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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 22, 1999
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NO. 0-19341
BOK FINANCIAL CORPORATION
INCORPORATED IN THE STATE I.R.S. EMPLOYER IDENTIFICATION
OF OKLAHOMA NO.73-1373454
Bank of Oklahoma Tower
P.O. Box 2300
Tulsa, Oklahoma 74192
Registrant's Telephone Number,
Including Area Code (918) 588-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT: (NONE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
OF THE ACT:
COMMON STOCK ($.00006 Par Value)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-X is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant: $77,780,112 as of February 28, 1999.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: 45,100,440 shares of common
stock ($.00006 par value) as of the start of business on March 1, 1999.
List hereunder the following documents if incorporated by reference and the part
of Form 10-K in which the document is incorporated:
Part I - Annual Report to Shareholders For Fiscal Year Ended
December 31, 1998 (designated portions only)
Part II - Annual Report to Shareholders For Fiscal Year Ended
December 31, 1998 (designated portions only)
Part III - Proxy Statement for Annual Meeting of Shareholders
scheduled for April 27, 1999 (designated portions only)
Part IV - Annual Report to Shareholders For Fiscal Year Ended
December 31, 1998 (designated portions only)
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BOK FINANCIAL CORPORATION
FORM 10-K ANNUAL REPORT
INDEX
<TABLE>
<CAPTION>
ITEM PAGE
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PART I
<S> <C> <C>
1. Business 3
2. Properties 5
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters 5
6. Selected Financial Data 6
7. Management's Discussion and Analysis of Financial Condition and 6
Results of Operations
7A. Quantitative and Qualitative Disclosures About Market Risk 6
8. Financial Statements and Supplementary Data 6
9. Changes in and Disagreements with Accountants on Accounting and 6
Financial Disclosure
PART III
10. Directors and Executive Officers of the Registrant 6
11. Executive Compensation 6
12. Security Ownership of Certain Beneficial Owners and Management 7
13. Certain Relationships and Related Transactions 7
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 7 - 11
Signatures 12
</TABLE>
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PART I
ITEM 1 - BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Developments relating to individual aspects of the business of BOK Financial
Corporation ("BOK Financial") are described below. Additional discussion of BOK
Financial's activities during the current year is incorporated by reference to
"Management's Assessment of Operations and Financial Condition" (pages 10-24)
in BOK Financial's 1998 Annual Report to Shareholders. Information regarding
BOK Financial's acquisitions is incorporated by reference to Note 2 of "Notes
to Consolidated Financial Statements" (page 34) in BOK Financial's 1998 Annual
Report to Shareholders.
NARRATIVE DESCRIPTION OF BUSINESS
BOK Financial is a bank holding company whose activities are limited by the Bank
Holding Company Act of 1956, as amended ("BHCA") to banking, certain
bank-related services and activities, and managing or controlling banks. BOK
Financial's banking and bank-related activities are primarily performed through
Bank of Oklahoma, N.A. ("BOk"), Bank of Texas, N.A., Bank of Albuquerque N.A.,
and Bank of Arkansas, N.A.. Other significant operating subsidiaries include
BOSC, Inc., which is a full-service securities firm with specialized expertise
in public and municipal finance, asset-backed securities and private placements,
and BOK Capital Services Corporation, which provides leasing and mezzanine
financing. Other nonbank subsidiary operations are not significant. As of
December 31, 1998, BOK Financial and its subsidiaries had 2,758 full-time
equivalent employees.
INDUSTRY SEGMENTS
BOK Financial operates four principal lines of business, corporate banking,
consumer banking, mortgage banking and trust services which in the aggregate
account for more than 75% of total revenue. Discussion of these principal lines
of business is incorporated by reference to Lines of Business in "Management's
Assessment of Operations and Financial Condition " (pages 13 - 14) and Note 17
of "Notes to Consolidated Financial Statements" (pages 46 - 49) in BOK
Financial's 1998 Annual Report to Shareholders.
COMPETITION
The banking industry in each of our markets is highly competitive. BOK
Financial, through four subsidiary banks, competes with other banks in obtaining
deposits, making loans and providing additional services related to banking.
BOk is the largest banking subsidiary of BOK Financial. It has the number one
market share in Oklahoma and a leading market position in nine of the 11
Oklahoma counties in which it operates. BOk competes with two super-regional
banks and numerous locally owned banks in both metropolitan areas, as well as
several locally owned small community banks in every other community in which we
do business throughout the rest of the state.
BOK Financial competes in the Dallas-Ft. Worth combined metropolitan area, in
the Albuquerque, New Mexico market, and in Fayetteville, Arkansas through
subsidiary banks. Bank of Texas, N.A., competes against numerous financial
institutions, including some of the largest in the U.S. Bank of Texas's market
share is approximately 1%. After giving effect to pending acquisitions, Bank of
Texas's market share is expected to increase to approximately 2%. Bank of
Albuquerque, N.A., was formed in December, 1998 to acquire $465 million in
deposits in a forced divestiture associated with the NationsBank/Bank of America
merger. Bank of Albuquerque has a number four market share position in the City
of Albuquerque behind Bank of America and two other super-regional competitors,
followed by several locally-owned smaller community banks. Bank of Arkansas,
N.A., operates as a community bank serving Benton and Washington counties in
Arkansas. It currently has $87 million in deposits and a Loan portfolio of
approximately $96 million.
Additional legislation, judicial and administrative decisions also may affect
the ability of banks to compete with each other as well as with other
businesses. These statutes and decisions may tend to make the operations of
various financial institutions more similar and increase competition among banks
and other financial institutions or limit the ability of banks to compete with
other businesses. Management currently cannot predict whether and, if so, when
any such changes might occur or the impact any such changes would have upon the
income or operations of BOK Financial or its subsidiaries, or upon the regional
banking environment in our markets.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both federal
and state law. The following information, to the extent it describes statutory
or regulatory provisions, is qualified in its entirety by reference to the
particular statutory and regulatory provisions. It is not possible to predict
the changes, if any, that may be made to existing banking laws and regulations
or whether such changes, if made, would have a materially adverse effect on the
business and prospects of BOK Financial, BOk, Bank of Texas, Bank of
Albuquerque, or Bank of Arkansas.
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BOK FINANCIAL
As a bank holding company, BOK Financial is subject to regulation under the BHCA
and to supervision by the Board of Governors of the Federal Reserve System (the
"Reserve Board"). Under the BHCA, BOK Financial files with the Reserve Board an
annual report and such other additional information as the Reserve Board may
require. The Reserve Board may also make examinations of BOK Financial and its
subsidiaries.
The BHCA requires the prior approval of the Reserve Board in any case where a
bank holding company proposes to acquire control of more than five percent of
the voting shares of any bank, unless it already controls a majority of such
voting shares. Additionally, approval must also be obtained before a bank
holding company may acquire all or substantially all of the assets of another
bank or before it may merge or consolidate with another bank holding company.
The BHCA further provides that the Reserve Board shall not approve any such
acquisition, merger or consolidation that will substantially lessen competition,
tend to create a monopoly or be in restraint of trade, unless it finds the
anti-competitive effects of the proposed transaction are clearly outweighed in
the public interest by the probable effect of the transaction in meeting the
convenience and needs of the community to be served.
The BHCA also prohibits a bank holding company, with certain exceptions, from
acquiring more than five percent of the voting shares of any company that is not
a bank and from engaging in any business other than banking or managing or
controlling banks. Under the BHCA, the Reserve Board is authorized to approve
the ownership of shares by a bank holding company in any company whose
activities the Reserve Board has determined to be so closely related to banking
or to managing or controlling banks as to be a proper incident thereto. In
making such determinations, the Reserve Board weighs the Community Reinvestment
Act activities of the bank holding company and the expected benefit to the
public, such as greater convenience, increased competition or gains in
efficiency, against the possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest or unsound
banking practices. The Reserve Board has by regulation determined that certain
activities are closely related to banking within the meaning of the BHCA. These
activities include operating a mortgage company, finance company, credit card
company or factoring company; performing certain data processing operations;
servicing loans and other extensions of credit; providing investment and
financial advice; acting as an insurance agent for certain types of
credit-related insurance; owning and operating savings and loan associations;
and leasing personal property on a full pay-out, nonoperating basis.
A bank holding company and its subsidiaries are further prohibited under the
BHCA from engaging in certain tie-in arrangements in connection with the
provision of any credit, property or services. Thus, a subsidiary of a bank
holding company may not extend credit, lease or sell property, furnish any
services or fix or vary the consideration for these activities on the condition
that (1) the customer obtain or provide some additional credit, property or
services from or to the bank holding company or any subsidiary thereof or (2)
the customer may not obtain some other credit, property or services from a
competitor, except to the extent reasonable conditions are imposed to insure the
soundness of credit extended.
The Federal Deposit Insurance Corporation Improvement Act of 1991 established
five capital rating tiers ranging from "well capitalized" to "critically
undercapitalized". A financial institution is considered to be well capitalized
if its Leverage, Tier 1 and Total Capital ratios are at 5%, 6% and 10%,
respectively. Any institution experiencing significant growth or acquiring other
institutions or branches is expected to maintain capital ratios above the well
capitalized level. At December 31, 1998, BOK Financial's Leverage, Tier 1 and
Total Capital ratios were 6.57%, 7.80% and 11.96%, respectively.
BANK SUBSIDIARIES
BOk, Bank of Texas, Bank of Albuquerque, and Bank of Arkansas are national
banking associations and are subject to the National Banking Act and other
federal statutes governing national banks. Under federal law, the Office of the
Comptroller of the Currency ("Comptroller") charters, regulates and serves as
the primary regulator of national banks. In addition, the Comptroller must
approve certain corporate or structural changes, including an increase or
decrease in capitalization, payment of dividends, change of place of business,
establishment of a branch and establishment of an operating subsidiary. The
Comptroller performs its functions through national bank examiners who provide
the Comptroller with information concerning the soundness of a national bank,
the quality of management and directors, and compliance with applicable laws,
rules and regulations. The National Banking Act authorizes the Comptroller to
examine every national bank as often as necessary. Although the Comptroller has
primary supervisory responsibility for national banks, such banks must also
comply with Reserve Board rules and regulations as members of the Federal
Reserve System.
Bank of Arkansas is also subject to certain consumer-protection laws
incorporated in the Arkansas Constitution, which, among other restrictions,
limit the maximum interest rate on general loans to five percent above the
Federal Reserve Discount Rate. The rate on consumer loans is five percent above
the discount rate or seventeen percent, whichever is lower.
BOk, Bank of Texas, Bank of Albuquerque, and Bank of Arkansas are insured by the
FDIC and are required to pay certain fees and premiums to the Bank Insurance
Fund ("BIF"). The BIF has implemented a risk-related insurance system for
determining premiums to be paid by a bank. Each bank is placed in one of nine
risk categories based on its level of capital and supervisory rating with the
well-capitalized banks with the highest supervisory rating paying a premium of
0.00% of deposits and the critically undercapitalized banks paying up to 0.27%
of deposits. Also, approximately 17% of BOK Financial's total deposits at
December 31, 1998 were acquired through Oakar transactions and are insured
through the Savings Association Insurance Fund ("SAIF"). The Deposit Insurance
Funds Act of 1996 was enacted on September 30, 1996, which recapitalized the
SAIF and implemented a risk-related insurance system identical to the BIF system
discussed above. In addition, the Deposit Insurance
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Fund Act of 1996 implemented an additional assessment on BIF and SAIF deposits,
the Financing Corporation ("FICO") Quarterly Payment, which is not tied to the
BIF risk classification. The FICO BIF annual rate at December 31, 1998 was 1.22
basis points and the FICO SAIF annual rate was 6.10 basis points.
Applicable federal statutes and regulations require national banks to meet
certain leverage and risk-based capital requirements. At December 31, 1998,
BOk's, Bank of Texas's, Bank of Albuquerque's and Bank of Arkansas's leverage
and risk-based capital ratios were well above the required minimum ratios.
Additional discussion regarding regulatory capital is incorporated by reference
to Note 15 of "Notes to Consolidated Financial Statements" (page 45) in BOK
Financial's 1998 Annual Report to Shareholders.
GOVERNMENTAL POLICIES AND ECONOMIC FACTORS
The operations of BOK Financial and its subsidiaries are affected by legislative
changes and by the policies of various regulatory authorities and, in
particular, the credit policies of the Reserve Board. An important function of
the Reserve Board is to regulate the national supply of bank credit. Among the
instruments of monetary policy used by the Reserve Board to implement its
objectives are: open market operations in U.S. Government securities; changes in
the discount rate on bank borrowings; and changes in reserve requirements on
bank deposits. The effect of such policies in the future on the business and
earnings of BOK Financial and its subsidiaries cannot be predicted with
certainty.
FOREIGN OPERATIONS
BOK Financial does not engage in operations in foreign countries, nor does it
lend to foreign governments.
ITEM 2 - PROPERTIES
BOK Financial, through BOk, BOk's subsidiaries, Bank of Texas, Bank of
Albuquerque and Bank of Arkansas, owns improved real estate that was carried at
$44 million, net of depreciation and amortization, as of December 31, 1998. BOK
Financial conducts its operations through 62 banking and 4 nonbanking locations
in Oklahoma, 5 banking and 2 nonbanking locations in Texas, 17 banking locations
in New Mexico, and 4 banking and 2 nonbanking locations in Arkansas as of
December 31, 1998. BOk's facilities are suitable for their respective uses and
present needs.
The information set forth in Notes 6 and 13 of "Notes to Consolidated Financial
Statements" (pages 38 and 44, respectively) of BOK Financial's 1998 Annual
Report to Shareholders provides further discussion related to properties and is
incorporated herein by reference.
ITEM 3 - LEGAL PROCEEDINGS
The information set forth in Note 13 of "Notes to Consolidated Financial
Statements" (page 44) of BOK Financial's 1998 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the three months ended December 31,
1998.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
BOK Financial's $.00006 par value common stock is traded over-the-counter and is
reported on the facilities of the National Association of Securities Dealers
Automated Quotation system ("NASDAQ"), with the symbol BOKF. At December 31,
1998, common shareholders of record numbered 1,198 with 45,037,558 shares
outstanding.
During 1998, BOK Financial declared a 3% stock dividend in respect of its Common
Stock payable in shares of Common Stock. The dividend was payable on November
25, 1998 to shareholders of record on November 8, 1998.
On January 26, 1999, BOK Financial declared a two-for-one stock split effected
in the form of a 100% stock dividend for common stockholders on record on
February 8, 1999 to be paid on February 22, 1999.
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BOK Financial's quarterly market information follows:
<TABLE>
<CAPTION>
First Second Third Fourth
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<S> <C> <C> <C> <C>
1998:
Low $ 19.50 $ 22.69 $ 20.25 $ 21.30
High 25.38 26.63 24.50 24.03
1997:
Low $ 12.88 $ 14.63 $ 16.38 $ 19.41
High 15.75 18.00 20.25 22.00
</TABLE>
On February 25, 1998, BOK Financial announced that its board of directors
approved a common stock repurchase program to purchase up to 200,000 shares. The
purchases were made from time-to-time in accordance with SEC Rule 10(b)18
transactions. This program was terminated on December 31, 1998.
The information set forth under the captions "Table 1 - Consolidated Selected
Financial Data" (page 9), "Table 10 - Selected Quarterly Financial Data" (page
17) and Note 15 of "Notes to Consolidated Financial Statements" (page 45) of BOK
Financial's 1998 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information set forth under the caption "Table 1 - Consolidated Selected
Financial Data" (page 9) of BOK Financial's 1998 Annual Report to Shareholders
is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth under the captions "Management's Assessment of
Operations and Financial Condition" (pages 10 - 24), "Annual Financial Summary -
Unaudited" (pages 54 - 55) and "Quarterly Financial Summary Unaudited" (pages 56
- - 57) of BOK Financial's 1998 Annual Report to Shareholders is incorporated
herein by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth under the caption "Market Risk" (pages 22 -24) of BOK
Financial's 1998 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The supplementary data regarding quarterly results of operations set forth under
the caption "Table 10 Selected Quarterly Financial Data" (page 17) of BOK
Financial's 1998 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the captions "Election of Directors" and
"Executive Compensation" in BOK Financial's 1999 Annual Proxy Statement for its
Annual Meeting of Shareholders scheduled for April 27, 1999 ("1999 Annual Proxy
Statement") is incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in BOK
Financial's 1999 Annual Proxy Statement is incorporated herein by reference.
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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the captions "Security Ownership of Certain
Beneficial Owners and Management" and "Election of Directors" in BOK Financial's
1999 Annual Proxy Statement is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Transactions" in BOK
Financial's 1999 Annual Proxy Statement is incorporated herein by reference.
The information set forth under Notes 3, 5 and 9 of "Notes to Consolidated
Financial Statements" (pages 35, 37, and 40, respectively) of BOK Financial's
1998 Annual Report to Shareholders is incorporated herein by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) LIST OF FINANCIAL STATEMENTS FILED.
The following financial statements and reports included in BOK Financial's
Annual Report to Shareholders for the Fiscal Year Ended December 31, 1998 are
incorporated by reference in Parts I and II of this Annual Report on Form 10-K.
<TABLE>
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EXHIBIT 13
1998 ANNUAL REPORT
DESCRIPTION PAGE NUMBER
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<S> <C>
Consolidated Selected Financial Data 9
Selected Quarterly Financial Data 17
Report of Management on Financial Statements 25
Report of Independent Auditors 25
Consolidated Statements of Earnings 26
Consolidated Balance Sheets 27
Consolidated Statements of Changes in Shareholders' Equity 28-29
Consolidated Statements of Cash Flows 30
Notes to Consolidated Financial Statements 31-53
Annual Financial Summary - Unaudited 54-55
Quarterly Financial Summary - Unaudited 56-57
</TABLE>
(A)(2) LIST OF FINANCIAL STATEMENT SCHEDULES FILED.
The schedules to the consolidated financial statements required by Regulation
S-X are not required under the related instructions or are inapplicable and are
therefore omitted.
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(A)(3) LIST OF EXHIBITS FILED.
Exhibit Number Description of Exhibit
3.0 The Articles of Incorporation of BOK Financial, incorporated
by reference to (i) Amended and Restated Certificate of
Incorporation of BOK Financial filed with the Oklahoma
Secretary of State on May 28, 1991, filed as Exhibit 3.0 to
S-1 Registration Statement No. 33-90450, and (ii) Amendment
attached as Exhibit A to Information Statement and Prospectus
Supplement filed November 20, 1991.
3.1 Bylaws of BOK Financial, incorporated by reference to Exhibit
3.1 of S-1 Registration Statement No. 33-90450.
4.0 The rights of the holders of the Common Stock and Preferred
Stock of BOK Financial are set forth in its Certificate of
Incorporation.
10.0 Purchase and Sale Agreement dated October 25, 1990, among BOK
Financial, Kaiser, and the FDIC, incorporated by reference to
Exhibit 2.0 of S-1 Registration Statement No. 33-90450.
10.1 Amendment to Purchase and Sale Agreement effective March 29,
1991, among BOK Financial, Kaiser, and the FDIC, incorporated
by reference to Exhibit 2.2 of S-1 Registration Statement No.
33-90450
10.2 Letter agreement dated April 12, 1991, among BOK Financial,
Kaiser, and the FDIC, incorporated by reference to Exhibit 2.3
of S-1 Registration Statement No. 33-90450.
10.3 Second Amendment to Purchase and Sale Agreement effective
April 15, 1991, among BOK Financial, Kaiser, and the FDIC,
incorporated by reference to Exhibit 2.4 of S-1 Registration
Statement No. 33-90450.
10.4 Employment agreements.
10.4(a) Employment Agreement between BOk and Stanley A. Lybarger,
incorporated by reference to Exhibit 10.4(a) of Form 10-K for
the fiscal year ended December 31, 1991.
10.5 Director indemnification agreement dated June 30, 1987,
between BOk and Kaiser, incorporated by reference to Exhibit
10.5 of S-1 Registration Statement No. 33-90450. Substantially
similar director indemnification agreements were executed
between BOk and the following:
<TABLE>
<CAPTION>
Date of Agreement
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<S> <C>
James E. Barnes June 30, 1987
William H. Bell June 30, 1987
James S. Boese June 30, 1987
Dennis L. Brand June 30, 1987
Chester E. Cadieux June 30, 1987
William B. Cleary June 30, 1987
Glenn A. Cox June 30, 1987
William E. Durrett June 30, 1987
Leonard J. Eaton, Jr. June 30, 1987
William B. Fader December 5, 1990
Gregory J. Flanagan June 30, 1987
Jerry L. Goodman June 30, 1987
David A. Hentschel July 7, 1987
Philip N. Hughes July 8, 1987
Thomas J. Hughes, III June 30, 1987
William G. Kerr June 30, 1987
Philip C. Lauinger, Jr. June 30, 1987
Stanley A. Lybarger December 5, 1990
Patricia McGee Maino June 30, 1987
Robert L. Parker, Sr. June 30, 1987
James A. Robinson June 30, 1987
William P. Sweich June 30, 1987
</TABLE>
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<TABLE>
<S> <C>
10.6 Capitalization and Stock Purchase Agreement dated May 20,
1991, between BOK Financial and Kaiser, incorporated by
reference to Exhibit 10.6 of S-1 Registration Statement No.
33-90450.
10.7 BOK Financial Corporation 1991 Special Stock Option Plan,
incorporated by reference to Exhibit 4.0 of S-8 Registration
Statement No. 33-44122.
10.7.1 BOK Financial Corporation 1992 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-55312.
10.7.2 BOK Financial Corporation 1993 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-70102.
10.7.3 BOK Financial Corporation 1994 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-79834.
10.7.4 BOK Financial Corporation 1994 Stock Option Plan
(Typographical Error Corrected January 16, 1995), incorporated
by reference to Exhibit 10.7.4 of Form 10-K for the fiscal
year ended December 31, 1994.
10.7.5 BOK Financial Corporation 1998 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-32642
10.7.6 BOK Financial Corporation Directors' Stock Compensation Plan,
incorporated by reference to Exhibit 4.0 of S-8 Registration
Statement No. 33-79836.
10.7.7 Bank of Oklahoma Thrift Plan (Amended and Restated Effective
as of January 1, 1995), incorporated by reference to Exhibit
10.7.6 of Form 10-K for the year ended December 31, 1994.
10.7.8 Trust Agreement for the Bank of Oklahoma Thrift Plan (December
30, 1994), incorporated by reference to Exhibit 10.7.7 of Form
10-K for the year ended December 31, 1994.
10.8 Lease Agreement between One Williams Center Co. and National
Bank of Tulsa (predecessor to BOk) dated June 18, 1974,
incorporated by reference to Exhibit 10.9 of S-1 Registration
Statement No. 33-90450.
10.9 Lease Agreement between Security Capital Real Estate Fund and
BOk dated January 1, 1988, incorporated by reference to
Exhibit 10.10 of S-1 Registration Statement No. 33-90450.
10.10 Asset Purchase Agreement (OREO and other assets) between BOk
and Phi-Lea-Em Corporation dated April 30, 1991, incorporated
by reference to Exhibit 10.11 of S-1 Registration Statement
No. 33-90450.
10.11 Asset Purchase Agreement (Tanker Assets) between BOk and Green
River Exploration Company dated April 30, 1991, incorporated
by reference to Exhibit 10.12 of S-1 Registration Statement
No. 33-90450.
10.12 Asset Purchase Agreement (Recovery Rights) between BOk and
Kaiser dated April 30, 1991, incorporated by reference to
Exhibit 10.13 of S-1 Registration Statement No. 33-90450.
10.13 Purchase and Assumption Agreement dated August 7, 1992 among
First Gibraltar Bank, FSB, Fourth Financial Corporation and
BOk, as amended, incorporated by reference to Exhibit 10.14 of
Form 10-K for the fiscal year ended December 31, 1992.
10.13.1 Allocation Agreement dated August 7, 1992 between BOk and
Fourth Financial Corporation, incorporated by reference to
Exhibit 10.14.1 of Form 10-K for the fiscal year ended
December 31, 1992.
</TABLE>
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10.14 Merger Agreement among BOK Financial, BOKF Merger Corporation
Number Two, Brookside Bancshares, Inc., The Shareholders of
Brookside Bancshares, Inc. and Brookside State Bank dated
December 22, 1992, as amended, incorporated by reference to
Exhibit 10.15 of Form 10-K for the fiscal year ended December
31, 1992.
10.14.1 Agreement to Merge between BOk and Brookside State Bank dated
January 27, 1993, incorporated by reference to Exhibit 10.15.1
of Form 10-K for the fiscal year ended December 31, 1992.
10.15 Merger Agreement among BOK Financial, BOKF Merger Corporation
Number Three, Sand Springs Bancshares, Inc., The Shareholders
of Sand Springs Bancshares, Inc. and Sand Springs State Bank
dated December 22, 1992, as amended, incorporated by reference
to Exhibit 10.16 of Form 10-K for the fiscal year ended
December 31, 1992.
10.15.1 Agreement to Merge between BOk and Sand Springs State Bank
dated January 27, 1993, incorporated by reference to Exhibit
10.16.1 of Form 10-K for the fiscal year ended December 31,
1992.
10.16 Partnership Agreement between Kaiser-Francis Oil Company and
BOK Financial dated December 1, 1992, incorporated by
reference to Exhibit 10.16 of Form 10-K for the fiscal year
ended December 31, 1993.
10.16.1 Amendment to Partnership Agreement between Kaiser-Francis Oil
Company and BOK Financial dated May 17, 1993, incorporated by
reference to Exhibit 10.16.1 of Form 10-K for the fiscal year
ended December 31, 1993.
10.17 Purchase and Assumption Agreement between BOk and FDIC,
Receiver of Heartland Federal Savings and Loan Association
dated October 9, 1993, incorporated by reference to Exhibit
10.17 of Form 10-K for the fiscal year ended December 31,
1993.
10.18 Merger Agreement among BOk, Plaza National Bank and The
Shareholders of Plaza National Bank dated December 20, 1993,
incorporated by reference to Exhibit 10.18 of Form 10-K for
the fiscal year ended December 31, 1993.
10.18.1 Amendment to Merger Agreement among BOk, Plaza National Bank
and The Shareholders of Plaza National Bank dated January 14,
1994, incorporated by reference to Exhibit 10.18.1 of Form
10-K for the fiscal year ended December 31, 1993.
10.19 Stock Purchase Agreement between Texas Commerce Bank, National
Association and BOk dated March 11, 1994, incorporated by
reference to Exhibit 10.19 of Form 10-K for the fiscal year
ended December 31, 1993.
10.20 Merger Agreement among BOK Financial Corporation, BOKF Merger
Corporation Number Four, Citizens Holding Company and others
dated May 11, 1994, incorporated by reference to Exhibit 10.20
of Form 10-K for the fiscal year ended December 31, 1994.
10.21 Stock Purchase and Merger Agreement among Northwest Bank of
Enid, BOk and The Shareholders of Northwest Bank of Enid
effective as of May 16, 1994, incorporated by reference to
Exhibit 10.21 of Form 10-K for the fiscal year ended December
31, 1994.
10.22 Agreement and Plan of Merger among BOK Financial Corporation,
BOKF Merger Corporation Number Five and Park Cities
Bancshares, Inc. dated October 3, 1996, incorporated by
reference to Exhibit C of S-4 Registration Statement No.
333-16337.
10.23 Agreement and Plan of Merger among BOK Financial Corporation
and First TexCorp., Inc. dated December 18, 1996, incorporated
by reference to Exhibit 10.24 of S-4 Registration Statement
No. 333-16337.
10.24 Purchase and Assumption Agreement between Bank of America
National Trust and Savings Association and BOK Financial
Corporation dated July 27, 1998.
10.25 Merger Agreement among BOK Financial Corporation, BOKF Merger
Corporation No. Seven, First Bancshares of Muskogee, Inc.,
First National Bank and Trust Company of Muskogee, and Certain
Shareholders of First Bancshares of Muskogee, Inc. dated
December 30, 1998.
13.0 Annual Report to Shareholders for the fiscal year ended
December 31, 1998. Such report, except for those portions
thereof which are expressly incorporated by reference in this
filing, is furnished for the information of the Commission and
is not deemed to be "filed" as part of this Annual Report on
Form 10-K.
10
<PAGE> 11
<TABLE>
<S> <C>
21.0 Subsidiaries of BOK Financial.
23.0 Consent of independent auditors - Ernst & Young LLP.
27.0 Financial Data Schedule for ended December 31, 1998
99.0 Additional Exhibits.
99.1 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-44121 for Bank of Oklahoma Master Thrift Plan
and Trust, incorporated by reference to Exhibit 99.1 of Form
10-K for the fiscal year ended December 31, 1993.
99.2 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-44122 for BOK Financial Corporation 1991
Special Stock Option Plan, incorporated by reference to
Exhibit 99.2 of Form 10-K for the fiscal year ended December
31, 1993.
99.3 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-55312 for BOK Financial Corporation 1992
Stock Option Plan, incorporated by reference to Exhibit 99.3
of Form 10-K for the fiscal year ended December 31, 1993.
99.4 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-70102 for BOK Financial Corporation 1993
Stock Option Plan, incorporated by reference to Exhibit 99.4
of Form 10-K for the fiscal year ended December 31, 1993.
99.5 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-79834 for BOK Financial Corporation 1994
Stock Option Plan, incorporated by reference to Exhibit 99.5
of Form 10-K for the fiscal year ended December 31, 1994.
99.6 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-79836 for BOK Financial Corporation
Directors' Stock Compensation Plan, incorporated by reference
to Exhibit 99.6 of Form 10-K for the fiscal year ended
December 31, 1994.
99.7 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-32642 for BOK Financial Corporation 1998
Stock Option Plan, Incorporated by reference to Exhibit 99.7
of Form 10-K for the fiscal year ended December 31, 1997.
</TABLE>
(B) REPORTS ON FORM 8-K
None.
(C) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
The exhibits listed in response to Item 14(A)(3) are filed as part of this
report.
(D) FINANCIAL STATEMENT SCHEDULES
None.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) 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.
BOK FINANCIAL CORPORATION
DATE: March 22, 1999 BY: /s/ George B. Kaiser
------------------ --------------------------
George B. Kaiser,
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 22, 1999, by the following persons on behalf of
the Registrant and in the capacities indicated.
OFFICERS
/s/ George B. Kaiser /s/ Stanley A. Lybarger
- ---------------------------------- -------------------------------------
George B. Kaiser, Stanley A. Lybarger,
Chairman of the Board of Directors Director, President and Chief
Executive Officer
/s/ James A. White /s/ John C. Morrow
- ---------------------------------- -------------------------------------
James A. White, John C. Morrow
Executive Vice President and Senior Vice President and Director of
Chief Financial Officer/Treasurer Financial Accounting and Reporting
DIRECTORS
/s/ W. Wayne Allen /s/ Frank A. McPherson
- ---------------------------------- ------------------------------------
W. Wayne Allen Frank A. McPherson
/s/ James E. Barnes /s/ Steven E. Moore
- ---------------------------------- ------------------------------------
James E. Barnes Steven E. Moore
/s/ Sharon J. Bell
- ---------------------------------- ------------------------------------
Sharon J. Bell J. Larry Nichols
/s/ Glenn A. Cox /s/ Robert L. Parker, Sr.
- ---------------------------------- ------------------------------------
Glenn A. Cox Robert L. Parker, Sr.
/s/ Robert H. Donaldson /s/ James W. Pielsticker
- ---------------------------------- ------------------------------------
Robert H. Donaldson James W. Pielsticker
/s/ William E. Durrett /s/ E.C. Richards
- ---------------------------------- ------------------------------------
William E. Durrett E.C. Richards
/s/ James O. Goodwin /s/ James A. Robinson
- ---------------------------------- ------------------------------------
James O. Goodwin James A. Robinson
/s/ V. Burns Hargis /s/ L. Francis Rooney, III
- ---------------------------------- ------------------------------------
V. Burns Hargis L. Francis Rooney, III
/s/ Howard E. Janzen /s/ David J. Tippeconnic
- ---------------------------------- ------------------------------------
Howard E. Janzen David J. Tippeconnic
/s/ E. Carey Joullian, IV /s/ Tom E. Turner
- ---------------------------------- ------------------------------------
E. Carey Joullian, IV Tom E. Turner
/s/ Robert J. LaFortune /s/ Robert L. Zemanek
- ---------------------------------- ------------------------------------
Robert J. LaFortune Robert L. Zemanek
/s/ Philip C. Lauinger, Jr.
- ---------------------------------- ------------------------------------
Philip C. Lauinger, Jr.
12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
3.0 The Articles of Incorporation of BOK Financial, incorporated
by reference to (i) Amended and Restated Certificate of
Incorporation of BOK Financial filed with the Oklahoma
Secretary of State on May 28, 1991, filed as Exhibit 3.0 to
S-1 Registration Statement No. 33-90450, and (ii) Amendment
attached as Exhibit A to Information Statement and Prospectus
Supplement filed November 20, 1991.
3.1 Bylaws of BOK Financial, incorporated by reference to Exhibit
3.1 of S-1 Registration Statement No. 33-90450.
4.0 The rights of the holders of the Common Stock and Preferred
Stock of BOK Financial are set forth in its Certificate of
Incorporation.
10.0 Purchase and Sale Agreement dated October 25, 1990, among BOK
Financial, Kaiser, and the FDIC, incorporated by reference to
Exhibit 2.0 of S-1 Registration Statement No. 33-90450.
10.1 Amendment to Purchase and Sale Agreement effective March 29,
1991, among BOK Financial, Kaiser, and the FDIC, incorporated
by reference to Exhibit 2.2 of S-1 Registration Statement No.
33-90450
10.2 Letter agreement dated April 12, 1991, among BOK Financial,
Kaiser, and the FDIC, incorporated by reference to Exhibit 2.3
of S-1 Registration Statement No. 33-90450.
10.3 Second Amendment to Purchase and Sale Agreement effective
April 15, 1991, among BOK Financial, Kaiser, and the FDIC,
incorporated by reference to Exhibit 2.4 of S-1 Registration
Statement No. 33-90450.
10.4 Employment agreements.
10.4(a) Employment Agreement between BOk and Stanley A. Lybarger,
incorporated by reference to Exhibit 10.4(a) of Form 10-K for
the fiscal year ended December 31, 1991.
10.5 Director indemnification agreement dated June 30, 1987,
between BOk and Kaiser, incorporated by reference to Exhibit
10.5 of S-1 Registration Statement No. 33-90450. Substantially
similar director indemnification agreements were executed
between BOk and the following:
</TABLE>
<TABLE>
<CAPTION>
Date of Agreement
-----------------
<S> <C>
James E. Barnes June 30, 1987
William H. Bell June 30, 1987
James S. Boese June 30, 1987
Dennis L. Brand June 30, 1987
Chester E. Cadieux June 30, 1987
William B. Cleary June 30, 1987
Glenn A. Cox June 30, 1987
William E. Durrett June 30, 1987
Leonard J. Eaton, Jr. June 30, 1987
William B. Fader December 5, 1990
Gregory J. Flanagan June 30, 1987
Jerry L. Goodman June 30, 1987
David A. Hentschel July 7, 1987
Philip N. Hughes July 8, 1987
Thomas J. Hughes, III June 30, 1987
William G. Kerr June 30, 1987
Philip C. Lauinger, Jr. June 30, 1987
Stanley A. Lybarger December 5, 1990
Patricia McGee Maino June 30, 1987
Robert L. Parker, Sr. June 30, 1987
James A. Robinson June 30, 1987
William P. Sweich June 30, 1987
</TABLE>
<PAGE> 14
<TABLE>
<S> <C>
10.6 Capitalization and Stock Purchase Agreement dated May 20,
1991, between BOK Financial and Kaiser, incorporated by
reference to Exhibit 10.6 of S-1 Registration Statement No.
33-90450.
10.7 BOK Financial Corporation 1991 Special Stock Option Plan,
incorporated by reference to Exhibit 4.0 of S-8 Registration
Statement No. 33-44122.
10.7.1 BOK Financial Corporation 1992 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-55312.
10.7.2 BOK Financial Corporation 1993 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-70102.
10.7.3 BOK Financial Corporation 1994 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-79834.
10.7.4 BOK Financial Corporation 1994 Stock Option Plan
(Typographical Error Corrected January 16, 1995), incorporated
by reference to Exhibit 10.7.4 of Form 10-K for the fiscal
year ended December 31, 1994.
10.7.5 BOK Financial Corporation 1998 Stock Option Plan, incorporated
by reference to Exhibit 4.0 of S-8 Registration Statement No.
33-32642
10.7.6 BOK Financial Corporation Directors' Stock Compensation Plan,
incorporated by reference to Exhibit 4.0 of S-8 Registration
Statement No. 33-79836.
10.7.7 Bank of Oklahoma Thrift Plan (Amended and Restated Effective
as of January 1, 1995), incorporated by reference to Exhibit
10.7.6 of Form 10-K for the year ended December 31, 1994.
10.7.8 Trust Agreement for the Bank of Oklahoma Thrift Plan (December
30, 1994), incorporated by reference to Exhibit 10.7.7 of Form
10-K for the year ended December 31, 1994.
10.8 Lease Agreement between One Williams Center Co. and National
Bank of Tulsa (predecessor to BOk) dated June 18, 1974,
incorporated by reference to Exhibit 10.9 of S-1 Registration
Statement No. 33-90450.
10.9 Lease Agreement between Security Capital Real Estate Fund and
BOk dated January 1, 1988, incorporated by reference to
Exhibit 10.10 of S-1 Registration Statement No. 33-90450.
10.10 Asset Purchase Agreement (OREO and other assets) between BOk
and Phi-Lea-Em Corporation dated April 30, 1991, incorporated
by reference to Exhibit 10.11 of S-1 Registration Statement
No. 33-90450.
10.11 Asset Purchase Agreement (Tanker Assets) between BOk and Green
River Exploration Company dated April 30, 1991, incorporated
by reference to Exhibit 10.12 of S-1 Registration Statement
No. 33-90450.
10.12 Asset Purchase Agreement (Recovery Rights) between BOk and
Kaiser dated April 30, 1991, incorporated by reference to
Exhibit 10.13 of S-1 Registration Statement No. 33-90450.
10.13 Purchase and Assumption Agreement dated August 7, 1992 among
First Gibraltar Bank, FSB, Fourth Financial Corporation and
BOk, as amended, incorporated by reference to Exhibit 10.14 of
Form 10-K for the fiscal year ended December 31, 1992.
10.13.1 Allocation Agreement dated August 7, 1992 between BOk and
Fourth Financial Corporation, incorporated by reference to
Exhibit 10.14.1 of Form 10-K for the fiscal year ended
December 31, 1992.
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
10.14 Merger Agreement among BOK Financial, BOKF Merger Corporation
Number Two, Brookside Bancshares, Inc., The Shareholders of
Brookside Bancshares, Inc. and Brookside State Bank dated
December 22, 1992, as amended, incorporated by reference to
Exhibit 10.15 of Form 10-K for the fiscal year ended December
31, 1992.
10.14.1 Agreement to Merge between BOk and Brookside State Bank dated
January 27, 1993, incorporated by reference to Exhibit 10.15.1
of Form 10-K for the fiscal year ended December 31, 1992.
10.15 Merger Agreement among BOK Financial, BOKF Merger Corporation
Number Three, Sand Springs Bancshares, Inc., The Shareholders
of Sand Springs Bancshares, Inc. and Sand Springs State Bank
dated December 22, 1992, as amended, incorporated by reference
to Exhibit 10.16 of Form 10-K for the fiscal year ended
December 31, 1992.
10.15.1 Agreement to Merge between BOk and Sand Springs State Bank
dated January 27, 1993, incorporated by reference to Exhibit
10.16.1 of Form 10-K for the fiscal year ended December 31,
1992.
10.16 Partnership Agreement between Kaiser-Francis Oil Company and
BOK Financial dated December 1, 1992, incorporated by
reference to Exhibit 10.16 of Form 10-K for the fiscal year
ended December 31, 1993.
10.16.1 Amendment to Partnership Agreement between Kaiser-Francis Oil
Company and BOK Financial dated May 17, 1993, incorporated by
reference to Exhibit 10.16.1 of Form 10-K for the fiscal year
ended December 31, 1993.
10.17 Purchase and Assumption Agreement between BOk and FDIC,
Receiver of Heartland Federal Savings and Loan Association
dated October 9, 1993, incorporated by reference to Exhibit
10.17 of Form 10-K for the fiscal year ended December 31,
1993.
10.18 Merger Agreement among BOk, Plaza National Bank and The
Shareholders of Plaza National Bank dated December 20, 1993,
incorporated by reference to Exhibit 10.18 of Form 10-K for
the fiscal year ended December 31, 1993.
10.18.1 Amendment to Merger Agreement among BOk, Plaza National Bank
and The Shareholders of Plaza National Bank dated January 14,
1994, incorporated by reference to Exhibit 10.18.1 of Form
10-K for the fiscal year ended December 31, 1993.
10.19 Stock Purchase Agreement between Texas Commerce Bank, National
Association and BOk dated March 11, 1994, incorporated by
reference to Exhibit 10.19 of Form 10-K for the fiscal year
ended December 31, 1993.
10.20 Merger Agreement among BOK Financial Corporation, BOKF Merger
Corporation Number Four, Citizens Holding Company and others
dated May 11, 1994, incorporated by reference to Exhibit 10.20
of Form 10-K for the fiscal year ended December 31, 1994.
10.21 Stock Purchase and Merger Agreement among Northwest Bank of
Enid, BOk and The Shareholders of Northwest Bank of Enid
effective as of May 16, 1994, incorporated by reference to
Exhibit 10.21 of Form 10-K for the fiscal year ended December
31, 1994.
10.22 Agreement and Plan of Merger among BOK Financial Corporation,
BOKF Merger Corporation Number Five and Park Cities
Bancshares, Inc. dated October 3, 1996, incorporated by
reference to Exhibit C of S-4 Registration Statement No.
333-16337.
10.23 Agreement and Plan of Merger among BOK Financial Corporation
and First TexCorp., Inc. dated December 18, 1996, incorporated
by reference to Exhibit 10.24 of S-4 Registration Statement
No. 333-16337.
10.24 Purchase and Assumption Agreement between Bank of America
National Trust and Savings Association and BOK Financial
Corporation dated July 27, 1998.
10.25 Merger Agreement among BOK Financial Corporation, BOKF Merger
Corporation No. Seven, First Bancshares of Muskogee, Inc.,
First National Bank and Trust Company of Muskogee, and Certain
Shareholders of First Bancshares of Muskogee, Inc. dated
December 30, 1998.
13.0 Annual Report to Shareholders for the fiscal year ended
December 31, 1998. Such report, except for those portions
thereof which are expressly incorporated by reference in this
filing, is furnished for the information of the Commission and
is not deemed to be "filed" as part of this Annual Report on
Form 10-K.
</TABLE>
<PAGE> 16
<TABLE>
<S> <C>
21.0 Subsidiaries of BOK Financial.
23.0 Consent of independent auditors - Ernst & Young LLP.
27.0 Financial Data Schedule for ended December 31, 1998
99.0 Additional Exhibits.
99.1 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-44121 for Bank of Oklahoma Master Thrift Plan
and Trust, incorporated by reference to Exhibit 99.1 of Form
10-K for the fiscal year ended December 31, 1993.
99.2 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-44122 for BOK Financial Corporation 1991
Special Stock Option Plan, incorporated by reference to
Exhibit 99.2 of Form 10-K for the fiscal year ended December
31, 1993.
99.3 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-55312 for BOK Financial Corporation 1992
Stock Option Plan, incorporated by reference to Exhibit 99.3
of Form 10-K for the fiscal year ended December 31, 1993.
99.4 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-70102 for BOK Financial Corporation 1993
Stock Option Plan, incorporated by reference to Exhibit 99.4
of Form 10-K for the fiscal year ended December 31, 1993.
99.5 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-79834 for BOK Financial Corporation 1994
Stock Option Plan, incorporated by reference to Exhibit 99.5
of Form 10-K for the fiscal year ended December 31, 1994.
99.6 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-79836 for BOK Financial Corporation
Directors' Stock Compensation Plan, incorporated by reference
to Exhibit 99.6 of Form 10-K for the fiscal year ended
December 31, 1994.
99.7 Undertakings incorporated by reference into S-8 Registration
Statement No. 33-32642 for BOK Financial Corporation 1998
Stock Option Plan, Incorporated by reference to Exhibit 99.7
of Form 10-K for the fiscal year ended December 31, 1997.
</TABLE>
<PAGE> 1
EXHIBIT 10.24
Execution Copy
---------------------------------
PURCHASE AND ASSUMPTION AGREEMENT
dated as of
July 27, 1998
between
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
and
BOK FINANCIAL CORPORATION
---------------------------------
- --------------------------------------------------------------------------------
BRANCH PURCHASE AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 Definitions.................................................................................2
1.1 Definitions.................................................................................2
ARTICLE 2 Purchase and Sale..........................................................................10
2.1 Purchase and Sale..........................................................................10
2.2 Closing....................................................................................10
2.3 Transitional Matters.......................................................................15
2.4 Employee Considerations....................................................................18
2.5 Loans......................................................................................22
ARTICLE 3 Price and Adjustments......................................................................24
3.1 Price......................................................................................24
3.2 Adjustments................................................................................24
ARTICLE 4 Additional Covenants.......................................................................30
4.1 Seller's Covenants.........................................................................30
4.2 Buyer's Covenants..........................................................................33
4.3 Consents...................................................................................35
4.4 Environmental Matters......................................................................35
4.5 Valuation of the Assets....................................................................39
4.6 Clearing Items.............................................................................39
4.7 IRA Deposits and Keogh Accounts............................................................40
4.8 Interest Reporting and Withholding.........................................................40
4.9 Eminent Domain or Taking...................................................................41
4.10 Damage or Destruction......................................................................41
4.11 Real Estate................................................................................43
4.12 Certain Cash Management Relationships......................................................43
4.13 Additional Branches........................................................................44
ARTICLE 5 Representations and Warranties.............................................................45
5.1 Seller's Representations and Warranties....................................................45
5.2 Buyer's Representations and Warranties.....................................................47
ARTICLE 6 Understandings.............................................................................49
6.1 Depositors' Rights.........................................................................49
6.2 Unclaimed Property.........................................................................49
6.3 Head Office Accounts.......................................................................49
6.4 Limitation of Warranties...................................................................50
ARTICLE 7 Conditions to the Closing..................................................................50
7.1 Seller's Conditions........................................................................50
7.2 Buyer's Conditions.........................................................................52
ARTICLE 8 Termination................................................................................53
8.1 Events of Termination......................................................................53
8.2 Liability for Termination..................................................................54
8.3 Procedures Upon Termination................................................................54
ARTICLE 9 Survival, Indemnification..................................................................55
9.1 Survival...................................................................................55
9.2 Seller's Indemnity.........................................................................55
</TABLE>
i
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BRANCH PURCHASE AGREEMENT
<PAGE> 3
<TABLE>
<S> <C> <C>
9.3 Buyer's Indemnity..........................................................................56
9.4 Arbitration of Disputes....................................................................57
9.5 Limit on Indemnities.......................................................................57
9.6 Indemnities................................................................................58
ARTICLE 10 Taxes......................................................................................58
10.1 Obligations of the Buyer...................................................................58
10.2 Access to Information......................................................................58
10.3 Allocation of Consideration................................................................59
ARTICLE 11 Miscellaneous..............................................................................59
11.1 Public Notice..............................................................................59
11.2 Assignment.................................................................................59
11.3 Notices....................................................................................59
11.4 Time.......................................................................................60
11.5 Expenses...................................................................................60
11.6 Misdirected Payments or Communications.....................................................61
11.7 Entire Agreement...........................................................................61
11.8 Amendment..................................................................................61
11.9 Governing Law, Severability................................................................61
11.10 Waiver.....................................................................................61
11.11 Confidentiality............................................................................62
11.12 Third Party Rights.........................................................................62
11.13 Headings...................................................................................62
11.14 Counterparts...............................................................................63
SCHEDULES
A-1 List of Branches
A-2 List of Offices
A-3 List of Off-Site ATMs
1.1(a)(1) Employees - Retail Branches,
Commercial, Business Banking
1.1(a)(2) Employees - Ancillary Operations, Cash
Management
1.1(b) Furniture, Fixtures and Equipment
1.1(c) Other Liabilities
1.1(d) Real Estate - Title Reports
2.2(e) Contracts
2.2(f) Leases
2.5(c) Loans Transferred at Closing
2.5(d) Loans Transferred at Supplemental Loan
Closing
3.1(a) Allocation of Real Estate and
Improvements
3.1(b) Leasehold Improvements
4.4(b) Phase I Environmental Site Assessments
and Asbestos Surveys
4.12 Certain Cash Management Relationships
5.1(e) Litigation
5.1(h) Disclosures Regarding Loans
6.3 Head Office Accounts
10.3 Allocation of Consideration
</TABLE>
ii
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BRANCH PURCHASE AGREEMENT
<PAGE> 4
EXHIBITS
A Form of Liability Assumption Agreement
B Form of Records Agreement
C Form of Special Warranty Deed
D Form of Bill of Sale
E Form of Assignment and Assumption
F Form of Officer's Certificate (Seller)
G Form of Officer's Certificate (Buyer)
H Terms and Conditions of Right of Entry Upon Real Estate and
Leased Real Estate
iii
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BRANCH PURCHASE AGREEMENT
<PAGE> 5
PURCHASE AND ASSUMPTION AGREEMENT
THIS PURCHASE AND ASSUMPTION AGREEMENT ("Agreement") is made as of July
27, 1998, by and between BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
a national banking association established under the laws of the United States
(the "Seller"), and BOK FINANCIAL CORPORATION, an Oklahoma corporation and a
bank holding company under the Bank Holding Company Act of 1956, as amended (the
"Buyer").
