97 4.93
Foreign time deposits .................................... 6.25 4.98 4.05 5.52
Borrowed funds and trading account liabilities ........... 6.40 4.87 3.45 3.33
Long-term debt ........................................... 7.00 6.85 7.44 8.92
Total interest-bearing liabilities ..................... 5.28 4.09 3.53 4.12
Profit Margins
Net interest spread ...................................... 2.70 3.07 3.53 3.58
Net interest yield ....................................... 3.33 3.58 3.96 4.10
Year-End Data
(Dollars in millions)
Loans, leases and factored accounts receivable, net of
unearned income ......................................... $117,033 $103,371 $ 92,007 $ 72,714
Securities held for investment ........................... 4,432 17,800 13,584 23,355
Securities available for sale ............................ 19,415 8,025 15,470 1,374
Loans held for sale ...................................... 1,663 318 1,697 1,236
Time deposits placed and other short-term
investments ............................................. 1,296 2,159 1,479 1,994
Total earning assets ..................................... 167,945 151,722 140,890 103,872
Total assets ............................................. 187,298 169,604 157,686 118,059
Noninterest-bearing deposits ............................. 23,414 21,380 20,723 17,702
Domestic savings and time deposits ....................... 64,388 66,487 66,356 62,988
Foreign time deposits .................................... 12,889 12,603 4,034 2,037
Total savings and time deposits .......................... 77,277 79,090 70,390 65,025
Total deposits ........................................... 100,691 100,470 91,113 82,727
Borrowed funds and trading account liabilities ........... 51,067 45,555 44,248 21,957
Long-term debt ........................................... 17,775 8,488 8,352 3,066
Total shareholders' equity ............................... 12,801 11,011 9,979 7,814
</TABLE>
80
<PAGE>
NationsBank Corporation and Subsidiaries
Six-Year Consolidated Statistical Summary
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Earnings Ratios
Return on average
Total assets ............................................... 1.26% 1.18%
Earning assets ............................................. 1.46 1.34
Common shareholders' equity ................................ 15.26 17.95
Earnings Analysis (Taxable-Equivalent)
Noninterest income as a percentage of net interest
income ..................................................... 62.42 56.76
Noninterest expense, excluding merger-related charge,
as a percentage of net interest income ..................... 92.92 88.20
Efficiency ratio: noninterest expense, excluding
merger-related charge, divided by the sum of net
interest income and noninterest income ..................... 57.2 56.3
Overhead ratio: noninterest expense, excluding
merger-related charge, less noninterest income divided
by net interest income ..................................... 30.51 31.44
Net income as a percentage of net interest income ........... 38.40 36.98
Asset Quality
For the year
Net charge-offs as a percentage of average loans, leases
and factored accounts receivable ........................... .54 .48
Net charge-offs as a percentage of the provision for
credit losses .............................................. 99.75 98.84
At year end
Allowance for credit losses as a percentage of net loans,
leases and factored accounts receivable .................... 1.94 1.89
Allowance for credit losses as a percentage of
nonperforming loans ........................................ 273.34 260.02
Nonperforming assets as a percentage of net loans,
leases, factored accounts receivable and foreclosed
properties ................................................. .79 .85
Nonperforming assets as a percentage of total assets ........ .43 .56
Nonperforming assets (in millions) .......................... $ 1,135 $ 1,043
Risk-Based Capital Ratios
Tier 1 ...................................................... 6.50% 7.76%
Total ....................................................... 10.89 12.66
Other Capital Ratios
Common shareholders' equity as a percentage of total
assets at year end ......................................... 8.04 7.31
Dividend payout ratio (per common share) .................... 32.13 29.95
Common shareholders' equity per common share
Average .................................................... $ 28.00 $ 22.28
At year end ................................................ 29.87 23.69
Other Statistics
Number of full-time equivalent employees .................... 80,360 62,971
Rate of increase (decrease) in average
Total loans and leases, net of unearned income ............. 18.80% 11.67%
Earning assets ............................................. 19.07 6.23
Total assets ............................................... 21.71 6.54
Total deposits ............................................. 24.24 8.37
Total shareholders' equity ................................. 52.21 15.82
Common Stock Information
Market price per share
High for the year .......................................... $ 71 11/16 $ 52 5/8
Low for the year ........................................... 48 32 3/16
Close at the end of the year ............................... 60 13/16 48 7/8
Daily average trading volume ................................ 2,365,800 1,937,938
Number of shareholders of record ............................ 128,488 106,345
<CAPTION>
1995 1994 1993 1992
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Earnings Ratios
Return on average
Total assets ............................................... 1.03% 1.02% .97% 1.00%
Earning assets ............................................. 1.17 1.14 1.09 1.12
Common shareholders' equity ................................ 17.01 16.10 15.00 15.83
Earnings Analysis (Taxable-Equivalent)
Noninterest income as a percentage of net interest
income ..................................................... 55.36 48.96 44.48 45.65
Noninterest expense, excluding merger-related charge,
as a percentage of net interest income ..................... 92.85 93.16 90.90 94.64
Efficiency ratio: noninterest expense, excluding
merger-related charge, divided by the sum of net
interest income and noninterest income ..................... 59.8 62.5 62.9 65.0
Overhead ratio: noninterest expense, excluding
merger-related charge, less noninterest income divided
by net interest income ..................................... 37.50 44.20 46.42 48.99
Net income as a percentage of net interest income ........... 35.07 31.86 31.79 27.33
Asset Quality
For the year
Net charge-offs as a percentage of average loans, leases
and factored accounts receivable ........................... .38 .33 .51 1.25
Net charge-offs as a percentage of the provision for
credit losses .............................................. 110.21 101.79 95.76 121.15
At year end
Allowance for credit losses as a percentage of net loans,
leases and factored accounts receivable .................... 1.85 2.11 2.36 2.00
Allowance for credit losses as a percentage of
nonperforming loans ........................................ 306.49 273.07 193.38 103.11
Nonperforming assets as a percentage of net loans,
leases, factored accounts receivable and foreclosed
properties ................................................. .73 1.10 1.92 2.72
Nonperforming assets as a percentage of total assets ........ .46 .67 1.13 1.69
Nonperforming assets (in millions) .......................... $ 853 $ 1,138 $ 1,783 $ 1,997
Risk-Based Capital Ratios
Tier 1 ...................................................... 7.24% 7.43% 7.41% 7.54%
Total ....................................................... 11.58 11.47 11.73 11.52
Other Capital Ratios
Common shareholders' equity as a percentage of total
assets at year end ......................................... 6.81 6.47 6.25 6.60
Dividend payout ratio (per common share) .................... 29.17 30.78 28.38 33.07
Common shareholders' equity per common share
Average .................................................... $ 20.95 $ 19.00 $ 16.68 $ 14.53
At year end ................................................ 23.26 19.85 18.20 15.40
Other Statistics
Number of full-time equivalent employees .................... 58,322 61,484 57,742 50,828
Rate of increase (decrease) in average
Total loans and leases, net of unearned income ............. 15.24% 20.29% 15.83% (1.70)%
Earning assets ............................................. 12.55 24.50 16.59 (.84)
Total assets ............................................... 13.36 23.75 16.82 (.64)
Total deposits ............................................. 5.91 12.30 .97 (5.59)
Total shareholders' equity ................................. 9.22 21.19 18.73 10.31
Common Stock Information
Market price per share
High for the year .......................................... $ 37 3/8 $ 28 11/16 $ 29 $26 11/16
Low for the year ........................................... 22 5/16 21 11/16 22 1/4 19 13/16
Close at the end of the year ............................... 34 13/16 22 9/16 24 1/2 25 11/16
Daily average trading volume ................................ 1,452,934 1,507,030 1,333,182 1,455,156
Number of shareholders of record ............................ 103,137 105,774 108,435 89,371
</TABLE>
81
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on accounting
and financial disclosure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information set forth under the caption "Election of Directors" on pages 2
through 7 of the definitive 1998 Proxy Statement of the registrant furnished to
shareholders in connection with its Annual Meeting to be held on April 22, 1998
(the "1998 Proxy Statement") with respect to the name of each nominee or
director, that person's age, positions and offices with the registrant,
business experience, directorships in other public companies, service on the
registrant's Board and certain family relationships, and information set forth
under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" on
page 10 of the 1998 Proxy Statement with respect to Section 16 matters, is
hereby incorporated by reference. In addition, information set forth under the
caption "Special Compensation Arrangements -- Employment Agreement with Mr.
Craig" on page 14 of the 1998 Proxy Statement is hereby incorporated by
reference. Additional information required by Item 10 with respect to executive
officers is set forth in Part I, Item 4A hereof.
Item 11. EXECUTIVE COMPENSATION
Information with respect to current remuneration of executive officers,
certain proposed remuneration to them, their options and certain indebtedness
and other transactions set forth in the 1998 Proxy Statement (i) under the
caption "Board of Directors' Compensation" on pages 10 and 11 thereof, (ii)
under the caption "Executive Compensation" on pages 11 and 12 thereof, (iii)
under the caption "Retirement Plans" on page 13 thereof, (iv) under the caption
"Deferred Compensation Plan" on pages 13 and 14 thereof, (v) under the caption
"Special Compensation Arrangements" on page 14 thereof, (vi) under the caption
"Compensation Committee Interlocks and Insider Participation" on page 18
thereof, and (vii) under the caption "Certain Transactions" on pages 18 and 19
thereof, is, to the extent such information is required by Item 402 of
Regulation S-K, hereby incorporated by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The security ownership information required by Item 403 of Regulation S-K
relating to persons who beneficially own more than 5 percent of the outstanding
shares of Common Stock, ESOP Preferred Stock or 7% Cumulative Redeemable
Preferred Stock, Series B, as well as security ownership information relating
to directors, nominees and named executive officers individually and directors
and executive officers as a group, is hereby incorporated by reference to the
ownership information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" on pages 7 through 10 of the 1998
Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to relationships and related transactions between
the registrant and any director, nominee for director, executive officer,
security holder owning 5 percent or more of the registrant's voting securities
or any member of the immediate family of any of the above, as set forth in the
1998 Proxy Statement under the caption "Compensation Committee Interlocks and
Insider Participation" on page 18 and under the caption "Certain Transactions"
on pages 18 and 19 thereof, is, to the extent such information is required by
Item 404 of Regulation S-K, hereby incorporated by reference.
82
<PAGE>
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:
<TABLE>
<CAPTION>
Page
-----
<S> <C> <C>
(1) Financial Statements:
Report of Independent Accountants ........................................................... 46
Consolidated Statement of Income for each of the three years ended December 31, 1997 ........ 47
Consolidated Balance Sheet at December 31, 1997 and 1996 .................................... 48
Consolidated Statement of Cash Flows for each of the three years ended December 31, 1997..... 49
Consolidated Statement of Changes in Shareholders' Equity for each of the three years
ended December 31, 1997 ..................................................................... 50
Notes To Consolidated Financial Statements .................................................. 51
(2) All schedules are omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto.
</TABLE>
b. The following reports on Form 8-K have been filed by the registrant during
the quarter ended December 31, 1997:
Current Report on Form 8-K dated October 14, 1997 and filed October 20,
1997, Items 5 and 7.
Current Report on Form 8-K/A-1 dated August 29, 1997 and filed November
12, 1997, Item 7. The following financial statements of the business to be
acquired (Barnett Banks, Inc.) were filed as part of this Current Report
on Form 8-K/A-1:
Consolidated Statements of Financial Condition as of December 31, 1996
and 1995;
Consolidated Statements of Income for the years ended December 31,
1996, 1995 and 1994;
Consolidated Statements of Changes in Shareholders' Equity for the
years ended December 31, 1996, 1995 and 1994; and
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994.
In addition, the following unaudited pro forma financial information was
filed as part of this Current Report on Form 8-K/A-1:
Uaudited Pro Forma Condensed Balance Sheet as of September 30, 1997;
Unaudited Pro Forma Condensed Statement of Income for the nine months
ended September 30, 1997; and
Unaudited Pro Forma Condensed Statement of Income for the year ended
December 31, 1996.
c. The exhibits filed as part of this report and exhibits incorporated
herein by reference to other documents are listed in the Index to
Exhibits to this Annual Report on Form 10-K (pages E-1 through E-5,
including executive compensation plans and arrangements which are
identified separately by asterisk).
With the exception of the information herein expressly incorporated by
reference, the 1998 Proxy Statement is not to be deemed filed as part of this
Annual Report on Form 10-K.
83
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NATIONSBANK CORPORATION
Date: March 13, 1998
By: */s/ Hugh L. McColl, Jr.
------------------------------------------
Hugh L. McColl, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - --------------------------------------- -------------------------------------- ---------------
<S> <C> <C>
*/s/ Hugh L. McColl, Jr. Chief Executive Officer and Director March 13, 1998
---------------------------------- (Principal Executive Officer)
(Hugh L. McColl, Jr.)
*/s/ James H. Hance, Jr. Vice Chairman, Chief Financial March 13, 1998
---------------------------------- Officer and Director
(James H. Hance, Jr.)
(Principal Financial Officer)
*/s/ Marc D. Oken Executive Vice President March 13, 1998
---------------------------------- (Principal Accounting Officer)
(Marc D. Oken)
*/s/ Andrew B. Craig, III Chairman of the Board March 13, 1998
----------------------------------
(Andrew B. Craig, III)
*/s/ Ray C. Anderson Director March 13, 1998
----------------------------------
(Ray C. Anderson)
*/s/ William M. Barnhardt Director March 13, 1998
----------------------------------
(William M. Barnhardt)
*/s/ Rita Bornstein Director March 13, 1998
----------------------------------
(Rita Bornstein)
*/s/ B. A. Bridgewater, Jr. Director March 13, 1998
----------------------------------
(B. A. Bridgewater, Jr.)
*/s/ Thomas E. Capps Director March 13, 1998
----------------------------------
(Thomas E. Capps)
*/s/ Alvin R. Carpenter Director March 13, 1998
----------------------------------
(Alvin R. Carpenter)
*/s/ Charles W. Coker Director March 13, 1998
----------------------------------
(Charles W. Coker)
</TABLE>
84
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- - ---------------------------------------- ------------------------ ---------------
<S> <C> <C>
*/s/ Thomas G. Cousins Director March 13, 1998
----------------------------------
(Thomas G. Cousins)
---------------------------------- Director March , 1998
(Alan T. Dickson)
*/s/ Paul Fulton Director March 13, 1998
----------------------------------
(Paul Fulton)
*/s/ C. Ray Holman Director March 13, 1998
----------------------------------
(C. Ray Holman)
*/s/ W. W. Johnson Director March 13, 1998
----------------------------------
(W. W. Johnson)
*/s/ Kenneth D. Lewis President and Director March 13, 1998
----------------------------------
(Kenneth D. Lewis)
*/s/ Russell W. Meyer, Jr. Director March 13, 1998
----------------------------------
(Russell W. Meyer, Jr.)
---------------------------------- Director March , 1998
(Richard B. Priory)
*/s/ Charles E. Rice Director March 13, 1998
----------------------------------
(Charles E. Rice)
---------------------------------- Director March , 1998
(John C. Slane)
*/s/ O. Temple Sloan, Jr. Director March 13, 1998
----------------------------------
(O. Temple Sloan, Jr.)
*/s/ Meredith R. Spangler Director March 13, 1998
----------------------------------
(Meredith R. Spangler)
*/s/ Albert E. Suter Director March 13, 1998
----------------------------------
(Albert E. Suter)
*/s/ Ronald Townsend Director March 13, 1998
----------------------------------
(Ronald Townsend)
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- - ------------------------------------------ ---------- ---------------
<S> <C> <C>
*/s/ Jackie M. Ward Director March 13, 1998
----------------------------------
(Jackie M. Ward)
*/s/ John A. Williams Director March 13, 1998
----------------------------------
(John A. Williams)
*/s/ Virgil R. Williams Director March 13, 1998
----------------------------------
(Virgil R. Williams)
*By:/s/ Charles M. Berger
----------------------------------
Charles M. Berger, Attorney-in-Fact
</TABLE>
86
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- - ------------- ---------------------------------------------------------------------------------
<S> <C>
3(a) Amended and Restated Articles of Incorporation of registrant, as in effect on
the date hereof, incorporated by reference to Exhibit 3.1 of registrant's
Current Report on Form 8-K dated December 9, 1997.
(b) Amended and Restated Bylaws of registrant, as in effect on the date hereof,
incorporated by reference to Exhibit 3(ii) of registrant's Quarterly Report on
Form 10-Q dated May 15, 1997.
4(a) Specimen certificate of registrant's Common Stock, incorporated by reference
to Exhibit 4.1 of registrant's Registration No. 33-45542.
(b) Specimen certificate of registrant's ESOP Convertible Preferred Stock, Series
C, incorporated by reference to Exhibit 4(c) of registrant's Annual Report on
Form 10-K dated March 25, 1992.
(c) Indenture dated as of August 1, 1982 between registrant and Morgan
Guaranty Trust Company of New York, pursuant to which registrant issued its
7 3/4% Debentures, due 2002, incorporated by reference to Exhibit 4.2 of
registrant's Registration No. 2-78530.
(d) Indenture dated as of September 1, 1989 between registrant and The Bank of
New York, pursuant to which registrant issued its 9 3/8% Subordinated Notes,
due 2009; its 10.20% Subordinated Notes, due 2015; its 9 1/8% Subordinated
Notes, due 2001; and its 8 1/8% Subordinated Notes, due 2002, incorporated by
reference to Exhibit 4.1 of registrant's Registration No. 33-30717.
(e) Indenture dated as of January 1, 1992 between registrant and BankAmerica
Trust Company of New York, pursuant to which registrant issued its 6 5/8%
Senior Notes, due 1998, incorporated by reference to Exhibit 4.1 of registrant's
Registration No. 33-54784.
(f) Indenture dated as of November 1, 1992 between registrant and The Bank of
New York, pursuant to which registrant issued its 6 7/8% Subordinated Notes,
due 2005, incorporated by reference to Exhibit 4.1 of registrant's Amendment
to Application or Report on Form 8 dated March 1, 1993.
(g) First Supplemental Indenture dated as of July 1, 1993 to the Indenture dated
as of January 1, 1992 between registrant and BankAmerica National Trust
Company (formerly BankAmerica Trust Company of New York), pursuant to
which registrant issued its Senior Medium-Term Notes, Series A, B and C; its
5 1/8% Senior Notes, due 1998; and its 5 3/8% Senior Notes, due 2000,
incorporated by reference to Exhibit 4.1 of registrant's Current Report on
Form 8-K dated July 6, 1993.
(h) First Supplemental Indenture dated as of July 1, 1993 to the Indenture dated
as of November 1, 1992 between registrant and The Bank of New York,
pursuant to which registrant issued its Subordinated Medium-Term Notes,
Series A and B; its 6 1/2% Subordinated Notes, due 2003; and its 7 3/4%
Subordinated Notes, due 2004, incorporated by reference to Exhibit 4.4 of
registrant's Current Report on Form 8-K dated July 6, 1993.
(i) Indenture dated as of January 1, 1995 between registrant and BankAmerica
National Trust Company, pursuant to which registrant issued its Floating Rate
Senior Notes, due 1998; its 7% Senior Notes, due, 2003; its 7% Senior Notes,
due 2001; and its Senior Medium-Term Notes, Series D, E, F and G,
incorporated by reference to Exhibit 4.1 of registrant's Registration
No. 33-57533.
(j) Indenture dated as of January 1, 1995 between registrant and The Bank of
New York, pursuant to which registrant issued its 7 5/8% Subordinated Notes,
due 2005; its 7 3/4% Subordinated Notes, due 2015; its 7 1/4% Subordinated
Notes, due 2025; its 6 1/2% Subordinated Notes, due 2006; its 7.80%
Subordinated Notes, due 2016; and its Subordinated Medium-Term Notes,
Series D, E, F and G, incorporated by reference to Exhibit 4.1 of registrant's
Registration No. 33-57533.
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- - ------------- --------------------------------------------------------------------------------
<S> <C>
(k) Fiscal and Paying Agency Agreement dated as of July 5, 1995, between
registrant and The Chase Manhattan Bank, N.A. (London Branch), pursuant
to which registrant issued its Floating Rate Senior Notes, due 2000,
incorporated by reference to Exhibit 4(l) of registrant's Annual Report on
Form 10-K dated March 29, 1996 (the "1995 Form 10-K").
(l) Amended and Restated Agency Agreement dated as of May 12, 1997
between registrant and The Chase Manhattan Bank, N.A. (London
Branch), pursuant to which registrant issued its Senior Euro Medium-Term
Notes.
(m) Issuing and Paying Agency Agreement dated as of April 10, 1995 between
NationsBank, N.A. (as successor to NationsBank, N.A. (Carolinas) and
NationsBank of Georgia, N.A.) and NationsBank of Texas, N.A., as Issuers,
and Bankers Trust Company, as Issuing and Paying Agent, incorporated by
reference to Exhibit 4(n) of the 1995 Form 10-K.
(n) Specimen certificate of registrant's 7% Cumulative Redeemable Preferred
Stock, Series B, incorporated by reference to Exhibit 4(q) of registrant's
Annual Report on Form 10-K dated March 28, 1997 (the "1996 Form 10-K").
(o) Indenture dated as of November 27, 1996 between registrant and The Bank of
New York, incorporated by reference to Exhibit 4.10 of registrant's
Registration No. 333-15375.
(p) First Supplemental Indenture dated as of December 4, 1996 to the Indenture
dated as of November 27, 1996 between registrant and The Bank of New York
pursuant to which registrant issued its 7.84% Junior Subordinated Deferrable
Interest Notes due 2026, incorporated by reference to Exhibit 4.3 of
registrant's Current Report on Form 8-K dated November 27, 1996.
(q) Second Supplemental Indenture dated as of December 17, 1996 to the
Indenture dated as of November 27, 1996 between the registrant and The
Bank of New York pursuant to which registrant issued its 7.83% Junior
Subordinated Deferrable Interest Notes due 2026, incorporated by reference to
Exhibit 4.3 of registrant's Current Report on Form 8-K dated December 10,
1996.
(r) Third Supplemental Indenture dated as of February 3, 1997 to the Indenture
dated as of November 27, 1996 between registrant and The Bank of New York
pursuant to which registrant issued its Floating Rate Junior Subordinated
Deferrable Interest Notes due 2027, incorporated by reference to Exhibit 4.3 of
registrant's Current Report on Form 8-K dated January 22, 1997.
(s) Fourth Supplemental Indenture dated as of April 22, 1997 to the Indenture
dated as of November 27, 1996 between registrant and The Bank of New York
pursuant to which registrant issued its 8 1/4% Junior Subordinated Deferrable
Interest Notes, due 2027, incorporated by reference to Exhibit 4.3 of
registrant's Current Report on Form 8-K dated April 15, 1997.
(t) Specimen certificate of registrant's $2.50 Cumulative Convertible Preferred
Stock, Series BB.
(u) Indenture dated as of November 27, 1996, between Barnett Banks, Inc. and
The First National Bank of Chicago, as Trustee, and First Supplemental
Indenture dated as of January 9, 1998, among registrant, NB Holdings
Corporation, Barnett Banks, Inc. and The First National Bank of Chicago, as
Trustee, pursuant to which registrant (as successor to Barnett Banks, Inc.)
issued its 8.06% Junior Subordinated Debentures, due 2026.
(v) The registrant has other long-term debt agreements, but these are not
material in amount. Copies of these agreements will be furnished to the
Commission on request.
10(a) Limited Partnership Agreement of CSC Associates, L. P., between The Citizens
and Southern Corporation and Cousins Properties Incorporated dated as of
September 29, 1989, including Transfer of Partnership Interest between The
Citizens and Southern Corporation and C&S Premises, Inc. and First
Amendment thereto, both of which are incorporated by reference to Exhibit
10(ss) of registrant's Annual Report on Form 10-K dated March 25, 1992; and
Second Amendment thereto dated as of December 31, 1990, incorporated by
reference to Exhibit 10(a) of registrant's Annual Report on Form 10-K dated
March 30, 1995.
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- - ------------- ---------------------------------------------------------------------------------
<S> <C> <C>
(b) NationsBank Corporation and Designated Subsidiaries Directors' Retirement *
Plan, incorporated by reference to Exhibit 10(f) of registrant's Annual Report
on Form 10-K dated March 27, 1991; Amendment thereto dated as of
September 28, 1994, incorporated by reference to Exhibit 10(i) of registrant's
Annual Report on Form 10-K dated March 30, 1995; and Amendment thereto
dated as of April 24, 1996, incorporated by reference to Exhibit 10(g) of the
1996 Form 10-K.
(c) NationsBank Corporation and Designated Subsidiaries Supplemental *
Executive Retirement Plan, incorporated by reference to Exhibit 10(j) of
registrant's Annual Report on Form 10-K dated March 30, 1995; Amendment
thereto dated as of June 28, 1989, incorporated by reference to Exhibit 10(g) of
registrant's Annual Report on Form 10-K dated March 28, 1990; Amendment
thereto dated as of June 27, 1990, incorporated by reference to Exhibit 10(g) of
registrant's Annual Report on Form 10-K dated March 27, 1991; Amendment
thereto dated as of July 21, 1991, incorporated by reference to Exhibit 10(bb)
of registrant's Annual Report on Form 10-K dated March 25, 1992;
Amendments thereto dated as of December 3, 1992 and December 15, 1992,
both of which are incorporated by reference to Exhibit 10(l) of registrant's
Annual Report on Form 10-K dated March 24, 1993; Amendment thereto dated
as of September 28, 1994, incorporated by reference to Exhibit 10(j) of
registrant's Annual Report on Form 10-K dated March 30, 1995; and
Amendments thereto dated March 27, 1996 and June 25, 1997.
(d) NationsBank Corporation and Designated Subsidiaries Deferred *
Compensation Plan for Key Employees, incorporated by reference to Exhibit
10(k) of registrant's Annual Report on Form 10-K dated March 30, 1995;
Amendment thereto dated as of June 28, 1989, incorporated by reference to
Exhibit 10(h) of registrant's Annual Report on Form 10-K dated March 28,
1990; Amendment thereto dated as of June 27, 1990, incorporated by reference
to Exhibit 10(h) of registrant's Annual Report on Form 10-K dated March 27,
1991; Amendment thereto dated as of July 21, 1991, incorporated by reference
to Exhibit 10(bb) of registrant's Annual Report on Form 10-K dated March 25,
1992; and Amendment thereto dated as of December 3, 1992, incorporated by
reference to Exhibit 10(m) of registrant's Annual Report on Form 10-K dated
March 24, 1993.
(e) NationsBank Corporation and Designated Subsidiaries Supplemental *
Retirement Plan, incorporated by reference to Exhibit 10(o) of registrant's
Annual Report on Form 10-K dated March 30, 1994; Amendment thereto dated
as of June 28, 1989, incorporated by reference to Exhibit 10(k) of registrant's
Annual Report on Form 10-K dated March 28, 1990; Amendment thereto dated
as of June 27, 1990, incorporated by reference to Exhibit 10(k) of registrant's
Annual Report on Form 10-K dated March 27, 1991; Amendment thereto dated
as of July 21, 1991, incorporated by reference to Exhibit 10(bb) of registrant's
Annual Report on Form 10-K dated March 25, 1992; Amendments thereto
dated as of December 3, 1992 and December 4, 1992, both of which are
incorporated by reference to Exhibit 10(p) of registrant's Annual Report on
Form 10-K dated March 24, 1993; and Amendment thereto dated as of July 5,
1995, incorporated by reference to Exhibit 10(l) of the 1995 Form 10-K.
(f) Split Dollar Agreement dated as of February 1, 1990 between registrant and *
Hugh L. McColl III, as Trustee for the benefit of Hugh L. McColl, Jr. and Jane
S. McColl, incorporated by reference to Exhibit 10(s) of registrant's Annual
Report on Form 10-K dated March 27, 1991.
(g) NationsBank Corporation Benefit Security Trust dated as of June 27, 1990, *
incorporated by reference to Exhibit 10(t) of registrant's Annual Report on
Form 10-K dated March 27, 1991; First Supplement thereto dated as of
November 30, 1992, incorporated by reference to Exhibit 10(v) of registrant's
Annual Report on Form 10-K dated March 24, 1993; and Trustee Removal/
Appointment Agreement dated as of December 19, 1995, incorporated by
reference to Exhibit 10(o) of the 1995 Form 10-K.
(h) The NationsBank Retirement Savings Restoration Plan, as amended and *
restated effective July 1, 1996, incorporated by reference to Exhibit 10(p) of
the 1996 10-K.
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- - ------------- ---------------------------------------------------------------------------------
<S> <C> <C>
(i) Employment Arrangement with Fredric J. Figge, II dated July 27, 1987, *
incorporated by reference to Exhibit 10(tt) of registrant's Annual Report on
Form 10-K dated March 25, 1992; and Amendment Agreement thereto dated
June 27, 1997.
(j) Noncompetition Agreement dated as of December 31, 1997 by and between *
registrant and Fredric J. Figge, II.
(k) NationsBank Corporation Executive Incentive Compensation Plan, as *
amended and restated effective January 1, 1997.
(l) NationsBank Corporation Key Employee Deferral Plan, as amended and *
restated effective July 1, 1996, incorporated by reference to Exhibit 10(s) of
the 1996 10-K.
(m) NationsBank Corporation Director Deferral Plan, as amended and restated *
effective April 24, 1996, incorporated by reference to Exhibit 10(k) of the 1996
10-K.
(n) NationsBank Corporation Key Employee Stock Plan, as amended and restated *
effective December 19, 1997.
(o) NationsBank Corporation Directors' Stock Plan, incorporated by reference to *
Exhibit 99.1 of registrant's Registration No. 333-02875.
(p) Amendment to Restricted Stock Award Plan Agreements with Hugh L. McColl, *
Jr. dated December 20, 1996, incorporated by reference to Exhibit 10(x) of the
1996 10-K.
(q) Agreement and Plan of Merger, by and between Boatmen's Bancshares, Inc.
and registrant, dated as of August 29, 1996, incorporated by reference to
Exhibit 2.1 of registrant's Registration No. 333-16189; Amendment thereto,
dated as of November 11, 1996, incorporated by reference to Exhibit 2.2 of
registrant's Registration No. 333-16189; and Amendment thereto, dated as of
January 6, 1997, incorporated by reference to Exhibit 10(y) of the 1996 10-K.
(r) Employment Agreement, dated as of September 26, 1996, by and between *
registrant and Andrew B. Craig, III, incorporated by reference to Exhibit 10.1
of registrant's Registration No. 333-16189.
(s) Employment Agreement, dated as of January 30, 1996, as amended May 17, *
1996, by and between Boatmen's Bancshares, Inc. and Andrew B. Craig, III,
incorporated by reference to Exhibit 10.2 of registrant's Registration
No. 333-16189.
(t) Boatmen's Bancshares, Inc. Amended 1981 Incentive Stock Option Plan, *
incorporated by reference to Exhibit 99.1 of registrant's Post-Effective
Amendment No. 1 to Registration No. 333-16189.
(u) Boatmen's Bancshares, Inc. 1987 Non-Qualified Stock Option Plan, *
incorporated by reference to Exhibit 99.2 of registrant's Post-Effective
Amendment No. 1 to Registration No. 333-16189.
(v) Boatmen's Supplemental Retirement Plan, as adopted effective August 8, 1989 *
and as amended on January 30, 1996 and February 8, 1996.
(w) Boatmen's Bancshares, Inc. Executive Deferred Compensation Plan as of *
February 8, 1996.
(x) Boatmen's Bancshares, Inc. Amended 1982 Long Term Incentive Plan effective *
as of February 9, 1982, as amended.
(y) Boatmen's Supplemental Retirement Plan Participation Agreement dated August 4, *
1993 between Boatmen's Bancshares, Inc. and Andrew B. Craig, III.
(z) Trust Under Boatmen's Supplemental Retirement Plan dated December 31, *
1993, and First Instrument of Amendment thereto dated August 13, 1996.
(aa) Letter agreement by and between registrant and Andrew B. Craig, III dated *
March 21, 1997 waiving certain stock appreciation rights.
(bb) Agreement and Plan of Merger, by and between Barnett Banks, Inc. and
registrant, dated as of August 29, 1997, incorporated by reference to Exhibit
2.1 of registrant's Registration No. 333-40515; and Amendment thereto, dated
as of November 18, 1997, incorporated by reference to Exhibit 2.2 of
registrant's Registration No. 333-40515.
(cc) Employment Agreement by and between registrant and Charles E. Rice dated *
October 10, 1997, incorporated by reference to Exhibit 10.1 of registrant's
Registration No. 333-40515.
</TABLE>
E-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- - ------------- ----------------------------------------------------------------
<S> <C>
11 Earnings per share computation.
12 (a) Ratio of Earnings to Fixed Charges.
(b) Ratio of Earnings to Fixed Charges and Preferred Dividends.
21 List of Subsidiaries.
23 Consent of Price Waterhouse LLP.
24 (a) Power of Attorney.
(b) Corporate Resolution.
27 Financial Data Schedule.
</TABLE>
- - ---------
* Denotes executive compensation plan or arrangement.
E-5
<PAGE>
AMENDED AND RESTATED
AGENCY AGREEMENT
RELATING TO
NATIONSBANK CORPORATION,
U.S. $4,500,000,000
Euro Medium-Term Note Program
AMONG
NATIONSBANK CORPORATION
as Issuer
and
THE CHASE MANHATTAN BANK, London Branch
as Issuing and Principal Paying Agent
and
CHASE MANHATTAN BANK LUXEMBOURG S.A.
as Paying Agent
Dated as of May 12, 1997
<PAGE>
INDEX
-----
Clause Page
- - ------ ----
1. Definitions and Interpretation.................................... 1
2. Appointments of Agent, Paying Agents
and Calculation Agents......................................... 2
3. Issue of Temporary Global Notes................................... 3
4. Determination of Exchange Date, Issue of Permanent
Global Notes or Definitive Notes and
Determination of Restricted Period............................. 4
5. Issue of Definitive Notes......................................... 5
6. Terms of Issue.................................................... 6
7. Payments.......................................................... 7
8. Determinations and Notifications in Respect of
Notes and Interest Determination............................... 8
9. Notice of any Withholding or Deduction............................ 11
10. Duties of the Agent in Connection with Early
Redemption..................................................... 11
11. Receipt and Publication of Notices; Receipt of
Certificates................................................... 12
12. Cancellation of Notes, Receipts, Coupons and Talons............... 12
13. Issue of Replacement Notes, Receipts, Coupons and
Talons......................................................... 13
14. Copies of Documents Available for Inspection...................... 14
15. Meetings of Noteholders........................................... 14
16. Repayment by the Agent............................................ 14
17. Conditions of Appointment......................................... 15
18. Communication Between the Parties................................. 15
19. Change in Agent and Paying Agents................................. 16
20. Merger and Consolidation.......................................... 17
21. Notification of Changes to Paying Agents.......................... 17
22. Change of Specified Office........................................ 17
23. Notices........................................................... 18
24. Taxes and Stamp Duties............................................ 19
25. Commissions, Fees and Expenses.................................... 19
26. Indemnity......................................................... 19
27. Reporting......................................................... 20
28. Governing Law..................................................... 20
29. Amendments........................................................ 20
30. Descriptive Headings.............................................. 21
31. Counterparts...................................................... 21
Schedule 1 - Form of Temporary Global Note
- - ----------
Schedule 2 - Form of Permanent Global Note
- - ----------
Schedule 3 - Form of Definitive Note, Coupon, Receipt and Talon
- - ----------
Schedule 4 - Terms and Conditions
- - ----------
Schedule 5 - Form of Certificate to be Presented by Euroclear or Cedel Bank
- - ----------
Schedule 6 - Form of Certificate of Beneficial Owner
- - ----------
Schedule 7 - Provision for Meetings of Noteholders
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Schedule 8 - Form of Put Notice
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Schedule 9 - Form of Calculation Agency Agreement
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THIS AMENDED AND RESTATED AGREEMENT dated as of May 12, 1997 among:
(i) NationsBank Corporation (the "Corporation");
(ii) The Chase Manhattan Bank, London Branch (the "Agent"
and the "Issuing and Principal Paying Agent"); and
(iii) Chase Manhattan Bank Luxembourg S.A. (the "Paying
Agent").
WHEREAS, the Corporation, the Agent and the Paying Agent wish
to record the arrangements originally agreed among them pursuant to that certain
Agency Agreement dated November 8, 1995, as amended and restated, (the "Original
Agency Agreement").
WHEREAS, the Corporation proposes to issue up to U.S.
$4,500,000,000 (or its equivalent in other currencies) in aggregate principal
amount of Euro Medium-Term Notes (the "Notes") outstanding at any one time as
provided in an amended and restated Program Agreement of even date among the
Corporation, the Arrangers and the Dealers named therein (the "Program
Agreement") and as described in an Offering Circular of even date (the "Offering
Circular");
WHEREAS, Notes will be issued in the denominations specified
in the relevant Pricing Supplement issued in connection with each Series and
each Tranche of Notes;
WHEREAS, beneficial interests in each Tranche of Notes will
initially be represented by a Temporary Global Note, exchangeable, as provided
in such Temporary Global Note, for beneficial interests in a Permanent Global
Note and, only under limited circumstances, beneficial interests in a Global
Note may be exchangeable for Definitive Notes, in each case in accordance with
the terms of the Global Notes; and
NOW, THEREFORE, it is agreed as follows:
1. Definitions and Interpretation
(1) Terms and expressions defined in the Program Agreement or
the Notes or used in the applicable Pricing Supplement shall have the same
meanings in this Agreement, except where the context requires otherwise.
(2) Without prejudice to the foregoing in this Agreement:
"outstanding" means, in relation to the Notes, all the Notes
issued other than (a) those which have been redeemed in accordance with the
Terms and Conditions, (b) those in respect of which the date for redemption in
accordance with the Terms and Conditions has occurred and the redemption moneys
(including all interest accrued on such Notes to the date for such redemption
and any interest or other amounts payable under the Terms and Conditions after
such date) have been duly paid to the Agent as provided in this Agreement and
remain available for payment against presentation and surrender of Notes and/or
Receipts and/or Coupons, as the case may be, (c) those which have become void
under Condition 8, (d) those which have been purchased and canceled as provided
in Condition 6 (or as provided in the Global Notes), (e) those mutilated or
defaced Notes which have been surrendered in exchange for replacement Notes
pursuant to Condition 10, (f) (for the purposes only of determining how many
Notes are outstanding and without prejudice to their status for any other
purpose) those Notes alleged to have been lost, stolen or destroyed and in
respect of which replacement Notes have been issued pursuant to Condition 10,
(g) any Temporary Global Note to the extent that it shall have been exchanged
for a Permanent Global Note, in each case pursuant to their respective
provisions; provided that for the purposes of (i) ascertaining the right to
attend and vote at any meeting of the Noteholders and (ii) the determination of
how many Notes are outstanding for the purposes of Schedule 7, those Notes which
are beneficially held by, or are held on behalf of, the Corporation or any of
its affiliates shall (unless and until ceasing to be so held) be deemed not to
remain outstanding;
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"Paying Agents" means the Issuing and Principal Paying Agent
and the Paying Agent referred to above and such other Paying Agent or Agents as
may be appointed from time to time hereunder; and
(3) The term "Notes" as used in this Agreement shall include
the Permanent Global Note, the Definitive Notes and the Coupons and, as the case
may be, the Temporary Global Note. The term "Global Note" as used in this
Agreement shall include both the Temporary Global Note and the Permanent Global
Note, each of which is a "Global Note." The term "Noteholders" as used in this
Agreement shall mean the several persons who are for the time being the holders
of the Notes, which expression shall, while the Notes are represented by a
Global Note, mean (other than with respect to the payment of principal and
interest on the Notes, the right to which shall be vested as against the
Corporation solely in the bearer of such Global Note in accordance with and
subject to its terms) the persons for the time being shown in the records of
Euroclear (as defined below) or Cedel Bank (as defined below)(other than Cedel
Bank, if Cedel Bank shall be an accountholder of Euroclear, and Euroclear, if
Euroclear shall be an accountholder of Cedel Bank) as the Noteholders of
particular principal amounts of Notes (in which regard any certificate or other
document issued by Euroclear or Cedel Bank as to the principal amount of Notes
standing to the credit of the account of any person shall be conclusive and
binding for all purposes).
(4) For purposes of this Agreement, the Notes of each Series
shall form a separate series of Notes and the provisions of this Agreement shall
apply MUTATIS MUTANDIS separately and independently to the Notes of each Series
and in such provisions the expressions "Notes", "Noteholders", "Receipts,
"Receiptholders", "Coupons", "Couponholders", "Talons" and "Talonholders" shall
be construed accordingly.
(5) All references in this Agreement to principal and/or
interest or both in respect of the Notes or to any moneys payable by the
Corporation under this Agreement shall have the meaning set out in Condition 5.
(6) All references in this Agreement to the "relevant
currency" shall be construed as references to the currency (which term shall,
for these purposes, be deemed to include ECU) in which the relevant Notes and/or
Coupons are denominated (or payable in the case of Dual Currency Notes) or, in
the case of Notes denominated in ECU, the chosen currency (as defined in
Condition 5(c)) in which payments in respect of such Notes are to be made, as
the case may be.
(7) In this Agreement, Clause headings are inserted for
convenience and ease of reference only and shall not affect the interpretation
of this Agreement. All references in this Agreement to the provisions of any
statute shall be deemed to be references to that statute as from time to time
modified, extended, amended or re-enacted or to any statutory instrument, order
or regulation made thereunder or under such re-enactment.
(8) All references in this Agreement to an agreement,
instrument or other document (including, without limitation, this Agreement, the
Program Agreement, the Notes and any Terms and Conditions appertaining thereto)
shall be construed as a reference to that agreement, instrument or document as
the same may be amended, modified, varied or supplemented from time to time.
(9) Any references herein to Euroclear and/or Cedel Bank
shall, whenever the context so permits, be deemed to include a reference to any
additional or alternative clearance system approved by the Corporation and the
Agent.
2. Appointments of Agent, Paying Agents and Calculation Agents
(1) The Corporation hereby appoints The Chase Manhattan Bank,
London Branch, as Agent, and The Chase Manhattan Bank, London Branch, hereby
accepts such appointment as Agent of the Corporation, upon the terms and subject
to the conditions set out below, for the purposes of, INTER ALIA:
(a) completing, authenticating and delivering Global
Notes and (if required) authenticating and delivering
Definitive Notes;
(b) exchanging Temporary Global Notes for Permanent
Global Notes or Definitive Notes, as the case may be, in
accordance with the terms of such Temporary Global Notes;
(c) under limited circumstances, exchanging Permanent
Global Notes for Definitive Notes in accordance with the terms
of such Permanent Global Notes;
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(d) paying sums due on Global Notes and Definitive
Notes, Receipts and Coupons;
(e) determining the end of the Restricted Period
applicable to each Tranche;
(f) unless otherwise specified in the applicable
Pricing Supplement, determining the interest and/or other
amounts payable in respect of the Notes in accordance with the
Terms and Conditions;
(g) arranging on behalf of the Corporation for
notices to be communicated to the Noteholders;
(h) preparing and sending monthly reports to the
Ministry of Finance of Japan (the "MoF"), the German Central
Bank and the Bank of England and, subject to confirmation from
the Corporation for the need for such further reporting,
ensuring that all necessary action is taken to comply with any
reporting requirements of any competent authority of any
relevant currency as may be in force from time to time with
respect to the Notes to be issued under the Program;
(i) subject to the Procedures Memorandum, submitting
to the Stock Exchange such number of copies of each Pricing
Supplement which relates to Notes which are to be listed as it
may reasonably require;
(j) receiving notice from Euroclear and/or Cedel Bank
relating to the certificates of non-US. beneficial ownership
of the Notes; and
(k) performing all other obligations and duties
imposed upon it by the Terms and Conditions and this
Agreement.
(2) The Corporation may, in its discretion, appoint one or
more agents outside the United States and its possessions (each a "Paying
Agent") for the payment (subject to applicable laws and regulations) of the
principal of and any interest and Additional Amounts, if any, (as defined in
Section 5 of the Terms and Conditions) on the Notes. The Corporation hereby
appoints Chase Manhattan Bank Luxembourg S.A., at its office in Luxembourg at 5
rue Plaetis, L-2338 Luxembourg-Grund, as its Paying Agent in Luxembourg. Each
Paying Agent shall have the powers and authority granted to and conferred upon
it herein and in the Notes, and such further powers and authority, acceptable to
it, to act on behalf of the Corporation as the Corporation may hereafter grant
to or confer upon it in writing. As used herein, "paying agencies" shall mean
paying agencies maintained by a Paying Agent on behalf of the Corporation as
provided elsewhere herein.
(3) The Corporation will appoint an agent to make certain
calculations with respect to the Notes (the "Calculation Agent") pursuant to the
Terms and Conditions.
3. Issue of Temporary Global Notes
(1) Subject to sub-clause (2), following receipt of a
notification from the Corporation in respect of an issue of Notes (such
notification being by receipt of a confirmation (a "Confirmation"),
substantially in the applicable form set out in the Procedures Memorandum) the
Agent will take the steps required of the Agent in the Procedures Memorandum.
For this purpose the Agent is hereby authorized on behalf of the Corporation:
(a) to prepare a Temporary Global Note in accordance
with such Confirmation by attaching a copy of the applicable
Pricing Supplement to a copy of the relevant master Temporary
Global Note;
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(b) to authenticate (or cause to be authenticated)
such Temporary Global Note;
(c) to deliver such Temporary Global Note to the
specified common depositary of Euroclear and/or Cedel Bank in
accordance with the Confirmation against receipt from the
common depositary of confirmation that such common depositary
is holding the Temporary Global Note in safe custody for the
account of Euroclear and/or Cedel Bank and to instruct
Euroclear or Cedel Bank or both of them (as the case may be)
unless otherwise agreed in writing between the Agent and the
Corporation (i) in the case of an issue of Notes on a
non-syndicated basis, to credit the Notes represented by such
Temporary Global Note to the Agent's distribution account, and
(ii) in the case of Notes issued on a syndicated basis, to
hold the Notes represented by such Temporary Global Note to
the Corporation's order; and
(d) to ensure that the Notes of each Tranche are
assigned a Common Code and ISIN by Euroclear and Cedel Bank
which are different from the Common Code and ISIN assigned to
Notes of any other Tranche of the same Series until 40 days
after the completion of the distribution of the Notes of such
Tranche as notified by the Agent to the relevant Dealer.
(2) The Agent shall only be required to perform its
obligations under sub-clause (1) if it holds:
(a) master Temporary Global Notes, duly executed by a
person or persons authorized to execute the same on behalf of
the Corporation, which may be used by the Agent for the
purpose of preparing Temporary Global Notes in accordance with
paragraph (a) of that sub-clause; and
(b) master Permanent Global Notes, duly executed by a
person or persons authorized to execute the same on behalf of
the Corporation, which may be used by the Agent for the
purpose of preparing Permanent Global Notes in accordance with
Clause 4 below.