WHEREAS, the Seller maintains the branch or branches listed on
Schedule A-1 hereto (sometimes referred to herein collectively as the
"Branches" and individually as a "Branch");
WHEREAS, the Seller maintains the back-office facilities
listed on Schedule A-2 hereto (sometimes referred to herein
collectively as the "Offices" and individually as an "Office");
WHEREAS, the Seller maintains certain unmanned automated
teller machines ("ATMs") at leased locations other than the Branches,
as listed on Schedule A-3 hereto (sometimes referred to herein
collectively as the "Off-Site ATMs" and individually as an "Off-Site
ATM") (the Branches, Offices and Off-Site ATMs are sometimes referred
to herein collectively as the "Facilities");
WHEREAS, the Buyer wishes to purchase certain of the assets
and assume certain of the liabilities of the Facilities and the Seller
is willing to sell and transfer the same upon the terms and subject to
the conditions hereinafter set forth;
WHEREAS, the Seller and the Buyer intend that, either (a) the
Buyer's rights to acquire the Assets and Liabilities will be assigned
to a national banking association, state banking corporation or
federally-chartered thrift institution, which will then be wholly-owned
by the Buyer, or (b) upon mutual agreement of the Seller and the Buyer
(i) the Seller will transfer the Assets and Liabilities to a
newly-formed national banking association, state banking corporation or
federally-chartered thrift institution wholly-owned by an Affiliate of
the Seller ("Newco") and (ii) at the closing hereinafter provided the
Buyer will purchase all of the capital stock of Newco (the "Stock
Purchase"). Where the context requires, references in this Agreement to
"Buyer" shall include Buyer's assignees; and
WHEREAS, the Buyer intends that retail, business banking and
commercial banking services will be offered in the geographic areas
served by the Branches.
-1-
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BRANCH PURCHASE AGREEMENT
<PAGE> 6
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions contained
herein, the Seller and the Buyer hereby agree as follows:
ARTICLE 11
Definitions
1.1 Definitions..1 Definitions For purposes of this Agreement:
"Account" means, as of any date, a deposit account with a customer
maintained at one or more of the Branches, whether an asset or a liability of
the Branch at the time of Closing.
"Accrued Expenses" means the accrued and unpaid expenses appearing as a
liability on the Financial Statements pursuant to Section 3.2(c).
"Accrued Interest" on any Deposits at any date means interest which is
accrued on such Deposits to and including such date and not yet posted to such
deposit accounts.
"Additional Branches" shall have the meaning set forth in Section 4.13.
"Additional Information shall have the meaning set forth in Section
4.13.
"Affected Facilities" shall have the meaning set forth in Section
4.4(d).
"Affected Improvements" shall have the meaning set forth in Section
4.10.
"Affiliate" of a person means any person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such person, as control is defined under Section 2 of the Bank Holding Company
Act of 1956, as amended.
"Agreement" means this Purchase and Assumption Agreement, including all
schedules, exhibits and addenda, as modified, amended or extended from time to
time.
"Allocation" shall have the meaning set forth in Section 10.3.
"Asbestos Survey" shall have the meaning set forth in Section 4.4(b).
"Assets" means the Real Estate, the Loans, the Furniture, Fixtures and
Equipment, Improvements, Leasehold Improvements,
-2-
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BRANCH PURCHASE AGREEMENT
<PAGE> 7
Cash on Hand, safe deposit boxes located at the Branches (exclusive of the
contents thereof), Prepaid Expenses, Overdrafts and all books, records, files
and documentation relating to the foregoing.
"Assumed Contracts" shall have the meaning set forth in Section 2.2(e).
"Assumed Deposits" means all Deposits existing on the Closing Date in
one or more of the Branches, together with all Accrued Interest thereon as of
the Closing Date; provided, however, that Assumed Deposits shall not include any
of the following, which shall be retained by Seller: (i) Deposits not assumed
pursuant to Sections 3.2(g), 3.2(h), or 6.3, (ii) Deposits which secure Visa
credit card accounts, and (iii) other Deposits, if any, which the Buyer has
advised the Seller, at least thirty (30) Business Days prior to the Closing
Date, it cannot legally accept.
"BankAmerica/NationsBank Business Combination" shall have the meaning
set forth in Section 7.1(f).
"BIF" shall have the meaning set forth in Section 3.2(c).
"Business Day" means a day on which the Seller is open for business in
New Mexico and which is not a Saturday or Sunday.
"Buyer's Regulatory Agencies" shall have the meaning set forth in
Section 8.1(e)(i).
"Cash on Hand" means, as of any date, all petty cash, vault cash,
teller cash, ATM cash and prepaid postage maintained at the Facilities.
"Closing" and "Closing Date" refer to the closing of the sale,
purchase, transfer and assumption provided for herein to be held at the time and
date provided for in Section 2.2(a) hereof.
"Closing Financial Statement" means the balance sheet of the Facilities
prepared by the Seller as of the close of business at the Facilities on the
tenth (10th) Business Day prior to the Closing Date and on which are recorded as
of such date, in accordance with the Seller's normal practices and procedures,
the Assets and the Liabilities (except that such normal practices and procedures
shall be modified as necessary to implement prorations required by, or other
provisions of, this Agreement).
"Collection Advice" shall have the meaning set forth in Section
3.2(i)(i)(A).
"Commitment" shall have the meaning set forth in Section 4.11(b).
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"Confidentiality Agreement" shall have the meaning set forth in Section
11.7.
"Continuation Coverage" shall have the meaning set forth in Section
2.4(g).
"CRA" shall have the meaning set forth in Section 5.2(h).
"Customer Account" shall have the meaning set forth in Section 3.2(i)
(i)(B).
"Damaged Facility" shall have the meaning set forth in Section 4.10(a).
"Deposit-Related Loans" means loans or lines of credit fully secured by
one or more Assumed Deposit accounts that are either savings Accounts or
Accounts with a fixed maturity that are evidenced by a certificate of deposit or
time deposit receipt.
"Deposits" means, as of any date, all deposit liabilities of the Seller
that are Accounts maintained at or allocated to the Branches, including, without
limitation, all uncollected items included in depositors' balances, as of such
date. The term "Deposit" includes the deposit agreement itself and any and all
rights and obligations of the Seller created pursuant to such deposit agreement.
"Direct Debit Accounts" shall have the meaning set forth in Section
4.1(h).
"Direct Deposit Cut-off Date" shall have the meaning set forth in
Section 4.1(g).
"Employee" means any employee employed by Seller or its subsidiaries or
Affiliates on the Closing Date who is described on Schedule 1.1(a)(1) or
1.1(a)(2), including, without limitation, those individuals on medical leave,
family leave, military leave or personal leave under Seller's policies.
"Environmental Assessments" shall have the meaning set forth in Section
4.4(c).
"Environmental Due Diligence Period" shall have the meaning set forth
in Section 4.4(c).
"Environmental Law" means any law, statute, ordinance or regulation
pertaining to health, industrial hygiene or the environment in effect as of the
date of this Agreement, including but not limited to, Title 42 of the United
States Code, Section 6901 et seq. (commonly known as "RCRA") or Section 9601 et
seq. (commonly known as "CERCLA" or "Superfund").
"Excluded Assets" means all investment securities owned by Seller; all
securities purchased by Seller subject to repurchase
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BRANCH PURCHASE AGREEMENT
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agreements; all other real estate owned by Seller and properties carried as
in-substance foreclosures that are associated with the Branches or Offices (if
any); all loans or participations in loans that are not Loans; all assets,
liabilities and records associated with the investment or brokerage business of
Seller or its Affiliates, whether conducted at the Branches, the Offices or any
other location of Seller; all intangible assets, including goodwill and mortgage
servicing rights, of Seller excluding the goodwill associated with the Assets;
all rights to the name Bank of America and any of Seller's corporate logos,
trademarks, trade names, signs, paper stock, monetary instruments (including,
but not limited to, traveler's checks and cashier's checks), forms and other
supplies containing any such logos, trademarks or trade names; all customer and
merchant credit card accounts; and all trust assets and trust accounts.
"Federal Funds Rate" on any day means the per annum rate of interest
(rounded upward to the nearest 1/100 of 1%) which is the weighted average of the
rates on overnight federal funds transactions arranged on such day or, if such
day is not a banking day, the previous banking day, by federal funds brokers
computed and released by the Federal Reserve Bank of New York (or any successor)
in substantially the same manner as such Federal Reserve Bank currently computes
and releases the weighted average it refers to as the "Federal Funds Effective
Rate" at the date of this Agreement.
"Final Financial Statement" means the balance sheet of the Facilities
prepared by the Seller as of the close of business at the Facilities on the
Closing Date, and delivered by the Seller to the Buyer pursuant to Section
3.2(a)(i). The Final Financial Statement is to be prepared in accordance with
the Seller's normal practices and procedures (except that such normal practices
and procedures shall be modified as necessary to implement prorations required
by, or other provisions of, this Agreement) and in a manner consistent with the
Closing Financial Statement.
"Final Loan List" shall have the meaning set forth in Section 2.5(a).
"Financial Statements" shall mean collectively the Closing Financial
Statement and the Final Financial Statement.
"Furniture, Fixtures and Equipment" means all furniture, fixtures and
equipment owned by the Seller that are located in the Facilities, as listed on
Schedule 1.1(b).
"Hazardous Substance" means any substance, material or waste that is or
becomes designated or regulated as "toxic," "hazardous," "pollutant," or
"contaminant" or a similar designation or regulation under any federal, state or
local law (whether under common law, statute, regulation or otherwise) or
judicial or administrative interpretation of such, including, without
limitation, petroleum or natural gas.
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BRANCH PURCHASE AGREEMENT
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"Head Office Accounts" has the meaning set forth in Section 6.3.
"Improvements" means all improvements to the Real Estate purchased,
installed or constructed by or on behalf of, and owned by, the Seller and used
in connection with the operation or maintenance of the Branches or Offices,
including, without limitation, buildings, structures, vaults, parking facilities
and drive-up teller facilities.
"Individual Retirement Account" or "IRA" means an account of Seller
created by trust for the exclusive benefit of an individual or his or her
beneficiaries in accordance with the provisions of Section 408 of the IRC.
"Initial Base Amount" shall have the meaning set forth in Section 3.1.
"IRC" means the Internal Revenue Code of 1986, as amended.
"Keogh Account" means an account created by a trust for the benefit of
employees (some or all of whom are owner-employees) and that complies with the
provisions of Section 401 of the IRC.
"Lease" means any lease or sublease of a lease by which Seller has
rights to occupy and use Leased Real Estate or Leasehold Improvements or any
lease or sublease by which Seller has granted a third party the right to occupy
or use all or a portion of the Real Estate, Improvements, Leased Real Estate or
Leasehold Improvements.
"Leased Real Estate" means all real property on which any of the
Facilities is located, which is occupied and used by the Seller pursuant to a
lease.
"Leasehold Improvements" means all improvements on or constituting a
portion of Leased Real Estate, purchased, installed or constructed by or on
behalf of, and owned by, Seller and used in connection with the operation or
maintenance of the Facilities, including, without limitation, buildings,
structures, vaults, parking facilities and drive-up teller facilities.
"Leasehold Improvements Value" shall have the meaning set forth in
Section 4.10(b).
"Liabilities" means (i) the Assumed Deposits, (ii) the Assumed
Contracts, if any, (iii) the Seller's obligations to provide services from and
after the Closing Date in connection with the Assets and the Assumed Deposits,
including obligations with respect to safe deposit boxes, (iv) the Leases, if
any, (v) the Accrued Expenses, and (vi) such other liabilities of the Seller
with respect to the operations of the Facilities as may be described on Schedule
1.1(c) (the "Other Liabilities");
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BRANCH PURCHASE AGREEMENT
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excluding, however, any Leases or Assumed Contracts as to which any consents
required to transfer the same to the Buyer at Closing cannot be obtained; and no
other duty, obligation or liability whatsoever (including, without limitation,
any and all penalties, fines, compensatory or punitive damages of any kind
whatsoever) of the Seller, its Affiliates or any other person or with respect to
the Assets or Liabilities.
"Liability Assumption Agreement" shall mean the agreement,
substantially in the form of Exhibit A hereto, pursuant to which Buyer agrees to
assume and discharge all of the Liabilities.
"Lien" means any lien, claim, security interest, charge, encumbrance,
option, special assessment or adverse claim, except for (i) statutory liens
securing payments not yet due, (ii) obligations pursuant to New Mexico's Uniform
Unclaimed Property Act, Sections 7-8-1 though 7-8-40 of New Mexico Statutes
Annotated 1978 ("NMSA") relating to Deposits and safe deposit box contents which
become subject to escheat to the State of New Mexico under such law in the year
in which the Closing occurs, and (iii) such imperfections of title as do not
materially and adversely affect the use of the properties or Assets subject
thereto or affected thereby or otherwise materially impair business operations
at such properties.
"Loan Cut-off Date" shall have the meaning set forth in Section 2.5(a).
"Loans" shall mean the Deposit-Related Loans and the Other Loans.
"Magnetic Tapes" shall mean the computer data storage tapes (which may
be in reel-to-reel or cartridge form) prepared by Seller or its agent processor
which contain the information to be used for an automated conversion of the
Assumed Deposits.
"Market Value" shall mean, with respect to any Real Estate, any
Improvements with respect thereto, and the Furniture, Fixtures and Equipment,
the appraised market value thereof on an "as is" basis, reflecting the highest
and best use thereof in the condition observed by the appraiser upon inspection
and as such property physically and legally exists without hypothetical
conditions, assumptions or qualifications. Market Value is the most probable
price which a property should bring in a competitive and open market under all
conditions requisite to a fair sale, the buyer and the seller each acting
prudently and knowledgeably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is the consummation of a sale as of a
specified date and the passing of title from the seller to the buyer under
conditions whereby: (i) the buyer and the seller are typically motivated; (ii)
both parties are well informed or well advised, and acting in what they consider
their own best interests; (iii) a reasonable time is allowed for exposure in the
open market; (iv) payment is made in cash in U.S. dollars or in terms of
financial arrangements comparable
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BRANCH PURCHASE AGREEMENT
<PAGE> 12
thereto; and (v) the price represents the normal consideration for the property
sold, unaffected by special or creative financing or sales concessions granted
by anyone associated with the sale.
"Non-Assumed Liabilities" means any liabilities or obligations of
Seller (whether accrued, absolute, contingent, liquidated, unliquidated, known
or unknown, due or to become due) other than those specifically described in the
term "Liabilities." Non-Assumed Liabilities include, but are not limited to, the
following:
(a) cashier's checks, money orders, interest checks, official
checks, drafts and expense checks issued by Seller prior to or at
Closing;
(b) any liabilities or obligations (other than the
Liabilities) arising from or connected with the Facilities or Assumed
Deposits proximately caused by any action by Seller prior to the
Closing or any failure to act by Seller prior to the Closing under
circumstances under which Seller had a legal duty to act prior to the
Closing; and
(c) any liabilities of Affiliates of Seller, including BA
Investment Services, Inc., which provides investment and brokerage
services to customers of Seller.
"OCC" means the Office of the Comptroller of the Currency.
"Other Loans" means the loans (other than Deposit-Related Loans) which
shall be described as such on those lists of Loans to be provided to Buyer
pursuant to Section 2.5(a).
"Overdrafts" means any overdrafts in Transaction Accounts (other than
overdrafts extended pursuant to a formal line of credit or similar arrangement)
maintained at the Branches.
"Permitted Exceptions" shall have the meaning set forth in Section
4.11(b).
"Phase I" shall have the meaning set forth in Section 4.4(b).
"Prepaid Expenses" means the prepaid expenses appearing as an asset on
the Financial Statements pursuant to Section 3.2(c).
"Purchase Premium" means, as of the Closing Date, [redacted].
"Real Estate" means all real property owned by the Seller on which any
of the Facilities is located and which is identified in the preliminary title
reports included in Schedule 1.1(d).
"Records" means the books, records, files and documentation relating to
the Assets and the Liabilities.
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"Records Agreement" means the agreement, substantially in the form of
Exhibit B hereto, pursuant to which Seller shall provide Buyer with access to
certain records with respect to the Facilities.
"Reported Amounts" shall have the meaning set forth in Section 4.8(a).
"Retained Records" means the records to remain in the possession of
Seller pursuant to the terms of the Records Agreement.
"RI" shall have the meaning set forth in Section 3.2(i)(i).
"Seller's Knowledge" or other similar phrases shall mean the actual
knowledge, without having conducted any independent inquiry or investigation, of
Steven Cortopassi, Executive Vice President and Regional Manager, Doreen Rast,
District Manager and Marcia Hembree, Small Business Manager.
"Settlement Date" means the sixtieth (60th) calendar day following the
Closing Date.
"Shares" shall have the meaning set forth in Section 2.1(b).
"Subject Assets" shall have the meaning set forth in Section 4.4(b).
"Supplemental Loans" shall have the meaning set forth in Section
2.5(d).
"Supplemental Loan Closing" shall have the meaning set forth in Section
2.5(d).
"Survey" shall have the meaning set forth in Section 4.11(a).
"Surveyor" shall have the meaning set forth in Section 4.11(a).
"Taking Facility" shall have the meaning set forth in Section 4.9.
"Title Company" means Albuquerque Title Company, 2400 Louisiana N.E.,
Building 5, Suite 180, Albuquerque, New Mexico.
"Title Documents" shall have the meaning set forth in Section 4.11(b).
"Title Policy" shall have the meaning set forth in Section 4.11(b).
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BRANCH PURCHASE AGREEMENT
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"Transaction Account" means any Account in respect of which deposits
therein are withdrawable in practice upon demand or upon which third party
drafts may be drawn by the depositor, including checking accounts, NOW accounts
and money market deposit accounts.
"Withholding Accounts" shall have the meaning set forth in Section
4.8(b).
The foregoing definitions apply equally, where applicable and with
appropriate modifications, to both singular and plural forms of the term
defined. Other terms are defined in the text of this Agreement and have the
meanings assigned herein.
ARTICLE 22
Purchase and Sale
2.1 Purchase and Sale.
(a) Unless the parties hereto shall have elected to pursue the Stock
Purchase, upon the terms and subject to the conditions of this Agreement, the
Seller agrees to sell and transfer and the Buyer agrees to purchase and assume
the Assets and the Liabilities at the Closing as provided in Section 2.2.
(b) In the event the Seller and the Buyer elect to pursue the Stock
Purchase, upon the terms and subject to the conditions of this Agreement (i)
immediately prior to the Closing the Seller agrees to transfer the Assets and
Liabilities to Newco and (ii) at the Closing the Seller agrees to sell and the
Buyer agrees to purchase from the Seller all of the outstanding capital stock of
Newco (the "Shares") as provided in Section 2.2(g).
2.2 Closing
(a) Closing Date and Place. The closing of the transactions provided
for herein will be held at the offices of Sutin Thayer & Browne, A Professional
Corporation, Two Park Square, 6565 Americas Parkway N.E., Albuquerque, New
Mexico 87110; provided that transfer of the Real Estate shall be effected
through a real estate escrow to be opened with the Title Company. The closing
shall be held on a Friday that is mutually agreeable to the Buyer and the Seller
as soon as practicable following the receipt of all government and other
approvals and consents necessary for the consummation of the transactions
contemplated hereby (including the expiration of any statutory waiting periods)
and the satisfaction (or waiver) of all other conditions to closing provided for
herein. The Closing shall be effective for purposes of this Article 2 as of
12:01 a.m. (Mountain Time) on the Saturday following the Closing Date; however,
the effective time of Closing shall have no effect on the calculations to be
made under the Financial Statements
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BRANCH PURCHASE AGREEMENT
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(which are to be as of the close of business at the Facilities on the Closing
Date). Notwithstanding the foregoing, the Seller may, for any proper business
reason, adjourn the date and time of the Closing, upon written notice to the
Buyer; provided, however, that the Seller shall use all reasonable efforts to
reschedule the Closing to take place at a time agreeable to the Buyer, which
agreement shall not be unreasonably withheld; provided further, however, that
the parties shall agree in any event upon a date for the Closing which shall be
no later than the later of March 31, 1999 and a date six months after the date
the BankAmerica/NationsBank Business Combination is consummated, or such other
date as the Seller and the Buyer shall agree upon in writing.
(b) Conveyances; Payment.
(i) Subject to Section 2.2(g), at the Closing, the Seller
shall execute and/or deliver to the Buyer the following, subject to
Sections 2.2(e), 2.2(f), 3.2(b), 4.3 and the final paragraph of Section
7.2:
(A) One or more special warranty deeds for the Real
Estate, if any, in the form attached hereto as Exhibit C,
subject only to the ad valorem taxes for the year of the
Closing and Permitted Exceptions;
(B) One or more bills of sale in the form attached
hereto as Exhibit D for the Improvements, the Leasehold
Improvements, if any, and the Furniture, Fixtures and
Equipment;
(C) One or more assignments in the form attached
hereto as Exhibit E for the Leases, if any, and the Assumed
Contracts, if any;
(D) The payment to the Buyer required by Section 3.1
in immediately available funds (such payment to be made no
later than 12:00 p.m. (Mountain Time) on the Closing Date);
(E) The Records Agreement;
(F) The officer's certificate required by Section
7.2(b) in the form of Exhibit F hereto;
(G) The Closing Financial Statement;
(H) The original notes or certified copies of the
original notes for all Loans, endorsed without recourse,
assignments of real property security instruments in
recordable form, and all related Loan files;
(I) All collateral security of any nature
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BRANCH PURCHASE AGREEMENT
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whatsoever held by Seller as collateral for any of the Assets;
(J) All documents, contracts, certificates,
instruments, keys and records necessary or appropriate to
transfer the safe deposit and safekeeping businesses, if any,
of the Branches, to be delivered at the close of business on
the Closing Date;
(K) Possession of the Assets and access to and keys
for each of the Facilities, to be delivered at the close of
business on the Closing Date;
(L) A non-foreign affidavit as required by Section
1445 of the IRC;
(M) Such other documents as may be reasonably
required by the Title Company in connection with the issuance
of the Title Policy, including an affidavit as to taxes, liens
and possession;
(N) The Seller shall use its reasonable efforts to
have available for pick-up by the Buyer as soon as practicable
on the day following the Closing Date (I) hard copy (printed)
lists of Assumed Deposits maintained at each Branch, which
lists shall identify each Assumed Deposit by type of account,
with appropriate information regarding the depositor and the
terms of the account and (II) Magnetic Tapes. The Buyer shall
have the responsibility of making and paying for the
appropriate courier arrangements to pick up from the Seller
the items referred to in (I) and (II) above and to deliver the
items referred to in (I) to the appropriate Branches and the
items referred to in (II) to the Buyer's system vendor; and
(O) Copies of written consents to the assignment of
any Assumed Contracts or Leases requiring such consent.
(c) Deliveries by Buyer at the Closing. Subject to Section 2.2(g), at
the Closing, Buyer shall execute and/or deliver to Seller, with such instruments
to be in form and substance satisfactory to Seller and Buyer, the following:
(i) The Liability Assumption Agreement;
(ii) The Records Agreement;
(iii) The officer's certificate required by Section 7.1(b) in
the form of Exhibit G hereto;
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BRANCH PURCHASE AGREEMENT
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(iv) A certificate duly executed by an authorized officer of
Buyer, dated as of the Closing Date, acknowledging receipt of
possession of the Assets; and
(v) Payment to the Seller of the amount of the interest which
would accrue at the Federal Funds Rate in effect on the Closing Date on
the cash payment by the Seller pursuant to Section 2.2(b)(i)(D) (such
payment to be made no later than 12:00 p.m. (Mountain Time) on the
Closing Date).
(d) Proration. The Seller and the Buyer shall each pay one-half of any
recording fees and escrow fees relating to the sale of the Assets and assumption
of the Liabilities, including but not limited to, the assignment of the Leases.
On the Closing Date, (i) all real and personal property taxes and current
installments of special assessments levied or assessed with respect to the Real
Estate, the Improvements, the Leasehold Improvements and the Furniture, Fixtures
and Equipment shall be prorated between the Seller and the Buyer on a daily
basis as of the Closing Date based upon the fiscal year of the appropriate
taxing authority, and (ii) utilities and any other normal maintenance and
operating expenses, if any, relating to the Real Estate, the Leases, the
Improvements, the Leasehold Improvements and the Furniture, Fixtures and
Equipment shall be prorated between the Seller and the Buyer as of the Closing
Date on a daily basis. The Buyer will be responsible for all other special
assessments with respect to any Real Estate or Leased Real Estate, including
so-called standby utility expansion, development, tap-in or pro rata or hook-up
charges, water meter or impact fees, including, but not limited to, assessments
for paving, curb, gutter, sidewalks, and sewer or storm sewers. The Seller will
be entitled to receive a credit at Closing equal to the credit that the Buyer
will receive from any governmental authority, if any, against utility expansion
charges or impact fees as a result of standby or other applicable fees that have
been paid by the Seller.
(e) Contracts. Subject to Section 2.2(g), at the Closing, the Seller
shall assign to the Buyer all of the Seller's right, title and interest in those
equipment leases and service and maintenance contracts, if any, relating to the
operations of one or more of the Facilities which are set forth in Schedule
2.2(e) and which the Buyer indicates in writing to the Seller not later than
thirty (30) Business Days prior to Closing the Buyer wishes to assume
(collectively, the "Assumed Contracts"). The Seller shall not be required to
provide Buyer with any information regarding, or to set forth in Schedule
2.2(e), equipment leases or service and maintenance contracts which it believes
are not legally assignable, and the Seller shall have no liability to the Buyer
as the result of its inability to accomplish assignments thereof. After the date
of this Agreement, the Seller shall not enter into, except with the prior
written
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BRANCH PURCHASE AGREEMENT
<PAGE> 18
consent of the Buyer, any service, maintenance or other contracts, or any
equipment lease, relating to the operations of the Facilities for which the
Buyer shall have any responsibility after the Closing.
(f) Leases. Subject to Section 2.2(g), at the Closing, the Seller shall
assign to the Buyer all of the Seller's right, title and interest in the Leases,
if any, set forth in Schedule 2.2(f); provided, however, that if the Seller
notifies the Buyer not later than thirty (30) Business Days prior to the Closing
Date that one or more such Leases are legally nonassignable without the consent
of one or more third parties, and that such consents have not been obtained,
then, if the Lease permits the Seller to sublease the premises and the related
Leasehold Improvements to the Buyer, the Seller shall sublease such premises and
Leasehold Improvements to Buyer for the maximum term permitted under the Lease,
on substantially the same terms and conditions as the terms and conditions of
the Lease, in which case the consideration payable under Article 3 shall be
adjusted to reflect the Leasehold Improvements which will not be transferred to
the Buyer and the parties shall continue to be obligated to carry out the
provisions of this Agreement as to the remaining Assets of such Facility and as
to the remaining Facilities. If the Lease does not permit the Seller to sublease
the premises and the related Leasehold Improvements to the Buyer, then (i) the
Seller shall not be required to assign or sublease such Lease or Leases at
Closing, (ii) the Seller shall have no liability to the Buyer as the result of
its inability to accomplish such assignment or sublease and (iii) the Seller at
its sole discretion may elect to exercise its right under the final paragraph of
Section 7.2 to exclude the affected Leased Real Estate from the Closing, and the
parties shall continue to be obligated to carry out the provisions of this
Agreement as to the remaining Assets of such Facility and as to the remaining
Facilities, in which case the consideration payable under Article 3 shall be
adjusted to reflect the Leased Real Estate which will not be transferred to the
Buyer.
(g) In the event the parties elect to pursue the Stock Purchase:
(i) the Seller shall transfer, assign and deliver to Newco and shall
cause Newco to accept and assume from the Seller, not later than the Closing
Date, all right, title and interest of the Seller in and to the Assets and
Liabilities;
(ii) following the transfer of the Assets and Liabilities as set forth
in Section 2.2(g)(i), at the Closing the Seller shall sell and the Buyer shall
purchase the Shares;
(iii) each of the items required to be delivered by the Seller under
Sections 2.2(b)(i)(A), (B), (C), (H) and (I) shall be delivered to Newco;
(iv) each of the items required to be delivered by the Buyer under
Section 2.2(c)(i) shall be delivered by Newco;
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BRANCH PURCHASE AGREEMENT
<PAGE> 19
(v) each of the contracts, leases and other agreements to be assigned
by the Seller under Sections 2.2(e) and 2.2(f) shall be assigned to Newco; and
(vi) the Seller shall execute and deliver to the Buyer duly endorsed
certificates, evidencing the Shares, or certificates evidencing the Shares
accompanied by valid stock powers duly endorsed in blank by the Seller.
2.3 Transitional Matters.
(a) Conduct of Business Prior to the Closing. From the date hereof
until the Closing, except as expressly permitted by this Agreement or otherwise
consented to or approved by the Buyer in writing (such consent or approval not
to be unreasonably withheld):
(i) The Seller shall not incur any material liabilities or
material obligations (whether directly or by way of guaranty,
endorsement, surety contract or otherwise) domiciled at any Facility or
for which any Facility may be bound, including, without limitation, any
obligation for borrowed money or evidenced by any note, bond, debenture
or similar instrument, except for deposit liabilities incurred in the
ordinary course of business pursuant to the Seller's customary rate
schedules, and except for other liabilities and obligations incurred in
the ordinary course of business;
(ii) The Seller shall not sell, transfer, mortgage, encumber
or otherwise dispose of any of the Assets except for the disposition of
Assets (other than the Real Estate, Improvements or Leasehold
Improvements) in the ordinary course of business;
(iii) Except as provided in Article 6, the Seller will not
cause the transfer from one or more of the Branches to the Seller's
other operations (except to another Branch) of any deposits of the type
included in the Liabilities; provided, however, that the Seller may
transfer deposits to the Seller's other branches or offices upon
request of the depositors and may transfer to its other branches or
offices other deposits which are not to be transferred to Buyer
pursuant to this Agreement;
(iv) The Seller shall not make any capital commitments with
respect to the Real Estate, the Improvements and the Leasehold
Improvements, except (A) aggregate capital commitments made in the
ordinary course of business not exceeding $25,000 for each
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BRANCH PURCHASE AGREEMENT
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Facility, and (B) emergency repairs required to restore any Facility to
a safe operating condition;
(v) The Seller shall not grant any increase in the rate of
compensation or in the benefits payable or to become payable to any
current officer or employee of the Facilities, or to any current agent
or consultant thereof, over the levels in effect as of the date hereof,
other than any regularly scheduled increases, including bonuses,
contemplated under contracts, policies or programs existing on the date
hereof or under any benefit program generally applicable to the
Seller's employees; provided that the Seller shall retain the right to
hire additional Branch and Office employees at comparable rates of
compensation as necessary for the operation of the Facilities;
(vi) The Seller will maintain the Real Estate, Leased Real
Estate, Improvements, Leasehold Improvements and Furniture, Fixtures
and Equipment substantially in accordance with its normal practices,
and keep such property in its present condition, ordinary wear and tear
excepted;
(vii) The Seller shall operate the Facilities and the
businesses thereof in accordance with Seller's normal practices and
will use reasonable efforts to preserve for the benefit of the Buyer
after the Closing the Facilities' business, goodwill and relationships
(including deposit relationships at the Facilities) with customers and
suppliers; without limiting the generality of the foregoing, Seller
will not, and, following the closing of the BankAmerica/NationsBank
Business Combination, Seller will not permit the New Mexico operations
of NationsBank, N.A., to:
(A) Solicit deposits, deposit-related products or loans
from persons who are depositors at the Facilities,
except in connection with general solicitations or
general advertising not targeted specifically at the
depositors at the Facilities and except non-targeted
solicitations or advertising in the ordinary course
of providing service to individual depositors at the
Facilities who are also at the time of such
solicitation or advertisement depositors of other
branches of Seller or, following the closing of the
BankAmerica/NationsBank Business Combination, of the
New Mexico operations of NationsBank, N.A.;
(B) Solicit persons who are depositors at the Facilities
to change deposit
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accounts at the Facilities to non-deposit-related
investments, except in connection with general
solicitations of individual depositors at the
Facilities in the ordinary course of providing
service to such depositors undertaken without
management direction given from and after the date of
this Agreement;
(C) Introduce at any of the Facilities any new deposit
product or change any feature of any deposit product
except a new product or feature introduced throughout
Seller's offices region-wide in the ordinary course
of business; and
(viii) The Seller shall provide the Buyer reasonable access
during normal business hours to, and the opportunity to review and
inspect, the Real Estate, Improvements, Leased Real Estate, Leasehold
Improvements, Furniture, Fixtures and Equipment, and the Records; shall
furnish to the Buyer such reports and compilations pertaining thereto
as the Buyer shall reasonably request from time to time (provided that
the Seller shall have no obligation to assemble any new reports or
compilations not already prepared in the ordinary course of the
Seller's business); and shall furnish to the Buyer all such other
information pertaining to the Assets and the Liabilities and the
business of the Facilities as the Buyer may reasonably request. In no
event, however, shall the Seller be obligated to incur any fees or
expenses (including accounting or other professional fees) other than
the indirect costs associated with the employment of the Seller's
existing employees in connection with the furnishing of any such
information or reports. In addition, the Seller shall provide the Buyer
reasonable access to the Facilities during the thirty (30) calendar day
period immediately preceding the Closing Date for the purpose of
installing teller terminals and other equipment, provided that (A)
Seller shall not be required to provide such access to any Facility
until after all consents, approvals and authorizations referred to in
Sections 7.1(c) and 7.2(c) hereof have been obtained with respect to
all Facilities and (B) Buyer shall give Seller at least twenty-four
(24) hours advance notice that it wishes to have such access. The Buyer
agrees to cause the installation of such teller terminals and other
equipment to be effected in a manner intended to minimize disruption to
the operations of the Facilities.
(b) Buyer's Access to Facility Premises. The Buyer will indemnify,
defend, and hold Seller harmless for, from and against any and all claims,
damages, costs, liabilities and
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losses (including mechanics' liens) arising out of any entry by Buyer or its
agents, designees or representatives on the Real Estate or Leased Real Estate
for purposes of the review, inspection and installation provided for in Section
2.3(a)(viii) or for any other purpose (other than for the purposes set forth in
Section 4.4(c), which shall be governed by the provisions of that Section).
Without limiting the scope of the foregoing, Buyer also will restore the Real
Estate, Improvements, Leased Real Estate, Leasehold Improvements, Furniture,
Fixtures and Equipment, and Records at its sole cost and expense if one or more
of the transactions contemplated by this Agreement do not close. Until
restoration is complete, Buyer will take all steps necessary to ensure that any
conditions at the Facilities created by any testing, review, inspection,
installation or other actions performed by or for Buyer will not interfere with
the normal operation of the Facilities or create any dangerous, unhealthy,
unsightly or noisy conditions at the Facilities. Buyer shall comply with any
requirements or restrictions contained in the Leases regarding any actions it
takes at the Leased Real Estate, including, without limitation, any requirements
of notice to the landlord (all of which notices at any time prior to Closing
will be made through Seller or Seller's agent). The provisions of this Section
2.3(b) shall survive the Closing or any earlier termination of this Agreement.
(c) Data Processing Conversion. The conversion of the data processing
with respect to the Facilities and the Assets and the Liabilities to be
transferred hereunder will be completed no later than the next Business Day
following the Closing Date. In connection with the data processing conversion,
the Seller and the Buyer shall each pay its own costs and expenses associated
with the data processing conversion and shall bear equally the duties and
responsibilities relating to such conversion. The Seller will use its reasonable
efforts to have available to the Buyer at a mutually agreed date and time after
the Closing Date, a list (which may be in the form of machine-readable data
cartridges) of the Assumed Deposits as of the most recent practicable date,
which list identifies each Assumed Deposit by type, with appropriate information
regarding the depositor and the terms of the Assumed Deposit. The Buyer will
have the responsibility of arranging and paying for courier pick-up of such
information from the Seller's data processor in Milwaukee, Wisconsin and
delivery to the Buyer's data processor. In no event shall the Seller be required
to provide any computer programming, source code or changes in existing file
layouts. The Seller will not migrate (transfer) existing PINs used for ATM cards
to the Buyer.
2.4 Employee Considerations
(a) Buyer shall offer employment as of the day after the Closing Date
to all Employees described on Schedule 1.1(a)(1). Buyer shall have the
opportunity to interview Employees
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described on Schedule 1.1(a)(2) and may offer employment as of the day after the
Closing Date to any such Employee. All Employees shall be offered employment at
base wages and salaries no less favorable than the wages and salaries currently
being paid by Seller to such Employees. To the extent consistent with Buyer's
existing structure for comparable positions and comparable officer titles and
its current policies regarding officer titles, Employees shall be offered
positions with responsibilities and officer titles comparable to those they
currently have with Seller. Unless agreed upon by an Employee, the position
offered by the Buyer will not create a commute that is greater than 35 miles one
way, and if the Employee's current commute is in excess of 35 miles one way, the
position will not increase the Employee's commute.
(b) All Employees who accept employment with Buyer as of the day after
the Closing Date shall be eligible to participate in the employee benefit plans
and other fringe benefits of Buyer on the same basis as such plans and benefits
are offered to employees of Buyer with comparable positions with Buyer, except
as provided in the penultimate sentence of Section 2.4(e). Buyer shall credit
such Employees for their length of service with Seller or its Affiliates for all
purposes under each employee benefit plan and fringe benefit to be provided by
Buyer to such Employees, to the same extent such service was recognized under a
similar plan of Seller, based on information provided by Seller. However, such
service need not be counted for purposes of calculating accrued benefits under a
pension benefit plan, except that in determining the rate of prospective benefit
accrual, service shall be counted where such rate increases with service. For
purposes of this Section 2.4, "employee benefit plans and other fringe benefits"
includes, without limitation, pension and profit sharing plans, retirement and
post retirement welfare benefits, health insurance benefits (medical, dental and
vision), disability, life and accident insurance, sickness benefits, vacation,
employee loans and banking privileges.
(c) If Buyer offers a salary continuation or similar program for
employees unable to work for medical reasons, the Employees who accept
employment with Buyer shall be credited under any program of Buyer with at least
the number of sickness benefit days accrued under Seller's program at the
Closing Date.
(d) Seller agrees to remain responsible for the payment of all benefits
accrued during the period of employment by the Seller under the terms of the
Seller's retirement plans with respect to any Employee. Buyer shall not at any
time assume any liability for the benefits of any active or any terminated,
vested or retired participants in the Seller's retirement plans.
(e) Seller shall be responsible for payments for accrued vacation not
taken by an Employee on or prior to the Closing
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BRANCH PURCHASE AGREEMENT
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Date and for timely payment as required by law of all wages, salaries, bonuses,
if any, and other compensation with respect to service completed on or prior to
the Closing Date. Seller shall offer Employees who accept employment with Buyer
the option to receive cash or to transfer to Buyer their accrued vacation days
or fractions thereof earned but unused while employed by Seller. In the event
any Employee elects to receive cash upon employment by Buyer, Seller shall make
a cash payment to such Employee in accordance with applicable law. In the event
any such Employee elects to have his or her accrued vacation transferred upon
employment by Buyer, Buyer shall give such Employee credit after the Closing
Date for the same number of vacation days or fractions thereof he or she has
accrued with Seller as of the Closing Date. For purposes of this Section 2.4(e),
personal choice days or fractions thereof will be treated as vacation days. In
the event Employees elect to have their accrued vacation carried over to Buyer,
Seller shall pay to Buyer, not later than the date of the Final Financial
Statement, an amount equal to the net cash value of each such Employee's accrued
vacation before payroll deductions. In the calendar year in which the Closing
Date occurs, Employees shall be eligible to earn at least the prorated annual
vacation amount Employees were eligible to earn under Seller's vacation policy.
In subsequent calendar years, Employees will be eligible to earn vacation
according to the schedule specified in Buyer's policy.
(f) Seller shall retain the responsibility for payment of all medical,
dental, vision, health and disability claims incurred by any Employee on or
prior to the Closing Date, and Buyer shall not assume any liability with respect
to such claims. After the Closing Date, all medical, dental, vision, health and
disability claims incurred by Employees in Buyer's employ shall be determined
under Buyer's benefit plans. Buyer agrees that Employees and their eligible
dependents will receive credit for their periods of coverage under Seller's
health or disability plans towards satisfying any preexisting condition clause
in any of Buyer's health or disability plans, provided such Employee or eligible
dependent is enrolled in Seller's plans on the Closing Date. Buyer also agrees
that Employees and their eligible dependents shall receive credit under Buyer's
health care plans for any deductibles paid by such Employee and enrolled
dependents for the current plan year under a health care plan maintained by
Seller.
(g) Seller shall be responsible for providing any Employee whose
"qualifying event," within the meaning of Section 4980B(f) of the IRC, occurs on
or prior to the Closing Date (and such Employee's "qualified beneficiaries"
within the meaning of Section 4980B(f) of the IRC) with the continuation of
group health coverage required by Section 4980B(f) of the IRC ("Continuation
Coverage") under the terms of the health plan maintained by Seller. Buyer shall
be responsible for Continuation Coverage to any Employee in Buyer's employ (and
each Employee's qualified beneficiaries) whose qualifying event occurs after the
Closing Date to the extent required by law.
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(h) Seller agrees that it shall retain, consistent with its normal
employment practices, all liability and obligation, if any (including, without
limitation, the liability and obligation for all wages, salary, vacation pay and
unemployment, medical, dental, vision, health and disability benefits) for those
former employees of the Facilities who retired or terminated employment on or
prior to the Closing Date or who otherwise do not become employees of Buyer.
(i) Effective as of the day after the Closing Date, Buyer shall assume
liability for severance pay and similar obligations payable to any Employee who
accepts employment with Buyer and who is terminated by Buyer on or after the
Closing Date. Such payment shall be made pursuant to Buyer's normal severance
policy and Buyer shall compute severance pay by giving Employees full credit for
all years of service that would have been recognized under Seller's severance
policy. In addition, for an Employee whose job with Buyer is eliminated by a
reduction in force or elimination of position within twelve (12) months of the
Closing Date, Buyer agrees to pay to such Employee the difference, if any,
between the amount of severance pay received by the Employee under Buyer's
severance policy and the amount such Employee would have received upon his or
her separation from the Seller under Seller's severance policy in effect at that
time.
(j) Effective immediately after the Closing Date, the Buyer shall
assume all liability and obligation for, and Seller shall have no further
liability or obligation for, short-term disability benefits, sick pay or salary
continuation to the extent attributable to periods after the Closing Date (and
any medical, dental, vision and health benefits for claims incurred after the
Closing Date) for those Employees who accept employment with the Buyer and who
as of the day after the Closing Date are absent from work due to sickness or
short-term disability.
(k) The Buyer shall make the offers of employment as soon as possible
after all the consents, approvals and authorizations referred to in Sections
7.1(c) and 7.2(c) hereof have been obtained (and in no event more than ten (10)
Business Days after the last of such consents, approvals and authorizations has
been obtained). Buyer will promptly notify Seller of any offer it plans to make
prior to extending such offer, and of acceptance of any such offer by any
Employee. Buyer shall be responsible for advising Employees of the details of
any offers and terms of employment, and answering any questions relating
thereto, but Seller shall be allowed to review and approve (which approval shall
not be unreasonably withheld), prior to its distribution, (i) any communication
with Employees on or prior to the Closing Date, and (ii) any communication with
such Employees after the Closing Date which describes or refers to Seller's
employee benefit plans and
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policies. Buyer shall not at any time have access to Employee personnel files of
Seller.
(l) (i) For a period of twelve (12) months following the Closing
Date, neither the Seller nor any Affiliate shall solicit the employment
(including the solicitation of any transfer of employment) of any
Employee who is employed by Buyer; provided, however, that nothing
herein shall prevent the Seller or its Affiliates from advertising
generally any employment opportunities, or from hiring any Employees
employed by Buyer who seek employment without inducement from the
Seller.
(ii) For a period of twelve (12) months following the Closing
Date, neither the Buyer nor any Affiliate shall solicit the employment
(including the solicitation of any transfer of employment) of any
employees of the Seller; provided, however, that nothing herein shall
prevent the Buyer or its Affiliates from advertising generally any
employment opportunities, or from hiring any employees of the Seller
who seek employment without inducement from the Buyer.
(iii) The parties hereby acknowledge and agree that the
failure of either party to fulfill its covenants and agreements set
forth in this Section 2.4(l) will cause irreparable harm to such other
party for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of
injunctive relief by any court of competent jurisdiction to compel
performance of such party's obligations under this Section 2.4(l) and
to the granting by any such court of the remedy of specific
performance by such party of its obligations hereunder.
2.5 Loans
(a) Loan Lists. As soon as practicable following the date hereof until
thirty (30) calendar days prior to the Closing Date, Seller shall provide to
Buyer within ten (10) Business Days following each month-end a cumulative list
of the Deposit-Related Loans and the Other Loans proposed to be transferred to
Buyer (or Newco in the case of the Stock Purchase) pursuant to Section 2.1
(subject to Buyer's rights as described in Section 2.5(b) to exclude certain of
such loans), prepared as of such month-end (the final Loan list prepared shall
be referred to herein as the "Final Loan List" and the date as of which such
Final Loan List is prepared shall be referred to herein as the "Loan Cut-off
Date").