(3) The Agent will provide Euroclear and/or Cedel Bank with
the notifications, instructions or other information to be given by the Agent to
Euroclear and/or Cedel Bank in accordance with the standard procedures of
Euroclear and/or Cedel Bank.
4. Determination of Exchange Date, Issue of Permanent
Global Notes or Definitive Notes and Determination of
Restricted Period
(1) (a) The Agent shall determine the Exchange Date for each
Temporary Global Note in accordance with the terms thereof.
Forthwith upon determining the Exchange Date in respect of any
Tranche the Agent shall notify such determination to the
Corporation, the relevant Dealer, Euroclear and Cedel Bank.
(b) The Agent shall deliver, upon notice from Euroclear or
Cedel Bank, a Permanent Global Note or Definitive Notes, as
the case may be, in accordance with the terms of the Temporary
Global Note. Upon any such exchange of a portion of a
Temporary Global Note for an interest in a Permanent Global
Note the Agent is hereby authorized on behalf of the
Corporation:
(i) in the case of the first Tranche of any
Series of Notes, to prepare and complete a Permanent
Global Note in accordance with the terms of the
Temporary Global Note applicable to such Tranche by
attaching a copy of the applicable Pricing Supplement
to a copy of the relevant master Permanent Global
Note;
(ii) in the case of the first Tranche of any
Series of Notes, to authenticate such Permanent
Global Note;
(iii) in the case of the first Tranche of
any Series of Notes, to deliver such
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Permanent Global Note to the common depositary which
is holding the Temporary Global Note applicable to
such Tranche for the time being on behalf of
Euroclear and/or Cedel Bank either in exchange for
such Temporary Global Note or, in the case of a
partial exchange, on entering details of such partial
exchange of the Temporary Global Note in the relevant
spaces in Schedule 2 of both the Temporary Global
Note and the Permanent Global Note, and in either
case against receipt from the common depositary of
confirmation that such common depositary is holding
the Permanent Global Note in safe custody for the
account of Euroclear and/or Cedel Bank; and
(iv) in any other case, to attach a copy of
the applicable Pricing Supplement to the Permanent
Global Note applicable to the relevant Series and
enter details of any exchange in whole or part as
aforesaid.
(2) (a) In the case of a Tranche in respect of which there is
only one Dealer, the Agent will determine the end of the
Restricted Period in respect of such Tranche as being the
fortieth day following the date certified by the relevant
Dealer to the Agent as being the date as of which distribution
of the Notes of that Tranche was completed.
(b) In the case of a Tranche in respect of which
there is more than one Dealer but is not issued on a
syndicated basis, the Agent will determine the end of the
Restricted Period in respect of such Tranche as being the
fortieth day following the latest of the dates certified by
all the relevant Dealers to the Agent as being the respective
dates as of which distribution of the Notes of that Tranche
purchased by each such dealer was completed.
(c) In the case of a Tranche issued on a syndicated
basis, the Agent will determine the end of the Restricted
Period in respect of such Tranche as being the fortieth day
following the date certified by the Lead Manager to the Agent
as being the date as of which distribution of the Notes of
that Tranche was completed.
(d) Forthwith upon determining the end of the
Restricted Period in respect of any Tranche, the Agent shall
notify such determination to the Corporation and the relevant
Dealer or the Lead Manager in the case of a syndicated issue.
5. Issue of Definitive Notes
(1) Interests in a Global Note will be exchangeable for
Definitive Notes with Coupons attached only if: (i) an Event of Default (as
defined in the Terms and Conditions) occurs and is continuing, or (ii) the
Corporation is notified that either Euroclear or Cedel Bank has been closed for
business for a continuous period of 14 days (other than by reason of holiday,
statutory or otherwise) after the original issuance of the Notes or has
announced an intention permanently to cease business or has in fact done so and
no alternative clearance system approved by the Noteholders is available, or
(iii) the Corporation, after notice to the Agent, determines to issue Notes in
definitive form. Upon the occurrence of these events, the Agent shall deliver
the relevant Definitive Note(s) in accordance with the terms of the relevant
Global Note.
For this purpose the Agent is hereby authorized on behalf of
the Corporation:
(a) to authenticate such Definitive Note(s) in
accordance with the provisions of this Agreement; and
(b) to deliver such Definitive Note(s) to or to the
order of Euroclear and/or Cedel Bank in exchange for such
Global Note.
The Agent shall notify the Corporation forthwith upon receipt of a request for
issue of (a) Definitive Note(s) in
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accordance with the provisions of a Global Note and this Agreement (and the
aggregate principal amount of such Temporary Global Note or Permanent Global
Note, as the case may be, to be exchanged in connection therewith).
(2) The Corporation undertakes to deliver to the Agent
sufficient numbers of executed Definitive Notes with, if applicable, Receipts,
Coupons and Talons attached to enable the Agent to comply with its obligations
under this Clause 5.
6. Terms of Issue
(1) The Agent shall cause all Temporary Global Notes,
Permanent Global Notes and Definitive Notes delivered to and held by it under
this Agreement to be maintained in safe custody and shall ensure that such Notes
are issued only in accordance with the provisions of this Agreement and the
relevant Global Note and Terms and Conditions.
(2) Subject to the procedures set out in the Procedures
Memorandum, for the purposes of Clause 3(1) the Agent is entitled to treat a
telephone, telex or facsimile communication from a person purporting to be (and
who the Agent believes in good faith to be) the authorized representative of the
Corporation named in the lists referred to in, or notified pursuant to, Clause
17(7) as sufficient instructions and authority of the Corporation for the Agent
to act in accordance with Clause 3(l).
(3) In the event that a person who has signed on behalf of the
Corporation any Note not yet issued but held by the Agent in accordance with
Clause 3(1) ceases to be authorized as described in Clause 17(7), the Agent
shall (unless the Corporation gives notice to the Agent that Notes signed by
that person do not constitute valid and binding obligations of the Corporation
or otherwise until replacements have been provided to the Agent) continue to
have authority to issue any such Notes, and the Corporation hereby warrants to
the Agent that such Notes shall, unless notified as aforesaid, be valid and
binding obligations of the Corporation. Promptly upon such person ceasing to be
authorized, the Corporation shall provide the Agent with replacement Notes and
upon receipt of such replacement Notes the Agent shall cancel and destroy the
Notes held by it which are signed by such person and shall provide to the
Corporation a confirmation of destruction in respect thereof specifying the
Notes so canceled and destroyed.
(4) If the Agent pays an amount (the "Advance") to the
Corporation on the basis that a payment (the "Payment") has been, or will be,
received from a Dealer and if the Payment is not received by the Agent on the
date the Agent pays the Corporation, the Agent shall notify the Corporation by
tested telex or facsimile that the Payment has not been received and the
Corporation shall repay to the Agent the Advance and shall pay interest on the
Advance (or the unreimbursed portion thereof) from (and including) the date such
Advance is made to (but excluding) the earlier of repayment of the Advance and
receipt by the Agent of the Payment (at a rate quoted at that time by the Agent
as its cost of funding the Advance).
(5) Except in the case of issues where the Agent does not act
as receiving bank for the Corporation in respect of the purchase price of the
Notes being issued, if on the relevant Issue Date a Dealer does not pay the full
purchase price due from it in respect of any Note (the "Defaulted Note") and, as
a result, the Defaulted Note remains in the Agent's distribution account with
Euroclear and/or Cedel Bank) after such Issue Date, the Agent will continue to
hold the Defaulted Note to the order of the Corporation. The Agent shall notify
the Corporation forthwith of the failure of the Dealer to pay the full purchase
price due from it in respect of any Defaulted Note and, subsequently, shall
notify the Corporation forthwith upon receipt from the Dealer of the full
purchase price in respect of such Defaulted Note.
7. Payments
(1) The Agent shall advise the Corporation, no later than ten
Business Days (as defined below) immediately preceding the date on which any
payment is to be made to the Agent pursuant to this sub-clause (1) of the
payment amount, value date and payment instructions and the Corporation will
before 10:00 a.m. New York time on each date on which any payment in respect of
any Notes issued by it becomes due, transfer to an account specified by the
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Agent such amount in the relevant currency as shall be sufficient for the
purposes of such payment in funds settled through such payment system as the
Agent and the Corporation may agree.
(2) The Corporation will ensure that no later than 4:00 p.m.
(London time) on the second Business Day (as defined below) immediately
preceding the date on which any payment is to be made to the Agent pursuant to
sub-clause (1), the Agent shall receive from the paying bank of the Corporation
an irrevocable confirmation in the form of a SWIFT message or tested telex that
such payment shall be made. For the purposes of this Clause 7 "Business Day"
means a day which is both:
(a) a day (other than a Saturday or a Sunday) on
which commercial banks and foreign exchange markets settle
payments in London and in Charlotte, North Carolina; and
(b) either (1) in relation to a payment to be made in
a Specified Currency other than ECU, a day on which commercial
banks and foreign exchange markets settle payments in the
principal financial center of the country of the relevant
Specified Currency (if other than London) or (2) in relation
to a payment to be made in ECU, an ECU Settlement Day.
(3) The Agent shall ensure that payments of both principal and
interest in respect of any Temporary Global Note will be made only to the extent
that certification of non-U.S. beneficial ownership as required by U.S.
securities laws and U.S. Treasury regulations (in the form set out in the
Temporary Global Note) has been received from Euroclear and/or Cedel Bank in
accordance with the terms thereof.
(4) Subject to the receipt by the Agent of the payment
confirmation as provided in sub-clause (2) above, the Agent or the relevant
Paying Agent shall pay or cause to be paid all amounts due in respect of the
Notes on behalf of the Corporation in the manner provided in the Terms and
Conditions. If any payment provided for in sub-clause (l) is made late but
otherwise in accordance with the provisions of this Agreement, the Agent and
each Paying Agent shall nevertheless make payments in respect of the Notes as
aforesaid following receipt by it of such payment.
(5) If for any reason the Agent considers in its sole
discretion that the amounts to be received by the Agent pursuant to sub-clause
(1) will be, or the amounts actually received by it pursuant thereto are,
insufficient to satisfy all claims in respect of all payments then falling due
in respect of the Notes, neither the Agent nor any Paying Agent shall be obliged
to pay any such claims until the Agent has received the full amount of all such
payments. Should the Agent or any Paying Agent elect not to make payment of
amounts falling due in respect of the Notes as aforesaid, it shall advise the
Corporation of any such decision as soon as practicable by telephone with
confirmation by telefax.
(6) Without prejudice to sub-clauses (4) and (5), if the Agent
pays any amounts to the holders of Notes, Receipts or Coupons or to any Paying
Agent at a time when it has not received payment in full in respect of the
relevant Notes in accordance with sub-clause (1) (the excess of the amounts so
paid over the amounts so received being the "Shortfall"), the Corporation will,
in addition to paying amounts due under sub-clause (l), pay to the Agent on
demand interest (at a rate which represents the Agent's cost of funding the
Shortfall) on the Shortfall (or the unreimbursed portion thereof) until the
receipt in full by the Agent of the Shortfall.
(7) The Agent shall on demand promptly reimburse each Paying
Agent for payments in respect of Notes properly made by such Paying Agent in
accordance with this Agreement and the Terms and Conditions unless the Agent has
notified the Paying Agent, prior to the opening of business in the location of
the office of the Paying Agent through which payment in respect of the Notes can
be made prior to the day on which such Agent has to give payment instructions in
respect of the due date of a payment in respect of the Notes, that the Agent
does not expect to receive sufficient funds to make payment of all amounts
falling due in respect of such Notes.
(8) If the Agent pays out on or after the due date therefor,
or becomes liable to pay out, funds on the assumption that the corresponding
payment by the Corporation has been or will be made and such payment has in fact
not been so made by the Corporation, then the Corporation shall on demand
reimburse the Agent for the relevant
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amount, and pay interest to the Agent on such amount from the date on which it
is paid out to the date of reimbursement at a rate per annum equal to the cost
to the Agent of funding the amount paid out, as certified by the Agent and
expressed as a rate per annum. For the avoidance of doubt, the provisions of the
Terms and Conditions as to subordination shall not apply to the Corporation's
obligations under this sub-clause 8.
(9) While any Notes are represented by a Global Note or Global
Notes, all payments due in respect of such Notes shall be made to, or to the
order of, the holder of the Global Note or Global Notes, subject to and in
accordance with the provisions of the Global Note or Global Notes. On the
occasion of any such payment the Paying Agent to which any Global Note was
presented for the purpose of making such payment shall cause the appropriate
Schedule to the relevant Global Note to be annotated so as to evidence the
amounts and dates of such payments of principal and/or interest as applicable.
(10) If a payment in respect of a Note denominated in ECU is
to be made in a chosen currency:
(i) the Agent shall choose a component currency of
the ECU as the chosen currency as provided in Condition 5(c)
and shall forthwith notify the Corporation, the other Paying
Agents and the Stock Exchange;
(ii) the Agent shall promptly perform the duties
required of it under Condition 5(c); and
(iii) the Agent shall notify the Corporation and the
other Paying Agents of the amount payable per Note and Coupon
in the chosen currency.
(11) If the amount of principal and/or interest then due for
payment is not paid in full (otherwise than by reason of a deduction required by
law to be made therefrom), the Paying Agent to which a Note is presented for the
purpose of making such payment shall make a record of such shortfall on the Note
and such record shall, in the absence of manifest error, be prima facie evidence
that the payment in question has not to that extent been made.
8. Determinations and Notifications in Respect of Notes
and Interest Determination
(a) Determinations and Notifications
(1) The Agent shall make all such determinations and
calculations (howsoever described) as it is required to do under the Terms and
Conditions, all subject to and in accordance with the Terms and Conditions,
provided that certain calculations with respect to the Notes, and associated
publication or notification, shall be made by the Calculation Agent in
accordance with the Terms and Conditions.
(2) The Agent or the Calculation Agent, as the case may be,
shall not be responsible to the Corporation or to any third party (except in the
event of negligence, default or bad faith of the Agent or the Calculation Agent)
as a result of the Agent or the Calculation Agent having acted in good faith on
any quotation given by any Reference Bank which subsequently may be found to be
incorrect.
(3) The Agent or the Calculation Agent, as the case may be,
shall promptly notify (and confirm in writing to) the Corporation, the other
Paying Agents and (in respect of a Series of Notes listed on a Stock Exchange)
the relevant Stock Exchange of, INTER ALIA, each Rate of Interest, Interest
Amount and Interest Payment Date and all other amounts, rates and dates which it
is obliged to determine or calculate under the Terms and Conditions as soon as
practicable after the determination thereof (and in any event no later than the
tenth Business Day as defined in Clause 7(2) immediately preceding the date on
which payment is to be made to the Agent pursuant to Clause 7(l)) and of any
subsequent amendment thereto pursuant to the Terms and Conditions.
(4) The Agent or the Calculation Agent, as the case may be,
shall use its best efforts to cause
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each Rate of Interest, Interest Amount and Interest Payment Date and all other
amounts, rates and dates which it is obliged to determine or calculate under the
Terms and Conditions to be published as required in accordance with the Terms
and Conditions as soon as possible after their determination or calculation.
(5) If the Agent or the Calculation Agent, as the case may be,
does not at any material time for any reason determine and/or calculate and/or
publish the Rate of Interest, Interest Amount and/or Interest Payment Date in
respect of any Interest Period or any other amount, rate or date as provided in
this Clause 8, it shall forthwith notify the Corporation and the Paying Agents
of such fact.
(6) Determinations with regard to Notes (including, without
limitation, Indexed Notes and Dual Currency Notes) shall be made by the
Calculation Agent specified in the applicable Pricing Supplement in the manner
specified in the applicable Pricing Supplement. Unless otherwise agreed between
the Corporation and the relevant Dealer, such determinations shall be made on
the basis of a Calculation Agency Agreement substantially in the form of
Schedule 9 to this Agreement.
(7) For the purposes of monitoring the aggregate principal
amount of Notes issued under the Program, the Agent shall determine the U.S.
dollar equivalent of the principal amount of each issue of Notes denominated in
another currency, each issue of Dual Currency Notes and each issue of Indexed
Notes as follows:
(a) the U.S. dollar equivalent of Notes denominated
in a currency other than U.S. Dollars shall be determined by
the Agent as of the date of the agreement to issue such Notes
or on the preceding day on which commercial banks and foreign
exchange markets are open for business in London, in each case
on the basis of the spot rate for the sale of the U.S. dollar
against the purchase of such other currency in the London
foreign exchange market quoted by any leading bank selected by
the Agent;
(b) the U.S. dollar equivalent of Dual Currency
Notes, Indexed Notes and Partly Paid Notes shall be determined
in the manner specified above by reference to the original
principal amount of such Notes; and
(c) the U.S. dollar equivalent of Zero Coupon Notes
and other Notes issued at a discount shall be deemed to be the
net proceeds received by the Company for the relevant issue.
(b) Interest Determination, Screen Rate Determination
including Fallback Provisions
(1) Where screen rate determination ("Screen Rate
Determination") is specified in the applicable Pricing Supplement as the manner
in which the Rate of Interest is to be determined, the Rate of Interest for each
Interest Period will, subject as provided below, be either:
(A) the offered quotation (if there is only one
quotation on the relevant screen page (the "Relevant Screen
Page")); or
(B) the arithmetic mean (rounded if necessary to the
fifth decimal place, with 0.000005 being rounded upwards) of
the offered quotations,
(expressed as a percentage rate per annum), for the reference rate ("Reference
Rate") which appears or appear, as the case may be, on the Relevant Screen Page
at approximately 11:00 a.m. (London time) on the interest determination date
("Interest Determination Date") in question plus or minus (as indicated in the
applicable Pricing Supplement) the Margin (if any), all as determined by the
Calculation Agent. If five or more such offered quotations are available on the
Relevant Screen Page, the highest (or, if there is more than one such highest
quotation, one only of such quotations) and the lowest (or, if there is more
than one such lowest quotation, one only of such quotations) shall be
disregarded by the Calculation Agent for the purpose of determining the
arithmetic mean (rounded as provided above) of such offered quotations.
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(2) If the Relevant Screen Page is not available or if, in the
case of sub-clause(b)(1)(A) above, no such offered quotation appears or, in the
case of sub-clause (b)(1)(B) above, fewer than three such offered quotations
appear, in each case as at the time specified in the preceding paragraph, the
Calculation Agent shall at its sole discretion request the principal London
office of each of the Reference Banks (defined below) to provide the Calculation
Agent with its offered quotation (expressed as a percentage rate per annum) for
deposits in the Specified Currency for the relevant Interest Period to leading
banks in the London inter-bank market at approximately 11:00 a.m. (London time)
on the Interest Determination Date in question. If two or more of the Reference
Banks provide the Calculation Agent with such offered quotations, the Rate of
Interest for such Interest Period shall be the arithmetic mean (rounded if
necessary to the fifth decimal place with 0.000005 being rounded upwards) of
such offered quotations plus or minus (as appropriate) the Margin (if any), all
as determined by the Calculation Agent.
(3) If on any Interest Determination Date one only or none of
the Reference Banks provides the Calculation Agent with such offered quotations
as provided in the preceding paragraph, the Rate of Interest for the relevant
Interest Period shall be the rate per annum which the Calculation Agent
determines as being the arithmetic mean (rounded if necessary to the fifth
decimal place, with 0.000005 being rounded upwards) of the rates, as
communicated to (and at the request of) the Calculation Agent by the Reference
Banks or any two or more of them, at which such banks offered, at approximately
11:00 a.m. (London time) on the relevant Interest Determination Date, deposits
in the Specified Currency for the relevant Interest Period by leading banks in
the London inter-bank market plus or minus (as appropriate) the Margin (if any).
If fewer than two of the Reference Banks provide the Calculation Agent with such
offered quotations, the Rate of Interest shall be the offered quotation for
deposits in the Specified Currency for the relevant Interest Period, or the
arithmetic mean (rounded as provided above) of the offered quotations for
deposits in the Specified Currency for the relevant Interest Period, at which,
at approximately 11:00 a.m. (London time) on the relevant Interest Determination
Date, any one or more banks informs the Calculation Agent it is quoting to
leading banks in the London inter-bank market plus or minus (as appropriate) the
Margin (if any), provided that, if the Rate of Interest cannot be determined in
accordance with the foregoing provisions of this paragraph, the Rate of Interest
shall be determined as at the last preceding Interest Determination Date (though
substituting, where a different Margin is to be applied to the relevant Interest
Period from that which applied to the last preceding Interest Period, the Margin
relating to the relevant Interest Period, in place of the Margin relating to
that last preceding Interest Period).
(4) If the Reference Rate from time to time in respect of
Floating Rate Notes is specified in the applicable Pricing Supplement as being
other than the London inter-bank offered rate, the Rate of Interest in respect
of such Notes will be determined as provided in the applicable Pricing
Supplement.
In this Clause 8, the expression "Reference Banks" means, in
the case of sub-clause (b)(1)(A) above, those banks whose offered rates were
used to determine such quotation when such quotation last appeared on the
Relevant Screen Page and in the case of sub-clause (b)(1)(B) above, those banks
whose offered quotations last appeared on the Relevant Screen Page when no fewer
than three such offered quotations appeared.
9. Notice of any Withholding or Deduction
If the Corporation is, in respect of any payment, compelled to
withhold or deduct any amount for or on account of taxes, duties, assessments or
governmental charges as specifically contemplated under the Terms and
Conditions, the Corporation shall give notice thereof to the Agent as soon as it
becomes aware of the requirement to make such withholding or deduction and shall
give to the Agent such information as it shall require to enable it to comply
with such requirement.
10. Duties of the Agent in Connection with Early Redemption
(1) If the Corporation decides to redeem any outstanding Notes
(in whole or in part) for the time being outstanding prior to their Maturity
Date or the Interest Payment Date falling in the Redemption Month (as the case
may be) in accordance with the Terms and Conditions, the Corporation shall give
notice of such decision to the Agent not less than seven London Business Days
before the date on which the Corporation will give notice to the Noteholders in
accordance with the Terms and Conditions of such redemption in order to enable
the Agent to undertake its
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obligations herein and in the Terms and Conditions.
(2) If only some of the Notes of like tenor and of the same
Series are to be redeemed on such date, the Agent shall make the required
drawing in accordance with the Terms and Conditions but shall give the
Corporation reasonable notice of the time and place proposed for such drawing.
Where partial redemptions are to be effected when there are Definitive Notes
outstanding, the Issuing and Principal Paying Agent will select by lot the Notes
to be redeemed from the outstanding Notes in compliance with all applicable laws
and stock exchange requirements and deemed by the Agent to be appropriate and
fair; and where partial redemptions are to be effected when there are no
Definitive Notes outstanding, the rights of Noteholders will be governed by the
standard provisions of Euroclear and Cedel Bank. Notice of any partial
redemption and, when there are Definitive Notes outstanding, of the serial
numbers of the Notes so drawn, will be given by the Agent to the Noteholders in
accordance with the terms of the Notes and this Agreement.
(3) The Agent shall publish the notice on behalf of and at the
expense of the Corporation required in connection with any such redemption and
shall at the same time also publish a separate list of the serial numbers of any
Notes previously drawn and not presented for redemption. Such notice shall
specify the date fixed for redemption, the redemption amount, the manner in
which redemption will be effected and, in the case of a partial redemption, the
serial numbers of the Notes to be redeemed. Such notice will be published in
accordance with the Terms and Conditions. The Agent will also notify the other
Paying Agents of any date fixed for redemption of any Notes.
(4) Immediately prior to the date on which any notice of
redemption is to be given to the Noteholders, the Corporation shall deliver to
the Agent a certificate stating that the Corporation is entitled to effect such
redemption and setting forth in reasonable detail a statement of facts showing
that all conditions precedent to such redemption have occurred or been satisfied
and shall comply with all notice requirements provided for in the Terms and
Conditions.
(5) Each Paying Agent will keep a stock of notices (each a
"Put Notice") in the form set out in Schedule 8 and will make such notices
available on demand to holders of Notes, the Terms and Conditions of which
provide for redemption at the option of Noteholders. Upon receipt of any Note
deposited in the exercise of such option in accordance with the Terms and
Conditions, the Paying Agent with which such Note is deposited shall hold such
Note (together with any Coupons, if any, relating to it and deposited with it)
on behalf of the depositing Noteholder (but shall not, save as provided below,
release it) until the due date for redemption of the relevant Note consequent
upon the exercise of such option, when, subject as provided below, it shall
present such Note (and any such Coupons, if any) to itself for payment of the
amount due thereon together with any interest due on such date in accordance
with the Terms and Conditions and shall pay such moneys in accordance with the
directions of the Noteholder contained in the Put Notice. If, prior to such due
date for its redemption, such Note becomes immediately due and payable or if
upon due presentation payment of such redemption moneys is improperly withheld
or refused, the Paying Agent concerned shall post such Note (together with any
such Coupons, if any) by uninsured post to, and at the risk of, the relevant
Noteholder unless the Noteholder has otherwise requested and paid the costs of
such insurance to the relevant Paying Agent at the time of depositing the Notes
at such address as may have been given by the Noteholder in the Put Notice. At
the end of each period for the exercise of such option, each Paying Agent shall
promptly notify the Agent of the principal amount of the Notes in respect of
which such option has been exercised with it together with their serial numbers
and the Agent shall promptly notify such details to the Corporation.
11. Receipt and Publication of Notices; Receipt of
Certificates
(1) Upon the receipt by the Agent of a demand or notice from
any Noteholder in accordance with the Terms and Conditions the Agent shall
forward a copy thereof to the Corporation.
(2) On behalf of and at the request and expense of the
Corporation, the Agent shall cause to be published all notices required to be
given by the Corporation to the Noteholders in accordance with the Terms and
Conditions.
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(3) The Agent shall have no responsibility to obtain the
certificate of the Corporation delivered by the Corporation to the Agent
pursuant to Condition 9 if such a certificate is required to be issued, nor
shall the Agent have any responsibility to notify the Corporation that the Agent
has not obtained such a certificate from the Corporation if such a certificate
is required to be issued.
12. Cancellation of Notes, Receipts, Coupons and Talons
(1) All Notes which are redeemed, all Receipts or Coupons
which are paid and all Talons which are exchanged shall be delivered outside the
United States to the Agent, and shall be canceled by the Agent. In addition, all
Notes which are purchased by or on behalf of the Corporation or any of its
subsidiaries and are surrendered to the Agent for cancellation, together (in the
case of Notes in definitive form) with all unmatured Receipts, Coupons or Talons
(if any) attached thereto or surrendered therewith, shall be canceled by the
Agent.
(2) The Corporation shall have the right to request that the
Agent provide, without limitation, the following information:
(a) the aggregate principal amount of Notes which
have been redeemed and the aggregate amount paid in respect
thereof;
(b) the number of Notes canceled together (in the
case of Definitive Notes, if any) with details of all
unmatured Receipts, Coupons or Talons (if any) attached
thereto or delivered therewith;
(c) the aggregate amount paid in respect of interest
on the Notes;
(d) the total number by maturity date of Receipts,
Coupons and Talons so canceled;
and
(e) (in the case of Definitive Notes, if any) the
serial numbers of such Notes,
shall be given to the Corporation by the Agent as soon as reasonably practicable
and in any event within three months after the date of such repayment or, as the
case may be, payment or exchange.
(3) The Agent shall destroy all canceled Notes, Receipts,
Coupons and Talons.
(4) The Agent shall keep a full and complete record of all
Notes, Receipts, Coupons and Talons (other than serial numbers of Coupons,
except those which have been replaced pursuant to Condition 10) and of all
replacement Notes, Receipts, Coupons or Talons issued in substitution for
mutilated, defaced, destroyed, lost or stolen Notes, Receipts, Coupons or
Talons. The Agent shall at all reasonable times make such record available to
the Corporation and any persons authorized by it for inspection and for the
taking of copies thereof or extracts therefrom.
(5) All records and certificates made or given pursuant to
this Clause 12 and Clause 13 shall make a distinction between Notes, Receipts,
Coupons and Talons of each Series.
13. Issue of Replacement Notes, Receipts, Coupons and Talons
(1) The Corporation will cause a sufficient quantity of
additional forms of Notes, Receipts, Coupons and Talons to be available, upon
request to the Agent in Luxembourg (in such capacity, the "Replacement Agent")
at its specified office for the purpose of issuing replacement Notes, Receipts,
Coupons and Talons as provided below.
(2) The Replacement Agent will, subject to and in accordance
with the Terms and Conditions and the following provisions of this Clause 13,
authenticate and cause to be delivered any replacement Notes, Receipts, Coupons
and Talons
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which the Corporation may determine to issue in place of Notes, Receipts,
Coupons and Talons which have been lost, stolen, mutilated, defaced or
destroyed.
(3) In the case of a mutilated or defaced Note, the
Replacement Agent shall ensure that (unless otherwise covered by such indemnity
as the Corporation may reasonably require) any replacement Note will only have
attached to it Receipts, Coupons and Talons corresponding to those (if any)
attached to the mutilated or defaced Note which is presented for replacement.
(4) The Replacement Agent shall not issue any replacement
Note, Receipt, Coupon or Talon unless and until the applicant therefor shall
have:
(a) paid such reasonable costs and expenses as may be
incurred in connection therewith, including any tax or other
governmental charge that may be imposed in relation thereto;
(b) furnished it with such evidence and indemnity as
the Corporation may reasonably require; and
(c) in the case of any mutilated or defaced Note,
Receipt, Coupon or Talon, surrendered it to the Replacement
Agent.
(5) The Replacement Agent shall cancel any mutilated or
defaced Notes, Receipts, Coupons and Talons in respect of which replacement
Notes, Receipts, Coupons and Talons have been issued pursuant to this Clause 13
and shall furnish the Corporation with a certificate stating the serial numbers
of the Notes, Receipts, Coupons and Talons so canceled and, unless otherwise
instructed by the Corporation in writing, shall destroy such canceled Notes,
Receipts, Coupons and Talons and furnish the Corporation with a destruction
certificate stating the serial number of the Notes (in the case of Definitive
Notes) and the number by maturity date of Receipts, Coupons and Talons so
destroyed.
(6) The Replacement Agent shall, on issuing any replacement
Note, Receipt, Coupon or Talon, forthwith inform the Corporation, the Agent and
the other Paying Agents of the serial number of such replacement Note, Receipt,
Coupon or Talon issued and (if known) of the serial number of the Note, Receipt,
Coupon or Talon in place of which such replacement Note, Receipt, Coupon or
Talon has been issued. Whenever replacement Receipts, Coupons or Talons are
issued pursuant to the provisions of this Clause 13, the Replacement Agent shall
also notify the Agent and the other Paying Agents of the maturity dates of the
lost, stolen, mutilated, defaced or destroyed Receipts, Coupons or Talons and of
the replacement Receipts, Coupons or Talons issued.
(7) The Agent shall keep a full and complete record of all
replacement Notes, Receipts, Coupons and Talons issued and shall make such
record available at all reasonable times to the Corporation and any persons
authorized by it for inspection and for the taking of copies thereof or extracts
therefrom.
(8) Whenever any Note, Receipt, Coupon or Talon for which a
replacement Note, Receipt, Coupon or Talon has been issued and in respect of
which the serial number is known is presented to the Agent or any of the Paying
Agents for payment, the Agent or, as the case may be, the relevant Paying Agent
shall immediately send notice thereof to the Corporation and the other Paying
Agents and shall not make payment in respect thereto, until instructed by the
Corporation.
14. Copies of Documents Available for Inspection
The Agent and the Paying Agents shall hold available for
inspection copies of:
(i) the organizational documents of the Corporation;
(ii) the latest available audited consolidated
financial statements of NationsBank Corporation and its
consolidated subsidiaries beginning with such financial
statements for the fiscal years ended December 31, 1994,
December 31, 1995 and December 31, 1996;
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(iii) the Program Agreement and this Agreement;
(iv) the Offering Circular; and
(v) any future offering circulars, information
memoranda and supplements (except that a Pricing Supplement
relating to any unlisted Note will only be available for
inspection by a holder of such Note and such holder must
produce evidence satisfactory to the Paying Agent as to
ownership) to the Offering Circular and any other documents
incorporated therein by reference and in the case of a
syndicated issue of listed Notes, the syndication agreement
(or equivalent document).
For this purpose, the Corporation shall furnish the Agent and
the Paying Agents with sufficient copies of each of such documents.
15. Meetings of Noteholders
(1) The provisions of Schedule 7 hereto shall apply to
meetings of the Noteholders and shall have effect in the same manner as if set
out in this Agreement.
(2) Without prejudice to sub-clause (l), each of the Agent and
the Paying Agents on the request of any Noteholder shall issue voting
certificates and block voting instructions in accordance with Schedule 7 and
shall forthwith give notice to the Corporation in writing of any revocation or
amendment of a block voting instruction. Each of the Agent and the Paying Agents
will keep a full and complete record of all voting certificates and block voting
instructions issued by it and will, not less than 24 hours before the time
appointed for holding a meeting or adjourned meeting, deposit at such place as
the Agent shall designate or approve, full particulars of all voting
certificates and block voting instructions issued by it in respect of such
meeting or adjourned meeting.
16. Repayment by the Agent
Upon the Corporation being discharged from its obligation to
make payments in respect of any Notes pursuant to the relevant Terms and
Conditions, and provided that there is no outstanding, bona fide and proper
claim in respect of any such payments, the Agent shall forthwith on written
demand pay to the Corporation sums equivalent to any amounts paid to it by the
Corporation for the purposes of such payments.
17. Conditions of Appointment
(1) The Agent shall be entitled to deal with money paid to it
by the Corporation for the purpose of this Agreement in the same manner as other
money paid to a banker by its customers except:
(a) that it shall not exercise any right of set-off,
lien or similar claim in respect thereof;
(b) as provided in sub-clause (2) below; and
(c) that it shall not be liable to account to the
Corporation for any interest thereon.
(2) In acting hereunder and in connection with the Notes, the
Agent and the Paying Agents shall act solely as agents of the Corporation and
will not thereby assume any obligations towards or relationship of agency or
trust for or with any of the owners or holders of the Notes, Receipts, Coupons
or Talons.
(3) The Agent and the Paying Agents hereby undertake to the
Corporation to perform such obligations and duties, and shall be obliged to
perform such duties and only such duties as are herein, in the Terms and
Conditions and in the Procedures Memorandum specifically set forth and no
implied duties or obligations shall be read into this Agreement or the Notes
against the Agent and the Paying Agents, other than the duty to act honestly and
in good faith.
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(4) The Agent may consult with legal and other professional
advisers and the opinion of such advisers shall be full and complete protection
in respect of any action taken, omitted or suffered hereunder in good faith and
in accordance with the opinion of such advisers.
(5) Each of the Agent and the Paying Agents shall be protected
and shall incur no liability for or in respect of any action taken, omitted or
suffered in reliance upon any instruction, request or order from the Corporation
or any notice, resolution, direction, consent, certificate, affidavit,
statement, cable, telex or other paper or document which it reasonably believes
to be genuine and to have been delivered, signed or sent by the proper party or
parties or upon written instructions from the Corporation.
(6) Any of the Agent and the Paying Agents and their officers,
directors and employees may become the owner of, or acquire any interest in any
Notes, Receipts, Coupons or Talons with the same rights that it or he would have
if the Agent or the relevant Paying Agent, as the case may be, concerned were
not appointed hereunder, and may engage or be interested in any financial or
other transactions with the Corporation and may act on, or as depositary,
trustee or agent for, any committee or body of Noteholders or Couponholders or
in connection with any other obligations of the Corporation as freely as if the
Agent or the relevant Paying Agent, as the case may be, were not appointed
hereunder.
(7) The Corporation shall provide the Agent with a certified
copy of the list of persons authorized to execute documents and take action on
its behalf in connection with this Agreement and shall notify the Agent
immediately in writing if any of such persons ceases to be so authorized or if
any additional person becomes so authorized together, in the case of an
additional authorized person, with evidence satisfactory to the Agent that such
person has been so authorized, provided, however, that the Agent shall not incur
any liability for any losses, claims or damages resulting from the Corporation's
failure to provide such notification to the Agent.
18. Communication Between the Parties
A copy of all communications relating to the subject matter of
this Agreement between the Corporation and the Noteholders, Receiptholders or
Couponholders and any of the Paying Agents shall be sent to the Agent by the
relevant Paying Agent.
19. Changes in Agent and Paying Agents
(1) The Corporation agrees that, for so long as any Note is
outstanding, or until moneys for the payment of all amounts in respect of all
outstanding Notes have been made available to the Agent or have been returned to
the Corporation as provided herein:
(a) so long as any Notes are listed on any Stock
Exchange, there will at all times be a Paying Agent with a
specified office in such place as may be required by the rules
and regulations of the relevant Stock Exchange; and
(b) there will at all times be a Paying Agent with a
specified office in a city in continental Europe; and
(c) there will at all times be an Agent.
In addition, the Corporation shall appoint a Paying Agent
having a specified office in New York City in the circumstances described in the
final paragraph of Condition 5(b). Any variation, termination, appointment or
change shall only take effect (other than in the case of insolvency (as provided
in sub-clause (5)), when it shall be of immediate effect) after not less than 30
nor more than 45 days' prior notice thereof shall have been given to the
Noteholders in accordance with the Terms and Conditions.
(2) The Agent may (subject as provided in sub-clause (4)) at
any time resign as Agent by giving
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at least 90 days' written notice to the Corporation of such intention on its
part, specifying the date on which its desired resignation shall become
effective, provided that such date shall never be less than three months after
the receipt of such notice by the Corporation unless the Corporation agrees to
accept less notice.
(3) The Agent may (subject as provided in sub-clause (4)) be
removed at any time on at least 45 days' notice by the filing with it of an
instrument in writing signed on behalf of the Corporation specifying such
removal and the date when it shall become effective.
(4) Any resignation under sub-clause (2) or removal under
sub-clause (3) shall only take effect upon the appointment by the Corporation as
hereinafter provided, of a successor Agent and (other than in cases of
insolvency of the Agent) on the expiry of the notice to be given under Clause
21. The Corporation agrees with the Agent that if, by the day falling ten days
before the expiry of any notice under sub-clause (2), the Corporation has not
appointed a successor Agent, then the Agent shall be entitled, on behalf of the
Corporation, to appoint as a successor Agent in its place a reputable financial
institution of good standing as it may reasonably determine to be capable of
performing the duties of the Agent hereunder.
(5) In case at any time the Agent resigns, or is removed, or
becomes incapable of acting or is adjudged bankrupt or insolvent, or files a
voluntary petition in bankruptcy or makes an assignment for the benefit of its
creditors or consents to the appointment of an administrator, liquidator or
administrative or other receiver of all or a substantial part of its property,
or admits in writing its inability to pay or meet its debts as they mature or
suspends payment thereof, or if any order of any court is entered approving any
petition filed by or against it under the provisions of any applicable
bankruptcy or insolvency law or if a receiver of it or of all or a substantial
part of its property is appointed or any officer takes charge or control of it
or of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, a successor Agent, which shall be a reputable financial institution
of good standing, may be appointed by the Corporation by an instrument in
writing filed with the successor Agent. Upon the appointment as aforesaid of a
successor Agent and acceptance by the latter of such appointment and (other than
in case of insolvency of the Agent) upon expiry of the notice to be given under
Clause 21 the Agent so superseded shall cease to be the Agent hereunder.
(6) Subject to sub-clause (l):
(A) the Corporation may, after prior consultation
(other than in the case of insolvency of any Paying Agent)
with the Agent, terminate the appointment of any of the Paying
Agents at any time; and/or
(B) the Corporation may in respect of the Program or
the Corporation may in respect of any Series of Notes, if so
required by the relevant Stock Exchange or regulatory body,
appoint one or more further Paying Agents by giving to the
Agent, and to the relevant Paying Agent, at least 45 days'
notice in writing to that effect.
(7) Subject to sub-clause (l), all or any of the Paying Agents
may resign their respective appointments hereunder at any time by giving the
Corporation and the Agent at least 45 days' written notice to that effect.
(8) Upon its resignation or removal becoming effective the
Agent or the relevant Paying Agent:
(a) shall, in the case of the Agent, forthwith
transfer all moneys held by it hereunder and the records
referred to in Clause 12(4) to the successor Agent hereunder;
and
(b) shall be entitled to the payment by the
Corporation of its commissions, fees and expenses for the
services theretofore rendered hereunder in accordance with the
terms of Clause 25.
(9) Upon its appointment becoming effective, a successor Agent
and any new Paying Agent
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shall, without further act, deed or conveyance, become vested with all the
authority, rights, powers, trusts, immunities, duties and obligations of its
predecessor or, as the case may be, a Paying Agent with like effect as if
originally named as Agent or (as the case may be) a Paying Agent hereunder.
20. Merger and Consolidation
Any corporation into which the Agent or any Paying Agent may
be merged or converted, or any corporation with which the Agent or any of the
Paying Agents may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Agent or any of the Paying Agents shall
be a party, or any corporation to which the Agent or any of the Paying Agents
shall sell or otherwise transfer all or substantially all the assets of the
Agent or any Paying Agent shall, on the date when such merger, conversion,
consolidation or transfer becomes effective and to the extent permitted by any
applicable laws, become the successor Agent or, as the case may be, Paying Agent
under this Agreement without the execution or filing of any paper or any further
act on the part of the parties hereto, unless otherwise required by the
Corporation, and after the said effective date all references in this Agreement
to the Agent or, as the case may be, such Paying Agent shall be deemed to be
references to such corporation. Written notice of any such merger, conversion,
consolidation or transfer shall forthwith be given to the Corporation by the
relevant Agent or Paying Agent.
21. Notification of Changes to Paying Agents
Following receipt of notice of resignation from the Agent or
any Paying Agent and forthwith upon appointing a successor Agent or, as the case
may be, further or other Paying Agents or on giving notice to terminate the
appointment of any Agent or, as the case may be, Paying Agent, the Agent (on
behalf of and at the expense of the Corporation) shall give or cause to be given
not more than 60 days' nor less than 30 days' notice thereof to the Noteholders
in accordance with the Terms and Conditions.
22. Change of Specified Office
If the Agent or any Paying Agent determines to change its
specified office it shall give to the Corporation and (if applicable) the Agent
written notice of such determination giving the address of the new specified
office which shall be in the same city and stating the date on which such change
is to take effect, which shall not be less than 45 days thereafter. The Agent
(on behalf and at the expense of the Corporation) shall within 15 days of
receipt of such notice (unless the appointment of the Agent or the relevant
Paying Agent, as the case may be, is to terminate pursuant to Clause 19 on or
prior to the date of such change) give or cause to be given not more than 45
days' nor less than 30 days' notice thereof to the Noteholders in accordance
with the Terms and Conditions.
23. Notices
All notices hereunder shall be deemed to have been given when
deposited in the mail as first class mail, registered or certified, return
receipt requested, postage prepaid, addressed to any party hereto as follows:
Address
The Corporation: NationsBank Corporation
NationsBank Corporate Center
NC 1007-23-1
Charlotte, North Carolina 28255-0065
Attn: John E. Mack
Treasurer
Telecopy: (704)386-0270
with a copy to:
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NationsBank Corporation
NationsBank Corporate Center
Legal Department
NC 1007-20-1
Charlotte, North Carolina 28255-0065
Attn: Paul J. Polking, Esq.
General Counsel
Telecopy: (704)386-6453
The Agent: The Chase Manhattan Bank, London Branch
Woolgate House
Coleman Street
London EC2P 2HD
United Kingdom
Attn: Manager, Corporate Trust
Operations
Telecopy: 44-1202-347438
The Paying Agent: Chase Manhattan Bank Luxembourg S.A.
5 rue Plaetis
L-2338 Luxembourg - Grund
Attn: Manager, Corporate Trust Operations
Telecopy: 352-462685-380
or at any other address of which any of the foregoing shall have notified the
others in writing.
(a) if delivered in person to the relevant address
specified in the signature pages hereof and if so delivered,
shall be deemed to have been delivered at the time of receipt;
or
(b) if sent by facsimile or telex to the relevant
number specified on the signature pages hereof and, if so
sent, shall be deemed to have been delivered immediately after
transmission provided such transmission is confirmed by the
answerback of the recipient (in the case of telex) or when an
acknowledgement of receipt is received (in the case of
facsimile).
Where a communication is received after business hours it
shall be deemed to be received and become effective on the next business day.
Every communication shall be irrevocable save in respect of any manifest error
therein.
24. Taxes and Stamp Duties
The Corporation agrees to pay any and all stamp and other
documentary taxes or duties which may be payable in connection with the
execution, delivery, performance and enforcement of this Agreement.
25. Commissions, Fees and Expenses
(1) The Corporation undertakes to pay in respect of the
services of the Agent and the Paying Agents under this Agreement such fees and
expenses as may be agreed between them from time to time, the initial such fees
being set out in a letter of even date herewith from the Agent to, and
countersigned by, the Corporation.
(2) The Corporation will promptly pay on demand all
out-of-pocket expenses (including legal, advertising, facsimile, telex and
postage expenses) properly incurred by the Agent and the Paying Agents in
connection with their services hereunder, including without limitation the
expenses contemplated in Clause 24.
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<PAGE>
26. Indemnity
(1) The Corporation undertakes to indemnify and hold harmless
each of the Agent and the Paying Agents against all losses, liabilities, costs
(including, without limitation, legal fees and expenses), expenses, claims,
actions or demands which the Agent or any Paying Agent, as the case may be, may
reasonably incur or which may be made against the Agent or any Paying Agent, as
a result of or in connection with the appointment or the exercise of or
performance of the powers, discretions, authorities and duties of the Agent or
any Paying Agent under this Agreement except such as may result from its own
gross negligence, bad faith or failure to comply with its obligations hereunder
or that of its officers, employees or agents.
(2) Each of the Agent and the Paying Agents shall severally
indemnify and hold harmless the Corporation against any loss, liability, costs
(including, without limitation, legal fees and expenses), expense, claim, action
or demand which it may reasonably incur or which may be made against it as a
result of such Agent's or Paying Agent's own negligence, bad faith or material
failure to comply with its obligations under this Agreement or that of its
officers, employees or agents.
(3) If, under any applicable law and whether pursuant to a
judgment being made or registered or in the liquidation, insolvency or analogous
process of any party hereto or for any other reason, any payment under or in
connection with this Agreement is made or fails to be satisfied in a currency
(the "Other Currency") other than that in which the relevant payment is
expressed to be due (the "Required Currency") under this Agreement, then, to the
extent that the payment (when converted into the Required Currency at the rate
of exchange on the date of payment or, if it is not practicable for the payee to
purchase the Required Currency with the Other Currency on the date of payment,
at the rate of exchange as soon thereafter as it is practicable for it to do so
or, in the case of a liquidation, insolvency or analogous process, at the rate
of exchange on the latest date permitted by applicable law for the determination
of liabilities in such liquidation, insolvency or analogous process) actually
received by the payee falls short of the amount due under the terms of this
Agreement, the payor shall, as a separate and independent obligation, indemnify
and hold harmless the payee against the amount of such shortfall. For the
purpose of this Clause 26, "rate of exchange" means the rate at which the payee
is able on the relevant date to purchase the Required Currency with the Other
Currency and shall take into account any premium and other costs of exchange.