(b) Buyer's Right to Exclude Loans Prior to Closing Date.
Notwithstanding anything in this Agreement to the contrary, until fifteen (15)
calendar days prior to the Closing Date, the Buyer shall have the right to
exclude from the transaction any Loan on the Final Loan List, which excluded
loan shall not be
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transferred to the Buyer pursuant to Section 2.1. The Buyer's right to exclude
such loans shall be exercisable by the Buyer giving written notice to the Seller
at any time until and including the fifteenth (15th) calendar day prior to the
Closing Date.
(c) Deposit-Related Loans Originated After Loan Cut-off Date. Any
Deposit-Related Loan originated by Seller on or after the Loan Cut-off Date and
prior to the Closing Date in the ordinary course of Seller's business at the
Branches and the Offices shall be transferred to Buyer (or Newco in the case of
the Stock Purchase) at the Closing. As soon as practicable following the
Closing, but in any event no later than ten (10) Business Days thereafter, the
Seller shall provide to the Buyer a schedule of the Loans transferred to the
Buyer at the Closing, which schedule shall become Schedule 2.5(c) hereto upon
such delivery to Buyer.
(d) Other Loans Originated After Loan Cut-off Date.
(i) Any Other Loan originated by Seller on or after the Loan Cut-off
Date and prior to the Closing Date in the ordinary course of Seller's
business at the Branches and the Offices (collectively, the
"Supplemental Loans") shall, subject to Buyer's rights as described in
this Section 2.5(d) to exclude certain of such loans, be transferred to
Buyer at a closing to be held as soon as practicable following the
Closing Date, but in any event no later than sixty (60) calendar days
following the Closing Date (the "Supplemental Loan Closing"). The
Supplemental Loan Closing shall occur on the same date as the payment
required by Section 3.2(a)(i).
(ii) As soon as practicable following the Closing, but in any event no
later than fifteen (15) Business Days thereafter, the Seller shall
provide to the Buyer a schedule of the Supplemental Loans to be
transferred to the Buyer pursuant to this Section 2.5(d), subject to
the Buyer's rights as described herein to exclude any of the
Supplemental Loans. Notwithstanding anything in this Agreement to the
contrary, from and after the date on which Buyer receives such
schedule, until ten (10) calendar days prior to the Supplemental Loan
Closing, (A) the Seller shall provide the Buyer reasonable access
during normal business hours to, and the opportunity to review and
inspect, the Records relating to the Supplemental Loans; and (B) the
Buyer shall have the right to exclude from the transaction any such
Supplemental Loan. If the Buyer exercises its right to exclude such
Supplemental Loan, such excluded loan shall not be transferred to the
Buyer at the Supplemental Loan Closing. The Buyer's right to exclude
any Supplemental Loans shall be exercisable by the Buyer giving written
notice to the Seller at any time until and including the tenth (10th)
calendar day prior to the Supplemental Loan Closing.
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Following the expiration of such ten (10) calendar day period, the
Seller shall provide to the Buyer a schedule of the Supplemental Loans
to be transferred to Buyer at the Supplemental Loan Closing, which
schedule shall become Schedule 2.5(d) hereto upon such delivery to
Buyer. The Final Financial Statement shall be adjusted to reflect the
Supplemental Loans transferred to Buyer pursuant to this Section
2.5(d).
(iii) At the Supplemental Loan Closing, the Seller shall execute and/or
deliver to the Buyer (A) the original notes or certified copies of the
original notes for all Supplemental Loans transferred to Buyer pursuant
to this Section 2.5(d), endorsed without recourse, assignments of real
property security instruments in recordable form and all related
Supplemental Loan files; and (B) an officer's certificate of Seller
certifying to the accuracy, in all material respects, of the
representations and warranties in Section 5.1(h) with respect to the
Supplemental Loans transferred to Buyer pursuant to this Section
2.5(d).
ARTICLE 33
Price and Adjustments
3.1 Price. The Seller agrees that in the event the Initial Base Amount
(as hereinafter defined) is less than the sum of (i) the amount of the Assumed
Deposits and (ii) the amount of the Accrued Expenses, the Seller shall transfer
to the Buyer cash in the amount equal to the deficit. The Buyer agrees that in
the event the Initial Base Amount is greater than the sum of (i) the amount of
the Assumed Deposits and (ii) the amount of the Accrued Expenses, the Buyer
shall transfer to the Seller cash in an amount equal to such excess.
Calculations and payments pursuant to this Section 3.1 shall be as of the date
and time of the Closing Financial Statement. The "Initial Base Amount" shall be
equal to the sum of (i) the amount of Cash on Hand, (ii) the Market Value of
$5,085,000.00 for the Real Estate and the Improvements (which amount is
allocated among the Facilities as listed on Schedule 3.1(a)), (iii) the amount
of $349,529.66 for the Leasehold Improvements (which amount, if any, is
allocated among the Facilities as listed on Schedule 3.1(b)), (iv) the Market
Value of $790,960.00 for the Furniture, Fixtures and Equipment (which amount is
allocated as listed on Schedule 1.1(b)), (v) the amount of Prepaid Expenses,
(vi) the amount of the Overdrafts, (vii) the amount of any fees, charges or
accrued interest receivable on such Overdrafts, (viii) the unpaid principal
amount of the Loans and the amount of accrued interest receivable on all such
Loans, net of loan loss reserve, and (ix) the amount of the Purchase Premium.
3.2 Adjustments. Subject to the provisions of Section 4.4 and Article
9, the assignments, transfers, acceptances and assumptions of the Assets and the
Liabilities
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and the payment of the amounts due in respect thereof in accordance with
Sections 2.2 and 3.1 shall be final and without recourse and not subject to any
claim for reimbursement, repayment, rescission or avoidance; provided, however,
that:
(a) The following adjustments shall be made:
(i) As soon as practicable after the Closing Date, but in no
event later than sixty (60) calendar days thereafter, the Seller shall
deliver the Final Financial Statement to the Buyer. Subject to the
Seller's and Buyer's rights of indemnification pursuant to Section 4.4
and Article 9, the Final Financial Statement shall become final and
binding on the Buyer and the Seller ten (10) calendar days after its
delivery to the Buyer, unless the Buyer gives written notice to the
Seller of its disagreement with respect to any item included in such
Final Financial Statement. The Seller and the Buyer shall use their
respective reasonable efforts to resolve the disagreement during the
ten (10) calendar day period following receipt by the Seller of the
notice. If the disagreement is not resolved during such ten (10)
calendar day period, the parties shall follow the procedures set forth
in Section 9.4 to resolve such dispute and such Final Financial
Statement shall be modified by any such resolution, whereupon the Final
Financial Statement shall become final and binding. When the Final
Financial Statement becomes final and binding, the Seller shall pay the
Buyer or the Buyer shall pay the Seller, as appropriate, the difference
between the amount paid at the Closing and the amount calculated on the
Final Financial Statement, plus interest accrued from the Closing Date
at the Federal Funds Rate in effect on the Closing Date. In the event
such amounts are not paid by Seller or Buyer, as appropriate, within
three (3) Business Days from the date the Final Financial Statement
becomes final and binding, then such amounts shall accrue interest
until paid at the Federal Funds Rate in effect on the Closing Date plus
five percent (5%) per annum, but in no event in excess of the highest
rate permitted by applicable law.
(b) If any non-material Asset (materiality to be determined by Seller
in good faith) shall not have been assigned to the Buyer (or Newco in the case
of the Stock Purchase) at the Closing, then the Seller shall use its reasonable
efforts to assign such Asset to the Buyer as soon as possible after the Closing
Date but in any event no later than on the Settlement Date. In the event the
Seller for any reason is unable to assign any such Asset to the Buyer on or
prior to the Settlement Date, then the Seller shall no longer have any
obligation to assign such Asset to the Buyer and the Seller shall refund to the
Buyer the value of such Asset as reflected on the Closing Financial Statement
together with interest on such amount accrued from the Closing Date through the
date of such refund at the Federal Funds Rate in effect on the Closing Date;
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(c) All operating expenses and fees accrued or prepaid prior to the
Closing Date, including, without limitation, wages, salaries, rents, Bank
Insurance Fund ("BIF") premiums, utility payments, telephone charges,
maintenance contract payments, personal property taxes, non-delinquent real
property taxes and assessments relating to the Assets and the Liabilities
transferred at the Closing, but excluding fees for use of safe deposit boxes,
shall be prorated between the parties as of the Closing Date. With respect to
the BIF premiums, the proration shall be on the basis set forth in Section
3.2(d). To the extent that the Seller has paid expenses that are expenses
allocable to the Buyer pursuant to this Section 3.2(c), such expenses shall
appear as an asset on the Financial Statements. To the extent that expenses have
been accrued and not paid by the Seller prior to the Closing Date, such expenses
shall appear as a liability on the Financial Statements;
(d) With respect to the proration of BIF premiums, Buyer shall
reimburse Seller for the amount of any BIF assessments that Seller is required
to pay for periods in which the Assumed Deposits are included in the Seller's
deposit insurance assessment base but during which periods Buyer has liability
for the Assumed Deposits. The amount of such reimbursement will be included as a
Prepaid Expense on the Financial Statements;
(e) All loan commitment fees and any other fees accrued by or paid to
the Seller prior to the Closing Date related to the loan commitments included as
Loans pursuant to this Agreement and to any periodic fees paid or payable to
Seller with respect to the Loans shall be pro-rated between the Buyer and the
Seller. To the extent that the Seller has received fees that are fees allocable
to the period on and after the Closing Date, such fees shall appear as a
liability on the Financial Statements. To the extent that such fees allocable to
a period prior to the Closing Date have not been paid to Seller prior to the
Closing Date, such fees shall appear as an asset on the Financial Statements;
(f) As soon as practicable after the Closing Date, the Seller will
provide to the Buyer a report of customer data for the Assumed Deposits showing
the names, addresses, tax identification numbers (where available from the
Seller's records) and deposit balances of each and all of the customers with
Assumed Deposits as of such date; the customer data shall include the signature
cards in the possession of Seller for all Assumed Deposits and a list of
Accounts subject as of the Closing Date to annual Taxpayer Identification Number
solicitation by Seller in the normal course of its business;
(g) With respect to IRA Deposits, the Seller will use reasonable
efforts and will cooperate with the Buyer, both
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<PAGE> 31
before and after the Closing, in taking whatever actions are reasonably
necessary to accomplish either the appointment of the Buyer as successor
custodian, the adoption of Buyer's form of IRA plan (or such plan of an
Affiliate of Buyer), or the delegation to the Buyer (or an Affiliate of the
Buyer) of the Seller's authority and responsibility as custodian of all such IRA
Deposits, including but not limited to, sending to the depositors thereof
appropriate notices, and filing any appropriate applications with applicable
regulatory authorities. If any such delegation is made to the Buyer (or such
Affiliate), the Buyer (or such Affiliate) will perform all of the duties so
delegated and comply with the terms of the Seller's agreement with the depositor
of the IRA Deposits affected thereby;
(h) With respect to Deposits which are Keogh Accounts, the Seller will
use reasonable efforts and cooperate with the Buyer to invite trustees of Keogh
plans to appoint the Buyer (or an Affiliate of the Buyer) as successor custodian
of each Keogh Account and related Deposit thereof, and to adopt the Buyer's (or
such Affiliate's) form of Keogh Master Plan as a successor to that of the
Seller. The Buyer (or such Affiliate) will assume no Deposits which are Keogh
Accounts unless the Buyer (or such Affiliate) has received the documents
necessary for such assumption or transfer at or before the Closing. With respect
to any depositors who do not transfer such accounts to the Buyer's (or such
Affiliate's) form of Keogh Master Plan, the Seller will use reasonable efforts
in order to enable the Buyer (or such Affiliate) to retain such Keogh Accounts
at the Branches at which such accounts were maintained;
(i) Any items that were credited for deposit to or cashed against an
Assumed Deposit prior to the Closing and are returned unpaid (each, an
"RI") within 60 days after the Closing Date will be handled as follows:
(A) Within one (1) Business Day after receipt of any RI by the
Seller, the Seller will fax to the Buyer a list reflecting the
amount of such RI, the date of deposit and depositor's account
number (if available) and the Seller will forward a
consolidated collection request with the original RIs (a
"Collection Advice"), to the Buyer via Seller's courier, at
Buyer's expense.
(B) Upon receipt of a Collection Advice, the Buyer will place
holds on the respective customers' deposit accounts with the
Buyer ("Customer Account") in an amount not less than the
amount of the RI and take any actions necessary to ensure that
such deposits are not withdrawn.
(C) Within one (1) Business Day after receipt of such
Collection Advice and original RI, the Buyer will debit the
available Customer Account and/or overdraw
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the Customer Account and return the paid collection request to
the Seller. If there are not sufficient funds in the Customer
Account because of the Buyer's failure to honor holds placed
on such Customer Account, the Buyer shall repay the amount of
the RI to the Seller. RIs that overdraw an account balance
shall be held by the Buyer unless requested by the Seller
during the collection process. The Buyer will release RIs to
depositors only upon receipt of sufficient good funds to cover
any deficient balances.
(D) A list reflecting name, address, phone number and amount
of accounts overdrawn $500 or more, resulting from an RI
forwarded by the Seller being charged to the Customer Account,
shall be faxed to the Seller, Attention: Loss Prevention
Manager, fax number 602-431-7156, on the date such item is
charged back.
(E) The Seller will be responsible for collecting overdrawn
balances of RIs over $500. The Buyer will cooperate with the
Seller with respect to providing information or records that
may be needed to pursue resolution of amounts due to the
Seller. The Buyer will be responsible for reasonable
collection efforts on overdrawn balances of RIs of $500 or
less.
(F) After a period of 60 days from the date a Customer Account
is charged for an RI and becomes overdrawn, the Buyer will
submit a collection request to the Seller for any remaining
balances that could not be collected. The original RIs
received shall be returned to the Seller with the collection
letter.
(G) Customer disputes regarding Buyer's rights to debit
Customer Accounts will be reviewed with Seller's Loss
Prevention Manager for resolution. The Buyer agrees to
cooperate with the Seller in debiting Customer Accounts for
RIs, except in such cases when Seller's negligence is the
basis of a defense by the customer to Buyer's right to debit
the Assumed Deposit(s).
(H) Claims involving checks paid prior to Closing, drawn
against Accounts sold, which are subsequently disputed to be
forged or otherwise unauthorized, shall be referred to
Seller's Loss Prevention Manager for resolution.
(ii) Any RIs that are returned unpaid more than sixty (60) calendar
days after the Closing Date will be the responsibility of the Buyer,
except that Seller shall be responsible, for a period of eighteen (18)
months after the Closing Date, for RIs when such items are one of the
following: checks drawn on the United States Treasury,
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checks issued by state governments or municipalities or checks returned
for endorsement irregularities; provided that the Buyer shall cooperate
with Seller as provided in subsection 3.2(i)(i) above to obtain
collection of such items from the applicable Customer Account.
(j) As soon as practicable, but in any event no later than five (5)
calendar days after the Closing Date, the Buyer shall mail to each depositor in
respect of a Transaction Account (included in the Assumed Deposits) a letter
approved in writing by the Seller requesting that such depositor promptly cease
writing checks or drafts on the Seller's check stock against such Transaction
Account. At such time as the Buyer mails each such notice to each such
depositor, the Buyer shall also forward to each such depositor new checks on the
Buyer's stock, which checks the depositor may draw upon the Buyer for the
purpose of effecting transactions with respect to such Transaction Accounts.
The parties hereto shall use reasonable efforts to develop procedures
that cause checks drawn on the Seller's form of check stock against Transaction
Accounts that are received after the Closing Date to be cleared through the
Buyer's then current clearing procedures.
During the ninety (90) calendar day period following the Closing Date,
if it is not possible to clear Transaction Account drafts through the Buyer's
then current clearing procedures after the Closing Date, the Seller shall
forward to the Buyer no later than the next Business Day after receipt thereof
all such Transaction Account drafts drawn against Assumed Deposit Accounts. The
Seller shall have no obligation to pay such Transaction Account drafts. Upon the
expiration of such ninety (90) calendar day period, the Seller shall cease
forwarding drafts against Transaction Accounts transferred on the Closing Date
and shall instead return them to the originators marked "Refer to Maker-Branch
Sold." The Buyer will compensate the Seller for processing of drafts as
described in this Section 3.2(j) according to the compensation arrangement set
forth in Section 4.6;
(k) Collection of Overdrafts, if any such collection is effected by the
Buyer in its sole discretion, shall be the sole responsibility of the Buyer. At
the Buyer's request, the Seller will use reasonable efforts to cooperate to
assist in collection of Overdrafts, but the Seller shall not be required to
incur any fees or expenses (including legal or other professional fees) other
than the indirect costs associated with the employment of Seller's existing
employees in connection with rendering such assistance.
(l) In connection with the transfer of the Loans, Seller and Buyer
agree as follows:
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(i) The parties will cooperate and use their reasonable
efforts to cause Buyer to become the beneficiary of credit life,
accident and health, vendor's single interest premium or similar
insurance purchased by or on behalf of customers on the Loans. For the
duration of such insurance, Seller and Buyer agree to cooperate in good
faith to develop a mutually satisfactory method by which the issuer of
such insurance will make rebate payments to and satisfy claims of the
holders of such certificates of insurance after the Closing Date.
(ii) Each of Buyer and Seller will use their reasonable
efforts to comply with all notice and reporting requirements of the
Loan documents or of any law or regulation with respect to the transfer
of such Loans.
(iii) Within thirty (30) calendar days after the Closing Date
or the Supplemental Loan Closing (as appropriate), Buyer will, at its
expense, issue new coupon books or similar payment notices for payment
of Loans with instructions to use Buyer's coupons or statements and to
destroy unused coupons furnished by Seller.
(iv) For a period of sixty (60) calendar days after the
Closing Date or the Supplemental Loan Closing (as appropriate), within
five (5) Business Days after receipt by Seller of any check or money
order made payable to Seller representing payment on a Loan, such item
shall be settled in accordance with mutual settlement procedures to be
agreed between Seller and Buyer as soon as practicable following the
date hereof. If the item is returned unpaid, however, Seller shall
promptly notify Buyer of such item's return and shall forward the
original of such item to Buyer. Within three (3) Business Days after
receipt of such returned item, Buyer shall issue and forward a
cashier's check or wire transfer to Seller in the amount of such item,
and Buyer shall be responsible for any further efforts to collect such
item.
(v) If the balance due on any Loan has been reduced by Seller
as a result of a payment by check received prior to the Closing Date or
the Supplemental Loan Closing (as appropriate), which item is returned
after the Closing Date or the Supplemental Loan Closing (as
appropriate), the asset value representing the Loan transferred shall
be correspondingly increased and an amount in cash equal to such
increase shall be paid by Buyer to Seller promptly upon demand. Such
amounts shall be debited or credited, where applicable, from Buyer's
correspondent bank account maintained with Seller.
ARTICLE 44
Additional Covenants
4.1 Seller's Covenants. The Seller (and, to the extent specifically
indicated below, the Buyer) agrees:
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(a) To use reasonable efforts to sign and deliver to the Buyer such
additional agreements and other documents, and to do such other acts and things,
as may be required to complete the transactions contemplated by this Agreement.
(b) To reasonably cooperate with the Buyer in obtaining all
governmental and regulatory consents, approvals, licenses, waivers and the like
required to be fulfilled or obtained for the completion of the transactions
contemplated by this Agreement.
(c) To deliver to the Buyer those Records relating solely to the Assets
and the Liabilities and being easily segregable from the Seller's other records,
as soon as practicable after the Closing and to store the other books, records
and accounts of the Facilities relating to the Seller's former operation of the
Facilities for the applicable period required by law.
(d) Until Closing or the earlier termination of this Agreement, to
cause the business of the Facilities to be conducted in accordance with Section
2.3 above.
(e) To remove all signage from the Facilities at the expense of the
Seller on or before the Closing Date, it being understood that the Buyer shall
be responsible for installation of its signage at its sole expense on or after
the Closing Date.
(f) As soon as practicable after the receipt of all regulatory
approvals required by Sections 7.1(c) and 7.2(c) with respect to all Facilities,
and no later than thirty (30) calendar days prior to the Closing Date (unless
earlier required by law, regulation or regulatory policy), each of the Seller
and the Buyer shall provide, or join in providing where appropriate, all
notices, separately as to each Branch, to holders of Deposits, borrowers under
the Loans and other persons that the Seller or the Buyer, as the case may be, is
required to give by any regulatory authority having jurisdiction or under
applicable law or the terms of any other agreement between the Seller and any
customer in connection with the transactions contemplated hereby. A party
proposing to send or publish any notice or communication pursuant to this
Section 4.1(f) shall furnish to the other party a copy of the proposed form of
such notice or communication as soon as practicable in advance of the proposed
date of the first mailing, posting, or other dissemination thereof to customers,
and shall not unreasonably refuse to amend such notice to incorporate any
changes that the other such party proposes as necessary to comply with
applicable statutes, rules, regulations or requirements of any regulatory
authority having jurisdiction. All costs and expenses of any notice or
communication sent or published by the Buyer or the Seller
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shall be the responsibility of the party sending such notice or communication.
All out-of-pocket costs and expenses of any joint notice or communication which
Buyer or Seller pays to a third party vendor shall be shared equally by the
Seller and the Buyer. Each party shall bear the costs and expenses of its own
employees or agents engaged in any joint notice or communication.
(g) The Seller will use reasonable efforts to transfer to the Buyer on
or as soon as practicable after the Closing Date all of those automated clearing
house and fed wire direct deposit arrangements which are tied by agreement or
other standing arrangement to Assumed Deposits. For a period of ninety (90)
calendar days after the Closing Date, in the case of automated clearing house
direct deposits to Assumed Deposits, and thirty (30) calendar days after the
Closing Date, in the case of fed wire direct deposits to Assumed Deposits (each,
a "Direct Deposit Cut-off Date"), the Seller will, no later than the next
Business Day following the date of receipt thereof, remit and transfer to the
Buyer all direct deposits intended for Accounts which are Assumed Deposits.
After the applicable Direct Deposit Cut-off Date, the Seller may discontinue
accepting and forwarding automated clearing house and fed wire entries and funds
and return such direct deposits to the originators. The Seller shall not be
liable for any account overdrafts that may thereby be created or for any other
matter. The Seller will not be obligated to accept new direct deposit
arrangements on any Account after the date that all regulatory approvals
required under Sections 7.1(c) and 7.2(c) (except for statutory waiting periods)
have been received, nor will the Seller be obligated to remit or transfer with
respect to any direct deposit arrangements other than by electronic
transmission. At the time of each Direct Deposit Cut-off Date, the Buyer will
provide automated clearing house originators with account numbers and conversion
tapes relating to Assumed Deposits.
(h) As soon as practicable after the receipt of all regulatory
approvals required by Sections 7.1(c) and 7.2(c) with respect to all Facilities
(except for statutory waiting periods), and after the notice provided in Section
4.1(f), the Buyer will send appropriate notice to all holders of Deposits which
are to be assumed by the Buyer at the Closing the terms of which provide for
direct debit of such accounts by third parties ("Direct Debit Accounts"),
instructing such customers concerning transfer of customer direct debit
authorizations from the Seller to Buyer. The Seller shall cooperate in
soliciting the transfer of such authorizations. Such notice shall be in a form
agreed to by the parties. For a period of ninety (90) calendar days following
the Closing Date, the Seller will, on the Business Day following the date of
receipt thereof, forward to the Buyer all direct debits on Direct Debit Accounts
and will give the Buyer a daily accounting by electronic transmission of such
debits to the Buyer's clearing account. Thereafter, the Seller may discontinue
forwarding
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such entries and return them to the originators marked "Refer to Maker--Branch
Sold." The Seller will not be obligated to accept new direct debit arrangements
on any Account after the date that all regulatory approvals required under
Sections 7.1(c) and 7.2(c) (except for statutory waiting periods) have been
received, nor will the Seller be obligated to forward such direct debits or give
an accounting thereof other than by electronic transmission. At the time of the
Closing Date, the Buyer will provide automated clearing house originators of
such direct debits with account numbers and conversion tapes.
(i) In addition to the requirements and procedures set forth in
Sections 4.1(g) and 4.1(h), the Buyer shall, commencing on the first Business
Day following the Closing Date, deliver to the originators of the direct
deposits of Assumed Deposits and the originators of direct debits of Assumed
Deposits specified in such sections, notices of change instructing such
originators to change the routing transit number for such deposits and debits
from the Seller's routing transit number to the Buyer's routing transit number.
(j) From and after the Closing, the Seller will not:
(i) use any of the information contained in the Records for any
purpose other than for the purpose of enforcing rights and
performing obligations arising under this Agreement; and
(ii) for a period of eighteen (18) months following the Closing
Date, conduct or, following the closing of the
BankAmerica/NationsBank Business Combination, permit the New
Mexico operations of NationsBank, N.A., to conduct, any
solicitation of depositors of the Assumed Deposits, except in
connection with general solicitations or general advertising
not targeted specifically at the depositors of the Assumed
Deposits.
4.2 Buyer's Covenants. The Buyer agrees:
(a) To use reasonable efforts to sign and deliver to the Seller such
additional agreements and other documents, and to do such other acts and
things, as may be required to complete the transactions contemplated by this
Agreement.
(b) To use its best efforts to fulfill all governmental, regulatory and
other requirements (including, without limitation, obtaining the approval of all
New Mexico and federal bank or other financial institution regulatory agencies
and any other governmental entity having jurisdiction over the Buyer's
acquisition of the Facilities or the Buyer) required to be fulfilled by the
Buyer for the completion of the transactions contemplated by this Agreement, and
to take the initial drafting responsibility therefor. The Seller shall have the
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right to review and comment upon all applications to, and filings with,
governmental and regulatory agencies and entities made for the above purpose,
prior to their filing; provided that, the Seller shall have no responsibility
for any such application or filing. Without limiting the generality of the
foregoing, Buyer agrees to file all required regulatory applications within
thirty (30) calendar days after the date of this Agreement.
(c) To pay, honor, discharge and perform all liabilities and
obligations in respect of the Assets and the Liabilities and any other
liabilities of the Facilities arising, accruing or subsisting after the Closing
which the Buyer is obligated to assume pursuant to this Agreement, subject to
applicable indemnification rights of the Buyer.
(d) Not to use, keep or claim any registered or unregistered trademark,
trade name, service mark or other identification commonly associated with the
Seller, or any sign, display or similar material of the Seller or any banking or
other forms, stationery, passbooks, checks, traveler's checks, cashier's checks,
manager's checks or similar banking material of the Seller or bearing the
Seller's name or other similar marks or identification (except to the extent
necessary to conduct business operations, and then only if the Seller's name,
marks or identification are obliterated from such material, and such material is
clearly identified as that of the Buyer), or any proprietary material of the
Seller, including, without limitation, operating manuals, training manuals and
public relations, explanatory or advertising materials.
(e) As of the Closing Date, to become the "holder," as that term is
defined in New Mexico's Uniform Unclaimed Property Act, Sections 7-8-1 through
7-8-40 of the NMSA, of all Assumed Deposits and safe deposit boxes which the
Buyer assumes under this Agreement. The Buyer will be responsible for the
escheat of any property for which it becomes the holder and which becomes
abandoned during the calendar year in which the Closing occurs.
(f) On and following the Closing Date, to honor and comply with the
terms of all holds, levies, garnishments, tax liens, orders, pledges,
guardianship agreements and other restrictions that are in effect on the Assumed
Deposits as of the Closing Date.
(g) On and following the Closing Date, to assume and discharge, in the
usual course of banking business, Seller's obligations with respect to the safe
deposit box business at the Branches in accordance with the terms and conditions
of contracts or rental agreements related to such business, and to maintain all
records related to such agreements and facilities necessary for the use of such
safe deposit boxes by persons entitled to use them.
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(h) To continue to operate each of the Branches at its current location
for a period of at least ninety (90) calendar days after the Closing Date
(unless Buyer has provided Seller written confirmation from Buyer's appropriate
banking regulatory agency that any earlier change in location by Buyer would be
exempt from the notice and other requirements of 12 U.S.C. Sec. 1831r-1).
(i) To obtain approval of this Agreement and the transactions
contemplated hereby by the requisite vote or consent of the holders of
outstanding securities of the Buyer if such approval is required by applicable
law, contract, the Buyer's Articles of Association or Bylaws, or otherwise.
(j) Not to take any actions that will injure Seller's present business
relations with its depositors, customers and others, and not, either before or
after the Closing, to commit any act, or in any way assist others to commit any
act, that injures Seller or the business heretofore conducted by Seller, and,
without limiting the generality of the foregoing, not to divulge any
confidential information or make available to any others any documents, files or
other papers concerning the business or financial affairs of Seller.
4.3 Consents. The Seller shall use its reasonable efforts to obtain any
nongovernmental consents required for the transfer or assignment of the Assets
and Liabilities to Buyer (or Newco in the case of the Stock Purchase) pursuant
to this Agreement, including (a) Leases, if any, and (b) Assumed Contracts, if
any; provided, however, that (i) the Seller shall not be required to pay any
additional compensation or fee to any person or entity to obtain any such
consent, (ii) the Buyer agrees that it shall provide reasonable assistance to
the Seller to obtain such consents, and (iii) the Seller shall be entitled to
rely on the provisions of Sections 2.2(e) and 2.2(f) and the final paragraph of
Section 7.2 if Seller does not obtain one or more such consents.
4.4 Environmental Matters.
(a) The provisions of this Section 4.4 shall exclusively govern the
rights and obligations of the Seller and Buyer with regard to Hazardous
Substances.
(b) Seller has delivered to the Buyer copies of a Phase I Environmental
Site Assessment ("Phase I") and an Asbestos Survey ("Asbestos Survey") regarding
each tract of Real Estate; provided that Seller has not delivered an Asbestos
Survey regarding any Branch or Office where construction of all Improvements was
completed after December 31, 1980. In addition, Seller has delivered to the
Buyer an Asbestos Survey for each of the Northtowne, Rio Bravo and Ladera
Branches. The dates of such Phase I's and Asbestos Surveys and the names of the
persons by whom they were prepared are listed on Schedule
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4.4(b). The cost of such Phase I's and Asbestos Surveys shall be borne by the
Seller.
The Buyer acknowledges and agrees that:
(i) Seller is furnishing copies of the Phase I's and Asbestos
Surveys to Buyer for informational purposes only and without
representation or warranty as to the accuracy or completeness of the
contents of such materials except as otherwise provided in this
Section 4.4;
(ii) Buyer will not rely on the Phase I's or Asbestos Surveys
and will conduct its own due diligence on the matters contained in the
documents; and
(iii) Buyer is not purchasing the Real Estate, Improvements
and Leasehold Improvements and accepting assignment of the Leases in
reliance upon any representations or warranties of any kind whatsoever
made by the Seller (or any representatives, agents or employees of the
Seller) except those made or contained in this Agreement.
Buyer and Seller acknowledge and agree that, prior to Closing, Buyer
will have the opportunity to independently and personally inspect the Real
Estate, Improvements, Leased Real Estate and Leasehold Improvements (sometimes
referred to collectively in this Section 4.4 as the "Subject Assets"). Buyer
further acknowledges and agrees that Buyer has entered into this Agreement based
upon this right of inspection. It is expressly agreed and understood that Seller
has made no representation or warranty as to the condition of any of the Subject
Assets or their suitability for any particular purpose except as expressly set
forth in this Agreement. Buyer agrees that the Real Estate, Improvements and
Leasehold Improvements are to be sold to and purchased by Buyer, and the Leases
assigned to and accepted by Buyer, "AS IS" AND "WHERE IS," WITH ALL FAULTS, IF
ANY, INCLUDING, WITHOUT LIMITATION, THE ENVIRONMENTAL CONDITION OF THE PROPERTY,
AND WITHOUT ANY WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, except as expressly set
forth in this Agreement.
(c) During the thirty (30) Business Day period starting on the date of
this Agreement ("Environmental Due Diligence Period"), Buyer shall have the
right to conduct environmental assessments, investigations, reviews or testing
performed by Buyer or any third party or consultant engaged by Buyer to conduct
such study (collectively, "Environmental Assessments") of the Subject Assets,
and Buyer and Buyer's representatives, agents and designees will have the right,
at reasonable times and upon reasonable notice to Seller (which notice must
describe the scope of the planned testing and investigations) to enter upon the
Real Estate and Leased Real Estate subject to the terms and conditions set forth
in Exhibit H.
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(d) During the Environmental Due Diligence Period, Buyer may notify
Seller in writing of any objections relating to any aspects of the Subject
Assets relating to one or more Facilities (the "Affected Facilities") pertaining
to presence of any Hazardous Substances, compliance with all applicable
Environmental Laws, any matters disclosed in the Phase I's or Asbestos Surveys,
any matters disclosed by Seller, or any matters disclosed in any Environmental
Assessments.
(i) In the event that Buyer fails to so notify Seller of any
such objections, Buyer shall be deemed to have approved such items.
(ii) In the event, however, that Buyer notifies Seller in
writing and within the Environmental Due Diligence Period of any such
objections, the parties will have a period of ten (10) Business Days
to agree upon a resolution of the objection(s). If the parties cannot
agree within such period of ten (10) Business Days, then within five
(5) Business Days after the expiration of such period either party may
initiate a proceeding to resolve such objections pursuant to the
procedures set forth in Section 9.4 of this Agreement; provided,
however, that within such five (5) Business Days the Seller in its
sole discretion may, in a case where Buyer has notified Seller of
objections with respect to Real Estate or Improvements, elect to
remove the Real Estate and Improvements relating to the Affected
Facilities from the Assets to be sold and transferred to Buyer, in
which event (A) the consideration payable under Article 3 shall
automatically be adjusted accordingly and (B) commencing on the
Closing Date Buyer shall lease the Real Estate and Improvements
relating to the Affected Facilities from Seller for a period of at
least six (6) months, at a rental rate and on terms to be agreed upon
by Buyer and Seller, which rate and terms shall be commercially
reasonable and comparable to those for similar properties in the
vicinities of the Affected Facilities, and provided further, that if
Buyer and Seller do not agree upon the rental rate or one or more such
terms within an additional ten (10) Business Days after expiration of
the five (5) Business Day period referred to above, then the
determination of such rate and/or term(s) shall be immediately
submitted to arbitration pursuant to the procedures set forth in
Section 9.4 of this Agreement. In a case where Buyer has notified
Seller of objections with respect to Leased Real Estate or Leasehold
Improvements, then if neither party has initiated a proceeding to
resolve such objections pursuant to the procedures set forth in
Section 9.4 of this Agreement within the five (5) Business Days
referred to in the immediately preceding sentence, then the Seller in
its sole
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discretion may elect to exercise its right under the final paragraph of
Section 7.2 to exclude the Affected Facility (but not the other Assets
and Liabilities related thereto) from the Closing.
(iii) If this Agreement is not amended or otherwise modified
pursuant to the provisions of the foregoing Section 4.4(d)(ii), Buyer
shall be deemed to have waived its objections and this Agreement will
continue in full force and effect.
(e) (i) Subject to Subsection 4.4(e)(iii) and Article 9 below,
if there are any third party claims against Buyer that arise out of any
Hazardous Substances that became located in, on or under Real Estate
during Seller's ownership of the Real Estate, or in, on or under Leased
Real Estate during the term of Seller's Lease, Seller will (to the
extent the Seller is liable for such Hazardous Substances under any
federal, state or local law pertaining to or concerning Hazardous
Substances) indemnify, defend (by counsel reasonably acceptable to
Buyer), protect and hold Buyer harmless for, from and against any and
all claims, liabilities, penalties, forfeitures, losses or expenses
(including, without limitation, reasonable expenses of investigation
and attorney's fees and expenses in connection with any action, suit or
proceeding brought against the Buyer) arising therefrom (to the extent
that any such third party claims are attributable to the portion of the
Hazardous Substances which occurred or were in existence at the Real
Estate or Leased Real Estate on or prior to the Closing Date) in an
amount which (together with any amount for which Seller may become
liable to provide indemnification pursuant to Section 9.2 or
otherwise), shall not exceed the amount of $5,000,000, and provided
that notwithstanding any other provision hereof, Seller shall not be
liable under this Section 4.4(e)(i) for any losses sustained by the
Buyer unless and until the aggregate amount of all losses with respect
to a Facility sustained by the Buyer to be indemnified by the Seller
under this Agreement (including any amount for which Seller may become
liable to provide indemnification pursuant to Section 9.2 or
otherwise), shall exceed $100,000, in which event the Seller shall be
liable only for such losses in excess of $100,000 with respect to that
Facility (it being the intention of the parties that losses sustained
by the Buyer with respect to one Facility shall not be combined with
losses sustained with respect to another Facility to satisfy such
minimum $100,000 amount).
(ii) Subject to Subsection 4.4(e)(iii) and Article 9 below, if
there are any third party claims against Seller that arise out of any
Hazardous Substances that became located in, on or under the Real
Estate or Leased Real Estate at any time after the Closing, Buyer will
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indemnify, defend (by counsel reasonably acceptable to Seller), protect
and hold Seller harmless for, from and against any and all claims,
liabilities, penalties, forfeitures, losses or expenses (including,
without limitation, reasonable expenses of investigation and attorney's
fees and expenses in connection with any action, suit or proceeding
brought against the Seller) arising therefrom, provided that
notwithstanding any other provision hereof, Buyer shall not be liable
under this Section 4.4(e)(ii) for any losses sustained by the Seller
unless and until the aggregate amount of all losses with respect to a
Facility sustained by the Seller to be indemnified by the Buyer under
this Agreement (including any amount for which Buyer may become liable
to provide indemnification pursuant to Section 9.3 or otherwise), shall
exceed $100,000, in which event the Buyer shall be liable only for such
losses in excess of $100,000 with respect to that Facility (it being
the intention of the parties that losses sustained by the Seller with
respect to one Facility shall not be combined with losses sustained
with respect to another Facility to satisfy such minimum $100,000
amount).
(iii) Nothing in this Section 4.4(e) is meant to diminish any
party's rights or obligations under any federal, state or local law
pertaining to or concerning Hazardous Substances; but Seller will not
be liable to Buyer under this Agreement, and Buyer hereby releases
Seller from any and all liability under any such law, for any third
party claims which are attributable to any environmental condition
which:
(A) was described or referred to in the Phase I's,
Asbestos Surveys or any Environmental Assessments obtained or
conducted by Buyer;
(B) was reasonably discoverable by prudent
investigation during the Environmental Due Diligence Period;
or
(C) was otherwise disclosed by Seller to Buyer or
discovered by Buyer at any time prior to the Closing.
(iv) The above release includes claims of which Buyer is
presently unaware or which Buyer does not presently suspect to exist
which, if known by Buyer, would materially affect Buyer's release(s) to
Seller. It is understood and agreed that the purchase price has been
adjusted by prior negotiations to reflect that all of the Real Estate,
Improvements, Leasehold Improvements and the Furniture, Fixtures and
Equipment are sold by Seller and purchased by Buyer and Buyer is
accepting assignment of the Leases subject to the foregoing. The sole
remedy of the Buyer will be to exercise its rights under Section 4.4(b)
prior to the end of the Environmental Due Diligence Period.
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4.5 Valuation of the Assets. Buyer agrees that it is relying solely
upon its own judgment as to the value of the Assets and the Liabilities (and the
Shares in the case of the Stock Purchase), and Seller hereby disclaims any
representations or warranties made by Seller as to their condition, value,
nature or amount except those made in Section 5.1 of this Agreement, and subject
to the provisions of Section 4.4 of this Agreement, which shall exclusively
govern the rights and obligations of the parties with regard to Hazardous
Substances.
4.6 Clearing Items. From the Closing Date and for ninety (90) calendar
days thereafter, items drawn on Transaction Accounts assumed by the Buyer may
continue to be presented to the Seller. The Seller will make provisional
settlement to the presenting institution and will forward such items to the
Buyer, via courier, at Buyer's expense, no later then the next Business Day
after receipt thereof, and the Buyer will reimburse the Seller for such
provisional settlement. For the first ninety (90) calendar days following the
Closing Date, the Seller shall perform its obligations under the first two
sentences of this Section 4.6 at no cost to the Buyer. After ninety (90)
calendar days from the Closing Date, the Buyer will pay the Seller $10.00 for
each item processed by the Seller. Upon timely presentation to the Buyer, the
Buyer will assume all responsibility for such items (except for such items which
have not been handled by the Seller in accordance with applicable law or
regulation, or with ordinary care), including but not limited to determining
whether to honor or dishonor such items and giving any required notification for
the return of large items.
4.7 IRA Deposits and Keogh Accounts. The Seller will deliver to the
Buyer, on the Closing Date, copies of the Seller's documents for each IRA
Deposit and Keogh Account which is included in the Assumed Deposits. The Seller
will prepare and file all reports to government authorities required to be filed
for the period ending on the Closing Date and all prior periods. The Buyer will
be responsible for all such reporting for periods commencing on the day after
the Closing.
4.8 Interest Reporting and Withholding.
(a) Except as set forth in Section 4.8(b), for the period from January
1 of the year in which the Closing occurs through the Closing Date, Seller will
provide to Buyer all information necessary for Buyer to report to applicable
taxing authorities and owners of Assumed Deposits transferred on the Closing
Date, all interest credited to, withheld from and any early withdrawal penalties
imposed upon the Assumed Deposits during
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such period (collectively, the "Reported Amounts"). With respect to all periods
beginning on or after January 1 of the year in which the Closing occurs, Buyer
will report all Reported Amounts to applicable taxing authorities and owners of
Assumed Deposits transferred on the Closing Date.
(b) With respect to any Assumed Deposits for which amounts are required
by any governmental agency to be withheld (the "Withholding Accounts"):
(i) Seller will: (A) for the period from January 1 of the year
in which the Closing occurs through the Closing Date, report all
Reported Amounts incurred during such period on the Withholding
Accounts to applicable taxing authorities and to the owners of the
Withholding Accounts; and (B) withhold any amounts required by any
governmental agencies to be withheld from the Withholding Accounts on
or before the Closing Date in accordance with applicable law or
appropriate notice from any governmental agency and remit such amounts
to the appropriate agency on or prior to the applicable due date.
(ii) Buyer will: (A) for the period from the day after the
Closing Date to the end of the calendar year (and all periods
thereafter), report all Reported Amounts incurred during such period on
the Withholding Accounts to applicable taxing authorities and to the
owners of the Withholding Accounts; and (B) withhold any amounts
required by any governmental agencies to be withheld from the
Withholding Accounts after the Closing Date in accordance with
applicable law or appropriate notice from any governmental agency and
remit such amounts to the appropriate agency on or prior to the
applicable due date.
(c) Buyer shall report to applicable taxing authorities and the
borrowers of the Loans all interest paid on such loans for the year in which
such loans are acquired by Buyer.
4.9 Eminent Domain or Taking. If proceedings under a power of eminent
domain relating to a specific Facility or any part thereof (the "Taking
Facility") are commenced prior to the Closing Date, Seller will promptly inform
Buyer in writing.
(a) If such proceedings involve the taking of all of or a material
interest in the Taking Facility, Buyer may elect to terminate this Agreement
with respect to such Taking Facility (but not the other Assets and Liabilities
related thereto) by notice in writing sent within ten (10) calendar days of
Seller's written notice to Buyer, in which case neither party will have any
further obligation to or rights against the other with respect to the Taking
Facility except with respect to the Deposits of such Facility and except any
rights or obligations
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of either party which are expressly stated to survive termination of this
Agreement.
(b) If the proceedings do not involve the taking of all of or a
material interest in the Taking Facility , or if Buyer does not elect to
terminate this Agreement as to the Taking Facility, this transaction will be
consummated as described herein, and, subject to the Lease, if any, or other
encumbrances, if any, relating to the Taking Facility, any award or settlement
payable with respect to such proceeding will be paid or assigned to Buyer on the
Closing Date.
(c) If the Closing contemplated by this Agreement is not consummated
for any reason, Buyer will have no claim to any condemnation award or settlement
with respect to the Taking Facility.
4.10 Damage or Destruction. Except as provided in this Section 4.10,
prior to the Closing Date, as between Seller and Buyer the entire risk of loss
or damage by earthquake, flood, landslide, fire or other casualty is borne and
assumed by Seller. If, prior to the Closing Date, any part of the Improvements
or Leasehold Improvements at a specific Facility (the "Affected Improvements")
is damaged or destroyed by earthquake, flood, landslide, fire or other casualty,
Seller will promptly inform Buyer of such fact in writing and advise Buyer as to
the extent of the damage and whether it is, in Seller's reasonable opinion,
"MATERIAL."
(a) If Seller determines that such damage or destruction is "MATERIAL",
Buyer has the option to terminate its obligation to acquire such Facility (but
not the other Assets and Liabilities related thereto) (the "Damaged Facility")
upon written notice to the Seller given not later than ten (10) calendar days
after receipt of Seller's written notice to Buyer advising of such damage or
destruction.
(b) For purposes of this Section 4.10, "MATERIAL" shall mean any damage
or destruction to the Affected Improvements where the cost of repair or
replacement is estimated to be (i) in the case of damage or destruction to
Improvements, more than twenty-five (25) percent of the Market Value of the Real
Estate and Improvements, or (ii) in the case of damage or destruction to
Leasehold Improvements, more than twenty-five (25) percent of the amount
indicated in Section 3.1 and Schedule 3.1(b) for the Leasehold Improvements at
the Damaged Facility ("Leasehold Improvements Value"), and that in either case
will take more than sixty (60) calendar days to repair.
(c) If the obligation to acquire the Damaged Facility is so terminated,
neither party will have any further obligation to or rights against the other
with respect to such Damaged Facility except with respect to the other Assets
and Liabilities of such Facility and except any rights or obligations of either
party which are expressly stated to survive termination of this Agreement.
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(d) Subject to the Lease, if any, or other encumbrances, if any, if the
Buyer does not elect to terminate its obligation to acquire the Damaged
Facility, or if the casualty is not material, Seller shall either (i) reduce the
Market Value of the Real Estate or the Leasehold Improvements Value at the
Damaged Facility, as the case may be, by the value reasonably estimated by
Seller to repair or restore the damaged portion of the Affected Improvements,
less any sums expended by Seller to make emergency repairs to the Affected
Improvements, or (ii) repair or restore the damaged portion of the Affected
Improvements, and in either case this transaction will close pursuant to the
terms of this Agreement, and the Buyer will accept the Damaged Facility as is,
where is, without recourse, with all faults and with no warranties other than as
expressly provided in Section 5.1 of this Agreement, and subject to the
provisions of Section 4.4 of this Agreement, which shall exclusively govern the
rights and obligations of the parties with regard to Hazardous Substances.
(e) If the damage is not material, Seller's notice to Buyer of the
damage or destruction will also set forth the reduced Market Value of the Real
Estate or the reduced Leasehold Improvements Value at the Damaged Facility, as
the case may be, and Seller's allocation of value to the damaged portion of the
Affected Improvements. If Buyer does not accept Seller's reduced valuation,
Buyer's sole remedy will be to submit the issue to arbitration pursuant to
Section 9.4 hereof.
(f) Whether or not the sale of the Damaged Facility is consummated
hereunder, Buyer shall have no rights to insurance claims or proceeds in respect
of damage or destruction to the Affected Improvements occurring prior to the
Closing Date.
4.11 Real Estate.
(a) Seller, at its sole cost and expense, has previously caused to be
furnished to Buyer and the Title Company one (1) copy each of a survey meeting
the current Amended Standards for Land Surveyors in New Mexico as adopted by the
New Mexico State Board of Registration for Professional Engineers and Surveyors
(the "Survey") of the Real Estate prepared and certified as to all matters shown
thereon by a surveyor licensed by the State of New Mexico ("Surveyor").
(b) Prior to the date hereof, Seller has caused the Title Company to
furnish to Buyer (i) a title commitment ("Commitment"), showing Seller as the
record title owner of the Real Estate by the terms of which Title Company agrees
to issue to Buyer at Closing an owner's policy of title insurance providing for
standard coverage ("Title Policy") in the amount of the Market Value of the Real
Estate and Improvements on the standard form therefor promulgated by the New
Mexico Department of Insurance insuring Buyer's fee simple title to the Real
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Estate to be good and indefeasible subject to the terms of such policy and the
Schedule B exceptions; and (ii) a photocopy of all documents ("Title Documents")
describing all Schedule B title exceptions shown on the Commitment. Unless Buyer
has objected thereto prior to the date hereof, all matters shown on the Survey
and exceptions listed in the Commitment are conclusively deemed to be acceptable
to Buyer. Seller shall provide to Buyer the Title Policy, reflecting only the
Permitted Exceptions, as soon as practicable after the Closing Date. As used in
this Agreement, the term "Permitted Exceptions" shall mean all title exceptions
or Survey matters which would not materially impair the ability of the Buyer to
utilize the Real Estate as a banking facility, and all matters either shown on
the Survey or listed in the Commitment to which Buyer has not objected prior to
the date hereof, or, having objected, Buyer has thereafter waived. Seller and
Buyer shall share equally in the cost and expense of the Title Policy.
(c) Prior to the date hereof, Seller submitted appraisals of the Market
Value of the Real Estate and Improvements to Buyer.
(d) Upon consummation of the transactions contemplated by this
Agreement, Buyer shall register the Real Estate under the name of the Buyer for
ad valorem real estate tax purposes.
4.12 Certain Cash Management Relationships.
(a) With respect to those certain cash management relationships
(including cash management accounts and related lines of credit and loans) which
are set forth on Schedule 4.12, at the Closing Seller shall transfer and Buyer
shall acquire such cash management relationships, subject to Buyer's rights as
described in Section 4.12(b) to exclude certain of such relationships from the
transaction.
(b) Notwithstanding anything in this Agreement to the contrary, from
the date hereof until thirty (30) calendar days after the Closing Date, the
Buyer shall have the right to exclude from the transaction one or more of such
cash management relationships. The Buyer's right to exclude such cash management
relationship(s) shall be exercisable by the Buyer giving written notice to the
Seller at any time until and including the thirtieth (30th) calendar day after
the Closing Date. If, prior to the Closing, the Buyer does not exercise its
right to exclude any of the cash management relationship(s) described on
Schedule 4.12, such cash management relationships (including cash management
accounts and related lines of credit and loans) shall be transferred to the
Buyer at the Closing. If the Buyer exercises its right to exclude any of the
cash management relationship(s) described on Schedule 4.12, the entire cash
management relationship (including cash management accounts and related lines of
credit and loans) shall be retained by the Seller (if Buyer exercises its right
to exclude
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such cash management relationship(s) prior to Closing) or transferred to the
Seller (if Buyer exercises its right to exclude such cash management
relationship(s) during the thirty-day period following Closing). The Closing
Financial Statement or Final Financial Statement (as appropriate) shall be
adjusted to reflect any such cash management relationship(s) excluded from the
transaction by Buyer pursuant to this Section 4.12(b).
(c) Notwithstanding anything in this Agreement to the contrary, for a
period of three (3) years following the Closing Date, Seller will not conduct
or, following the closing of the BankAmerica/NationsBank Business Combination,
permit the New Mexico operations of NationsBank, N.A., to conduct, any
solicitation of the customers of the cash management relationships acquired and
retained by Buyer pursuant to this Section 4.12, except (i) in connection with
general solicitations or general advertising not targeted specifically at such
customers, or (ii) any solicitation of any such customer who, prior to the
closing of the BankAmerica/NationsBank Business Combination, had a pre-existing
customer relationship with NationsBank, N.A.
4.13 Additional Branches.
(a) As soon as practicable, but in no event later than 20 calendar days
following the date hereof, the Seller shall provide to the Buyer deposit, loan,
employee, facilities and related information (the "Additional Information")
regarding each of the Branches listed on Schedule A-1 designated as "Additional
Branches" (the "Additional Branches") in format and scope similar to information
delivered to the Buyer prior to the date hereof regarding the Branches other
than the Additional Branches.
(b) The Additional Information shall be deemed to be satisfactory and
accepted by the Buyer unless, within 20 calendar days of the receipt by the
Buyer of the Additional Information, the Buyer notifies the Seller in writing
that, based on its review of the Additional Information, the Buyer in good faith
believes that the Assets and Liabilities at the Additional Branches are not
substantially similar in type and character to the Assets and Liabilities
maintained at the Branches other than the Additional Branches. Within 10
calendar days of the receipt by the Seller of such notice, the Seller and the
Buyer shall confer in good faith on a commercially reasonable basis with a view
towards determining a mutually acceptable adjustment to the purchase price to be
paid pursuant to Section 3.1. In the event the Seller and the Buyer are unable
to agree on an acceptable adjustment to the purchase price within such 10 day
period, the matter shall be determined in accordance with Section 9.4.
(c) As soon as practicable following the delivery of the Additional
Information to the Buyer, Section 3.1 relating to the calculation of the Initial
Base Amount and Schedule 3.1(a) shall be revised to reflect the inclusion of the
Additional Branches.
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ARTICLE 55
Representations and Warranties
5.1 Seller's Representations and Warranties. The Seller represents and
warrants to the Buyer that, as of the date of this Agreement (or, as to any
information specified in a Schedule to have been compiled as of some earlier
date, as of such earlier date), and subject to Section 4.4(a):
(a) The Seller is a national banking association, duly organized and in
good standing under the laws of the United States;
(b) The Seller has the requisite power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby; all corporate action necessary to be taken by or on the
part of the Seller to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby has been duly and validly taken;
and this Agreement has been duly executed and delivered by, and constitutes the
valid and binding agreement of the Seller, enforceable in accordance with its
terms except as limited by bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and similar laws affecting creditors generally and by the
availability of equitable remedies;
(c) The execution, delivery and performance by the Seller of this
Agreement do not, and the consummation by the Seller of the transactions
contemplated hereby will not, violate or conflict with the articles of
association or bylaws of the Seller, or any law or regulation currently
applicable to the Seller, or any material agreement or instrument, or currently
applicable award, order, judgment or decree to which the Seller is a party or by
which it is bound, or require any filing by the Seller with, or authorization,
approval, consent or other action with respect to the Seller by, any
governmental or regulatory agency except such as have been made or obtained and
are in full force and effect or as identified in this Agreement;
(d) Schedule 2.2(e) sets forth a list of all material written
contracts, agreements and other obligations which relate specifically to the
operation of the Facilities (other than those giving rise to the Assets and the
Liabilities), including, without limitation, equipment leases and service and
maintenance contracts, consulting contracts, agency agreements and licensing
agreements; provided, however, that equipment leases and service and maintenance
contracts which the Seller does not believe are assignable and contracts that
relate to
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the Seller's general operations and that are not being assigned to the Buyer are
not listed;
(e) Except as set forth in Schedule 5.1(e): (i) there is no litigation,
claim, action, suit or proceeding pending which, if adversely determined, would
materially and adversely affect the use of the Assets or the Liabilities; and
(ii) to the Seller's knowledge, there is no litigation, claim, action, suit or
proceeding threatened by any organization, person, individual or governmental
agency which, if adversely determined, would, individually or in the aggregate,
materially and adversely affect the use of the Assets or the Liabilities;
(f) Except for its agreement with Bear, Stearns & Co., Inc., for which
the Seller is solely responsible, the Seller has not in any manner whatsoever
paid or agreed to pay any fee or commission to any agent, broker, finder or
other person for or on account of services rendered as a broker or finder in
connection with this Agreement or the transactions covered and contemplated
hereby. All negotiations relating to this Agreement have been conducted by the
Seller directly and without the intervention of any person in such manner as to
give rise to any valid claim against the Seller for any brokerage commission or
like payment;
(g) Schedule 2.2(f) contains an accurate and complete list of all
Leases, if any. True and correct copies of all Leases referred to in such
Schedule have been provided to Buyer; and
(h) Except as disclosed in Schedule 5.1(h), to the knowledge of Seller,
(i) each Loan, in all material respects, is a legal, valid and binding
obligation, in full force and effect and enforceable in accordance with its
terms, except as may be limited by bankruptcy, insolvency, moratorium,
receivership, conservatorship, reorganization or similar laws affecting the
rights of creditors generally or equitable principles limiting the right to
obtain specific performance or other similar relief; (ii) Seller has duly
performed in all material respects all of its obligations thereunder to the
extent that such obligations to perform have accrued; (iii) all documents and
agreements necessary for Seller to enforce each Loan are in existence; (iv) no
claims, counter-claims, set-off rights or other rights exist, nor do the grounds
for any such claim, counter-claim, set-off rights or other rights exist, with
respect to any such Loans which could impair the collectibility thereof; and (v)
each such Loan has been, in all material respects, originated and serviced in
accordance with Seller's then applicable underwriting guidelines, the terms of
the relevant credit documents and agreements and applicable law.
(i) The Furniture, Fixtures and Equipment, the Improvements and the
Leasehold Improvements have been and as of the Closing will have been installed,
maintained and operated in accordance with the customary standards of Seller.
The
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equipment owned by the Seller and located at the Facilities is currently
adequate for Seller's customary and ordinary operations. No expenditures for the
repair, maintenance or improvement of the Assets are currently, and as of the
Closing Date will be, necessary or budgeted by Seller other than normal
recurring expenses for routine maintenance and upkeep.
(j) The Assets (excluding the Real Estate which shall be subject to the
provisions of Section 4.11) are, and as of the Closing Date shall be, free and
clear of all Liens, except the Liabilities.
(k) Only in the event the parties elect to pursue the Stock Purchase
and only as of the Closing Date:
(i) Newco is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(ii) The Seller owns all of the Shares, free and clear of any and all
Liens. All of the Shares are validly issued and outstanding, full paid and
nonassessable. Except for this Agreement, there are no understandings,
arrangements, restrictions, commitments or agreements of any kind relating to
the Shares or any securities outstanding representing the right to purchase or
otherwise receive shares of common stock or any other capital stock or equity
security of Newco. The stock certificates, endorsements and other documents
delivered to the Buyer at the Closing will transfer to and vest in the Buyer
good, valid and indefeasible title to the Shares, free and clear of any and all
Liens.
5.2 Buyer's Representations and Warranties. The Buyer represents and
warrants to the Seller that, as of the date of this Agreement, and subject to
Section 4.4(a):
(a) The Buyer is a national banking association, duly organized and in
good standing under the laws of the United States;
(b) Subject to the satisfaction of any applicable governmental or
regulatory requirements referred to in Section 4.2(b) and to approval of this
Agreement and the transactions contemplated hereby by the requisite vote or
consent of the holders of outstanding securities of the Buyer, if such approval
is required by applicable law, contract, the Buyer's articles of association or
bylaws, or otherwise, the Buyer has the requisite power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby; all acts and other proceedings required to be taken by or
on the part of the Buyer to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby have been duly and validly
taken; and this Agreement has been duly executed and delivered by, and
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constitutes the valid and binding agreement of, the Buyer, enforceable in
accordance with its terms except as limited by bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and similar laws affecting
creditors generally and by the availability of equitable remedies;
(c) Subject to the satisfaction of any applicable governmental or
regulatory requirements referred to in Section 4.2(b), the execution, delivery
and performance by the Buyer of this Agreement do not, and the consummation by
the Buyer of the transactions contemplated hereby will not, violate or conflict
with the articles of association or bylaws of the Buyer, or any law or
regulation currently applicable to the Buyer, or any material agreement or
instrument, or currently applicable order, judgment or decree to which the Buyer
is a party or by which it is bound or require any prior filing by the Buyer
with, or authorization, approval, consent or other action with respect to the
Buyer by, any governmental or regulatory agency except such as have been made or
obtained and are in full force and effect or will be made or obtained and are in
full force and effect as of the Closing;
(d) There are no actions, suits or proceedings pending or, to the
knowledge of the Buyer, threatened against or affecting, the Buyer, which may
cause a material adverse change in the Buyer's business or financial condition
or would prohibit consummation of the transactions contemplated hereunder;
(e) The Buyer has not paid or agreed to pay any fee or commission to
any agent, broker, finder or other person for or on account of services rendered
as a broker or finder in connection with this Agreement or the transactions
covered and contemplated hereby. All negotiations relating to this Agreement
have been conducted by the Buyer directly and without the intervention of any
person in such manner as to give rise to any valid claim against the Seller for
any brokerage commission or like payment;
(f) The Buyer has not received written notice from any federal or New
Mexico governmental or regulatory agency indicating that it would oppose or not
grant or issue its consent or approval, if required, with respect to the
transactions contemplated by this Agreement;
(g) The Buyer satisfies each and all of the standards and requirements
lawfully within the control of the Buyer of which it is aware (and, as of the
Closing Date, will satisfy each and all of the standards and requirements
lawfully within the control of the Buyer) imposed as a condition to obtaining,
or necessary to comply with and in order to obtain, any of the governmental or
regulatory approvals referred to in Section 4.2(b) of this Agreement;
(h) At the time of the most recent regulatory evaluation of Buyer's
performance under the Community Reinvestment Act
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(the "CRA"), Buyer's record of performance was deemed to be "outstanding" or
"satisfactory", and no proceedings are pending or, to the knowledge of Buyer,
threatened, that would result in a change in such evaluation. Except as
previously disclosed in writing to Seller, Buyer has not received any adverse
public comments with respect to its compliance under the CRA since the date of
its most recent regulatory evaluation of its performance under the CRA; and
(i) The Buyer has available sufficient cash or other liquid assets or
financing pursuant to binding agreements or commitments which may be used to
fund the transactions contemplated hereby and its ability to consummate such
transactions is not contingent on raising any equity capital, obtaining specific
financing therefor, consent of any lender or any other matter.
ARTICLE 66
Understandings
Buyer and Seller understand and agree as follows:
6.1 Depositors' Rights. All transfers to the Buyer of Assumed Deposits
are subject to the individual depositors' continuing rights to withdraw, and the
Seller makes no representation or warranty to the Buyer concerning the
continuing maintenance of such deposits at the Branches.
6.2 Unclaimed Property. With respect to safe deposit boxes that have
been opened by the Seller and whose contents have been inventoried and are being
held by the Seller in safekeeping in preparation for escheat to the State of New
Mexico, the Seller shall remove any and all such contents from the Branches
prior to the Closing Date.
6.3 Head Office Accounts. Schedule 6.3 sets forth certain Accounts at
the Branches and Offices which have been designated by the Seller as "Head
Office Accounts." The Buyer and the Seller understand and agree that the Seller
may remove from the Branches and Offices prior to the Closing Date any and all
Head Office Accounts and deposits of the types described in the proviso in
Section 2.3(a)(iii) and any Head Office Accounts and any such deposits so
removed shall not be included in the Assumed Deposits.
6.4 Limitation of Warranties. Except as may be expressly represented or
warranted by Seller in Section 5.1 of this Agreement, and subject to the
provisions of Section 4.4 of this Agreement which shall exclusively govern the
rights and obligations of the parties with regard to Hazardous Substances,
Seller makes no representation or warranty whatsoever with regard to any Asset,
any Liability (or the Shares in the case of the Stock
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Purchase) or the business or operation of any of the Facilities, it being
expressly understood that such Assets and Liabilities (and the Shares in the
case of the Stock Purchase) are being transferred AS IS, WHERE IS, WITHOUT
RECOURSE, WITH ALL FAULTS AND WITH NO WARRANTIES OTHER THAN AS EXPRESSLY
PROVIDED IN SECTION 5.1 OF THIS AGREEMENT. Buyer agrees that it is relying
solely upon its own judgment, after such investigation and inspection as it
deems necessary or appropriate, as to the quality, condition, fitness and value
of the Assets and the nature and amount of the Liabilities, and Seller hereby
disclaims any representations or warranties made by Seller as to their
condition, value, nature or amount except those made in Section 5.1 of this
Agreement, subject to Section 4.4 of this Agreement. Notwithstanding any other
provision of this Agreement, Buyer and Seller understand and agree that Seller
is making, and shall make, no representations or warranties with respect to
title to the Real Estate other than those, if any, contained in the special
warranty deed the form of which is attached hereto as Exhibit C.
ARTICLE 77
Conditions to the Closing
7.1 Seller's Conditions. The obligations of the Seller to consummate
the Closing shall be subject to the satisfaction at or prior to Closing of all
of the following conditions, any one or more of which may be waived, in whole or
in part, by the Seller:
(a) The Buyer shall have complied in all material respects with each of
its covenants and agreements contained herein to be performed at or prior to the
Closing Date, and each of the representations and warranties of the Buyer in
Section 5.2 hereof shall be true and correct in all material respects as if made
at and as of the Closing;
(b) The Buyer shall have delivered to the Seller a duly authorized and
signed officer's certificate, dated as of the Closing Date, certifying as to the
matters specified in Section 7.1(a), and further that (i) the methodology and
accounting procedures used by the Seller in preparing the Closing Financial
Statement have been reviewed and are acceptable to the Buyer, and (ii) the
Buyer, to and including the Closing Date, has performed such review of the
books, records, files, documentation and accounts of the Facilities as it has
deemed appropriate;
(c) All consents, approvals and authorizations required to be obtained
prior to the Closing from governmental and regulatory authorities in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby to be consummated at the Closing shall have
been made or obtained, and shall remain in full force and effect, all waiting
periods applicable to the
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consummation of the transactions contemplated hereby shall have expired or been
terminated and all required regulatory filings shall have been made; provided,
however, that no governmental or regulatory consent, approval or authorization
shall have imposed any condition or requirement that the Seller in good faith
determines to be materially burdensome upon the business of the Seller or upon
the consummation of the transactions contemplated hereby;
(d) There shall not be in effect any nonappealable final order, decree
or judgment of any court or governmental body having competent jurisdiction that
would be violated by consummation of the transactions contemplated hereby, nor
any material pending or threatened action, proceeding or investigation, the
adverse determination of which would result in such order, decree or judgment;
provided, that in the case of such material pending or threatened action,
proceeding or investigation, neither party shall decline to proceed with the
Closing pending final resolution thereof without exercising its reasonable
efforts promptly to determine jointly with the other party the merit thereof and
the likelihood of an adverse determination in such proceeding;
(e) This Agreement and the transactions contemplated hereby shall have
been approved by the requisite vote or consent of the holders of outstanding
securities of the Buyer if such approval is required by applicable law,
contract, the Buyer's articles of association or bylaws, or otherwise; and
(f) All necessary corporate approvals and the Merger Regulatory
Approvals shall have been obtained and Seller shall have determined that all
other conditions to the closing of the BankAmerica/NationsBank Business
Combination have been satisfied or waived. As used herein, (i) "Merger
Regulatory Approvals" shall mean all approvals, permits, authorizations, waivers
or consents of governmental agencies or authorities necessary or appropriate to
permit consummation of the BankAmerica/NationsBank Business Combination (such
Merger Regulatory Approvals shall not be deemed to have been obtained if any of
them shall contain any provisions or conditions which Seller, in the exercise of
its reasonable business judgment, deems to be unduly burdensome or restrictive);
and (ii) "BankAmerica/NationsBank Business Combination" shall mean that
transaction pursuant to which Agreement and Plan of Merger dated April 10, 1998,
BankAmerica Corporation shall merge with and into NationsBank Corporation.
7.2 Buyer's Conditions. The obligations of the Buyer to consummate the
Closing shall be subject to the satisfaction at or prior to Closing of all of
the following conditions, any one or more of which may be waived, in whole or in
part, by the Buyer:
(a) The Seller shall have complied in all material respects with each
of its covenants and agreements herein to be
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performed at or prior to the Closing Date and each of the representations and
warranties of the Seller contained in this Agreement and the Schedules shall be
true and correct in all material respects as if made at and as of Closing except
to the extent of changes that have occurred prior to Closing that are consistent
with the provisions of Section 2.3(a);
(b) The Seller shall have delivered to the Buyer a duly authorized and
signed officer's certificate, dated as of the Closing Date, certifying that (i)
the representations and warranties of the Seller contained in this Agreement and
the Schedules are true and correct in all material respects as if made at and as
of Closing except to the extent of changes that have occurred prior to Closing
that are consistent with the provisions of Section 2.3(a), and (ii) the Seller
has complied in all material respects with each of its covenants and agreements
herein to be performed at or prior to the Closing Date;
(c) As to each of the Facilities, there shall have been given, obtained
or satisfied in final form any notice, approval, permit or other requirement of
law or any competent governmental or regulatory authority that is necessary to
proceed with the Closing, including, without limitation, such approvals as may
be required of any New Mexico or federal bank or other financial institution
regulatory agency and any other entity or entities having jurisdiction over the
Facilities, the Buyer or the Seller, and no such agency or entity shall, in
connection therewith, have imposed any condition or requirement that would
result in a material adverse effect on the business or prospects of the
Facilities or the Buyer, or on the consummation of the transactions contemplated
hereby; and
(d) There shall not be in effect any nonappealable final order, decree
or judgment of any court or governmental body having competent jurisdiction that
would be violated by consummation of the transactions contemplated hereby, nor
any pending or threatened action, proceeding or investigation, the adverse
determination of which would result in such order, decree or judgment; provided,
that in the case of such pending or threatened action, proceeding or
investigation, neither party shall decline to proceed with the Closing pending
final resolution thereof without exercising its reasonable efforts promptly to
determine jointly with the other party the merit thereof and the likelihood of
an adverse determination in such proceeding.
Notwithstanding any other provision of this Agreement, in the event
that, at the Closing, there shall be a failure of any condition specified in
this Section 7.2 or elsewhere in this Agreement, including, without limitation,
any failure of condition specified in Section 2.2(e), 2.2(f), 4.3, 4.4, 4.9 or
4.10 to the obligations of the Buyer in respect of the acquisition of any
specific Facility or Facilities, the Buyer nevertheless shall be obligated to
consummate the transactions
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contemplated by this Agreement upon the Closing Date, and the Seller may, upon
written notice to the Buyer, exclude from the Closing the Facility or Facilities
(but not the other Assets and Liabilities related thereto) in respect of which
the failure of condition shall exist, in which case, appropriate adjustment
shall be made in the consideration payable pursuant to Article 3, the Schedules
hereto, the Financial Statements and the other documents to be delivered
pursuant hereto so as to duly reflect the deletion of such Facility or
Facilities (but not the other Assets and Liabilities related thereto) from the
Closing.
ARTICLE 88
Termination
8.1 Events of Termination. This Agreement may be terminated at any time
prior to Closing:
(a) By the mutual written agreement of the Seller and the Buyer;
(b) By the Seller or by the Buyer in the event that the Closing has not
occurred on or before the date indicated in the third proviso in Section
2.2(a), or such other date as the Seller and the Buyer shall agree in writing,
unless the failure to so consummate by such time is due to a breach of this
Agreement by the party seeking to terminate;
(c) By the Seller or by the Buyer if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction;
(d) By the Seller or the Buyer, in the event of a material breach by
the other of any representation, warranty or agreement contained herein which
is not cured or cannot be cured within thirty (30) calendar days after written
notice of such termination has been delivered to the breaching party; provided,
however, that (i) termination pursuant to this Section 8.1(d) shall not relieve
the breaching party of liability for such breach or otherwise and (ii) this
Section 8.1(d) shall not under any circumstances provide the Buyer with a basis
for termination due to any actual or alleged breach relating to Hazardous
Substances, Buyer's sole remedies with respect to Hazardous Substances being
contained in Section 4.4; and
(e) By the Seller in the event that:
(i) at the expiration of thirty (30) calendar days after the
date of this Agreement, the Buyer has failed to file substantially
complete applications requesting approval of the transactions
contemplated by this Agreement with all applicable regulatory agencies
("Buyer's Regulatory Agencies"); or
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(ii) at the expiration of sixty (60) calendar days after the
date of this Agreement, any of the Buyer's Regulatory Agencies has
failed to accept the Buyer's application pending before such agency as
informationally complete; or
(iii) at the expiration of one hundred fifty (150) calendar
days after the date of this Agreement, any of the Buyer's Regulatory
Agencies has failed to issue formal approval of the Buyer's
application; or
(iv) at any time, the Buyer's application has been disapproved
by any of the Buyer's Regulatory Agencies.
Any party desiring to terminate this Agreement pursuant to any of the
foregoing clauses shall give written notice of such termination to the other
party.
8.2 Liability for Termination8.2 Liability for Termination. If this
Agreement is terminated as permitted by Section 8.1, except as provided in
Section 8.1(d) or (e), such termination shall be without liability of either
party (or any shareholder, director, officer, employee, agent, consultant or
representative of such party) to the other party to this Agreement, except that,
subject to Section 4.4, if such termination shall result from the willful
failure of a party to fulfill a condition to the performance of the obligations
of the other party or to perform a covenant of this Agreement or from a willful
misrepresentation or breach of a warranty, covenant or agreement hereunder by
either party to this Agreement, such party shall be fully liable for any and all
damages, costs and expenses (including, but not limited to, reasonable
attorney's fees) sustained or incurred by the other party as a result of such
failure or breach.
8.3 Procedures Upon Termination8.3 Procedures Upon Termination. In the
event of termination pursuant to the terms of this Agreement, and except as
otherwise stated herein, written notice thereof shall be given to the other
party, and this Agreement shall terminate immediately upon receipt of such
notice unless an extension is consented to by the party having the right to
terminate. If this Agreement is terminated as provided herein,
(a) Each party will return all documents, work papers and other
materials of the other party, including photocopies or other duplications
thereof, relating to this transaction, whether obtained before or after the
execution hereof, to the party furnishing the same; and
(b) All information received by either party thereto with respect to
the business of the other party (other than information that is a matter of
public knowledge or that has
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heretofore been published in any publication for public distribution or filed as
public information with any governmental authority) shall not at any time be
used for any business purpose by such party or disclosed by such party to third
persons.
ARTICLE 99
Survival, Indemnification
9.1 Survival. The covenants, agreements, representations and warranties
of the parties hereto made, contained in or to be performed pursuant to this
Agreement, the Schedules or Exhibits hereto or the officers' certificates
delivered pursuant hereto or in connection herewith shall survive Closing and
remain operative and in full force and effect until the first anniversary of the
Closing Date, except for the provisions of Sections 2.4, 3.2(i), 4.1(j),
4.4(e)(ii), 4.12, 10.1 and 11.11, which shall survive such first anniversary.
Notwithstanding the preceding sentence, any covenant, agreement, representation,
warranty or claim in respect of which indemnity may be sought under Sections 9.2
or 9.3 shall survive the time at which it would otherwise terminate pursuant to
the preceding sentence if notice of the claim, inaccuracy or breach giving rise
to such right to indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time. After Closing, the sole and
exclusive remedy of the Buyer and the Seller for any breach of any covenant or
agreement or any inaccuracy of any such representation or warranty by the Seller
or the Buyer shall be the indemnities contained in Sections 9.2 and 9.3,
respectively, which shall survive Closing; provided, however, that the
provisions of Section 4.4 shall exclusively govern the rights and obligations of
the Seller and Buyer with regard to Hazardous Substances.
9.2 Seller's Indemnity. Subject to the proviso in the final sentence of
Section 9.1, the Seller hereby indemnifies the Buyer against and agrees to hold
it harmless from any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and attorney's fees and
expenses in connection with any action, suit or proceeding brought against the
Buyer) demanded, claimed or threatened in writing against the Buyer or incurred
or suffered by the Buyer arising out of (i) any action taken or omitted to be
taken by the Seller prior to the Closing relating to the ownership or operation
of the Facilities or their business and properties prior to Closing, but
excluding all Liabilities and any damage, loss, liability or expense resulting
from actions taken by the Seller at the written direction of the Buyer or
resulting from defects in title to the Real Estate; (ii) any misrepresentation
or breach of warranty, covenant or agreement made, contained in or to be
performed by the Seller pursuant to this Agreement, the Schedules or Exhibits
hereto or the Seller's officer's
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certificate; (iii) all Non-Assumed Liabilities; and (iv) any claim or demand by
any Branch or Office employee of the Seller who shall not become an employee of
the Buyer (except as may be the result of any action or inaction of the Buyer).
Any direct claim by the Buyer against the Seller, as distinguished from a claim
against the Buyer by a third party, shall be settled by arbitration pursuant to
Section 9.4. The Seller shall not be liable under this Section 9.2 for any
settlement effected without its consent (which consent shall not be unreasonably
withheld) of any claim, litigation or proceeding in respect of which indemnity
may be sought hereunder. The Buyer agrees to give prompt notice to the Seller of
the assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought hereunder. The Seller
may, and at the request of the Buyer shall, participate in and control the
defense of any such suit, action or proceeding at its own expense.
9.3 Buyer's Indemnity. Subject to the proviso in the final sentence of
Section 9.1, the Buyer hereby indemnifies the Seller against and agrees to hold
it harmless from any and all damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and attorney's fees and
expenses in connection with any action, suit or proceeding brought against the
Seller) demanded, claimed or threatened in writing against the Seller or
incurred or suffered by the Seller arising out of (i) ownership or operation of
the Facilities or their business and properties on and after Closing (except as
to such damage, liability, loss or expense resulting from actions taken by the
Buyer at the written direction of the Seller); (ii) any misrepresentation or
breach of warranty, covenant or agreement made, contained in or to be performed
by the Buyer pursuant to this Agreement, the Schedules or Exhibits hereto or the
Buyer's officer's certificate; and (iii) all Liabilities (which term excludes
Non-Assumed Liabilities). Any direct claim by the Seller against the Buyer, as
distinguished from a claim against the Seller by a third party, shall be settled
by arbitration pursuant to Section 9.4. The Buyer shall not be liable under this
Section 9.3 for any settlement effected without its consent (which consent shall
not be unreasonably withheld) of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder. The Seller agrees to give prompt
notice to the Buyer of the assertion of any claim, or the commencement of any
suit, action or proceeding in respect of which indemnity may be sought
hereunder. The Buyer may, and at the request of the Seller shall, participate in
and control the defense of any such suit, action or proceeding at its own
expense.
9.4 Arbitration of Disputes. (a) ANY CONTROVERSY OR CLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY AGREEMENTS OR INSTRUMENTS RELATING
HERETO OR DELIVERED IN CONNECTION HEREWITH, INCLUDING, BUT NOT LIMITED TO A
CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, WILL, AT
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THE REQUEST OF ANY PARTY, BE DETERMINED BY ARBITRATION IN ACCORDANCE WITH THE
FEDERAL ARBITRATION ACT (9 U.S.C. SECTION 1 ET SEQ.) UNDER THE AUSPICES AND
RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA"). THE AAA WILL BE
INSTRUCTED BY EITHER OR BOTH PARTIES TO PREPARE A LIST OF THREE PROPOSED
ARBITRATORS. WITHIN TEN (10) CALENDAR DAYS OF RECEIPT OF THE LIST, EACH PARTY
MAY STRIKE ONE (1) NAME FROM THE LIST. THE AAA WILL THEN APPOINT THE ARBITRATOR
FROM THE NAME(S) REMAINING ON THE LIST. THE ARBITRATION WILL BE CONDUCTED IN
ALBUQUERQUE, NEW MEXICO. ANY CONTROVERSY IN INTERPRETATION OR ENFORCEMENT OF
THIS PROVISION OR WHETHER A DISPUTE IS ARBITRABLE, WILL BE DETERMINED BY THE
ARBITRATOR. JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN
ANY COURT HAVING JURISDICTION. THE INSTITUTION AND MAINTENANCE OF AN ACTION FOR
JUDICIAL RELIEF OR IN PURSUIT OF AN ANCILLARY REMEDY DOES NOT CONSTITUTE A
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE PLAINTIFF, TO SUBMIT THE
CONTROVERSY OR CLAIM TO ARBITRATION.
(b) IN ANY ARBITRATION PROCEEDING, THE ARBITRATOR IS AUTHORIZED TO
APPORTION COSTS AND EXPENSES, INCLUDING INVESTIGATION, LEGAL AND OTHER EXPENSES,
WHICH WILL INCLUDE, IF APPLICABLE, A REASONABLE ESTIMATE OF ALLOCATED COSTS AND
EXPENSES OF IN-HOUSE LEGAL COUNSEL AND LEGAL STAFF. SUCH COSTS AND EXPENSES ARE
TO BE AWARDED ONLY AFTER THE CONCLUSION OF THE ARBITRATION AND WILL NOT BE
ADVANCED DURING THE COURSE OF SUCH ARBITRATION.
9.5 Limit on Indemnities.
(a) Notwithstanding any other provision hereof, an indemnifying party
shall not be liable under this Article 9 or Exhibit H for any losses sustained
by the indemnified party with respect to a Facility unless and until the
aggregate amount of all such losses sustained by the indemnified party with
respect to that Facility (including any amount for which the indemnifying party
may become liable to provide indemnification pursuant to Section 4.4), shall
exceed $30,000, in which event the indemnifying party shall be liable only for
such losses in excess of $30,000 (it being the intention of the parties that
losses sustained by a party with respect to one Facility shall not be combined
with losses sustained with respect to another Facility to satisfy such minimum
$30,000 amount). The minimum $30,000 amount shall not apply to amounts which one
party may be required to pay to the other under Sections 2.4, 3.2, 4.1(g),
4.1(h), 4.6 and 10.1 of this Agreement or other provisions dealing with
customary and foreseeable post-closing adjustments. In no event shall the
aggregate losses for which the Seller may be liable under this Article 9 or
Section 4.4 or any other basis exceed the amount of $5,000,000. IN ADDITION, THE
INDEMNIFYING PARTY SHALL HAVE NO OBLIGATIONS UNDER THIS AGREEMENT FOR ANY
CONSEQUENTIAL LIABILITY, DAMAGE OR LOSS OF THE INDEMNIFIED PARTY THAT THE
INDEMNIFIED PARTY MAY SUFFER.
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(b) Each party's right to indemnification under this Article 9 shall
preclude any other monetary award (whether at law or in equity) and shall
preclude assertion by such party of any right to any such monetary award from
the indemnifying party.
9.6 Indemnities. Notwithstanding the foregoing, to the extent, if at
all, Section 56-7-1 of NMSA is applicable to this Agreement, the indemnity
provided in this Article 9 will not extend to liability, claims, damages, losses
or expenses, including fees of attorneys, relating to the construction,
installation, alteration, modification, repair, maintenance, servicing,
demolition, excavation, drilling, reworking, grading, paving, clearing, site
preparation or development of any real property or any improvement of any kind
on, above or under real property and arising out of (a) the preparation or
approval of maps, drawings, opinions, reports, surveys, change orders, designs
or specifications by the indemnitee, or the agents or employees of the
indemnitee, or (b) the giving of or the failure to give directions or
instructions by the indemnitee, or the agents or employees of the indemnitee,
where the giving or failure to give directions or instructions is the primary
cause of bodily injury to persons or damage to property.
ARTICLE 1010
Taxes
10.1 Obligations of the Buyer. The Buyer shall pay to the Taxation and
Revenue Department or to Seller, as determined by Seller, and shall indemnify
the Seller for, any gross receipts and compensating tax, any sales tax, use tax,
deed tax or property transfer tax imposed on the sale or transfer of, or
receipts of Seller from the sale or transfer of, the Assets or the Liabilities
or any part thereof.
10.2 Access to Information. For the applicable period required by law,
the Seller and the Buyer shall have a right to have access to and to copy all of
the records of the other party relevant to the Assets and the Liabilities and
necessary for the preparation of income tax returns, employee tax returns,
employee reports, employee benefits calculations, and for customary accounting
functions and other similar bona fide purposes. Additionally, the Buyer and the
Seller each agree to make available to the other party, at reasonable times and
upon reasonable advance notice, relevant records and personnel in connection
with an investigation or the preparation of or participation in a defense,
negotiation or settlement relating to any pending, future, or threatened
litigation or government agency proceeding (including a tax audit) involving the
conduct or interest of such other party.
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10.3 Allocation of Consideration. The Buyer and the Seller shall use
reasonable efforts to allocate the consideration payable hereunder at the
Closing among the Assets, tangible and intangible, on the basis of an allocation
(the "Allocation") to be determined by Buyer and Seller as soon as practicable
following the date hereof in the manner set forth on Schedule 10.3.
ARTICLE 1111
Miscellaneous
11.1 Public Notice. All written notices to third parties, including
customers of the Branches and borrowers under the Loans (but excluding requests
for consent or approval of regulatory agencies, contractors and similar third
parties), all oral or written notices or general communications to employees of
the Facilities, and all public announcements and press releases concerning the
transactions contemplated by this Agreement made prior to Closing shall be
jointly planned and coordinated by the Buyer and the Seller. Neither party shall
act unilaterally in this regard without the prior approval of the other party,
which approval shall not be unreasonably withheld or delayed; provided, however,
that in the event that a party reasonably concludes that a public announcement
or release is required by applicable law and the parties cannot reach agreement
upon a mutually acceptable release, the party releasing the information,
announcement or public statement shall not be deemed to be in breach of this
Agreement.
11.2 Assignment. Neither party shall assign this Agreement or any of
its rights, duties or obligations hereunder without the prior written consent of
the other party, provided that the Seller may assign this Agreement, whether by
merger or other agreement, to an Affiliate; and provided, further, that Buyer
may assign its rights and obligations as contemplated in the sixth Recital to
this Agreement, it being understood that such assignment shall not release Buyer
from any liability to Seller hereunder.
11.3 Notices. Notices and legal process to be delivered to or served
upon either party hereto shall be deemed to have been duly delivered or served
when delivered in written form by hand or by telegraph, telex or facsimile
transmission, or the day after being sent from within the continental United
States by overnight delivery or courier service, or three (3) calendar days
after posting by registered mail or certified mail with return receipt
requested, to the parties hereto at the following addresses:
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If to the Seller:
c/o BankAmerica Corporation
Corporate Strategy and Development Department #13262
315 Montgomery Street, Suite 1300
San Francisco, CA 94104
Attention: Director of Corporate Strategy and
Development
Fax: (415) 953-0390
With copies to:
Bank of America NT&SA
Legal Department #6399
500 N. Akard
Dallas, Texas 75201-3364
Attention: Linda Newman, Legal Department
Fax: (214) 758-4755
And to:
Pillsbury Madison & Sutro LLP
235 Montgomery Street, 14th Floor
San Francisco, CA 94104
Attention: James C. Olson, Esq.
Fax: (415) 983-1200
If to the Buyer:
BOK Financial Corporation
Bank of Oklahoma Tower
One Williams Center
Tulsa, OK 74192
Attention: James F. Ulrich
Senior Vice President,
Mergers & Acquisitions
Fax: (918) 588-6853
With copies to:
Frederic Dorwart, Lawyers
Old City Hall
124 East Fourth Street
Tulsa, OK 74103
Attention: Frederic Dorwart, Esq.
Fax: (918) 583-8251
or to such other authorized agent or address as either party may hereafter
select by written notice to the other party.
11.4 Time. Time shall be of the essence for all purposes connected with
this Agreement.
11.5 Expenses. Except as otherwise expressly provided herein, the Buyer
and the Seller shall each
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bear its own out-of-pocket expenses incurred in connection with the transactions
contemplated by this Agreement.
11.6 Misdirected Payments or Communications. If for any reason any
payment or communication to which one party is entitled is received by the other
party hereto, the receiving party shall at its own expense forward such payment
or communication to the other party as soon as practicable, but in no event
later than three (3) Business Days, after receipt thereof.
11.7 Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings, except that certain Confidentiality Agreement between the
parties hereto which was executed by the Seller as of June 2, 1998 (the
"Confidentiality Agreement"), relating to the subject matter of this Agreement.
The Confidentiality Agreement shall survive, in accordance with its own terms,
the execution, delivery and performance of this Agreement.
11.8 Amendment. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally. Any such change, waiver,
discharge or termination may be effected only by an instrument in writing signed
by the party against which enforcement of such change, waiver, discharge or
termination is sought.
11.9 Governing Law, Severability. This Agreement shall be governed by
and construed in accordance with the laws of the State of California. If any one
or more of the provisions of this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision were not contained herein.
11.10 Waiver. No delay or omission to exercise any right, power or
remedy accruing to either party upon any breach or default under this Agreement
shall impair any such right, power or remedy of such party, nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or in any similar breach or default thereafter occurring; nor shall any
waiver of any single breach or default be deemed a waiver of any other breach of
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval or any kind or character of any breach or default under this Agreement,
or any waiver of any provision or condition of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All rights and remedies, either under this Agreement or by law or
otherwise afforded to a party, shall be cumulative and not alternative.
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11.11 Confidentiality. The Buyer and its representatives, agents and
designees shall keep confidential and shall not disclose to any person or
entity, without Seller's prior written consent: the amount of the Purchase
Premium, the fact that confidential information has been made available to
Buyer, the existence of this Agreement or any of the terms or conditions hereof,
the status of the transactions contemplated hereby, all information concerning
the books, records, accounts and documents of Seller to which it has access
under this Agreement and any information developed in connection with any
Environmental Assessments that are performed by or on behalf of the Buyer
(including, without limitation, any reports or sampling results and analysis).
These restrictions, however, shall not apply to any such information (i) that
becomes public knowledge through no fault, act or omission of Buyer or its
representatives, agents or designees (for purposes of this Section 11.11,
collectively, the "Buyer"), (ii) that Buyer lawfully acquires from an entity not
under an obligation of confidentiality to Seller, (iii) that is independently
developed by Buyer, or (iv) where the Buyer is legally compelled to disclose
such information, provided that the Seller is provided with advance written
notice of the intention of Buyer to disclose to allow the Seller to contest the
proposed disclosure before any court or agency with jurisdiction unless such
notice impedes a duty or obligation of the Buyer under applicable laws,
regulations or legal requirements to timely report such information, in which
event Buyer shall concurrently advise Seller of Buyer's disclosure. In case of
any actual or purported inconsistency or conflict between the provisions of this
Agreement and the provisions of the Confidentiality Agreement with respect to
obligations of the Buyer to maintain confidentiality as to any information, the
provisions which impose a higher standard of confidentiality on the Buyer with
respect to such information shall control and govern as to such actual or
purported inconsistency or conflict.
11.12 Third Party Rights. Other than the provisions of Section 2.4,
nothing contained in this Agreement, whether express or implied, is intended to
(i) confer any rights or remedies upon any persons other than the parties hereto
and their respective successors and assigns, (ii) relieve or discharge the
obligations or liabilities of any third person to either party to this
Agreement, or (iii) give any third person any right of subrogation or action
over either party to this Agreement.
11.13 Headings. The headings and captions used herein and in the
Schedules and Exhibits are included for purposes of convenience of reference
only and shall not limit or define the meaning of any provisions of this
Agreement.
-63-
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BRANCH PURCHASE AGREEMENT
<PAGE> 68
11.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original instrument, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers or representatives as of the date
first above written.
SELLER:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Brian A. Dunne
----------------------------------------
Name Brian A. Dunne
-----------------------------------
Its Vice President
------------------------------------
BUYER:
BOK FINANCIAL CORPORATION
By /s/ James A. White
----------------------------------------
Name James A. White
-----------------------------------
Its EVP, CFO
------------------------------------
-64-
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BRANCH PURCHASE AGREEMENT
<PAGE> 69
AMENDMENT NO. 1 TO
PURCHASE AND ASSUMPTION AGREEMENT
AMENDMENT NO. 1 TO PURCHASE AND ASSUMPTION AGREEMENT, dated as of
December 1, 1998 (this "Amendment"), between BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association established under the laws
of the United States (the "Seller"), and BOK FINANCIAL CORPORATION, an Oklahoma
corporation and a bank holding company under the Bank Holding Company Act of
1956, as amended (the "Buyer").
RECITALS
WHEREAS, the Seller and the Buyer are parties to a Purchase and
Assumption Agreement dated as of July 27, 1998 ("Original Agreement");
WHEREAS, pursuant to that certain Assignment dated November 13, 1998 (a
copy of which is attached hereto as Exhibit A) ("Assignment") Buyer has assigned
its interest in the Original Agreement to Bank of Albuquerque, National
Association, a national banking association in formation and a wholly-owned
subsidiary of Buyer ("Bank of Albuquerque");
WHEREAS, as a result of subsequent discussions, the parties now intend
to modify certain terms of the Original Agreement.
NOW, THEREFORE, in consideration of their mutual promises and
obligations and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE 1
Certain Definitions
1.1 Certain Definitions.
(a) Capitalized terms used herein without definition shall have the
meanings specified in the Original Agreement.
(b) As used in this Amendment and the Original Agreement, "Agreement"
shall mean the Original Agreement, as amended hereby.
<PAGE> 70
ARTICLE 2
Amendment of the Original Agreement
2.1 Schedule A-1. Schedule A-1 to the Agreement shall be restated in
its entirety to read as set forth on Schedule A-1 hereto.
2.2 Schedule A-2. Schedule A-2 to the Agreement shall be restated in
its entirety to read as set forth on Schedule A-2 hereto.
2.3 Schedule A-3. Schedule A-3 to the Agreement shall be restated in
its entirety to read as set forth on Schedule A-3 hereto.
2.4 Schedule 1.1(b). Schedule 1.1(b) to the Agreement shall be amended
to add the Furniture, Fixtures and Equipment set forth on Schedule 1.1(b)
hereto.
2.5 Schedule 1.1(d). Schedule 1.1(d) to the Agreement shall be amended
to add the Preliminary Title Report set forth on Schedule 1.1(d) hereto.
2.6 Section 1.1. (a) The definition of "Closing Financial Statement"
set forth in Section 1.1 to the Agreement shall be restated in its entirety to
read as follows:
"'Closing Financial Statement' means the balance sheet of the
Facilities prepared by the Seller as of the close of business at the
Facilities on the ninth (9th) Business Day prior to the Closing Date
and on which are recorded as of such date, in accordance with the
Seller's normal practices and procedures, the Assets and the
Liabilities (except that such normal practices and procedures shall be
modified as necessary to implement prorations required by, or other
provisions of, this Agreement)."
(b) The definition of "Loan Cut-off Date" set forth in Section 1.1 to
the Agreement shall be restated in its entirety to read as follows:
"'Loan Cut-off Date' shall mean October 31, 1998."
2.7 Schedule 2.2(f). Schedule 2.2(f) to the Agreement shall be restated
in its entirety to read as set forth on Schedule 2.2(f) hereto.
2.8 Section 2.4. Section 2.4(e) of the Agreement shall be restated in
its entirety to read as follows:
"(e) Seller shall be responsible for timely payment to Employees as
required by law of all wages, salaries,
<PAGE> 71
bonuses, if any, and other compensation with respect to service
completed on or prior to the Closing Date. Seller shall pay each
Employee an amount equal to the total days of vacation that Employee
was eligible to earn under Seller's vacation policy for the entire
calendar year in which the Closing occurs, less the number of vacation
days or fractions thereof that Employee has used as of the Closing
Date. Buyer shall pay Seller an amount equal to the prorated vacation
days or fractions thereof that each Employee would have been eligible
to accrue under Seller's vacation policy between the Closing Date and
the end of the calendar year in which the Closing occurs (regardless of
how many vacation days the Employee has actually used as of the
Closing, or whether the Employee remains employed with Buyer through
the end of the calendar year). Buyer shall allow Employees to take
unpaid leave through the remainder of the calendar year in which the
Closing Date occurs equal to the total days of vacation that Employee
was eligible to earn under Seller's vacation policy for the entire
calendar year in which the Closing occurs, less the number of vacation
days or fractions thereof that Employee has used as of the Closing
Date. For purposes of this Section, personal choice days or fractions
thereof will be treated as vacation days. In subsequent calendar years,
Employees will be eligible to earn vacation according to the schedule
specified in Buyer's policy."