27. Reporting
(1) The Agent shall upon receipt of a written request therefor
from the Corporation and after the payment of any further remuneration agreed
between the Corporation and the Agent (on behalf of the Corporation and on the
basis of the information and documentation the Agent had in its possession) use
all reasonable efforts to submit such reports or information as may be required
from time to time by any applicable law, regulation or guideline promulgated by
(i) any relevant United States governmental regulatory authority in respect of
the issue and purchase of Notes or (ii) any other relevant governmental
regulatory authority in respect of the issue and purchase of Notes denominated
in the applicable currency of such governmental regulatory authority.
(2) The Agent will notify the MoF of such details relating to
Yen Notes and provide such other information about the Program to the MoF as may
be required.
(3) The Agent will notify the German Bundesbank at the end of
each month about the amounts, dates of issue and other terms of all
DM-denominated Notes issued during the month in question and provide such other
information about the Program to the German Bundesbank as may be required.
(4) The Agent will notify the Bank of England of such details
relating to Sterling Notes and provide such other information about the Program
to the Bank of England as may be required.
28. Governing Law
(1) This Agreement, the Notes, and any Receipts, Coupons or
Talons appertaining thereto shall
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<PAGE>
be governed by and construed in accordance with the laws of the State of New
York, United States of America, without regard to principles of conflicts of
laws.
(2) The Corporation and the Agent each hereby irrevocably
submits to the non-exclusive jurisdiction of any United States Federal court
sitting in New York City, the Borough of Manhattan over any suit, action or
proceeding arising out of or related to this Agreement, any Note, Receipt,
Coupon or Talon, as the case may be (together, the "Proceedings"). The
Corporation and the Agent each irrevocably waives, to the fullest extent
permitted by law, any objection which it may have to the laying of the venue of
the Proceedings brought in such a court and any claim that the Proceedings have
been brought in an inconvenient forum. The Corporation and the Agent each agrees
that final judgment in the Proceedings brought in such a court shall be
conclusive and binding upon the Corporation or the Agent, as the case may be,
and may be enforced in any court of the jurisdiction to which the Corporation or
the Agent is subject by a suit upon such judgment, provided that the service of
process is effected upon the Corporation and the Agent in the manner specified
in subsection (C) below or as otherwise permitted by law.
(3) As long as any of the Notes, Receipts, Coupons or Talons
remains outstanding, the Corporation shall at all times either maintain an
office or have an authorized agent in New York City upon whom process may be
served in the Proceedings. Service of process upon either it at its offices or
upon such agent with written notice of such service mailed or delivered to the
Corporation shall, to the fullest extent permitted by law, be deemed in every
respect effective service of process upon the Corporation in the Proceedings.
The Corporation hereby appoints CT Corporation System located at 1633 Broadway,
New York, New York 10019 as its agent for such purposes, and covenants and
agrees that service of process in the Proceedings may be made upon it at its
office or at the specified offices of such agent (or such other addresses or at
the offices of any other authorized agents which the Corporation may designate
by written notice to the Agent) and prior to any termination of such agencies
for any reason, it will so appoint a successor thereto as agent hereunder.
29. Amendments
Without the consent of the Noteholders, Receiptholders or
Couponholders, the Agent and the Corporation may agree to modifications of or
amendments to this Agreement, the Notes, the Receipts or the Coupons for any of
the following purposes:
(i) to evidence the succession of another corporation to
the Corporation and the assumption by any such
successor of the covenants of the Corporation in this
Agreement, the Notes, Receipts or Coupons;
(ii) to add to the covenants of the Corporation for the
benefit of the Noteholders, the Receiptholders or the
Couponholders, or to surrender any right or power
herein conferred upon the Corporation;
(iii) to relax or eliminate the restrictions on payment of
principal and interest in respect of the Notes,
Receipts or Coupons in the United States, provided
that such payment is permitted by United States tax
laws and regulations then in effect and provided that
no adverse tax consequences would result to the
Noteholders, the Receiptholders or the Couponholders;
(iv) to cure any ambiguity, to correct or supplement any
defective provision herein or any provision which may
be inconsistent with any other provision herein;
(v) to make any other provisions with respect to matters
or questions arising under the Notes, the Receipts,
the Coupons or this Agreement, provided such action
pursuant to this subclause (v) shall not adversely
affect the interests of the Noteholders, the
Receiptholders or the Couponholders; and
(vi) permit further issuances of Notes in accordance with
the terms of this Agreement and as
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<PAGE>
further provided hereof.
Any such modification or amendment shall be binding on the
Noteholders, the Receiptholders and the Couponholders and any such modification
or amendment shall be notified to the Noteholders, the Receiptholders or the
Couponholders in accordance with Condition 13 as soon as practicable thereafter.
30. Descriptive Headings
The descriptive headings in this Agreement are for convenience
of reference only and shall not define or limit the provisions hereof.
31. Counterparts
This Agreement may be executed in any number of counterparts,
all of which shall constitute one and the same instrument. Any party may enter
into this Agreement by signing such a counterpart.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their respective corporate names by their respective
officers thereunder duly authorized as of the date and year first above written.
NATIONSBANK CORPORATION
as Issuer
By /s/ John E. Mack
---------------------------------
Name: John E. Mack
Title: Senior Vice President
THE CHASE MANHATTAN BANK,
LONDON BRANCH
as Agent and
Principal Paying Agent
By /s/ Christopher Knowles
---------------------------------
Name: Christopher Knowles
Title: Second Vice President
CHASE MANHATTAN BANK LUXEMBOURG S.A.
as Paying Agent
By /s/ Christopher Knowles
---------------------------------
Name: Christopher Knowles
Title: Second Vice President
EXHIBIT 4
[FACE OF CERTIFICATE]
$2.50 CUMULATIVE CONVERTIBLE NATIONSBANK CORPORATION $2.50 CUMULATIVE
CONVERTIBLE PREFERRED STOCK, SERIES BB PREFERRED STOCK, SERIES BB
NUMBER SHARES
PBB
INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA
CUSIP 638585 80 2
SEE REVERSE FOR CERTAIN DEFINITIONS
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF $2.50 CUMULATIVE CONVERTIBLE PREFERRED
STOCK, SERIES BB OF
NationsBank Corporation transferable only on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid until countersigned
by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
SECRETARY [SEAL] CHIEF EXECUTIVE OFFICER
countersigned and registered:
Chasemellon Shareholder Services, L.L.C.
Transfer Agent and Registrar
by
Authorized Signature
<PAGE>
[REVERSE OF CERTIFICATE]
NATIONSBANK CORPORATION
NATIONSBANK CORPORATION'S AUTHORIZED CAPITAL STOCK INCLUDES COMMON STOCK
AND ADDITIONAL SERIES OF PREFERRED STOCK WHICH, WHEN ISSUED, MAY HAVE CERTAIN
PREFERENCES OR SPECIAL RIGHTS IN THE PAYMENT OF DIVIDENDS, IN VOTING, UPON
LIQUIDATION, OR OTHERWISE. THE CORPORATION WILL, UPON REQUEST, FURNISH TO ANY
SHAREHOLDER WITHOUT CHARGE INFORMATION IN WRITING AS TO EACH CLASS OR SERIES OF
SUCH COMMON AND PREFERRED STOCK AUTHORIZED AND OUTSTANDING AND A COPY OF THE
PORTIONS OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OR RESOLUTIONS
CONTAINING THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ALL
SHARES AND ANY CLASS OR SERIES THEREOF. ANY SUCH REQUEST IS TO BE ADDRESSED TO
THE TRANSFER AGENT NAMED ON THE FACE OF THIS CERTIFICATE.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED,
THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE
OF A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _______Custodian __________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minor
survivorship and not as tenants Act ______________________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- - -----------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
SHARES OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
ATTORNEY TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION
WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED
SIGNATURE
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE GUARANTEE:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO RULE 17Ad-15 UNDER
THE SECURITIES EXCHANGE ACT OF 1934.
BARNETT BANKS, INC.
TO
THE FIRST NATIONAL BANK OF CHICAGO
a national banking association, Trustee
INDENTURE
Dated as of November 27, 1996
8.06% Junior Subordinated Debentures due 2026
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
<S> <C> <C>
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.................................. 1
SECTION 101. Definitions................................................................ 1
Act ....................................................................... 2
Adjusted Treasury Rate.......................................................... 2
Affiliate....................................................................... 2
Authenticating Agent............................................................ 2
Board of Directors.............................................................. 2
Board Resolution................................................................ 3
Business Day.................................................................... 3
Capital Securities.............................................................. 3
Cedel ....................................................................... 3
Closing Date.................................................................... 3
Commission...................................................................... 3
Common Securities............................................................... 3
Company ....................................................................... 3
Company Request................................................................. 3
Company Order................................................................... 3
Comparable Treasury Issue....................................................... 3
Comparable Treasury Price....................................................... 3
Corporate Trust Office.......................................................... 4
Covenant Defeasance............................................................. 4
Declaration..................................................................... 4
Defaulted Interest.............................................................. 4
Depositary...................................................................... 4
DWAC ....................................................................... 4
Event of Default................................................................ 4
Exchange Act.................................................................... 4
Extension Period................................................................ 4
Euroclear....................................................................... 4
Federal Reserve................................................................. 4
Global Security................................................................. 4
Guarantee....................................................................... 4
Holder ....................................................................... 5
Indebtedness.................................................................... 5
Indenture....................................................................... 5
Initial Purchasers.............................................................. 5
Institutional Accredited Investor............................................... 5
Interest Payment Date........................................................... 5
Investment Company Event........................................................ 6
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<PAGE>
Page
Junior Subordinated Securities.................................................. 6
Legal Defeasance................................................................ 6
Maturity ....................................................................... 6
New Junior Subordinated Securities.............................................. 6
Officers' Certificate........................................................... 6
Opinion of Counsel.............................................................. 6
Outstanding..................................................................... 7
Paying Agent.................................................................... 7
Person ....................................................................... 7
Predecessor Security............................................................ 7
Private Placement Legend........................................................ 7
Property Trustee................................................................ 7
Qualified Institutional Buyer" or "QIB.......................................... 7
Quotation Agent................................................................. 7
Redemption Date................................................................. 7
Redemption Price................................................................ 8
Reference Treasury Dealer Quotations............................................ 8
Registration Rights Agreement................................................... 8
Regular Record Date............................................................. 8
Regulation S.................................................................... 8
Regulation S Global Security.................................................... 8
Regulatory Capital Event........................................................ 8
Remaining Life.................................................................. 8
Responsible Officer............................................................. 8
Restricted Global Security...................................................... 9
Restricted Period............................................................... 9
Restricted Security............................................................. 9
Rule 144A....................................................................... 9
Securities...................................................................... 9
Securities Act.................................................................. 9
Security Register............................................................... 9
Security Registrar.............................................................. 9
Special Event................................................................... 9
Special Record Date............................................................. 9
Stated Maturity"................................................................ 9
Subsidiary...................................................................... 9
Tax Event....................................................................... 9
Treasury Rate................................................................... 10
Trust ....................................................................... 10
Trustee ....................................................................... 10
Trust Indenture Act............................................................. 10
U.S. Government Obligations..................................................... 10
Vice President.................................................................. 10
-ii-
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SECTION 102. Compliance Certificates and Opinions....................................... 11
SECTION 103. Form of Documents Delivered to Trustee..................................... 11
SECTION 104. Acts of Holders; Record Dates.............................................. 11
SECTION 105. Notices, Etc. to Trustee and the Company................................... 12
SECTION 106. Notice to Holders; Waiver.................................................. 13
SECTION 107. Conflict With Trust Indenture Act.......................................... 13
SECTION 108. Effect of Headings and Table of Contents................................... 13
SECTION 109. Separability Clause........................................................ 13
SECTION 110. Benefits of Indenture...................................................... 14
SECTION 111. GOVERNING LAW.............................................................. 14
SECTION 112. Legal Holidays............................................................. 14
ARTICLE TWO
SECURITY FORMS......................... 14
ARTICLE THREE
THE SECURITIES......................... 15
SECTION 301. Title and Terms............................................................ 15
SECTION 302. Denominations.............................................................. 17
SECTION 303. Execution, Authentication, Delivery and Dating............................. 17
SECTION 304. Temporary Securities....................................................... 18
SECTION 305. Registration; Registration of Transfer and Exchange........................ 18
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities........................... 19
SECTION 307. Payment of Interest; Interest Rights Preserved............................. 20
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<PAGE>
Page
----
SECTION 308. Persons Deemed Owners...................................................... 21
SECTION 309. Cancellation............................................................... 21
SECTION 310. Computation of Interest.................................................... 22
SECTION 311. Right of Set-off........................................................... 22
SECTION 312. CUSIP Numbers.............................................................. 22
SECTION 313. Global Securities.......................................................... 22
SECTION 314. Restrictive Legend......................................................... 24
SECTION 315. Special Transfer Provisions................................................ 26
ARTICLE FOUR
SATISFACTION AND DISCHARGE; DEFEASANCE............. 29
SECTION 401. Satisfaction and Discharge of Indenture.................................... 29
SECTION 402. Legal Defeasance........................................................... 30
SECTION 403. Covenant Defeasance........................................................ 30
SECTION 404. Conditions to Legal Defeasance or Covenant Defeasance...................... 31
SECTION 405. Application of Trust Money................................................. 32
SECTION 406. Indemnity for U.S. Government Obligations.................................. 32
ARTICLE FIVE
REMEDIES............................ 32
SECTION 501. Events of Default.......................................................... 32
SECTION 502. Acceleration of Maturity; Rescission and Annulment......................... 33
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee............ 34
SECTION 504. Trustee may File Proofs of Claim........................................... 35
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<PAGE>
Page
----
SECTION 505. Trustee may Enforce Claims Without Possession of Securities................ 35
SECTION 506. Application of Money Collected............................................. 35
SECTION 507. Limitation on Suits........................................................ 36
SECTION 508. Unconditional Right of Holders to Receive Principal and
Interest; Capital Security Holders' Rights............................................... 36
SECTION 509. Restoration of Rights and Remedies......................................... 37
SECTION 510. Rights and Remedies Cumulative............................................. 37
SECTION 511. Delay or Omission not Waiver............................................... 37
SECTION 512. Control by Holders......................................................... 37
SECTION 513. Waiver of Past Defaults.................................................... 38
SECTION 514. Undertaking for Costs...................................................... 38
SECTION 515. Waiver of Stay or Extension Laws........................................... 39
ARTICLE SIX
TRUSTEE............................ 39
SECTION 601. Certain Duties and Responsibilities........................................ 39
SECTION 602. Notice of Defaults......................................................... 39
SECTION 603. Certain Rights of Trustee.................................................. 40
SECTION 604. Not Responsible for Recitals or Issuance of Securities..................... 41
SECTION 605. Trustee and Other Agents may Hold Securities............................... 41
SECTION 606. Money Held in Trust........................................................ 41
SECTION 607. Compensation; Reimbursement; and Indemnity................................. 41
SECTION 608. Disqualification; Conflicting Interests.................................... 42
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<PAGE>
Page
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SECTION 609. Corporate Trustee Required; Eligibility.................................... 42
SECTION 610. Resignation and Removal; Appointment of Successor.......................... 42
SECTION 611. Acceptance of Appointment by Successor..................................... 43
SECTION 612. Merger, Conversion, Consolidation or Succession to Business................ 44
SECTION 613. Preferential Collection of Claims Against Company.......................... 44
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY....... 44
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.................. 44
SECTION 702. Preservation of Information; Communications to Holders..................... 45
SECTION 703. Reports by Trustee......................................................... 45
SECTION 704. Reports by Company......................................................... 45
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE...... 46
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms....................... 46
SECTION 802. Successor Person Substituted............................................... 46
ARTICLE NINE
SUPPLEMENTAL INDENTURES.................... 47
SECTION 901. Supplemental Indentures Without Consent of Holders......................... 47
SECTION 902. Supplemental Indentures With Consent of Holders............................ 48
SECTION 903. Execution of Supplemental Indentures....................................... 48
SECTION 904. Effect of Supplemental Indentures.......................................... 49
SECTION 905. Conformity With Trust Indenture Act........................................ 49
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SECTION 906. Reference in Securities to Supplemental Indentures......................... 49
ARTICLE TEN
COVENANTS........................... 49
SECTION 1001. Payment of Principal and Interest......................................... 49
SECTION 1002. Maintenance of Office or Agency........................................... 49
SECTION 1003. Money for Security Payments to be Held in Trust........................... 50
SECTION 1004. Statements by Officers as to Default...................................... 51
SECTION 1005. Existence................................................................. 51
SECTION 1006. Maintenance of Properties................................................. 51
SECTION 1007. Payment of Taxes and Other Claims......................................... 52
SECTION 1008. Waiver of Certain Covenants............................................... 52
SECTION 1009. Payment of the Trust's Costs and Expenses................................. 52
ARTICLE ELEVEN
SUBORDINATION OF SECURITIES.................. 53
SECTION 1101. Securities Subordinate to Indebtedness.................................... 53
SECTION 1102. Default on Indebtedness................................................... 53
SECTION 1103. Prior Payment of Indebtedness Upon Acceleration of Securities............. 54
SECTION 1104. Liquidation; Dissolution; Bankruptcy...................................... 54
SECTION 1105. Subrogation............................................................... 56
SECTION 1106. Trustee to Effectuate Subordination....................................... 57
SECTION 1107. Notice by the Company..................................................... 57
SECTION 1108. Rights of the Trustee; Holders of Indebtedness............................ 58
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SECTION 1109. Subordination may not be Impaired......................................... 58
ARTICLE TWELVE
REDEMPTION OF SECURITIES.................... 59
SECTION 1201. Optional Redemption; Conditions to Optional Redemption.................... 59
SECTION 1202. Applicability of Article.................................................. 60
SECTION 1203. Election to Redeem; Notice to Trustee..................................... 60
SECTION 1204. Selection by Trustee of Securities to be Redeemed......................... 60
SECTION 1205. Notice of Redemption...................................................... 60
SECTION 1206. Deposit of Redemption Price............................................... 61
SECTION 1207. Securities Payable on Redemption Date..................................... 61
</TABLE>
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<PAGE>
Sections 310 through
318 of the Trust Indenture Act of 1939:
Trust Indenture Indenture
Act Section Section
- - ----------- -------
Section 310(a)(1) ...........................................................609
(a)(2) .............................................................609
(a)(3) ..................................................Not Applicable
(a)(4) ..................................................Not Applicable
(b) ...........................................................608, 610
Section 311(a) ..............................................................613
(b) ................................................................613
Section 312(a) ..............................................................701
(b) .............................................................702(b)
(c) .............................................................702(c)
Section 313(a) ...........................................................703(a)
(a)(4) .......................................................101, 1004
(b) .............................................................703(a)
(c) .............................................................703(a)
(d) .............................................................703(b)
Section 314(a) ..............................................................704
(b) .....................................................Not Applicable
(c)(1) .............................................................102
(c)(2) .............................................................102
(c)(3) ..................................................Not Applicable
(d) .....................................................Not Applicable
(e) ................................................................102
Section 315(a) ..............................................................601
(b) ................................................................602
(c) ................................................................601
(d) ................................................................601
(e) ................................................................514
Section 316(a) ..............................................................101
(a)(1)(A) ..........................................................502
(a)(1)(B) ..........................................................513
(a)(2) ..................................................Not Applicable
(b) ................................................................508
(c) .............................................................104(c)
Section 317(a)(1) ...........................................................503
(a)(2) .............................................................504
(b) ...............................................................1003
Section 318(a) ..............................................................107
<PAGE>
This INDENTURE is dated as of November 27, 1996, between
BARNETT BANKS, INC., a corporation duly organized and existing under the laws of
the State of Florida (herein called the "Company"), having its principal office
at 50 North Laura Street, Jacksonville, Florida 32202, and THE FIRST NATIONAL
BANK OF CHICAGO, a national banking association, as Trustee (herein called the
"Trustee").
RECITALS
WHEREAS, for its lawful corporate purposes, the Company has
duly authorized the execution and delivery of this Indenture to provide for the
issuance of its 8.06% Junior Subordinated Debentures due 2026 (the "Junior
Subordinated Securities") and its 8.06% New Junior Subordinated Debentures due
2026 (the "New Junior Subordinated Securities", and together with the Junior
Subordinated Securities, the "Securities") to be issued
in exchange for the Junior Subordinated Securities.
WHEREAS, Barnett Capital I (the "Trust") has offered to the
public $300,000,000 aggregate liquidation amount of its 8.06% Capital Securities
(the "Capital Securities") representing undivided beneficial interests in the
assets of the Trust and proposes to invest the proceeds from such offering and
the proceeds from the issuance of its Common Securities in $309,279,000
aggregate principal amount of the Securities.
WHEREAS, to provide the terms and conditions upon which the
Securities are to be authenticated, issued and delivered, the Company has duly
authorized the execution of this Indenture.
WHEREAS, all things necessary to make this Indenture a valid
agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the singular
and the masculine as well as the feminine;
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(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles;
(4) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(5) a reference to any Person shall include its successor and
assigns;
(6) a reference to any agreement or instrument shall mean such
agreement or instrument as supplemented, modified, amended or amended and
restated and in effect from time to time;
(7) a reference to any statute, law, rule or regulation, shall
include any amendments thereto applicable to the relevant Person, and any
successor statute, law, rule or regulation; and
(8) a reference to any particular rating category shall be
deemed to include any corresponding successor category, or any corresponding
rating category issued by a successor or subsequent rating agency.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Adjusted Treasury Rate" means, with respect to any Redemption
Date, the Treasury Rate plus (i) 1.25% if such Redemption Date occurs on or
before December 1, 1997 or (ii) 0.50% if such Redemption Date occurs after
December 1, 1997.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the
Trustee to act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board as the context
requires.
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"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day other than a Saturday or Sunday
or a day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or a day on which the
Corporate Trust Office of the Trustee, or the principal office of the Property
Trustee, under the Declaration, is closed for business.
"Capital Securities" has the meaning specified in the Recitals
to this instrument.
"Cedel" means Cedel, S.A.
"Closing Date" means November 27, 1996.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this instrument such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Securities" means the common securities issued by the
Trust.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
Vice Chairman of the Board, a President or a Vice President, and by its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Comparable Treasury Issue" means with respect to any
Redemption Date the United States Treasury security selected by the Quotation
Agent as having a maturity comparable to the Remaining Life that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the Remaining Life. If no United States treasury security has a
maturity which is within a period from three months before to three months after
December 1, 2006, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Treasury Rate
shall be interpolated or extrapolated on a straight-line basis, rounding to the
nearest month using such securities.
"Comparable Treasury Price" means (A) the average of five
Reference Treasury Dealer Quotations for such Redemption Date, after excluding
the highest and lowest such
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4
Reference Treasury Dealer Quotations, or (B) if the Indenture Trustee obtains
fewer than three such Reference Treasury Dealer Quotations, the average of all
such Quotations.
"Corporate Trust Office" means the principal office of the
Trustee in the City of New York, at which at any particular time its corporate
trust business shall be administered and which at the date of this Indenture is
located at 153 West 51st Street, New York, New York 10019.
"Covenant Defeasance" has the meaning specified in Section
403.
"Declaration" means the Amended and Restated Declaration of
Trust among the Company, as Sponsor and the Trustee, as the initial Property
Trustee, First Chicago Delaware Inc., a Delaware corporation, as the initial
Delaware Trustee, and Paris P. Thermenos, Charles W. Newman and Patrick J.
McCann, as the initial Regular Trustees, dated as of November 27, 1996.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to Securities issuable in
whole or in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities.
"DWAC" means Deposit and Withdrawal At Custodian Service.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor legislation.
"Extension Period" has the meaning specified in Section 301.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Federal Reserve" means the Board of Governors of the Federal
Reserve System.
"Global Security" means a Security that evidences all or part
of the Securities and is authenticated and delivered to, and registered in the
name of, the Depositary for such Securities or a nominee thereof.
"Guarantee" means the Guarantee Agreement, dated as of
November 27, 1996, made by the Company in favor of The First National Bank of
Chicago, as trustee thereunder for the benefit of the Holders (as defined
therein) of the Capital Securities and the holder of the Common Securities.
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"Holder" means a Person in whose name a Security is registered
in the Security Register.
"Indebtedness" means, with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business), (v) every capital lease obligation of such Person,
(vi) every obligation of such person for claims (as defined in Section 101(4) of
the United States Bankruptcy Code of 1978, as amended) in respect of derivative
products such as interest and foreign exchange rate contracts, commodity
contracts and similar arrangements and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another person and all dividends of
another person the payment of which, in either case, such person has guaranteed
or is responsible or liable, directly or indirectly, as obligor or otherwise;
PROVIDED that "Indebtedness" shall not include (i) any obligations which, by
their terms, are expressly stated to rank PARI PASSU in right of payment with,
or to not be superior in right of payment to, the Securities, (ii) any
Indebtedness of the Company which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Company, (iii) any Indebtedness of the
Company to any of its subsidiaries, (iv) Indebtedness to any employee of the
Company or (v) any indebtedness in respect of debt securities issued to any
trust, or a trustee of such trust, partnership or other entity affiliated with
the Company that is a financing entity of the Company in connection with the
issuance of such financing entity or securities that are similar to the Capital
Securities.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchasers" means Morgan Stanley & Co. Incorporated,
Lehman Brothers Inc., Merrill Lynch & Co. and Salomon Brothers Inc.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as the term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"Interest Payment Date", when used with respect to any
installment of interest on a Security, means the date specified in such Security
as the fixed date on which an installment of interest with respect to the
Securities is due and payable.
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"Investment Company Event" means the receipt by the Trust of
an Opinion of Counsel having a recognized national securities practice to the
effect that, as a result of the occurrence of a change in law or regulation or a
change in interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority (a "Change in 1940 Act
Law"), the Trust is or will be considered an "investment company" that is
required to be registered under the Investment Company Act of 1940 as amended,
which Change in 1940 Act Law becomes effective on or after the date of original
issuance of the Securities.
"Junior Subordinated Securities" has the meaning specified in
the Recitals to this instrument.
"Legal Defeasance" has the meaning specified in Section 402.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security becomes due and payable as therein
or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"New Junior Subordinated Securities" has the meaning specified
in the Recitals to this instrument.
"Officers' Certificate" means a certificate signed on behalf
of the Company by the Chairman of the Board, a Vice Chairman of the Board, the
President or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company, and delivered to the
Trustee. One of the officers signing an Officers' Certificate given pursuant to
Section 1004 shall be the principal executive, financial or accounting officer
of the Company. Any Officers' Certificate delivered with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that each officer signing the Officers'
Certificate on behalf of the Company has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer on behalf of the Company
in rendering the Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company (and who may be an employee of the Company), and
who shall be
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7
reasonably acceptable to the Trustee. An opinion of counsel may rely on
certificates as to matters of fact.
"Outstanding", when used with respect to Securities, means, as
of the date of determination, all Securities authenticated and delivered under
this Indenture, except: (i) Securities cancelled by the Trustee or delivered to
the Trustee for cancellation; (ii) Securities for whose payment or redemption
money in the necessary amount has been deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the Holder of
such Securities; PROVIDED that, if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made; and (iii) Securities which
have been paid pursuant to Section 306, or in exchange or for in lieu of which
other Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there shall have
been presented to the Trustee proof satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company.
"Paying Agent" means any Person authorized by the Company to
pay the principal of or interest on any Securities on behalf of the Company.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
security authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Private Placement Legend" as defined in Section 314 of this
Indenture.
"Property Trustee" has the meaning set forth in the
Declaration.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"Quotation Agent" means (i) Morgan Stanley & Co. Incorporated
and its successors; PROVIDED, HOWEVER, that if the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer;
and (ii) any other Primary Treasury Dealer selected by the Indenture Trustee
after consultation with the Company.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
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"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Indenture Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Indenture Trustee by such Reference
Treasury Dealer at 5:00 p.m. New York City time, on the third business day
preceding such Redemption Date.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the date hereof between the Company and the Initial Purchasers
for the benefit of themselves and the Holders (as defined therein) of the
Capital Securities as the same may be amended from time to time in accordance
with the terms thereof.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the 15th day of the month prior to the relevant Interest
Payment Date.
"Regulation S" means Regulation S under the Securities Act and
any successor regulation thereto.
"Regulation S Global Security" means any Global Security or
Securities evidencing Securities that are to be traded pursuant to Regulation S.
"Regulatory Capital Event" means that the Company shall have
received an opinion of independent bank regulatory counsel experienced in such
matters to the effect that, as a result of (a) any amendment to or change
(including any announced prospective change) in the laws (or any regulations
thereunder) of the United States or any rules, guidelines or policies of the
Federal Reserve or (b) any official administrative pronouncement or judicial
decision for interpreting or applying such laws or regulations which amendment
or change is effective or such pronouncement or decision is announced on or
after the date of original issuance of the Capital Securities, the Capital
Securities do not constitute, or within 90 days of the date thereof, will not
constitute Tier I capital (or its then equivalent); PROVIDED, HOWEVER, that the
distribution of the Securities in connection with the liquidation of the Trust
by the Company shall not in and of itself constitute a Regulatory Capital Event
unless such liquidation shall have occurred in connection with a Tax Event or an
Investment Company Event.
"Remaining Life" has the meaning specified in Section 1201.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any Vice President, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, any
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed
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9
by any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Global Security" means any Global Security or
Securities evidencing Securities that are to be traded pursuant to Rule 144A.
"Restricted Period" shall have the meaning specified in
Section 315.
"Restricted Security" has the meaning assigned to such term in
Rule 144(a)(3) of the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" has the meaning specified in the Recitals to this
instrument.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Special Event" means either an Investment Company Event, a
Regulatory Capital Event or a Tax Event.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or
any installment of interest thereon, means the date specified in such Security
as the date on which the principal, together with any accrued and unpaid
interest, of such Security or such installment of interest is due and payable.
"Subsidiary" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
"Tax Event" means the receipt by the Trust of an Opinion of
Counsel, rendered by a law firm having a recognized national tax practice, to
the effect that, as a result of any amendment to, change in or announced
proposed change in the laws (or any regulations thereunder) of the United States
or any political subdivision or taxing authority thereof or therein, or as a
result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
adopted or which pronouncement or decision is announced on or after the date of
original issuance of the
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Capital Securities under the Declaration, there is more than an insubstantial
risk that (i) the Trust is, or will be within 90 days of the date of such
opinion, subject to United States federal income tax with respect to income
received or accrued on the Securities, (ii) interest payable by the Company on
the Securities is not, or within 90 days of the date of such opinion, will not
be, deductible by the Company, in whole or in part, for United States federal
income tax purposes, or (iii) the Trust is, or will be within 90 days of the
date of such opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
"Treasury Rate" means (i) the yield, under the heading which
represents the average for the immediately prior week, appearing in the most
recently published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities", for the
maturity corresponding to the Remaining Life (if no maturity is within three
months before or after the Remaining Life, yields for the two published
maturities most closely corresponding to the Remaining Life shall be determined
and the Treasury Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding to the nearest month) or (ii) if such release
(or any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date. The Treasury Rate shall be calculated on the third
business day preceding the Redemption Date.
"Trust" means Barnett Capital I, a statutory business trust
declared and established pursuant to the Delaware Business Trust Act by the
Declaration.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; PROVIDED,
HOWEVER, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"U.S. Government Obligations" has the meaning specified in
Section 404.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
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SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be given by an officer of the Company,
or an Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirement set forth in
this Indenture.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or given an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee at the address specified in Section 105 and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture
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12
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted to be given or taken by Holders. If not set
by the Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 701) prior to such first solicitation or vote, as the case
may be.
With regard to any record date, only the Holders on such date
(or their duly designated proxies) shall be entitled to give or take, or vote
on, the relevant action.
(d) The ownership of Securities shall be proved by the
Security Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
SECTION 105. Notices, Etc. to Trustee and the Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with:
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office, Attention:
Corporate Trust Trustee Administration; or
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(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the first
paragraph of this instrument or at any other address previously furnished in
writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict With Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the provision of the Trust Indenture Act
shall control. If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as to modified or so
be excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
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SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the holders of Indebtedness, the holders of Capital
Securities (to the extent provided herein) and the Holders of Securities, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 111. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES THEREOF. THIS INDENTURE IS SUBJECT TO THE
PROVISIONS OF THE TRUST INDENTURE ACT THAT ARE REQUIRED TO BE PART OF THIS
INDENTURE AND SHALL, TO THE EXTENT APPLICABLE, BE GOVERNED BY SUCH PROVISIONS.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal of the Securities need not be made on such
date, but may be made on the next succeeding Business Day (except that, if such
Business Day is in the next succeeding calendar year, such Interest Payment
Date, Redemption Date or Stated Maturity, as the case may be, shall be the
immediately preceding Business Day) with the same force and effect as if made on
the Interest Payment Date or Redemption Date, or at the Stated Maturity,
PROVIDED that no interest shall accrue for the period from and after such
Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
ARTICLE TWO
SECURITY FORMS
The Junior Subordinated Securities in definitive form and the
New Junior Subordinated Securities in definitive form shall be in the form
attached hereto as Exhibit A; PROVIDED, that the New Junior Subordinated
Securities shall not contain any of the provisions following the Trustee's
authentication.
If the Securities are distributed to the holders of Capital
Securities and Common Securities, the record holder (including any Depositary)
of any Capital Securities or Common Securities shall be issued Securities in
definitive, fully registered form without interest coupons, substantially in the
form of Exhibit A hereto, with the legends in substantially the form of the
legends existing on the security representing the Capital Securities or Common
Securities to be exchanged (with such changes thereto as the officers
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15
executing such Securities determine to be necessary or appropriate, as evidenced
by their execution of the Securities) and such other legends as may be
applicable thereto (including any legend required by Section 313 or Section 314
hereof), duly executed by the Company and authenticated by the Trustee or the
authenticating agent as provided herein, which Securities, if to be held in
global form by any Depositary, may be deposited on behalf of the holders of the
Securities represented thereby with the Trustee, as custodian for the
Depositary, and registered in the name of a nominee of the Depositary.
Any Global Security shall represent such of the outstanding
Securities as shall be specified therein and shall provide that it shall
represent the aggregate amount of outstanding Securities from time to time
endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be increased or reduced to reflect
transfers or exchanges permitted hereby. Any endorsement of a Global Security to
reflect the amount of any increase or decrease in the amount of outstanding
Securities represented thereby shall be made by the Trustee or the Custodian, at
the direction of the Trustee, in such manner and upon instructions given by the
holder of such Securities in accordance with the Indenture. Payment of principal
of and interest and premium, if any, on any Global Security shall be made to the
holder of such Global Security.
The Securities shall have such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these or other methods, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $309,279,000
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 906 or 1208.
The Securities' Maturity shall be December 1, 2026.
The Securities shall bear interest at the rate of 8.06% per
annum, from November 27, 1996 or from the most recent Interest Payment Date to
which interest has been
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16
paid or duly provided for, as the case may be, payable semi-annually (subject to
deferral as set forth herein), in arrears, on June 1 and December 1 of each
year, commencing June 1, 1997, until the principal thereof is paid or made
available for payment. Interest will compound semi-annually and will accrue at
the rate of 8.06% per annum on any interest installment in arrears for more than
one semi-annual period or during an extension of an interest payment period as
set forth below in this Section 301. In the event that any date on which
interest is payable on the Securities is not a Business Day, then a payment of
the interest payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay).
The Company shall have the right, at any time during the term
of the Securities, from time to time, to defer payment of interest on such
Security for up to 10 consecutive semi-annual periods (an "Extension Period")
PROVIDED that no Extension Period may extend past the Maturity of the Security.
There may be multiple Extension Periods of varying lengths during the term of
the Securities. At the end of each Extension Period, if any, the Company shall
pay all interest then accrued and unpaid, together with interest thereon,
compounded semi-annually at the rate specified on this Security to the extent
permitted by applicable law. During any such Extension Period, the Company may
not, and may not permit any Subsidiary of the Company to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or (ii)
make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank PARI PASSU
with or junior in interest to the Securities or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any Subsidiary
of the Company if such guarantee ranks PARI PASSU or junior in interest to the
Securities (other than (a) dividends or distributions in common stock of the
Company, (b) payments under the Guarantee, (c) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, and (d) purchases of common
stock related to the issuance of common stock or rights under any of the
Company's benefit plans). Prior to the termination of any such Extension Period,
the Company may further extend the interest payment period, PROVIDED that no
Extension Period may exceed 10 consecutive semi-annual periods or extend beyond
the Stated Maturity of the Securities. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period subject to the above
requirements. No interest shall be due and payable during an Extension Period,
except at the end thereof. The Company shall give the Property Trustee, the
Regular Trustees and the Debenture Trustee notice of its election of such
Extension Period at least one Business Day prior to the record date for the
related interest payment.
The Trustee shall promptly give notice of the Company's
selection of such Extension Period to the Holders of the Capital Securities.
The principal of and interest on the Securities shall be
payable at the office or agency of the Paying Agent in the United States
maintained for such purpose and at any other office or agency maintained by the
Company for such purpose in such coin or currency of the
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17
United States of America as at the time of payment is legal tender for payment
of public and private debts; PROVIDED, HOWEVER, that at the option of the
Company payment of interest may be made (i) by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register or (ii) by wire transfer in immediately available funds at such place
and to such account as may be designated by the Person entitled thereto as
specified in the Security Register.
The Securities shall be subordinated in right of payment to
Indebtedness as provided in Article Eleven.
The Securities shall be redeemable as provided in Article
Twelve.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form,
without coupons, and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman of the Board, its Vice Chairman of the Board, a President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein executed by the Trustee by manual signature, and such certificate upon
any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
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18
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
1002, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 305. Registration; Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby appointed "Security Registrar" for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at
an office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
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19
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Sections 304, 906 or 1208 not involving any transfer.
If the Securities are to be redeemed in part, the Company
shall not be required (A) to issue, register the transfer of or exchange any
Securities during a period beginning at the opening of business 15 days before
the day of the mailing of a notice of redemption of any such Securities selected
for redemption under Section 1204 and ending at the close of business on the day
of such mailing, or (B) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
So long as the Securities are eligible for book-entry
settlement with the Depositary, or unless otherwise required by law, all
Securities to be traded on the PORTAL Market shall be represented by the
Restricted Global Security registered in the name of the Depositary or the
nominee of the Depositary.
The transfer and exchange of beneficial interests in any
Global Security, which does not involve the issuance of a definitive Security or
the transfer of interests to another Global Security, shall be effected through
the Depositary (but not the Trustee or the Custodian) in accordance with this
Indenture (including the restrictions on transfer set forth herein) and the
procedures of the Depositary therefor. Neither the Trustee nor the Custodian (in
such respective capacities) will have any responsibility for the transfer and
exchange of beneficial interests in such Global Security that does not involve
the issuance of a definitive Security or the transfer of interests to another
Global Security.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as nay be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall
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20
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the
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21
payment of such Defaulted Interest which shall be not more than 15 days and not
less than 10 days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at his address as it appears
in the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted Interest shall be
paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and if so listed, upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee. Subject to the
foregoing provisions of this Section, each Security delivered under this
Indenture upon registration of transfer of or in exchange for or in lieu of any
other Security shall carry the rights to interest accrued and unpaid, and to
accrue which, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
shall treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of and (subject
to Section 307) interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities cancelled as provided in this
Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.
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22
SECTION 310. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months. The amount of interest payable for any
period shorter than a full semi-annual period for which interest is computed
will be computed on the basis of actual number of days elapsed in such 180-day
semi-annual period.
SECTION 311. Right of Set-off.
Notwithstanding anything to the contrary in the Indenture, the
Company shall have the right to set-off any payment it is otherwise required to
make thereunder to the extent the Company has theretofore made, or is
concurrently on the date of such payment making, a related payment under the
Guarantee.
SECTION 312. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; PROVIDED that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
SECTION 313. Global Securities.
If the Securities are distributed to the holders of Capital
Securities, Securities distributed in respect of Capital Securities that are
held in global form by a Depositary will initially be issued as a Global
Security, unless such transfer cannot be effected through book-entry settlement.
If the Company shall establish that the Securities are to be issued in the form
of one or more Global Securities, then the Company shall execute and the Trustee
shall, in accordance with Section 303 and the Company Order, authenticate and
deliver one or more Global Securities that (i) shall represent and shall be
denominated in an amount equal to the aggregate principal amount of all of the
Securities to be issued in the form of Global Securities and not yet cancelled,
(ii) shall be registered in the name of the Depositary for such Global Security
or Securities or the nominee of such Depositary, and (iii) shall be delivered by
the Trustee to such Depositary or pursuant to such Depositary's instructions.
Global Securities shall bear a legend substantially to the following effect:
"This Security is a Global Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depositary
or a nominee of a Depositary. Notwithstanding the provisions of Section 305,
unless and until it is exchanged in whole or in part for Securities in
definitive registered form, a Global Security representing all or a part of the
Securities may not be transferred in the manner provided in Section 305 except
as a whole by the Depositary to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such
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23
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Every Security delivered upon registration or transfer of,
or in exchange for, or in lieu of, this Global Security shall be a Global
Security subject to the foregoing, except in the limited circumstances described
above. Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Company or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is to be made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein."
Definitive Securities issued in exchange for all or a part of
a Global Security pursuant to this Section 313 shall be registered in such names
and in such authorized denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Trustee. Upon execution and authentication, the Trustee shall deliver such
definitive Securities to the persons in whose names such definitive Securities
are so registered.
At such time as all interests in Global Securities have been
redeemed, repurchased or canceled, such Global Securities shall be, upon receipt
thereof, canceled by the Trustee in accordance with standing procedures and
instructions existing between the Depositary and the Custodian. At any time
prior to such cancellation, if any interest in Global Securities is exchanged
for definitive Securities, redeemed, canceled or transferred to a transferee who
receives definitive Securities therefor or any definitive Security is exchanged
or transferred for part of Global Securities, the principal amount of such
Global Securities shall, in accordance with the standing procedures and
instructions existing between the Depositary and the Custodian, be reduced or
increased, as the case may be, and an endorsement shall be made on such Global
Securities by the Trustee or the Custodian, at the direction of the Trustee, to
reflect such reduction or increase.
The Company and the Trustee may for all purposes, including
the making of payments due on the Securities, deal with the Depositary as the
authorized representative of the Holders for the purposes of exercising the
rights of Holders hereunder. The rights of the owner of any beneficial interest
in a Global Security shall be limited to those established by law and agreements
between such owners and depository participants or Euroclear and Cedel;
PROVIDED, that no such agreement shall give any rights to any person against the
Company or the Trustee without the written consent of the parties so affected.
Multiple requests and directions from and votes of the Depositary as holder of
Securities in global form with respect to any particular matter shall not be
deemed inconsistent to the extent they do not represent an amount of Securities
in excess of those held in the name of the Depositary or its nominee.
If at any time the Depositary for any Securities represented
by one or more Global Securities notifies the Company that it is unwilling or
unable to continue as Depositary for such Securities or if at any time the
Depositary for such Securities shall no
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24
longer be eligible under this Section 313, the Company shall appoint a successor
Depositary with respect to such Securities. If a successor Depositary for such
Securities is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Company's
election that such Securities be represented by one or more Global Securities
shall no longer be effective and the Company shall execute, and the Trustee,
upon receipt of a Company Order for the authentication and delivery of
definitive Securities, will authenticate and deliver Securities in definitive
registered form, in any authorized denominations, in an aggregate principal
amount equal to the principal amount of the Global Security or Securities
representing such Securities in exchange for such Global Security or Securities.
The Company may at any time and in its sole discretion
determine that the Securities issued in the form of one or more Global
Securities shall no longer be represented by a Global Security or Securities. In
such event the Company shall execute, and the Trustee, upon receipt of a Company
Order or an Officers' Certificate for the authentication and delivery of
definitive Securities, shall authenticate and deliver, Securities in definitive
registered form, in any authorized denominations, in an aggregate principal
amount equal to the principal amount of the Global Security or Securities
representing such Securities, in exchange for such Global Security or
Securities.
Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in Section 314(a)), Global Securities may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
Interests of beneficial owners in Global Security may be
transferred or exchanged for definitive Securities and definitive Securities may
be transferred or exchange for Global Securities in accordance with rules of the
Depositary and the provisions of Section 315.
Any Security in global form may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Indenture as may be required by the
Custodian, the Depositary or by the National Association of Securities Dealers,
Inc. in order for the Securities to be tradeable on the PORTAL Market or as may
be required for the Securities to be tradeable on any other market developed for
trading of securities pursuant to Rule 144A or required to comply with any
applicable law or any regulation thereunder or with Regulation S or with the
rules and regulations of any securities exchange upon which the Securities may
be listed or traded or to conform with any usage with respect thereto, or to
indicate any special limitations or restrictions to which any particular
Securities are subject.
SECTION 314. Restrictive Legend.
(a) Each Global Security and definitive Security that
constitutes a Restricted Security shall bear the following legend (the "Private
Placement Legend") on the
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25
face thereof until three years after the later of the date of original issue and
the last date on which the Company or any affiliate of the Company was the owner
of such Capital Securities (or any predecessor thereto) (the "Resale Restriction
Termination Date"), unless otherwise agreed by the Company and the Holder
thereof:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS
SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES
FOR THE BENEFIT OF THE COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED"
SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II)
IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO
THE LATER OF THE DATE WHICH IS THREE YEARS AFTER THE DATE OF ORIGINAL
ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE
OF THE COMPANY WAS THE OWNER OF SUCH RESTRICTED SECURITIES (OR ANY
PREDECESSOR) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(D) OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE
JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE
RESTRICTIONS SET FORTH IN (II) ABOVE, ANY OFFER, SALE OR OTHER
DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D) AND (E) IS
SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE PROPERTY
TRUSTEE FOR SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM
AND SUBSTANCE."
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26
Any Security (or security issued in exchange or substitution
therefor) as to which such restrictions on transfer shall have expired in
accordance with their terms may, upon satisfaction of the requirements of
Section 314(b) and surrender of such Security for exchange to the Security
registrar in accordance with the provisions of this Section 314, be exchanged
for a new Security or Securities, of like tenor and aggregate principal amount,
which shall not bear the restrictive legend required by this Section 314(a).