Section 2.4(f) of the Agreement shall be restated in its entirety to
read as follows:
"(f) Through the end of the month in which the Closing Date occurs,
medical, dental, vision, life and accidental death and dismemberment
insurance claims incurred by Employees shall be determined under
Seller's benefit plans. All medical, dental, vision, life and
accidental death and dismemberment insurance claims incurred by
Employees who are in Buyer's employ on the day after the Closing Date
shall be determined under Buyer's benefit plans beginning on the first
of the month that begins after the Closing Date occurs. Beginning the
day after the Closing Date occurs, all disability claims incurred by
Employees who are in Buyer's employ on the day after the Closing Date
shall be determined under Buyer's benefit plans. Buyer agrees that
Employees and their eligible dependents will receive credit for their
periods of coverage under Seller's health or disability plans toward
satisfying any preexisting condition clause in any of Buyer's health or
disability plans, provided such Employee or eligible dependent is
enrolled in Seller's plans on the Closing Date. Buyer also agrees that
Employees and their eligible dependents shall receive credit under
Buyer's health care plans for any deductibles paid by such Employee and
enrolled dependents for the current plan year under a health care plan
maintained by Seller."
<PAGE> 72
2.9 Section 2.5(d)(ii). Section 2.5(d)(ii) of the Agreement shall be
amended to replace the references therein to "tenth (10th) calendar day" and
"ten (10) calendar" with "ninth (9th) calendar day" and "nine (9) calendar",
respectively.
2.10 Section 3.1. Section 3.1 of the Agreement shall be restated in its
entirety to read as follows:
"3.1 Price. The Seller agrees that in the event the Initial
Base Amount (as hereinafter defined) is less than the sum of (i) the
amount of the Assumed Deposits and (ii) the amount of the Accrued
Expenses, the Seller shall transfer to the Buyer cash in the amount
equal to the deficit. The Buyer agrees that in the event the Initial
Base Amount is greater than the sum of (i) the amount of the Assumed
Deposits and (ii) the amount of the Accrued Expenses, the Buyer shall
transfer to the Seller cash in an amount equal to such excess.
Calculations and payments pursuant to this Section 3.1 shall be as of
the date and time of the Closing Financial Statement. The "Initial Base
Amount" shall be equal to the sum of (i) the amount of Cash on Hand,
(ii) the Market Value of $8,325,000.00 for the Real Estate and the
Improvements (which amount is allocated among the Facilities as listed
on Schedule 3.1(a)), (iii) the amount of $1,452,091.30 for the
Leasehold Improvements (which amount, if any, is allocated among the
Facilities as listed on Schedule 3.1(b)), (iv) the Market Value of
$1,428,265.00 for the Furniture, Fixtures and Equipment (which amount
is allocated as listed on Schedule 1.1(b)), (v) the amount of Prepaid
Expenses, (vi) the amount of the Overdrafts, (vii) the amount of any
fees, charges or accrued interest receivable on such Overdrafts, (viii)
the unpaid principal amount of the Loans and the amount of accrued
interest receivable on all such Loans, net of loan loss reserve, and
(ix) the amount of the Purchase Premium."
2.11 Schedule 3.1(a). Schedule 3.1(a) to the Agreement shall be
restated in its entirety to read as set forth on Schedule 3.1(a) hereto.
2.12 Schedule 3.1(b). Schedule 3.1(b) to the Agreement shall be
restated in its entirety to read as set forth on Schedule 3.1(b) hereto.
2.13 Section 3.2(j). The second to last sentence in Section 3.2(j) of
the Agreement shall be restated in its entirety to read as follows:
<PAGE> 73
"Upon the expiration of such ninety (90) calendar day period, the
Seller shall cease forwarding drafts against Transaction Accounts
transferred on the Closing Date and shall instead return them to the
originators marked 'Refer to Maker-Branch Sold'; provided, however,
that, notwithstanding the foregoing, from and after April 8, 1999, such
drafts shall be returned, but the stamped wording may change."
2.14 Section 4.4(b). The second sentence of Section 4.4(b) of the
Agreement shall be restated in its entirety to read as follows:
"In addition, Seller has delivered to the Buyer an Asbestos Survey for
each of the Northtowne, Rio Bravo, Ladera and Uptown Branches."
2.15 Schedule 4.4(b). Schedule 4.4(b) to the Agreement shall be
restated in its entirety to read as set forth on Schedule 4.4(b) hereto.
2.16 Section 5.2. Section 5.2 of the Agreement shall be restated in its
entirety to read as follows:
"Representations and Warranties of Buyer and Bank of Albuquerque. The
Buyer represents and warrants to the Seller that, as of the date of
this Agreement, and Bank of Albuquerque represents and warrants to
Seller that, as of the Closing Date, in each case subject to Section
4.4(a):
(a) The Buyer is a corporation duly organized and in good standing
under the laws of the State of Oklahoma and is a bank holding company
under the Bank Holding Company Act of 1956, as amended;
(b) Bank of Albuquerque is a national banking association, duly
organized and in good standing under the laws of the United States;
(c) Subject to the satisfaction of any applicable governmental or
regulatory requirements referred to in Section 4.2(b) and to approval
of this Agreement and the transactions contemplated hereby by the
requisite vote or consent of the holders of outstanding securities of
each of the Buyer and Bank of Albuquerque, if such approval is required
by applicable law, contract, their respective articles of incorporation
or association or bylaws, or otherwise, each of the Buyer and Bank of
Albuquerque has the requisite power and authority to execute, deliver
and perform this Agreement and to consummate the transactions
contemplated hereby; all acts and other proceedings required to be
taken by or on the part of the Buyer and Bank of Albuquerque to
execute, deliver and perform this
<PAGE> 74
Agreement and to consummate the transactions contemplated hereby have
been duly and validly taken; and this Agreement has been duly executed
and delivered by, and constitutes the valid and binding agreement of,
each of the Buyer and Bank of Albuquerque, enforceable in accordance
with its terms except as limited by bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and similar laws
affecting creditors generally and by the availability of equitable
remedies;
(d) Subject to the satisfaction of any applicable governmental or
regulatory requirements referred to in Section 4.2(b), the execution,
delivery and performance by each of the Buyer and Bank of Albuquerque
of this Agreement do not, and the consummation by each of the Buyer and
Bank of Albuquerque of the transactions contemplated hereby will not,
violate or conflict with their respective articles of incorporation or
association or bylaws, or any law or regulation currently applicable to
the Buyer or Bank of Albuquerque, or any material agreement or
instrument, or currently applicable order, judgment or decree to which
either is a party or by which either is bound or require any prior
filing by the Buyer or Bank of Albuquerque with, or authorization,
approval, consent or other action with respect to either the Buyer or
Bank of Albuquerque by, any governmental or regulatory agency except
such as have been made or obtained and are in full force and effect or
will be made or obtained and are in full force and effect as of the
Closing;
(e) There are no actions, suits or proceedings pending or, to the
knowledge of the Buyer, threatened against or affecting, the Buyer or
Bank of Albuquerque, which may cause a material adverse change in the
business or financial condition of the Buyer or Bank of Albuquerque or
would prohibit consummation of the transactions contemplated hereunder;
(f) Neither the Buyer nor Bank of Albuquerque has paid or agreed to pay
any fee or commission to any agent, broker, finder or other person for
or on account of services rendered as a broker or finder in connection
with this Agreement or the transactions covered and contemplated
hereby. All negotiations relating to this Agreement have been conducted
by the Buyer directly and without the intervention of any person in
such manner as to give rise to any valid claim against the Seller for
any brokerage commission or like payment;
(g) Neither the Buyer nor Bank of Albuquerque has received written
notice from any federal or New Mexico governmental or regulatory agency
indicating that it would oppose or not grant or issue its consent or
approval, if required, with respect to the transactions contemplated by
this Agreement;
<PAGE> 75
(h) Each of the Buyer and Bank of Albuquerque satisfies each and all of
the standards and requirements lawfully within their respective control
of which each is aware (and, as of the Closing Date, will satisfy each
and all of the standards and requirements lawfully within their
respective control) imposed as a condition to obtaining, or necessary
to comply with and in order to obtain, any of the governmental or
regulatory approvals referred to in Section 4.2(b) of this Agreement;
(i) At the time of the most recent regulatory evaluation of Buyer's
performance under the Community Reinvestment Act (the "CRA"), Buyer's
record of performance was deemed to be "outstanding" or "satisfactory",
and no proceedings are pending or, to the knowledge of Buyer,
threatened, that would result in a change in such evaluation. Except as
previously disclosed in writing to Seller, Buyer has not received any
adverse public comments with respect to its compliance under the CRA
since the date of its most recent regulatory evaluation of its
performance under the CRA; and
(j) The Buyer has available sufficient cash or other liquid assets or
financing pursuant to binding agreements or commitments which may be
used to fund the transactions contemplated hereby and its ability to
consummate such transactions is not contingent on raising any equity
capital, obtaining specific financing therefor, consent of any lender
or any other matter."
ARTICLE 3
Employee Services
3.1 Employee Services. Prior to the Closing Date and ending by the
Closing Date, Seller agrees to loan certain employees ("Loaned Employees") to
Buyer to undertake such activities for Buyer as mutually agreed upon between
Seller and Buyer (the "Employee Training") by the execution of Assignment
Letters in substantially the form attached hereto as Exhibit B (each, an
"Assignment Letter"). Employees of Seller shall not be authorized to participate
in any Employee Training until an Assignment Letter has been executed by Seller
and agreed to by Buyer in accordance herewith. Unless otherwise expressly
provided herein or in an Assignment Letter, if any term or provision contained
in an Assignment Letter conflicts with any other terms or provisions of the
Agreement, such other terms or provisions of the Agreement shall govern.
Further, Seller's obligation hereunder is to use reasonable efforts to make
Employees available to Buyer, without materially affecting the continuing
operations of the Branches and the Offices. Should any Employee's employment
relationship with Seller end for any reason, Seller shall have no obligation to
replace such Employees.
<PAGE> 76
3.2 Assignment Letter Changes. All changes or modifications to any
Assignment Letter require the prior written approval of Buyer and Seller.
3.3 Supervision. While a Loaned Employee is being trained by Buyer
hereunder, Buyer will ensure that:
(a) Buyer shall supervise and instruct the Loaned Employee
with regard to the training being provided to the Loaned Employee;
(b) Such Loaned Employee shall not be named or act in any way
in the capacity as an employee of Buyer unless expressly agreed by
Seller and Buyer in each individual instance in writing;
(c) Training performed by a Loaned Employee on behalf of Buyer
for other Loaned Employees, if requested by Buyer, shall be reviewed by
Buyer's supervisors on a regular basis;
(d) If a Loaned Employee is being trained by Buyer while
working for Seller, Buyer will cooperate with Seller to balance such
Loaned Employee's work in a reasonable fashion, consistent with the
terms of the Assignment Letter; and
(e) Buyer and its officers, employees and agents will not
request or direct any Loaned Employee to disclose to Buyer or any other
party confidential information of Seller or otherwise direct or
encourage the Loaned Employee to take any action that would be
detrimental to Seller, its customers, or otherwise impede or diminish
the value to Seller of the transactions contemplated by the Agreement.
In the event that Buyer or its officers, employees or agents gain
possession of any such confidential information of Seller, Buyer shall
immediately return such confidential information to Seller. Buyer will
direct all requests for Seller's confidential information only to those
officers of Seller who have been designated in writing by Seller as
authorized contacts.
3.4 Payment. (a) Unless otherwise specified in an Assignment Letter,
Buyer will pay Seller for Employee Training in an amount equal to the
incremental additional compensation costs for each unit (computed on the basis
of actual FTE usage less FTE budget for the period) incurred by Seller as a
result of each such Loaned Employees' participation in such Employee
<PAGE> 77
Training for the time during which the Employee Training is being conducted.
Such incremental additional compensation costs shall be computed on the basis of
actual FTE usage less FTE budget for the period multiplied by the blended
average base salary rate for such unit (plus, where applicable, an additional
28% of such base salary rate to cover benefits). Buyer shall not be responsible
for payment for an Employee's absence due to vacation, holidays, illness or
leaves of absence, unless otherwise specified in an Assignment Letter. Seller
will invoice Buyer monthly on net thirty (30) day terms, unless otherwise
specified in the applicable Assignment Letter.
(b) Travel and Meal Expenses. Loaned Employees will submit travel and
meal expenses incurred by such Loaned Employees as set forth in the Assignment
Letter to Seller for reimbursement, in accordance with Seller's travel policy.
Buyer will reimburse Seller for all such travel and meal expenses, which will be
submitted to Buyer on Seller's monthly invoices.
3.5 Insurance and Indemnification.
(a) Scope. With respect to Employee Training and any claims, losses, or
expense arising in connection with the Employee Training, this Section 3.5 shall
control, and Article 9 of the Agreement shall not apply.
(b) Insurance. Each party shall obtain and maintain at its own expense,
the insurance coverage it deems appropriate to adequately insure itself against
losses arising under this Article 3.
(c) Expenses and Allocation of Risk of Loss. Prior to the Closing Date,
the following expenses and risks of loss shall be allocated between Buyer and
Seller as follows:
(i) Seller shall be responsible for the Loaned Employees'
salary, benefits, workers' compensation coverage and unemployment
benefits; and
(ii) Buyer shall be responsible for, and Buyer's insurance
(both on behalf of Buyer and the Loaned Employee) shall answer to any
losses of Buyer, Seller or any third party arising out of or related to
any act or omission of a Loaned Employee while involved in Employee
Training for Buyer.
(d) Indemnification. Buyer shall indemnify and hold harmless each of
Seller and its employees, officers, directors, representatives, and agents and
each of their respective heirs, personal representatives, successors, and
assigns, from any and all claims, actions, causes of action, demands, liability,
losses, costs and expenses (including court costs and reasonable fees of
attorneys and other professionals, including the
<PAGE> 78
allocated cost of internal counsel) which (i) are the responsibility of Buyer
under subsections (b) and (c) above, or (ii) arise with respect to any claim by
a Loaned Employee for damages not covered by workers' compensation coverage by a
Loaned Employee arising from any claim of injury incurred or sustained by such
Loaned Employee while involved in Employee Training for the Buyer. Because
Seller is self-insured for workers' compensation purposes, Buyer agrees to
reimburse Seller for out-of-pocket expenses incurred as a result of an injury
sustained by such Loaned Employee while involved in Employee Training for Buyer.
After receipt by Seller of notice of commencement of any action against
it in respect of which a claim is to be made against Buyer under this Section,
Seller will promptly notify Buyer of the commencement of such action, enclosing
a copy of all papers served, but the omission to so notify Buyer will not
relieve Buyer from any liability that it may have to Seller under the foregoing
provisions of this Article 3 unless, and only to the extent that, such omission
results in the loss of substantive rights or defenses by Buyer. If any such
action is brought against Seller and it notifies Buyer of its commencement,
Buyer will be entitled to participate in and, to the extent that it elects by
delivering written notice to Seller promptly after receiving notice of the
commencement of the action from Seller, to assume the defense of the action,
with counsel reasonably satisfactory to Seller, and after notice from Buyer to
Seller of its election to assume the defense. Buyer will not be liable to Seller
for any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the Seller in
connection with the defense. Seller will have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of such
counsel will be at the expense of Seller unless (1) the employment of counsel by
Seller has been authorized in writing by Buyer, (2) Seller has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it that are different from or in addition to those available to
Buyer, (3) a conflict or potential conflict exists (based on advice of counsel
to Seller) between Seller and Buyer (in which case Buyer will not have the right
to direct the defense of such action on behalf of Seller) or (4) Buyer has not
in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges or
counsel will be at the expense of Buyer. It is understood that Buyer shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges
of more than one separate firm admitted to practice in such jurisdiction at any
one time for Seller. All such fees, disbursements and other charges will be
reimbursed by Buyer promptly as they are incurred. Buyer will
<PAGE> 79
not be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld).
3.6 Termination of Assignment Letter Without Cause. Buyer at its sole
discretion, may elect to terminate any Assignment Letter effective immediately
upon written notice thereof to Seller. Upon receipt of such notice, Seller and
the respective Loaned Employee immediately shall cease all Employee Training
under the applicable Assignment Letter, and Buyer will pay Seller's final
invoice for all Employee Training rendered pursuant to the terminated Assignment
Letter through the date of such termination.
3.7 Relationship of the Parties. No joint venture, partnership, agency,
employment relationship or other joint enterprise between Seller and Buyer is
contemplated hereby during the training period. No employee of Seller shall be
considered an employee of the Buyer during this training period. Seller shall
take all actions and do all things which are required to ensure that it has
complied with all laws respecting its position as the employer providing
Employee Training pursuant hereto. In performing their respective obligations
under this Article 3, the parties shall act at all times as independent
contractors, and at no time shall either party make any commitments or incur any
charges or expenses for or in the name of the other party.
3.8 Employment Taxes and Benefits. To the extent required under
applicable law, Seller shall report as income all compensation received by
Seller pursuant hereto and pay all taxes due on such compensation. Seller shall
indemnify and hold harmless Buyer and its employees, officers, directors,
representatives and agents, and their respective heirs, personal
representatives, successors and assigns, from any and all claims, actions,
causes of action, demands, liability, losses, costs and expenses (including
court costs and reasonable fees of attorneys and other professionals) arising
from any obligation imposed on Buyer to pay any withholding taxes, social
security, unemployment insurance, workers' compensation insurance, disability
insurance or similar items, including interest and penalties thereon, in
connection with any payments made to Seller by Buyer pursuant hereto.
ARTICLE 4
Branch Support Center
4.1 Lease of Certain Branch Support Center Premises. Buyer and Seller
hereby covenant and agree to execute and deliver the BSC Lease (as hereinafter
defined) on the Closing Date, and to take all other action necessary to be taken
to cause the BSC Lease to become effective as of the Closing Date.
<PAGE> 80
As used herein, "BSC Lease" shall mean that certain lease agreement between
Buyer, as lessor, and Seller, as lessee, relating to certain premises located at
the Branch Support Center, which lease agreement shall be in substantially the
form attached hereto as Exhibit C.
4.2 Section 7.1. Section 7.1 of the Agreement shall be amended to add a
subsection (g) as follows:
"(g) The BSC Lease shall have become effective as of the Closing Date."
4.3 Environmental Due Diligence Period. Buyer and Seller hereby
acknowledge and agree that the Environmental Due Diligence Period with respect
to the Branch Support Center began on September 11, 1998 and concluded on
September 30, 1998.
ARTICLE 5
Miscellaneous
5.1 Terms of Original Agreement Ratified. Except as amended or modified
hereby, the terms, covenants and provisions of the Original Agreement are hereby
ratified and confirmed and shall remain in full force and effect.
5.2 Governing Law. This Amendment and the rights and obligations of the
parties hereto shall be governed by and construed in accordance with the laws of
the State of California.
5.3 Entire Agreement. This Amendment constitutes the entire agreement
of the parties hereto with respect to the amendments contained herein and
supersedes any prior expressions of intent or understandings with respect
thereto.
<PAGE> 81
5.4 Counterparts. This Amendment may be executed in two or more
counterparts and by different parties hereto on separate counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first above written.
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By /s/ Laurie Readhead
--------------------------------
Laurie Readhead
Executive Vice President
BOK FINANCIAL CORPORATION
By /s/ James A. White
--------------------------------
James A. White
Executive Vice President
and Chief Financial
Officer
BANK OF ALBUQUERQUE, NATIONAL
ASSOCIATION (IN FORMATION)
By /s/ James A. White
--------------------------------
James A. White
Executive Vice President
and Chief Financial
Officer
<PAGE> 1
EXHIBIT 10.25
[EXECUTION COPY DATED DECEMBER 30, 1998 PREPARED BY FREDERIC DORWART]
C O N F I D E N T I A L
ACQUISITION DOCUMENT
(POOLING OF INTERESTS AND TRIPARTITE FORWARD MERGER TRANSACTION)
****
<PAGE> 2
MERGER AGREEMENT
AMONG
BOK FINANCIAL CORPORATION,
BOKF MERGER CORPORATION NUMBER SEVEN,
FIRST BANCSHARES OF MUSKOGEE, INC.,
FIRST NATIONAL BANK AND TRUST COMPANY OF MUSKOGEE,
AND
CERTAIN SHAREHOLDERS
OF
FIRST BANCSHARES OF MUSKOGEE, INC.,
* * * *
AGREEMENT DATE OF DECEMBER 30, 1998
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INDEX
TO
MERGER AGREEMENT
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SECTION PAGE
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1. Purpose of this Merger Agreement.........................................................................1
2. The Merger...............................................................................................2
3. Effect of the Merger.....................................................................................3
4. Representations and Warranties of Principal Shareholders ................................................4
5. Representations and Warranties of BOKF..................................................................13
6. Covenants...............................................................................................17
7. Conditions Precedent to Closing by BOKF and Mergercorp..................................................28
8. Conditions Precedent to Closing by First Muskogee.......................................................30
9. Closing.................................................................................................31
10. Provisions Respecting BOKF Shares.......................................................................34
11. First Muskogee Termination Damages......................................................................35
12. BOKF Termination Damages................................................................................37
13. The BOKF Common Stock Escrow............................................................................37
14. Miscellaneous Provisions................................................................................53
EXHIBIT CAPTION EXHIBIT NUMBER
--------------- --------------
Principal Shareholders 1.3
Stock Options 2.9
Subsidiaries 4.3
Material Liabilities 4.6.3
Conduct of Business Prior to Closing Exceptions 4.7
Contracts and Commitments 4.9
Litigation 4.10
Employee Contracts and Benefit Plans 4.15
Employment Agreement 6.12.1
Obligations 6.13
Compensation Exceptions 6.3.7
First Muskogee Counsel's Opinion 7.4
Non-Competition Agreement 7.7
BOKF Counsel's Opinion 8.3
Exceptions to Agreement Terminations 9.1.3
</TABLE>
<PAGE> 4
MERGER AGREEMENT
This merger agreement ("Merger Agreement") is effective as of December
30, 1998 (the "Agreement Date") among:
(i) First Bancshares of Muskogee, Inc., an Oklahoma
Corporation ("First Muskogee");
(ii) First National Bank and Trust Company of Muskogee
("First Muskogee Bank");
(iii) The shareholders of First Muskogee set forth in
Exhibit 1.3 ("Principal Shareholders");
(iv) BOK Financial Corporation ("BOKF"); and,
(v) BOKF Merger Corporation Number Seven
("Mergercorp").
In consideration of the mutual covenants contained herein, the adequacy
of which is hereby expressly acknowledged, and intending to be legally bound
hereby, First Muskogee, First Muskogee Bank, Principal Shareholders, BOKF and
Mergercorp agree as follows:
1. PURPOSE OF THIS MERGER AGREEMENT. The purpose of this Merger Agreement
is as follows:
1.1 First Muskogee is a bank holding company organized under the
laws of Oklahoma with offices in Muskogee, Oklahoma. First
Muskogee is subject to regulation by the Federal Reserve
Board ("FRB"). First Muskogee owns all of the issued and
outstanding capital stock of First Muskogee Bank (located in
Muskogee, Oklahoma). First Muskogee Bank is a bank organized
in accordance with the laws of the United States and subject
to regulation by the Office of the Comptroller of the
Currency. The issued and outstanding capital stock of First
Muskogee consists solely of a single class of common stock of
a par value of $10.00 per share ("Common Stock") of which
81,260 shares are issued and outstanding. The issued and
outstanding Common
<PAGE> 5
Stock of First Muskogee as of the Closing is hereafter called
the "First Muskogee Common Stock".
1.2 BOKF is a bank holding company organized under the laws of
the State of Oklahoma. BOKF is subject to regulation by the
FRB. BOKF owns all of the capital stock of Mergercorp.
Mergercorp has not heretofore engaged in business, but has
been formed to effect the transaction contemplated in this
Merger Agreement. The issued and outstanding capital stock of
Mergercorp consists solely of 1,000 shares of common stock,
par value of $1.00 per share (the "Mergercorp Shares").
1.3 The Principal Shareholders set forth on Exhibit 1.3 own not
less than fifty and one tenth percent (50.1%) of the First
Muskogee Common Stock.
1.4 The purpose of this Merger Agreement is to set forth the
terms and conditions on which First Muskogee and Mergercorp
shall merge. This Merger Agreement shall constitute a plan of
merger for corporate law purposes and for federal income tax
purposes under Section 368(a)(2)(D) of the Internal Revenue
Code.
1.5 BOKF owns all of the issued and outstanding capital stock of
Bank of Oklahoma, National Association ("BOk").
1.6 As used in this Merger Agreement, the term "Holders" includes
the Principal Shareholders and all other holders of First
Muskogee Common Stock, including all holders of Stock Options
(as hereafter defined) which are exercised prior to the
Closing or converted at the Closing.
2. THE MERGER. On the terms and conditions hereafter stated, First
Muskogee shall be merged into Mergercorp (the "Merger").
<PAGE> 6
2.1 Mergercorp shall be the surviving corporation ("Surviving
Corporation").
2.2 The Certificate of Incorporation of Mergercorp shall be the
Certificate of Incorporation of the Surviving Corporation
until changed as provided by law.
2.3 The Bylaws of Mergercorp shall be the Bylaws of the Surviving
Corporation until changed as provided by law.
2.4 The officers of Mergercorp shall be the officers of the
Surviving Corporation, until changed as provided by law.
2.5 The directors of Mergercorp shall be the directors of the
Surviving Corporation until changed as provided by law.
2.6 The Merger shall be effective at the Closing (as hereafter
provided in Section 9).
2.7 Each share of First Muskogee Common Stock shall, subject to
the provisions of Section 1091 of the Oklahoma General
Corporation Act, automatically and without any action on the
part of the holder thereof, be converted into:
2.7.1 14.3089 shares (Conversion Ratio") of fully paid and
non- assessable shares of Common Stock, par value of
$0.0006 per share, of BOKF ("BOKF Common Stock");
provided, however, no fractional shares shall be
issued and, in lieu of any fractional share to which
any person or entity who or which is a record holder
of First Muskogee Common Stock is entitled, a full
share of BOKF Common Stock shall be issued; and,
<PAGE> 7
2.7.2 Each Holder shall have the right to receive, upon
termination of the BOKF Common Stock Escrow (as
hereafter defined in Section 13), his or her share
of the Escrow Shares (as hereafter defined)
distributable to Holders upon termination of the
BOKF Common Stock Escrow.
2.8 The shares of BOKF Common Stock issued in accordance with
Section 2.7 and Section 2.9 are hereafter collectively called
the "BOKF Shares".
2.9 Each stock option to buy one share of First Muskogee Common
Stock described in Exhibit 2.9 which remains outstanding at
the Closing (collectively, the "Stock Options") shall
automatically and without any action on the part of the
holders of the Stock Options be converted (without the
payment of the Option Price) into 10.6596 shares of BOKF
Common Stock; provided, however, no fractional shares shall
be issued and, in lieu of any fractional share to which any
person who is a record holder of Stock Options is entitled, a
full share of BOKF Common Stock shall be issued.
Notwithstanding the foregoing, if permitted by the accounting
rules pertaining to accounting for the Merger as a pooling of
interest under A.P.B. 16 (as determined by the opinion
described in Section 7.5), each Stock Option to buy one share
of First Muskogee Common Stock which remains outstanding at
the Closing shall automatically and without any action on the
part of the holders of the Stock Options be converted
(without the payment of the Option Price) into 6.8221 shares
of BOKF Common Stock and BOKF shall, in respect of each such
Stock Option, withhold and pay over in lieu of any other
withholding $181.32 to the Internal Revenue Service for the
account of the holder of such Stock Option; provided,
however, no fractional
<PAGE> 8
shares shall be issued and, in lieu of any fractional share
to which any person who is a record holder of Stock Options
is entitled, a full share of BOKF Common Stock shall be
issued. If any of the Stock Options terminate without being
exercised, the Conversion ratio and the conversion factor for
the Stock Options shall be recalculated by mutual agreement
of BOKF and First Muskogee to accomplish the intention of the
parties.
2.10 A portion of the BOKF Common Stock issuable to Holders of
First Muskogee Common Stock and Stock Options will be
delivered to the BOKF Common Stock Escrow (as defined in
Section 13) (the "Escrow Shares"). The Escrow Shares shall
consist of a total number of shares of BOKF Common Stock
having a market value on the Closing date of $1 million
(determined in the manner provided in Section 13.6), adjusted
for any rounding requirements. The number of shares of BOKF
Common Stock deliverable into escrow shall be prorated
between the holders of First Muskogee Common Stock
outstanding on the Closing Date (excluding any dissenting
shares) (based on the number of shares of First Muskogee
Common Stock owned by each Holder) and the holders of Stock
Options at the Closing date (based on the number of shares of
First muskogee Common Stock the optionee would have received
had the option been exercised in full prior to the closing),
rounded in the case of each Holder up to the nearest whole
share.
3. EFFECT OF THE MERGER. The Merger shall have the following effects:
3.1 The corporate franchise, existence, rights and liabilities of
Mergercorp shall continue unaffected and unimpaired.
<PAGE> 9
3.2 The corporate franchise, existence, rights and liabilities of
First Muskogee shall be merged into Mergercorp and the
separate existence of First Muskogee shall cease.
3.3 Mergercorp shall have and be vested with all of the rights,
powers, assets, property, liabilities and obligations of
First Muskogee.
4. REPRESENTATIONS AND WARRANTIES OF FIRST MUSKOGEE AND FIRST MUSKOGEE
BANK. First Muskogee and First Muskogee Bank hereby, jointly and
severally, represent and warrant to BOKF that:
4.1 INCORPORATION AND CORPORATE POWER. First Muskogee is a
corporation duly organized, validly existing and in good
standing under the laws of Oklahoma. First Muskogee Bank is a
bank duly organized, validly existing and in good standing
under the laws of the United States. Each of First Muskogee
and First Muskogee Bank has all the corporate power and
authority necessary and required to own its properties and to
conduct its business as such business is now being conducted.
Each of First Muskogee and First Muskogee Bank is (A) in
material compliance with all applicable provisions of all
applicable federal, state and local statutes, laws,
regulations, ordinances and other requirements of any
governmental authorities (including, but not limited to,
whether similar or dissimilar, the Bank Holding Company Act
of 1956, the Oklahoma General Corporation Act, the National
Bank Act and the filing of all administrative reports and the
payment of all fees) in effect as of the date of this Merger
Agreement and (B) shall be in material compliance therewith
at the time of Closing.
<PAGE> 10
4.2 CAPITAL.
4.2.1 The Principal Shareholders are the record and
beneficial owners of (i) not less than fifty and one
tenth percent (50.1%) of the First Muskogee Common
Stock. The First Muskogee Common Stock is and at the
Closing will be all of the issued and outstanding
capital stock of First Muskogee. No person or entity
has any right or option to acquire any capital stock
of First Muskogee except Stock Options. The First
Muskogee Common Stock shall consist at the Closing
of no more than eighty-one thousand two hundred and
forty (81,240) shares plus the number of such shares
as may be issued upon the exercise of Stock Options.
4.2.2 First Muskogee owns all of the issued and
outstanding capital stock of First Muskogee Bank
(the "First Muskogee Bank Stock"). The First
Muskogee Bank Stock is and at the Closing will be
all of the issued and outstanding capital stock of
First Muskogee Bank. No person or entity has any
right or option to acquire any capital stock of
First Muskogee Bank.
4.3 CAPITALIZATION OF FIRST MUSKOGEE AND FIRST MUSKOGEE BANK. The
First Muskogee Common Stock and First Muskogee Bank Stock are
validly issued and outstanding, fully paid and
non-assessable. There are no outstanding subscriptions,
conversion privileges, calls, warrants, options or agreements
<PAGE> 11
obligating First Muskogee and First Muskogee Bank to issue,
sell or dispose of, or to purchase, redeem or otherwise
acquire any shares of their capital stock (collectively,
"options and rights") except the Stock Options and agreements
relating to directors qualifying shares of First Muskogee
Bank. None of the First Muskogee Common Stock and First
Muskogee Bank Stock has been issued or disposed of in
violation of any preemptive rights of any shareholder nor in
violation of any agreement to which First Muskogee or First
Muskogee Bank was or is a party. First Muskogee and First
Muskogee Bank have no subsidiaries and do not own, nor have
the right or obligation to acquire, any shares of equity
securities of any corporation except (i) First Muskogee Bank
is a subsidiary of First Muskogee and (ii) as set forth in
Exhibit 4.3.
4.4 NON-VIOLATION OF OTHER AGREEMENTS. The execution and delivery
of this Merger Agreement, and the compliance with its terms
and provisions by First Muskogee and First Muskogee Bank
(including the execution and delivery of any document
required to be executed by First Muskogee or First Muskogee
Bank) will not breach any agreement, lease, or obligation of
any nature, whether similar or dissimilar, by which First
Muskogee or First Muskogee Bank is bound.
4.5 FINANCIAL STATEMENTS. First Muskogee has delivered to BOKF,
or will have delivered to BOKF prior to the Closing as soon
as future financial statements are available, copies of the
following ("Financial Statements"):
4.5.1 Consolidated Financial Statements (Unaudited) for
First Muskogee and Subsidiaries, December 31, 1996
and 1997;
<PAGE> 12
4.5.2 Financial Statements (Unaudited) for First Muskogee
Bank, December 31, 1996 and 1997;
4.5.3 Financial Statements (Unaudited) for First Muskogee
and Subsidiaries, September 30, 1998, December 31,
1998, March 31, 1999 (if the Closing occurs after
March 31, 1999), and after March 31,1999 such
financial statements as are available; and,
4.5.4 Financial Statements (Unaudited) for First Muskogee
Bank, September 30, 1998, December 31, 1998, March
31, 1999 (if the Closing occurs after March 31,
1999) and after March 31,1999 such financial
statements as are available.
The Financial Statements described in Section 4.5.1 and 4.5.2
(A) have been prepared or will have been prepared in
accordance with generally accepted regulatory accounting
principles, consistently applied and (B) fairly reflect the
financial condition and results of operations for the
indicated periods. The Financial Statements described in
Sections 4.5.3 and 4.5.4 fairly reflect the financial
condition and results of operations for the periods
indicated, subject to immaterial year-end adjustments and the
omission of footnotes.
4.6 MATERIAL LIABILITIES. Neither First Muskogee nor First
Muskogee Bank has any material liabilities (including, but
not limited to, whether similar or dissimilar, liabilities or
obligations for taxes, whether due or to become due) except:
4.6.1 Those fully reflected or reserved against, or
otherwise disclosed, in the Financial Statements;
<PAGE> 13
4.6.2 Those incurred with due care since September 30,
1998 in the normal course of business consistent
with past practices; and,
4.6.3 Those specifically disclosed in Exhibit 4.6.3 to
this Merger Agreement.
4.7 CONDUCT OF BUSINESS PRIOR TO CLOSING. Except as set forth in
Exhibit 4.7, since September 30, 1998, and until the Closing
of this transaction, (A) each of First Muskogee and First
Muskogee Bank has carried on and will carry on its business
only in the ordinary and normal course consistent with past
practices and (B) has not and will not, without the prior
consent of BOKF:
4.7.1 Incur any material liabilities, commitments or
obligations, contingent or otherwise, or dispose of
any of its assets, except in the ordinary course of
its business consistent with past practices and for
the purpose of carrying on the business as a going
concern;
4.7.2 Incur any bank or other institutional debt, or enter
into any agreement for the borrowing of money;
except borrowing of federal funds or borrowing from
the Federal Home Loan Bank by First Muskogee Bank
consistent with past practices;
4.7.3 Suffer any material adverse change in the financial
conditions, assets, liabilities, business or
property of First Muskogee taken as a whole or of
First Muskogee Bank taken as a whole; and,
<PAGE> 14
4.7.4 Make any material change in the manner in which
business is conducted (including, without
limitation, branch relations, branch closings, and
any material change in products offered to
customers).
4.8 TAX RETURNS/REPORTS. Each of First Muskogee and First
Muskogee Bank has duly filed all tax reports and returns
required to be filed by it and has duly paid all taxes and
other charges claimed to be due from it by federal, state and
local taxing authorities. No waivers of the statute of
limitation have been issued with respect to unaudited years.
First Muskogee and First Muskogee Bank have no knowledge of
any facts which could reasonably be expected to result in a
material deficiency with respect to unaudited tax returns
which would result in a material adverse effect on First
Muskogee taken as a whole or First Muskogee Bank taken as a
whole.
4.9 CONTRACTS AND COMMITMENTS.
4.9.1 A list of all contracts and commitments, other than
credit and lending, deposit or borrowing
transactions entered into in the ordinary course of
business by First Muskogee or First Muskogee Bank
which are material to the business, operations or
financial condition of First Muskogee or First
Muskogee Bank as of this date, is set forth on
Exhibit 4.9. For the purpose of Exhibit 4.9,
materiality shall mean those contracts and
commitments (including a series of related contracts
or commitments) for which payment or other
consideration to be furnished by any party is more
than $25,000.
<PAGE> 15
4.9.2 Except as set forth on Exhibit 4.9, each of First
Muskogee and First Muskogee Bank has in all material
respects performed and is performing all contractual
and other obligations required to be performed by
them.
4.10 LITIGATION. Except as set forth in Exhibit 4.10, there is not
pending, or, to the knowledge and belief of First Muskogee
and First Muskogee Bank threatened, any claim, litigation,
proceeding, order of any court or governmental agency, or
governmental investigation or inquiry to which First Muskogee
or First Muskogee Bank is a party or which involves their
business operations, any of their property or any property
leased by them which, individually or in the aggregate:
4.10.1 May reasonably result in any material adverse change
in the financial condition, business, prospects,
assets, properties or operations of First Muskogee
taken as a whole or First Muskogee Bank taken as a
whole;
4.10.2 May reasonably involve the expenditure of more than
a total of $10,000 in legal fees and/or allocated
employees' salaries or their direct or indirect
costs; or,
4.10.3 Alleges violation of any law, rule or regulation.
4.11 BROKERAGE FEES. Neither First Muskogee nor First Muskogee
Bank has incurred or will incur, directly or indirectly, any
liability for brokerage, finder's, financial advisor's or
agent's fees or commissions by virtue of any commitment made
by any of them in connection with this Merger Agreement or
any transaction contemplated hereby except for the fee to
Alex Sheshunoff & Co. ("Sheshunoff") pursuant to that certain
agreement dated August 31, 1998.
<PAGE> 16
4.12 REQUIRED CORPORATE ACTION. The execution, delivery and
consummation of this Merger Agreement has been duly and
validly authorized by the board of directors of First Muskogee
and will at the time of Closing have been duly and validly
authorized by the board of directors of First Muskogee Bank
and the shareholders of First Muskogee and First Muskogee
Bank.
4.13 AUTHORIZED EXECUTION. This Merger Agreement has been duly
executed and delivered by Principal Shareholders and by duly
authorized officers of First Muskogee and First Muskogee
Bank. This Merger Agreement constitutes the legal, valid and
binding agreement and obligation of Principal Shareholders,
First Muskogee and First Muskogee Bank enforceable against
them in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, moratorium,
receivership, and other similar laws affecting the rights of
creditors generally.
4.14 TITLE TO ASSETS; ENCUMBRANCES. First Muskogee and First
Muskogee Bank have good and valid title (with respect to fee
real estate, good and valid title shall mean such title as
may be insured on standard title insurance forms with no
exceptions materially and adversely affecting the value or
use of the fee real estate) to their assets, and in each case
subject to no mortgage, pledge, lien, security interest,
conditional sale agreement, or other encumbrance of any
nature whether similar or dissimilar, except:
4.14.1 Such encumbrances which are purchase money security
interests entered into in the ordinary course of
business consistent with past practice reflected on
their books and records;
<PAGE> 17
4.14.2 Lessors' interests in leased tangible real and
personal property reflected on their books and
records;
4.14.3 Such encumbrances for taxes and assessments not yet
due and payable;
4.14.4 Encumbrances as do not materially detract from the
value or interfere with the use or operation of the
asset subject thereto; and,
4.14.5 Repossessed and foreclosed assets acquired in
satisfaction of debt previously contracted.
4.15 EMPLOYEES. Except as set forth on Exhibit 4.15, none of the
employees of First Muskogee and First Muskogee Bank is
employed under any employment contract (oral or written) or
is the beneficiary of any compensation plan (oral or written)
or is entitled to any payment from First Muskogee and First
Muskogee Bank by reason of this Merger Agreement or the
Merger and there are no employment contracts, management
contracts, consulting agreements, union contracts, labor
agreements, pension plans, profit sharing plans or employee
benefit plans to which First Muskogee or First Muskogee Bank
are a party or by which either of them is bound. The First
Muskogee 401k Plan is in full compliance with all
requirements of the Plan and with the Employee Retirement
Income Security Act and the regulations promulgated pursuant
thereto.
<PAGE> 18
4.16 ENVIRONMENTAL LAWS. The existence, use and operation of the
assets of First Muskogee and First Muskogee Bank are in
material compliance with all applicable statutes, rules and
regulations including, without limiting the generality of the
foregoing, all environmental and zoning laws and the
Americans With Disabilities Act.
4.17 SURVIVAL AND INDEPENDENCE OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of First Muskogee and
First Muskogee Bank made in this Merger Agreement shall
survive the Closing hereof notwithstanding any investigation
or knowledge of BOKF; provided BOKF or Mergercorp shall give
notice to Agent (as hereafter defined) of any claim of a
breach of any such representations and warranties on or
before the earlier of one year following the Closing or the
first audit of financial statements containing the combined
operations of BOKF and First Muskogee by BOKF's independent
auditors, at which any such breach would reasonably be
expected to be encountered in the audit process (the "Claim
Notice Deadline"). Each of the representations and warranties
of First Muskogee and First Muskogee Bank set forth in this
Merger Agreement is a separate and independent representation
and warranty, shall be cumulative of and in addition to all
other warranties and representations, and shall not limit or
be interpreted to be in derogation of any other
representation or warranty made herein.
4.18 FIRST MUSKOGEE AND FIRST MUSKOGEE BANK INDEMNIFICATION. First
Muskogee and First Muskogee Bank shall defend and indemnify
BOKF against, and hold BOKF harmless from, all loss, cost and
expense (including interest at the judgment rate and
attorney's fees) arising out of any material
<PAGE> 19
breach of any representation or warranty made by First
Muskogee and First Muskogee Bank in this Merger Agreement;
provided, BOKF shall, on or before the Claim Notice Deadline,
give notice of any breach of such representations and
warranties to Agent (as hereafter defined); and, provided
further, the sole remedy for a breach of such representations
and warranties following the Closing shall be a claim against
the Escrow Shares.
5. REPRESENTATIONS AND WARRANTIES OF BOKF. BOKF and Mergercorp represent
and warrant, jointly and severally, to First Muskogee and Holders that:
5.1 INCORPORATION AND CORPORATE POWER. BOKF and Mergercorp are
corporations duly organized, validly existing and in good
standing under the laws of Oklahoma. BOKF and Mergercorp have
all the corporate power and authority necessary and required
to consummate the transactions contemplated by this Merger
Agreement.
5.2 NON-VIOLATION OF OTHER AGREEMENTS. The execution and delivery
of this Merger Agreement, and compliance with its terms and
provisions by BOKF and Mergercorp and the execution of any
document required to be executed by BOKF or Mergercorp, will
not:
5.2.1 Violate, conflict with or result in the breach of
their respective certificates of incorporation or
bylaws or any of the terms, conditions or provisions
of any agreement or instrument to which BOKF or
Mergercorp is a party, or by which BOKF or
Mergercorp is bound;
5.2.2 Result in the creation or imposition of any lien,
charge, encumbrance or restriction of any nature
whatever upon any
<PAGE> 20
of the property, contracts or business of BOKF and
Mergercorp; or,
5.2.3 Require the consent of any party to a contract with
BOKF and Mergercorp in order to keep the contract
enforceable.
5.3 ISSUANCE OF BOKF SHARES. The issuance and delivery of the
BOKF Shares have been duly authorized and the BOKF Shares
have been duly reserved for issuance by all necessary
corporate actions on the part of BOKF. The BOKF Shares, when
issued and delivered in accordance with this Merger
Agreement, shall be duly authorized, validly issued and
outstanding, fully paid and non-assessable, and free and
clear of any liens or encumbrances.
5.4 REQUIRED CORPORATE ACTION. The execution, delivery and
consummation of this Merger Agreement by BOKF and Mergercorp
have been duly and validly authorized by the boards of
directors of BOKF and Mergercorp and the approval of the
shareholders of Mergercorp. The approval of the shareholders
of BOKF is not required. This Merger Agreement has been duly
executed and delivered by duly authorized officers of BOKF
and Mergercorp. This Merger Agreement constitutes a legal,
valid and binding agreement and obligation of BOKF and
Mergercorp enforceable against BOKF and Mergercorp in
accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, moratorium, receivership,
and other similar laws affecting the rights of creditors
generally.
5.5 CAPITALIZATION. As of September 30, 1998, the authorized
capital stock of BOKF consisted of (i) 2.5 billion shares of
Common Stock, 22,505,709 shares of which are currently issued
and outstanding and (ii) one billion
<PAGE> 21
shares of Preferred Stock, of which 2.5 million shares of
Series A Preferred Stock are currently issued and outstanding
which are currently convertible into 2,985,132 shares of BOKF
Common Stock. All outstanding shares of BOKF Common Stock and
Preferred Stock have been duly authorized and validly issued,
and are fully paid and nonassessable.
5.6 LITIGATION. There is no action, suit, proceeding or
investigation pending, or, to the knowledge of BOKF or
Mergercorp, threatened, against BOKF or Mergercorp which
questions the validity of this Merger Agreement or the right
of BOKF or Mergercorp to enter into this Merger Agreement or
to consummate the transactions contemplated hereby.
5.7 BROKERAGE FEES. Neither BOKF nor Mergercorp has incurred or
will incur, directly or indirectly, any liability for
brokerage, finder's, financial advisor's or agent's fees or
commissions by virtue of any commitment made by BOKF or
Mergercorp in connection with this Merger Agreement or any
transaction contemplated hereby. Neither BOKF nor Mergercorp
has any knowledge that any party has asserted any claim of
such nature against BOKF or Mergercorp.
5.8 SEC DOCUMENTS AND FINANCIAL STATEMENTS. BOKF has furnished or
made available to First Muskogee and First Muskogee Bank a
true and complete copy of each statement, annual, quarterly,
registration statement and other report filed with the
Securities and Exchange Commission ("SEC") since December 31,
1997, other than preliminary material (the "BOKF SEC
Documents). The BOKF SEC Documents are all documents required
to be filed by BOKF since such date. As of their respective
filing dates, the BOKF
<PAGE> 22
SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933 and the Securities
Exchange Act of 1934, as the case may be, and none of the
BOKF SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact necessary
in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except
to the extent corrected by a subsequently filed BOKF SEC
Document. The financial statements of BOKF in the BOKF SEC
Documents (the "BOKF Financial Statements") comply as to form
in all material respects with applicable accounting
requirements and with the published rules and regulations of
the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles
consistently applied (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted
by Form 10Q of the SEC) and fairly present the consolidated
financial position of BOKF and its consolidated subsidiaries
at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended
(subject, in the case of unaudited statements to normal,
recurring audit adjustments). There have been no changes in
BOKF's accounting policies or estimates except as described
in the notes to the BOKF Financial Statements.