(b) Upon any sale or transfer of any Restricted Security
(including any interest in a Global Security) (i) that is effected pursuant to
an effective registration statement under the Securities Act or (ii) in
connection with which the Trustee receives certificates and other information
(including an opinion of counsel, if requested) reasonably acceptable to the
Company and the Trustee to the effect that such security will no longer be
subject to the resale restrictions under federal and state securities laws, then
(A) in the case of a Restricted Security in definitive form, the Security
registrar or co-registrar shall permit the holder thereof to exchange such
Restricted Security for a security that does not bear the legend set forth in
Section 314(a), and shall rescind any such restrictions on transfer and (B) in
the case of Restricted Securities represented by a Global Security, such
Security shall no longer be subject to the restrictions contained in the legend
set forth in Section 314(a) (but still subject to the other provisions hereof).
In addition, any Security (or security issued in exchange or substitution
therefor) as to which the restrictions on transfer described in the legend set
forth in Section 314(a) have expired by their terms, may, upon surrender thereof
(in accordance with the terms of this Indenture) together with such
certifications and other information (including an opinion of counsel having
substantial experience in practice under the Securities Act and otherwise
reasonably acceptable to the Company, addressed to the Company and the Trustee
and in a form acceptable to the Company, to the effect that the transfer of such
Restricted Security has been made in compliance with Rule 144 or such successor
provision) acceptable to the Company and the Trustee as either of them may
reasonably require, be exchanged for a new Security or Securities of like tenor
and aggregate principal amount, which shall not bear the restrictive legends set
forth in Section 314(a).
SECTION 315. Special Transfer Provisions.
At any time at the request of the beneficial holder of an
interest in a Security in global form, such beneficial holder shall be entitled
to obtain a definitive Security upon written request to the Trustee in
accordance with the standing instructions and procedures existing between the
Depositary and the Trustee for the issuance thereof. Any transfer of a
beneficial interest in a Security in global form which cannot be effected
through book-entry settlement must be effected by the delivery to the transferee
(or its nominee) of a definitive Security or Securities registered in the name
of the transferee (or its nominee) on the books maintained by the Trustee. With
respect to any such transfer, the Trustee will cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Trustee, the aggregate principal amount of the Security in global form to be
reduced and, following such reduction, the Company will execute and the Trustee
will authenticate and deliver to the transferee (or such transferee's nominee,
as the case may be), a Security or Securities in the appropriate aggregate
principal amount in the name of such transferee (or its nominee) and bearing
such restrictive legends as may be required by this Indenture. In
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27
connection with any such transfer, the Trustee may request such representations
and agreements relating to the restrictions on transfer of such Security or
Securities from such transferee (or such transferee's nominee) as the Trustee
may reasonably require.
So long as the Securities are eligible for book-entry
settlement, or unless otherwise required by law, upon any transfer of a
definitive Security to a QIB in accordance with Rule 144A, unless otherwise
requested by the transferor, and upon receipt of the definitive Security or
Securities being so transferred, together with a certification from the
transferor that the transferor reasonably believes the transferee is a QIB (or
other evidence satisfactory to the Trustee), the Trustee shall make an
endorsement on the Restricted Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Restricted
Global Security, the Trustee shall cancel such definitive Security or Securities
and cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Trustee, the aggregate principal amount of
Securities represented by the Restricted Global Security to be increased
accordingly.
So long as the Securities are eligible for book-entry
settlement, or unless otherwise required by law, upon any transfer of a
definitive Security in accordance with Regulation S, if requested by the
transferor, and upon receipt of the definitive Security or Securities being so
transferred, together with a certification from the transferor that the transfer
was made in accordance with Rule 903 or 904 of Regulation S or Rule 144 under
the Securities Act (or other evidence satisfactory to the Trustee), the Trustee
shall make or direct the Custodian to make, an endorsement on the Regulation S
Global Security to reflect an increase in the aggregate principal amount of the
Securities represented by the Regulation S Global Security, the Trustee shall
cancel such definitive Security or Securities and cause, or direct the Custodian
to cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Custodian, the aggregate principal amount of
Securities represented by the Regulation S Global Security to be increased
accordingly.
If a holder of a beneficial interest in the Restricted Global
Security wishes at any time to exchange its interest in the Restricted Global
Security for an interest in the Regulation S Global Security, or to transfer its
interest in the Restricted Global Security to a person who wishes to take
delivery thereof in the form of an interest in the Regulation S Global Security,
such holder may, subject to the rules and procedures of the Depositary and to
the requirements set forth in the following sentence, exchange or cause the
exchange or transfer or cause the transfer of such interest for an equivalent
beneficial interest in the Regulation S Global Security. Upon receipt by the
Trustee, as transfer agent of (1) instructions given in accordance with the
Depositary's procedures from or on behalf of a holder of a beneficial interest
in the Restricted Global Security, directing the Trustee (via DWAC), as transfer
agent, to credit or cause to be credited a beneficial interest in the Regulation
S Global Security in an amount equal to the beneficial interest in the
Restricted Global Security to be exchanged or transferred, (2) a written order
given in accordance with the Depositary's procedures containing information
regarding the Euroclear or Cedel account to be credited with such increase and
the name of such account, and (3) a certificate given by the holder of such
beneficial interest stating that the exchange or transfer of such interest has
been made pursuant to and in accordance with Rule 903 or Rule 904 of Regulation
S or Rule
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28
144 under the Securities Act (or other evidence satisfactory to the Trustee),
the Trustee, as transfer agent, shall promptly deliver appropriate instructions
to the Depositary (via DWAC), its nominee, or the custodian for the Depositary,
as the case may be, to reduce or reflect on its records a reduction of the
Restricted Global Security by the aggregate principal amount of the beneficial
interest in such Restricted Global Security to be so exchanged or transferred
from the relevant participant, and the Trustee, as transfer agent, shall
promptly deliver appropriate instructions (via DWAC) to the Depositary, its
nominee, or the custodian for the Depositary, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase of the
principal amount of such Regulation S Global Security by the aggregate principal
amount of the beneficial interest in such Restricted Global Security to be so
exchanged or transferred, and to credit or cause to be credited to the account
of the person specified in such instructions (who may be Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear or Cedel or
another agent member of Euroclear or Cedel, or both, as the case may be, acting
for and on behalf of them) a beneficial interest in such Regulation S Global
Security equal to the reduction in the principal amount of such Restricted
Global Security.
If a holder of a beneficial interest in the Regulation S
Global Security wishes at any time to exchange its interest in the Regulation S
Global Security for an interest in the Restricted Global Security, or to
transfer its interest in the Regulation S Global Security to a person who wishes
to take delivery thereof in the form of an interest in the Restricted Global
Security, such holder may, subject to the rules and procedures of Euroclear or
Cedel and the Depositary, as the case may be, and to the requirements set forth
in the following sentence, exchange or cause the exchange or transfer or cause
the transfer of such interest for an equivalent beneficial interest in such
Restricted Global Security. Upon receipt by the Trustee, as transfer agent of
(l) instructions given in accordance with the procedures of Euroclear or Cedel
and the Depositary, as the case may be, from or on behalf of a beneficial owner
of an interest in the Regulation S Global Security directing the Trustee, as
transfer agent, to credit or cause to be credited a beneficial interest in the
Restricted Global Security in an amount equal to the beneficial interest in the
Regulation S Global Security to be exchanged or transferred, (2) a written order
given in accordance with the procedures of Euroclear or Cedel and the
Depositary, as the case may be, containing information regarding the account
with the Depositary to be credited with such increase and the name of such
account, and (3) prior to the expiration of the Restricted Period, a certificate
given by the holder of such beneficial interest and stating that the person
transferring such interest in such Regulation S Global Security reasonably
believes that the person acquiring such interest in the Restricted Global
Security is a QIB and is obtaining such beneficial interest in a transaction
meeting the requirements of Rule 144A and any applicable securities laws of any
state of the United States or any other jurisdiction (or other evidence
satisfactory to the Trustee), the Trustee, as transfer agent, shall promptly
deliver (via DWAC) appropriate instructions to the Depositary, its nominee, or
the custodian for the Depositary, as the case may be, to reduce or reflect on
its records a reduction of the Regulation S Global Security by the aggregate
principal amount of the beneficial interest in such Regulation S Global Security
to be exchanged or transferred, and the Trustee, as transfer agent, shall
promptly deliver (via DWAC) appropriate instructions to the Depositary, its
nominee, or the custodian for the Depositary, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase of the
<PAGE>
29
principal amount of the Restricted Global Security by the aggregate principal
amount of the beneficial interest in the Regulation S Global Security to be so
exchanged or transferred, and to credit or cause to be credited to the account
of the person specified in such instructions a beneficial interest in the
Restricted Global Security equal to the reduction in the principal amount of the
Regulation S Global Security. After the expiration of the Restricted Period (as
defined below), the certification requirement set forth in clause (3) of the
second sentence of the above paragraph will no longer apply to such exchanges
and transfers.
Any beneficial interest in one of the Global Securities that
is transferred to a person who takes delivery in the form of an interest in the
other Global Security will, upon transfer, cease to be an interest in such
Global Security and become an interest in the other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions and other
procedures applicable to beneficial interests in such other Global Security for
as long as it remains such an interest.
Prior to or on the 40th day after the later of the
commencement of the offering of the Capital Securities and the Closing Date (the
"Restricted Period"), beneficial interests in a Regulation S Global Security may
only be held through Morgan Guaranty Trust Company of New York, Brussels office,
as operator of Euroclear or Cedel or another agent member of Euroclear and Cedel
acting for and on behalf of them, unless delivery is made through the Restricted
Global Security in accordance with the certification requirements hereof. During
the Restricted Period, interests in the Regulation S Global Security, if any,
may be exchanged for interests in the Restricted Global Security or for
definitive Securities only in accordance with the certification requirements
described above.
ARTICLE FOUR
SATISFACTION AND DISCHARGE; DEFEASANCE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as
to any surviving rights of registration of transfer or exchange of Securities
herein expressly provided for), and the Trustee, on written demand of and at the
expense of the Company, shall execute instruments supplied by the Company
acknowledging satisfaction and discharge of this Indenture, when (1) either (A)
all Securities theretofore authenticated and delivered (other than (i)
Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 306 and (ii) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1003) have been delivered to the Trustee for
cancellation; or (B) all such Securities not theretofore delivered to the
Trustee for cancellation (i) have become due and payable, or (ii) will become
due and payable at their Maturity within one year, or (iii) if redeemable at the
option of the Company, are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the
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30
Company and the Company, in the case of (i), (ii) or (iii) above, has deposited
or caused to be deposited with the Trustee as funds in trust for the purpose on
amount sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for cancellation, for
principal and interest to the date of such deposit (in the case of Securities
which have become due and payable) or to the Maturity or Redemption Date, as the
case may be; (2) the Company has paid or ceased to be paid all other sums
payable hereunder by the Company; and (3) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with. Notwithstanding the
satisfaction and discharge of this Indenture, the obligations of the Company to
the Trustee under Section 607 and, if money shall have been deposited with the
Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations
of the Trustee under Section 402 and the last paragraph of Section 1003 shall
survive.
SECTION 402. Legal Defeasance.
In addition to discharge of this Indenture pursuant to Section
401, in the case of any Securities with respect to which the exact amount
described in subparagraph (a) of Section 404 can be determined at the time of
making the deposit referred to in such subparagraph (a), the Company shall be
deemed to have paid and discharged the entire indebtedness on all the Securities
as provided in this Section on and after the date the conditions set forth in
Section 404 are satisfied, and the provisions of this Indenture with respect to
the Securities shall no longer be in effect (except as to (i) rights of
registration of transfer and exchange of Securities, (ii) substitution of
mutilated, defaced, destroyed, lost or stolen Securities, (iii) rights of
Holders of Securities to receive, solely from the trust fund described in
subparagraph (a) of Section 404, payments of principal thereof and interest, if
any, thereon upon the original stated due dates therefor (but not upon
acceleration), (iv) the rights, obligations, duties and immunities of the
Trustee hereunder, (v) this Section 402 and (vi) the rights of the Holders of
Securities as beneficiaries hereof with respect to the property so deposited
with the Trustee payable to all or any of them) (hereinafter called "Legal
Defeasance"), and the Trustee, at the cost and expense of the Company, shall
execute proper instruments acknowledging the same.
SECTION 403. Covenant Defeasance.
In the case of any Securities with respect to which the exact
amount described in subparagraph (a) of Section 404 can be determined at the
time of making the deposit referred to in such subparagraph (a), (i) the Company
shall be released from its obligations under any covenants specified in or
pursuant to this Indenture (except as to (i) rights of registration of transfer
and exchange of Securities, (ii) substitution of mutilated, defaced, destroyed,
lost or stolen Securities, (iii) rights of Holders of Securities to receive,
from the Company pursuant to Section 1001, payments of principal thereof and
interest, if any, thereon upon the original stated due dates therefor (but not
upon acceleration), (iv) the rights, obligations, duties and immunities of the
Trustee hereunder and (v) the rights of the Holders of Securities as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them), and (ii) the occurrence of any event specified
in Section
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31
501(3) (with respect to any of the covenants specified in or pursuant to this
Indenture) shall be deemed not to be or result in an Event of Default, in each
case with respect to the Outstanding Securities as provided in this Section on
and after the date the conditions set forth in Section 404 are satisfied
(hereinafter called "Covenant Defeasance"), and the Trustee, at the cost and
expense of the Company, shall execute proper instruments acknowledging the same.
For this purpose, such Covenant Defeasance means that the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant (to the extent so specified in the
case of Section 501(3)), whether directly or indirectly by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document, but
the remainder of this Indenture and the Securities shall be unaffected thereby.
SECTION 404. Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 402 or 403 to the Outstanding Securities:
(a) with reference to Section 402 or 403, the Company has
irrevocably deposited or caused to be irrevocably deposited with the Trustee as
funds in trust, specifically pledged as security for, and dedicated solely to,
the benefit of the Holders of Securities (i) cash in an amount, (ii) direct
obligations of the United States of America, backed by its full faith and credit
("U.S. Government Obligations"), maturing as to principal and interest, if any,
at such times and in such amounts as will ensure the availability of cash, (iii)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, or (iv) a combination thereof, in each case sufficient, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
and discharge the principal of and interest, if any, on all Securities on each
date that such principal or interest, if any, is due and payable;
(b) in the case of Legal Defeasance under Section 402, the
Company has delivered to the Trustee an Opinion of Counsel based on the fact
that (x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (y), since the date hereof, there has been
a change in the applicable United States federal income tax law, in either case
to the effect that, and such opinion shall confirm that, the Holders of the
Securities of such series will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and Legal Defeasance and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit and Legal Defeasance
had not occurred;
(c) in the case of Covenant Defeasance under Section 403, the
Company has delivered to the Trustee an Opinion of Counsel to the effect that,
and such opinion shall confirm that, the Holders of the Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and Covenant Defeasance and will be subject
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32
to federal income tax on the same amount in the same manner and at the same
times as would have been the case if such deposit and Covenant Defeasance had
not occurred;
(d) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under, any agreement
or instrument to which the Company is a party or by which it is bound; and
(e) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent contemplated by this provision have been complied with.
SECTION 405. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations deposited with the Trustee
pursuant to Section 401 shall be held in trust and such money and all money from
such U.S. Government Obligations shall be applied by it, in accordance with the
provisions of the Securities and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company acting as its own Paying
Agent) as the Trustee may determine, to the Persons entitled thereto, of the
principal and interest for whose payment such money and U.S. Government
Obligations has been deposited with the Trustee.
SECTION 406. Indemnity for U.S. Government Obligations.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 404 or the principal or interest
received in respect of such obligations other than any such tax, fee or other
charge that by law is for the account of the Holders of Outstanding Securities.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default" wherever used herein, means any one of the
following events that has occurred and is continuing (whatever the reason for
such Event of Default and whether it shall be occasioned by the provisions of
Article Eleven or be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) failure for 30 days to pay any interest on the Securities
when due (subject to the deferral of any due date in the case of an Extension
Period); or
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33
(2) failure to pay any principal on the Securities when due,
whether at Maturity, upon redemption, by declaration of acceleration or
otherwise;
(3) failure to observe or perform in any material respect any
other covenant herein that continues 90 days after written notice to the Company
from the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities; or
(4) entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable Federal or State law, at appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of substantially all of the property of the
Company, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 90 consecutive days; or
(5) (A) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or (B) the consent by the Company or to the
entry of a decree or order for relief in respect of itself in an involuntary
case or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against the Company, or (C) the filing by the
Company of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or (D) the consent by the Company to
the filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of all or substantially all of the property
of the Company, or (E) the making by the Company of an assignment for the
benefit of creditors.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding Securities shall have the right to declare the
principal of and the interest on all the Securities and any other amounts
payable hereunder to be due and payable immediately, PROVIDED, HOWEVER, that if
upon an Event of Default, the Trustee or the Holders of at least 25% in
aggregate principal amount of the outstanding Securities fail to declare the
payment of all amounts on the Securities to be immediately due and payable, the
holders of at least 25% in aggregate liquidation preference of Capital
Securities then outstanding shall have such right, by a notice in writing to the
Company (and to the Trustee if given by Holders or the holders of Capital
Securities) and upon any such declaration such principal and all accrued
interest shall become immediately due and payable.
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34
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter provided in this Article, the Holders of
a majority in principal amount of the Outstanding Securities, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if (1) the Company has paid or deposited with the Trustee a sum
sufficient to pay (A) all overdue interest on all Securities, (B) the principal
of (and premium, if any, on) any Securities which have become due otherwise than
by such declaration of acceleration and interest thereon at the rate borne by
the Securities, (C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities, and (D) all
sums paid or advanced by the Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of the principal of
Securities which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513. Should the Holders of such
Securities fail to annul such declaration and waive such default, the holders of
a majority in aggregate liquidation amount of the Capital Securities shall have
such right. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of any
Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest, and, to the extent that payment thereof
shall be legally enforceable, interest on any overdue principal and on any
overdue interest, at the rate borne by the Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
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35
SECTION 504. Trustee may File Proofs of Claim.
In case of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Company (or any other obligor upon
the Securities), its property or its creditors, the Trustee shall be entitled
and empowered, by intervention in such proceeding or otherwise, to take any and
all actions authorized under the Trust Indenture Act in order to have claims of
the Holders and the Trustee allowed in any such proceeding. In particular, the
Trustee shall be authorized to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607. No provision of this Indenture shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganizations, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 505. Trustee may Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trust without the possession of
any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of any express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Eleven, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal, upon presentation of the Securities and the notation
thereon of the payment, if only partially paid, and upon surrender thereof, if
fully paid;
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable as such
Securities for principal and interest, respectively.
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SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities; it being understood and
intended that no one or more Holders shall have any right in any manner whatever
by virtue of, or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other Holders, or to obtain or to seek to
obtain priority or preference over any other Holders or to enforce any right
under this Indenture, except in the manner herein provided and for the equal and
ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal and Interest;
Capital Security Holders' Rights.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of and (subject to Section
307) interest on such Security on the Stated Maturity expressed in such Security
(or, in the case of redemption, on the Redemption Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
If an Event of Default constituting the failure to pay
interest or principal on the Securities on the date such interest or principal
is otherwise payable has occurred and is continuing, then a holder of Capital
Securities may directly institute a proceeding (a "Direct Action") for
enforcement of payment to such holder directly of the principal of or interest
on the Securities having a principal amount equal to the aggregate liquidation
amount of the Capital Securities as such holder on or after the respective due
date specified in the Securities. The Company may not amend this Section without
the prior written consent of the
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holders of all of the Capital Securities. Notwithstanding any payment made to
such holder of Capital Securities by the Company in connection with such a
Direct Action, the Company shall remain obligated to pay the principal of or
interest on the Securities held by the Trust or the Property Trustee and the
Company shall be subrogated to the rights of the holder of such Capital
Securities with respect to payments on the Capital Securities to the extent of
any payments made by the Company to such holder in any Direct Action. The
holders of Capital Securities will not be able to exercise directly any other
remedy available to the Holders of the Securities.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
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(1) such direction shall not be in conflict with any rule of
law or with this Indenture; and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
Subject to Sections 902 and 1008 hereof, the Holders of not
less than a majority in principal amount of the Outstanding Securities may on
behalf of the Holders of all the Securities waive any past default hereunder and
its consequences, except a default
(1) in the payment of the principal of or interest on any
Security (unless such default has been cured and a sum sufficient to pay all
matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Trustee); or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected;
PROVIDED, HOWEVER, that such waiver or modification to such waiver shall not be
effective until the holders of a majority in liquidation preference of Capital
Securities shall have consented to such waiver or modification to such waiver;
PROVIDED FURTHER, that if the consent of the Holder of each of the Outstanding
Securities is required, such waiver shall not be effective until each holder of
the Capital Securities shall have consented to such waiver.
Upon any such waiver, such default shall cease to exist,
effective as of the date specified in such waiver (and effective retroactively
to the date of default, if so specified) and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, a court may require any party litigant in
such suit to file an undertaking to pay the costs of such suit, and any assess
costs against any such party litigant, in the manner and to the extent provided
in the Trust Indenture Act; PROVIDED, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the Company
or the Trustee or in any suit for the enforcement of the right to receive the
principal of and interest on any Security.
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SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
ARTICLE SIX
TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision
of this Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default
hereunder as and to the extent provided by the Trust Indenture Act; PROVIDED,
HOWEVER, that except in the case of a default in the payment of the principal of
or interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determine that the withholding of such notice is in the interests of the
Holders of Securities; PROVIDED, FURTHER, that in the case of any default of the
character specified in Section 501(3), no such notice to Holders shall be given
until at least 30 days after the occurrence thereof. For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default. For purposes of this Section,
the Trustee shall not be deemed to have knowledge of a default unless the
Trustee has actual knowledge of such default or has received written notice of
such default in the manner contemplated by Section 105.
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SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its choice and the
written advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company, personally or by agent
or attorney; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by it
hereunder.
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SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, the Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
SECTION 605. Trustee and Other Agents may Hold Securities.
The Trustee, any Paying Agent, any Security Registrar, or any
other agent of the Company, in its individual or any other capacity, may become
the owner or pledge of Securities and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Security Registrar, or such other agent. Money held
by the Trustee in trust hereunder shall not be invested by the Trustee pending
distribution thereof to the holders of the Securities.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
SECTION 607. Compensation; Reimbursement; and Indemnity.
The Company, in its capacity as the issuer of the Securities,
agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from tine to time agree in
writing for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
(3) to indemnify each of the Trustee and any predecessor
Trustee for, and to hold it harmless against, any and all loss, damage, claim,
liability or expense, including taxes (other than taxes based on the income,
revenues or gross receipts of the Trustee) incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this trust or the trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder.
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The obligations of the Company under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the
Securities upon all property and lands held or collected by the Trustee as such,
except funds held in trust for the payment of principal of (and premiums, if
any, on) or interest on particular Securities.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
a Person that is eligible pursuant to the Trust Indenture Act and to act as such
and has a combined capital and surplus of at least $50,000,000 and has its
Corporate Trust Office in New York, New York. If such Person publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 611.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of removal, the removed Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
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(d) If at any time:
(1) the Trustee shall fail to comply with Section 608
after written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under
Section 609 and shall fail to resign after written request therefor by the
Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, (i) the Company by a Board
Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the Retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; PROVIDED that, on request of
the Company or the successor Trustee, such retiring Trustee shall, upon payment
of its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers
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and trusts of the retiring Trustee and shall duly assign, transfer and deliver
to such successor Trustee all property and money held by such retiring Trustee
hereunder. Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or becomes a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the
Trustee (a) semiannually, not later than June 30 and December 31 in each year, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders to the extent the Company has knowledge thereof as of a
date not more than 15 days prior to the delivery thereof, and (b) at such other
times as the Trustee may request in writing, within 30 days after the receipt by
the Company of any such, a list of similar form and content as of a date not
more than 15 days prior to the time such list is furnished, excluding from any
such list names and addresses received by the Trustee in its capacity as
Security Registrar.
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SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 701, and the names
and addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding rights and duties of the Trustee, shall be provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to names and addresses of Holders made pursuant
to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission,
and transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; PROVIDED that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934
shall be filed with the Trustee within 15 days after the same is so required to
be filed with the Commission.
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ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, unless:
(1) the Person formed by such consolidation or into which the
Company is merged or the Person that acquires by conveyance or transfer, or
which leases, the properties and assets of the Company substantially as an
entirety shall be a corporation, partnership or trust, shall be organized and
existing under the laws of the United States of America or any State or the
District of Columbia, and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to the
Trustee, the due and punctual payment of the principal of (and premium, if any)
and interest (including any additional interest) on all the Securities and the
performance of every covenant of this Indenture on the part of the Company to be
performed or observed;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time, or both,
would become an Event of Default, shall have happened and be continuing;
(3) for so long as Securities registered on the Securities
Register in the name of the Trust (or the Property Trustee) are outstanding,
such consolidation, merger, conveyance, transfer or lease is permitted under the
Declaration and the Guarantee and does not give rise to any breach or violation
of the Declaration or the Guarantee;
(4) any such lease shall provide that it will remain in effect
so long as any Securities are Outstanding; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger, conveyance, transfer or lease and any such supplemental indenture
complies with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with; and the Trustee, subject
to Section 601, may rely upon such Officers' Certificate and Opinion of Counsel
as conclusive evidence that such transaction complies with this Section 801.
SECTION 802. Successor Person Substituted.
Upon any consolidation or merger by the Company with or into
any other Person, or any conveyance, transfer or lease by the Company of its
properties and assets substantially as an entirety to any Person in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may
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exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein;
and in the event of any such conveyance, transfer or lease the Company shall be
discharged from all obligations and covenants under the Indenture and the
Securities and may be dissolved and liquidated.
Such successor Person may cause to be signed, and may issue
either in its own name or in the name of the Company, any or all of the
Securities issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Trustee; and, upon the order of such successor
Person instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities which previously shall have been signed and
delivered by the officers of the Company to the Trustee for authentication
pursuant to such provisions and any Securities which such successor Person
thereafter shall cause to be signed and delivered to the Trustee on its behalf
for the purpose pursuant to such provisions. All the Securities so issued shall
in all respects have the same legal rank and benefit under this Indenture as the
Securities theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Securities had been issued at the date of the
execution hereof.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising under
this Indenture which shall not be inconsistent with the provisions of this
Indenture, provided that such action pursuant to this clause (3) shall not
adversely affect the interests of the Holders of the Securities or, so long as
any of the Capital Securities shall remain outstanding, the holders of the
Capital Securities; or
(4) to comply with any requirement of the Commission in order
to effect or maintain the qualification of this Indenture under the Trust
Indenture Act, if so required.
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SECTION 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
PROVIDED, HOWEVER, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
(1) except to the extent permitted and subject to the
conditions set forth in Section 301 with respect to the extension of the Stated
Maturity of the Securities, change the Stated Maturity of, the principal of, or
any installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon, or change the place of payment where,
or the coin or currency in which, any Security or interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption, on or after
the Redemption Date), or modify the provisions of this Indenture with respect to
the subordination of the Securities in a manner adverse to the Holders,
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513
or Section 1008, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby;
PROVIDED, that, so long as any of the Capital Securities remains outstanding, no
such amendment shall be made that adversely affects the holders of the Capital
Securities, and no termination of this Indenture shall occur, and no waiver of
any Event of Default or compliance with any covenant under this Indenture shall
be effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation preference of the outstanding Capital Securities
unless and until the principal of and any premium on the Securities and all
accrued and unpaid interest thereon have been paid in full.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
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49
In executing, or accepting the additional trust created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and (subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into such supplemental indenture which affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity With Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal and Interest.
The Company will duly and punctually pay the principal of and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York an office or
agency where Securities may be presented or surrendered for registration of
transfer or exchange, where Securities may be surrendered for conversion and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The
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50
Company will give prompt written notice to the Trustee of the location, and any
change in location, of such office or agency. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee, and
the Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies in the United States where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the United States for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
SECTION 1003. Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on, or at the option of the Company, or before each due date of the
principal of or interest on any of the Securities, segregate and hold in trust
for the benefit of the Persons entitled thereto a sum sufficient to pay the
principal or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act. In such case the Company shall not
invest the amount so segregated and held in trust pending the distribution
thereof.
Whenever the Company shall have one or more Paying Agents, it
will, on or prior to each due date of the principal of or interest on any
Securities, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act; PROVIDED, HOWEVER, that any such deposit on a due
date shall be initiated prior to 1:00 p.m. (New York time) in same-day funds.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will (i) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (ii) during the continuance
of any default by the Company (or any other obligor upon the Securities) in the
making of any payment in respect of the Securities, upon the written request of
the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
the trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any
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51
Paying Agent to the Trustee, such Payment Agent shall be released from all
further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal or interest
that has become due and payable shall be paid to the Company on Company Request,
or (if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease.
SECTION 1004. Statements by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance and observance of
any of the material terms, provisions and conditions of this Indenture (without
regard to any period of grace or requirement of notice provided hereunder) and,
if the Company shall be in default, specifying all such defaults and the nature
and status thereof of which they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; PROVIDED, HOWEVER,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders and, while
any Capital Securities are outstanding, the holders of the Capital Securities.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; PROVIDED,
HOWEVER, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
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52
SECTION 1007. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary that
comprise more than 10% of the assets of the Company and its Subsidiaries, taken
as a whole; PROVIDED, HOWEVER, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
SECTION 1008. Waiver of Certain Covenants.
Except as otherwise specified as contemplated by Section 301
for Securities, the Company may, with respect to the Securities, omit in any
particular instance to comply with any term, provision or condition set forth in
any covenant provided pursuant to Section 901(2) for the benefit of the Holders
if before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Securities shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such term, provision or condition, but no waiver shall extend to or affect such
term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
SECTION 1009. Payment of the Trust's Costs and Expenses.
Since the Trust is being formed solely to facilitate an
investment in the Securities, the Company, in its capacity as the issuer of the
Securities, hereby covenants to pay all debts and obligations (other than with
respect to the Capital Securities and Common Securities) and all costs and
expenses of the Trust (including, but not limited to, all costs and expenses
relating to the organization of the Trust, the fees and expenses of the Trustees
and all costs and expenses relating to the operation of the Trust) and to pay
any and all taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed on the Trust by the United States,
or any other taxing authority, so that the net amounts received and retained by
the Trust and the Property Trustee after paying such expenses will be equal to
the amounts the Trust and the Property Trustee would have received had no such
costs or expenses been incurred by or imposed on the Trust. The foregoing
obligations of the Company are for the benefit of, and shall be enforceable by,
any person to whom any such debts, obligations, costs, expenses and taxes are
owed (each, a "Creditor") whether or not such Creditor has received notice
thereof. Any such Creditor may enforce such obligations of the Company directly
against the Company, and the Company irrevocably waives any right or remedy to
require that any such Creditor take any action against the Trust or any other
person before proceeding against the Company. The Company shall execute such
additional agreements as may be necessary or desirable to give full effect to
the foregoing. The obligations of the Company to pay all the debts, obligations,
costs and
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53
expenses of the Trust (other than with respect to the Capital Securities and the
Common Securities) shall constitute additional indebtedness hereunder and shall
survive the satisfaction and discharge of this Indenture.
ARTICLE ELEVEN
SUBORDINATION OF SECURITIES
SECTION 1101. Securities Subordinate to Indebtedness.
The Company covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this Article (subject to
Article Four), the payment of the principal of and interest on each and all of
the Securities are hereby expressly made subordinate and subject in right of
payment to the prior payment in full in cash of all Indebtedness.
This Article Eleven shall constitute a continuing offer to all
persons who become holders of, or continue to hold, Indebtedness, and such
provisions are made for the benefit of the holders of Indebtedness and such
holders are made obligees hereunder and any one or more of them may enforce such
provisions. Holders of Indebtedness need not prove reliance on the subordination
provisions hereof.
SECTION 1102. Default on Indebtedness.
In the event and during the continuation of any default in the
payment of principal, premium, interest or any other payment due on any
Indebtedness, or in the event that any event of default with respect to any
Indebtedness shall have occurred and be continuing and shall have resulted in
such Indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable (unless and until such
event of default shall have been cured or waived or shall have ceased to exist
and such acceleration shall have been rescinded or annulled) or in the event any
judicial proceeding shall be pending with respect to any such default in payment
or such event of default, then no payment shall be made by the Company with
respect to the principal (including redemption payments) of, or interest on, the
Securities.
In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by the preceding paragraph of this Section 1102, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Indebtedness may have been
issued, as their respective interests may appear, but only to the extent that
the holders of the Indebtedness (or their representative or representatives or a
trustee) notify the Trustee within 90 days of such payment of the amounts then
due and owing on the Indebtedness and only the amounts specified in such notice
to the Trustee shall be paid to the holders of Indebtedness.
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54
SECTION 1103. Prior Payment of Indebtedness Upon Acceleration of Securities.
In the event that the Securities are declared due and payable
before their Stated Maturity, then and in such event the holders of the
Indebtedness outstanding at the time such Securities so become due and payable
shall be entitled to receive payment in full of all amounts then due on or in
respect of such Indebtedness (including any amounts due upon acceleration), or
provision shall be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Indebtedness, before the
Holders of the Securities are entitled to receive any payment or distribution of
any kind or character, whether in cash, properties or securities, by the Company
on account of the principal of or interest on the Securities or on account of
the purchase or other acquisition of Securities by the Company or any
Subsidiary; PROVIDED, HOWEVER, that holders of Indebtedness shall not be
entitled to receive payment of any such amounts to the extent that such holders
would be required by the subordination provisions of such Indebtedness to pay
such amounts over to the obligees on trade accounts payable or other liabilities
arising in the ordinary course of the Company's business.
In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by the preceding paragraph of this Section 1103, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Indebtedness may have been
issued, as their respective interests may appear, but only to the extent that
the holders of the Indebtedness (or their representative or representatives or a
trustee) notify the Trustee within 90 days of such payment of the amounts then
due and owing on the Indebtedness and only the amounts specified in such notice
to the Trustee shall be paid to the holders of Indebtedness.
SECTION 1104. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company, or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to creditors upon any dissolution or winding-up or liquidation or reorganization
of the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all principal of, and premium, if any, and
interest due or to become due upon all Indebtedness (including interest after
the commencement of any bankruptcy, insolvency, receivership or other
proceedings at the rate specified in the applicable Indebtedness, whether or not
such interest is an allowable claim in any such proceeding) shall first be paid
in full, or payment thereof provided for in money in accordance with its terms,
before any payment is made on account of the principal or interest on the
Securities; and upon any such dissolution or winding-up or liquidation or
reorganization any payment by the Company, or distribution of substantially all
of the assets of the Company of any kind or character, whether in cash, property
or securities, to which the Holders of the Securities or the Trustee would be
entitled, except for the provisions of this Article Eleven, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other Person making such payment or distribution, or by the Holders of the
Securities or by the Trustee under this Indenture if received by them or
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55
it, directly to the holders of Indebtedness (pro rata to such holders on the
basis of the respective amounts of Indebtedness held by such holders, as
calculated by the Company) or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Indebtedness may have been issued, as their respective interests
may appear, to the extent necessary to pay all Indebtedness in full (including
interest after the commencement of any bankruptcy, insolvency, receivership or
other proceedings at the rate specified in the applicable Indebtedness, whether
or not such interest is in an allowable claim in any such proceeding) or to
provide for such payment in money in accordance with its terms, after giving
effect to any concurrent payment or distribution to or for the holders of
Indebtedness, before any payment or distribution is made to the Holders of
Securities or to the Trustee; PROVIDED, HOWEVER, that such holders of
Indebtedness shall not be entitled to receive payment of any such amounts to the
extent that such holders would be required by the subordination provisions of
such Indebtedness to pay such amounts over to the obligees on trade accounts
payable or other liabilities arising in the ordinary course of the Company's
business.
In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, prohibited by the foregoing, shall be received by
the Trustee or the Holders of the Securities before all Indebtedness is paid in
full (including interest after commencement of any bankruptcy, insolvency,
receivership or other proceedings at the rate specified in the applicable
Indebtedness, whether or not such interest is an allowable claim in any such
proceeding), or provision is made for such payment in money in accordance with
its terms, such payment or distribution shall be held in trust for the benefit
of and shall be paid over or delivered to the holders of Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Indebtedness may have
been issued, as their respective interests may appear, as calculated by the
Company, for application to the payment of all Indebtedness remaining unpaid to
the extent necessary to pay all Indebtedness in full in money in accordance with
its terms, after giving effect to any concurrent payment or distribution to or
for the holders of such Indebtedness.
Any holder of Indebtedness may file any proof of claim or
similar instrument on behalf of the Trustee and the Holders if such instrument
has not been filed by the date which is 30 days prior to the date specified for
filing thereof.
For purposes of this Article Eleven, the words "cash, property
or securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Eleven with
respect to the Securities to the payment of all Indebtedness that may at the
time be outstanding, PROVIDED, HOWEVER, that (i) the Indebtedness is assumed by
the new corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of the Indebtedness are not,
without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or merger of the Company
into, another corporation or the liquidation or
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56
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article Eight hereof shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 1103 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
Eight hereof. Nothing in Section 1102 or in this Section 1103 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 607.
SECTION 1105. Subrogation.
Subject to the payment in full of all Indebtedness to the
extent provided in Sections 1103 and 1104, the rights of the Holders of the
Securities shall be subrogated to the rights of the holders of Indebtedness to
receive payments or distributions of cash, property or securities of the Company
applicable to the Indebtedness until the principal of (and premium, if any) and
interest on the Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of the Indebtedness of
any cash, property or securities to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this Article Eleven,
shall, as between the Company, its creditors other than holders of Indebtedness,
and the Holders of the Securities, be deemed to be a payment by the Company to
or on account of the Indebtedness. It is understood that the provisions of this
Article Eleven are and are intended solely for the purposes of defining the
relative rights of the Holders of the Securities, on the one hand, and the
holders of the Indebtedness on the other hand.
Nothing contained in this Article Eleven or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as between the
Company, its creditors other than the holders of Indebtedness, and the Holders
of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders of the Securities and creditors
of the Company other than the holders of the Indebtedness, nor shall anything
herein or therein prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article Eleven of the
holders of Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company
referred to in this Article Eleven, the Trustee, subject to the provisions of
Section 601, and the Holders of the Securities, shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Holders of the Securities, for the purposes of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Indebtedness and other indebtedness of the Company, the
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57
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Eleven.
SECTION 1106. Trustee to Effectuate Subordination.
Each Holder of a Security by acceptance thereof authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Eleven and appoints the Trustee such Holder's attorney-in-fact for any
and all such purposes.
SECTION 1107. Notice by the Company.
The Company shall give prompt written notice to a Responsible
Officer of the Trustee of any fact known to the Company that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article Eleven. Notwithstanding
the provisions of this Article Eleven or any other provision of this Indenture,
the Trustee shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment of monies to or by the Trustee in
respect of the Securities pursuant to the provisions of this Article Eleven,
unless and until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office of the Trustee from the
Company or a holder or holders of Indebtedness or from any trustee therefor; and
before the receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to assume that no
such facts exist; PROVIDED, HOWEVER, that if the Trustee shall not have received
the notice provided for in this Section 1106 at least two Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of (or
premium, if any) or interest on any Security), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and authority
to receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Section 601, shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Indebtedness (or a trustee on behalf of
such holder) to establish that such notice has been given by a holder of
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Indebtedness to participate in
any payment or distribution pursuant to this Article Eleven, the Trustee may
request such Person to furnish evidence to the reasonable satisfaction of the
Trustee as to the amount of Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such Person under this Article
Eleven, and if such evidence is not furnished the Trustee may defer any payment
to such Person pending judicial determination as to the right of such Person to
receive such payment.
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SECTION 1108. Rights of the Trustee; Holders of Indebtedness.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article Eleven in respect of any Indebtedness
at any time held by it, to the same extent as any other holder of Indebtedness,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
With respect to the holders of Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eleven, and no implied covenants
or obligations with respect to the holders of Indebtedness shall be read into
this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Indebtedness and, subject to the provisions of
Section 601, the Trustee shall not be liable to any holder of Indebtedness if it
shall pay over or deliver to holders of Securities, the Company or any other
Person money or assets to which any holder of Indebtedness shall be entitled by
virtue of this Article Eleven or otherwise.
SECTION 1109. Subordination may not be Impaired.
No right of any present or future holder of any Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter,
Indebtedness or otherwise amend or supplement in any manner Indebtedness or any
instrument evidencing the same or any agreement under which Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Indebtedness; (iii) release any Person
liable in any manner for the collection of Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.
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ARTICLE TWELVE
REDEMPTION OF SECURITIES
SECTION 1201. Optional Redemption; Conditions to Optional Redemption.
At any time on or after December 1, 2006, the Company shall
have the right, subject to the last paragraph of this Section 1201 and to the
receipt of any necessary prior approval of the Federal Reserve, to redeem the
Securities, in whole or in part, from time to time, at the Redemption Prices
(expressed as a percentage of the principal amount of such Securities) set forth
below, plus any accrued but unpaid interest to the Redemption Date, if redeemed
during the twelve-month period beginning on the December 1 of the years
indicated below:
Year Percentage
2006 104.030%
2007 103.627%
2008 103.224%
2009 102.821%
2010 102.418%
2011 102.015%
2012 101.612%
2013 101.209%
2014 100.806%
2015 100.403%
On or after December 1, 2016, the Redemption Price will be
100%, plus accrued and unpaid interest, if any, to the Redemption Date.
Prior to December 1, 2006, if a Special Event shall occur and
be continuing, the Company shall have the right, subject to the last paragraph
of this Section 1201 and to the receipt of any necessary prior approval of the
Federal Reserve, to redeem, upon not less than 30 days nor more than 60 days
notice, the Securities in whole, but not in part, at a Redemption Price equal to
the greater of (i) 100% of the principal amount of Securities then outstanding
and (ii) as determined by a Quotation Agent, the sum of the present values of
the principal amount and premium payable with respect to an optional redemption
on such Securities on December 1, 2006, together with scheduled payments of
interest from the Redemption Date to December 1, 2006 (the "Remaining Life")
discounted to the Redemption Date on a semi-annual basis (assuming a 360-day
year consisting of 30-day months) at the Adjusted Treasury Rate, plus, in each
case, accrued interest thereon to the Redemption Date.
For so long as the Trust is the Holder of all Securities
Outstanding, the proceeds of any redemption described in this Section 1201 shall
be used by the Trust to redeem Common Securities and Capital Securities in
accordance with their terms. The Company shall not redeem the Securities in part
unless all accrued and unpaid interest has
<PAGE>
60
been paid in full on all Securities outstanding for all semi-annual interest
periods terminating on or prior to the Redemption Date.
SECTION 1202. Applicability of Article.
Redemption of Securities at the election of the Company, as
permitted by Section 1201, shall be made in accordance with such provision and
this Article.
SECTION 1203. Election to Redeem; Notice to Trustee.
The election of the Company to redeem Securities pursuant to
Section 1201 shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company, the Company shall, at least 45 (unless a shorter
notice period shall be satisfactory to the Trustee) days and no more than 60
days prior to the Redemption Date fixed by the Company, notify the Trustee of
such Redemption Date and of the principal amount of Securities to be redeemed
and provide a copy of the notice of redemption given to Holders of Securities to
be redeemed pursuant to Section 1205.
SECTION 1204. Selection by Trustee of Securities to be Redeemed.
If less than all the Securities are to be redeemed (unless
such redemption affects only a single Security), the particular Securities to be
redeemed shall be selected by lot (or such other method of selection as the
Trustee may customarily employ) not more than 60 days prior to the Redemption
Date by the Trustee, from the Outstanding Securities not previously called for
redemption.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption as aforesaid and, in case of any
Securities selected for partial redemption as aforesaid, the principal amount
thereof to be redeemed.
The provisions of the two preceding paragraphs shall not apply
with respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has been
or is to be redeemed.
SECTION 1205. Notice of Redemption.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at his address
appearing in the Security Register.
<PAGE>
61
All notices of redemption shall identify the Securities to be
redeemed (including CUSIP number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date, and
(4) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company.
SECTION 1206. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an amount
of money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all the
Securities which are to be redeemed on that date; PROVIDED, HOWEVER, that any
such deposit on a Redemption Date shall be initiated prior to 1:00 p.m.
(New York time) in same-day funds.
SECTION 1207. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such Securities shall cease to bear interest. Upon surrender
of any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest to the Redemption Date; PROVIDED, HOWEVER, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at the rate borne by the Security.
SECTION 1208. Securities Redeemed in Part.
<PAGE>
62
Any Security which is to be redeemed only in part shall be
surrendered at a place of payment therefor (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
therefor or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in aggregate principal amount equal to
and in exchange for the unredeemed portion of the principal of the Security so
surrendered.
<PAGE>
63
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
BARNETT BANKS, INC.
/s/ Hinton F. Nobles, Jr.
By:_________________________________________
Name: Hinton F. Nobles, Jr.
Title: Executive Vice President
/s/ Catherine C. Cosby
Attest:__________________________
Catherine C. Cosby
Secretary
THE FIRST NATIONAL BANK OF
CHICAGO
/s/ Mary R. Fonti
By:_________________________________________
Name: Mary R. Fonti
Title: Assistant Vice President
/s/ illegible signature
Attest:___________________________
<PAGE>
Barnett Banks, Inc.
NB Holdings Corporation
NationsBank Corporation
8.06% Junior Subordinated Debentures due 2026
FIRST SUPPLEMENTAL INDENTURE
Dated as of January 9, 1998
Supplementing the Indenture, dated
as of November 27, 1996, between
Barnett Banks, Inc. and
The First National Bank of Chicago,
a national banking association,
as Trustee
The First National Bank of Chicago,
Trustee
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of January 9, 1998 (the "First
Supplemental Indenture"), among NationsBank Corporation, a North Carolina
corporation ("NationsBank"), NB Holdings Corporation, a Delaware corporation
("Holdings"), Barnett Banks, Inc., a Florida corporation ("Barnett"), and The
First National Bank of Chicago, as Trustee (the "Trustee") under the Indenture
referred to herein;
WHEREAS, Barnett and the Trustee heretofore executed and delivered an
Indenture, dated as of November 27, 1996 (the "Indenture"); and
WHEREAS, pursuant to the Indenture Barnett issued and the Trustee
authenticated and delivered $300 million aggregate principal amount of 8.06%
Junior Subordinated Debentures, due 2026 (the "Securities"); and
WHEREAS, NationsBank, Holdings and Barnett have entered into the
Agreement and Plan of Merger, dated as of August 29, 1997, and amended as of
November 18, 1997, pursuant to which Barnett will merge with and into Holdings
(the "Barnett Merger") on the date hereof; and
WHEREAS, Section 801 of the Indenture provides that in the case of the
Barnett Merger, Holdings shall expressly assume by supplemental indenture all
the obligations under the Securities and the Indenture; and
WHEREAS, NationsBank, as the holder of 100% of the outstanding capital
stock of Holdings, desires to assume, jointly and severally with Holdings, all
of the rights and obligations under the Securities and Indenture that are
required to be assumed by Holdings pursuant to Section 801 of the Indenture; and
WHEREAS, Section 901 of the Indenture provides that Barnett and the
Trustee may amend the Indenture and the Securities without notice to or consent
of any Holders of the Securities in order to comply with Article Eight of the
Indenture; and
WHEREAS, this First Supplemental Indenture has been duly authorized by
all necessary corporate action on the part of each of NationsBank, Holdings and
Barnett.