5.9 SURVIVAL AND INDEPENDENCE OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of BOKF and Mergercorp
made in this Merger Agreement shall survive the Closing
hereof notwithstanding any investigation or knowledge of the
Principal Shareholders; provided Holders shall give notice to
BOKF on or before the Claim Notice Deadline of any
<PAGE> 23
claim of a breach of any such representations and warranties.
Each of the representations and warranties of BOKF and
Mergercorp set forth in this Merger Agreement is a separate
and independent representation and warranty, shall be
cumulative of and in addition to all other warranties and
representations; and shall not limit any other representation
or warranty made herein.
5.10 BOKF AND MERGERCORP INDEMNIFICATION. BOKF and Mergercorp
shall indemnify Holders against, and hold Holders harmless
from, all loss, cost and expense (including interest at the
judgment rate and attorney's fees) arising out of any breach
by BOKF and Mergercorp of any representation or warranty made
in this Merger Agreement; provided, Agent shall, on or before
the Claim Notice Deadline, give notice of any breach of such
representations and warranties to BOKF and Mergercorp on the
request of a majority in interest of the Holders.
6. COVENANTS.
6.1 FULL ACCESS. In order that BOKF shall have the full
opportunity to make such investigations as it shall
reasonably desire concerning First Muskogee and First
Muskogee Bank and their business affairs, First Muskogee and
First Muskogee Bank shall:
6.1.1 Give BOKF, its employees, counsel, accountants and
other authorized representatives, as necessary to
conduct the investigation and whose names shall have
been provided to First Muskogee, full access, upon
reasonable notice to First Muskogee and at
reasonable times without unduly
<PAGE> 24
interfering with the conduct of business by First
Muskogee and First Muskogee Bank throughout the
period up to the Closing, to all of the facilities,
properties, books, contracts and records of First
Muskogee and First Muskogee Bank.
6.1.2 Authorize its accountants to give BOKF full access
to the accountant's records, including work papers;
and,
6.1.3 Furnish to BOKF during that period all additional
financial, operating and other information
concerning First Muskogee and First Muskogee Bank
and their business affairs, as BOKF may reasonably
request and which First Muskogee and First Muskogee
Bank shall have available.
6.1.4 All information provided pursuant to this Section
6.1 shall be subject to the provisions of Section
6.7.
6.2 CONDUCT OF BUSINESS PRIOR TO THE CLOSING DATE. From this date
until the Closing Date, each of First Muskogee and First
Muskogee Bank shall, except as may be first approved in
writing by BOKF or as is otherwise permitted or contemplated
in this Merger Agreement:
6.2.1 Maintain their corporate existence in good standing;
6.2.2 Maintain the general character of their business and
conduct their business in their ordinary and usual
manner consistent with past practices;
6.2.3 Maintain proper business and accounting records
generally in accordance with past practices;
6.2.4 Maintain their properties (except repossessed and
foreclosed
<PAGE> 25
assets acquired in satisfaction of debt previously
contracted) in normal repair and condition, normal
wear and tear and damage due to fire or other
unavoidable casualty excepted;
6.2.5 Preserve their business organizations intact, use
their reasonable efforts to maintain satisfactory
relationships with suppliers, customers and others
having business relations with them whose
relationships they believe are desirable to
maintain, and use their reasonable efforts to
procure the willingness of all of the personnel
employed by them immediately prior to the execution
of this Merger Agreement who are material to the
success of their business to continue in their
employ on substantially the same terms and
conditions as those on which such personnel were
employed immediately prior to the execution of this
Merger Agreement;
6.2.6 Maintain in full force and effect insurance
comparable in amount and in scope of coverage to
that now maintained by them;
6.2.7 Except as otherwise disclosed in this Merger
Agreement, perform all of their obligations under
all material contracts, leases and agreements
relating to or affecting their assets, properties
and businesses; and,
6.2.8 Comply in all material respects with and perform all
obligations and duties imposed upon them by federal,
state
<PAGE> 26
and local laws, and all rules, regulations and
orders imposed by federal, state or local
governmental authorities, except as may be contested
by them in good faith by appropriate proceedings.
6.3 FIRST MUSKOGEE AND FIRST MUSKOGEE BANK PROHIBITED ACTIONS
PRIOR TO THE CLOSING DATE. From this date until the Closing
Date, First Muskogee and First Muskogee Bank shall not
(except as otherwise permitted by this Merger Agreement or as
requested or approved by BOKF which approval shall not be
unreasonably withheld, delayed, or denied):
6.3.1 Incur any indebtedness for borrowed money or incur
any noncurrent indebtedness for the purchase price
of any fixed or capital asset, or make any extension
of credit or any loans to, guarantee the obligations
of, or make any additional investments in, any other
person, corporation or joint venture (whether an
existing customer or a new customer) except:
6.3.1.1 Extensions of credit, loans and guarantees
(i) less than One Million Dollars
($1,000,000) per transaction or (ii) less
than One Hundred Thousand Dollars
($100,000) with existing First Muskogee
customers having existing credit of One
Million Dollars ($1,000,000) or more made
by First Muskogee Bank in the usual
<PAGE> 27
and ordinary course of its banking
business, consistent with prior practices
and policies;
6.3.1.2 Legal investments by First Muskogee Bank in
the usual and ordinary course of its
banking business consistent with prior
practices and policies.
6.3.1.3 Borrowings from the Federal Home Loan Bank,
the Federal Reserve Bank, deposit
liabilities, and federal funds transactions
by First Muskogee Bank in the ordinary
course of business consistent with past
practices.
6.3.2 Make any (a) material change, except in the ordinary
and usual course of business, in their assets
(including, but not limited to, any change in the
composition of such assets so as to materially alter
the proportion of cash) or liabilities, (b) material
commitment for any capital expenditures, excluding
expenditures for repairs and remodeling in the
ordinary and usual course of business, or (c) sale
or other disposition of any material capital asset
other than for fair value in the ordinary course of
business;
6.3.3 Make any change in their Certificates of
Incorporation or Bylaws;
6.3.4 Authorize any shares of their capital stock for
issuance, issue any shares of any previously
authorized but unissued
<PAGE> 28
capital stock or grant, issue or make any option or
commitment relating to their capital stock except
the issuance of First Muskogee Common Stock upon
exercise of the Stock Options;
6.3.5 Enter into any letter of intent or agreement to sell
any of their assets, except in the normal and
ordinary course of their business, or acquire, be
acquired by, or merge, consolidate or reorganize
with any person, firm or corporation;
6.3.6 Declare or pay any dividend, make any other
distribution or payment or set aside any amount for
payment with respect to any shares of their capital
stock or directly or indirectly, redeem, purchase or
otherwise acquire any shares of their capital stock
or make any commitment relating thereto, provided,
however, First Muskogee may (i) pay a dividend in
the amount of $750,000 in the first quarter of 1999
consistent with past practices, (ii) in addition to
the dividend described in the preceding clause (i)
and until the Closing, continue to pay quarterly
dividends in respect of the First Muskogee Common
Stock for the purpose of reimbursing the income tax
liability of the holders thereof arising by virtue
of the fact that First Muskogee is an "S"
corporation under the Internal Revenue Code, such
quarterly dividends to be paid at the times and in
the amounts and at the same
<PAGE> 29
assumed tax rates consistent with the prior
practices of First Muskogee (the "S Corporation
Dividends"); (iii) pay the S Corporation Dividends
immediately prior to the Closing for any income
attributable to the stub-period terminating at the
Closing for which S Corporation Dividends have not
theretofore been paid; (iv) pay a final S
Corporation Dividend in respect of calendar year
1998 (in the approximate amount of $614,000) in
January 1999; (v) First Muskogee Bank may pay
dividends in an amount to make available to First
Muskogee Bancshares sufficient funds to pay the
foregoing described First Muskogee Dividends; and
(vi) First Muskogee may repurchase up to twenty (20)
shares of First Muskogee Common Stock held by
directors of First Muskogee Bank as director's
qualifying shares pursuant to existing agreements
for a total consideration not exceeding $4,000;
6.3.7 Except as set forth in Exhibit 6.3.7, make any (a)
increase in the compensation payable or to become
payable to any of their directors, officers or
employees who are subject to the provisions of
Regulation O of the Board of Governors of the
Federal Reserve System (including, without
limitation, any bonus or incentive payment or
agreement), (b) make or enter into any written
employment contract or any bonus, stock option,
profit sharing, pension, retirement or other
<PAGE> 30
similar payment or arrangement, or (c) make any
payment to any person, except in the usual and
ordinary course of business or except as required by
an existing agreement set forth in the Exhibits
hereto;
6.3.8 Make any material change in their banking, safe
deposit or power of attorney arrangements;
6.3.9 Enter into any trust, escrow, agency and similar
trust company agreements, purchase orders and
contracts for goods and services, except in the
ordinary course of business consistent with past
practices;
6.3.10 Enter into any agreement resulting in the imposition
of any mortgage or pledge of their assets or the
creation of any lien, charge or encumbrance on any
of their assets;
6.3.11 Incur any material obligation or liability, absolute
or contingent, except in the ordinary course of
business or pursuant to existing contracts described
in this Merger Agreement;
6.3.12 Take any action which would prevent compliance with
any of the conditions of this Merger Agreement; or,
6.3.13 Increase compensation to any employee except annual
increases at the times and in amounts consistent
with past practices or pay any bonuses to any
employee except as otherwise provided in this Merger
Agreement.
<PAGE> 31
6.4 VOTE FOR MERGER AND WAIVER OF RIGHT TO DISSENT. Each
Principal Shareholder shall vote, as a stockholder of First
Muskogee, for the Merger and use his or her best efforts to
cause the Merger to be approved by the directors and
shareholders of First Muskogee and First Muskogee Bank in
accordance with applicable law and consummated in accordance
with the terms of this Merger Agreement. Each Principal
Shareholder hereby irrevocably waives any and all rights to
dissent to the Merger.
6.5 REGULATORY APPROVAL. BOKF shall diligently file and pursue
(A) all regulatory applications required in order to
consummate the Merger and the merger of First Muskogee Bank
into Bank of Oklahoma, National Association, including but
not limited to the necessary applications for prior approval
of the Board of Governors of the Federal Reserve System and
the Office of the Comptroller of the Currency on or before
the thirtieth (30th) calendar day following the Agreement
Date and (B) thereafter promptly file any required
supplements or amendments thereto. All applications,
supplements, and amendments shall be substantially complete
when filed. BOKF shall deliver to First Muskogee a copy of
all such filings, as filed, within three (3) business days
after the filing thereof. Although all such filings shall be
the responsibility of BOKF, BOKF shall nevertheless advise
and consult with First Muskogee on an ongoing basis with
respect to the filings and all matters and events related
thereto. BOKF shall inform and make available to First
Muskogee from time to time all matters relating to the
filings and the regulatory approvals. BOKF shall diligently
proceed with reasonable deliberate speed to obtain all such
approvals. If any regulatory
<PAGE> 32
application required to be filed by BOKF should be finally
denied or disapproved by the respective regulatory authority,
then BOKF shall immediately give notice to First Muskogee and
this Merger Agreement shall thereupon terminate, subject to
the provisions of Section 11. However, it is understood that
a request for additional information or undertaking by the
applicant, as a condition for approval, shall not be deemed
to be a denial or disapproval so long as the applicant can
reasonably be expected to provide the requested information
or undertaking. In the event an application is denied pending
an appeal, petition for review, or similar such act on the
part of the applicant, then the application will be deemed
denied unless the applicant promptly and diligently prepares
and files such appeal and continues the appellate process for
the purposes of getting the necessary approval.
6.6 CONFIDENTIALITY. Prior to the Closing, BOKF shall keep all
information disclosed to BOKF (its employees, counsel,
accountants, and other authorized representatives) by First
Muskogee or First Muskogee Bank respecting the business and
financial condition of First Muskogee and First Muskogee Bank
confidential and shall make no use of such information except
to conduct the investigation contemplated by Section 6.4 and
to consummate the transactions contemplated hereby and shall
not use such information to obtain a competitive advantage in
connection with any customer of First Muskogee Bank. In the
event this Merger Agreement is terminated for any reason BOKF
shall (i) return all copies of all information and documents
obtained from First Muskogee, First Muskogee Bank, and
<PAGE> 33
Principal Shareholders and (ii) thereafter keep all such
information confidential and not make use of any such
information to obtain a competitive advantage in connection
with any customer of First Muskogee Bank.
6.7 BOKF PROHIBITED ACTION PRIOR TO CLOSING. From this date until
the Closing Date, BOKF shall not take any action which would
prevent compliance with any of the conditions of this Merger
Agreement. BOKF shall not, and shall cause its subsidiaries
not to, make or agree to make any acquisition, or take any
other action, that adversely affects its ability to
consummate the transactions contemplated by this Merger
Agreement and will otherwise continue to conduct its business
operations and shall cause the operations of its subsidiaries
to be conducted in a manner consistent with past operating
practices.
6.10 ACCOUNTING OPINION. BOKF shall promptly request and obtain
the opinion of Ernst & Young whether the Merger is properly
accounted for as a pooling of interests in accordance with
A.P.B. No. 16. BOKF and First Muskogee shall each use
commercially reasonable efforts to cause the Merger to be
accounted for as a pooling of interests.
6.11 TAX OPINION. First Muskogee and BOKF shall each promptly
request and obtain an opinion of Crowe & Dunlevy addressed
separately to each of them whether the Merger is a tax free
reorganization in accordance with Section 368(a)(2)(D) of the
Internal Revenue Code. BOKF and First Muskogee shall each use
commercially reasonable efforts to cause the Merger to be a
tax free reorganization in accordance with the Internal
Revenue Code.
<PAGE> 34
6.12 EMPLOYMENT AGREEMENT. Contemporaneously herewith, Michael S.
Leonard ("Leonard") and BOKF and First Muskogee shall enter
into an employment agreement in the form and content of
Exhibit 6.12.1 (the "Leonard Employment Agreement"). Leonard
hereby accepts, and shall contemporaneously with the
execution and delivery of this Merger Agreement, execute and
deliver to BOKF the Leonard Employment Agreement.
6.13 EMPLOYMENT TRANSITIONS UPON CLOSING. BOKF shall cause or
permit BOk or First Muskogee Bank to perform those
obligations described in Exhibit 6.13 attached hereto.
6.14 FIRST MUSKOGEE COVENANT TO OBTAIN APPROVALS. First Muskogee
shall promptly seek and use commercially reasonable efforts
to obtain the approval of this Merger Agreement and the
transactions contemplated hereby by the shareholders of First
Muskogee. First Muskogee Bank shall enter into an agreement
to merge with BOk, subject to the Closing of this Merger
Agreement, in form and content acceptable to BOKF.
6.15 COVENANTS RESPECTING EMPLOYMENT AND NON-COMPETITION
AGREEMENTS. BOKF and First Muskogee shall use commercially
reasonable efforts to
<PAGE> 35
cause all employment and non-competition agreements which are
a condition precedent to the obligations of BOKF under this
Merger Agreement to be executed and delivered.
6.16 EMPLOYMENT BENEFITS. Following the Closing, BOKF shall cause
all employees of First Muskogee Bank to have the same
benefits provided by BOKF generally to employees of BOKF and
its affiliates. Employees of First Muskogee Bank shall be
credited for their actual and credited service with First
Muskogee Bank for purposes of eligibility, vesting and
beneficial accrual for all BOKF employee benefit plans
including the BOKF 401k plan; provided, however, such
employees shall not be credited with prior service in BOKF's
defined benefit pension plan. First Muskogee Bank employees
shall not be subject to any exclusions for pre-existing
conditions under BOKF's medical benefit plan and shall
receive credit for any deductibles or out-of-pocket expenses
previously paid.
6.17 PUBLICATION OF COMBINED FINANCIAL RESULTS. BOKF shall file
with the SEC a report (on SEC Form 8K, Form 10K, or Form 10Q)
containing financial statements which include no less than 30
days of combined operations of BOKF and First Muskogee, not
later than the fifteenth (15th) day of the month next
following the first full calendar month of combined
operations.
6.18 TAX RETURN. BOKF shall cause the final S Corporation tax
return for First Muskogee to be prepared in a manner
consistent with First Muskogee's past practices, including
providing information to the Holders relating to their
increase in basis of First Muskogee Common Stock. Such return
will be prepared based on a closing of the First Muskogee
books as of the Closing Date.
<PAGE> 36
6.19 ITI-UNISYS CONTRACT. First Muskogee shall terminate the
ITI-Unisys Contract.
7. CONDITIONS PRECEDENT TO CLOSING BY BOKF AND MERGERCORP. The obligation
of BOKF and Mergercorp to consummate and close this transaction is
conditioned upon each and all of the following:
7.1 The representations, warranties and covenants of First
Muskogee and First Muskogee Bank shall be materially true at
the Closing as though such representations, warranties and
covenants were also made at the Closing.
7.2 The Federal Reserve Board shall have approved the Merger, or
issued a waiver of approval, in accordance with 12 U.S.C.
Section 1842 and 12 C.F.R. Section 225. The Office of the
Comptroller of the Currency shall have approved the merger of
First Muskogee Bank into BOk in accordance with 12 U.S.C.
Section 215a and 12 C.F.R. 5.33, and such other regulatory
approval as may be required is obtained.
7.3 First Muskogee, First Muskogee Bank and Principal
Shareholders shall have performed and complied with, in all
material respects, all of their obligations under this Merger
Agreement which are to be performed or complied with by them
prior to or on the Closing Date.
7.4 First Muskogee shall have delivered to BOKF an opinion of its
counsel, dated the Closing Date, in the form and content of
the opinion attached hereto as Exhibit 7.4.
7.5 BOKF shall have received an opinion of Ernst & Young that the
Merger is appropriately accounted for as a pooling of
interest in accordance with A.P.B. No. 16.
<PAGE> 37
7.6 The shareholders of First Muskogee shall have approved this
Merger Agreement in accordance with the Oklahoma General
Corporation Act. First Muskogee Bank shall have entered into
an agreement to merge with BOk, subject to the Closing of
this Merger Agreement, in form and content acceptable to
BOKF.
7.7 Contemporaneously herewith, each of Leonard, Chris Condley,
and David Thompson shall have entered into employment
agreements, subject to the Closing of this Merger Agreement,
acceptable in form and content to BOKF. Each director of
First Muskogee and First Muskogee Bank, which BOKF deems
critical in BOKF's good faith judgment, shall, prior to or at
the Closing, have entered into a non-competition agreement in
the form of Exhibit 7.7.
7.8 Neither First Muskogee taken as a whole or First Muskogee
Bank taken as a whole shall have suffered any material
adverse change in their financial conditions, assets,
liabilities, businesses or properties.
7.9 Holders of no more than eight percent (8%) of the First
Muskogee Common Stock shall have exercised appraisal rights
under Section 1091 of the Oklahoma General Corporations Act.
7.10 BOKF shall have received an opinion of Crowe & Dunlevy
addressed to BOKF that the Merger is a tax free reorganization
in accordance with Internal Revenue Code Section 368(a)(2)(D).
In the event any one or more of these conditions shall not have been
fulfilled prior to or at the Closing, BOKF and Mergercorp may terminate
this Merger Agreement by written notice
<PAGE> 38
to First Muskogee, in which event neither party shall have any further
obligation or liability to the other except the obligations of BOKF set
forth in Section 6.7 and Section 11 and the obligations of First
Muskogee and First Muskogee Bank set forth in Section 4.11 and Section
12. BOKF shall be entitled to waive compliance with any one or more of
the conditions, representations, warranties or covenants in whole or in
part.
8. CONDITIONS PRECEDENT TO CLOSING BY FIRST MUSKOGEE. The obligation of
First Muskogee and First Muskogee Bank to consummate and close this
transaction are conditioned upon each and all of the following:
8.1 The representations, warranties and covenants of BOKF and
Mergercorp made in this Merger Agreement shall be true at the
Closing as though such representations, warranties and
covenants were also made at the Closing.
8.2 BOKF and Mergercorp shall have performed and complied, in all
material respects, with all of their obligations under this
Merger Agreement which are to be performed or complied with
by them prior to or at the Closing.
8.3 BOKF shall have delivered to the Holders an opinion of its
counsel, Frederic Dorwart, Tulsa, Oklahoma, dated the Closing
Date, in the form and content of the opinion attached hereto
as Exhibit 8.3.
8.4 The Federal Reserve Board shall have approved the Merger, or
issued a waiver of approval, in accordance with 12 U.S.C.
Section 1842 and 12 C.F.R. Section 225. The Office of the
Comptroller of the Currency shall have approved the merger of
First Muskogee Bank into BOk in accordance with 12 U.S.C.
Section 215a and 12 C.F.R. 5.33, and such other regulatory
approval as may be required is obtained.
<PAGE> 39
8.5 There shall have been no material and adverse change in the
financial condition, results of operations, assets, business
or properties of BOKF taken as a whole.
8.6 First Muskogee shall have received an opinion of Crowe &
Dunlevy addressed to the shareholders of First Muskogee that
the Merger is a tax free reorganization in accordance with
Internal Revenue Code Section 368(a)(2)(D).
8.7 The Holders shall have approved this Merger Agreement and the
transactions contemplated hereby as required by the Oklahoma
General Corporations Act.
First Muskogee shall be entitled to waive compliance with any one or
more of the conditions, representations, warranties or covenants in
whole or in part. In the event any one or more of these conditions
shall not have been fulfilled prior to or at the Closing, First
Muskogee may terminate this Merger Agreement by notice to BOKF, in
which event no party shall have any further obligation or liability to
the other, except the obligations of BOKF set forth in Section 6.7 and
Section 11 and the obligations of First Muskogee set forth in Section
12.
9. CLOSING. The Closing ("Closing" or "Closing Date") of the transactions
contemplated by this Merger Agreement shall take place five (5)
business days following the first day on which (i) BOKF and Mergercorp
can lawfully consummate the Merger under 12 U.S.C. Section 1842, 12
C.F.R. Section 225 and other applicable laws, rules and regulations and
(ii) BOk and First Muskogee Bank can merge under 12 U.S.C. Section
215a, and 12 C.F.R. Section 5.23 and other applicable laws, rules and
regulations. In any event, if the Closing Date does not occur on or
before June 1, 1999, then either BOKF or First Muskogee may by notice
to the other, terminate this Merger Agreement, provided such notice is
given on or before June 15, 1999; and provided further such termination
shall be subject to the
<PAGE> 40
provisions of Section 11 or Section 12, as the case may be. The Closing
shall be held at 10:00 a.m. on the Closing Date at the offices of First
Muskogee Bank or at such other time and place as BOKF and First
Muskogee may agree. At the Closing, BOKF, Mergercorp, First Muskogee,
and Principal Shareholders shall execute and deliver all of the
documents and take all other actions which are contemplated by the
terms hereof.
9.1 Without limiting the generality of Section 9 of this Merger
Agreement, the following actions shall be taken at the
Closing concurrently. First Muskogee shall:
9.1.1 Use commercially reasonable efforts to cause to be
delivered to Mergercorp certificates representing
the First Muskogee Common Stock;
9.1.2 Deliver the opinion of First Muskogee's counsel
pursuant to Section 7.4; and,
9.1.3 Except as otherwise set forth on Exhibit 9.1.3,
cause the employment agreements, plans and payments
described in Exhibit 4.15 to be terminated and
discharged at no cost to First Muskogee and First
Muskogee Bank.
9.2 Without limiting the generality of Section 9 of this Merger
Agreement, the following actions shall be taken at the
Closing concurrently. BOKF shall:
9.2.1 Issue and deliver to Mergercorp certificates to
evidence the conversion of the First Muskogee Common
Stock into shares of BOKF, as provided in Section
2.7 subject to adjustment in accordance with the
next sentence. In the event that BOKF shall, on or
prior to the Closing Date,
<PAGE> 41
(a) declare or pay to the holders of its Common
Stock a dividend payable in any kind of shares of
stock or other equity securities of BOKF, (b) change
or divide or otherwise reclassify its Common Stock
into the same or a different number of shares of any
class or classes or authorize any such change,
division or reclassification, (c) consolidate or
merge with, or transfer its property as an entirety
or substantially as an entirety to, any other
corporation or entity or authorize any such
consolidation, merger or transfer, or (d) make any
distribution of its assets to holders of its Common
Stock as a liquidation or partial liquidation,
dividend or by way of return of capital or authorize
any such distribution, then BOKF shall issue and
deliver such additional shares of stock of BOKF, or
such reclassified shares of stock of BOKF, or such
shares of the securities or property of BOKF
resulting from such consolidation or merger or
transfer, or such assets of BOKF, which the Holders
would have been entitled to receive had the Holders
been shareholders of BOKF immediately prior to the
happening of any of the foregoing events.
9.2.2 Deliver the opinion of BOKF's counsel pursuant to
Section 8.3.
9.2.3 Cause appropriate evidences of merger to be filed in
accordance with applicable law.
<PAGE> 42
9.3 Without limiting the generality of Section 9 of this Merger
Agreement, the following actions shall be taken at the Closing
concurrently. Mergercorp shall deliver the BOKF Shares to the
record holders (as of a date set by First Muskogee which date
shall be not later than five business days preceding the
Closing) of First Muskogee Common Stock in accordance with
Section 2.7.
10. PROVISIONS RESPECTING BOKF SHARES. The following provisions shall apply
to all BOKF Shares issued in accordance with this Merger Agreement (the
"BOKF Shares"):
10.1 Each Principal Shareholder individually represents and
warrants to BOKF that:
10.1.1 Such Principal Shareholder is not acquiring the BOKF
Shares with a view to further distribution and shall
not sell any BOKF Shares until such BOKF Shares
shall have been registered under the Securities Act
of 1933 and any applicable Blue Sky Act or are sold
in a transaction exempt from such registration.
10.1.2 Such Principal Shareholder is acquiring the BOKF
Shares for his own account.
10.2 On the terms and conditions set forth in this Section 10, (i)
BOKF shall, on the next business day following the Closing,
file an SEC registration statement on Form S-3 for the offer
and sale of BOKF Common Stock by Holders of the BOKF Shares
received by them pursuant to Section 2.7 (the "Holders
Registration"), in non-underwritten transactions from time to
time, and use BOKF's best efforts to cause such registration
statement to become effective, and (ii) in addition, BOKF
shall, on or before December 31, 1999,
<PAGE> 43
at a time to be determined by BOKF in the exercise of its
sole discretion (without any obligation to provide any
explanation for the exercise of such discretion), file a
registration statement for an underwritten primary and/or
secondary offering (the "Underwritten Registration") with the
SEC and with the comparable state securities commissions in
such states (the securities laws of which are collectively
called the "Blue Sky Acts") as BOKF shall in the exercise of
its sole discretion (without any obligation to provide any
explanation for the exercise of such discretion) determine
and use BOKF's best efforts to cause such registration
statement to become effective. The Holders Registration and
the Underwritten Registration are hereafter individually and
collectively called the "registration" or "registration
statement"). The registration shall be on the following terms
and conditions:
10.2.1 Michael S. Leonard shall be the representative of
Holders to serve as their agent for the performance
of all obligations, and the exercise of all rights
arising under this Section, Section 4 and Section 5
("Agent"). The Holders may change their designated
Agent, prospectively only, to any other person or
entity upon notice thereof to BOKF signed by a
majority in interest of all Holders then owning the
BOKF Shares. The Agent shall not be deemed a
fiduciary of Holders and shall be liable to Holders
only for gross negligence or intentional wrongdoing.
10.2.2 The registration statement shall be filed in
compliance with the Securities Act of 1933 and the
Blue Sky Acts.
<PAGE> 44
10.2.3 BOKF shall pay all costs of the registration
(including filing fees, legal, accounting, printing,
and transfer agent costs), excluding Holders legal
fees, and underwriting discounts and commissions.
BOKF shall make available to Holders such number of
prospectus as Agent may reasonably request.
10.2.4 BOKF shall submit all registration documents to
Agent, reasonably in advance of filing or finalizing
such documents and shall receive, consider and
accept or reject (in BOKF's reasonable discretion)
such comments as Agent shall timely make. BOKF shall
file the registration statement in accordance with
all applicable laws.
10.2.5 BOKF represents and warrants that the registration
statement (including any prospectus) will (i)
contain all statements respecting BOKF (and its
subsidiaries) which are required to be stated
therein in accordance with the Securities Act of
1933 and the Blue Sky Acts, (ii) conform in all
material respects with the applicable requirements
of such acts, and (iii) will not contain any untrue
statement of a material fact concerning BOKF (and
its subsidiaries), or fail to state any material
fact necessary to make the statements therein
concerning BOKF (and its subsidiaries) not
misleading.
10.2.6 Agent shall cooperate with BOKF in the registration
as may be appropriate.
<PAGE> 45
10.2.7 BOKF shall keep Agent reasonably advised of the
status of the registration including any
underwriting agreements into which BOKF may enter as
hereafter provided.
10.2.8 Except for the Holders Registration and the
Underwritten Registration, BOKF shall have no
obligation to register the BOKF Shares.
10.2.9 In the Underwritten Registration, BOKF may combine
the registration of the BOKF Shares issued by BOKF
with shares of BOKF Common Stock held by others,
including affiliates of BOKF. BOKF shall notify
Agent reasonably in advance of its intention to file
the Underwritten Registration and, in the event the
Agent so requests, shall combine the registration of
the BOKF Shares (or such number of BOKF Shares as
the Agent may request) with the other shares of BOKF
Common Stock being offered (whether to be issued by
BOKF or sold for the account of others including
affiliates of BOKF). In the event some or all of the
BOKF Shares are offered in the Underwritten
Registration, (i) such BOKF Shares shall be offered
for sale pursuant to such underwriting agreements
(and the terms and provisions thereof, including
such allocations among selling shareholders) as BOKF
shall in good faith enter with underwriters and (ii)
the Holders offering such
<PAGE> 46
BOKF Shares shall pay their proportionate share of
any selling or underwriting fees and commissions
incurred in connection with an Underwritten
Registration.
10.2.10 Upon at least three (3) business days prior written
notice by BOKF given to the Agent specifying a
ninety (90) calendar day period commencing in 1999
(the "Lockup Period") those Holders owning more than
2,000 shares of First Muskogee Common Stock as of
the date hereof ("Lockup Shareholders") shall not
offer or sell BOKF Shares pursuant to the Holders'
Registration during the Lockup Period, except in
non-NASDAQ privately negotiated transactions.
<PAGE> 47
10.2.11 If at any time, BOKF has material information not
publicly disclosed which, under the applicable
regulations of the Securities and Exchange
Commission precludes the sale of BOKF Shares without
an effective amendment to the registration
statement: 10.2.11.1 BOKF shall promptly advise
Agent and Agent shall advise Holders to cease
effecting sales of the BOKF Shares until an
appropriate amendment becomes effective;
10.2.11.2 BOKF shall withhold such information from
the public for only the reasonable period
of time a valid reason for such non-
disclosure exists; and,
10.2.11.3 BOKF shall promptly file an appropriate
amendment and use its best efforts to
cause the amendment to become effective
on the same terms and conditions as
provided above for the registration
statement.
10.2.11.4 BOKF shall use its best efforts to
maintain the effectiveness of the
<PAGE> 48
registration statement for a period of
time from the effectiveness of the
Holders' Registration until the
expiration of two years following the
Closing.
10.2.11.5 BOKF shall amend or supplement the
registration statement at the request of
Holders' Agent to name any donee or
pledgee as a selling shareholder.
10.2.12 Each Holder offering BOKF Shares for sale pursuant
to the registration shall indemnify BOKF, its
directors and officers and each person controlling
BOKF for any costs or expenses incurred by it or
them for any material breach of Holders' agreements
under this Section and in respect of any untrue
statement of a material fact contained in the
registration statement or any omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading but only to the extent that such
untrue statement or omission is made in such
registration statement in reliance upon and in
conformity with written information furnished to
BOKF by or on behalf of such Holder for use in the
preparation of such registration statement or
prospectus included
<PAGE> 49
therein. BOKF will indemnify each Holder for any
costs or expenses incurred by the Holder for any
material breach of BOKF's agreements under this
Section or non-compliance with law in respect of
this Section and/or in respect of any untrue
statement of a material fact contained in the
registration statement or any omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, provided that BOKF will not be
liable in any such case to the extent that any such
cost or expense arises out of or is based upon any
untrue statement or omission made in reliance upon
and in conformity with written information furnished
to BOKF by or on behalf of such Shareholder for use
in the preparation of such registration statement or
prospectus therein.
10.2.13 BOKF shall, from the date of the issuance of the
BOKF Shares until the second anniversary of such
issuance, maintain its eligibility to use SEC Form
S-3 or its equivalent.
10.2.14 The representations and warranties made in this
Section shall survive for the maximum periods
permitted by applicable law.
10.2.15 The provisions of this Section 10 are for the
express benefit of each of the Holders, but the
Holders shall only
<PAGE> 50
be permitted to enforce this Section by action taken
solely by Agent on behalf of all Holders determined
by the vote of a majority in interest.
10.3 RESTRICTIONS ON TRANSFER. Each BOKF Share shall be issued
subject to the following restrictions:
10.3.1 No BOKF Share issued to a person whom BOKF in the
exercise of its sole discretion (provided only such
discretion is exercised in good faith) determines is
an affiliate within the meaning of SEC Rule 405
(each herein called an "Affiliate Share") may be
sold or otherwise transferred until BOKF shall have
published financial statements which reflect at
least one month's combined operations subsequent to
the Closing.
10.3.2 Each certificate representing an Affiliate Share
shall bear a restrictive legend evidencing the
restriction described in the preceding subsection.
10.3.3 Each certificate representing an Affiliate Share
shall bear a usual and customary private placement
restricted stock legend in addition to the legend
described in the preceding subsection and shall be
subject to stop transfer orders (as reasonably
required); provided, however, at such time as BOKF
shall have published financial statements which
reflect at least one month's combined operations
subsequent to the Closing, and upon the
effectiveness of
<PAGE> 51
the Holders' Registration or upon receipt of an
opinion of counsel that a proposed sale or other
transfer of a specified number of shares of BOKF
Common Stock will comply with or be exempt from the
Securities Act of 1933, BOKF shall as promptly as
practicable after receipt of the stock certificates
representing such Affiliate Shares (and, in any
event, within seven business days after such
receipt) direct BOKF's transfer agent to remove the
stop transfer order and reissue a stock certificate
evidencing such Affiliate Shares without any
restrictive legend.
10.3.4 First Muskogee shall use commercially reasonable
efforts to obtain agreements from its affiliates
acknowledging that the BOKF Shares are subject to
the provisions of this Section 10.
10.3.5 All certificates representing BOKF Shares shall bear
a private placement restrictive legend and the
Holders thereof shall not be entitled to sell or
transfer any such BOKF Shares except pursuant to the
Holders Registration, the Underwritten Registration,
or an opinion of counsel to BOKF (which opinion
shall not be unreasonably withheld, delayed, or
denied) that the transaction is exempt from
registration pursuant to the Securities Act of 1933
and any applicable Blue Sky Acts.
10.3.6 All certificates representing BOKF Shares issued in
respect
<PAGE> 52
of shares of First Muskogee Common Stock held by a
Lockup Shareholder as of the date hereof shall bear
a restrictive legend.
11. FIRST MUSKOGEE TERMINATION DAMAGES. In the event this Agreement is not
consummated by reason of a failure of one or more of the conditions
precedent set forth in Sections 7.5, 8.1, 8.2, 8.3, 8.4 or 8.5 through
no fault of First Muskogee, then BOKF shall promptly pay First Muskogee
the sum of One Million Dollars ($1,000,000) as an amount to compensate
First Muskogee for damages, and not as a penalty, arising from or in
connection with such termination and failure to consummate the Merger,
which amount BOKF and First Muskogee agree would be very difficult to
determine and which agreed amount BOKF and First Muskogee agree is fair
and reasonable.
12. BOKF TERMINATION DAMAGES. In the event this Agreement is not
consummated by reason of a failure of one or more of the conditions
precedent set forth in Sections 7.1, 7.2 (but only in the event such
condition fails because of a breach by First Muskogee or First Muskogee
Bancshares of a promise, covenant, representation or warranty set forth
in this Merger Agreement), 7.3, 7.4, 7.6, 7.7, and 7.8 through no fault
of BOKF, then First Muskogee shall promptly pay BOKF the sum of Two
Hundred Fifty Thousand Dollars ($250,000) as an amount to compensate
BOKF for damages, and not as a penalty, arising from or in connection
with such termination and failure to consummate the Merger, which
amount BOKF and First Muskogee agree would be very difficult to
determine and which agreed amount BOKF and First Muskogee agree is fair
and reasonable.
13. THE BOKF COMMON STOCK ESCROW. The BOKF Common Stock Escrow shall be
established on the following terms and conditions:
13.1 The escrow agent shall be BOk ("Escrow Agent").
<PAGE> 53
13.2 The BOKF Common Stock Escrow shall be governed by the
standard form of escrow agreement generally in use by BOk
(the "Escrow Agreement").
13.3 BOKF shall deliver the Escrow Shares to the Escrow Agent at
the Closing.
13.4 In the event BOKF claims a breach of the representations and
warranties of First Muskogee and First Muskogee Bank arising
under this Merger Agreement, BOKF shall give notice of the
claim to the Agent (a "Claim"). The notice shall identify the
representations and warranties which BOKF claims have been
breached and describe in reasonable detail the basis of the
Claim.
13.5 In the event BOKF makes a Claim(s) prior to the Claim Notice
Deadline, the Escrow Agent shall continue to hold the Escrow
Shares until such Claim(s) is resolved by (i) the mutual
agreement of Agent and BOKF or (ii) a final adjudication
determining the merits of the Claim(s), at which time the
Escrow shall terminate and the Escrow Agent shall pay (a
"Claim Payment") the Claim as mutually agreed or finally
adjudicated (an "Allowed Claim"); provided, however, Allowed
Claims shall be paid only to the extent the total of all
Allowed Claims exceeds $100,000.
13.6 A Claim Payment shall be made by the delivery to BOKF of that
number of Escrow Shares determined by dividing the amount of
the Allowed Claim by an amount equal to the average of the
mid-points between the highest price and the lowest price at
which trades occurred (or, in the event of a single trade,
the price of such trade) for BOKF Common Stock on NASDAQ on
the five (5) trading days on which at least one trade
actually occurs immediately preceding the Closing.
<PAGE> 54
13.7 The Escrow shall terminate at the later of the Claim Notice
Deadline or the date on which all timely noticed Claims have
been resolved by mutual agreement or final adjudication and
all Allowed Claims, if any, shall have been paid.
13.8 Upon termination of the Escrow all Escrow Shares remaining in
the Escrow shall be delivered to Holders in the same
proportion as the shares were deposited in the Escrow.
13.9 The rights of the Holders to receive BOKF Shares from the
Escrow shall not be assignable or transferable except by
operation of law or by intestacy or with the approval of BOKF
(which approval shall not be unreasonably withheld, delayed,
or denied) and will not be evidenced by any certificate or
other evidence of ownership.
13.10 BOKF shall pay the fees and costs of the Escrow Agent with
respect to the Escrow.
13.11 The cost, if any, to First Muskogee and First Muskogee Bank
of terminating the ITI-Unisys Contract shall be an Allowed
Claim.
14. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions shall
apply to this Agreement:
14.1 All notices or advices required or permitted to be given by
or pursuant to this Agreement, shall be given in writing. All
such notices and advices shall be (i) delivered personally,
(ii) delivered by facsimile or delivered by U.S. Registered
or Certified Mail, Return Receipt Requested mail, or (iii)
delivered for overnight delivery by a nationally recognized
overnight courier service. Such notices and advices shall be
deemed to have been
<PAGE> 55
given (i) the first business day following the date of
delivery if delivered personally or by facsimile, (ii) on the
third business day following the date of mailing if mailed by
U.S. Registered or Certified Mail, Return Receipt Requested,
or (iii) on the date of receipt if delivered for overnight
delivery by a nationally recognized overnight courier
service. All such notices and advices and all other
communications related to this Agreement shall be given as
follows:
BOKF and Mergercorp:
James A. White, Executive Vice President
BOK FINANCIAL CORPORATION
P.O. Box 2300
Tulsa, OK 74192
(918) 588-6853 - Facsimile
and
Frederic Dorwart, Secretary and General Counsel to
BOK Financial Corporation
Old City Hall
124 East Fourth Street
Tulsa, OK 74103
(918) 583-8251 - Facsimile
First Muskogee, Principal Shareholders,
and First Muskogee Bank:
Michael S. Leonard
215 State Street
Muskogee, Oklahoma 74401-6526
(918) 684-2737 - Facsimile
and
Michael M. Stewart
Crowe & Dunlevy
1800 Mid-America Tower
Oklahoma City, OK
(405) 272-5238 - Facsimile
<PAGE> 56
or to such other address as the party may have furnished to
the other parties in accordance herewith, except that notice
of change of addresses shall be effective only upon receipt.
14.2 This Agreement is made and executed in Tulsa County,
Oklahoma.
14.3 This Agreement shall be subject to, and interpreted by and in
accordance with, the laws (excluding conflict of law
provisions) of the State of Oklahoma.
14.4 This Agreement is the entire Agreement of the parties
respecting the subject matter hereof. There are no other
agreements, representations or warranties, whether oral or
written, respecting the subject matter hereof.
14.5 No course of prior dealings involving any of the parties
hereto and no usage of trade shall be relevant or advisable
to interpret, supplement, explain or vary any of the terms of
this Agreement, except as expressly provided herein.
14.6 This Agreement, and all the provisions of this Agreement,
shall be deemed drafted by all of the parties hereto.
14.7 This Agreement shall not be interpreted strictly for or
against any party, but solely in accordance with the fair
meaning of the provisions hereof to effectuate the purposes
and interest of this Agreement.
14.8 Each party hereto has entered into this Agreement based
solely upon the agreements, representations and warranties
expressly set forth herein and upon his own knowledge and
investigation. Neither party has relied upon any
representation or warranty of any other party hereto except
any such representations or warranties as are expressly set
forth herein.
<PAGE> 57
14.9 Each of the persons signing below on behalf of a party hereto
represents and warrants that he or she has full requisite
power and authority to execute and deliver this Agreement on
behalf of the parties for whom he or she is signing and to
bind such party to the terms and conditions of this
Agreement.
14.10 This Agreement may be executed in counterparts, each of which
shall be deemed an original. This Agreement shall become
effective only when all of the parties hereto shall have
executed the original or counterpart hereof. This agreement
may be executed and delivered by a facsimile transmission of
a counterpart signature page hereof.
14.11 In any action brought by a party hereto to enforce the
obligations of any other party hereto, the prevailing party
shall be entitled to collect from the opposing party to such
action such party's reasonable litigation costs and attorneys
fees and expenses (including court costs, reasonable fees of
accountants and experts, and other expenses incidental to the
litigation).
14.12 This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and
assigns.
14.13 This is not a third party beneficiary contract except as
otherwise expressly stated herein. No person or entity other
than a party signing this Agreement shall have any rights
under this Agreement except as otherwise expressly stated
herein.
14.14 This Agreement may be amended or modified only in a writing
which specifically references this Agreement.
14.15 This Agreement may not be assigned by any party hereto.
14.16 A party to this Agreement may decide or fail to require full
or timely
<PAGE> 58
performance of any obligation arising under this Agreement.
The decision or failure of a party hereto to require full or
timely performance of any obligation arising under this
Agreement (whether on a single occasion or on multiple
occasions) shall not be deemed a waiver of any such
obligation. No such decisions or failures shall give rise to
any claim of estoppel, laches, course of dealing, amendment
of this Agreement by course of dealing, or other defense of
any nature to any obligation arising hereunder.
14.17 The repudiation, breach, or failure to perform any obligation
arising under this Agreement by a party after reasonable
notice thereof shall be deemed a repudiation, breach, and
failure to perform all of such party's obligations arising
under this Agreement.
14.18 Time is of the essence with respect to each obligation
arising under this Agreement. The failure to timely perform
an obligation arising hereunder shall be deemed a failure to
perform the obligation.
14.19 Any cause of action for a breach or enforcement of, or a
declaratory judgment respecting, this Agreement shall be
commenced and maintained only in the United States District
Court for the Northern District of Oklahoma or the applicable
Oklahoma state trial court sitting in Tulsa, Oklahoma and
having subject matter jurisdiction.
14.20 All actions taken and documents delivered at the Closing
shall be deemed to have been taken and executed
simultaneously and no action shall be deemed taken nor any
document delivered until all have been taken and delivered.
Dated and effective the date first set forth above.
<PAGE> 59
FIRST BANCSHARES OF MUSKOGEE, INC.,
an Oklahoma Corporation
By /s/ Michael S. Leonard
----------------------------------------------------
Michael S. Leonard, Vice President
FIRST NATIONAL BANK AND TRUST COMPANY
OF MUSKOGEE
By /s/ Michael S. Leonard
----------------------------------------------------
Michael S. Leonard, President
Principal Shareholders of First Bancshares of
Muskogee, Inc. (As Set Forth On Exhibit 1.3)
/s/ Chris Condley
----------------------------------------------------
Chris Condley
/s/ David Guthery
----------------------------------------------------
David or Jeanie Guthery
/s/ Robert Krumme
----------------------------------------------------
Robert Krumme
/s/ Robert Krumme
----------------------------------------------------
Robert Krumme, as Custodian for Carolyn Krumme
/s/ Robert Krumme
----------------------------------------------------
Robert Krumme, as Custodian for John Krumme
/s/ Courtney Lamont
----------------------------------------------------
Courtney Lamont
/s/ Hank Leonard
----------------------------------------------------
Hank Leonard, Trustee of the Courtney Lamont Trust
/s/ Amy Leonard
----------------------------------------------------
Amy Leonard
/s/ Hank Leonard
----------------------------------------------------
Hank Leonard, Trustee of the Amy Leonard Trust
/s/ Carlene Leonard
----------------------------------------------------
Carlene Leonard, Trustee of the
Carlene Leonard Trust
/s/ Harry Leonard
----------------------------------------------------
Harry Leonard, Trustee of the Harry Leonard Trust
/s/ Hank Leonard
----------------------------------------------------
Hank Leonard
<PAGE> 60
/s/ Michael Leonard
----------------------------------------------------
Michael Leonard, Trustee of the
Michael Leonard Trust
/s/ Robert List
----------------------------------------------------
Robert List
/s/ Bob Smith
----------------------------------------------------
Bob Smith
/s/ Robert N. Yaffe
----------------------------------------------------
Robert N. Yaffe
BOK FINANCIAL CORPORATION
By /s/ James A. White
----------------------------------------------------
James A. White, Executive Vice President
BOKF MERGER CORPORATION NUMBER SEVEN
By /s/ James A. White
----------------------------------------------------
James A. White, Vice-President
<PAGE> 61
EXHIBIT 1.3
TO
MERGER AGREEMENT
Principal Shareholders
<TABLE>
<CAPTION>
# OF SHARES
<S> <C>
Chris Condley 410
David or Jeanie Guthery 2,930
Robert Krumme 3,079
Robert Krumme, as Custodian for Carolyn Krumme 571
Robert Krumme, as Custodian for John Krumme 571
Courtney Lamont 1,229
Hank Leonard, Trustee of the Courtney Lamont Trust 750
Amy Leonard 1,229
Hank Leonard, Trustee of the Amy Leonard Trust 750
Carlene Leonard, Trustee of the Carlene Leonard Trust 876
Harry Leonard, Trustee of the Harry Leonard Trust 876
Hank Leonard 2,408
Michael Leonard, Trustee of the Michael Leonard Trust 4,733
Robert List 2,390
Bob Smith 11,772
Robert N. Yaffe 9,000
-------
43,574
Total Shares Outstanding 81,260
Percent of Total 53.5%
</TABLE>
<PAGE> 62
EXHIBIT 2.9
TO
MERGER AGREEMENT
<PAGE> 63
EXHIBIT 4.3
TO
MERGER AGREEMENT
Subsidiaries
First Bancshares of Muskogee owns 100% of
First Muskogee Insurance Corporation
<PAGE> 64
EXHIBIT 4.6.3
TO
MERGER AGREEMENT
Material Liabilities
1. HUD Loan Indemnified
Saunders 45,110.29 Current
McReynolds 56,617.63 Current
101,727.92
2. Sheshunoff Contract - Investment Banking Firm
3. Crowe & Dunlevy, Attorneys - Legal Fees
4. There has been no reserve for income taxes due to Subchapter
S status or arising from termination of S Status due to the
Merger.