-2-
<PAGE>
NOW, THEREFORE, NationsBank, Holdings, Barnett and the Trustee agree as
follows for the equal and ratable benefit of the Holders of the Securities:
ARTICLE I
ASSUMPTION BY SUCCESSOR CORPORATION
AND ITS PARENT ENTITY
SECTION 1.1. Assumption of the Securities. NationsBank hereby expressly
assumes, jointly and severally with Holdings, the due and punctual payment of
the principal of and interest on the Securities and the performance of every
covenant of the Indenture on the part of Barnett to be performed or observed.
SECTION 1.2. Trustee's Acceptance. The Trustee hereby accepts this
First Supplemental Indenture and agrees to perform the same under the terms and
conditions set forth in the Indenture.
ARTICLE II
MISCELLANEOUS
SECTION 2.1. Effect of Supplemental Indenture. Upon the later to occur
of (i) the execution and delivery of this First Supplemental Indenture by
NationsBank, Holdings, Barnett and the Trustee and (ii) the consummation of the
Barnett Merger, the Indenture shall be supplemented in accordance herewith, and
this First Supplemental Indenture shall form a part of the Indenture for all
purposes, and every Holder of Securities heretofore or hereafter authenticated
and delivered under the Indenture shall be bound thereby.
SECTION 2.2. Indenture Remains in Full Force and Effect. Except as
supplemented hereby, all provisions in the Indenture shall remain in full force
and effect.
SECTION 2.3. Indenture and Supplemental Indenture Construed Together.
This First Supplemental Indenture is an indenture supplemental to and in
implementation of the Indenture, and the Indenture and this First Supplemental
Indenture shall henceforth be read and construed together.
SECTION 2.4. Confirmation and Preservation of Indenture. The Indenture
as supplemented by this First Supplemental Indenture is in all respect confirmed
and preserved.
SECTION 2.5. Conflict with Trust Indenture Act. If any provision of
this First Supplemental Indenture limits, qualifies or conflicts with any
<PAGE>
provision of the Trust Indenture Act ("TIA") that is required under the TIA to
be part of and govern any provision of this First Supplemental Indenture, the
provision of the TIA shall control. If any provision of this First Supplemental
Indenture modifies or excludes any provision of the TIA that may be so modified
or excluded, the provision of the TIA shall be deemed to apply to the Indenture
as so modified or to be excluded by this First Supplemental Indenture, as the
case may be.
SECTION 2.6. Severability. In case any provision in this First
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 2.7. Terms Defined in the Indenture. All capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Indenture.
SECTION 2.8. Headings. The Article and Section headings of this First
Supplemental Indenture have been inserted for convenience of reference only, are
not to be considered part of this Supplemental Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 2.9. Benefits of First Supplemental Indenture, etc. Nothing in
this First Supplemental Indenture or the Securities, express or implied, shall
give to any Person, other than the parties hereto and thereto and their
successors hereunder and thereunder and the Holders of the Securities, any
benefit of any legal or equitable right, remedy or claim under the Indenture,
this First Supplemental Indenture or the Securities.
SECTION 2.10. Successors. All agreements of Holdings and NationsBank in
this First Supplemental Indenture shall bind their successors. All agreements of
the Trustee in this First Supplemental Indenture shall bind its successors.
SECTION 2.11. Trustee Not Responsible for Recitals. The recitals
contained herein shall be taken as the statements of Barnett, NationsBank and
Holdings, and the Trustee assumes no responsibility for their correctness.
SECTION 2.12. Certain Duties and Responsibilities of the Trustees. In
entering into this First Supplemental Indenture, the Trustee shall be entitled
to the benefit of every provision of the Indenture relating to the conduct or
affecting the liability or affording protection to the Trustee, whether or not
elsewhere herein so provided.
-4-
<PAGE>
SECTION 2.13. Governing Law. This First Supplemental Indenture shall be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 2.14. Counterpart originals. The parties may sign any number of
copies of this First Supplemental Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Indenture to be duly executed as of the date first written above.
NationsBank Corporation
By: /s/ John E. Mack
---------------------------------------
Name: John E. Mack
Title: Senior Vice President
NB Holdings Corporation
By: /s/ John E. Mack
---------------------------------------
Name: John E. Mack
Title: Senior Vice President
Barnett Banks, Inc.
By: /s/Charles E. Rice
---------------------------------------
Name: Charles E. Rice
Title: Chairman and CEO
The First National Bank of Chicago, as Trustee
By: /s/ Richard D. Manella
---------------------------------------
Name: Richard D. Manella
Title: Vice President
-6-
AMENDMENT TO THE
NATIONSBANK CORPORATION AND DESIGNATED SUBSIDIARIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, NationsBank Corporation ("NationsBank") and certain of its
subsidiary corporations (collectively with NationsBank, the "Participating
Employers") maintain the NationsBank Corporation and Designated Subsidiaries
Supplemental Executive Retirement Plan (the "Plan"); and
WHEREAS, NationsBank desires to amend the Plan to change the mortality
table to be used in the calculation of a participant's "commuted payment amount"
from the 1971 Group Annuity Mortality Table to the 1983 Group Annuity Mortality
Table; and
WHEREAS, the Compensation Committee of the Board of Directors of
NationsBank has authorized and approved said amendment to the Plan in accordance
with the provisions of Article VI of the Plan;
NOW, THEREFORE, NationsBank does hereby declare that the Plan is hereby
amended effective as of the date hereof as follows:
1. The second sentence of Section III. of Exhibit B to the Plan is amended
to read as follows: "To the extent that benefits are payable over the
lifetime(s) of one or more individuals, the AESSV shall also be based on the
1983 Group Annuity Mortality Table."
2. Except as expressly or by necessary implication amended hereby, the Plan
shall continue in full force and effect.
IN WITNESS WHEREOF, NationsBank has caused this instrument to be executed
by its duly authorized officer as of the 27th day of March, 1996.
NATIONSBANK CORPORATION
By: /s/ C. J. COOLEY
------------------------
C. J. Cooley
Executive Vice President
"NationsBank"
<PAGE>
AMENDMENT TO THE
NATIONSBANK CORPORATION AND DESIGNATED SUBSIDIARIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, NationsBank Corporation ("NationsBank") and certain of its
subsidiary corporations (collectively with NationsBank, the "Participating
Employers") maintain the NationsBank Corporation and Designated Subsidiaries
Supplemental Executive Retirement Plan (the "Plan"); and
WHEREAS, NationsBank desires to amend the Plan to modify the procedure
under which Participants may elect to have their benefits under the Plan paid in
a single cash payment; and
WHEREAS, the Compensation Committee of the Board of Directors of
NationsBank has authorized and approved said amendment to the Plan in accordance
with the provisions of Article VI of the Plan;
NOW, THEREFORE, NationsBank does hereby declare that the Plan is hereby
amended effective as of the date hereof as follows:
1. Section 4.12 of the Plan is amended to read as follows:
"Section 4.12. Special Election for Single Cash Payment.
Notwithstanding any provisions of the Plan to the contrary, a Participant
may elect to have the Participant's benefits under the Plan paid in a
single cash payment to such Participant, and a Participant's surviving
Eligible Spouse may elect to have the benefits payable under Section 4.6 of
the Plan after a Participant's death while in Service paid in a single cash
payment to such Participant's surviving Eligible Spouse under the following
terms and conditions and in lieu of the method otherwise applicable under
the provisions of this Article IV:
(i) The Participant or the Participant's surviving Eligible
Spouse, as the case may be, must make such election at least thirty
(30) days prior to the date benefit payments under the Plan would
otherwise commence to the Participant or the Participant's surviving
Eligible Spouse.
(ii) Any election under this Section 4.12 shall be irrevocable.
<PAGE>
(iii) An election under this Section 4.12 may be made only with
respect to (1) those benefits payable under Sections 4.2, 4.3 and 4.4
of the Plan upon a Participant's Retirement or (2) those benefits
payable under Section 4.6 of the Plan upon a Participant's death while
in Service.
(iv) The amount of the single cash payment payable under this
Section 4.12 upon a Participant's Retirement shall be the Commuted
Payment Amount determined for such Participant as of the date of such
Participant's Retirement.
(v) The amount of the single cash payment payable under this
Section 4.12 upon a Participant's death while in Service [or, to the
extent provided in Section 4.6(b), while Disabled] shall be the
actuarially equivalent single sum value of the benefits (if any)
provided for in Section 4.6(c) determined as of the date of the
Participant's death using assumptions consistent with those set forth
in Exhibit B to the Plan.
(vi) Any election under this Section 4.12 shall not be effective
unless approved by (i) the Compensation Committee if the Participant
is an executive officer of NationsBank Corporation or the Principal
Corporate Personnel Officer of NationsBank Corporation or (ii) the
Management Compensation Committee in the case of any other
Participant, and in either case the applicable committee may approve
or disapprove the election in its sole and exclusive discretion. The
single cash payment shall be made within thirty (30) days of the
approval of such election by the applicable committee."
2. Except as expressly or by necessary implication amended hereby, the
Plan shall continue in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, NationsBank has caused this instrument to be
executed by its duly authorized officer as of the 25th day of June, 1997.
NATIONSBANK CORPORATION
By: /s/ C. J. Cooley
-------------------------
C. J. Cooley
Executive Vice President
3
June 27, 1997
Mr. Fredric J. Figge, II
2225 Sharon Lane
Charlotte, North Carolina 28211
In re: Supplemental Retirement Benefits
Dear Fred:
The purpose of this letter is to confirm our understanding and agreement about
the supplemental retirement arrangement provided for you in your July 27, 1987
letter agreement in connection with your retirement from NationsBank effective
December 31, 1997.
As you know, the 1987 letter agreement provided you with a "target" annual
retirement benefit from all sources (including The NationsBank Pension Plan, the
NationsBank Supplemental Retirement Plan, your vested Chase retirement benefits
and Social Security) equal to 50% of your final average annual earnings payable
as a joint and 50% survivor benefit if you retired at age 62. You would have
become eligible for this "age 62" benefit if you had remained with NationsBank
until October 1998.
In connection with your retirement, NationsBank has agreed to modify your 1987
letter agreement to provide you with your "age 62" target annual retirement
benefit even though you are leaving before October 1998. The amount of your
target annual retirement benefit will be $830,000, which has been calculated
using your actual compensation from 1994 through 1996 plus (i) your 1997 base
salary of $700,000 and an assumed 1997 bonus of $1.2 million and (ii) assumed
1998 salary and bonus through October 31, 1998 that is equal to five-sixths
(i.e., 10 months) of your 1997 salary and assumed 1997 bonus. Attached to this
letter is a schedule illustrating this calculation. The actual amount of your
1997 bonus will be determined in accordance with the provisions of the
NationsBank Executive Incentive Compensation Plan.
This $830,000 target annual retirement benefit will be reduced dollar-for-dollar
by (i) your December 31, 1997 annual retirement benefit under The NationsBank
Pension Plan and the NationsBank Supplemental Retirement Plan payable as a joint
and 50% survivor annuity and reduced for early commencement under the terms and
actuarial assumptions of those plans, (ii) your annual retirement benefit you
earned at Chase payable as a joint and 50% survivor annuity and reduced for
early commencement under the terms and actuarial assumptions of the Chase plan
and (iii) your annual Social
Security benefit. We will provide you with calculations of these offset benefits
prior to December 31, 1997. The actual timing and form of payment of your
benefits from The
<PAGE>
NationsBank Pension Plan, the NationsBank Supplemental Retirement Plan and the
Chase plan will be determined in accordance with the terms and provisions of
those plans.
The excess of your target annual retirement benefit after the reductions
described above will be payable to you as a monthly benefit beginning in January
1998 and continuing for your life, and if you are survived by your wife, she
will receive a survivor benefit equal to 50% of the benefit payable while you
are both alive beginning in the month after your death and continuing monthly
for the remainder of her life. All payments will be subject to applicable
payroll and withholding taxes.
Also, you will be treated as having "retired" for purposes of your outstanding
stock option awards from the NationsBank Key Employee Stock Plan. This means
that your options will become 100% vested as of December 31, 1997 and that you
will have 36 months from that date to exercise those options.
This letter agreement supersedes the provisions of your 1987 letter agreement
with respect to your supplemental retirement benefits. This letter agreement is
conditioned on your executing the attached Noncompetition Agreement. This letter
agreement is also conditioned on its approval by the Compensation and Stock
Option Committees of the NationsBank Board of Directors at their next regularly
scheduled meetings in December. If you are in agreement with this letter, please
sign and date the enclosed copy of this letter and both copies of the
Noncompetition Agreement, and return the signed copy of this letter and one copy
of the Noncompetition Agreement to me.
Sincerely,
/s/ C. J. Cooley
C. J. Cooley
ACCEPTED AND AGREED TO:
/s/ Fredric J. Figge, II
- - ----------------------------------------
Fredric J. Figge, II Date
<PAGE>
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT (the "Agreement") is made and entered
into as of the 31st day of December, 1997 by and between NATIONSBANK
CORPORATION, a North Carolina corporation ("NationsBank"), and FREDRIC J. FIGGE,
II ("Executive").
W I T N E S S E T H:
WHEREAS, as of the date hereof, Executive is retiring from NationsBank;
and
WHEREAS, during his period of employment Executive has served
NationsBank in executive capacities, including most recently as Chairman,
Corporate Risk Policy; and
WHEREAS, Executive has acquired extensive knowledge of NationsBank's
business methods, customers and employees; and
WHEREAS, the parties hereto desire to enter into this Agreement
restricting the activities of Executive in retirement in an effort to protect
NationsBank's legitimate business interests;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly controlling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, including any
amendments hereto made in accordance with paragraph 7(d) hereof.
"Company" means (i) NationsBank, (ii) any corporation, partnership or
other business entity that is, directly or indirectly, controlled by or under
common control with NationsBank and (iii) their respective successors.
"Covenant Period" means the period beginning on the date of this
Agreement and ending on the date of Executive's death.
2. Consideration. In consideration for Executive's covenants and
obligations under this Agreement, NationsBank has agreed to provide Executive
with a supplemental target annual retirement benefit payable beginning January
1998 for Executive's life pursuant to a letter
<PAGE>
agreement between Executive and NationsBank dated August 28, 1997 (the
"Supplemental Retirement Benefits").
3. Executive's Obligations in Connection with His Termination of
Employment with the Company.
(a) Nonsolicitation of Employees. During the Covenant Period,
Executive agrees not to hire, directly or indirectly, or entice or participate
in any efforts to entice to leave the Company's employ, any person who was or is
a "key employee" (as hereinafter defined) of the Company during 1997. For
purposes of this Agreement, "key employee" means an employee who has an
annualized rate of base salary equaling or exceeding fifty thousand dollars
($50,000).
(b) Noncompetition. During the Covenant Period, Executive
agrees not to engage in any manner, whether as an officer, employee, owner,
partner, stockholder, director, consultant or otherwise -- directly or
indirectly -- in any business which engages or attempts to engage, directly or
indirectly, in any business in which the Company engages within the United
States, as determined by NationsBank in its reasonable discretion; provided,
however, that Executive may (i) acquire an interest in a business entity so long
as such interest is a passive investment of Executive not exceeding five percent
(5%) of the total ownership interest in such entity or (ii) engage in any other
activities as approved in writing in advance by NationsBank.
(c) Trade Secrets and Confidential Information. Executive
hereby agrees that he will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose any Trade Secret,
as defined hereinafter, that Executive may have acquired during the term of his
employment by the Company for so long as such information remains a Trade
Secret. The term "Trade Secret" as used in this Agreement shall mean information
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or suppliers which derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable efforts by the
Company to maintain its secrecy.
In addition to the foregoing and not in limitation thereof,
Executive agrees that during the Covenant Period he will hold in a fiduciary
capacity for the benefit of the Company and shall not directly or indirectly use
or disclose, any Confidential or Proprietary Information, as defined
hereinafter, that Executive may have acquired (whether or not developed or
compiled by Executive and whether or not Executive was authorized to have access
to such Information) during the term of, in the course of or as a result of his
employment by the Company. The term "Confidential or Proprietary Information" as
used in this Agreement means any secret, confidential or proprietary information
of the Company not otherwise included in the definition of "Trade Secret" above.
The term "Confidential and Proprietary Information" does not include information
that has become generally available to the public by the act of one who has the
right to disclose such information without violating any right of the Company.
2
<PAGE>
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions of this Agreement, including
without limitation the Covenant Period, are reasonable, fair and equitable in
scope, term and duration, are necessary to protect the legitimate business
interests of NationsBank, and are a material inducement to NationsBank to enter
into this Agreement and the letter agreement providing for the Supplemental
Retirement Benefits. Executive covenants that Executive will not challenge the
enforceability of this Agreement nor will Executive raise any equitable defense
to its enforcement.
5. Remedies. In the event Executive breaches any provision of this
Agreement, Executive shall forfeit and have no right to receive any of the
Supplemental Retirement Benefits due and payable from and after the date of such
breach (including without limitation any survivor benefits otherwise payable to
Executive's spouse).
6. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive.
7. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remainder of this Agreement shall remain
operative and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of North
Carolina, not including the choice-of-law rules thereof.
(d) Amendment; Waiver. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by each
of the parties hereto. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver
3
<PAGE>
or consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
(f) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
(g) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, none of which need contain the signatures of all
parties hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
NATIONSBANK CORPORATION
By: /s/ C. J. Cooley
--------------------------------
Name: C. J. Cooley
------------------------
Title: Executive Vice President
------------------------
"NationsBank"
/s/ Fredric J. Figge, II [SEAL]
--------------------------------
Fredric J. Figge, II
"Executive"
4
NATIONSBANK CORPORATION
EXECUTIVE INCENTIVE COMPENSATION PLAN
(as amended and restated effective January 1, 1997)
THIS INSTRUMENT OF AMENDMENT AND RESTATEMENT is executed as of the 22nd day
of January, 1997 by NATIONSBANK CORPORATION, a North Carolina corporation (the
"Corporation").
Statement of Purpose
The Corporation maintains the NationsBank Corporation Executive Incentive
Compensation Plan (the "Plan") pursuant to which certain covered employees of
the Corporation may receive annual incentive compensation based on the annual
performance of the Corporation consistent with the "performance-based
compensation" requirements of Section 162(m) of the Internal Revenue Code. The
Corporation desires to amend the Plan effective January 1, 1997 to change the
annual incentive compensation formula under the Plan to a fixed award formula of
0.20% of the Corporation's Net Income for each Covered Employee. The Corporation
believes that such amendment can best be effected by amending and restating the
Plan in its entirety effective as of January 1, 1997. In accordance with
paragraph 7 of the Plan, such amendment and restatement of the Plan has been
approved by the Board of Directors of the Corporation, and in accordance with
paragraph 6 of the Plan, such amendment and restatement shall not be effective
unless approved and ratified by the shareholders of the Corporation.
NOW, THEREFORE, the Plan is hereby amended and restated in its entirety to
consist of the following paragraphs 1 through 11 effective as of the date
hereof:
1. Name:
This plan shall be known as the "NationsBank Corporation Executive
Incentive Compensation Plan" (the "Plan").
2. Purpose and Intent:
NationsBank Corporation (the "Corporation") established this Plan effective
January 1, 1994 for the purpose of providing certain of its senior executive
officers with annual incentive compensation based on the annual performance of
the Corporation measured by objective corporate financial performance measures.
This amendment and restatement is effective January 1, 1997. The intent of the
Plan is to provide "performance-based compensation" within the meaning of
Section 162(m)(4)(C) of the Code. The provisions of the Plan shall be construed
and interpreted to effectuate such intent.
3. Definitions:
For purposes of the Plan, the following terms shall have the following
meanings:
(a) "Account" means the account established and maintained on the books of
the Corporation to record a Covered Employee's interest under the Plan
attributable to amounts
<PAGE>
credited to the Covered Employee pursuant to paragraph 10(b) below, as adjusted
from time to time pursuant to the terms of the Plan.
(b) "Claim" means a claim for benefits under the Plan.
(c) "Claimant" means a person making a Claim.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and references thereto shall include the valid Treasury regulations
thereunder.
(e) "Committee" means all of the members of the Compensation Committee of
the Board of Directors of the Corporation who are Outside Directors.
(f) "Covered Employee" for a Plan Year means any employee of the
Corporation whose compensation is anticipated to be subject to the provisions of
Section 162(m) of the Code and who is designated by the Committee prior to April
1 of such Plan Year as a "Covered Employee" under the Plan for such Plan Year,
and any other key employee of the Corporation designated by the Committee prior
to April 1 of a Plan Year as a "Covered Employee" under the Plan for such Plan
Year.
(g) "Mirror Rate Method" means a method for determining the adjustment to a
Covered Employee's Account for a month such that the level of investment return
for the Account for such month substantially equals the aggregate level of
investment return for such month of all of the Covered Employee's accounts under
The NationsBank Retirement Savings Plan (the "Savings Plan") that are invested
in the Investment Trust under the Savings Plan other than amounts mandatorily
invested in the common stock of the Corporation under the Investment Trust. For
this purpose, amounts shall be deemed to be mandatorily invested in the common
stock of the Corporation even if the Covered Employee is eligible to make a
diversification election under the Savings Plan with respect to such common
stock. However, once such a diversification election is in fact made by a
Covered Employee, amounts transferred out of such mandatorily invested account
in accordance with such election shall be included in determining the aggregate
level of investment return under the Mirror Rate Method for the Covered Employee
from and after the effective date of such election.
(h) "Net Income" means, with respect to a Plan Year, "net income" of the
Corporation for such Plan Year determined in accordance with generally accepted
accounting principles that would be reported in the Corporation's Annual Report
to Shareholders for such Plan Year assuming payment of all awards under the Plan
for such Plan Year without reduction by the Committee.
(i) "Outside Director" means an "outside director" within the meaning of
Section 162(m)(4)(C)(i) of the Code.
(j) "Plan Year" means the fiscal year of the Corporation beginning January
1 and ending December 31.
(k) "Single Sum Value" of the Account of a Covered Employee who is
receiving annual installments pursuant to paragraph 10(f) means the single sum
present value of the
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<PAGE>
installments determined as of the relevant determination date using for such
purpose as the discount rate the same rate that was used in calculating the
amount of the installments pursuant to paragraph 10(f) below.
(l) "30-Year Treasury Rate Method" means a method for determining the
adjustment to a Covered Employee's Account for a month such that the level of
investment return of the Account for such month substantially equals the ask
yield of the most recent auction of 30-year Treasury bonds, as quoted for the
last business day of the immediately preceding calendar month in the Wall Street
Journal (Eastern Edition), or if such quotations are not available in the Wall
Street Journal, in a similar financial publication selected by the Committee.
4. Administration:
The Committee shall be responsible for administering the Plan. The
Committee shall have all of the powers necessary to enable it to properly carry
out its duties under the Plan. Not in limitation of the foregoing, the Committee
shall have the power to construe and interpret the Plan and to determine all
questions that shall arise thereunder. The Committee shall have such other and
further specified duties, powers, authority and discretion as are elsewhere in
the Plan either expressly or by necessary implication conferred upon it. The
Committee may appoint such agents, who need not be members of the Committee, as
it may deem necessary for the effective performance of its duties, and may
delegate to such agents such powers and duties as the Committee may deem
expedient or appropriate that are not inconsistent with the intent of the Plan.
The decision of the Committee upon all matters within its scope of authority
shall be final and conclusive on all persons, except to the extent otherwise
provided by law.
5. Operation:
(a) Prior to April 1 of a Plan Year, the Committee shall designate the
Covered Employees for the Plan Year.
(b) Subject to the Committee's discretion to reduce awards under the Plan,
each Plan Year each Covered Employee for such Plan Year shall be entitled to an
award under the Plan equal to two-tenths of one percent (0.20%) of the
Corporation's Net Income for such Plan Year.
(c) Notwithstanding the provisions of paragraph 5(b) to the contrary, the
Committee in its sole and exclusive discretion may reduce (including a reduction
to zero) any award to a Covered Employee otherwise payable under the Plan for a
Plan Year.
(d) In accordance with Section 162(m)(4)(C)(iii) of the Code, prior to any
payment under the Plan for a Plan Year, the Committee shall certify in writing
the amount of Net Income for such Plan Year.
(e) Unless deferred pursuant to the provisions of paragraph 10, a Covered
Employee's award under the Plan for a Plan Year shall be paid by the Corporation
to such Covered Employee in cash, less applicable payroll and withholding taxes,
within seventy-five (75) days after the certification by the Committee as
provided in paragraph 5(d).
3
<PAGE>
(f) If the employment of a Covered Employee for a Plan Year is terminated
for any reason during the Plan Year, the Covered Employee shall not receive any
award under the Plan for such Plan Year.
(g) Notwithstanding any provision of the Plan to the contrary, a reduction
in the amount otherwise payable to a Covered Employee for a Plan Year as
provided in paragraph 5(c) or paragraph 5(f) above shall not result in a
recalculation of Net Income for such Plan Year.
6. Shareholder Approval:
In accordance with Section 162(m)(4)(C)(ii) of the Code, the effectiveness
of this amendment and restatement of the Plan is subject to its approval and
ratification by the shareholders of the Corporation after disclosure to the
shareholders of the Corporation of the material terms of the Plan, such approval
and ratification to be obtained (i) at the annual shareholders' meeting of the
Corporation scheduled for April 1997 and (ii) at such other times as required by
Section 162(m)(4)(C)(ii) of the Code.
7. Amendment, Modification and Termination of the Plan:
(a) General. The Board of Directors of the Corporation may amend, modify or
terminate the Plan at any time, provided that no amendment, modification or
termination of the Plan shall reduce the amount payable to a Covered Employee
under the Plan as of the date of such amendment, modification or termination.
(b) Effect on Deferred Amounts Under the Plan. Notwithstanding any
provision of the Plan to the contrary, no amendment, modification or termination
of the Plan shall reduce the amount actually credited to a Covered Employee's
Account under the Plan on the date of such amendment, modification or
termination, or further defer the due dates for the payment of such amounts,
without the consent of the affected Covered Employee. Notwithstanding the
provisions of paragraph 10(d), in connection with any termination of the Plan
the Committee shall have the authority to cause the Accounts of all Covered
Employees to be paid in a single sum payment as of a date determined by the
Committee or to otherwise accelerate the payment of all Accounts in such manner
as the Committee shall determine in its discretion. In that regard, upon any
termination of the Plan the amount of any payment to a Covered Employee (or
beneficiary of a deceased Covered Employee) who is receiving annual installments
pursuant to paragraph 10(f) shall be the Single Sum Value of the Covered
Employee's Account determined as of the selected determination date.
8. Applicable Law:
The Plan shall be construed, administered, regulated and governed in all
respects under and by the laws of the United States to the extent applicable,
and to the extent such laws are not applicable, by the laws of the state of
North Carolina.
9. Miscellaneous:
A Covered Employee's rights and interests under the Plan may not be
assigned or transferred by the Covered Employee. To the extent the Covered
Employee acquires a right to
4
<PAGE>
receive payments from the Corporation under the Plan, such right shall be no
greater than the right of any unsecured general creditor of the Corporation.
Nothing contained herein shall be deemed to create a trust of any kind or any
fiduciary relationship between the Corporation and the Covered Employee.
Designation as a Covered Employee in the Plan shall not entitle or be deemed to
entitle a Covered Employee to continued employment with the Corporation.
10. Deferral of Amounts Payable Under the Plan:
(a) Elections to Defer. Each Covered Employee for a Plan Year shall be
given the opportunity to irrevocably elect, on a form provided by the Committee,
to defer all or a portion of any amount that may become payable to such Covered
Employee under the Plan for such Plan Year. In order to be effective, a Covered
Employee's election to defer must be executed and returned to the Committee on
or before the date specified by the Committee for such purpose.
(b) Establishment of Accounts. The Corporation shall establish and maintain
on its books an Account for each Covered Employee making an election to defer
under this paragraph 10. Each Account shall be designated by the name of the
Covered Employee for whom established. Any amount otherwise allocable to the
Covered Employee under the formula established for a Plan Year that is deferred
by the Covered Employee under this paragraph 10 shall be credited to the Covered
Employee's Account as of the date such amount would have otherwise been paid to
the Covered Employee.
(c) Account Adjustments. Each Account shall be adjusted on a monthly basis
pursuant to either the Mirror Rate Method or the 30-Year Treasury Rate Method.
Each Covered Employee with an Account shall be given an opportunity to elect
between the Mirror Rate Method and the 30-Year Treasury Rate Method for such
purpose. To be effective, such election must be made at such times, on such
forms and pursuant to such procedures as established by the Committee in its
sole discretion from time to time. An election once made shall remain in effect
unless and until changed by the Covered Employee in accordance with this
paragraph 10(c). If a Covered Employee fails to make an election under this
paragraph 10(c), the method for making adjustments to the Covered Employee's
Account shall be the 30-Year Treasury Rate Method. If a Covered Employee has
elected the Mirror Rate Method, and subsequently the Covered Employee ceases to
have any account balances under the Savings Plan upon which the Mirror Rate
Method is based (e.g., as a result of an in-service withdrawal of the Covered
Employee's accounts under the Savings Plan after attaining age 59-1/2), then the
method for making adjustments to the Covered Employee's Account shall
automatically be changed to the 30-Year Treasury Rate Method beginning effective
with the calendar month in which the Covered Employee ceases to have such
Savings Plan account balances.
(d) Payment Options.
(i) A Covered Employee who first elects to defer amounts under this
paragraph 10 after having attained age fifty-four (54) shall, at the time
of the Covered Employee's initial deferral election, irrevocably elect one
of the payment options described in subparagraph (iii) below.
(ii) For a Covered Employee who first elects to defer amounts under
this paragraph 10 before having attained age fifty-four (54), such Covered
5
<PAGE>
Employee shall, upon attainment of age fifty-four (54), be given the
opportunity to irrevocably elect one of the payment options described in
subparagraph (iii) below.
(iii) The payment options from which a Covered Employee may elect are
as follows: (A) single cash payment, (B) five (5) annual installments or
(C) ten (10) annual installments, as such methods are more fully described
below.
(iv) Any election made under this paragraph 10(d) shall be made on
such forms, at such time and pursuant to such procedures as determined by
the Committee in its sole discretion from time to time. An election made
under subparagraph (i) shall be immediately effective. An election made
under subparagraph (ii) shall not become effective until the first
anniversary of the date of such election. In addition, the Committee may
establish special procedures for the first Plan Year in which such election
becomes available for Covered Employees who are age fifty-four (54) and
older, provided that any such election is not effective for at least twelve
(12) months from the date made.
(v) For a Covered Employee who does not yet have an election in effect
under this paragraph 10(d) or for a Covered Employee who fails to elect a
payment option under this paragraph 10(d), the method of payment shall be
the single cash payment.
(e) Single Cash Payment. If a Covered Employee who is to be paid by the
single cash payment method pursuant to paragraph 10(d) terminates employment
with the Corporation, then such Covered Employee's Account shall continue to be
credited with monthly adjustments under paragraph 10(c) through March 31 of the
calendar year immediately following the calendar year of such termination of
employment, except that the rate for such monthly adjustments for the calendar
month of such termination of employment through such March 31 shall be the
30-year Treasury bond ask yield for the last business day of the calendar month
immediately preceding such termination of employment (regardless of the method
of Account adjustment elected by the Covered Employee under paragraph 10(d)
above). The final Account balance as of such March 31 shall be paid in a single
cash payment to the Covered Employee (or to the Covered Employee's designated
beneficiary in the case of the Covered Employee's termination of employment as
the result of the Covered Employee's death) on or about such March 31.
(f) Annual Installments. If a Covered Employee who is to be paid by one of
the annual installment payment methods pursuant to paragraph 10(d) terminates
employment with the Corporation, the amount of such annual installments shall be
calculated and paid pursuant to the provisions of this paragraph 10(f). The
first installment shall be paid on or about March 31 of the calendar year
immediately following the calendar year of such termination of employment, and
each subsequent installment shall be paid on or about each subsequent March 31.
The amount of the installments shall be calculated as follows: First, the
Covered Employee's Account shall continue to be credited with monthly
adjustments under paragraph 10(c) through such March 31, except that the rate
for such monthly adjustments for the calendar month of such termination of
employment through such March 31 shall be the 30-year Treasury bond ask yield
for the last business day of the calendar month immediately preceding such
termination of
6
<PAGE>
employment (regardless of the method of Account adjustment elected by the
Covered Employee under paragraph 10(d) above). The amount of the annual
installments shall then be calculated, based on the Account balance as of such
March 31, as equal annual installments amortized over the selected period using
the same 30-year Treasury bond ask yield. If a Covered Employee dies after the
effectiveness of the Covered Employee's election as to the method of payment
under paragraph 10(d) and the Covered Employee has selected annual installments,
such annual installments (or remaining annual installments in the case of death
after commencement of payment) shall be paid to the Covered Employee's
designated beneficiary.
(g) Other Payment Provisions. Subject to the provisions of paragraph 10(h)
below and paragraph 7 above, a Covered Employee shall not be paid any portion of
the Covered Employee's Account prior to the Covered Employee's termination of
employment with the Corporation. Any deferral or payment hereunder shall be
subject to applicable payroll and withholding taxes. For purposes of the Plan, a
Covered Employee shall be deemed to have terminated employment with the
Corporation upon such Covered Employee becoming eligible for benefits under the
NationsBank Long-Term Disability Plan as in effect from time to time. In the
event any amount becomes payable under the provisions of the Plan to a Covered
Employee, beneficiary or other person who is a minor or an incompetent, whether
or not declared incompetent by a court, such amount may be paid directly to the
minor or incompetent person or to such person's fiduciary (or attorney-in-fact
in the case of an incompetent) as the Committee, in its sole discretion, may
decide, and the Committee shall not be liable to any person for any such
decision or any payment pursuant thereto.
(h) Withdrawals on Account of an Unforeseeable Emergency. A Covered
Employee who is in active service with the Corporation may, in the Plan
Administrator's sole discretion, receive a refund of all or any part of the
amounts previously credited to the Covered Employee's Account in the case of an
"unforeseeable emergency." A Covered Employee requesting a payment pursuant to
this subparagraph (h) shall have the burden of proof of establishing, to the
Committee's satisfaction, the existence of such "unforeseeable emergency," and
the amount of the payment needed to satisfy the same. In that regard, the
Covered Employee shall provide the Committee with such financial data and
information as the Committee may request. If the Committee determines that a
payment should be made to a Covered Employee under this subparagraph (h), such
payment shall be made within a reasonable time after the Committee's
determination of the existence of such "unforeseeable emergency" and the amount
of payment so needed. As used herein, the term "unforeseeable emergency" means a
severe financial hardship to a Covered Employee resulting from a sudden and
unexpected illness or accident of the Covered Employee or of a dependent of the
Covered Employee, loss of the Covered Employee's property due to casualty, or
other similar extraordinary and unforeseeable circumstances arising as a result
of events beyond the control of the Covered Employee. The circumstances that
shall constitute an "unforeseeable emergency" shall depend upon the facts of
each case, but, in any case, payment may not be made to the extent that such
hardship is or may be relieved (i) through reimbursement or compensation by
insurance or otherwise, or (ii) by liquidation of the Covered Employee's assets,
to the extent the liquidation of such assets would not itself cause severe
financial hardship. Examples of what are not considered to be "unforeseeable
emergencies" include the need to send a Covered Employee's child to college or
the desire to purchase a home. Withdrawals of amounts because of an
"unforeseeable emergency" shall not exceed an amount reasonably needed to
satisfy the emergency need.
7
<PAGE>
(i) Statements of Account. Each Covered Employee shall receive an annual
statement of the Covered Employee's Account balance.
11. Claims Procedures:
(a) General. In the event that a Covered Employee or designated beneficiary
has a claim for benefits under the Plan (a "Claim"), such Claim shall be made by
such person's (the "Claimant") filing a notice thereof with the Committee within
ninety (90) days after such Claimant first has knowledge of such Claim. Each
Claimant who has submitted a Claim to the Committee shall be afforded a
reasonable opportunity to state such Claimant's position and to present evidence
and other material relevant to the Claim to the Committee for its consideration
in rendering its decision with respect thereto. The Committee shall render its
decision in writing within ninety (90) days after the Claim is referred to it,
unless special circumstances require an extension of such time within which to
render such decision, in which event such decision shall be rendered no later
than one hundred eighty (180) days after the Claim is referred to it. A copy of
such written decision shall be furnished to the Claimant.
(b) Notice of Decision of Committee. Each Claimant whose Claim has been
denied by the Committee shall be provided written notice thereof, which notice
shall set forth:
(i) the specific reason(s) for the denial;
(ii) specific reference to pertinent provision(s) of the Plan upon
which such denial is based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect such Claim and an explanation of why
such material or information is necessary; and
(iv) an explanation of the procedure hereunder for review of such
Claim;
all in a manner calculated to be understood by such Claimant.
(c) Review of Decision of Committee. Each such Claimant shall be afforded a
reasonable opportunity for a full and fair review of the decision of the
Committee denying the Claim. Such review shall be by the Committee. Such appeal
shall be made within ninety (90) days after the Claimant received the written
decision of the Committee and shall be made by the written request of the
Claimant or such Claimant's duly authorized representative of the Committee. In
the event of appeal, the Claimant or such Claimant's duly authorized
representative may review pertinent documents and submit issues and comments in
writing to the Committee. The Committee shall review the following:
(i) the initial proceedings of the Committee with respect to such
Claim;
(ii) such issues and comments as were submitted in writing by the
Claimant or the Claimant's duly authorized representative; and
8
<PAGE>
(iii) such other material and information as the Committee, in its
sole discretion, deems advisable for a full and fair review of the decision
of the Committee.
The Committee may approve, disapprove or modify the decision of the Committee,
in whole or in part, or may take such other action with respect to such appeal
as it deems appropriate. The decision of the Committee with respect to such
appeal shall be made promptly, and in no event later than sixty (60) days after
receipt of such appeal, unless special circumstances require an extension of
such time within which to render such decision, in which event such decision
shall be rendered as soon as possible and in no event later than one hundred
twenty (120) days following receipt of such appeal. The decision of the
Committee shall be in writing and in a manner calculated to be understood by the
Claimant and shall include specific reasons for such decision and set forth
specific references to the pertinent provisions of the Plan upon which such
decision is based. The Claimant shall be furnished a copy of the written
decision of the Committee. Such decision shall be final and conclusive upon all
persons interested therein, except to the extent otherwise provided by
applicable law.
IN WITNESS WHEREOF, this instrument has been executed by an authorized
officer of the Corporation as of the day and year first above written.
NATIONSBANK CORPORATION
By: /s/ C. J. Cooley
------------------------------
C. J. Cooley
Executive Vice President
"Corporation"
9
NationsBank
Corporation
Key Employee Stock Plan
Effective Date: January 1, 1995
(As amended and restated effective December 19, 1997)
<PAGE>
Contents
- - --------------------------------------------------------------------------------
Page
Article 1. Establishment, Purpose, and Duration.............................1
Article 2. Definitions.......................................................1
Article 3. Administration....................................................5
Article 4. Shares Subject to the Plan........................................6
Article 5. Eligibility and Participation....................................7
Article 6. Stock Options.....................................................7
Article 7. Stock Appreciation Rights.........................................9
Article 9. Performance Shares...............................................12
Article 10. Performance Measures............................................13
Article 11. Beneficiary Designation.........................................13
Article 12. Deferrals.......................................................13
Article 13. Rights of Key Employees.........................................14
Article 14. Change in Control...............................................14
Article 15. Amendment, Modification, and Termination.......................16
Article 16. Withholding.....................................................17
Article 17. Indemnification.................................................17
Article 18. Successors......................................................17
Article 19. Legal Construction..............................................17
<PAGE>
NationsBank Corporation
Key Employee Stock Plan
Article 1. Establishment, Purpose, and Duration
1.1 Establishment of the Plan. NationsBank Corporation, a North Carolina
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "NationsBank Corporation Key
Employee Stock Plan" (hereinafter referred to as the "Plan"), as set forth in
this document. The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock and
Performance Shares.
Subject to approval by the Company's shareholders, the Plan shall become
effective as of January 1, 1995 (the "Effective Date") and shall remain in
effect as provided in Section 1.3 hereof.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the success
and enhance the value of the Company by linking the personal interests of
Participants to those of the Company's shareholders, and by providing
Participants with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants upon whose
judgment, interest and special effort the successful conduct of its operation
largely is dependent.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan after December 31, 2004.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word is
capitalized:
2.1 "Award" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock or Performance Shares.
2.2 "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.
2.3 "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.4 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.5 "Change in Control" of the Company means, and shall be deemed to have
occurred upon, any of the following events:
<PAGE>
(a) The acquisition by any Person of Beneficial Ownership of
twenty-five percent (25%) or more of either:
(i) The then-outstanding Shares (the "Outstanding Shares"); or
(ii) The combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election
of Directors (the "Outstanding Voting Securities"); provided, however,
that the following acquisitions shall not constitute a Change in
Control: (A) any acquisition directly from the Company or pursuant to
a written agreement to which the Company is a party, as such written
agreement is more particularly described in Section 55-9A-01(b)(3)f
and g of the North Carolina Business Corporation Act as ratified by
the North Carolina General Assembly on June 8, 1989, (B) any
acquisition by the Company or any of its Subsidiaries, (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any of its Subsidiaries, (D) any
acquisition by any corporation with respect to which, following such
acquisition, more than fifty percent (50%) of, respectively, the
then-outstanding shares of common stock of such corporation and the
combined voting power of the then-outstanding voting securities of
such corporation entitled to vote generally in the election of
directors are then beneficially owned by all or substantially all of
the Persons who were the Beneficial Owners, respectively, of the
Outstanding Shares and Outstanding Voting Securities immediately prior
to such acquisition in substantially the same proportions as their
Beneficial Ownership, immediately prior to such acquisition, of the
Outstanding Shares and Outstanding Voting Securities, as the case may
be; or
(b) Individuals who, as of the Effective Date, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors; provided, however, that any
individual who becomes a Director subsequent to the Effective Date and
whose election, or whose nomination for election by the Company's
shareholders, to the Board of Directors was either (i) approved by a vote
of at least a majority of the Directors then comprising the Incumbent Board
or (ii) recommended by a Nominating Committee comprised entirely of
Directors who are then Incumbent Board members shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act), other actual or threatened solicitation of proxies or
consents or an actual or threatened tender offer; or
(c) Approval by the Company's shareholders of a reorganization,
merger, or consolidation, in each case, with respect to which all or
substantially all of the Persons who were the Beneficial Owners,
respectively, of the Outstanding Shares and Outstanding Voting Securities
immediately prior to such reorganization, merger, or consolidation do not,
following such reorganization, merger, or consolidation, beneficially own
more than fifty percent (50%) of, respectively, the then-outstanding shares
of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such reorganization,
merger, or consolidation in substantially the same proportions as their
Beneficial Ownership, immediately prior to such
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reorganization, merger, or consolidation, of the Outstanding Shares and
Outstanding Voting Securities, as the case may be; or
(d) Approval by the Company's shareholders of:
(i) A complete liquidation or dissolution of the Company; or
(ii) The sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, more than fifty
percent (50%) of, respectively, the then-outstanding shares of common
stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned by
all or substantially all of the Persons who were the Beneficial
Owners, respectively, of the Outstanding Shares and Outstanding Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their Beneficial Ownership,
immediately prior to such sale or other disposition, of the
Outstanding Shares and Outstanding Voting Securities, as the case may
be.
2.6 "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to the Code shall include the valid and binding governmental
regulations, court decisions and other regulatory and judicial authority issued
or rendered thereunder.
2.7 "Committee" means the Stock Option Committee of the Board, as specified
in Article 3 herein, appointed by the Board to administer the Plan with respect
to grants of Awards.
2.8 "Company" means NationsBank Corporation, a North Carolina corporation,
and any successor as provided in Article 18 herein.
2.9 "Director" means any individual who is a member of the Board of
Directors of the Company.
2.10 "Disability" with respect to a Participant, means "disability" as
defined from time to time under any long-term disability plan of the Company or
Subsidiary with which the Participant is employed.
2.11 "Earnings Per Share" means "earnings per common share" of the Company
determined in accordance with generally accepted accounting principles that
would be reported in the Company's Annual Report to Shareholders.
2.12 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.14 "Fair Market Value" shall be determined on the basis of the closing
sale price on the New York Stock Exchange (or such other principal securities
exchange on which the Shares are traded if the Shares are no longer traded on
the New York Stock Exchange) or, if there is no such sale on the relevant date,
then on the last previous day on which a sale was reported.
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2.15 "Freestanding SAR" means an SAR that is granted independently of any
Options.
2.16 "Incentive Stock Option" or "ISO" means an option to purchase Shares,
granted under Article 6 herein, and which is designated as an Incentive Stock
Option which is intended to meet the requirements of Section 422 of the Code.
2.17 "Insider" shall mean an individual who is, on the relevant date, an
officer, director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.
2.18 "Key Employee" means an employee of the Company, including an officer
of the Company, in a managerial or other important position who, by virtue of
such employee's ability, qualifications and performance, has made important
contributions to the Company, all as determined by the Committee in its
discretion.
2.19 "Named Executive Officer" means, for a calendar year, a Participant
who is one of the group of "covered employees" for such calendar year within the
meaning of Code Section 162(m) or any successor statute.
2.20 "Net Income" means "net income" of the Company determined in
accordance with generally accepted accounting principles that would be reported
in the Company's Annual Report to Shareholders.
2.21 "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted to Key Employees under Article 6 herein, and which is not
intended to meet the requirements of Code Section 422.
2.22 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.23 "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.24 "Participant" means a Key Employee who has outstanding an Award
granted under the Plan.
2.25 "Performance-Based Exception" means the performance-based exception
set forth in Code Section 162(m)(4)(C) from the deductibility limitations of
Code Section 162(m).
2.26 "Performance Share" means an Award granted to an Key Employee, as
described in Article 9 herein.
2.27 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, at its discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in Article 8 herein.
2.28 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
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2.29 "Restricted Stock" means an Award granted to a Participant pursuant to
Article 8 herein.
2.30 "Retirement" of a Participant means the Participant's termination of
employment with the Company and Subsidiaries (other than by reason of death)
after the Participant has attained both (i) age fifty (50) and (ii) a combined
age and years of "Vesting Service" under the NationsBank Pension Plan equal to
at least seventy-five (75).
2.31 "Return on Assets" means "return on average assets" of the Company
determined in accordance with generally accepted accounting principles that
would be reported in the Company's Annual Report to Shareholders.
2.32 "Return on Equity" means "return on average common shareholders'
equity" of the Company determined in accordance with generally accepted
accounting principles that would be reported in the Company's Annual Report to
Shareholders.