5. Information Technology Inc. Contracts
6. Liability Under the Unisys Contracts
7. Accrued vacation not on financial statements
8. Liabilities described under all other exhibits
9. Liabilities under $25,000, which are not material.
<PAGE> 65
EXHIBIT 4.7
TO
MERGER AGREEMENT
Conduct of Business Prior to Closing Exceptions
1. Contracts listed on Exhibit 4.9 since 9/30/98.
2. Payments permitted by the express terms of the Merger
Agreement
<PAGE> 66
EXHIBIT 4.9
TO
MERGER AGREEMENT
Contracts and Commitments
None; except as listed below:
1. Contracts with Information Technology Inc.
2. Contracts with Unisys
3. Tenant leases
4. Data Processing Agreement with First Bank & Trust, Wagoner
5. SW Bell Contracts
6. NW Mutual Life Insurance Contract on M.S. Leonard
7. NW Mutual Life Insurance Contract on C.L. Condley
8. NW Mutual Life Insurance Contract on Glen Scott
9. NW Mutual Life Insurance Contract on Lanny Andrews
11. NW Mutual Life Insurance Contract on Letha Hoos
12. K-Mart ATM Lease
13. NW Mutual Life Insurance Contract on Pam Ford
First National Bank has notified Information Technology Inc. and Unisys
of cancellation of the above contracts. This cancellation will cause
First National Bank to be in default under the contracts.
<PAGE> 67
EXHIBIT 4.10
TO
MERGER AGREEMENT
Pending Litigation
1. Muskogee Title / U.S. Fidelity & Guaranty
2. Mike Butler, et al
3. Kenneth Mather Bankruptcy Trustee
4. Various Actions Where First National Bank is Plaintiff
<PAGE> 68
EXHIBIT 4.15
TO
MERGER AGREEMENT
Employee Contracts and Benefit Plans
1. Melody Diebold - Employment Contract
2. Deferred Compensation Plans for: M.S. Leonard, C.L. Condley,
Glen Scott, P.L. Ford, Lanny Andrews and Letha Hoos -
Attached Schedule
3. Stock Option Plan for M.S. Leonard, C.L. Condley and P.L.
Ford
4. First Bancshares of Muskogee Employees 401(K) Profit Sharing
Plan
5. Health Plan
6. Long Term Disability Plan
7. Employee Life Insurance Plan
8. Vacation and Sick Leave Plan
9. Employee benefits and agreements specifically permitted by
the Merger Agreement
<PAGE> 69
EXHIBIT 6.12.1
TO
MERGER AGREEMENT
Employment Agreement
None; except Leonard Employment Agreement.
<PAGE> 70
EXHIBIT 6.13
TO
MERGER AGREEMENT
Obligations
BONUS. BOKF shall cause BOk to pay a bonus ("Bonus") of Ten Thousand
Dollars (less withholding) to each of the following employees of First Muskogee
Bank who are not offered, on or before the Closing, employment by BOk in Tulsa
or Muskogee on terms and conditions, including salary, comparable to their
employment with First Muskogee: L. Andrews, G. Batson, P. Ford, L. Hoos, and G.
Scott. Each bonus shall be paid immediately following the Closing.
SEVERANCE PAY FOR REDUCTION IN FORCE. In the event any employees of
First Muskogee Bank shall be terminated by BOK as a result of a reduction in
force or without cause on or before the first day of the twelfth (12th)
calendar month following the Closing, BOKF shall cause BOk to pay such
employees severance pay (less usual and customary withholdings) in an amount
equal to each such employee's regular salary (excluding bonuses, incentive
compensation, and the like) for four weeks plus one week for each full year of
employment with First Muskogee Bank not exceeding twelve weeks. For the purpose
of determining entitlement to severance pay in accordance with this paragraph,
no First Muskogee Bank employee shall be required to change his place of work
from the Muskogee area.
CONSUMMATION PAY. BOKF shall cause First Muskogee Bank to pay an
aggregate amount not exceeding $105,000 to First Muskogee Bank employees (which
may be employees receiving benefits under the other provisions of this Exhibit)
for the purpose of ensuring such employees continue to perform their duties
through the date of the consummation of the Merger and the merger of First
Muskogee Bank into BOk, as mutually agreed between the Chief Executive Officer
of First Muskogee Bank and BOKF.
CHANGE IN CONTROL BONUS POOL. At or immediately before the Closing,
First Muskogee Bank may pay bonuses in the aggregate amount of approximately
$258,398 (including FICA and other indirect costs) to such employees of First
Muskogee Bank as the Chief Executive Officer of First Muskogee Bank determines,
which shall be in addition to the other bonuses and severance payments
permitted by this Merger Agreement.
<PAGE> 71
EXHIBIT 6.3.7
TO
MERGER AGREEMENT
Compensation Exceptions
1. Payments permitted by the express terms of the Merger
Agreement
2. 1998 Stock Options for M.S. Leonard, C.L. Condley and P.L.
Ford per Exhibit 2.9
3. Employment Agreements with M.S. Leonard, C.L. Condley and
David Thompson as contemplated by Merger Agreement
<PAGE> 72
EXHIBIT 7.4
TO
MERGER AGREEMENT
First Muskogee Counsel's Opinion
[To be prepared by mutual agreement of counsel to BOKF and
counsel to First Muskogee.]
<PAGE> 73
EXHIBIT 7.7
TO
MERGER AGREEMENT
AGREEMENT NOT TO COMPETE
This Agreement Not to Compete ("Agreement") is made effective as of
_____________, 199___ (the "Effective Date") between:
(i) _____________________ ("Principal"); and,
(ii) BOK Financial Corporation ("BOKF").
In consideration of the mutual covenants contained herein, the adequacy
of which is hereby expressly acknowledged, and intending to be legally bound
hereby, Principal and BOKF agree as follows:
(1) PURPOSE OF THIS AGREEMENT NOT TO COMPETE. Principal is a key
officer or director and shareholder of First Muskogee and/or First
Muskogee Bank. The shareholders of First Muskogee and First
Muskogee Bank and BOKF are contemporaneously herewith entering
into that certain Merger Agreement dated effective as of
______________, 1998 to which reference is hereby made (the
"Merger Agreement"). The Merger Agreement constitutes the sale of
the goodwill of the business of First Muskogee and First Muskogee
Bank to BOKF. Principal acknowledges that competition by Principal
with BOKF would damage the goodwill being sold by Principal. The
purpose of this agreement is to set forth the terms and conditions
on which Principal agrees not to compete with BOKF. The defined
terms set forth herein shall have the meanings set forth in the
Merger Agreement.
(2) Principal hereby agrees that, from and after the Closing for one
year following the closing, Principal shall not directly or
indirectly (whether as an officer, director, employee, partner,
stockholder, creditor or agent or representative of other persons
or entities or in any other manner) engage in the banking business
in Muskogee County, State of Oklahoma or any county contiguous
thereto or in such other area where First Muskogee or First
Muskogee Bank has heretofore regularly conducted business or
maintained an office.
(3) Paragraph 2 hereof shall not apply to any investment by the
Principal in any widely-held class of securities of any banking
business, which investment comprises less than 5% of the total
number of shares of that class of securities outstanding.
(4) Principal agrees that:
<PAGE> 74
(a) This Agreement is entered into in connection with the sale of the
goodwill of First Muskogee and First Muskogee Bank within the
meaning of the laws of Oklahoma relating to agreements not to
compete.
(b) The restrictions imposed by this Agreement (particularly the
geographical and time restrictions) are fair, reasonable and
necessary to protect the goodwill of First Muskogee and First
Muskogee Bank which is being sold to BOKF.
(c) Any remedy at law for any breach of this Agreement would be
inadequate and, in the event of any such breach, BOKF shall be
entitled to immediate and permanent injunctive relief to preclude
any such breach (in addition to any remedies at law to which BOKF
may be entitled) without any necessity of establishing irreparable
injury or posting bond or security therefore.
(d) Without limiting the generality of the obligations imposed by
Paragraph 2 hereof, Principal agrees that the Principal shall not
solicit persons or entities who are customers or clients of First
Muskogee and First Muskogee Bank at the date hereof or solicit
employees of First Muskogee or First Muskogee Bank to seek
employment with any person or entity except BOKF and its
subsidiaries, whether, in either case, such solicitation is made
within or without the area described in Paragraph 2 hereof.
(e) Principal represents that Principal is entering into this
Agreement in order to induce BOKF to enter into and consummate the
Merger Agreement and acknowledges that the consideration received
in the Merger is full and adequate consideration for the promises
of Principal made herein.
(5) MISCELLANEOUS. The following miscellaneous provisions shall apply to
this Agreement:
(a) This Agreement is made and executed in Tulsa County, Oklahoma.
(b) This Agreement shall be subject to, and interpreted by and in
accordance with, the laws of the State of Oklahoma (excluding the
conflicts of law provisions thereof).
(c) This Agreement is the entire agreement of the parties respecting
the subject matter hereof. There are no other agreements, whether
oral or written, respecting the subject matter hereof.
<PAGE> 75
(d) This Agreement may be executed in counterparts, each of which
shall be deemed an original. This Agreement shall become effective
only when all of the parties hereto shall have executed the
original or a counterpart hereof. This Agreement may be delivered
by facsimile transmission of an executed original or counterpart
hereof.
(e) In any action brought by a party hereto to enforce the obligations
of any other party hereto, the prevailing party shall be entitled
to collect from the opposing parties to such action such party's
reasonable attorneys fees and costs (including court costs,
reasonable fees of accountants and experts, and other expenses
incidental to the action).
(f) This is not a third party beneficiary contract. No person or
entity other than an express party hereto shall have any rights
hereunder.
(g) This Agreement shall be binding upon the parties and their
respective successors and assigns. The rights of the parties under
this Agreement may not be assigned without the prior written
consent of the parties hereto.
By
----------------------------------------------
BOK FINANCIAL CORPORATION
By
----------------------------------------------
<PAGE> 76
EXHIBIT 8.3
TO
MERGER AGREEMENT
BOKF Counsel's Opinion
[To be prepared by mutual agreement of counsel to BOKF
and counsel to First Muskogee.]
<PAGE> 77
EXHIBIT 9.1.3
TO
MERGER AGREEMENT
EMPLOYMENT AGREEMENT EXCEPTIONS
1. Deferred compensation plans are to remain in effect provided
there is no incremental cost to First Muskogee Bank or BOKF.
2. Melody Diebold Contract.
3. Termination of retirement and medical plans will involve
potential routine cost to implement termination.
<PAGE> 1
BOK FINANCIAL CORPORATION
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
TABLE OF CONTENTS
<TABLE>
<S> <C>
Consolidated Selected Financial Data 9
Management's Assessment of Operations and
Financial Condition 10
Selected Quarterly Financial Data 17
Report of Management on Financial Statements 25
Report of Independent Auditors 25
Consolidated Financial Statements 26
Notes to Consolidated Financial Statements 31
Annual Financial Summary 54
Quarterly Financial Summary 56
Appendix A 63
</TABLE>
<PAGE> 2
1998 Annual Report
BOK FINANCIAL
CORPORATION
<PAGE> 3
FINANCIAL HIGHLIGHTS
(Dollars In Thousands Except Share Data)
<TABLE>
<CAPTION>
1998(2) 1997(2),(3) 1996(2),(3)
----------- ----------- -----------
<S> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31
Net income $ 74,716 $ 64,625 $ 54,127
Earnings per share:
Basic 1.62 1.40 1.17
Diluted 1.44 1.25 1.06
Return on average assets 1.31% 1.27% 1.26%
Return on average equity 15.99 16.41 16.80
----------- ----------- -----------
Tangible operating results (see Table 2):
Tangible net income $ 83,122 $ 72,536 $ 61,336
Tangible net income per diluted share 1.61 1.41 1.20
Return on tangible assets 1.47% 1.44% 1.44%
Return on tangible shareholders' equity 20.81 22.13 21.18
----------- ----------- -----------
AS OF DECEMBER 31
Loans, net of reserves $ 3,487,010 $ 2,711,992 $ 2,349,432
Assets 6,809,348 5,399,642 4,620,700
Deposits 4,379,230 3,728,079 3,256,755
Shareholders' equity 505,114 435,477 359,966
Nonperforming assets 17,716 24,232 23,411
----------- ----------- -----------
Book value per common share $ 11.09 $ 9.68 $ 7.98
Common shares and options outstanding at year-end 47,937,174 47,812,331 47,332,208
----------- ----------- -----------
Tier 1 capital ratio (see Note 15) 7.80% 9.39% 10.49%
Total capital ratio (see Note 15) 11.96 14.54 11.74
Leverage ratio (see Note 15) 6.57 6.81 7.46
Shareholders' equity to total assets 7.42 8.06 7.79
Reserve for loan losses to nonperforming loans 495.05 279.86 239.70
Reserve for loan losses to loans(1) 1.88 1.98 1.96
Net charge offs (recoveries) to average loans .09 .14 (.12)
=========== =========== ===========
</TABLE>
(1) Excludes residential mortgage loans held for sale which are carried at
the lower of aggregate cost or market value.
(2) Shares and per share data have been restated to reflect the 2-for-1
stock split in the form of a 100% stock dividend on February 22, 1999.
(3) Shares and per share data have been restated to reflect the 3% stock
dividend paid in November 1998.
<PAGE> 4
[PICTURE]
Stan Lybarger George Kaiser
President and CEO Chairman
TO OUR SHAREHOLDERS,
CUSTOMERS, EMPLOYEES AND FRIENDS:
Nineteen ninety-eight was another excellent year for BOK Financial Corp. We
had record earnings, entered a major new market and achieved remarkable progress
at Bank of Texas in its rise to prominence in the Dallas-Ft. Worth Metroplex.
Our fee-based lines of business continued growing much faster than most other
banks, to reach an industry-leading share of our income. In this letter and the
accompanying articles, we want to share our progress and our goals with you.
GOALS:
Our objective is to grow BOK Financial into a regionally prominent firm
which:
o remains preeminent in its home markets
o focuses on selected expansion markets throughout the rest of the region
which best match our skill set
o serves all its markets with a visible commitment to quality and total
dedication to meeting customers' expectations
o delivers superior financial performance, emphasizing return on shareholder
equity and growth in earnings per share
o further develops the potential of its nationally competitive fee-based
services
o reemphasizes cost efficiency in a period of unprecedented franchise
shifting after years of focus on building market share
o thinks and acts entrepreneurially within the boundaries of sound banking
practice
DISCIPLINED ACQUISITION STRATEGY:
With the extraordinary market vacuum created by the sale of all but four
mid-size banks in the seven-state Oklahoma region, we continue to see great
opportunity to expand our horizons in the major markets bordering Oklahoma. In
seeking and developing new markets, we do not pursue volume or dots on a map,
but look instead for the following characteristics:
o attractive market growth rates
o a well managed platform for entry or consolidation economies
o a well developed middle market customer base
o a large gap between mega-bank and community bank competitors to serve the
middle market
o a good match between market opportunities and our skill set, with a
concentration on commercial services
o accretive earnings potential in the first two years
[GRAPH I]
See Appendix A for
Graph I data
<PAGE> 5
Expansion into faster growing markets, while extending our commitment to our
home market
And in developing each potential market, we seek to attract officers with
talent and experience well above the levels normally assigned to the middle
market customer base by our competitors. We emphasize to them our strategy of
winning over relationships in the community, not marginal or exclusively
price-competitive credit transactions.
COMMENTS ON OUR PROGRESS IN 1998:
To meet our growth targets, our expansion must be directed into faster
growing and larger markets, while still extending our position and commitment to
our home market. The success achieved in 1998 by Bank of Texas, formed by the
combination of our 1997 acquisitions of First National Bank of Park Cities and
First Texas Bank, validates our strategy and approach. We plan to continue to
grow that franchise internally and by acquisition. Our business model calls for
the delivery of the products and services of a big bank, with the customer
attention and responsiveness of a small, community bank -- under a management
team with decision making authority and deeply rooted in the local community. As
detailed in a later section of this report, it worked extremely well in Texas in
1998.
Our growth in Texas, of course, is just part of the story of 1998. In
December, we consummated the acquisition of 17 branches in New Mexico. Our new
Bank of Albuquerque, with $465 million in deposits, is now the fourth largest
bank in that city, and the fifth largest in New Mexico. As discussed below, we
view the New Mexico acquisition as a significant step in our regional expansion.
As the year closed, we announced an agreement to acquire the parent company
of First National Bank of Muskogee, Oklahoma, in a pooling of interests
transaction. This merger, which is awaiting regulatory approval, will enable us
to combine our offices in that market with those of First Muskogee into the
leading bank in the Muskogee area, one of Oklahoma's largest cities outside the
two major metropolitan areas. First Muskogee's deposits were $230 million and
its loans $95 million at December 31, 1998.
Fee-based revenue increased 25% -- and accounted for 47% of our total
revenue -- in 1998, a level we believe to be the highest of any full line
banking company in our size range in the country. This revenue stream is less
dependent on credit or investment activities or on the level of interest rates,
making our earnings less susceptible to the credit cycle. And this fee income is
unusually well balanced among trust, ATM, mortgage, brokerage and related
securities activities, and traditional consumer and commercial services.
[GRAPH II]
See Appendix A for
Graph II data
2
<PAGE> 6
EARNINGS AND ASSET QUALITY
For the year, we earned $74.7 million, an increase of 15.6% over the
preceding year. Diluted earnings per share increased 15.2%, and have grown
steadily at a rate in excess of 13% since 1993. Our return on equity was 16%,
and has averaged almost 18% for the past five years. Asset quality remains very
good, with the level of non-performing assets actually declining to the lowest
percentage level in over a decade at $18 million, equivalent to 0.5% of loans
and leases. Our reserve for loan losses stands at $65 million, or 1.9% of loans
and leases. While this level is higher than that of some peer organizations, we
feel it is appropriate, given the current stage of the business cycle and the
loan growth we have experienced. Our long experience in two industries which are
currently suffering from low commodity prices -- energy and agriculture -- plus
our maintenance of strong underwriting standards have enabled us to fare
exceptionally well.
[GRAPH III]
See Appendix A for
Graph III data
OTHER MILESTONES
In 1998, we also acquired Leo Oppenheim & Co., Inc. - Oklahoma's leading
public finance firm -- and merged it with our other securities units to create
BOSC, Inc., a regional securities firm for commercial and public enterprises. We
also secured Tier II powers for this "Section 20" subsidiary from the Federal
Reserve Board, enabling us to build this company into a niche investment banking
firm with a strong foundation in public finance, but expertise in the full range
of securities activities throughout the region. As the only remaining full-line
provider of such services in Oklahoma, we believe we can offer an advantage in
responsiveness to our customers in competition with out-of-state firms.
Fee-based revenue the highest of any full time banking company in our size range
in the country.
BOk Mortgage acquired firms in Little Rock and suburban Kansas City, opened
an office in Albuquerque, and announced an agreement to acquire a second
mortgage originator and servicer in the Kansas City area. During the past year,
BOk Mortgage originated $850 million in loans in Oklahoma, Arkansas, and Kansas,
and serviced loans nationally totaling $6.4 billion. With its expansion into
Arkansas, New Mexico, Kansas and Missouri, BOk Mortgage has grown into one of
the region's strongest mortgage banking companies.
Our consumer banking area adopted its Strategic Selling
Initiative (SSI) program, aimed at managing each of its customer relationships
most effectively. SSI was introduced in our branches during 1998 and now allows
consumer bankers to identify their best customers on a quantitative basis --
thus keeping the focus on the right combination of service and profitability,
rather than on volume.
3
<PAGE> 7
In keeping with our interest in increasing the marketability of the common
stock of BOK Financial, our board of directors approved a two-for-one split of
our stock, in the form of a 100% dividend. This split became effective in
February, 1999.
Thinks and acts entrepreneurially within the boundaries of sound banking
practice
YEAR 2000 ISSUES
During the past year, we continued our plan to prepare our computer systems
and facilities for the Year 2000 date change. Our company-wide Year 2000 effort
encompassed some 281 individual systems. We have successfully completed
remediation of all hardware and mission-critical software, and we are currently
in the final stages of testing six remaining mission-critical software programs.
All six systems should have testing satisfactorily completed by March 31, 1999.
We have also initiated a Change Control Process to avoid introduction of
problems by normal system maintenance and installation of some new systems in
1999. In addition, we have reviewed both our loan portfolio and our funding
sources for early identification of potential Year 2000 problems, and are
pleased with the results of both reviews.
The last two years of banking consolidation in our region have left us as
the only locally managed full-service bank in Oklahoma with the ability to
combine community bank responsiveness with national bank services. The
disruption in our marketplace caused by the sale of our major competitors has
generated a large amount of migration of customer relationships back to locally
controlled financial institutions. We have focused our attention on this
franchise shift by assuring that we had adequate -- and well trained -- customer
service representatives and the back office capability to support the
transition, including the hiring of more than 100 new talented people from our
direct competitors. While we will continue to be interested in adding new
talent, during 1999 our focus will begin to gradually shift somewhat more
attention to efficiency in the delivery of services.
We view 1999 with great promise for your company and your bank, and as always,
welcome your questions, comments and suggestions.
Sincerely,
/s/ GEORGE B. KAISER /s/ STANLEY A. LYBARGER
George B. Kaiser Stanley A. Lybarger
Chairman of the Board President and Chief Executive Officer
<PAGE> 8
COMMERCIAL BANKING & TREASURY SERVICES
o This unit has been the historical strength of our company, with a focus on
middle market customers.
o Banking consolidation has generated opportunities to serve customers
abandoned by their traditional bank.
o Our regional expansion strategy allows us to achieve greater growth rates
than through exclusive reliance on our base where our market share is more
mature. While our commercial loan growth was 17% in the Tulsa and Oklahoma
City middle-market sector ($226 million), our growth in the community and
small-business lending was 29% ($76 million), and in Dallas was 113% ($108
million). Expansion from a small base in faster growing markets will
continue to propel the company's overall growth rates.
o Our strong credit culture is evidenced by our solid history of negligible
net commercial losses in recent years. Our mature lending staff is well
tempered through experience in prior business downturns.
o Our corporate treasury service products are nationally competitive and
easily superimposed onto the array of services delivered to customers of
acquired banks.
o We have significantly built our market share in our home markets against
national competition.
- --------------------------------------------------------------------------------
CONSUMER BANKING
o BOk offers the most convenient consumer banking services in Oklahoma - 64
branches, including 26 supermarket locations - 24-hour ExpressBank call
center - Internet banking with online banking and loan applications.
o Our Strategic Selling Initiative program allows the use of detailed
customer profitability information to target sales and service efforts,
and to optimize product pricing.
o Non-interest deposits grew by 15%.
o BOk was one of the first banks in the country to introduce the Small
Business Visa Check Card.
o The Bank of Albuquerque acquisition will provide a platform to export the
consumer banking model to New Mexico.
[GRAPH IV]
[GRAPH V]
See Appendix A for
Graph IV and Graph V data.
5
<PAGE> 9
INVESTMENTS
o Leo Oppenheim & Co., Inc., an 80-year-old, conservatively managed Oklahoma
firm, was acquired in August and merged into BOSC, Inc., our existing
"Section 20" securities firm -- thus greatly enhancing public finance
coverage in Oklahoma.
o BOSC/Oppenheim's primary competition now serves Oklahoma from out of state
without the responsiveness of a local provider.
o Through the merger and receipt of "Tier II" powers, BOSC, Inc. can become
a competitive force throughout our market area.
o The consumer investment center experienced record revenue last year, and
ranks third among U.S. banks in the Southwest in the ratio of investment
sales revenue to deposits.
o Consolidated institutional and consumer revenue grew in 1998 by 48% to $14
million.
[GRAPH VI]
See Appendix A for
Graph VI data.
- --------------------------------------------------------------------------------
TRUST COMPANY
o The largest fiduciary organization based in Oklahoma.
o Administers more than $14 billion in assets.
o The American Performance mutual fund family grew nearly 18% in 1998 after
adjusting for market growth:
- More than $1.5 billion in assets
- Nationally competitive performance for all funds
* AP Short-Term Income Fund ranked #1 in the U.S. for 1998
* Growth Equity Fund ranked in 7th, 6th, and 4th percentiles
nationally for the last 1, 2, and 3 year periods, respectively.
* Other funds, both equity and fixed income, with consistently high
rankings.
o Highly successful Private Financial Services offering, combining personal
trust, investments, insurance and banking services into a single unit
o Trust operating revenue grew by 26% in 1998 to $37.9 million.
[GRAPH VII]
See Appendix A for
Graph VII data.
6
<PAGE> 10
MORTGAGE BANKING
o BOK Mortgage is far and away the market leader in Oklahoma with market
share of mortgage originations several times the level of our next
competitor in most of Oklahoma's larger cities.
o With acquisitions and expansion in 1998, BOk Mortgage has become one of
the strongest overall mortgage banking firms in the region.
- Acquired mortgage companies in Little Rock and suburban Kansas City
- Opened office in Albuquerque
- Announced second acquisition pending in the Kansas City area in
early 1999, giving excellent coverage of the greater metropolitan
Kansas City market
- 13 offices in Arkansas, Kansas, Missouri, New Mexico, and Oklahoma.
o The firm services more than $6 billion in loans in 49 states, with an
additional $1 billion currently under contract to purchase.
o In 1998, operating revenues for BOk Mortgage grew by almost 30% to $44.4
million.
[GRAPH VIII]
See Appendix A for
Graph VIII data.
- --------------------------------------------------------------------------------
TRANSFUND/CREDIT CARD SERVICES
o TransFund is the 20th largest electronic funds transfer network in the
U.S., and by far the largest in Oklahoma and bordering areas.
- 995 ATMs in the TransFund branded network
- the preferred outsource option for 237 other financial institutions
- leader of a 107 financial institution network which has more than 400
"no surcharge" ATMs for their cardholders
o 1.2 million cardholders -- 23% increase from the prior year
o 23 million Check Card purchases -- 63% more than in 1997
o 35 million total ATM transactions -- an 11% increase
o TransFund now operates in eight states, including all states contiguous to
Oklahoma.
o Fee revenues grew by 26% in 1998 to $24.4 million.
- The compound growth rate since 1995 is 30%.
[GRAPH IX]
See Appendix A for
Graph IX data.
7
<PAGE> 11
DALLAS-FT. WORTH METROPLEX
o Acquired First National Bank of Park Cities and First Texas Bank in early
1997.
- Park Cities was the preeminent bank serving the affluent markets in
University Park and Highland Park.
- First Texas was a clear leader among small business banks in the
Metroplex.
o Merged to form Bank of Texas, N.A., in 1998.
- 1998 total loan growth was $130 million, primarily in middle-market
commercial lending, which increased $108 million, or 113%.
- Staff and product lines were augmented by the addition of middle-market
commercial lending, cash management services, personal trust, corporate
trust and employee benefits, and personal investments.
- Highly successful new branch opened in Sherman, Texas, complementing an
existing trust office.
o 1999 plan contemplates additional acquisitions in the Metroplex to make
the Bank of Texas larger than any independent Dallas/Ft. Worth bank.
- --------------------------------------------------------------------------------
ALBUQUERQUE
o Formed in December 1998 to acquire $465 million in deposits from Bank of
America/NationsBank in a divestiture required to gain approval of their
merger.
o Strategic plan calls for a combination of this retail franchise with our
pre-existing loan production office and expansion into a full-service
bank, emphasizing:
- Middle-market commercial lending.
- Our nationally competitive cash management services.
- Personal trust, personal investments, insurance and
lending services integrated in our Private Financial
Services concept.
- Our full range of corporate trust and employee
benefits offerings.
[GRAPH X]
[GRAPH XI]
See Appendix A for Graph X
and Graph XI data.
8
<PAGE> 12
<TABLE>
<CAPTION>
Table 1 Consolidated Selected Financial Data
(Dollars In Thousands Except Share Data) DECEMBER 31,
-----------------------------------------------------------------
1998(2) 1997(2),(3) 1996(2),(3) 1995(2),(3) 1994(2),(3)
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA
For the year:
Interest revenue $ 386,587 $ 344,548 $ 290,532 $ 275,441 $ 223,058
Interest expense 204,335 188,948 163,093 160,177 104,055
Net interest revenue 182,252 155,600 127,439 115,264 119,003
Provision for loan losses 14,451 9,026 4,267 231 195
Net income 74,716 64,625 54,127 49,205 45,065
Period-end:
Loans, net of reserve 3,487,010 2,711,992 2,349,432 2,156,081 1,805,782
Assets 6,809,348 5,399,642 4,620,700 4,244,118 3,927,276
Deposits 4,379,230 3,728,079 3,256,755 2,937,709 2,629,574
Subordinated debenture 146,921 148,356 -- -- 23,000
Shareholders' equity 505,114 435,477 359,966 301,565 236,902
Nonperforming assets 17,716 24,232 23,411 32,687 24,214
PROFITABILITY STATISTICS
Per share (based on average equivalent shares):
Basic earnings:
Net income $ 1.62 $ 1.40 $ 1.17 $ 2751.06 $ .97
Diluted earnings:
Net income 1.44 1.25 1.06 .96 .88
Percentages (based on daily averages):
Return on average assets 1.31% 1.27% 1.26% 1.22% 1.26%
Return on average shareholders' equity 15.99 16.41 16.80 18.07 19.92
Average shareholders' equity to average assets 8.18 7.73 7.49 6.73 6.32
COMMON STOCK PERFORMANCE AND EXISTING
SHAREHOLDER STATISTICS
Per Share:
Book Value of common shareholders' equity $ 11.09 $ 9.68 $ 7.98 $ 6.67 $ 5.22
Market price: December 31 bid 23.38 19.40 13.50 9.75 10.00
Market range - High bid 25.56 21.25 13.50 11.75 12.50
- Low bid 18.62 13.44 9.62 9.25 9.50
SELECTED BALANCE SHEET STATISTICS
Period-end:
Tier 1 capital ratio (see Note 15) 7.80% 9.39% 10.49% 9.91% 9.14%
Total capital ratio (see Note 15) 11.96 14.54 11.74 11.17 11.19
Leverage ratio (see Note 15) 6.57 6.81 7.46 6.55 5.64
Reserve for loan losses to
nonperforming loans 495.05 279.86 239.70 130.73 190.27
Reserve for loan losses to loans(1) 1.88 1.98 1.96 1.80 2.12
MISCELLANEOUS (AT DECEMBER 31)
Number of employees (FTE) 2,758 2,318 2,102 1,842 1,801
Number of banking locations 88 73 69 66 63
Number of TransFund locations 995 782 635 549 520
Mortgage loan servicing portfolio $6,375,239 $6,981,744 $5,948,187 $5,363,175 $5,080,859
</TABLE>
- -------------------
(1) Excludes residential mortgage loans held for sale which are carried at
the lower of aggregate cost or market value.
(2) Shares and per share data have been restated to reflect the 2-for-1
stock split in the form of a 100% stock dividend on February 22, 1999.
(3) Shares and per share data have been restated to reflect the 3% stock
dividend paid in November 1998.
9
<PAGE> 13
Management's Assessment of Operations and Financial Condition
BOK Financial Corporation ("BOK Financial") is a bank holding company which
offers full service banking in Oklahoma, Northwest Arkansas, North Texas and New
Mexico. BOK Financial's principal subsidiaries are Bank of Oklahoma, N.A.
("BOk"), Bank of Texas, N.A., Bank of Albuquerque, N.A., and Bank of Arkansas,
N.A. Other significant operating subsidiaries include BOK Capital Services
Corporation which provides leasing and mezzanine financing and BOSC, Inc., a
"Section 20" company which engages in retail and institutional securities sales
and municipal underwriting. During the fourth quarter, BOK Financial formed Bank
of Albuquerque through the acquisition of 17 branches with total deposits of
$465 million. BOK Financial has also announced acquisitions of banks in
Muskogee, Oklahoma and Dallas, Texas which will increase total assets by $656
million. These acquisitions are expected to be completed by June 30, 1999,
pending regulatory approval.
ASSESSMENT OF OPERATIONS
SUMMARY OF PERFORMANCE
BOK Financial recorded net income of $74.7 million for 1998 compared to
$64.6 million for 1997. Diluted earnings per common share were $1.44 for 1998
compared to $1.25 for 1997. Prior period per share data have been restated to
reflect a 3% stock dividend paid in November, 1998 and a two-for-one stock split
in the form of a 100% stock dividend announced on January 26, 1999 and paid on
February 22, 1999. Returns on average assets and average equity were 1.31% and
15.99%, respectively, for 1998 compared to 1.27% and 16.41%, respectively, for
1997.
The increase in net income for 1998 was due to increases of $26.7 million
or 17% in net interest revenue, $32.2 million or 25% in fees and commissions and
$10.7 million in gains on securities sales. These increases were partially
offset by increases of $33.5 million or 17% in operating expenses, $5.4 million
in provision for loan losses, and $20.8 million in income taxes.
Net income for the fourth quarter of 1998 was $19.2 million or $0.37 per
diluted common share, an increase of 14% over the same period of 1997. The
primary sources of increased quarterly earnings included net interest revenue,
which increased $7.3 million or 17%, fees and commissions, which increased $6.2
million or 17%, and securities gains which increased $5.2 million. These
increases were partially offset by a $16.1 million increase in tax expense.
Income tax expense for the fourth quarter of 1997 was reduced by $9.0 million
due to the reversal of a reserve for disputed items that was no longer
necessary. Total operating expenses were unchanged between the fourth quarters
of 1998 and 1997. However, operating expenses for the fourth quarter of 1998
included $1.1 million of start-up costs for Bank of Albuquerque and were reduced
by a $4.3 million reversal of a valuation allowance for the impairment of
mortgage servicing rights. Operating expenses for the fourth quarter of 1997
included a $4.1 million provision for the potential impairment of mortgage
servicing rights and a $3.6 million charge for the cost of stock contributed to
the BOk Charitable Foundation. Operating expense for the fourth quarter 1998
increased $10.5 million or 20%, excluding these items.
Net income for 1996 was $54.1 million or $1.06 per diluted common
share. Returns on average assets and equity were 1.26% and 16.80%, respectively.
TANGIBLE OPERATING RESULTS
Since inception, BOK Financial has completed several acquisitions that were
accounted for under the purchase method of accounting. The purchase method
results in the recording of goodwill and other identifiable intangible assets
that are amortized as noncash charges in future years into operating expense.
The intangible assets that result from the purchase method of accounting are
deducted from shareholders' equity in the determination of regulatory capital.
Thus, the related tangible net income represents the regulatory capital
generated during the year and can be viewed as net income excluding intangible
amortization net of tax. While the definitions of "tangible" earnings may vary
by company, we believe this definition is appropriate as it measures the per
share growth of regulatory capital, which impacts the amounts available for
dividends and acquisitions. Operating results excluding the impact of these
intangible assets are summarized below:
<TABLE>
<CAPTION>
Table 2 Tangible Operating Results
(Dollars in Thousands Except Share Data) YEARS ENDED DECEMBER 31,
--------------------------------------
1998(1) 1997(1),(2) 1996(1),(2)
---------- ---------- ----------
<S> <C> <C> <C>
Net income $ 74,716 $ 64,625 $ 54,127
After-tax impact of amortization of intangible
assets 8,406 7,911 7,209
---------- ---------- ----------
Tangible net income $ 83,122 $ 72,536 $ 61,336
========== ========== ==========
Tangible net income per diluted share $ 1.61 $ 1.41 $ 1.20
========== ========== ==========
Average tangible shareholders' equity $ 399,433 $ 327,719 $ 289,603
Return on tangible shareholders' equity 20.81% 22.13% 21.18%
========== ========== ==========
Average tangible assets $5,644,924 $5,024,557 $4,269,774
Return on tangible assets 1.47% 1.44% 1.44%
========== ========== ==========
</TABLE>
(1) Shares and per share data have been restated to reflect the 2-for-1
stock split in the form of a 100% stock dividend on February 22, 1999.
(2) Shares and per share data have been restated to reflect the 3% stock
dividend paid in November 1998.
10
<PAGE> 14
NET INTEREST REVENUE
Net interest revenue, on a tax-equivalent basis, totaled $191.5 million
for 1998 compared to $165.2 million in 1997. This increase in net interest
revenue was due to increases in both net interest margin and average earning
assets. Additionally, BOK Financial recognized nonrecurring interest income in
1998 of $3.3 million from the collection of foregone interest. The yield on
average earning assets decreased to 7.75% in 1998 compared to 7.85% in 1997 due
to a general trend toward lower interest rates and increasingly competitive loan
pricing. This decline in yield was partially offset by an improvement in the mix
of earning assets. Loans, which generally have higher yields than other types of
earning assets, increased to 58% of earning assets in 1998 compared to 56% in
1997. The cost of interest-bearing liabilities decreased to 4.78% in 1998
compared to 4.88% in 1997 due to lower market interest rates. Interest rate
swaps, which are used to hedge against interest rate risk on certain long-term
certificates of deposit and long-term subordinated debt, reduced interest
expense by $1.7 million in 1998 compared to $1.2 million in 1997.
Average earning assets increased $553 million, including a $380 million
increase in average loans. Over the same period, average interest-bearing
liabilities increased $399 million. The growth of average earning assets in
excess of average interest-bearing liabilities contributed $24.6 million to
1998's increase in net interest revenue.
<TABLE>
<CAPTION>
Table 3 Volume/Rate Analysis
(In Thousands) 1998/1997 1997/1996
-------------------------------------- --------------------------------------
Change Due To(1) Change Due To(1)
------------------------ ------------------------
Change Volume Yield/Rate Change Volume Yield/Rate
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tax-equivalent interest revenue:
Securities $ 9,975 $ 11,368 $ (1,393) $ 23,164 $ 19,843 $ 3,321
Trading securities 759 856 (97) (53) (20) (33)
Loans 28,924 32,937 (4,013) 30,745 30,271 474
Funds sold and resell agreements (1,155) (1,226) 71 1,362 1,337 25
---------- ---------- ---------- ---------- ---------- ----------
Total 38,503 43,935 (5,432) 55,218 51,431 3,787
---------- ---------- ---------- ---------- ---------- ----------
Interest expense:
Transaction deposits 3,334 4,377 (1,043) 4,755 6,488 (1,733)
Savings deposits 6 122 (116) (97) 129 (226)
Time deposits 4,639 6,093 (1,454) (682) 511 (1,193)
Borrowed funds 1,881 3,288 (1,407) 17,713 16,788 925
Subordinated debenture 5,527 5,463 64 4,166 4,166 --
---------- ---------- ---------- ---------- ---------- ----------
Total 15,387 19,343 (3,956) 25,855 28,082 (2,227)
---------- ---------- ---------- ---------- ---------- ----------
Tax-equivalent net interest revenue 23,116 $ 24,592 $ (1,476) 29,363 $ 23,349 $ 6,014
Nonrecurring foregone interest 3,262 --
Change in tax-equivalent adjustment (274) 1,202
---------- ---------- ---------- ---------- ---------- ----------
Net interest revenue $ 26,652 $ 28,161
========== ========== ========== ========== ========== ==========
<CAPTION>
4th Qtr 1998/4th Qtr 1997
--------------------------------------
Change Due To(1)
------------------------
Change Volume Yield/Rate
---------- ---------- ----------
<S> <C> <C> <C>
Tax-equivalent interest revenue:
Securities $ 4,166 $ 5,088 $ (922)
Trading securities 139 178 (39)
Loans 8,234 10,928 (2,694)
Funds sold and resell agreements (482) (525) 43
---------- ---------- ----------
Total 12,057 15,669 (3,612)
---------- ---------- ----------
Interest expense:
Transaction deposits 501 1,002 (501)
Savings deposits 11 73 (62)
Time deposits (773) 256 (1,029)
Borrowed funds 5,258 6,339 (1,081)
Subordinated debenture (106) (15) (91)
---------- ---------- ----------
Total 4,891 7,655 (2,764)
---------- ---------- ----------
Tax-equivalent net interest revenue 7,166 $ 8,014 $ (848)
Change in tax-equivalent adjustment (97)
---------- ---------- ----------
Net interest revenue $ 7,263
========== ========== ==========
</TABLE>
(1) Changes attributable to both volume and yield/rate are allocated to
both volume and yield/rate on an equal basis.
11
<PAGE> 15
Net interest margin, the ratio of net interest revenue to average earning
assets, increased from 3.66% in 1997 to 3.72% in 1998. This increase was due
primarily to lower rates paid on deposits and borrowed funds. Since inception in
1990, BOK Financial has followed a strategy of fully utilizing its capital
resources by borrowing funds in the capital markets to supplement deposit growth
and to invest in securities. Although this strategy frequently results in a net
interest margin that falls below those normally seen in the commercial banking
industry, it provides positive net interest revenue. Management estimates that
for 1998, this strategy resulted in a 59 basis point decrease in net interest
margin. However, this strategy contributed $8.4 million to net interest revenue
for the year. As more fully discussed in the subsequent Market Risk section,
management employs various techniques to control, within established parameters,
the interest rate and liquidity risk inherent in this strategy.
The financial services environment in BOK Financial's primary markets is
highly competitive due to a large number of commercial banks, thrifts, credit
unions and brokerage firms. Additionally, many customers have access to national
and regional financial institutions for many products and services. Management
expects that BOK Financial will continue to be able to successfully compete with
these financial institutions by delivering the products and services
traditionally associated with a large bank with the responsiveness of a smaller,
community bank.
Tax-equivalent net interest revenue for the fourth quarter of 1998 was
$51.3 million compared to $44.1 million for the fourth quarter of 1997. This
increase was due to the growth in average earning assets, which increased $803
million or 17%. Net interest margin decreased 3 basis points to 3.72% as falling
interest rates had a similar effect on both asset yields and the cost of
interest-bearing liabilities.
Net interest revenue on a tax-equivalent basis, totaled $165.2 million for
1997 compared to $135.8 million in 1996. This increase in net interest revenue
was due to increases in both net interest margin and average earning assets. The
yield on average earning assets increased from 7.79% in 1996 to 7.85% in 1997 as
both securities and loans showed yield increases. At the same time, the cost of
interest-bearing liabilities decreased from 4.94% to 4.88% due primarily to a 22
basis point decrease in rates paid on deposits. Average earning assets increased
$676 million, including $265 million from acquisitions, $216 million from net
loan fundings, and $172 million from securities purchases. Over the same period,
average interest-bearing liabilities increased $573 million, including $190
million from acquisitions and $293 million from borrowed funds.
OTHER OPERATING REVENUE
Other operating revenue, which consists primarily of fee income on products
and services, increased $43.1 million or 33% compared to 1997. Excluding gains
and losses on securities sales, other operating revenue increased $32.5 million
or 25%. Other operating revenue excluding securities gains contributed 47% of
BOK Financial's total revenue for 1998. Service fees on deposits totaled $32.2
million, an increase of 12% over 1997, while revenue generated by card-based
transactions such as the TransFund ATM network, bankcards, and related merchant
deposits increased by 26% to $24.4 million. These increases are generally due to
a higher volume of transactions processed in 1998. Brokerage and trading revenue
increased $5.7 million or 60% during 1998 due to improved market conditions and
additional resources focused in this area.
Many of BOK Financial's fee generating activities, such as brokerage and
trading activities, trust fees, and mortgage servicing revenue, are indirectly
affected by changes in interest rates. Significant increases in interest rates
may tend to decrease the volume of trading activities, and may lower the value
of trust assets managed, which is the basis of certain fees, but would tend to
decrease the incidence of mortgage loan prepayments. Similarly, a decrease in
economic activity would decrease ATM, bankcard and related revenue.
<TABLE>
<CAPTION>
Table 4 Other Operating Revenue
(In Thousands) YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Brokerage and trading revenue $ 15,301 $ 9,556 $ 7,896 $ 6,046 $ 5,517
Transaction card revenue 24,426 19,339 14,298 11,045 8,474
Trust fees and commissions 29,939 24,062 21,638 19,363 17,117
Service charges and fees on deposit accounts 32,187 28,651 24,104 21,152 20,698
Mortgage banking revenue 41,733 32,235 26,234 20,336 15,868
Leasing revenue 7,111 5,861 2,236 586 --
Other revenue 11,237 10,013 10,769 9,512 8,299
--------- --------- --------- --------- ---------
Total fees and commissions 161,934 129,717 107,175 88,040 75,973
--------- --------- --------- --------- ---------
Gain on student loan sale 1,548 1,311 1,069 762 259
Gain (loss) on branch sales -- -- (325) 1,170 --
Gain (loss) on securities 9,337 (1,329) (2,607) 1,174 (1,868)
--------- --------- --------- --------- ---------
Total other operating revenue $ 172,819 $ 129,699 $ 105,312 $ 91,146 $ 74,364
========= ========= ========= ========= =========
</TABLE>
12
<PAGE> 16
While management expects continued growth in other operating revenue, the
future rate of increase could be affected by increased competition from national
and regional financial institutions and from market saturation. Continued growth
may require BOK Financial to introduce new products or to enter new markets
which introduces additional demands on capital and managerial resources.
Other operating revenue for the fourth quarter of 1998 totaled $44.8
million compared to $33.5 million for the fourth quarter of 1997. All
significant revenue producing activities contributed to this increase, including
gains on securities sales that increased $5.2 million. Transaction card revenue
and deposit fees each increased $1.5 million due to more transactions.
Other operating revenue for 1997 increased $24.4 million or 23% compared to
1996. Service fees on deposits totaled $28.7 million an increase of 19% over
1996 while revenue generated by card-based transactions such as the TransFund
ATM network, bankcards, and related merchant deposits increased by 35% to $19.3
million. These increases are generally due to a higher volume of transactions
processed in 1997. Leasing revenue increased to $5.9 million in 1997 compared to
$2.2 million in 1996. The financing of specialty oil field and other
energy-related equipment, primarily through operating leases, was developed in
1996 and continued to grow in 1997.
LINES OF BUSINESS
BOK Financial operates four principal lines of business, corporate banking,
consumer banking, mortgage banking and trust services which in the aggregate
account for more than 75% of total revenue. Other lines of business include the
TransFund ATM system, BOSC, Inc., Bank of Arkansas, Bank of Texas and Bank of
Albuquerque.
Corporate Banking
The Corporate Banking Division provides loan and lease financing and
treasury and cash management services to businesses throughout Oklahoma and
seven surrounding states. In addition to serving the banking needs of middle
market and larger customers, the Corporate Banking Division has specialized
groups which serve customers in the energy, agriculture, healthcare and
banking/finance industries. The Corporate Banking Division contributed 49% of
consolidated net income for 1998 and 54% of consolidated net income for 1997.