2.33 "Shares" means the shares of Common Stock of the Company.
2.34 "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the terms
of Article 7 herein.
2.35 "Subsidiary" means any corporation, partnership, joint venture,
affiliate, or other entity in which the Company has an ownership interest, and
which the Committee designates as a participating entity in the Plan.
2.36 "Tandem SAR" means an SAR that is granted in connection with a related
Option, the exercise of which shall require forfeiture of the right to purchase
a Share under the related Option (and when a Share is purchased under the
Option, the Tandem SAR shall similarly be canceled).
2.37 "Total Shareholder Return" means the percentage change of an initial
investment in Shares over a specified period assuming reinvestment of all
dividends during the period.
Article 3. Administration
3.1 The Committee. The Plan shall be administered by the Stock Option
Committee of the Board or by any other Committee appointed by the Board
consisting of not less than two (2) Directors. All of the members of the
Committee shall comply with the "disinterested administration" rules of Rule
16b-3 under the Exchange Act. The members of the Committee shall be appointed
from time to time by, and shall serve at the discretion of, the Board of
Directors. In addition, any action taken with respect to Named Executive
Officers for purposes of meeting the Performance-Based Exception shall be taken
by the Committee only if all of the members of the Committee are "outside
directors" within the meaning of Code Section 162(m). If all of the members of
the Committee are not "outside directors," such action shall be taken by a
subcommittee of the Committee comprised of at least two (2) members who are
"outside directors"
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3.2 Authority of the Committee. Except as limited by law, or by the
Articles of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Key Employees
who shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 15 herein),
amend the terms and conditions of any outstanding Award to the extent such terms
and conditions are within the discretion of the Committee as provided in the
Plan. Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan. As permitted by law,
the Committee may delegate its authority as identified herein.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its shareholders, employees, Participants, and their
estates and beneficiaries.
Article 4. Shares Subject to the Plan
4.1 Number of Shares Available for Grants. Beginning on the Effective Date,
there is hereby reserved for issuance under the Plan a number of shares equal
to:
(a) seventy-five one hundredths of a percent (0.75%) of the
outstanding Shares as of the first business day of each calendar year
beginning with calendar year 1995 and continuing through calendar year
2004; plus
(b) the Shares available for issuance under the Company's 1986
Restricted Stock Award Plan (the "1986 Plan") as of January 31, 1995.
Such Shares available for grants of Awards in any year shall be increased by the
number of Shares available under this Section 4.1 in previous years but not
covered by Awards granted under this Plan in those years plus any Shares as to
which Awards granted under this Plan have lapsed, expired, terminated, or been
canceled. In addition, any Shares as to which Awards under the Company's 1986
Plan may lapse, expire, terminate, or be canceled, shall also be reserved and
available for issuance or reissuance under this Section 4.1 in any calendar
year. No further awards are to be granted under the 1986 Plan after January 31,
1995; provided that any outstanding awards under the 1986 Plan shall continue to
remain outstanding in accordance with the terms thereof. An additional Ten
Million (10,000,000) Shares were made available for grants of Awards under the
Plan beginning effective January 7, 1997 in connection with the merger of the
Company with Boatmen's Bancshares, Inc. (after giving effect to the two-for-one
stock split of the Shares effective February 27, 1997). In addition, the Company
has entered an Agreement and Plan of Merger with Barnett Banks, Inc.
("Barnett"). In the event the Barnett transaction is consummated, an additional
Ten Million (10,000,000) Shares shall be made available for grants of Awards
under the Plan beginning effective as of the consummation of such transaction.
In no event shall a Participant receive an Award or Awards during any one (1)
calendar year covering in the aggregate more than Five Hundred Thousand
(500,000) Shares. In addition, in no event shall the total number of Incentive
Stock Options granted during the ten (10) year term of the Plan cover in the
aggregate more than the product of (i) ten (10) times (ii) seventy-five one
hundredths of a percent (0.75%) of the outstanding Shares as of the first
business day of calendar year 1995. The number of Shares reserved for issuance
under this Section 4.1 and the limitations on the number of annual Awards to
individuals and Incentive Stock Option Awards set forth above shall be subject
to adjustment as provided in Section 4.3.
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4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award again shall be available for the grant of an
Award under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under the
Plan and in the number and class of and/or price of Shares subject to
outstanding Awards granted under the Plan, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; provided, however, that the number of Shares
subject to any Award shall always be a whole number.
Article 5. Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in this Plan are all Key
Employees of the Company, as determined by the Committee, including Key
Employees who are Directors, but excluding Directors who are not Key Employees.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Key Employees those
to whom Awards shall be granted and shall determine the nature and amount of
each Award.
5.3 Foreign Employees. Notwithstanding any provision of the Plan to the
contrary, in order to foster and promote achievement of the purposes of the Plan
or to comply with provisions of laws in other countries in which the Company
operates or has employees, the Committee, in its sole discretion, shall have the
power and authority to (i) determine which Key Employees (if any) employed
outside the United States are eligible to participate in the Plan, (ii) modify
the terms and conditions of any Awards made to such Key Employees and (iii)
establish subplans, modified Option exercise and other terms and procedures to
the extent such actions may be necessary or advisable.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Key Employees in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Section 422 of the Code,
or an NQSO whose grant is intended not to fall under Code Section 422.
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6.3 Option Price. The Option Price for each grant of an Option under this
Plan shall be at east equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th) anniversary date of its
grant.
6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve and which shall be set forth in the
applicable Award Agreement, which need not be the same for each grant or for
each Participant.
6.6 Payment. Options shall be exercised by the delivery of a written notice
of exercise to the Company, setting forth the number of Shares with respect to
which the Option is to be exercised, accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which are
tendered must have been held by the Participant for at least six (6) months
prior to their tender to satisfy the Option Price), or (c) by a combination of
(a) and (b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
6.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable Federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
6.8 Termination of Employment. Each Participant's Option Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the Option following termination of the Participant's employment with
the Company and its Subsidiaries. Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with Participants, need not be uniform among all Options issued
pursuant to this Article 6, and may reflect distinctions based on the reasons
for termination of employment. In that regard, if an Award Agreement permits
exercise of an Option following the death of the Participant, the Award
Agreement shall provide that such Option shall be exercisable to the extent
provided therein by any person that may be empowered to do so under the
Participant's will, or if the Participant shall fail to make a testamentary
disposition of the Option or shall have died intestate, by the Participant's
executor or other legal representative.
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6.9 Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under this Article 6 may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the Plan
shall be exercisable during his or her lifetime only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under this Article 6
shall be exercisable during his or her lifetime only by such Participant.
6.10 No Rights. A Participant granted an Option shall have no rights as a
shareholder of the Company with respect to the Shares covered by such Option
except to the extent that Shares are issued to the Participant upon the due
exercise of the Option.
Article 7. Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to Key Employees at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of
a Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Option
Price of the ISO.
7.3 Exercise of Freestanding SARs. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them.
7.4 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine.
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7.5 Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
7.6 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the
date of exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.
7.7 Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of an SAR (including,
without limitation, the right of the Committee to limit the time of exercise to
specified periods) as may be required to satisfy the requirements of Section 16
(or any successor rule) of the Exchange Act.
7.8 Termination of Employment. Each SAR Award Agreement shall set forth the
extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of employment.
In that regard, if an Award Agreement permits exercise of an SAR following the
death of the Participant, the Award Agreement shall provide that such SAR shall
be exercisable to the extent provided therein by any person that may be
empowered to do so under the Participant's will, or if the Participant shall
fail to make a testamentary disposition of the SAR or shall have died intestate,
by the Participant's executor or other legal representative.
7.9 Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
7.10 No Rights. A Participant granted an SAR shall have no rights as a
shareholder of the Company with respect to the Shares covered by such SAR except
to the extent that Shares are issued to the Participant upon the due exercise of
the SAR.
Article 8. Restricted Stock
8.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to eligible Key Employees in such amounts as the Committee
shall determine.
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8.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Agreement that shall specify the Period of
Restriction, or Periods, the number of Shares of Restricted Stock granted, and
such other provisions as the Committee shall determine.
8.3 Transferability. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Restricted Stock
Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Agreement. All rights with respect to the Restricted Stock
granted to a Participant under the Plan shall be available during his or her
lifetime only to such Participant.
8.4 Other Restrictions. The Committee shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance goals
(Company-wide, divisional, and/or individual), time-based restrictions on
vesting following the attainment of the performance goals, and/or restrictions
under applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the Period of Restriction.
8.5 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
8.6 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate.
In the event that any dividend constitutes a derivative security or an
equity security pursuant to Rule 16(a) under the Exchange Act, such dividend
shall be subject to a vesting period equal to the remaining vesting period of
the Shares of Restricted Stock with respect to which the dividend is paid.
8.7 Termination of Employment. Each Restricted Stock Award Agreement shall
set forth the extent to which the Participant shall have the right to receive
unvested Restricted Shares following termination of the Participant's employment
with the Company and its Subsidiaries. Such provisions shall be determined in
the sole discretion of the Committee, shall be included in the Award Agreement
entered into with Participants, need not be uniform among all Shares of
Restricted Stock issued pursuant to the Plan, and may reflect distinctions based
on the reasons for termination of employment. In amplification but not
limitation of the foregoing, in the case of an award of Restricted Stock to a
Named Executive Officer which is intended to qualify for the Performance-Based
Exception, the Award Agreement may provide that such Restricted Stock may become
payable in the event of a termination of employment by reason of death,
Disability or Change in Control, such payment not to occur before attainment of
the related performance goal.
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Article 9. Performance Shares
9.1 Grant of Performance Shares. Subject to the terms of the Plan,
Performance Shares may be granted to eligible Key Employees in such amount and
upon such terms, and at any time and from time to time, as shall be determined
by the Committee. The number and/or vesting of Performance Shares granted, in
the Committee's discretion, shall be contingent upon the degree of attainment of
specified performance goals or other conditions over a specified period (the
Performance Period). The terms and conditions of an Award of Performance Shares
shall be evidenced by an appropriate Award Agreement.
9.2 Value of Performance Shares. The value of a Performance Share at any
time shall equal the Fair Market Value of a Share at such time.
9.3 Form and Timing of Payment of Performance Shares. During the course of
a Performance Period, the Committee shall determine the number of Performance
Shares as to which the Participant has earned a right to be paid pursuant to the
terms of the applicable Award Agreement. The Committee shall pay any earned
Performance Shares as soon as practical after they are earned in the form of
cash, Shares or a combination thereof (as determined by the Committee) having an
aggregate Fair Market Value equal to the value of the earned Performance Shares
as of the date they are earned. Any Shares used to pay out earned Performance
Shares may be granted subject to any restrictions deemed appropriate by the
Committee. In addition, the Committee, in its discretion, may cancel any earned
Performance Shares and grant Stock Options to the Participant which the
Committee determines to be of equivalent value based on a conversion formula
stated in the Performance Shares Award Agreement.
The Committee, in its discretion, may also grant dividend equivalents
rights with respect to earned but unpaid Performance Shares as evidenced by the
applicable Award Agreement. Performance Shares shall not have any voting rights.
Prior to the beginning of a Performance Period (or at such other time as
determined by the Committee), Participants may elect to defer the receipt of
payment of any Performance Shares or other amounts (e.g., dividend equivalents
rights) earned pursuant to the Award Agreement upon such terms as the Committee
deems appropriate and as set forth in the applicable Award Agreement.
9.4 Termination of Employment. Each Performance Share Award Agreement shall
set forth the extent to which the Participant shall have the right to receive
unearned Performance Shares following termination of the Participant's
employment with the Company and its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Award Agreements entered into with Participants, need not be uniform among all
Performance Shares awarded pursuant to the Plan, and may reflect distinctions
based on the reasons of termination of employment. In amplification but not
limitation of the foregoing, in the case of an award of Performance Shares to a
Named Executive Officer which is intended to qualify for the Performance-Based
Exception, the Award Agreement may provide that such Performance Shares may
become payable in the event of a termination of employment by reason of death,
Disability or Change in Control, such payment not to occur before attainment of
the related performance goal.
9.5 Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise
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<PAGE>
provided in a Participant's Award Agreement, a Participant's rights under the
Plan shall be exercisable during the Participant's lifetime only by the
Participant.
Article 10. Performance Measures
The performance measure(s) to be used for purposes of Awards to Named
Executive Officers which are designed to qualify for the Performance-Based
Exception shall be chosen from among the following alternatives:
(a) Earnings Per Share;
(b) Net Income;
(c) Return On Assets;
(d) Return On Equity; or
(e) Total Shareholder Return.
The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the preestablished performance goals; provided, however,
that Awards which are designed to qualify for the Performance-Based Exception,
and which are held by Named Executive Officers, may not be adjusted upward (the
Committee shall retain the discretion to adjust such Awards downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining shareholder approval.
Article 11. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
Article 12. Deferrals
The Committee may permit a Participant to defer such Participant's receipt
of the payment of cash or the delivery of Shares that would otherwise be due to
such Participant by virtue of the exercise of an Option or SAR, the lapse or
waiver of restrictions with respect to Restricted Stock, or the satisfaction of
any requirements or goals with respect to Performance Shares. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.
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<PAGE>
Article 13. Rights of Key Employees
13.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
For purposes of this Plan, a transfer of a Participant's employment between
the Company and a Subsidiary, or between Subsidiaries, shall not be deemed to be
a termination of employment. Upon such a transfer, the Committee may make such
adjustments to outstanding Awards as it deems appropriate to reflect the changed
reporting relationships.
13.2 Participation. No Key Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
Article 14. Change in Control
14.1 Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all Options and SARs granted hereunder shall become
immediately exercisable, and shall remain exercisable throughout their
entire term;
(b) Any restriction periods and restrictions imposed on shares of
Restricted Stock shall lapse;
(c) The target payout opportunities attainable under all outstanding
Awards of Restricted Stock and Performance Shares shall be deemed to have
been fully earned for the entire Performance Period(s) as of the effective
date of the Change in Control, and the vesting of all Awards shall be
accelerated as of the effective date of the Change in Control; and
(d) Subject to Article 15 herein, the Committee shall have the
authority to make any modifications to the Awards as determined by the
Committee to be appropriate before the effective date of the Change in
Control.
14.2 Limitation on Change-in-Control Benefits. It is the intention of the
Company and the Participants to reduce the amounts payable or distributable to a
Participant hereunder if the aggregate Net After Tax Receipts (as defined below)
to the Participant would thereby be increased, as a result of the application of
the excise tax provisions of Section 4999 of the Code. Accordingly, anything in
this Plan to the contrary notwithstanding, in the event that the certified
public accountants regularly employed by the Company immediately prior to any
"change" described below (the "Accounting Firm") shall determine that receipt of
all Payments (as defined below) would subject the Participant to tax under
Section 4999 of the Code, it shall determine whether some amount of Payments
would meet the definition of a "Reduced Amount" (as defined below). If the
Accounting Firm determines that there is a Reduced Amount, the aggregate
Payments shall be reduced to such Reduced Amount in accordance with the
provisions of Section 14.2(b) below.
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<PAGE>
(a) For purposes of this Section 14.2(a):
(i) A "Payment" shall mean any payment or distribution in the
nature of compensation to or for the benefit of a Participant who is a
"disqualified individual" within the meaning of Section 280G(c) of the
Code and which is contingent on a "change" described in Section
280G(b)(2)(A)(i) of the Code with respect to the Company, whether paid
or payable pursuant to this Plan or otherwise;
(ii) "Plan Payment" shall mean a Payment paid or payable pursuant
to this Plan (disregarding this Section 14.2);
(iii) "Net After Tax Receipt" shall mean the Present Value of a
Payment, net of all taxes imposed on the Participant with respect
thereto under Sections 1 and 4999 of the Code, determined by applying
the highest marginal rate under Section 1 of the Code which applied to
the Participant's Federal taxable income for the immediately preceding
taxable year;
(iv) "Present Value" shall mean such value determined in
accordance with Section 280G(d)(4) of the Code; and
(v) "Reduced Amount" shall mean the smallest aggregate amount of
Payments which (A) is less than the sum of all Payments and (B)
results in aggregate Net After Tax Receipts which are equal to or
greater than the Net After Tax Receipts which would result if all
Payments were paid to or for the benefit of the Participant.
(b) If the Accounting Firm determines that aggregate Payments should
be reduced to the Reduced Amount, the Committee shall promptly give the
Participant notice to that effect and a copy of the detailed calculation
thereof, and the Participant may then elect, in the Participant's sole
discretion, which and how much of the Payments, including without
limitation Plan Payments, shall be eliminated or reduced (as long as after
such election the Present Value of the aggregate Payments is equal to the
Reduced Amount), and shall advise the Committee in writing of such election
within ten (10) days of the Participant's receipt of notice. If no such
election is made by the Participant within such ten (10) day period, the
Committee may elect which of the Payments, including without limitation
Plan Payments, shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Payments is equal to the
Reduced Amount) and shall notify the Participant promptly of such election.
All determinations made by the Accounting Firm under this Section 14.2
shall be binding upon the Company and the Participant and shall be made
within sixty (60) days immediately following the event constituting the
"change" referred to above. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit of
the Participant such Payments as are then due to the Participant under this
Plan.
(c) At the time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or distributed
by the Company to or for the benefit of the Participant pursuant to this
Plan which should not have been so paid or distributed ("Overpayment") or
that additional amounts which will have not been paid or
15
<PAGE>
distributed by the Company to or for the benefit of the Participant
pursuant to this Plan could have been so paid or distributed
("Underpayment"), in each case, consistent with the calculation of the
Reduced Amount hereunder. In the event that the Accounting Firm, based
either upon the assertion of a deficiency by the Internal Revenue Service
against the Company or the Participant which the Accounting Firm believes
has a high probability of success or controlling precedent or other
substantial authority, determines that an Overpayment has been made, any
such Overpayment paid or distributed by the Company to or for the benefit
of the Participant shall be treated for all purposes as a loan ab initio to
the Participant which the Participant shall repay to the Company together
with interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code; provided, however, that no such loan shall be
deemed to have been made and no amount shall be payable by the Participant
to the Company if and to the extent such deemed loan and payment would not
either reduce the amount on which the Participant is subject to tax under
Section 1 and Section 4999 of the Code or generate a refund of such taxes.
In the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an Underpayment
has occurred, any such Underpayment shall be promptly paid by the Company
to or for the benefit of the Participant together with interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Code.
14.3 Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior written
consent of the Participant with respect to said Participant's outstanding
Awards; provided, however, the Board of Directors, upon recommendation of the
Committee, may terminate, amend, or modify this Article 14 at any time and from
time to prior to the date of a Change in Control.
Article 15. Amendment, Modification, and Termination
15.1 Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, however, that no amendment which requires shareholder
approval in order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act, including any successor to such Rule, shall be effective unless
such amendment shall be approved by the requisite vote of shareholders of the
Company entitled to vote thereon.
The Committee shall not have the authority to cancel outstanding Awards and
issue substitute Awards in replacement thereof.
15.2 Awards Previously Granted. No termination, amendment, or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
15.3 Acceleration of Award Vesting; Waiver of Restrictions. Notwithstanding
any provision of this Plan or any Award Agreement provision to the contrary, the
Committee, in its sole and exclusive discretion, shall have the power at any
time to (i) accelerate the vesting of any Award granted under the
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<PAGE>
Plan, including without limitation, acceleration to such a date that would
result in said Awards becoming immediately vested, or (ii) waive any
restrictions of any Award granted under the Plan.
Article 16. Withholding
16.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of this Plan.
16.2 Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock,
or upon any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All such elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that the
Committee, in its sole discretion, deems appropriate.
Article 17. Indemnification
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company's Articles of Incorporation of Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
Article 18. Successors
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
Article 19. Legal Construction
19.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
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<PAGE>
19.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
19.3 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
19.4 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
19.5 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of North Carolina.
18
PLAN DOCUMENT
BOATMEN'S SUPPLEMENTAL RETIREMENT PLAN
WHEREAS, Boatmen's Bancshares, Inc., a Missouri corporation, (the
"Corporation") desires to provide certain key executive employees of the
Corporation and its subsidiaries with supplemental benefits in addition to those
benefits provided under the Boatmen's Bancshares, Inc. Retirement Plan for
Employees.
Therefore, the Boatmen's Supplemental Retirement Plan is adopted, effective
as of August 8, 1989, as amended on January 30, 1996 and February 8, 1996, as
follows.
ARTICLE I
Definitions
Except as otherwise specified herein or in a Participant's Participation
Agreement, all capitalized terms shall have the same meanings as such terms have
under the Boatmen's Bancshares, Inc. Retirement Plan for Employees.
Section 1.1. "Board of Directors" means the Board of Directors of Boatmen's
Bancshares, Inc.
Section 1.2. "Cause" means conduct of the Participant which is finally
adjudged to be knowingly fraudulent, deliberately dishonest or willful
misconduct. The Compensation Committee of the Corporation shall have sole and
uncontrolled discretion with respect to the application of the provisions of
this Section 1 .2 and any determination shall be conclusive and binding upon the
Participant and all other persons.
Section 1.3. "Change in Control" means any of the following events:
(a) any individual, corporation (other than the Corporation), partnership,
trust, association, pool, syndicate, or any other entity or any group
of persons acting in concert becomes the beneficial owner, as that
concept is defined in Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, of
securities of the Corporation possessing twenty percent (20%) or more
of the voting power for the election of directors of the Corporation;
(b) there shall be consummated any consolidation, merger or other business
combination involving the Corporation or the securities of the
Corporation in which holders of voting securities of the Corporation
immediately prior to such consummation own, as a group, immediately
after such consummation, voting securities of the Corporation (or, if
the Corporation does not survive such transaction, voting securities
of the corporation surviving such transaction) having less than sixty
percent (60%) of the total voting power in an election of directors of
the Corporation (or such other surviving corporation);
<PAGE>
(c) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Directors of the Corporation
cease for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Corporation's
shareholders, of each new Director of the Corporation was approved by
a vote of at least two-thirds of the Directors of the Corporation then
still in office who were Directors of the Corporation at the beginning
of any such period; or
(d) there shall be consummated any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation (on a consolidated
basis) to a party which is not controlled by or under common control
with the Corporation.
Section 1.4. "Code" means the Internal Revenue Code of 1986, as amended.
Section 1.5. "Committee" means the Boatmen's Bancshares, Inc. Compensation
Committee.
Section 1.6. "Corporation" means Boatmen's Bancshares, Inc.
Section 1.7. "Employee" means any person employed by the Corporation or any
of its subsidiaries.
Section 1.8. "Participant" means any Employee who is selected for
participation in the Plan by the Committee as provided in Article 11.
Section 1.9. "Plan" means the Boatmen's Supplemental Retirement Plan as set
forth herein and as the same may be amended from time to time.
Section 1.10. "Retirement Plan" means the Boatmen's Bancshares, Inc.
Retirement Plan for Employees.
ARTICLE II
Participation
Section 2.1. Subject to the provisions of Section 2.2, the Committee shall
have exclusive power to designate the Employees who will participate in the
Plan.
Section 2.2. Participation in the Plan shall be limited to a select group
of Employees of the Corporation and its subsidiaries who are management or
highly compensated Employees within the meaning of Section 201(2) of the
Employee Retirement Income Security Act of 1974, as amended.
Section 2.3. Each Employee selected to participate in the Plan by the
Committee shall indicate his agreement to the terms of the Plan by executing a
Participation Agreement, a form
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<PAGE>
of which is attached hereto as Exhibit A. By means of paragraph 4 of the
Participation Agreement, an Employee and the Corporation may agree to vary the
terms of the Plan as to such Employee.
ARTICLE III
Benefits
Section 3.1. Except in the case of termination for Cause, in which event no
benefit shall be payable under the Plan, if a Participant's employment with the
Corporation or one of its subsidiaries is terminated (a) by Disability, (b)
within one (1) year after a Change in Control, (c) by the Corporation or one of
its subsidiaries after the Participant has completed five (5) years of Vesting
Service, or (d) after the Participant has satisfied the requirements for early
retirement under the Retirement Plan, the Corporation shall pay to the
Participant, in the manner provided in Article V, a benefit equal to the excess
of the benefit in (i) over the benefit in (ii) described below:
(i) the benefit which the Participant would be entitled to receive
under the Retirement Plan (based upon the terms of the Retirement Plan then
in effect) upon the Participant's termination of employment and if the
benefit under the Retirement Plan were computed
(a) including in Earnings for Retirement Plan purposes all
incentive compensation, if a Participant prior to January 1, 1996; or
(b) including in Earnings for Retirement Plan purposes annual
incentive compensation, if an individual becomes a Participant after
December 31, 1995; and
(c) without giving effect to the limitations then currently
imposed by Section 415 of the Code, the limitations of Section
1.401-4(c) of the Income Tax Regulations or their successors, or the
limitations under Section 401(a)(17) of the Code;
(ii) the benefit which the Participant would be entitled to receive
under the Retirement Plan upon the Participant's termination of employment,
if such benefit were computed without giving effect to the limitation then
currently imposed by Section 1.401-4(c) of the Income Tax Regulations or
its successor.
Section 3.2. For purposes of Section 3.1(i), a Participant whose employment
has terminated for reasons other than death or Disability within one (1) year
after a Change in Control and who is not otherwise entitled to receive a benefit
under the Retirement Plan shall be deemed to be entitled to receive a benefit
under the Retirement Plan based upon the formula set forth in the Retirement
Plan.
3
<PAGE>
ARTICLE IV
Death Benefits
Section 4.1. If the spouse of a Participant is entitled to receive a
benefit under the Retirement Plan upon the death of the Participant then such
spouse will be entitled to receive a death benefit under this Plan calculated
pursuant to the formula set forth in Article III.
ARTICLE V
Payment of Benefits
Section 5.1. Payment of benefits under the Plan will be made in the same
manner and at the same time as benefit payments to the Participant or his spouse
under the Retirement Plan.
ARTICLE VI
Claims
Section 6.1. If a claim for benefits under the Plan is denied, the
Committee will provide a written notice of the denial setting forth the specific
reasons for the denial, a description of any additional material or information
necessary for a claimant to perfect a claim, and an explanation of why such
material or information is necessary and appropriate information as to the steps
to be taken for the claim to be submitted for review. A claimant may request a
review of a denial. Such requests should be submitted to the Committee, in
writing, within 60 days after receipt of the denial notice stating the reasons
for requesting the review. A claimant may review pertinent documents and submit
issues and comments in writing. A decision will be made on the review of the
denial of a claim not later than 60 days after the Committee's receipt of a
request for review unless special circumstances require an extension of time for
processing, in which case a decision shall be rendered as soon as possible but
not later than 120 days after receipt of a request for review. The decision on
review will be in writing to the claimant and shall include specific reasons for
the decision.
ARTICLE VII
Amendment and Termination
Section 7.1. The Committee may amend the Plan at any time; provided,
however, that no such amendment shall have the effect of depriving Participants
of rights accrued under the Plan as of the date of such amendment. The Board of
Directors will have the power and authority to terminate this Plan; provided,
however, that any such termination shall not terminate any rights or benefits
accrued by a Participant under this Plan as of the effective date of any such
termination.
4
<PAGE>
ARTICLE VIII
Administration
Section 8.1. The Plan shall be administered by the Committee in accordance
with its terms, for the exclusive benefit of Participants. The powers and duties
of the Committee shall be similar to those powers and duties granted to the Plan
Administrator of the Retirement Plan. In addition, the Committee, in its sole
discretion, shall have the power to accelerate the payment of benefits under the
Plan to any Participant or spouse. Any interpretation or construction of Plan
terms or any determination by the Committee with respect to Plan benefits, etc.,
shall be conclusive and binding with respect to Participants and all other
persons.
ARTICLE IX
Miscellaneous
Section 9.1. Nothing contained in this Plan and no action taken pursuant to
the provisions of this Plan shall give the Participant the right to be retained
in the employ of the Corporation or its subsidiaries or interfere with the right
of the Corporation or its subsidiaries to discharge the Participant at any time,
nor shall it give the Corporation or its subsidiaries the right to require the
Participant to remain in their employ or interfere with the Participant's right
to terminate his employment at any time.
Section 9.2. No benefit payable at any time under this Plan shall be
subject in any manner to alienation, sale, transfer, assignment, pledge,
attachment or encumbrance of any kind.
Section 9.3. All rights hereunder shall be governed by and construed
according to the laws of the State of Missouri, except to the extent such laws
are preempted by the laws of the United States of America. In the event any
provision of this Plan is held invalid, void or unenforceable, the same shall
not affect, in any respect whatsoever, the validity of any other provision of
this Plan.
Section 9.4. Nothing contained in this Plan and no action taken pursuant to
the provisions of this Plan shall create or be construed to create a trust of
any kind or a fiduciary relationship between the Corporation or its subsidiaries
and the Participant or any other person. To the extent that any person acquires
the right to receive payment from the Corporation under this Plan, such right
shall be no greater than the right of any unsecured general creditor of the
Corporation.
Section 9.5. The terms of this Plan shall be binding upon and inure to the
benefit of the Corporation, its successors and assigns, and the Participant and
his heirs and legal representatives.
Section 9.6. If a Participant becomes entitled to a distribution of
benefits under the Plan, and if at such time the Participant has outstanding any
debt, obligation, or other liability representing an amount owing to the
Corporation or its subsidiaries, then the Corporation may
5
<PAGE>
offset such amount so owing against the amount of benefits otherwise
distributable. Such determination shall be made by the Committee.
Section 9.7. The Corporation shall, to the extent permitted by law, have
the right to deduct from any payments of any kind with respect to the benefit
otherwise due to the Participant any Federal, state or local taxes of any kind
required by law to be withheld from such payments.
6
Boatmen's Bancshares, Inc.
Executive Deferred Compensation Plan
WHEREAS, Boatmen's Bancshares, Inc., a Missouri corporation ("Boatmen' s"),
desires to provide a select group of employees with the opportunity to defer a
portion of the salary and incentive compensation to be earned by them.
WHEREAS, Boatmen's adopted the Boatmen's Executive Deferred Compensation
Plan (the "Plan") on August 8, 1989, effective for deferrals of salary
attributable to services rendered on or after January 1,1990.
WHEREAS, Boatmen's adopted the Boatmen's Executive Deferred Bonus Plan (the
"Bonus Deferral Plan") on September 1, 1995.
WHEREAS, Boatmen's desires to amend the Plan to incorporate the Bonus
Deferral Plan, to make certain additional amendments with respect to the Plan,
and to restate the Plan in its entirety.
THEREFORE, effective February 8,1996, Boatmen's hereby amends the Bonus
Deferral Plan to incorporate it into the Plan and amends and restates the Plan
as follows:
Article I. Definitions
Section 1.1. "Additions" means all amounts credited to the Participant's
Deferred Compensation Account pursuant to Article IV herein.
Section 1.2. "Annual Bonus" means any incentive award measured over a
period not to exceed one year, payable by the Corporation to the Participant
with respect to the Participant's services during such period.
Section 1.3. "Base Salary" means the salary paid to a Participant by the
Corporation with respect to services performed during any particular Plan Year
before any reduction pursuant to this Plan, including commissions and amounts
deferred by the Participant under the Boatmen's Thrift Incentive 401(k) Plan and
pursuant to any salary reduction agreement under Section 125 of the Code.
Section 1.4. "Beneficiary" means any person (including but not limited to
any trust, estate, fiduciary, corporation, foundation, but excluding the
Participant) designated by the Participant in a written document delivered to
the Corporation to receive any benefit under the Plan after the death of the
Participant all in accordance with the provisions herein. In the event the
Participant fails to designate a beneficiary or if no such designated
beneficiary is living upon the death of the Participant or if, for any reason,
such designation shall be legally ineffective,
<PAGE>
then in any of said events the amounts which would have been paid to the
designated living beneficiary shall be paid to the trustee of the Participant's
revocable living trust, and if none to the trustee of the Participant's
testamentary trust, and if none to the personal representative of the estate of
the Participant.
Section 1.5. "Board of Directors" means the Board of Directors of
Boatmen's.
Section 1.6. "Boatmen's" means Boatmen's Bancshares, Inc., a Missouri
corporation.
Section 1.7. "Bonus Compensation" means the Annual Bonus and Long-Term
Incentive Award eligible for deferral under the Plan.
Section 1.8. "Code" means the Internal Revenue Code of 1986, as amended.
Section 1.9. "Committee" means the Boatmen's Bancshares, Inc. Compensation
Committee.
Section 1.10. "Compensation" means (i) Base Salary, and (ii) Bonus
Compensation.
Section 1.11. "Corporation" means Boatmen's and, unless the context
requires otherwise, all its subsidiaries and affiliates.
Section 1.12. "Deferral Amount" means the portion of Compensation which the
Participant elects to defer under the Plan for any Plan Year or Performance
Period, as applicable.
Section 1.13. "Deferred Compensation Account" means a bookkeeping account
maintained by the Corporation for each Participant which reflects accumulated
Deferral Amounts of the Participant, plus Additions thereto, calculated as set
forth in Article IV herein.
Section 1.14. "Disability" means such physical or mental disability as, in
the opinion of a physician selected by the Committee, will prevent the
Participant from ever resuming work of the same general nature as that which the
Participant performed for the Corporation immediately prior to the Participant's
disability or the duties of such other position or job which the Corporation
makes available to the Participant and for which the Participant is qualified by
reason of the Participant's training, education or experience.
Section 1.15. "Employee" means an employee of the Corporation.
Section 1.16. "Long-Term Incentive Award" means any cash incentive award
measured over a period of greater than one year, payable by the Corporation to
the Participant with respect to the Participant's services during such period.
2
<PAGE>
Section 1.17. "Participant" means any Employee who meets the requirements
specified in, and is selected for participation as provided in, Article II
herein.
Section 1.18. "Performance Period" means the period over which performance
is measured for purposes of determining the Bonus Compensation payable by the
Corporation to the Participant. The Performance Period for the Annual Bonus
shall be equal to or less than one year and the Performance Period for the
Long-Term Incentive Award shall be greater than one year.
Section 1.19. "Plan" means this Boatmen's Bancshares, Inc. Executive
Deferred Compensation Plan.
Section 1.20. "Plan Year" means any twelve-month period commencing January
1.
Section 1.21. "Retirement" means the termination of employment from the
Corporation on or after attainment of age 55.
Section 1.22. "Severe Financial Hardship" means any financial hardship
resulting from extraordinary and unforeseeable circumstances arising as a result
of one or more recent events beyond the control of the Participant, which is not
or may not be relieved (i) through reimbursement or compensation by insurance or
otherwise; (ii) by liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause Severe Financial Hardship; and
(iii) by cessation of deferrals under the Plan. Severe Financial Hardship shall
not include, by way of illustration only, financial hardship occasioned by a
child's college tuition or the purchase of a home.
Article II. Eligibility
Section 2.1. Subject to the provisions of Section 2.2 herein, the Committee
shall have the exclusive power to designate, on an annual basis, Participants
from among those Employees who are eligible for participation in the Plan.
Section 2.2. Eligibility for participation in the Plan shall be limited to
a select group of Employees of the Corporation who are management or highly
compensated employees within the meaning of Section 201(2) of the Employees
Retirement Income Security Act of 1974, as amended.
Section 2.3. Participants designated to participate in the Plan by the
Committee shall indicate his or her agreement to the terms of the Plan by
executing a Participation Agreement, the form of which is attached hereto as
Exhibit A.
Section 2.4. If an Employee ceases to be eligible for participation in the
Plan for any reason prior to his termination of employment with the Corporation,
the Participation Agreement
3
<PAGE>
shall be terminated and no further benefit shall accrue under the Plan except as
herein expressly granted.
Article III. Deferral of Compensation
Section 3.1. Subject to the terms of the Plan, the Participant shall have
the right to elect to defer, in increments of one percent (1%), (a) not less
than two percent (2%) nor greater than thirty percent (30%) of the Participant's
Base Salary for the Plan Year to which such election relates, and (b) not less
than ten percent (10%) of the Participant's Bonus Compensation for the
Performance Period to which such election relates; provided, however, that an
Employee who first becomes eligible, and is designated, to participate in the
Plan after the commencement of a Plan Year or Performance Period may only, with
respect to such Plan Year or Performance Period, as applicable, elect to defer
that portion of the Employee's Compensation which is attributable to services to
be rendered after the filing of the Deferral Election Form(s) pursuant to
Section 3.2 herein. The Deferral Election Form(s) shall be in the form attached
hereto as Exhibit B through Exhibit D.
Section 3.2. The Participant shall notify the Corporation of the election
to defer a portion of the Participant's Compensation for any Plan Year or
Performance Period, as applicable, by completing a Deferral Election Form(s).
Section 3.3. For deferrals of Compensation to be effective, a separate
Deferral Election Form for Base Salary, Annual Bonus and Long-Term Incentive
Award, as applicable, must be received by the Corporation as follows: (i) for
deferrals of Base Salary, prior to the first day of the Plan Year; and (ii) for
deferrals of Bonus Compensation, within 30 calendar days after an eligible
Employee is selected during the current Performance Period to which the election
relates to participate in a cash incentive award bonus plan of the Corporation;
provided, however, in the event an Employee first becomes eligible, and is
designated, for participation in the Plan after the commencement of a Plan Year
or Performance Period, such Employee must, in order to participate in the Plan
for the remainder of such Plan Year or Performance Period, submit a Deferral
Election Form(s) to the Corporation within 30 calendar days after the Employee
becomes eligible to participate in the Plan during such partial Plan Year or
Performance Period and such election shall be effective for Compensation
attributable to services to be rendered after the date of the Deferral Election
Form(s).
Section 3.4. An election to defer Compensation under the Plan shall be
irrevocable by the Participant with respect to the Plan Year or Performance
Period to which such election relates.
Section 3.5. The Compensation deferred under the Plan shall be credited to
the Participant's Deferred Compensation Account no later than the last day of
the month in which such Deferral Amount would otherwise have been paid to the
Participant.
4
<PAGE>
Article IV. Additions to Deferral Amounts
Section 4.1. The Corporation, on the last day of each month preceding the
final distribution of benefits to the Participant, will credit the Participant's
Deferred Compensation Account with Additions thereto. Additions shall be
calculated by multiplying the balance of the Deferred Compensation Account as of
the last day of each month by a rate which shall be equal to one-twelfth of the
ten-year U.S. Treasury Bond rate on October 31 of the preceding Plan Year, as
determined by the Committee; provided, however, that with respect to the
deferral of Bonus Compensation for the Performance Period(s) ending December 31,
1995, Additions to the Participant's Deferred Compensation Account during 1996
shall be calculated by multiplying the balance of the Deferred Compensation
Account attributable to such Bonus Compensation as of the last day of each month
during that year by a rate which shall be equal to one-twelfth of the ten-year
U.S. Treasury Bond rate on August 31, 1995, as determined by the Committee.
Article V. Payment of Deferral Amounts
Section 5.1. Except as otherwise provided in this Article V, the Deferral
Amount and Additions thereto for each Plan Year or Performance Period, as
applicable, shall be payable to the Participant at the time and in the manner
specified in the Participation Agreement of the Participant and the Deferral
Election Form(s) submitted by the Participant for such Plan Year or Performance
Period.
Section 5.2. The Deferral Amount and Additions thereto for each Plan Year
shall be payable at the time and in the manner specified below:
(a) Unless otherwise elected by the Participant as provided in Section
5.2(b) below, all amounts in the Participant's Deferred Compensation
Account shall be payable to the Participant upon his Retirement in one
of the following forms, as irrevocably elected by the Participant in
the Participation Agreement:
(i) a lump sum payable during the January following the effective
date of the Participant's Retirement, or
(ii) in a series of substantially equal yearly installments over a
five, ten or fifteen year period payable in January of the year
following the year in which the Participant's Retirement is
effective and each January thereafter; provided, that, in the
event the amount payable is $50,000 or less, a lump sum payment
under Section 5.2(a)(i) shall be made instead.
(b) Each Plan Year or Performance Period, as applicable, a Participant may
irrevocably elect to have the Deferral Amount and Additions thereto
for such Plan Year or Performance Period payable in a lump sum at
least five years but not longer than fifteen years following the end
of such Plan Year or Performance
5
<PAGE>
Period, as specified in the Deferral Election Form; provided, however,
that if the Participant's employment with the Corporation is
terminated by reason of Retirement prior to the distribution to the
Participant of all or part of his Deferred Compensation Account, the
balance shall be paid to the Participant in accordance with Section
5.2(a).
(c) Notwithstanding the election(s) made by the Participant on the
Participation Agreement and the Deferral Election Form(s), if the
Participant's employment by the Corporation is terminated by reason of
the Participant's death or Disability, then all amounts in the
Participant's Deferred Compensation Account shall be payable to the
Participant or the Participant's Beneficiary, as applicable, in one
lump sum payable no later than 30 days after the Participant's
termination of employment with the Corporation. If death occurs after
Retirement, then all amounts in the Participant's Deferred
Compensation Account shall be payable to the Participant's Beneficiary
in one lump sum, payable no later than 30 days after notification of
the Participant's death.
(d) Notwithstanding the election(s) made by the Participant on the
Participation Agreement and the Deferral Election Form(s), if the
Participant's employment by the Corporation is terminated for any
reason other than the Participant's Retirement, death or Disability,
then all amounts in the Participant's Deferred Compensation Account
shall be payable to the Participant in one lump sum payable during the
January following the effective date of the Participant's termination
of employment with the Corporation.
Section 5.3. The Committee shall have the authority to alter the timing or
manner of payment of Deferral Amounts and Additions thereto in the event that
the Participant establishes, to the satisfaction of the Committee, the existence
of a Severe Financial Hardship. In the event of a Severe Financial Hardship, the
Committee may, in its sole discretion, take any one or more of the following
actions to the extent reasonably necessary to satisfy the hardship:
(a) Authorize the cessation of deferrals by the Participant under the Plan
for the remainder of the Plan Year or Performance Period to which the
most recent Deferral Election Form relates; or
(b) Provide that all, or a portion, of the amounts in the Deferred
Compensation Account shall immediately be paid to the Participant in a
lump sum cash payment; or
(c) Provide for such other payment schedule as deemed appropriate by the
Committee under the circumstances.
The Committee's determination as to the existence of a Severe Financial Hardship
and the actions to be taken as a result thereof shall be final, conclusive and
non-appealable.
6
<PAGE>
Article VI. Claims
Section 6.1. If a claim for benefits under the Plan is denied, the
Committee will provide a written notice of the denial setting forth the specific
reasons for the denial, a description of any additional material or information
necessary for a claimant to perfect a claim, and an explanation of why such
material or information is necessary and appropriate information as to the steps
to be taken for a claim to be submitted for review. A claimant may request a
review of a denial. Such request should be submitted to the Committee, in
writing, within 60 days after receipt of the denial notice stating the reasons
for requesting the review. A claimant may review pertinent documents and submit
issues and comments in writing. A decision will be made on the review of the
denial of a claim not later than 60 days after the Committee's receipt of a
request for review unless specific circumstances require an extension of time
for processing, in which case a decision shall be rendered as soon as possible
but not later than 120 days after the receipt of a request for review. The
decision on review will be in writing to the claimant and shall include specific
reasons for the decision.
Article VII. Administration
Section 7.1. The Plan shall be administered by the Committee. The Committee
shall administer the Plan in accordance with its terms and shall have all powers
necessary to carry out the provisions of the Plan, including the power, in its
sole discretion, to accelerate the payment of benefits under the Plan to any
Participant or Beneficiary as provided in Section 5.3 hereof.
Section 7.2. The Committee shall, with respect to the general management of
the Plan, have the sole, final and absolute right to reconcile any inconsistency
in the Plan, to interpret and construe the provisions of the Plan in all
particulars in such manner and to such extent as it deems proper and to take all
action and make all decisions and determinations necessary under the Plan or in
connection with its administration, interpretation and application. Any
interpretation or construction placed upon any term or provision of the Plan by
the Committee, any decision of the Committee with regard to the eligibility of
an employee to become a Participant, the rights of a Participant, former
Participant or Beneficiary or any other person, any reconciliation of an
inconsistency in the Plan made by the Committee and any other action,
determination or decision whatsoever taken by the Committee, shall be final,
conclusive and binding upon all persons or parties interested or concerned in
the Plan.
Article VIII. Miscellaneous
Section 8.1. The Corporation shall maintain a record of each Participant's
accumulated Deferral Amounts and Additions thereto by means of a Deferred
Compensation Account.
Section 8.2. The Plan shall create a contractual obligation on the part of
the Corporation to make payment from the Participants' Deferred Compensation
Account when due.
7
<PAGE>
Section 8.3. If a Participant becomes entitled to a distribution of
benefits under the Plan, and if at such time the Participant has outstanding any
debt, obligation, or other liability representing an amount owing to the
Corporation, then the Corporation may offset such amount so owing against the
amount of benefits otherwise distributable. Such determination shall be made by
the Committee.
Section 8.4. No Participant or party claiming an interest in Deferral
Amounts and Additions thereto shall have any interest whatsoever in any specific
asset of the Corporation. To the extent that any person acquires the right to
receive payment of benefits from the Corporation under the Plan, such right
shall be no greater than the rights of any unsecured general creditor of the
Corporation.
Section 8.5. Neither the Participant, his Beneficiary, heirs, assigns,
trust, estate, nor any other person claiming through or under the Participant
shall have any right to commute, encumber or dispose of the right to receive
payments hereunder, all of which payments and the right thereto are expressly
declared to be non-assignable and any such attempt at assignment shall be void
and of no effect.
Section 8.6. No provision of the Plan nor any action taken hereunder shall
be construed as giving the Participant any right to be retained in the employ of
the Corporation.
Section 8.7. The Corporation shall, to the extent permitted by law, have
the right to deduct from any payments of any kind with respect to the benefit
otherwise due to the Participant any federal, state or local taxes of any kind
required by law to be withheld from such payments.
Section 8.8. The Plan shall be governed and construed in accordance with
the laws of the State of Missouri. In the event any provision of the Plan is
held invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of the Plan.
Article IX. Termination and Amendment
Section 9.1. The Committee shall have full power and authority to amend,
modify, alter or terminate the Plan in whole or in part; provided, however, that
any such termination, modification or amendment shall not terminate or diminish
any rights or benefits accrued by a Participant under the Plan as of the
effective date of any such termination, modification or amendment.
8
<PAGE>
EXHIBIT A
BOATMEN'S EXECUTIVE DEFERRED
COMPENSATION PLAN
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered as of the date stated below, by and
between Boatmen's Bancshares, Inc. ("Boatmen's"), a Missouri corporation, and
__________________________ ("Participant").
Boatmen's and the Participant mutually agree as follows:
1. The Participant has received a copy of the Boatmen's Executive
Deferred Compensation Plan ("Plan") and has read and understands the
Plan.
2. By completion of this Agreement and the accompanying Deferral Election
Form(s), the Participant agrees to comply with the terms of the Plan
in all respects.
3. All provisions of the Plan are hereby made a part of this Agreement.
If there is any conflict between the terms of this Agreement and the
terms of the Plan, the Plan shall govern.
4. The Participant elects to defer the percentage of his/her Compensation
(as defined in the Plan) indicated on the accompanying Deferral
Election Form(s).
5. Subject to the terms of the Plan, for each subsequent Plan Year and/or
Performance Period (as such terms are defined in the Plan), the
Participant shall have the right to make a similar election to defer a
portion of his/her Base Salary and Bonus Compensation.
6. The Participant is in no way obligated to make a deferral election in
any Plan Year or Performance Period, as applicable, and the failure to
elect for any Plan Year or Performance Period will not affect the
Participant's right to do so in any subsequent Plan Year or
Performance Period.
7. The Participant's Deferral Election Form(s) must be received by
Boatmen's no later than the date(s) specified in the Plan. Any
Deferral Election Form received after said date(s) shall be of no
effect for purposes of the Plan.
8. Each Deferral Election Form, signed and dated by the Participant,
shall be irrevocable.
<PAGE>
9. Subject to the terms of the Plan, the Participant hereby elects to
have all amounts in his/her Deferred Compensation Account (as defined
in the Plan) payable following his/her Retirement (as defined in the
Plan) pursuant to the following benefits payment schedule:
__ single lump sum;
__ substantially equal yearly installments over a five (5) year
period;
__ substantially equal yearly installments over a ten (10) year
period; or
__ substantially equal yearly installments over a fifteen (15) year
period.
The Participant understands that the foregoing election shall be
irrevocable. The Participant further understands that, in accordance
with the Plan, benefits payable prior to his/her Retirement shall be
paid in a single lump sum.
10. The Participant designates the following person as his/her Beneficiary
(as defined in the Plan) under the Plan:
Name: ____________________________________________________
Address: ____________________________________________________
____________________________________________________
____________________________________________________
Relationship to
the Participant: ____________________________________________________
11. The Participant has the right to change his/her Beneficiary at any
time by notifying Boatmen's in writing of such change in Beneficiary.
BOATMEN'S BANCSHARES, INC.
By:_______________________________ Date:____________________
By:_______________________________ Date:____________________
PLAN DOCUMENT
- - --------------------------------------------------------------------------------
BOATMEN'S BANCSHARES, INC.
AMENDED 1982 LONG TERM INCENTIVE PLAN
1. PURPOSE
- - --------------------------------------------------------------------------------
The purpose of the Amended 1982 Long Term Incentive Plan (the "Plan") of
Boatmen's Bancshares, Inc. (the "Corporation") is to provide a means by
which the Corporation and its subsidiaries shall be able to attract and
retain key employees of exceptional ability, to provide such individuals
with added incentives to make a maximum contribution of their efforts,
initiative and skill toward the goal of greater profitability and to be
competitive with other companies as to executive compensation.
2. ADMINISTRATION
- - --------------------------------------------------------------------------------
The Plan shall be administered by the Compensation Committee (the
"Committee") composed of three or more directors of the Corporation who are
not officers or employees thereof. Members of the Committee shall be
appointed by, and shall serve at the pleasure of, the Board of Directors of
the Corporation (the Board"). Subject to the express provisions of the
Plan, the Committee shall have complete authority to determine the
individuals who shall be participants in the Plan and their Salary Grades,
to establish for each Performance Period (as hereafter defined) applicable
Target Average Annual Earnings Per Share Growth Rates, to select peer
groups of the Corporation, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it and to the conduct of the
Committee's affairs and to take all other actions, and make all other
determinations, necessary or advisable for the administration of the Plan.
All actions and determinations by the Committee shall be conclusive.
3. ELIGIBILITY AND DESIGNATION OF PARTICIPANTS
- - --------------------------------------------------------------------------------
Only those persons who are key employees of the Corporation or its
subsidiaries, including but not limited to officers, whether or not they
are directors of the Corporation or its subsidiaries, shall be eligible to
participate in the Plan. In each successive year until termination of the
Plan as provided hereinafter (each, a "Participation Designation Year"),
the Committee shall designate certain persons, who meet the eligibility
requirements, to participate in the Plan (the "Participants") and shall
determine the Salary Grade to which each such Participant belongs. Such
designation during a Participation Designation Year shall apply with
respect to the three year period beginning with such Participation
Designation Year and including the next two successive years after the
Participation Designation Year (the "Performance Period"). The designation
of Participants shall be at the sole discretion of the Committee. Such
Participants may, but need not, be the same as those who were designated in
any preceding year. As soon
<PAGE>
as practicable after he or she is designated by the Committee, each
Participant shall be given written notice of his or her designation and
Salary Grade and a listing of the Corporation's peer group for the
applicable Performance Period, as selected by the Committee.
4. CALCULATION OF AWARDS
- - --------------------------------------------------------------------------------
The Committee shall cause awards under the Plan (the "Awards") to be paid
after the end of each Performance Period with respect to the Performance
Period last ended. Awards shall be paid to all of the Participants
(including those who have retired, died or become disabled) designated for
such prior Performance Period, with the exception of those Participants
whose rights to payment of Awards have been divested pursuant to Section 6
hereof. Each Participant's Award, if any, shall be an amount equal to the
Participant's Average Salary (as hereafter defined) for the applicable
Performance Period multiplied by the Participant's Payout Factor (as
hereafter defined) for such Performance Period.
The term "Average Salary" means, for each Participant, the sum of such
Participant's annual salary at the date of his or her designation of
participation and at each of the next two anniversary dates thereof,
divided by three; provided, however, that if a Participant was not eligible
to participate in the Plan on January 1 of the Participation Designation
Year, or if a Participant retires, dies or becomes disabled during the
Performance Period, his or her salary for any such partial year or years
shall be annualized for purposes of determining such Participant's Average
Salary. The term "Payout Factor" means, for each Participant, a percentage
factor determined by reference to such Participant's Salary Grade and the
percentile rank of the Total Shareholder Return (as hereafter defined) of
the Corporation as compared to the Total Shareholder Return of the
Corporation's peer group. The Payout Factor, which is determined by
reference to Exhibit A attached hereto, is subject to further increase or
decrease (but not by more than 20% in either direction) of 1% for each 0.1%
that the Corporation's actual average annual earnings per share growth rate
for the Performance Period exceeds or is less than the Target Average
Annual Earnings Per Share Growth Rate for that Performance Period, as
determined by the Committee. The term "Total Shareholder Return" means the
change in market value of the common stock of a company, plus dividends
thereon, during a Performance Period.
Notwithstanding the foregoing, if a Participant was not eligible for
participation in the Plan on January 1 of the Plan Designation Year in
which he or she was designated, or if a Participant retires during a
Performance Period, such Participant's Award shall be an amount equal to
the Award which he or she would have otherwise received under the Plan
multiplied by a fraction, the numerator of which shall be the number of
calendar years or portions thereof in the Performance Period during which
the Participant was eligible for participation in the Plan and the
denominator of which shall be three, all subject, however, to the
provisions of Section 9.
2
<PAGE>
5. PAYMENT OF AWARDS
- - --------------------------------------------------------------------------------
The Corporation shall make payment of each Award in cash. Payment shall be
made as soon as practicable, but not later than March 31 of the applicable
year.
6. VESTING
- - --------------------------------------------------------------------------------
Upon designation of participation with respect to a Performance Period, a
Participant's right to payment of an Award in accordance with the
provisions hereof shall vest subject to automatic divestiture upon
termination during the applicable Performance Period of such Participant's
employment by the Corporation or one of its subsidiaries other than for
reasons of retirement at or after normal retirement age, disability, death
or a Change in Control as specified in Section 9. No change in the duties
of a Participant while in the employ of the Corporation or one of its
subsidiaries, or any transfer among them, shall constitute termination of
employment by the Corporation or its subsidiaries.
7. NO GUARANTEE OF EMPLOYMENT
- - --------------------------------------------------------------------------------
Nothing in the Plan shall be deemed to create any limitation or restriction
on such rights as the Corporation and its subsidiaries otherwise would have
to terminate the employment of any person at any time for any reason.
8. AMENDMENT OR TERMINATION
- - --------------------------------------------------------------------------------
Subject to the provisions of Section 9, the Board, at any time, may
terminate the Plan or make such modifications of the Plan as it may deem
advisable, except that no such termination or modification shall diminish a
Participant's right to an Award to the extent vested under Section 6
hereof.
9. CHANGE IN CONTROL
- - --------------------------------------------------------------------------------
In the event of a Change in Control of the Corporation (as hereafter
defined) during any Performance Period or Periods, each Participant shall
be paid, immediately prior to the Change in Control, an amount equal to the
Award or Awards that he or she would have been entitled to receive at the
end of each of the Performance Period or Periods had such Change in Control
not occurred; provided, however, that, for purposes of calculating the
Award or Awards payable pursuant to this Section 9, (i) the applicable
Payout Factors shall be 60% for Salary Grade 75 Participants, 45% for
Salary Grade 74-73 Participants, 40% for Salary Grade 72-67 Participants
3
<PAGE>
and 30% for Salary Grade 66 Participants, without adjustment in relation to
Target Average Annual Per Share Growth Rates, and (ii) each Participant's
Average Salary shall be equal to such Participant's annual salary on the
date of the Change in Control.
"Change in Control" of the Corporation shall be deemed to have occurred as
of the first day that any one or more of the following conditions shall
have been satisfied:
(i) Any individual, corporation (other than the Corporation), partnership,
trust, association, pool, syndicate, or any other entity or any group
of persons acting in concert becomes the beneficial owner, as that
concept is defined in Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, of
securities of the Corporation possessing twenty percent (20%) or more
of the voting power for the election of directors of the Corporation;
(ii) There shall be consummated any consolidation, merger, or other
business combination involving the Corporation or the securities of
the Corporation in which holders of voting securities of the
Corporation immediately prior to such consummation own, as a group,
immediately after such consummation, voting securities of the
Corporation (or, if the Corporation does not survive such transaction,
voting securities of the corporation surviving such transaction)
having less than sixty percent (60%) of the total voting power in an
election of directors of the Corporation (or such other surviving
corporation);
(iii) During any period of two (2) consecutive years, individuals who at
the beginning of such period constitute the directors of the
Corporation cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the
Corporation's shareholders, of each new director of the Corporation
was approved by a vote of at least two-thirds (2/3) of the directors
of the Corporation then still in office who were directors of the
Corporation at the beginning of any such period; or
(iv) There shall be consummated any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of
all, or substantially all, of the assets of the Corporation (on a
consolidated basis) to a party which is not controlled by or under
common control with the Corporation.
10. BENEFICIARY
- - --------------------------------------------------------------------------------
Each Participant shall have the right, from time to time, to designate or
change the designation of a primary and a contingent beneficiary, or either
thereof, to receive on his death the benefit provided herein or, as the
case may be, any undistributed balance of any benefit distributable to him
pursuant to the provisions hereof. Any such Participant may make such
designation only in writing and by filling out and furnishing to the
committee such form or forms as the committee may require. In the event
that any Participant fails to designate a beneficiary or if no such
4
<PAGE>
designated beneficiary is living upon the death of such Participant or if
for any reason such designation shall be legally ineffective, then, and in
any of said events, the amount which would have been paid to a designated
living beneficiary shall be paid to the trustee of the Participant's
revocable living trust, and if none to the trustee of the Participant's
testamentary trust, and if none to the personal representative of the
estate of such deceased Participant.
Upon the death of a beneficiary entitled to the distribution of an amount
pursuant to the provisions hereof prior to receipt of all amounts
distributable to such beneficiary hereunder, an amount equal to the unpaid
balance shall be paid to the trustee of the beneficiary's revocable living
trust, and if none to the trustee of the beneficiary's testamentary trust,
and if none to the personal representative of the estate of such deceased
beneficiary.
11. EFFECTIVE DATE OF PLAN
- - --------------------------------------------------------------------------------
The Plan shall be effective as of February 9, 1982, as amended as of
February 10 and March 10, 1987, January 1, 1992, January 1, 1995, January
30, 1996 and February 12, 1996.
5
Exhibit 10(y)
BOATMEN'S SUPPLEMENTAL RETIREMENT PLAN
PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of August 4, 1993, between Boatmen's Bancshares, Inc.
("Corporation") and Andrew B. Craig, III ("Participant").
The Corporation and the Participant mutually agree as follows:
1. The Participation has received a copy of the Boatmen's Supplemental
Retirement Plan ("Plan") and has read and understands the Plan.
2. By completion of the Agreement, the Participant agrees to comply with the
terms of the Plan in all respects.
3. All provisions of the Plan are hereby made a part of the Agreement.
4. The following special provisions are applicable to the Participant's
participation in the Plan: For purposes of Section 3.1(i), the participant shall
receive the greater of:
a) thirty-three and one-third (33.3) years of credited service at age 65; or
b) the actual number of years of credited service accrued using an employment
commencement date of March 1, 1971.
BOATMEN'S BANCSHARES, INC.
By: /s/ ARTHUR J. FLEISCHER 8-5-93
Date
/s/ ANDREW B. CRAIG, III 8-5-93
Participant Date
TRUST UNDER BOATMEN'S SUPPLEMENTAL RETIREMENT PLAN
This Agreement made this 31st day of December, 1993, by and between
Boatmen's Bancshares, Inc. ("Company") and United States Trust Company of New
York (Trustee");
WHEREAS, Company has adopted nonqualified deferred compensation Plans as
listed in Appendix A (hereinafter collectively called "Plan");
WHEREAS, Company wishes to establish a trust (hereinafter called "Trust")
and to contribute to the Trust assets that shall be held therein, subject to the
claims of Company's creditors in the event of Company's Insolvency, as herein
defined, until paid to Plan participants and their beneficiaries in such manner
and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of Company to make contributions to the Trust
to provide itself with a source of funds to assist it in the meeting of its
liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
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Section 1. Establishment of Trust
(a) Company hereby deposits with Trustee in trust One Hundred Dollars
($100.00), which shall become the principal of the Trust to be held,
administered and disposed of by trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of Plan participants and general creditors as herein set
forth. Plan participants and their beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries against Company.
Any assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or from time to time,
make additional deposits of cash or other property in trust with Trustee to
augment the principal to be held, administered and disposed of by Trustee as
provided in this Trust
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Agreement. Neither Trustee nor any Plan participant or beneficiary shall have
any right to compel such additional deposits.
(f) Upon a Change of Control, Company shall, as soon as possible, but in no
event longer than ten (10) days following the Change of Control, as defined
herein, make an irrevocable contribution to the Trust in an amount that is
sufficient to pay each Plan participant or beneficiary the benefits to which
Plan participants or their beneficiaries would be entitled pursuant to the terms
of the Plan as of the date on which the Change of Control occurred.
Section 2. Payments to Plan Participants and Their Beneficiaries.
(a) Company shall deliver to Trustee a schedule (the "Payment Schedule")
that indicates the amounts payable in respect of each Plan participant (and his
or her beneficiaries), that provides a formula or other instructions acceptable
to Trustee for determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plan), and the time of
commencement for payment of such amounts. Except as otherwise provided herein,
Trustee shall make payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits pursuant to the
terms of the Plan and shall pay amounts
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withheld to the appropriate taxing authorities or determine that such amounts
have been reported, withheld and paid by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as it shall
designate under the Plan, and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan participants or
their beneficiaries as they become due under the terms of the Plan. Company
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, Company shall make the balance of each such payment as it falls due.
Trustee shall notify Company where principal and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
when Company is Insolvent.
(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay
its debts as they become due, or (ii) Company is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code.
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(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below.
(1) The Board of Directors and the Chief Executive Officer of Company
shall have the duty to inform Trustee in writing of Company's Insolvency.
If a person claiming to be a creditor of Company alleges in writing to
Trustee that Company has become Insolvent, Trustee shall determine whether
Company is Insolvent and, pending such determination, Trustee shall
discontinue payment of benefits to Plan participants or their
beneficiaries.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or
has received notice from Company or a person claiming to be a creditor
alleging that Company is Insolvent, Trustee shall have no duty to inquire
whether Company is Insolvent. Trustee may in all events rely on such
evidence concerning Company's solvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a determination
concerning Company's solvency.
(3) If at any time Trustee has determined that Company is Insolvent,
Trustee shall discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this Trust Agreement shall
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in any way diminish any rights of Plan participants or their beneficiaries
to pursue their rights as general creditors of Company with respect to
benefits due under the Plan or otherwise.
(4) Trustee shall resume the payment of benefits to Plan participants
or their beneficiaries in accordance with Section 2 of this Trust Agreement
only after Trustee has determined that Company is not Insolvent (or is no
longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
Section 4. Investment Authority.
(a) In no event may Trustee invest in securities (including stock or rights
to acquire stock) or obligations issued by Company, other than a de minimis
amount held in common investment vehicles in which Trustee invests. All rights
associated with assets of the Trust shall be exercised by Trustee or the person
designated by
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Trustee, and shall in no event be exercisable by or rest with Plan participants.
Section 5. Disposition of Income.
(a) During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 6. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within ninety (90) days following the close of each
calendar year and within ninety (90) days after the removal or resignation of
Trustee, Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be.
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Section 7. Responsibility of Trustee.
(a) If Trustee undertakes or defends any litigation arising in connection
with this Trust, Company agrees to indemnify Trustee against Trustee's costs,
expenses, and liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such payments. If
Company does not pay such costs, expenses and liabilities in a reasonably timely
manner, Trustee may obtain payment from the Trust.
(b) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations hereunder.
(c) Trustee may hire agents, accountants, actuaries, investment advisors,
financial consultants or other professionals to assist it in performing any of
its duties or obligations hereunder.
(d) Trustee shall have, without exclusion, all powers conferred on Trustees
by applicable law, unless expressly provided otherwise herein, provided,
however, that if an insurance policy is held as an asset of the Trust, Trustee
shall have no power to name a beneficiary of the policy other than the Trust, to
assign the policy (as distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to loan to any person the proceeds
of any borrowing against such policy.
(e) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on
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a business and dividing the gains, therefrom, within the meaning of Section
301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant
to the Internal Revenue Code.
Section 8. Compensation and Expenses of Trustee. Company shall pay all
administrative and Trustee's fees and expenses. If not so paid, the fees and
expenses shall be paid from the Trust.
Section 9. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to Company, which
shall be effective sixty (60) days after receipt of such notice unless Company
and Trustee agree otherwise.
(b) Except as provided in Section 9(c), Trustee may be removed by Company
on sixty (60) days notice or upon shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee may not be removed
by Company for twenty (20) years.
(d) If Trustee resigns within twenty (20) year(s) of a Change of Control,
as defined herein, Trustee shall select a successor Trustee in accordance with
the provisions of Section 10(b) hereof prior to the effective date of Trustee's
resignation.
(e) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The transfer shall be completed within sixty (60) days after receipt of notice
of resignation, removal or transfer, unless Company extends the time limit,
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(f) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 10 hereof, by the effective date of resignation or
removal under paragraphs (a) or (b) of this section. If no such appointment has
been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
Section 10. Appointment of Successor.
(a) Except as provided in Section 9(d), if Trustee resigns or is removed in
accordance with Section 9(a) or (b) hereof, Company may appoint any third party,
such as a bank trust department or other party that may be granted corporate
trustee powers under state law, as a successor to replace Trustee upon
resignation or removal. The appointment shall be effective when accepted in
writing by the new Trustee, who shall have all of the rights and powers of the
former Trustee, including ownership rights in the Trust assets. The former
Trustee shall execute any instrument necessary or reasonably requested by
Company or the successor Trustee to evidence the transfer.
(b) If Trustee resigns pursuant to the provisions of Section 9(d) hereof
and selects a successor Trustee, Trustee may appoint any third party such as a
bank trust department or other party that may be granted corporate trustee
powers under state law. The appointment of a successor Trustee shall be
effective when accepted in writing by the new Trustee. The new Trustee shall
have all the
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rights and powers of the former Trustee, including ownership rights in Trust
assets. The former Trustee shall execute any instrument necessary or reasonably
requested by the successor Trustee to evidence the transfer.
Section 11. Amendment or Termination.
(a) This Trust Agreement may be amended by a written instrument executed by
Trustee and Company. Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Plan or shall make the Trust revocable.
(b) Subject to Section 11(c), the Trust shall not terminate until the date
on which Plan participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan. Upon termination of the Trust any
assets remaining in the Trust shall be returned to Company.
(c) Upon written approval of participants or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plan, Company may terminate
this Trust prior to the time all benefit payments under the Plan have been made.
All assets in the Trust at termination shall be returned to Company.
(d) Sections l.(b), l.(d), l.(f), 2.(a), 2.(b), 4.(a), 5.(a), 9.(c),
9.(d), 10.(b), 11.(a), 11.(b), 11.(d), 12.(a), 12.(b), 12.(c) and 12(d) of this
Trust Agreement may not be amended by Company for twenty (20) year(s)
following a Change of Control, as defined herein.
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Section 12. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of Missouri.
(d) For purposes of this Trust, Change of Control shall mean any of the
following events: (a) any individual, corporation (other than the Company),
partnership, trust, association, pool, syndicate, or any other entity or any
group of persons acting in concert becomes the beneficial owner, as that concept
is defined in Rule 13d-3 promulgated by the SEC under the Securities Exchange
Act of 1934, of securities of the Company possessing twenty percent (20%) or
more of the voting power for the election of directors of the Company; (b) there
shall be consummated any consolidation, merger or other business combination
involving the Company or the securities of the Company in which holders of
voting securities of the Company immediately prior to such consummation own, as
a group, immediately after such consummation, voting securities of the Company
(or, if the Company does not survive such transaction, voting securities of the
corporation surviving such transaction)
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having less than fifty percent (50%) of the total voting power in an election of
directors of the Company (or such other surviving corporation); (c) during any
period of two consecutive years, individuals who at the beginning of such period
constitute the Directors of the Company cease for any reason to constitute at
least a majority thereof unless the election, or the nomination for election by
the Company's shareholders, of each new Director of the Company was approved by
a vote of at least two-thirds of the Directors of the Company then still in
office who were Directors of the Company at the beginning of any such period;
(d) removal by the stockholders of all or any of the incumbent Directors of the
Company other than a removal for Cause; and (e) there shall be consummated any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the Company
(on a consolidated basis) to a party which is not controlled by or under common
control with the Company. For purposes of this Section 12(d), "Cause" means
conduct which is knowingly fraudulent, deliberately dishonest or willful
misconduct.
Section 13. Effective Date.
The effective date of this Trust Agreement shall be December 31, 1993.
BOATMEN'S BANCSHARES, INC.
By /s/ [ILLEGIBLE]
---------------------------
Title: SVP
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Trustee:
UNITED STATES TRUST COMPANY
OF NEW YORK
By /s/ [ILLEGIBLE]
---------------------------
Title: Senior Vice President
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Appendix A
Boatmen's Supplemental Retirement Compensation Plan
Centerre Executive Retirement Program; provided, however, for purposes of
the Trust to which this Appendix A is attached, only the benefits of the
participants in the Centerre Plan who are active employees of Boatmen's
Bancshares, Inc. or its subsidiaries as of the date the Trust is entered into
shall be deemed part of the Plan and covered by the Trust.
<PAGE>
FIRST INSTRUMENT OF AMENDMENT
WHEREAS, Boatmen's Bancshares, Inc. (the "Company")
established the Trust Under Boatmen's Supplemental Retirement Plan (the
"Trust",) by entering into a trust agreement, dated December 31, 1993 (the
"Trust Agreement"), with United States Trust Company of New York (the
"Trustee"), in order to provide a vehicle to fund certain of the Company's
deferred compensation plans, subject to the claims of the Company's creditors;
WHEREAS, the Company wishes and the Trustee agrees to amend
the Trust Agreement to include the Company's Tier Two Supplemental Retirement
Plan under the Trust Agreement and to provide that sufficient assets are set
aside upon a Change of Control (as defined in the Trust) to ensure that the
Company shall satisfy its obligations under certain employment agreements and
the Company's Change of Control Severance Plan;
NOW THEREFORE, the Trust Agreement is hereby amended as
follows:
1. The first paragraph is hereby amended and restated in its
entirety to read as follows:
This Agreement made this 31st day of December, 1993, by and
between Boatmen's Bancshares, Inc. ("Company") and United
States Trust Company of New York ("Trustee") and as amended as
of August 13, 1996;
2. The first WHEREAS clause is hereby amended and restated in
its entirety to read as follows:
WHEREAS, Company has adopted nonqualified compensation plans
and other compensation arrangements and entered into certain
employment agreements as listed in Appendix A (hereinafter
collectively called "Plan");
3. The third WHEREAS clause is hereby amended and restated in
its entirety to read as follows:
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect
the status of the Retirement Plans (as defined in Appendix A)
as unfunded plans maintained for the purpose of providing
deferred compensation for a select group of management or
highly compensated employees for purposes of Title I of the
Employee Retirement Income Security Act of 1974 and for the
purpose of ensuring that the Company set aside assets
sufficient to satisfy its obligations or potential obligations
under certain compensation arrangements and employment
agreements in the event of a Change of Control (as defined
herein); and
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4. Section 1, paragraph (b) is hereby amended and restated in
its entirety to read as follows:
(b) The Trust hereby established shall be irrevocable, except
to the extent funds may revert to the Company as specifically
provided herein.
5. Section 1, paragraph (e) is hereby amended and restated in
its entirety to read as follows:
(e) Company, in its sole discretion (except as provided in
Section 1(f) herein), may at any time, or from time to time,
make additional deposits of cash or other property in trust
with the Trustee to augment the principal to be held,
administered and disposed of by Trustee as provided in this
Trust Agreement. Neither the Trustee nor any Plan participant
or beneficiary shall have any right to compel such additional
deposits, except as provided in Section 1(f) herein.
6. Section 1, paragraph (f) is hereby amended and restated in
its entirety to read as follows:
Upon a Change of Control (as defined herein), with respect to
the Retirement Plans (as defined in Appendix A herein),
Company shall, as soon as possible, but in no event longer
than ten (10) days following such Change of Control, make an
irrevocable cash contribution to the Trust in an amount that
is sufficient to pay each Plan participant or beneficiary the
benefits to which Plan participants or their beneficiaries
would be entitled pursuant to the terms of such Retirement
Plans as of the date on which the Change of Control occurs.
Upon a Change of Control, with respect to the Change of
Control Agreements (as defined in Appendix A herein), Company
shall, as soon as possible, but in no event longer than ten
(10) days following such Change of Control, make a cash
contribution, which shall be allocated proportionately to each
Change of Control Account (as defined below) for each such
participant, in an amount that is sufficient to pay each
Change of Control Agreement participant or beneficiary the
benefits to which such participants and beneficiaries would be
entitled if such participants' employment with the Company was
involuntarily terminated without Cause (as defined in the
Change of Control Agreements) on the date that the Change of
Control occurs, excluding amounts payable in connection with
the Retirement Plans with respect to which such amounts are
set aside under the preceding sentence and excluding any
amounts
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payable under any plans that are qualified under Section
401(a) of the Code (the "Funding Amount"). Company shall
indicate the amount of such contribution with respect to the
Change of Control Agreements on a Payment Schedule prepared by
the Company and submitted to the Trustee immediately prior to
the date of the Change of Control. In addition, upon such
Change of Control, the Trustee shall establish a separate
account for each participant of the Change of Control
Agreements (the "Change of Control Accounts") and shall
allocate deposits made with respect to the Company's
obligations under the Change of Control Agreements
proportionately among such accounts.
7. Section 2 is hereby amended by adding a new paragraph (g)
to read in its entirety as follows:
(g) Following a Change of Control, if the Company has
satisfied its obligation with respect to any participant under
a Change of Control Agreement, including any lump-sum payment
due under any of the Retirement Plans, or, if the Company's
obligations with respect to such participant have expired, the
Company may request the Trustee to return any funds which were
allocated to such participant's Change of Control Account with
a copy of such request provided to such participant. Upon
receiving such a request, the Trustee will determine whether
the Company's obligations have been satisfied or have expired
and if the Trustee determines that such obligations either
have been satisfied or have expired, the Trustee will close
that participant's Change of Control Account and will allocate
or pay out any excess funds in the following order: (i)
proportionally to the Change of Control Accounts of any other
participants until each such Account contains an amount equal
to the Funding Amount, (ii) to the account established for the
Retirement Plans in an amount that is sufficient to pay each
Retirement Plan participant or beneficiary the benefits to
which such participants or their beneficiaries would be
entitled pursuant to the terms of such Retirement Plans as of
the date of the Company's request, and (iii) the remainder of
the funds, if any, back to the Company. Company shall not
institute any action or proceeding to compel the Trustee to
refund such amounts and the Trustee shall be fully protected
from any liability with respect thereto in the event that the
Trustee fails to refund such amount to the Company based on an
assertion by such participant or his or her beneficiary that
Company's obligations have not been satisfied or have not
expired.
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8. Section 2, paragraph (a) is hereby amended by deleting the
first sentence and replacing it with the following:
Company shall deliver to Trustee a copy of each Plan listed on
Appendix A and a schedule (the "Payment Schedule") that
indicates the amounts payable or potentially payable in
respect of each Plan participant (and his or her
beneficiaries), provides a formula or other instructions
acceptable to Trustee for determining the amounts so payable,
the form in which such amount is to be paid (as provided for
or payable under the Plan), and the time of commencement for
payment of such amounts. In addition, the Trustee shall obtain
from the Company, participants, beneficiaries and independent
third parties, and the Company shall provide to the Trustee,
such data about each such participant, including data about
beneficiaries, to the extent determinable, as are necessary
to enable the Trustee to determine the amount and time of the
benefits payable under the terms of each Plan on account of
such participant (the "Participant Data").
9. Section 2, paragraph (b) is hereby amended and restated in
its entirety to read as follows:
(b) Prior to a Change of Control, the entitlement of a Plan
participant or his or her beneficiaries to benefits under the
Plan shall be determined by Company or such party as it shall
designate under the Plan, and any claim for such benefits
shall be considered and reviewed under the procedures set out
in the Plan. Following a Change of Control, the entitlement of
a Plan participant or his beneficiaries to benefits under the
Plan shall be determined by the Trustee. The Trustee shall
determine such benefits based on the Payment Schedule
submitted by the Company immediately prior to the Change of
Control, as updated by the Trustee in accordance with the
following procedures: (i) the Trustee shall update the
Participant Data as necessary to compute benefits under any
Plan; and (ii) the Trustee shall add persons to the list of
participants only upon the receipt of deposits from the
Company earmarked for that person and only after all other
funding obligations of the Company for other participants have
been satisfied. In carrying out its duties to update the
Payment Schedule, the Trustee shall be entitled to obtain
assistance from the Company and from independent third
parties, including but not limited to actuaries or accountants
retained by the Trustee, and shall be afforded access to all
Company records reasonably necessary to update the Participant
Data. If the Company refuses to cooperate with the Trustee or
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fails to provide the Trustee with necessary access to Company
records, the Trustee shall request such information from the
participants or beneficiaries and shall be entitled to rely on
such information.
10. Section 4, paragraph (a) is hereby amended by deleting the
first sentence and replacing it with the following:
(a) The Trustee shall have the powers and authorities granted
to a trustee under New York law. Nevertheless, in no event may
Trustee invest in securities (including stock or rights to
acquire stock) or obligations issued by Company, other than a
de minimis amount held in common investment vehicles in which
Trustee invests.
11. Section 5, paragraph (a) is hereby amended and restated in
its entirety to read as follows:
(a) During the term of this Trust, all income earned by the
Trust, net of expenses and taxes, with respect to funds
earmarked for the Retirement Plans, shall be allocated to the
account established for the Retirement Plans, and, with
respect to funds earmarked for the Change of Control
Agreements, shall be allocated proportionately among the
Change of Control Accounts.
12. Section 6 is hereby amended by inserting at the end of
such Section the following:
Any such statement shall be deemed an account stated and
accepted and approved by the Company, and the Trustee shall be
relieved and discharged, as if such account had been settled
and allowed by a judgment or decree of a court of competent
jurisdiction, unless protected by written notice by the
company or any Plan participant or beneficiary to the Trustee
within sixty (60) days of receipt of such statement by the
Company. Upon reasonable request, the Trustee shall provide a
copy of such statement to the requesting Plan participant or
beneficiary. The Trustee shall have the right to apply at any
time to a court of competent jurisdiction for judicial
settlement of any account of the Trustee not previously
settled as herein provided or for the determination of any
question of construction or for instructions. In any such
action or proceeding it shall be necessary to join as parties
only the Trustee and the Company (although the Trustee may
also join such other parties as it may deem appropriate), and
any judgment or decree entered therein shall be conclusive.
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13. Section 7 is hereby amended by adding a new paragraph (f)
to read in its entirety as follows:
(f) the Trustee shall incur no liability to any person in
discharging its duties hereunder for any action taken or
omitted in good faith and without negligence in conformity
with the terms of this Trust Agreement. Except as otherwise
required by law, under no circumstances shall the Trustee
incur liability to any person for any indirect or
consequential damages (including without limitation lost
profits) of any form, whether or not foreseeable and
regardless of the form of the action in which such a claim may
be brought, with respect to the Trust or its role as Trustee,
except that this sentence shall not apply in the case of the
Trustee's willful misconduct.
14. Section 8 is hereby amended by deleting the last sentence
and replacing it with the following:
If not so paid, the fees and expenses shall be paid from the
Trust in a manner deemed by the Trustee, in its sole
discretion, to be appropriate.
15 Section 12, paragraph (c) is hereby amended by deleting
the reference to "Missouri" and inserting "New York" in its place.
16. Section 12, paragraph (d) is hereby amended by deleting
the reference to "fifty percent (50%)" in subclause (b) and inserting "sixty
percent (60%)" in its place.
17. Appendix A is hereby amended and restated in its entirety
to read as follows:
(a) Boatmen's Supplemental Retirement Plan
(b) Boatmen's Tier Two Supplemental Retirement Plan
(c) Centerre Executive Retirement Plan; provided, however, for
purposes of the Trust to which this Appendix A is attached,
only the benefits of the participants in the Centerre Plan who
are active employees of Boatmen's Bancshares, Inc. or its
subsidiaries as of the date the Trust is entered into shall be
deemed part of the Centerre Plan and covered by the Trust
(d) Boatmen's Change of Control Severance Plan
(e) Employment Agreement of Andrew B. Craig III, dated January
30, 1996
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(f) Employment Agreement of Gregory L. Curl, dated January 30,
1996
(g) Employment Agreement of Samuel B. Hayes III, dated January
30, 1996, as amended August 13, 1996
(h) Employment Agreement of James W. Kienker, dated August 13,
1996
(i) Employment Agreement of John M. Brennan, dated August 13,
1996
The plans listed in paragraphs (a), (b) and (c) are
collectively referred to as the "Retirement Plans" and the
other compensation arrangements and employment agreements
listed in paragraphs (d) through (i) are collectively referred
to as the "Change of Control Agreements."
IN WITNESS WHEREOF, the Company and the Trustee have executed
this Instrument of Amendment, pursuant to approval of the Compensation
Committee and the approval and ratification by the Board of Directors, as of
August 13, 1996.
Boatmen's Bancshares, Inc.
/s/ illegible signature
- - -----------------------
Chase Manhattan Bank, successor in
interest to United States Trust Company of
New York, as Trustee
/s/ illegible signature
- - -----------------------
Vice President
7
<PAGE>
NationsBank
March 21, 1997
Andrew B. Craig
NationsBank
800 Market Street
St. Louis, MO 63101
Dear Mr. Craig:
You currently have outstanding an option to purchase 272,866 shares of the
common stock of NationsBank Corporation that was granted to you under the
Boatmen's Bancshares, Inc. 1987 Non-Qualified Stock Option Plan (the "Option").
You were also granted in tandem with the Option stock appreciation rights for an
equal number of shares (the "SARs"). Shown on the enclosed exhibit are those
options to which SARs are attached.
This letter agreement evidences our mutual understanding that you hereby waive
any and all of your rights with respect to the SARs shown on the enclosed
exhibit and that your SARs are hereby canceled. In consideration thereof,
NationsBank will make available to you a cashless exercise procedure for
exercising your Option through NationsBanc Securities, Inc. If you exercise your
Option through NationsBanc Securities, Inc. using the cashless exercise
procedure, NationsBank will cover any broker's fees, margin account interest
charges, commissions or other expenses incurred by you in connection with such
cashless exercise. The payment of these fees constitutes a taxable benefit and
NationsBank will gross up the expense associated with this benefit. In order to
exercise your option as a cashless exercise, please contact either Cathy Butner,
Cindy Kirwan or Sig Johnson at NationsBanc Securities in Charlotte. All three
are assigned to the priority services unit and are aware of your agreement. They
can be reached by calling 1-800-926-1111. Press 4 to be connected to the trading
desk where you can ask for one of the three.
If this letter agreement accurately reflects your understanding of our agreement
on these matters, please so indicate by signing and returning to me the enclosed
copy of this letter.
Sincerely,
/s/ CHARLES D. LORING
Charles D. Loring
Senior Vice President
ACCEPTED AND AGREED TO:
/s/ Andrew B. Craig 4-20-97
- - -----------------------------
Exhibit 11
Diluted Earnings Per Common Share and
Diluted Average Common Shares Outstanding
For diluted earnings per common share, net income available to common
shareholders can be affected by the conversion of the registrant's convertible
preferred stock. Where the effect of this conversion would have been dilutive,
net income available to common shareholders is adjusted by the associated
preferred dividends. This adjusted net income is divided by the weighted
average number of common shares outstanding for each period plus amounts
representing the dilutive effect of stock options outstanding and the dilution
resulting from the conversion of the registrant's convertible preferred stock,
if applicable. The effect of convertible preferred stock is excluded from the
computation of diluted earnings per common share in periods in which the effect
would be antidilutive.
Diluted earnings per common share was determined as follows (shares in
thousands, dollars in millions except per-share information):
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Average common shares outstanding ......................................... 717,450 590,216 544,959
Dilutive effect of
Convertible preferred stock ............................................. 3,683 3,896 4,582
Stock options ........................................................... 16,658 9,235 4,726
------- ------- -------
Total dilutive shares ..................................................... 737,791 603,347 554,267
======= ======= =======
Income available to common shareholders ................................... $ 3,066 $ 2,360 $ 1,942
Preferred dividends paid on dilutive convertible preferred stock .......... 7 7 8
--------- --------- ---------
Total net income available to common shareholders adjusted for dilution ... $ 3,073 $ 2,367 $ 1,950
========= ========= =========
Diluted earnings per common share ......................................... $ 4.17 $ 3.92 $ 3.52
========= ========= =========
</TABLE>
NationsBank Corporation and Subsidiaries
Ratio of Earnings to Fixed Charges Exhibit 12(a)
(Dollars in Millions)
<TABLE>
<CAPTION>
Year ended December 31
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Excluding Interest on Deposits
Income before taxes ..................................... $ 4,796 $ 3,634 $2,991 $2,555 $1,991
Equity in undistributed losses (earnings)
of unconsolidated subsidiaries ........................ -- 2 (7) (3) (5)
Fixed charges:
Interest expense (including capitalized interest) ..... 4,707 4,125 4,480 2,896 1,421
Amortization of debt discount and
appropriate issuance costs ........................... 19 20 12 8 6
1/3 of net rent expense ............................... 150 126 125 114 96
------- ------- -------- ------- -------
Total fixed charges ........................... ...... 4,876 4,271 4,617 3,018 1,523
Earnings (excluding capitalized interest) ............... $ 9,672 $ 7,907 $7,601 $5,570 $3,509
======= ======= ======== ======= =======
Fixed charges ........................................... $ 4,876 $ 4,271 $4,617 $3,018 $1,523
======= ======= ======== ======= =======
Ratio of Earnings to Fixed Charges ...................... 1.98 1.85 1.65 1.85 2.30
Including Interest on Deposits
Income before taxes ..................................... $ 4,796 $ 3,634 $2,991 $2,555 $1,991
Equity in undistributed losses (earnings)
of unconsolidated subsidiaries ........................ -- 2 (7) (3) (5)
Fixed charges:
Interest expense (including capitalized interest) ..... 8,662 7,447 7,761 5,310 3,570
Amortization of debt discount and
appropriate issuance costs ........................... 19 20 12 8 6
1/3 of net rent expense ............................... 150 126 125 114 96
-------- -------- -------- ------- -------
Total fixed charges ........................... ...... 8,831 7,593 7,898 5,432 3,672
Earnings (excluding capitalized interest) ............... $13,627 $11,229 $10,882 $7,984 $5,658
======== ======== ======== ======= =======
Fixed charges ........................................... $ 8,831 $ 7,593 $7,898 $5,432 $3,672
======== ======== ======== ======= =======
Ratio of Earnings to Fixed Charges ...................... 1.54 1.48 1.38 1.47 1.54
</TABLE>
NationsBank Corporation and Subsidiaries
Ratio of Earnings to Fixed Charges and Preferred Dividends Exhibit 12(b)
(Dollars in Millions)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Excluding Interest on Deposits
Income before taxes ..................................... $ 4,796 $ 3,634 $2,991 $2,555 $1,991
Equity in undistributed losses (earnings)
of unconsolidated subsidiaries ........................ -- 2 (7) (3) (5)
Fixed charges:
Interest expense (including capitalized interest) ..... 4,707 4,125 4,480 2,896 1,421
Amortization of debt discount and
appropriate issuance costs ........................... 19 20 12 8 6
1/3 of net rent expense ............................... 150 126 125 114 96
------- ------- -------- ------- -------
Total fixed charges .................................. 4,876 4,271 4,617 3,018 1,523
Preferred dividend requirements ......................... 17 22 13 15 16
Earnings (excluding capitalized interest) ............... $ 9,672 $ 7,907 $7,601 $5,570 $3,509
======= ======= ======== ======= =======
Fixed charges ........................................... $ 4,893 $ 4,293 $4,630 $3,033 $1,539
======= ======= ======== ======= =======
Ratio of Earnings to Fixed Charges ...................... 1.98 1.84 1.64 1.84 2.28
Including Interest on Deposits
Income before taxes ..................................... $ 4,796 $ 3,634 $2,991 $2,555 $1,991
Equity in undistributed losses (earnings)
of unconsolidated subsidiaries ........................ -- 2 (7) (3) (5)
Fixed charges:
Interest expense (including capitalized interest) ..... 8,662 7,447 7,761 5,310 3,570
Amortization of debt discount and
appropriate issuance costs ........................... 19 20 12 8 6
1/3 of net rent expense ............................... 150 126 125 114 96
-------- -------- -------- ------- -------
Total fixed charges ........................... ...... 8,831 7,593 7,898 5,432 3,672
Preferred dividend requirements ......................... 17 22 13 15 16
Earnings (excluding capitalized interest) ............... $13,627 $11,229 $10,882 $7,984 $5,658
======== ======== ======== ======= =======
Fixed charges ........................................... $ 8,848 $ 7,615 $7,911 $5,447 $3,688
======== ======== ======== ======= =======
Ratio of Earnings to Fixed Charges ...................... 1.54 1.47 1.38 1.47 1.53
</TABLE>
Exhibit 21
NationsBank Corporation and Its Subsidiaries at 01/31/98
(100% Owned by NationsBank Corporation Unless Otherwise Noted)
Atlantic Equity Corporation
GLM Investments, Inc. (1)
Blue Ridge Investments, L.L.C. (2)
Sweet River Investments, Ltd. (3)
Carolina Mountain Holding Company
CSF Holdings, Inc.
Citizens Travel, Inc. (4)
Citizens Financial Services, Inc. (4)
Equitable Service Corporation (5)
Transtex Management Company (5)
Export Funding Corporation
MAR, Inc.
MN World Trade Corporation
MNC Affiliates Group, Inc.
MNC American Corporation (6)
MNC Credit Corp (6)
A/M Properties, Inc. (7)
American Financial Service Group, Inc. (LEASEFIRST) (7)
Maryland National Realty Investors, Inc. (7)
Maryland National Leasing Services Corporation (7)
MNC Capital Corporation (7)
NationsCredit Corporation
NationsCredit Commercial Corporation (8)
ALS II, Inc. (9)
ALS Superior, Inc. (9)
BJCC, Inc. (9)
JCCA, Inc. (9)
BIRMSON, L.L.C. (10)
Cape Canterbury, Ltd. (9)
Chepstow Holding Corporation (9)
Chepstow Real Estate Investment Trust (11)
LDI Corporation (10)
MOIL Corporation (9)
NationsCredit Distribution Finance, Inc. (9)
Ariens Credit Corporation (12)
Gravely Credit Corporation (12)
Korg Acceptance Corporation (12)
Mercury Marine Acceptance Corporation (12)
NationsCredit Commercial Corporation Ltd. (12)
NationsCredit Marine Funding Corporation (12)
NationsCredit Securitization Corporation (12)
NIMAC Finance Corp. (12)
Sea Ray Credit Corporation (12)
Winnebago Acceptance Corporation (12)
1
<PAGE>
SBMB Corporation (9)
TJN Corporation (9)
USW SIS I, Inc. (9)
USW SIS II, Inc. (9)
NationsCredit Consumer Corporation (8)
NationsCredit Acceptance Corporation (13)
NationsCredit Consumer Discount Company (13)
NationsCredit Consumer Services, Inc. (13)
NationsCredit Finance Group Inc. (13)
NationsCredit Financial Acceptance Corporation (13)
NationsCredit Financial Services Corporation (13)
NationsCredit Financial Services Corporation of Alabama (13)
NationsCredit Financial Services Corporation of America (13)
NationsCredit Financial Services Corporation of Florida (13)
NationsCredit Mortgage Corporation of Florida (14)
NationsCredit Financial Services Corporation of Nevada (13)
NationsCredit Financial Services Corporation of Virginia (13)
NationsCredit Home Equity ABS Corporation (13)
NationsCredit Home Equity Corporation of Kentucky (13)
NationsCredit Home Equity Corporation of Virginia (13)
NationsCredit Home Equity Services Corporation (13)
Canterbury Indiana Holdings, Inc. (15)
NationsCredit Insurance Agency, Inc. (13)
NationsCredit Insurance Corporation (13)
NationsCredit Manufactured Housing Corporation (13)
NationsCredit Management Corporation (8)
NationsBanc Business Credit, Inc.
NationsBanc Capital Markets International Limited
NationsBanc-CRT Services, Inc.
NationsBanc Montgomery Securities LLC (16)
NationsBanc Mortgage Capital Corporation
NationsBanc Asset Securities, Inc. (17)
NationsCommercial Corp. (17)
NationsLink Funding Corporation (17)
Tryon Mortgage Funding, Inc. (17)
NationsBanc Pacific Corporation
NationsBank, N.A. (Glynn County)
First Shelter Service Corporation (18)
NB Capital Trust I
NB Capital Trust II
NB Capital Trust III
NB Capital Trust IV
NB Holdings Corporation
Bank IV Community Development Corporation (19)
Bank IV Affordable Housing Corporation (19)
Fourth Investment Advisors, Inc. (19)
IV CB&T Tulsa Holdings Inc. (19)
Barnett Bank, N.A. (19)
Barnett Annuities Corporation (20)
2
<PAGE>
Barnett Bank Premises Company - Brickell (20)
Barnett Bank Premises Company - Oakland Park (20)
Barnett Bank Premises Company - Service Center (20)
Barnett Bank Premises Company - Tamarac (20)
Barnett Bank Premises Company - Weston (20)
Barnett Business Finance Corp. (20)
Barnett Capital Advisors, Inc. (20)
Barnett Dealer Financial Services, Inc. (20)
Barnett Auto Receivables Corp. (21)
Barnett Dealer Financial Services Corporation-Alabama (22)
BTRAC Leasing Corporation (22)
Sagebrush Holdings, Inc. (22)
Barnett Insurance Services, Inc. (20)
Barnett Investments, Inc. (20)
Barnett Leasing Company (20)
Barnett Lending Services, Inc. (20)
Barnett Merchant Services Corporation (20)
Barnett Mortgage Company (20)
EquiCredit Corporation of New York (23)
Siesta Holdings, Inc. (23)
Barnett Real Estate Management, Inc. (20)
BBNA Technology Holdings, Inc. (20)
FEES, Inc. (20)
Lee County Holdings Company (20)
Oxford Resources Corp. (20)
Centrex Capital Corp. (24)
Centrex Capital Automobile Assets, Inc. (25)
Centrex Capital Automobile Assets (Number Two), Inc. (25)
Centrex Capital Automobile Assets (Number Three), Inc. (25)
Centrex Capital Automobile Assets (Number Four), Inc. (25)
Centrex Capital Corp. of Alabama (25)
Centrex Capital Corp. of Arizona (25)
Centrex Capital Corp. of California (25)
Centrex Capital Corp. of Colorado (25)
Centrex Capital Corp. of Connecticut (25)
Centrex Capital Corp. of Delaware (25)
Centrex Capital Corp. of D.C. (25)
Centrex Capital Corp. of Florida (25)
Centrex Capital Corp. of Georgia (25)
Centrex Capital Corp. of Illinois (25)
Centrex Capital Corp. of Indiana (25)
Centrex Capital Corp. of Maryland (25)
Centrex Capital Corp. of MA (25)
Centrex Capital Corp. of Michigan (25)
Centrex Capital Corp. of MO (25)
Centrex Capital Corp. of New Jersey (25)
Centrex Capital Corp. of New York (25)
Centrex Capital Corp. of N.Carolina (25)
Centrex Capital Corp. of Ohio (25)
3
<PAGE>
Centrex Capital Corp. of PA (25)
Centrex Capital Corp. of Rhode Island 25
Centrex Capital Corp. of S.Carolina (25)
Centrex Capital Corp. of Tennessee (25)
Centrex Capital Corp. of Texas (25)
Centrex Capital Corp. of Vermont (25)
Centrex Capital Corp. of Virginia (25)
Centrex Capital Corp. of West Virginia (25)
Centrex Capital Corp. of Wisconsin (25)
CCC Capital Corp. of Maine (25)
CCC Capital Corp. of N.H. (25)
Centrex Resources Corp. (24)
Electronic Vehicle Remarketing, Inc. (26)
Linden Tree Development Corp. (24)
Lyndhurst Properties Corp. (27)
Oxford Management Services Corp. (24)
Trexar Financial Corp. (24)
Trexar Corp. of New York (28)
USA Auto Mall, Inc. (24)
Price Auto Outlet of California, Inc. (29)
USA Auto Mall of Florida (29)
USA Auto Mall of New Jersey (29)
USA Auto Mall of New York, Inc. (29)
Statewide Administrative Services, Inc. (20)
Suncoast Advertising Company, Inc. (20)
Boatmen's Texas, Inc. (19)
Boatmen's First National Bank of Amarillo (30)
Southwest Bank of Texas (31)
Community Bank of the Islands (19)
Founders Bancorporation, Inc. (19)
NationsBank, N.A. (19)
American Security (Louisiana) Ltd. (32)
Ashburn A Corp. (32)
Atico Financial Corporation dba Cavalier Properties (32)
Atico Investment Management (32)
Baltic M Corp.(32)
Bank IV Securities Inc. (32)
Bank Marketing Systems, Inc. (32)
Bank South Home Equity, Inc. (32)
BBI Merchant Processing Company, LLC (33)
Boatmen's Merchant Processing Company, LLC (34)
BNB Auto, Inc. (32)
Boatmen's Capital Management, Inc. (32)
Boatmen's Foreign Investment Corporation (32)
Savannah International Sales, Inc. (35)
Tyler International Sales, Inc. (35)
Carolina Pacific, Inc. (32)
CC Plaza M Corp. (32)
CFB Holding Corporation (32)
4
<PAGE>
Chase Eagle, Inc. (32)
Chase Federal Housing Corporation (32)
ChaseFed Insurance Co. (32)
Chase I, Inc. (32)
Chase/Scarborough Group, Inc. (32)
Chesapeake M Corp. (32)
Citizens Advisory Group, Inc. (32)
Citizens Financial Securities Corporation (32)
Citizens Real Estate, Inc. (32)
Community Reinvestment Group, L.C. (36)
Consolidated Asset Management Company (32)
Courtcom M Corp.(32)
CSI Holdings, Inc. (32)
Devon A Corp.(32)
Down Under Finance Corporation (32)
Dulaney Valley Corporation (32)
Education Financing Services, LLC (37)
Elwin Company, Inc. (32)
EXHO Properties, Inc. (32)
Federal Properties I, Inc. (32)
Financial Automation, Inc. (32)
Finance Investment Company (32)
First Development Corporation (32)
First Financial Real Estate Development, Inc. (32)
First Land Sales, Inc. (32) Co
First Revitalization Corp. (32)
Forty-Six Twenty-Five Lindell Corp. (32)
Fountain Square Corporation of Maryland (32)
Gatwick, Inc. (32)
Mayfair Partners (38)
Green Park, Inc. (40)
Regent Street, Inc. (39)
Piccadilly, Inc. (40)
High Street, Inc. (41)
New Broad Street, Inc. (41)
Guardian Property, Inc. (32)
Harbilan Corporation (32)
Harper Farm M Corp. (32)
HICO Park M Corp. (32)
M & M Realty, Inc. (32)
Madison Park A Corp. (32)
Main Place Holdings Corporation (32)
Main Place Real Estate Investment Trust (42)
Mar A Lowe Corp. (32) Activities
Marco Properties, Inc. (32)
Greenburgh Marco, Inc. (43)
Reprise, Inc. (43)
Maryland National Community Development Corporation (32)
Greensides Elderly Limited Partnership (44)
5
<PAGE>
The Maryland National/Enterprise Equity Fund
Limited Partnership (44)
Montgomery Homes Limited Partnership II (45)
Montgomery Homes Limited Partnership III (44)
Montgomery Homes Limited Partnership IV (44)
Neighborhood Rental Limited Partnership II (46)
The Newington Limited Partnership (46)
Rosedale Terrace Limited Partnership (46)
St. Wenceslaus Limited Partnership (46)
Maryland Nationalease Corporation (32)
Maywell Mark Corp. (32)
Melwood M Corp. (32)
Metropo M Corp. (32)
Metropolitan Commercial Properties Corporation I (32)
Metropolitan Commercial Properties Corporation VIII (32)
Metropolitan Commercial Properties Corporation X (32)
Midwest Realty & Management, Inc. (32)
MNC Consumer Discount Company (32)
MNC Investment Bank, Ltd. (32)
Motift, Inc. (32)
Multi-State Properties, Inc. (32)
MYM Holdings Corporation (32)
NationsBanc Advisors, Inc. (32)
NationsBanc Auto Funding Corporation (32)
NationsBanc Charlotte Center, Inc. (32)
NationsBanc Commercial Corporation (32)
NationsBanc Dealer Leasing, Inc. (32)
NationsBanc Equity Mortgage Corporation (32)
NationsBanc Financial Products, Inc. (32)
NationsBanc Insurance Services, Inc. (32)
NationsBanc Investments, Inc. (32)
NBII Agency, Inc. (47)
NBII Agency, LLC (47)
NationsBanc Lease Investments, Inc.(32)
NationsBanc Leasing Corporation (32)
NationsBanc Mortgage Corporation (48)
NationsBanc SBIC Corporation (32)
NationsBanc Venture Corporation (32)
NationsBank Carolinas Merchant Services, Inc. (32)
NationsBank Merchant Services (49)
Unified Merchant Services (50)
NationsBank CLO Funding Corp. (32)
NationsBank CLO Corporation (51)
NationsBank de Mexico, S.A. (52)
NationsBank Europe Limited (32)
Carolina Leasing Ltd. (53)
Nations Financial Futures Limited (53)
Nations Investment Management Limited (53)
Commonwealth Securities Limited (54)
Nations Investments Limited (53)
6
<PAGE>
Nations Securities Services Ltd. (53)
NationsBank (Export Finance) Ltd. (53)
NationsBank Florida Merchant Services, Inc. (32)
NationsBank Merchant Services (49)
Unified Merchant Services (50)
NationsBank International (32)
NationsBank Overseas Corporation (32)
AF Funding (1993), Inc. (55)
Kill Devil Hills Finance Limited Partnership (56)
Air France/NationsBank (Grantor Trust) (57)
Wrightbrothers Ltd. (58)
AF Funding II (1993), Inc. (55)
Kill Devil Hills II Limited Partnership (59)
Air France/KDHF II (NGHGI)(Grantor Trust) (60)
Florita Finance Ltd. (61)
Binfield Ltd. (55)
Carolina Investments Limited (55)
Cathay Pacific/NationsBank Trust 1 (Grantor Trust) (55)
Wanda Finance Ltd. (62)
Clenston Ltd. (55)
Diamond Shoals Finance Ltd. (55)
Friary Leasing Limited (55)
Hatteras Finance Ltd. (55)
Heathrow, Inc. (63)
InterFirst Leasing Ltd. (London) (64)
Island Funding, Ltd. (55)
Japan Airlines/NCNB 1993-1 (Grantor Trust) (55)
First in Flight Finance Ltd. (65)
Nations-CRT Asia, Inc. (55)
Nations-CRT Hong Kong, Limited (55)
Nations-CRT Japan, Inc. (55)
Nations-CRT U.K. & Co. (55)
NationsBank International Trust (Jersey) Limited (66)
NCNB Lease Atlantic, Inc. (55)
NCNB Lease Finance III (67)
Blue Ridge Finance Ltd. (68)
NCNB Lease Finance (55)
Wingtip Finance Limited (69)
NCNB Lease Finance IV (55)
Sandhills Finance Ltd. (70)
NCNB Lease Finance V (55)
Piedmont Finance Ltd. (71)
NationsBanc Lease Finance VI (55)
Kitty Hawk Finance Ltd. (72)
NCNB Lease International, Inc. (55)
Barnesbury, Ltd. (73)
NCNB Lease Offshore, Inc. (55)
NCNB Lease Finance II (74)
Outerbanks Finance Ltd. (75)
7
<PAGE>
NCNB Overseas Services, Inc. (55)
Phaestos FSC, Inc. (76)
Republic Dallas Ltd. (U.K.) (77)
TransPacific Funding (1993), Inc. (55)
TransPacific Finance Limited Partnership (78)
ANA II (Grantor Trust) (79)
Fontana Finance Ltd. (80)
Uwharrie Finance Ltd. (55)
Nations-CRT Options, Inc. (32)
NB Partner Corp. (32)
Gartmore Global Partners (81)
NB Technology Partner, Inc. (32)
NCNB Community Development Corporation (82)
OA Management, Inc. (32)
The Ocmulgee Corporation (32)
Palisades A Corp. (32)
Pan American Mortgage Corp. (32)
Pratt Management Company (32)
Quality A Corp. (32)
Quatro I, Inc. (32)
Ritchie Court M Corporation (32)
Rive Gauche A Corp. (32)
Rockwell Resources, Inc. (32)
Rooms-Springfield, Inc. (32)
SCRC Carrolltowne, Inc. (32)
SCRC Process Service Corp. (32)
Seabrook Operations, Inc. (32)
Seaview of Seabrook, Inc. (32)
Securitization Funding Corporation (32)
Service-Wright Corporation (32)
Seventeenth Commerce Properties Corporation (32)
SOP M Corp.(32)
South Charles Realty Corp (32)
South Point Shopping Center, Inc. (32)
Spotted Horse Holdings, Inc. (32)
St. Louis Investment Properties, Inc. (32)
Sully A Corp. (32)
Sunset Hill Corporation (32)
Sweitzer M Corp. (32)
Sykesville M Corp. (32)
Townsite Plaza Development, Inc. (32)
TradeStreet Investment Associates, Inc. (32)
U.N. Service Corporation (32)
The Union Modern Mortgage Corporation (32)
Vernon M Corp. (32)
WAC One, Inc. (32)
Washington View, Inc. (32)
Washington View (H) Corporation (83)
Washington View (NH) Corporation (83)
8
<PAGE>
Wellington Land Co., Inc. (32)
Wickliffe A Corp. (32)
Woods M Corp. (32)
Worthen Mortgage Company (32)
200 Service Corp. (32)
NationsBank of Delaware, N.A. (19)
NationsBank of Kentucky, N.A. (19)
NationsBank of Tennessee, N.A. (19)
Commerce Place Company (84)
Boatmen's Financial Services, Inc. (84)
200 Madison Avenue Realty Corp. (84)
Tennessee Nationalease Corporation (84)
NationsBank Texas Bancorporation, Inc. (19)
NationsBank of Texas, N.A. (85)
APL, Inc. (86)
Austin National Realty Corporation (86)
Beechnut Holdings, Inc. (86)
Capitol Information Networks, Inc. (86)
Charter Colonial Securities, Inc. (86)
Charter-Houston Securities, Inc. (86)
DPC, Inc. (86)
NationsBanc Capital Corporation (86)
NationsBanc Energy Group Denver, Inc. (86)
NationsBanc Mortgage Corporation (48)
NationsBanc Services, Inc. (86)
NationsBank CLO Funding Corp. of Texas (86)
NationsBank CLO Corporation (51)
Republic National Corporation (86)
Texas Nationalease Corporation (86)
RepublicBank Insurance Agency, Inc. (85)
Superior Federal Bank, FSB (19)
SFS Corporation (87)
Premier Management (88)
Southwest Protective Life Insurance Company (88)
Superior Financial Services of Oklahoma (88)
Arch Reinsurance Company, Ltd. (19)
Atlantic Credit Corporation (19)
Bancshares Properties, Inc. (19)
Barnett Aircraft Leasing, Inc. (19)
Barnett Capital Trust I (19)
Barnett Capital Trust II (19)
Barnett Capital Trust III (19)
Barnett Community Development Corporation (19)
Barnett Southside Land, Inc. (19)
Boatmen's Community Development Corporation (19)
Boatmen's Insurance Agency, Inc. (19)
Boatmen's Life Insurance Company (19)
Boatmen's Trust Company (19)
Boatmen's Trust Company, an Oklahoma Trust Company (89)
9
<PAGE>
River City Capital Management, Inc. (89)
Tower Commercial Realty, Inc. (89)
Tower Holdings, L.P. (90)
Union Realty and Securities Company (89)
Boatmen's Trust Company of Arkansas (19)
Cash Flow, Inc. (19)
CreditQuick, Inc. (19)
CreditQuick Finance Company (19)
C&S Premises, Inc. (19)
C&S Premises-SPE, Inc. (91)
Employee Relocation Consultants, Inc. (19)
EquiCredit Corporation (19)
EquiCredit Corporation of America (92)
California/EquiCredit Corporation (93)
UniTrusco Corporation (94)
EquiCredit Corporation/ALA & MISS (93)
EquiCredit Corporation of AR (93)
EquiCredit Corporation of AZ (93)
EquiCreditCorporation of CO (93)
EquiCredit Corporation of CT (93)
EquiCredit Corporation of DC (93)
EquiCredit Corporation of DE (93)
EquiCredit Corporation of FL (93)
EquiCredit Corporation of GA (93)
EquiCredit Corporation of IA (93)
EquiCredit Corporation of ID (93)
EquiCredit Corporation of Illinois (93)
EquiCredit Corporation of IN (93)
EquiCredit Corporation of KY (93)
EquiCredit Corporation of LA (93)
EquiCredit Corporation of MA (93)
EquiCredit Corporation of ME (93)
EquiCredit Corporation of MD (93)
EquiCredit Corporation of MI (93)
EquiCredit Corporation of MN (93)
EquiCredit Corporation of MO (93)
EquiCredit Corporation of NC (93)
EquiCredit Corporation of NE (93)
EquiCredit Corporation of NJ (93)
EquiCredit Corporation of NM (93)
EquiCredit Corporation of NV (93)
EquiCredit Corporation of Ohio (93)
EquiCredit Corporation of OK (93)
EquiCredit Corporation of OR (93)
EquiCredit Corporation of PA (93)
EquiCredit Corporation of SC (93)
EquiCredit Corporation of TN (93)
EquiCredit Corporation of TX (93)
EquiCredit Corporation of UT (93)
10
<PAGE>
EquiCredit Corporation of VA (93)
EquiCredit Corporation of VT (93)
EquiCredit Corporation of WA (93)
EquiCredit Corporation of WI (93)
EquiCredit Corporation of WV (93)
EquiCredit Mortgage Loan Company (93)
Equity/Protect Reinsurance Company (93)
EQCC Asset Backed Corporation (93)
EQCC Receivables Corporation (93)
EQCC of TN, Inc. (93)
EQCC Trans Receivable Corporation (93)
OS Securities Corporation (93)
Rhode Island/EquiCredit Corporation (93)
First Florida Bank OREO Holding Company (19)
First Mortgage Corporation (19)
FKF, Inc. (19)
Green Peak Insurance Company (19)
NationsBanc Insurance Agency, Inc. (19)
NationsBanc Insurance Company, Inc. (19)
NationsBanc Insurance Inc. (19)
NationsBanc Investment Corporation (19)
NationsBanc Leasing & Finance Corporation (19)
NationsBanc Leasing & R.E. Corporation (19)
McCormick Realty Limited Partnership (95)
NationsBanc Mortgage Corporation of Georgia (19)
NationsBanc Retirement Management, Inc. (19)
NationsBank Trust Company of New York (19)
NB Insurance Services, Inc. (19)
Second Land Sales, Inc. (19)
Sovran Capital Management Corporation (19)
Suburban Service Corporation (19)
Sunwest Texas, Inc. (19)
Sunwest Bank of El Paso (96)
Three Commercial Place Associates (97)
Worthen Community Development Corporation (19)
Worthen Development Corporation (19)
National Credit Corporation (98)
Worthen Financial Corporation (19)
Boatmen's National Bank of Austin (99)
NationsBank Community Development Corporation (100)
Atlanta Affordable Housing Fund Limited Partnership (101)
Biscayne Apartments, Inc. (102)
Capital Crossing Development Corporation (102)
The Charlotte Affordable Housing LLC (103)
Carlton Court CDC, Inc. (102)
Courtyards Apartments, Inc. (102)
Coventry Village Apartments, Inc. (102)
Eban Incorporated (102)
Tabono Partnership II, Ltd. (104)
11
<PAGE>
Eban Village II, Ltd. (105)
Tabono Joint Venture (106)
Eban Village I, Ltd. (107)
Historic District Redevelopment Partnership (108)
Kenilworth Industrial Park Limited Liability Company (109)
Leon Avenue Redevelopment Company (110)
Meharry-Batavia Heights Development, LLC (111)
Misty Waters Apartments, Inc. (102)
NationsBank CDC Special Holding Company, Inc. (102)
Oak Park at Nations Ford LLC (103)
The Park at Hillside, LLC (111)
The Park at Lakewood L.L.C. dba Campbellton Glen Apartments LLC (113)
Queen City Partnership (102)
Sherwood Terrace Apartments, Inc. (102)
Southern Oaks Condominium Partners, Ltd. (112)
Stanton Road LLC (113)
T-Oaks Apartments, Inc. (102)
Terry Street Redevelopment Limited Liability Company (114)
University Park Shopping Center, LLC (115)
Nations Argentina, S.A. (116)
NationsBank do Brasil Ltda (116)
Santa Isabela Limitada (117)
NationsBank Housing Fund Investment Corporation (118)
Nations Housing Fund Limited Partnership (119)
Florida City Apartments, Ltd. (120)
Owen Brown II Limited Partnership (121)
Bellevieu Manchester Limited Partnership (121)
Hillcrest House Partnership, Ltd. (122)
Oliver Plaza Limited Partnership (123)
Broadway Court Limited Partnership (121)
Walnut Woods Limited Partnership (121)
Roanoke at HOME Limited Partnership (121)
Broadway Apartments Limited Partnership (121)
San Antonio Master Limited Partnership (124)
Vera Cruz Redevelopment Partnership, LTD. (125)
Greensboro Elderly Affordable Housing I Limited Partnership (121)
Historic East Side Neighborhood Housing L.P. (121)
Timber Ridge of Immokalee Limited Partnership (121)
Park City, Ltd. (120)
King Street Apartments, II, L.P. (121)
S.C. Model I Limited Partnership (121)
Columbia Hill Partners, L.P. (121)
Columbia Mill, I, L.P. (121)
The Arbors, Limited Partnership (126)
Cranberry Equities Limited Partnership (121)
ODC Crossing, Limited Partnership (121)
Highlandtown Cooperative Limited Partnership (127)
VOA Eastern Avenue Limited Partnership (121)
Mt. Pleasant Ventures Limited Partnership (121)
12
<PAGE>
Sherwood Park Limited Partnership (121)
Etowah, L.P. (128)
Dominion Pines Partners L.P. (121)
Cheshire Chase Limited Partnership (121)
Delowe Place, L.P. (121)
Westwood Manor Development, L.P. (121)
Elkridge Apartments Limited Partnership (129)
Columbia Plaza I, L.P. (121)
Ripley Station Limited Partnership (121)
BHP/Johnston Square Limited Partnership (130)
SPAR S.H.A.R.E. II, Ltd. (128)
North Carolina Equity Fund (131)
Riverview Townes Limited Partnership (132)
Sedgebrook Limited Partnership (132)
Willow Pond Limited Partnership (132)
St. Andrew's Homes Limited Partnership (133)
Carmel Ridge Limited Partnership (132)
Bridgewood Square Limited Partnership (132)
Hycienda Heights Limited Partnership (132)
Nations Housing Fund II Limited Partnership (119)
Eban Village I, Ltd. (107)
Pine Knoll Limited Partnership (134)
NationsBridge, L.L.C.(116)
NCNB Corporate Services, Inc.
NCNB Properties, Inc.
South Charles Investment Corporation
Tidewater Partners Limited Partnership (135)
SCI Holdings Corporation (136)
SunStar Acceptance Corporation
DCRS Corporation (137)
SunStar Acceptance Corporation (Hawaii) (137)
TIM, Inc.
TriStar Communications, Inc.
Montgomery Sports, Inc. (138)
Tryon Assurance Company, Ltd.
- - ---------------------------------
The following companies are 50% or less owned by NationsBank Corporation or one
of its subsidiaries.
ABB Funding Partners, L.P., Stamford, CT - NationsCredit Commercial
Corporation owns a 14.27% nonvoting interest in this entity.
Barnett-First Data Alliance, Jacksonville, FL - Barnett Merchant Services
Corporation owns 50% of this entity.
13
<PAGE>
Carlton Court Limited Partnership, Dallas, TX - NationsBank Community
Development Corporation ("NBCDC") and Carlton Court CDC, Inc. own 49% and
1%, respectively, of this entity.
Carver State Bank, Savannah, GA - NationsBank Corporation owns preferred
nonvoting securities representing 20.63% of the total equity of this
entity.
Charlotte Transit Center, Inc., Charlotte, NC - NationsBank CDC Special
Holding Company, Inc. has 50% control as one of the two members of this
non-profit corporation.
Church Street Crossing Associates, L.P., Washington, DC - NBCDC owns 50% of
this entity.
Citizens Savings Bank & Trust Co., Nashville, TN - NationsBank Corporation
owns preferred voting shares representing 5.271% of the total equity of
this entity.
Collmain Customer Services Ltd., London - NationsBank Europe Limited owns
22.5% of this entity.
Collmain Services Ltd., London - Carolina Investments Limited holds a 20%
minority interest in this company.
Columbia Community Investment Limited Partnership, Charlotte, NC - NBCDC
has a 20% interest in this entity.
Commonwealth National Bank, Mobile, AL - NationsBank Corporation owns
nonvoting securities representing 47% of this entity, however, does not
exercise any form of control over it.
CSC Associates, L.P., Marietta, GA - C&S Premises, Inc. and C&S
Premises-SPE, Inc. own 49% and 1%, respectively, of this entity.
Danville Community Development Corporation, Danville, VA - NBCDC owns 22%
of this inactive entity.
Factoraje Bancomer, S.A., Mexico - NationsBank Overseas Corporation owns
10% of this entity.
First Housing Development Corporation of Florida, Tampa, FL - NationsBank,
N.A. (South) owns 12.07% of this entity.
Foremost Factors Limited, New Delhi, India - NationsBank Overseas
Corporation owns 35% of this entity.
Homeside Holdings, Inc., Jacksonville, FL - Siesta Holdings, Inc. owns 33%
of this entity.
HONOR Technologies, Inc., Maitland, FL - NationsBank Corporation and NB
Holdings Corporation own 18.26% and 11.627%, respectively, of this entity.
14
<PAGE>
Integrion Financial Network, LLC, Atlanta, GA - Each of NB Technology
Partners, Inc. and BBNA Technology Holdings, Inc. owns 5.88% of this
entity.
Kenilworth-Burroughs Limited Partnership, Washington, DC - Kenilworth
Industrial Park Limited Liability Company is General Partner with a .01%
general partnership interest and a 25.99% limited partnership interest.
Maryland Housing Equity Fund Limited Partnership, Columbia, MD - Maryland
National Community Development Corporation owns 13.12% of this limited
partnership.
MECA Software, L.L.C., Fairfield, CT - MYM Holdings Corporation owns 16.67%
of this entity.
MS Spitfire LLC, San Francisco, CA - NationsBanc Montgomery Securities LLC
is managing member with a 1% capital interest and may be deemed to have
control. The remaining 99% is owned by employees of the managing member.
Spitfire Capital Partners LP, San Francisco, CA - MS Spitfire LLC is
general partner and contributes one-third of the capital of this entity.
The limited partners are unrelated third parties.
Nubia Redevelopment Partnership, Dallas, TX - NBCDC owns 50% of this
entity.
Roanoke Community Development Corporation, Roanoke, VA - NBCDC owns 28% of
this inactive entity.
Savannah Community Development Corporation dba Savannah Regional Small
Business Capital Fund - NationsBank, N.A. owns 21% of this entity.
Third Ward Neighborhood Development Association, Charlotte, NC - NCNB
Community Development Association, a subsidiary of NationsBank, N.A. owns
50% of this joint venture.
Cedar Mill, LLC, Raleigh, NC - Third Ward Neighborhood Development
Association owns a 50% general partnership interest in this entity.
Tiryns FSC, Inc., Charlotte Amalie, VI - NationsBank Overseas Corporation
owns 50% of this entity.
Tri-Tech, L.P., Baltimore, MD - NationsBank of Delaware, N.A. owns 9.1% of
this entity.
Troy Street Limited Liability Company, Alexandria, VA - NationsBank
Community Development Corporation has a 39.89% interest in this entity,
however, has no right of control over it.
Unity National Bank, Houston, TX - NationsBank Corporation owns preferred
nonvoting shares representing 6.09% of the total equity of this entity.
- - ----------
1 Atlantic Equity Corporation owns 100% of this entity.
2 NationsBank Corporation and NB Holdings Corporation own 99% and 1%,
respectively, of this entity.
3 Blue Ridge Investments, L.L.C. owns 33% of this entity.
15
<PAGE>
4 CSF Holdings, Inc. owns 100% of this entity.
5 Citizens Financial Services, Inc. owns 100% of this entity.
6 MNC Affiliates Group, Inc. owns 100% of this entity.
7 MNC Credit Corp owns 100% of this entity.
8 Nations Credit Corporation owns 100% of this entity.
9 NationsCredit Commercial Corporation owns 100% of this entity.
10 BJCC, Inc. and JCCA, Inc. own 49% and 51%, respectively, of this entity.
11 Chepstow Holding Corporation owns 100% of this entity.
12 NationsCredit Distribution Finance, Inc. owns 100% of this entity.
13 NationsCredit Consumer Corporation owns 100% of this entity.
14 NationsCredit Financial Services Corporation of Florida owns 100% of this
entity.
15 NationsCredit Home Equity Services Corporation owns 100% of this entity.
16 NationsBank Corporation owns 99.9% and NB Holdings Corporation owns .1% of
this entity.
17 NationsBanc Mortgage Capital Corporation owns 100% of this entity.
18 NationsBank, N.A. (Glynn County) owns 100% of this entity.
19 NB Holdings Corporation owns 100% of this entity.
20 Barnett Bank, N.A, owns 100% of this entity.
21 Barnett Dealer Financial Services, Inc. owns 33.29% of this entity; Oxford
Resources Corp. owns .07%; and the remainder is owned by a number of
Centrex Capital Corp. entities.
22 Barnett Dealer Financial Services, owns 100% of this entity.
23 Barnett Mortgage Company owns 100% of this entity.
24 Oxford Resources Corp. owns 100% of this entity.
25 Centrex Capital Corp. owns 100% of this entity.
26 Oxford Resources Corp. owns 80% of this entity.
27 Linden Tree Development Corp. owns 100% of this entity.
28 Trexar Financial Corp. owns 100% of this entity.
29 USA Auto Mall, Inc. owns 100% of this entity.
30 Boatmen's Texas, Inc. owns 100% of this entity.
31 Boatmen's Texas, Inc. owns 100% of the non-voting preferred stock of this
entity.
32 NationsBank, N.A. owns 100% of this entity.
33 NationsBank, N.A. owns 91.334% of this entity; the remainder is owned by
Boatmen's First National Bank of Amarillo (2.239%); Boatmen's National Bank
of Austin (0.155%); NationsBank of Tennessee, N.A. (5.039%); and Sunwest
Bank of El Paso (1.233%).
34 BBI Merchant Processing Company, LLC owns 50% of this entity.
35 Boatmen's Foreign Investment Corporation owns 100% of this entity.
36 NationsBank, N.A. owns 61.5% of this entity.
37 NationsBank, N.A. owns up to 22.26% of this entity; definitive % depends on
total number of participants.
38 Gatwick, Inc. and Heathrow, Inc. own 75% and 25%, respectively, of this
entity.
39 Green Park, Inc. owns 90% of this entity. The remainder is owned by an
unrelated third party.
40 Mayfair Partners owns 100% of this entity.
41 Piccadilly, Inc. owns 90% of this entity. The remainder is owned by an
unrelated third party.
42 Main Place Holdings Corporation owns 100% of this entity.
43 Marco Properties, Inc. owns 100% of this entity.
44 Maryland National Community Development Corporation owns 99% of this
entity.
45 Maryland National Community Development Corporation and NationsBank, N.A.,
each, has a 33.3% interest in this entity.
46 Maryland National Community Development Corporation owns 98.99% of this
entity.
47 NationsBanc Investments, Inc. owns 100% of this entity.
48 NationsBank, N.A. and NationsBank of Texas, N.A. own 9.1% and 90.9%,
respectively, of this entity.
49 NationsBank Carolinas Merchant Services, Inc. and NationsBank Florida
Merchant Services, Inc. own 49% and 51%, respectively, of this entity.
50 NationsBank Merchant Services owns 20% of this entity.
16
<PAGE>
51 NationsBank, N.A. and NationsBank of Texas, N.A. own 52% and 48%,
respectively, of this entity.
52 NationsBank Overseas Corporation and NationsBank, N.A. own 99% and 1%,
respectively, of this entity.
53 NationsBank Europe Limited owns 100% of this entity.
54 Nations Investment Management Limited owns 100% of this entity.
55 NationsBank Overseas Corporation owns 100% of this entity.
56 AF Funding (1993), Inc. holds a 1% general partnership and a 49% limited
partnership interest in this entity and has 100% of the voting rights..
57 Kill Devil Hills Finance Limited Partnership owns 100% of this entity.
58 Air France/NationsBank (Grantor Trust) owns 100% of this entity.
59 AF Funding II (1993), Inc. holds a 1% general partnership and a 34% limited
partnership interest in this entity and has 100% of the voting rights.
60 Kill Devil Hills II Limited Partnership owns 100% of this entity.
61 Air France/KDHF II (NGHGI)(Grantor Trust) owns 100% of this entity.
62 Cathay Pacific/NationsBank Trust I (Grantor Trust) owns 100% of this
entity.
63 NationsBank Overseas Corporation and Island Funding, Inc. own 75% and 25%,
respectively, of this entity.
64 NationsBank Overseas Corporation owns 99.5% of this entity.
65 Japan Airlines/NCNB 1993-1 (Grantor Trust) owns 100% of this entity.
66 NationsBank Overseas Corporation and NationsBank, N.A. own 99.33% and .67%,
respectively, of this entity.
67 NCNB Lease Atlantic, Inc. owns 100% of this entity.
68 NCNB Lease Finance III owns 100% of this entity.
69 NCNB Lease Finance owns 100% of this entity.
70 NCNB Lease Finance IV owns 100% of this entity.
71 NCNB Lease Finance V owns 100% of this entity.
72 NCNB Lease Finance VI owns 100% of this entity.
73 NCNB Lease International, Inc. owns 99.9% of this entity.
74 NCNB Lease Offshore, Inc. owns 100% of this entity.
75 NCNB Lease Finance II owns 100% of this entity.
76 NationsBank Overseas Corporation owns 50% of this entity.
77 NationsBank Overseas Corporation owns 98% of this entity.
78 TransPacific Funding (1993), Inc. holds a 1% general partnership and a 65%
limited partnership interest in this entity and has 100% of the voting
rights.
79 TransPacific Finance Limited Partnership owns 100% of this entity.
80 ANA II (Grantor Trust) owns 100% of this entity.
81 NB Partner Corp. owns 50% of this entity.
82 NationsBank, N.A. is the sole member of this non-profit corporation.
83 Washington View, Inc. owns 69% of this entity.
84 NationsBank of Tennessee, N.A. owns 100% of this entity.
85 NationsBank Texas Bancorporation, Inc. owns 100% of this entity.
86 NationsBank of Texas, N.A. owns 100% of this entity.
87 Superior Federal Bank, FSB owns 100% of this entity.
88 SFS Corporation owns 100% of this entity.
89 Boatmen's Trust Company owns 100% of this entity.
90 Boatmen's Trust Company owns 99% of this entity.
91 C&S Premises, Inc. owns 100% of this entity.
92 EquiCredit Corporation owns 100% of this entity.
93 EquiCredit Corporation of American owns 100% of this entity.
94 California/EquiCredit Corporation owns 100% of this entity.
95 NationsBanc Leasing & R.E. Corporation and NationsBanc Leasing and Finance
Corporation own 99% and 1%, respectively, of this entity.
96 Sunwest Texas, Inc. owns 100% of this entity.
97 NB Holdings Corporation owns 70% of this entity.
17
<PAGE>
98 Worthen Development Corporation owns 100% of this entity.
99 Worthen Financial Corporation owns 100% of this entity.
100 NationsBank, N.A. and NationsBank of Texas, N.A. own, respectively, 61.9%
and 38.1% of this entity.
101 NationsBank Community Development Corporation ("NBCDC")has a 95.4% voting
general partnership interest in this entity.
102 NBCDC owns 100% of this entity.
103 NBCDC and NCNB Community Development Corporation have 99% and 1% interests,
respectively, in this entity.
104 Eban Incorporated has a 50% interest as general partner in this entity.
105 Tabono Partnership II, Ltd. has a 99% interest as general partner in this
entity.
106 Eban Incorporated owns 5% of this entity, however, has control over it.
107 Tabono Joint Venture has a 1% interest as general partner and controls this
entity; Nations Housing Fund II Limited Partnership has a 12.9% limited
partnership interest.
108 NBCDC has a 94.89% interest in this entity.
109 NBCDC owns 70% of this entity.
110 NBCDC owns 80% of this entity.
111 NBCDC and Sherwood Terrace Apartments, Inc. own 99% and 1%, respectively,
of this entity.
112 NBCDC has a 50.26% interest in this entity.
113 NBCDC owns 99% of this entity.
114 NBCDC owns 98% of this entity.
115 NBCDC owns 15% of this entity.
116 NationsBank Corporation and NB Holdings Corporation own 99% and 1%,
respectively, of this entity.
117 NationsBank do Brasil, Ltda owns 99% of this entity.
118 NationsBank, N.A. and NationsBank of Texas, N.A. own, respectively, 75% and
25% of the voting stock of this entity.
119 NationsBank Housing Fund Investment Corporation has a 99% nonvoting limited
partnership interest in this entity.
120 Nations Housing Fund Limited Partnership ("NHF") has a 51% limited
partnership interest in this entity.
121 NHF has a 99% limited partnership interest in this entity.
122 NHF has an 88% limited partnership interest in this entity.
123 NHF has a 67.5% limited partnership interest in this entity.
124 NHF has a 50.49% limited partnership interest in this entity.
125 San Antonio Master Limited Partnership has a 99% limited partnership
interest in this entity.
126 NHF has a 75.85% limited partnership interest in this entity.
127 NHF has an 88.05% limited partnership interest in this entity.
128 NHF has a 98.99% limited partnership interest in this entity.
129 NHF has a 51.17% limited partnership interest in this entity.
130 NHF has a 32.51% limited partnership interest in this entity.
131 NHF has a 39.6% limited partnership interest in this entity.
132 North Carolina Equity Fund ("NCEF") has a 99% limited partnership interest
in this entity.
133 NCEF has a 98% limited partnership interest in this entity.
134 Nations Housing Fund II Limited Partnership ("NHFII") has a 99% limited
partnership interest in this entity.
135 South Charles Investment Corporation has an 88% limited partnership
interest and SCI Holdings Corporation has a 2% general partnership interest
in this entity.
136 South Charles Investment Corporation owns 100% of this entity.
137 SunStar Acceptance Corporation owns 100% of this entity.
138 TriStar Communications, Inc. owns 100% of this entity.
18
<PAGE>
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-44826;
33-57533; 33-63097; 333-7229; 333-13811; 333-15375; 333-18273 and 333-43137);
the Registration Statements on Form S-8 (Nos. 2-80406; 33-45279; 33-60695;
333-02875; 333-07105; 333-20913 and 333-24331) and the Post-Effective Amendment
No. 1 on Form S-8 to Registration Statements on Form S-4 (Nos. 33-43125;
33-55145; 33-63351; 33-62069; 33-62208; 333-16189 and 333-40515) of NationsBank
Corporation of our report dated January 9, 1998 appearing on page 46 of this
Form 10-K.
PRICE WATERHOUSE LLP
Charlotte, North Carolina
March 13, 1998
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of NationsBank Corporation
and the several undersigned officers and directors whose signatures appear
below, hereby makes, constitutes and appoints James W. Kiser and Charles M.
Berger, and each of them acting individually, its, his and her true and lawful
attorneys with power to act without any other and with full power of
substitution, to prepare, execute, deliver and file in its, his and her name and
on its, his and her behalf, and in each of the undersigned officer's and
director's capacity or capacities as shown below, an Annual Report on Form 10-K
for the year ended December 31, 1997, and all exhibits thereto and all documents
in support thereof or supplemental thereto, and any and all amendments or
supplements to the foregoing, hereby ratifying and confirming all acts and
things which said attorneys or attorney might do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, NationsBank Corporation has caused this power of
attorney to be signed on its behalf, and each of the undersigned officers and
directors, in the capacity or capacities noted, has hereunto set his or her hand
as of the date indicated below.
NATIONSBANK CORPORATION
By: /s/ Hugh L. McColl, Jr.
Hugh L. McColl, Jr.
Chief Executive Officer
Dated: January 28, 1998
<TABLE>
<CAPTION>
Signature Title Date
- - --------- ----- ----
<S> <C> <C>
/s/ Hugh L. McColl, Jr. Chief Executive Officer and Director January 28, 1998
(Hugh L. McColl, Jr.) (Principal Executive Officer)
/s/ James H. Hance, Jr. Vice Chairman, Chief Financial Officer January 28, 1998
(James H. Hance, Jr.) and Director (Principal Financial Officer)
/s/ Marc D. Oken Executive Vice President and January 28, 1998
(Marc D. Oken) Chief Accounting Officer
(Principal Accounting Officer)
/s/ Andrew B. Craig, III Chairman of the Board January 28, 1998
(Andrew B. Craig, III)
/s/ Ray C. Anderson Director January 28, 1998
(Ray C. Anderson)
/s/ William M. Barnhardt Director January 28, 1998
(William M. Barnhardt)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Rita Bornstein Director January 28, 1998
(Rita Bornstein)
/s/ B.A. Bridgewater, Jr. Director January 28, 1998
(B.A. Bridgewater, Jr.)
/s/ Thomas E. Capps Director January 28, 1998
(Thomas E. Capps)
/s/ Alvin R. Carpenter Director January 28, 1998
(Alvin R. Carpenter)
/s/ Charles W. Coker Director January 28, 1998
(Charles W. Coker)
/s/ Thomas G. Cousins Director January 28, 1998
(Thomas G. Cousins)
(Alan T. Dickson) Director January 28, 1998
/s/ Paul Fulton Director January 28, 1998
(Paul Fulton)
(Timothy L. Guzzle) Director January 28, 1998
/s/ C. Ray Holman Director January 28, 1998
(C. Ray Holman)
/s/ W. W. Johnson Director January 28, 1998
(W.W. Johnson)
/s/ Kenneth D. Lewis President and Director January 28, 1998
(Kenneth D. Lewis)
/s/ Russell W. Meyer, Jr. Director January 28, 1998
(Russell W. Meyer, Jr.)
(Richard B. Priory) Director January 28, 1998
/s/ Charles E. Rice Director January 28, 1998
(Charles E. Rice)
(John C. Slane) Director January 28, 1998
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
/s/ O. Temple Sloan, Jr. Director January 28, 1998
(O. Temple Sloan, Jr.)
/s/ John W. Snow Director January 28, 1998
(John W. Snow)
/s/ Meredith R. Spangler Director January 28, 1998
(Meredith R. Spangler)
/s/ Albert E. Suter Director January 28, 1998
(Albert E. Suter)
/s/ Ronald Townsend Director January 28, 1998
(Ronald Townsend)
/s/ Jackie M. Ward Director January 28, 1998
(Jackie M. Ward)
/s/ John A. Williams Director January 28, 1998
(John A. Williams)
/s/ Virgil R. Williams Director January 28, 1998
(Virgil R. Williams)
</TABLE>
-3-
Exhibit 24(b)
NATIONSBANK CORPORATION
BOARD OF DIRECTORS
RESOLUTIONS
January 28, 1998
Annual Report on Form 10-K
WHEREAS, the Chief Financial Officer and Chief Accounting Officer of
NationsBank Corporation (the "Corporation") have made presentations to the Board
of Directors regarding the Corporation's financial results for the year ended
December 31, 1997; and
WHEREAS, the Board has had adequate opportunity to review and comment on
such results;
NOW, THEREFORE, BE IT:
RESOLVED, that the proper officers of the Corporation be, and they hereby
are, authorized and empowered on behalf of the Corporation to prepare, execute,
deliver and file the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "Form 10-K"), based upon the information presented to and
considered at this meeting, in such form and with such content and attachment of
exhibits as the signing officers shall approve, their approval to be
conclusively evidenced by their signature thereof; and be it
FURTHER RESOLVED, that the proper officers of the Corporation be, and they
hereby are, authorized and empowered on behalf of the Corporation to execute the
Form 10-K and file it with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, as amended, and with such other
governmental agencies or instrumentalities as such officers deem necessary or
desirable, and to prepare, execute, deliver and file any amendment or amendments
to the Form 10-K, as they may deem necessary or appropriate; and be it
FURTHER RESOLVED, that James W. Kiser and Charles M. Berger be, and each of
them with full power to act without the other hereby is, authorized and
empowered to prepare, execute, deliver and file the Form 10-K and any amendment
or amendments thereto on behalf of and as attorneys for the Corporation and on
behalf of and as attorneys for any of the following: the Principle Executive
Officer, the Principal Financial Officer, the Principal Accounting Officer, and
any other officer of the Corporation; and be it
<PAGE>
FURTHER RESOLVED, that the proper officers of the Corporation be, and they
hereby are, authorized and directed to do all things necessary, appropriate or
convenient to carry into effect the foregoing resolutions.
<PAGE>
CERTIFICATE OF SECRETARY
I, ALLISON L. GILLIAM, Assistant Secretary of NationsBank Corporation, a
corporation duly organized and existing under the laws of the State of North
Carolina, do hereby certify that the foregoing is a true and correct copy of
resolutions duly adopted by a majority of the entire Board of Directors of the
corporation at a meeting of the Board of Directors held January 28, 1998, at
which meeting a quorum was present and acted throughout and that the resolutions
are in full force and effect and have not been amended or rescinded as of the
date hereof.
IN WITNESS WHEREOF, I have hereupon set my hand and affixed the seal of the
corporation this 4th day of March, 1998.
(CORPORATE SEAL)
/s/ Allison Gilliam
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE DECEMBER
31, 1997 ANNUAL REPORT ON FORM 10-K FOR NATIONSBANK CORPORATION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> $10,586
<INT-BEARING-DEPOSITS> 2,395
<FED-FUNDS-SOLD> 10,022
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<INVESTMENTS-CARRYING> 1,156
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<ALLOWANCE> (2,782)
<TOTAL-ASSETS> 264,562
<DEPOSITS> 138,194
<SHORT-TERM> 66,011
<LIABILITIES-OTHER> 11,816
<LONG-TERM> 27,204
0
94
<COMMON> 9,168
<OTHER-SE> 12,075
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<INTEREST-LOAN> 12,481
<INTEREST-INVEST> 1,855
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<INTEREST-TOTAL> 16,579
<INTEREST-DEPOSIT> 3,955
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<INTEREST-INCOME-NET> 7,898
<LOAN-LOSSES> 800
<SECURITIES-GAINS> 153
<EXPENSE-OTHER> 7,457
<INCOME-PRETAX> 4,796
<INCOME-PRE-EXTRAORDINARY> 4,796
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,077
<EPS-PRIMARY> 4.27
<EPS-DILUTED> 4.17
<YIELD-ACTUAL> 3.79
<LOANS-NON> 1,018
<LOANS-PAST> 315
<LOANS-TROUBLED> 0
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<ALLOWANCE-CLOSE> 2,782
<ALLOWANCE-DOMESTIC> 2,189
<ALLOWANCE-FOREIGN> 31
<ALLOWANCE-UNALLOCATED> 562
</TABLE>