Total revenue for this division increased by 18% primarily due to increased loan
volumes. However, operating expenses for this division grew by 39% during 1998
due to higher servicing and personnel costs. This caused a lower return on
average assets and equity for the division for 1998. Average assets allocated to
this division increased $351 million or 19% due to higher loan volumes.
<TABLE>
<CAPTION>
Table 5 Corporate Banking
(In Thousands)
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
Total revenue $ 102,355 $ 86,645 $ 70,727
----------- ----------- ------------
Operating expense 42,077 30,328 23,126
----------- ----------- ------------
Net income 36,884 34,636 29,276
----------- ----------- ------------
Average assets 2,171,023 1,819,834 1,449,637
----------- ----------- ------------
Average equity 255,108 210,407 164,214
----------- ----------- ------------
Return on assets 1.70% 1.90% 2.02%
----------- ----------- ------------
Return on equity 14.46% 16.46% 17.83%
----------- ----------- ------------
Efficiency ratio 41.11% 35.00% 32.70%
----------- ----------- ------------
</TABLE>
Consumer Banking
The Consumer Banking Division provides its customers with a full line of
deposit, loan and fee-based services through four major distribution channels;
traditional branches, supermarket branches, the 24-hour ExpressBank call center,
and the Internet. Additionally, the division is a significant referral source
for the Bank of Oklahoma Mortgage Division ("BOk Mortgage") and BOSC's Retail
Brokerage Division. The Consumer Banking Division contributed 11% of
consolidated net income for 1998 and 10% of consolidated net income for 1997.
Total revenue, which consists primarily of intercompany credit for funds
provided to other divisions within BOK Financial and fees generated by various
services, increased 7% during 1998. The increase in operating expenses for this
same period was limited to 3%. The result is an improvement in returns on
average assets and equity for the division and an improved efficiency ratio.
<TABLE>
<CAPTION>
Table 6 Consumer Banking
(In Thousands)
YEARS ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Total revenue $ 69,446 $ 65,083 $ 64,500
--------- --------- ---------
Operating expense 52,395 50,879 49,911
--------- --------- ---------
Net income 8,340 6,191 7,118
--------- --------- ---------
Average assets 1,904,409 1,894,535 1,963,068
--------- --------- ---------
Average equity 46,767 44,600 55,332
--------- --------- ---------
Return on assets 0.44% 0.33% 0.36%
--------- --------- ---------
Return on equity 17.83% 13.88% 12.86%
--------- --------- ---------
Efficiency ratio 75.45% 78.18% 77.38%
--------- --------- ---------
</TABLE>
13
<PAGE> 17
Mortgage Banking
BOK Financial engages in mortgage banking activities through BOk Mortgage.
These activities include the origination, marketing and servicing of mortgage
loans. BOk Mortgage contributed 9% to consolidated net income in 1998 compared
to 2% in 1997. Operating results for 1997 were constrained by a provision of
$4.1 million for possible impairment of mortgage servicing rights. Operating
results for 1998 benefited from a $2.3 million reversal of the allowance for
impaired mortgage servicing rights.
Total revenue from BOk Mortgage increased $11.3 million or 29% during 1998.
Origination and marketing activities resulted in net gains of $8.3 million in
1998 compared to net gains of $1.5 million in 1997. The improvement was the
result of an increase in loan production due to lower interest rates including a
high level of refinancing activity. Total mortgage loan production for 1998
increased $20 million to $850 million compared to $830 million in 1997.
Originations for 1997 included approximately $353 million in correspondent
originations. This activity was significantly lower in 1998, with $24 million in
correspondent originations. As of the end of 1998, BOk Mortgage had effectively
eliminated correspondent originations.
Commitments to originate mortgage loans creates both credit and interest
rate risk. Credit risk is managed through underwriting policies and procedures,
and interest rate risk is partially hedged through forward sales contracts. All
fixed rate mortgage loans are generally sold in the secondary market pursuant to
forward sales contracts. All adjustable rate mortgage loans are sold to an
affiliate. BOk Mortgage currently does not securitize pools of mortgage loans
either for sale or retention.
Mortgage loan servicing revenue for 1998 was $33.5 million, a $2.7 million
increase over 1997. Mortgage loans serviced by BOk Mortgage totaled $6.4 billion
at December 31, 1998 compared to $7.0 billion at the end of 1997. These amounts
include loans serviced for BOk of $130 million for 1998 and $216 million for
1997.
Capitalized mortgage servicing rights, which totaled $69.2 million at
December 31,1998 and $83.9 million at December 31, 1997, represent mortgage
loans serviced for others carried at the lower of amortized cost, plus or minus
deferred hedging losses or gains, or fair value. Fair value is based on the
present value of projected net servicing revenue over the estimated life of the
mortgage loans serviced. This estimated life and the value of the servicing
rights is very sensitive to changes in interest rates and loan prepayment
assumptions. Rising interest rates tend to decrease loan prepayments and
increase the value of mortgage servicing rights while falling interest rates
have the opposite effect. A valuation allowance is provided for the excess of
the net carrying value of servicing rights over their fair values. In 1998, BOk
Mortgage implemented a program that uses futures contracts and call and put
options to hedge against this risk. This program generated realized gains of
$22.7 million and unrealized gains of $518 thousand that reduced the carrying
value of the mortgage servicing rights. The allowance for impairment of mortgage
servicing rights that had previously been provided was reversed in the fourth
quarter of 1998 due to the overall effect of the hedge program. Additional
discussion about the sensitivity of the mortgage servicing portfolio to changes
in interest rates is in the Market Risk section.
<TABLE>
<CAPTION>
Table 7 Mortgage Banking
(In Thousands)
YEARS ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Total revenue $ 50,643 $ 39,307 $ 32,436
--------- --------- ---------
Operating expense 41,863 33,204 27,750
--------- --------- ---------
Provision for
impairment of
mortgage servicing
rights (2,290) 4,100 361
--------- --------- ---------
Net income 6,634 1,059 2,522
--------- --------- ---------
Average assets 350,362 386,985 520,559
--------- --------- ---------
Average equity 30,556 28,723 26,396
--------- --------- ---------
Return on assets 1.89% 0.27% 0.48%
--------- --------- ---------
Return on equity 21.71% 3.69% 9.55%
--------- --------- ---------
Efficiency ratio 82.66% 84.47% 85.55%
--------- --------- ---------
</TABLE>
Trust Services
BOK Financial provides a wide range of trust services, including
institutional, investment and retirement products and services to affluent
individuals and businesses, to not-for-profit organizations and to governmental
agencies through the Bank of Oklahoma Trust Division and Bank of Texas Trust
Company. Trust services are primarily provided to clients in Oklahoma, Texas,
Arkansas and New Mexico. Additionally, trust services include a nationally
competitive self-directed 401k program with client firms in Chicago, New York
and Los Angeles. At December 31, 1998, trust assets with an aggregate market
value of $14.4 billion were subject to various fiduciary arrangements, compared
to $11.1 billion at December 31, 1997. Trust services contributed 10% to
consolidated net income in 1998 compared to 9% in 1997. Revenue from trust
services increased $9.6 million or 25% during 1998. However, operating expenses
increased $6.9 million or 24% due primarily to a $4.7 million increase in
personnel costs.
<TABLE>
<CAPTION>
Table 8 Trust Services
(In Thousands)
YEARS ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Total revenue $ 48,007 $ 38,408 $ 33,520
--------- --------- ---------
Operating expense 35,419 28,532 25,779
--------- --------- ---------
Net income 7,566 5,854 4,600
--------- --------- ---------
Average assets 295,660 242,886 219,851
--------- --------- ---------
Average equity 30,188 24,233 20,898
--------- --------- ---------
Return on assets 2.56% 2.41% 2.09%
--------- --------- ---------
Return on equity 25.06% 24.16% 22.01%
--------- --------- ---------
Efficiency ratio 73.78% 74.29% 76.91%
--------- --------- ---------
</TABLE>
14
<PAGE> 18
YEAR 2000 CONSIDERATIONS
The Year 2000 issue, in general, is the result of computer programs being
written using two digits rather than four to define the applicable year. Any
computer programs, including information technology ("IT") and noninformation
technology ("non-IT") systems, that have date sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations, including
among other things, a temporary inability to process transactions or to engage
in similar normal business activities.
The Federal Financial Institution Examination Council ("FFIEC") provides
regulatory guidance on BOK Financial's and other financial institutions' Year
2000 compliance and has outlined five phases to effectively manage the Year 2000
issues. The phases are: Awareness; Assessment; Renovation; Validation; and
Implementation. The FFIEC encouraged institutions to have all mission-critical
applications identified and priorities set by September 30, 1997 and to have
renovation work largely completed and testing well underway by December 31,
1998. Furthermore, the FFIEC required that testing of mission-critical systems
be substantially complete by June 30, 1999.
Assisting in BOK Financial's Year 2000 efforts are the Year 2000 Oversight
Committee, comprised of various members of executive management, as well as a
Year 2000 Project Team, which includes representatives from BOK Financial's
major business units. Both groups meet on a regular basis to monitor and discuss
continuing Year 2000 developments for both IT and non-IT systems. The Board of
Directors recognizes the importance of and supports these Year 2000 initiatives.
Outsourced providers of data processing services run most critical
applications. These processors have been contacted and have provided compliance
status reports for their respective hardware and software systems. BOK
Financial's core processing systems are outsourced to FiServ Solutions, Inc.
("FiServ"), based in Pittsburgh, Pennsylvania. FiServ is an international data
processing company that specializes in financial institution data processing and
is subject to regulatory requirements imposed upon bank data processors. BOK
Financial personnel are members of FiServ's customer advisory committee and
directly participated in the coordination of the testing process for these
applications. BOK Financial receives monthly updates from FiServ to monitor
progress towards completion of the Year 2000 compliance process.
BOK Financial's trust accounting systems are outsourced to M&I Data
Services ("M&I"), based in Milwaukee, Wisconsin. Proxy testing of the M&I trust
accounting system was conducted in June, 1998 by members of M&I's staff. The
test procedures and results were subject to review by the M&I Advisory Board,
which included a BOK Financial representative. The results of this testing have
been analyzed and accepted as satisfactory by BOK Financial's management. BOK
Financial also receives processing services from Mellon Network Services based
in Pittsburgh, Pennsylvania and SunGard Securities Systems in Hopkins,
Minnesota. Both Mellon's and SunGard's systems have also been successfully
renovated, tested and implemented.
Overall, BOK Financial is well ahead of the FFIEC guidelines. There were
281 core IT applications identified which required testing, 53 of these
applications were deemed mission critical. Over 90% of the total applications
have been successfully tested. Only six of the critical IT applications remain
to be fully tested. Testing of these critical applications is expected to be
completed by March 31, 1999. All mission critical, non-IT systems within our
control have been successfully tested. Written representations as to Year 2000
readiness have been received for all other mission critical, non-IT systems.
BOK Financial has also initiated communication with large customers to
determine what steps they have undertaken to ensure they are prepared for Year
2000. This effort has enabled BOK Financial to develop contingency plans related
to the possible effects of the Year 2000 issue on the credit risk of its
borrowers, cash flow disruptions of its funds providers, and its overall
liquidity needs. BOK Financial has included the potential effect of Year 2000 on
the credit risk of its borrowers in determining the adequacy of its loan loss
reserve.
FFIEC guidelines require financial institutions to substantially complete
the four phases of the Year 2000 business resumption contingency planning
process no later than June 30, 1999. BOK Financial's Year 2000 Project Team is
focused on preparation for the Year 2000 event. Plans are being finalized to
address situations that may arise as a result of internal or external
disruptions. These plans will be completed by June 30, 1999, and will include a
definition of and a plan to address the most reasonably likely worst case
scenario. Our system change control policy requires that new enhancements or
initiatives within the company or at our outsourced providers be tested for Year
2000 compliance prior to introduction to our processing environment. This policy
includes severe limitations on all changes from October 1, 1999 through February
29, 2000. Finally, plans are being developed to have key resources available
throughout all high risk processing periods during December, January, and
February.
BOK Financial invested approximately $9.9 million in computer systems
upgrades during 1998, including $405 thousand directly related to the Year 2000
issue. The majority of computer systems upgrades have been planned in the normal
course of business for competitive reasons, although compliance with Year 2000
issues is a factor in determining the timing of such upgrades. These investments
are in addition to upgrades for Year 2000 compliance by outside processors that
provide services to BOK Financial. During 1997, BOK Financial invested $5.2
million in computer systems upgrades with minimal expenditures directly related
to the Year 2000 issue. Based upon 1998 expenditures and the anticipated 1999
expenditures, management believes that the costs of the Year 2000 compliance
efforts will not materially affect BOK Financial's results of operations,
liquidity or capital resources.
15
<PAGE> 19
The foregoing forward-looking statements, including the costs of addressing
the Year 2000 issue and the dates upon which compliance will be attained,
reflect management's current assessment and estimates with respect to BOK
Financial's Year 2000 compliance effort. Various factors could cause actual
plans and results to differ materially from those contemplated by such
assessments, estimates and forward-looking statements, many of which are beyond
the control of BOK Financial. Some of these factors include, but are not limited
to, third party modification plans, availability of technological and monetary
resources, representations by vendors and counter parties, technological
advances, economic considerations and consumer perceptions. BOK Financial's Year
2000 compliance program is an ongoing process involving continual evaluation and
may be subject to change in response to new developments.
OTHER OPERATING EXPENSE
Other operating expense totaled $228.7 million for 1998 compared to $195.2
million in 1997, an increase of 17%.
Personnel expense increased $18.3 million or 21%. Regular compensation and
benefits (including overtime and temporary assistance) increased $15.3 million
or 19%. Staffing on a full time equivalent ("FTE") basis increased by 238
employees or 11%. Average compensation per FTE increased 7%, including a 6%
increase in salaries and wages and an 11% increase in benefits. The transition
toward performance based compensation continued during 1998. Incentive
compensation increased by $3.0 million or 34% compared to 1997 due to growth in
revenue over pre-determined targets and growth in the number of business units
covered by incentive plans.
Net occupancy, equipment and data processing expense for 1998 increased
$7.2 million or 20%. Net occupancy expense increased by $2.5 million due to a
$1.2 million decrease in rental income and a $1.3 million increase in expenses.
The decrease in rental income was primarily due to the conversion of BOK
Financial's ownership in its Oklahoma City headquarters building from a general
interest to a limited interest. The increase in occupancy expense was due
primarily to a $1.1 million increase in rent for BOk.
Data processing expenses increased $4.1 million or 24%. Bankcard processing
charges increased $2.2 million due to a greater volume of transactions. Bank of
Albuquerque data processing charges were $545 thousand, including an estimated
$350 thousand for systems conversions and other start up costs.
Mortgage banking costs increased $6.0 million or 30% compared to 1997.
Costs related to the origination and marketing of loans totaled $8.4 million, an
increase of $1.3 million from 1997. Loans originated in 1998, excluding
correspondent originations, totaled $850 million, an increase of 78% over 1997.
This reflects the refinancing of loans due to lower interest rates throughout
the year. Amortization of capitalized mortgage servicing increased to $17.5
million for 1998 compared to $12.8 million for 1997 due to accelerated loan
prepayments.
<TABLE>
<CAPTION>
Table 9 Other Operating Expense
(In Thousands) YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Personnel expense $ 105,995 $ 87,728 $ 71,945 $ 67,298 $ 63,111
Business promotion 8,040 8,657 6,372 6,039 6,213
Contribution of stock to BOk Charitable Foundation 2,257 3,638 -- -- --
Professional fees and services 9,657 6,769 5,406 5,898 4,664
Net occupancy, equipment and data processing expense 42,819 35,614 30,831 27,324 23,619
FDIC and other insurance 1,260 1,293 1,740 4,406 6,386
Special deposit insurance assessment -- -- 3,820 -- --
Printing, postage and supplies 9,196 7,783 6,792 6,340 5,415
Net gains and operating expenses on repossessed assets (480) (3,849) (4,552) (3,098) (4,575)
Amortization of intangible assets 9,371 8,824 5,411 5,992 5,597
Write-off of core deposit intangible assets related to
SAIF-insured deposits -- -- 3,821 -- --
Mortgage banking costs 25,949 19,968 15,473 11,990 10,764
Provision for impairment of mortgage servicing rights (2,290) 4,100 361 539 --
Other expense 16,881 14,641 11,608 9,478 12,281
--------- --------- --------- --------- ---------
Total $ 228,655 $ 195,166 $ 159,028 $ 142,206 $ 133,475
========= ========= ========= ========= =========
</TABLE>
Other operating expenses for the fourth quarter of 1998 totaled $60.8
million compared to $61.3 million for the fourth quarter of 1997. The fourth
quarter of 1998 included approximately $1.1 million of Bank of Albuquerque
start-up costs and the reversal of the valuation allowance for mortgage
servicing rights of $4.3 million. The fourth quarter of 1997 included a $4.1
million provision for impairment of mortgage servicing rights and a $3.6 million
charge for the cost of stock contributed to the BOk Charitable Foundation.
Additionally, gains from the sale of repossessed assets totaled $91 thousand for
the fourth quarter of 1998 compared to $1.6 million for 1997. Excluding these
items, other operating expenses increased $9.0 million or 16%.
Other operating expense totaled $195.2 million for 1997 compared to $159.0
million in 1996, an increase of 23%. Notable large or non-recurring expenses
affected 1997. These items included $12.7 million from the Bank of Texas
acquisitions (primarily personnel costs of $5.3 million and amortization expense
of $3.9 million), a provision of $4.1 million for impairment of mortgage
servicing rights, a contribution of stock with a cost of $3.6 million (market
value at the time of donation was $7.0 million) to the BOk Charitable
Foundation, equipment expenses of $1.0 million in conjunction with the
development of a new retail banking computer system, and professional fees of
$660 thousand for consulting assistance on recommendations for revenue
enhancement and expense control opportunities.
16
<PAGE> 20
INCOME TAXES
Income tax expense was $37.2 million, $16.5 million, and $15.3 million for
1998, 1997, and 1996, respectively, representing 33%, 20%, and 22%,
respectively, of book taxable income. Tax expense currently payable totaled
$46.4 million in 1998 compared to $20.0 million in 1997 and $19.0 million in
1996. During 1998, Internal Revenue Service examinations for 1994 and 1995 were
closed with no significant adjustments. During 1997, the Internal Revenue
Service closed its examination of BOk and BOK Financial for 1992 and 1993,
respectively. As a result of the outcome of these examinations, BOK Financial
realized a $9.0 million tax allowance that was no longer needed. Income tax
expense for 1997 was 31% of pre-tax book income excluding the elimination of
this allowance.
During 1996, the limitation on the use of certain built-in losses and net
operating loss carryforwards from the acquisition of BOk by BOK Financial in
1991 expired. As a result, valuation allowances totaling $6.2 million related to
these items were eliminated. Income tax expense for 1996 was 31% of pre-tax book
income excluding the elimination of these allowances.
<TABLE>
<CAPTION>
Table 10 Selected Quarterly Financial Data
(In Thousands Except Per Share Data)
FOURTH(1) THIRD(1),(2) SECOND(1),(2) FIRST(1),(2)
------------------------------------------------
1998
------------------------------------------------
<S> <C> <C> <C> <C>
Interest revenue $ 102,573 $ 98,411 $ 92,859 $ 92,744
Interest expense 53,598 51,634 48,395 50,708
--------- --------- --------- ---------
Net interest revenue 48,975 46,777 44,464 42,036
Provision for loan losses 4,027 4,001 3,953 2,470
--------- --------- --------- ---------
Net interest revenue after provision for
loan losses 44,948 42,776 40,511 39,566
Other operating revenue 41,850 42,322 41,035 38,275
Securities gains, net 2,967 538 3,320 2,512
Other operating expense 60,821 56,837 53,804 57,193
--------- --------- --------- ---------
Income before taxes 28,944 28,799 31,062 23,160
Income tax expense 9,729 10,049 10,624 6,847
--------- --------- --------- ---------
Net income $ 19,215 $ 18,750 $ 20,438 $ 16,313
========= ========= ========= =========
Earnings per share:
Basic $ .42 $ .41 $ .44 $ .35
--------- --------- --------- ---------
Diluted .37 .36 .39 .31
--------- --------- --------- ---------
Average shares:
Basic 45,034 45,052 45,114 45,211
--------- --------- --------- ---------
Diluted 51,680 51,703 51,862 51,917
--------- --------- --------- ---------
1997(1),(2)
-----------------------------------------------
Interest revenue $ 90,419 $ 88,548 $ 86,771 $ 78,810
Interest expense 48,707 48,890 47,603 43,748
--------- --------- --------- ---------
Net interest revenue 41,712 39,658 39,168 35,062
Provision for loan losses 3,500 3,000 1,500 1,026
--------- --------- --------- ---------
Net interest revenue after provision for loan
loan losses 38,212 36,658 37,668 34,036
Other operating revenue 35,721 33,506 31,611 30,190
Securities gains (losses), net (2,200) 809 (200) 262
Other operating expense 61,277 46,720 45,443 41,726
--------- --------- --------- ---------
Income before taxes 10,456 24,253 23,636 22,762
Income tax expense (benefit) (6,362) 7,857 7,572 7,415
--------- --------- --------- ---------
Net income $ 16,818 $ 16,396 $ 16,064 $ 15,347
========= ========= ========= =========
Earnings per share:
Basic $ .36 $ .35 $ .35 $ .33
--------- --------- --------- ---------
Diluted .32 .32 .31 .30
--------- --------- --------- ---------
Average shares:
Basic 45,187 45,143 45,080 45,062
--------- --------- --------- ---------
Diluted 51,817 51,721 51,566 51,465
--------- --------- --------- ---------
</TABLE>
(1) Shares and per share data have been restated to reflect the 2-for-1 stock
split in the form of a 100% stock dividend on February 22, 1999.
(2) Shares and per share data have been restated to reflect the 3% stock
dividend paid in November 1998.
17
<PAGE> 21
ASSESSMENT OF FINANCIAL CONDITION
SECURITIES PORTFOLIO
Securities are identified as either investment or available for sale based
upon various factors, including asset/liability management strategies, liquidity
and profitability objectives, and regulatory requirements. Investment securities
are carried at cost, adjusted for amortization of premiums or accretion of
discounts. Amortization or accretion of mortgage- backed securities is
periodically adjusted for estimated prepayments. Available for sale securities
are those that may be sold prior to maturity based upon asset/liability
management decisions. Securities identified as available for sale are carried at
fair value. Unrealized gains or losses on available for sale securities, less
applicable deferred taxes, are recorded as accumulated other comprehensive
income in Shareholders' Equity.
During 1998, BOK Financial increased its securities portfolio by $485
million based on amortized cost, including $220 million from investment of the
proceeds of the Bank of Albuquerque acquisition. Most notably, amortized cost of
mortgage-backed securities classified as available for sale increased $602
million and U.S. Treasury securities decreased $119 million. These changes in
the securities portfolio were made in expectation of the lower interest rates in
1998.
Table 11 presents the amortized costs and fair values of BOK Financial's
securities portfolio at December 31, 1998, 1997 and 1996. Additional information
regarding the securities portfolio is presented in Note 4 to the Consolidated
Financial Statements.
<TABLE>
<CAPTION>
Table 11 Securities
(In Thousands) DECEMBER 31,
---------------------------------------------------------------------------
1998 1997 1996
----------------------- ----------------------- -----------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment:
U.S. Treasury $ 600 $ 600 $ 850 $ 845 $ 1,000 $ 992
Municipal and other tax-exempt 184,988 184,521 164,379 164,873 134,150 134,705
Mortgage-backed U.S. agency securities 30,385 30,829 46,849 47,374 62,282 62,876
Other debt securities 11,804 11,804 1,033 1,033 976 976
---------- ---------- ---------- ---------- ---------- ----------
Total $ 227,777 $ 227,754 $ 213,111 $ 214,125 $ 198,408 $ 199,549
========== ========== ========== ========== ========== ==========
Available-for-sale:
U.S. Treasury $ 158,314 $ 158,945 $ 277,618 $ 278,402 $ 200,505 $ 201,091
Municipal and other tax-exempt 86,647 87,526 107,196 108,720 160,813 161,358
Mortgage-backed securities:
U.S. agencies 1,813,036 1,823,230 1,210,322 1,215,867 985,219 979,117
Other 1,772 1,762 2,183 2,185 3,288 3,961
---------- ---------- ---------- ---------- ---------- ----------
Total mortgage-backed securities 1,814,808 1,824,992 1,212,505 1,218,052 988,507 983,078
---------- ---------- ---------- ---------- ---------- ----------
Other debt securities 456 462 4,480 4,498 178 178
Equity securities and mutual funds 141,727 147,711 130,196 139,739 106,655 113,417
---------- ---------- ---------- ---------- ---------- ----------
Total $2,201,952 $2,219,636 $1,731,995 $1,749,411 $1,456,658 $1,459,122
========== ========== ========== ========== ========== ==========
</TABLE>
LOANS
Loans increased $787 million or 28% during 1998, including $144 million
from the acquisitions of Bank of Albuquerque. Excluding this acquisition, loans
increased $643 million or 23%. Commercial loans increased by $442 million or 29%
over 1997 year- end. This continues a trend of strong growth in commercial
loans. Commercial loans comprised 55% of total loans at December 31, 1998
compared to 54% at December 31, 1997. Energy loans increased by $134 million or
40% during 1998 and totaled $467 million or 13% of the loan portfolio at
year-end. Commercial loans to service entities increased by $150 million or 32%
during 1998. Total commercial real estate loans grew by $266 million or 56%
during 1998. Multifamily loans and construction and land development loans,
which consists primarily of single family construction loans, increased by 77%
and 68%, respectively, during 1998.
<TABLE>
<CAPTION>
Table 12 Loans
(In Thousands) DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Commercial:
Energy $ 467,259 $ 332,770 $ 289,011 $ 219,909 $ 213,301
Manufacturing 240,633 201,918 144,228 142,650 113,140
Wholesale/retail 264,691 242,156 231,215 201,212 146,152
Agriculture 155,103 151,525 125,097 103,165 89,791
Services 615,285 465,317 324,737 276,500 211,713
Other commercial and industrial 198,385 105,714 127,089 143,143 129,196
Commercial real estate:
Construction and land development 172,258 102,800 67,826 50,389 39,398
Multifamily 178,217 100,422 147,814 141,494 106,197
Other real estate loans 393,578 274,579 212,386 190,530 179,084
Residential mortgage:
Secured by 1-4 family residential properties 482,097 419,139 388,820 395,941 343,969
Residential mortgages held for sale 98,616 78,669 95,332 72,412 40,909
Consumer 285,819 290,084 241,025 257,023 231,203
---------- ---------- ---------- ---------- ----------
Total $3,551,941 $2,765,093 $2,394,580 $2,194,368 $1,844,053
========== ========== ========== ========== ==========
</TABLE>
18
<PAGE> 22
While BOK Financial continues to increase geographic diversification
through expansion in the Dallas, Texas and Albuquerque, New Mexico areas,
geographic concentration subjects the loan portfolio to the general economic
conditions in Oklahoma. Notable loan concentrations by the primary industry of
the borrowers are presented in Table 12. Agriculture includes loans totaling
$137 million to the cattle industry and services includes loans totaling $120
million to the hotel industry. Commercial real estate loans are secured
primarily by properties in the Tulsa or Oklahoma City metropolitan areas. The
major components of other real estate loans are office buildings, $154 million
and retail facilities, $133 million.
<TABLE>
<CAPTION>
Table 13 Loan Maturity and Interest Rate
Sensitivity on December 31, 1998
(In Thousands)
Remaining Maturities of Selected Loans
---------------------------------------
Total Within 1 Year 1-5 Years After 5 Years
---------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Loan maturity:
Commercial $1,941,356 $ 867,026 $ 793,158 $ 281,172
Commercial real estate 744,053 274,782 337,960 131,311
---------- ---------- ---------- ----------
Total $2,685,409 $1,141,808 $1,131,118 $ 412,483
---------- ---------- ---------- ----------
Interest rate sensitivity for selected
loans with:
Predetermined interest rates $ 533,287 $ 90,704 $ 302,749 $ 139,834
Floating or adjustable interest
rates 2,152,122 1,051,104 828,369 272,649
---------- ---------- ---------- ----------
Total $2,685,409 $1,141,808 $1,131,118 $ 412,483
========== ========== ========== ==========
</TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE
The reserve for loans losses, which is available to absorb losses inherent
in the loan portfolio, totaled $65 million at December 31, 1998, compared to $53
million at December 31, 1997. This represents 1.88% and 1.98% of total loans,
excluding loans held for sale, at December 31, 1998 and 1997, respectively.
Losses on loans held for sale, principally mortgage loans accumulated for
placement in securitized pools, are charged to earnings through adjustments in
carrying value to the lower of cost or market value in accordance with
accounting standards applicable to mortgage banking. Table 14 presents
statistical information regarding the reserve for loan losses for the past five
years.
<TABLE>
<CAPTION>
Table 14 Summary of Loan Loss Experience
(Dollars In Thousands)
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Beginning balance $ 53,101 $ 45,148 $ 38,287 $ 38,271 $ 37,261
Loans charged-off:
Commercial 3,175 3,343 2,318 753 1,112
Commercial real estate 175 698 523 171 227
Residential mortgage 151 409 237 190 553
Consumer 3,977 4,753 3,432 2,874 1,345
-------- -------- -------- -------- --------
Total 7,478 9,203 6,510 3,988 3,237
-------- -------- -------- -------- --------
Recoveries of loans previously charged-off:
Commercial 1,483 2,530 3,747 1,579 1,366
Commercial real estate 1,398 957 4,113 987 972
Residential mortgage 162 555 262 373 157
Consumer 1,814 1,563 982 834 602
-------- -------- -------- -------- --------
Total 4,857 5,605 9,104 3,773 3,097
-------- -------- -------- -------- --------
Net loans charged-off (recoveries) 2,621 3,598 (2,594) 215 140
Provision for loan losses 14,451 9,026 4,267 231 195
Additions due to acquisitions -- 2,525 -- -- 955
-------- -------- -------- -------- --------
Ending balance $ 64,931 $ 53,101 $ 45,148 $ 38,287 $ 38,271
-------- -------- -------- -------- --------
Reserve for loan losses to loans outstanding at year-end(1) 1.88% 1.98% 1.96% 1.80% 2.12%
Net charge-offs (recoveries) to average loans .09 .14 (.12) .01 .01
Provision for loan losses to average loans .50 .35 .19 .01 .01
Recoveries to gross charge-offs 64.95% 60.90% 139.85% 94.61% 95.68%
Reserve as a multiple of net charge-offs (recoveries) 24.77X 14.76x (17.40)x 178.08x 273.36x
-------- -------- -------- -------- --------
PROBLEM LOANS
Loans past due (90 days) $ 9,414 $ 10,575 $ 9,639 $ 2,625 $ 1,118
Nonaccrual(2) 13,116 18,767 18,835 29,288 20,114
Renegotiated -- 207 -- -- --
-------- -------- -------- -------- --------
Total $ 22,530 $ 29,549 $ 28,474 $ 31,913 $ 21,232
-------- -------- -------- -------- --------
Foregone interest on nonaccrual loans(2) $ 2,173 $ 2,882 $ 2,975 $ 2,928 $ 1,392
======== ======== ======== ======== ========
</TABLE>
(1) Excludes residential mortgage loans held for sale which are carried at the
lower of aggregate cost or market value.
(2) Interest collected and recognized on nonaccrual loans was $3.3 million in
1998 and was immaterial in previous years disclosed.
19
<PAGE> 23
The adequacy of the reserve for loan losses is assessed by management based
upon an ongoing quarterly evaluation of the probable estimated losses inherent
in the portfolio, and includes probable losses on both outstanding loans and
unused commitments to provide financing. A consistent methodology has been
developed that includes reserves assigned to specific criticized loans, general
reserves that are based upon a statistical migration analysis for each category
of loans, and unallocated reserves that are based upon an analysis of current
economic conditions, loan concentrations, portfolio growth, and other relevant
factors. An independent Credit Administration department is responsible for
performing this evaluation for all of BOK Financial's subsidiaries to ensure
that the methodology is applied consistently.
All significant criticized loans are reviewed quarterly. Written
documentation of these reviews are prepared. Specific reserves for impairment
are determined in accordance with generally accepted accounting principles and
appropriate regulatory standards. At December 31, 1998 specific impairment
reserves totaled $1.4 million.
The adequacy of general loan loss reserves is determined primarily through
an internally developed migration analysis model. Management uses an
eight-quarter aggregate accumulation of net loan losses as the basis for this
model. Greater emphasis is placed on net loan losses in the more recent periods.
This model is used to assign general loan loss reserves to commercial loans and
leases, residential mortgage loans and consumer loans. All loans, leases and
letters of credit are allocated a migration factor by this model. Management can
override the general allocation only by utilizing a specific allocation that is
greater than the general allocation. General loan loss reserves assigned to
various categories of loans are presented in Table 15.
BOK Financial has assessed the risk of loan losses due to the impact of
Year 2000 risks on its customers. A standard questionnaire was completed for a
majority of its commercial loan customers to assess the potential risk of Year
2000 on the customer's operations and the status of customer actions to address
these risks. Customers were assigned to risk categories based upon the results
of this assessment and a range of potential losses was determined for each
category. Management continues to monitor the status of customer preparation for
Year 2000 and to update the risk assessment.
A nonspecific allowance for loan losses is maintained for risks beyond
those factors specific to a particular loan or those identified by the migration
analysis. These factors include trends in general economic conditions in BOK
Financial's primary lending areas, duration of the business cycle, specific
conditions in industries where BOK Financial has a concentration of loans,
overall growth in the loan portfolio, error potential in either the migration
analysis model or in the underlying data, and other relevant factors. A range of
potential losses is then determined for each factor identified. At December 31,
1998, the loss potential ranges for the more significant factors are:
Concentration of large loans - $2.1 million to $4.1 million
General economic conditions - $1.2 million to $2.4 million
Loan portfolio growth and expansion into new markets - $1.5 million
to $2.9 million
A provision for loan losses is charged against earnings in amounts
necessary to maintain an adequate reserve for loan losses. These provisions
totaled $14.5 million for 1998, $9.0 million for 1997 and $4.3 million for 1996.
The increased provision for 1998 reflected management's assessment of increased
risk of loan losses due primarily to continued growth in the loan portfolio,
geographic expansion of BOK Financial's market area to include Dallas and North
Texas and New Mexico, and current weaknesses in the energy and agriculture
sectors.
<TABLE>
<CAPTION>
Table 15 Loan Loss Reserve Allocation
(Dollars in Thousands)
DECEMBER 31,
-----------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------------- ------------------- ------------------- ------------------- -------------------
% of % of % of % of % of
Reserve(3) Loans(1) Reserve(3) Loans(1) Reserve(3) Loans(1) Reserve(3) Loans(1) Reserve(3) Loans(1)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loan category:
Commercial(2) $ 37,545 56.22 $ 34,981 55.81 $ 26,741 53.99 $ 26,446 51.21 $ 24,533 50.09
Commercial real estate 7,945 21.55 3,233 17.79 3,907 18.62 3,774 18.02 2,524 18.01
Residential mortgage 1,794 13.96 1,778 15.60 1,651 16.91 638 18.66 556 19.08
Consumer 6,678 8.27 5,728 10.80 5,174 10.48 2,556 12.11 3,436 12.82
Nonspecific allowance 10,969 -- 7,381 -- 7,675 -- 4,873 -- 7,222 --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total $ 64,931 100.00 $ 53,101 100.00 $ 45,148 100.00 $ 38,287 100.00 $ 38,271 100.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
(1) Excludes residential mortgage loans held for sale which are carried at the
lower of aggregate cost or market value.
(2) Specific allocation for Year 2000 risks as discussed previously were $3.6
million in 1998 and $4.8 million in 1997.
(3) Specific allocation for the loan concentration risks are included in the
appropriate category: Energy, Agriculture and Hotel/Motel.
NONPERFORMING ASSETS
Information regarding nonperforming assets, which were $18 million at December
31, 1998 and $24 million at December 31, 1997 is presented in Table 16.
Nonperforming loans include nonaccrual loans and renegotiated loans. Nonaccrual
commercial loans decreased during 1998 due to significant improvement in one
customer relationship. The total nonaccrual principal balance on this
relationship of $5.1 million at December 31, 1997 was reduced by $4.0 million
through cash collections during 1998. The remaining unpaid principal was
returned to accruing status. Additionally, interest income of $1.3 million was
collected and recognized in 1998.
The loan review process also identifies loans which possess more than the
normal amount of risk due to deterioration in the financial condition of the
borrower or the value of the collateral. Because the borrowers are performing in
accordance with the original terms of the loan agreements and no loss of
principal or interest is anticipated, such loans are not included in the
nonperforming assets totals. These loans are assigned to various risk categories
in order to focus management's attention on the loans with higher risk of loss.
At December 31, 1998, loans totaling $60 million were assigned to the
substandard risk category and loans totaling
20
<PAGE> 24
$31 million were assigned to the special mention risk category, compared to $57
million and $68 million, respectively, at December 31, 1997. The decrease in
special mention loans was primarily due to the pay-off of two loans that totaled
$18.9 million and the upgrading of two loans that totaled $13.1 million due to
improved performance and collateral value.
<TABLE>
<CAPTION>
Table 16 Nonperforming Assets
(Dollars in Thousands) DECEMBER 31,
---------------------------------------------------
1998 1997(3) 1996(3) 1995(3) 1994(3)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Nonaccrual loans:
Commercial $ 8,386 $12,717 $13,494 $14,646 $11,238
Commercial real estate 1,684 2,960 2,313 10,621 5,273
Residential mortgage 1,928 2,441 2,495 2,794 2,916
Consumer 1,118 649 533 1,227 687
------- ------- ------- ------- -------
Total nonaccrual loans 13,116 18,767 18,835 29,288 20,114
Renegotiated loans -- 207 -- -- --
------- ------- ------- ------- -------
Total nonperforming loans 13,116 18,974 18,835 29,288 20,114
Other nonperforming assets 4,600 5,258 4,576 3,399 4,100
------- ------- ------- ------- -------
Total nonperforming assets $17,716 $24,232 $23,411 $32,687 $24,214
======= ======= ======= ======= =======
Ratios:
Reserve for loan losses to nonperforming loans 495.05% 279.86% 239.70% 130.73% 190.27%
Nonperforming loans to period-end loans(2) .38 .71 .82 1.38 1.12
======= ======= ======= ======= =======
Loans past due (90 days)(1) $ 9,414 $10,575 $ 9,639 $ 2,625 $ 1,118
======= ======= ======= ======= =======
8,122 $ 7,072 $ 4,755 $ -- $ --
6,953 7,396 9,177 6,754 6,549
</TABLE>
(1) Includes residential mortgages guaranteed by agencies of the U.S.
Government. Excludes residential mortgages guaranteed by agencies of the
U.S. Government in foreclosure.
(2) Excludes residential mortgage loans held for sale.
(3) Nonperforming assets for prior years have been restated to exclude loans
past due 90 days to conform with current year presentations.
LEASING AND MEZZANINE FINANCING
BOK Financial engages in lease and mezzanine financing through its
subsidiary, BOK Capital Services Corporation. ("BCS"). These activities
generally have a higher return potential but have a higher risk of loss than
those normally permissible for banks. Most notably, at December 31, 1998, other
assets included $28.8 million of natural gas compression and other equipment
that is leased to various customers by entities in which BCS is a general
partner. The terms of these leases are generally much shorter than the estimated
useful lives of the equipment. Therefore, as each lease expires, there is a risk
that the remaining net book value of the equipment may not be recovered based
upon market conditions and re-leasing opportunities at that time.
DEPOSITS
Average deposits for 1998 increased $407 million compared to 1997,
including $33 million from acquisitions. Demand deposits, interest-bearing
transaction accounts and time deposits increased by $144 million, $128 million
and $99 million, respectively. The average cost of each category of interest
bearing deposits has decreased during 1998 due to lower market interest rates.
<TABLE>
<CAPTION>
Table 17 Deposit Analysis
(In Thousands) Average Balances
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Core deposits $2,562,111 $2,422,803
Public funds 383,902 330,757
Uninsured deposits 932,788 718,315
---------- ----------
Total $3,878,801 $3,471,875
========== ==========
</TABLE>
As shown in Table 17, average core deposits increased $139 million to $2.6
billion. This represented 66% of total deposits in 1998 compared to 70% for
1997. Concurrently, uninsured deposits increased to 24% of total deposits for
1998 compared to 21% in 1997. Average uninsured deposits included approximately
$156 million of brokered deposits. Uninsured deposits as used in this
presentation is based on a simple analysis of account balances and does not
reflect combined ownership and other account styling that would determine
insurance based on FDIC regulations.
BOK Financial competes for deposits by offering a broad range of products
and services to its customers. While this includes offering competitive interest
rates and fees, the primary means of competing for deposits is convenience and
service to the customers. BOk offers banking convenience to its customers though
64 branches, including 26 branches with extended hours in local supermarkets and
a 24-hour ExpressBank call center. During 1998, BOk opened 3 supermarket
branches and introduced an Internet home banking service. BOk plans to open 4
new supermarket branches in 1999 to further enhance customer convenience. The
acquisition of 17 branches, including 15 in Albuquerque, New Mexico, provided a
significant new source of deposits and entrance into this market.
<TABLE>
<CAPTION>
Table 18 Maturity of Domestic CDs and Public Funds
in Amounts of $100,000 or More
(In Thousands) DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Months to maturity:
3 or less $464,996 $336,003
Over 3 through 6 97,256 203,268
Over 6 through 12 94,322 96,273
Over 12 68,056 74,074
-------- --------
Total $724,630 $709,618
======== ========
</TABLE>
21
<PAGE> 25
BORROWINGS AND CAPITAL
BOK Financial and its subsidiary banks use several borrowing sources to
supplement deposits as a source of funds to support asset growth. Primarily
these sources include federal funds purchased and securities repurchase
agreements, advances from the Federal Home Loan Bank, and borrowings from lines
of credit through commercial banks. Average borrowed funds increased $58 million
or 5% over 1997 and represented 20% of all funds for 1998 compared to 21% for
1997. By year-end 1998, borrowed funds increased to 25% of all funds due to
additional borrowings to support the formation and initial capitalization of
Bank of Albuquerque. Interest rates and maturity dates for the various sources
of funds are matched with specific types of assets in the asset / liability
management process.
During the fourth quarter of 1998, BOK Financial filed a shelf registration
statement with the Securities and Exchange Commission for the issuance of up to
$250 million of senior debt securities. These securities will be direct,
unsecured obligations of BOK Financial and are not insured by the Federal
Deposit Insurance Corporation or guaranteed by any governmental agency. Payment
of principal and interest is dependent upon dividends paid to BOK Financial by
its subsidiary banks. Such dividends are limited by regulations of the
Comptroller of the Currency. BOK Financial expects to issue debt securities
pursuant to this shelf registration during 1999.
BOK Financial increased its lines of credit with two commercial banks to a
total of $100 million in conjunction with the formation and initial
capitalization of Bank of Albuquerque. The total outstanding balance on these
lines was $92 million at December 31, 1998. BOK Financial has committed to
reduce the combined amount of these lines to no more than $50 million in the
second half of 1999.
BOk issued $150 million of 10-year subordinated notes, discounted to a cost
of 7.2% during 1997. These notes are unsecured obligations of BOk and are not
insured by the FDIC or any other government agency and are not guaranteed by BOK
Financial. Standard & Poors Rating Service rated the notes as BBB; Moody's
Investor Service, Baa3; and Thomson Bank Watch, A-. Concurrent with the issuance
of these notes, $50 million was paid as dividends to BOK Financial to repay
existing debt, including a $20 million subordinated debenture due to an
affiliate of George B. Kaiser, BOK Financial's principal shareholder. BOk
retained the remaining proceeds to fund asset growth. Interest rate swaps with a
notional amount of $100 million are used to change the cost of these notes from
fixed rate to variable rate. BOk receives a fixed weighted-average rate of 6.77%
on these swaps and pays the one-month LIBOR. See Note 9 to the Consolidated
Financial Statements for additional information.
Equity capital for BOK Financial averaged $467 million and $394 million for
1998 and 1997, respectively. The $73 million increase resulted from 1998
earnings and a $9 million increase in unrealized gains on available for sale
securities. During 1998, BOK Financial repurchased 386 thousand shares of its
common stock for $9.1 million under a previously announced stock repurchase
program. This program terminated on December 31, 1998. Management has identified
capital and funding needs of approximately $105 million for anticipated growth
in 1999. These include potential acquisitions and the previously noted repayment
of bank debt. Resources available to meet these needs include dividends from BOK
Financial's subsidiary banks and the possible issuance of senior subordinated
debt. Timing and extent of future growth plans will be evaluated based upon
available resources.
BOK Financial is contemplating offering approximately 6 million shares of
common stock in 1999. Approximately 4 million shares will be a secondary
offering by current shareholders and 2 million shares will be newly issued.
A registration statement relating to these securities is being prepared but
has not yet been filed with the Securities and Exchange Commission. These
securities will be offered only by means of a prospectus and may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This Annual Report shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of those
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such state. The securities are being offered in connection with a distribution
by BOK Financial Corporation and certain selling shareholders and represents a
new financing. To receive a copy of a written prospectus related to the offering
of the securities, when filed, please contact James A. White, EVP and CFO, at
Bank of Oklahoma Tower, Tulsa, Oklahoma 74172.
MARKET RISK
Market risk is a broad term for the risk of economic loss due to adverse
changes in the fair value of a financial instrument. These changes may be the
result of various factors, including interest rates, foreign exchange rates,
commodity prices, or equity prices. Additionally, the financial instruments
subject to market risk can be classified either as held for trading or held for
purposes other than trading.
BOK Financial is subject to market risk primarily through the effect of
changes in interest rates on both its portfolio of assets held for purposes
other than trading and trading assets. The effect of other changes, such as
foreign exchange rates, commodity prices or equity prices, do not pose material
market risk to BOK Financial. The responsibility for managing market risk rests
with the Asset/Liability Committee which operates under policy guidelines
established by the Board of Directors. The negative acceptable variation in net
earnings and economic value of equity due to a 200 basis point increase or
decrease in interest rates is generally limited by these guidelines to +/- 10%.
These guidelines also establish maximum levels for short-term borrowings,
short-term assets, and public and brokered deposits, and establish minimum
levels for unpledged assets, among other things. Compliance with these
guidelines is reviewed monthly.
22
<PAGE> 26
Interest Rate Risk Management (Other than Trading)
BOK Financial performs a sensitivity analysis to identify more dynamic
interest rate risk exposures, including embedded option positions, on net
interest revenue, net income and economic value of equity. A simulation model is
used to estimate the effect of changes in interest rates over the next twelve
months based on three interest rate scenarios. These are a "most likely" rate
scenario and two "shock test" scenarios, the first assuming a sustained parallel
200 basis point increase and the second a sustained parallel 200 basis point
decrease in interest rates. An independent source is used to determine the most
likely interest rates for the next year. BOK Financial's primary interest rate
exposures include the Federal Reserve Bank's discount rate which affects
short-term borrowings, the prime lending rate and the London InterBank Offering
Rate ("LIBOR") which are the basis for much of the variable-rate loan pricing,
the 30-year mortgage rate which directly affects the prepayment speeds for
mortgage-backed securities and mortgage servicing rights and the 10-year U.S.
Treasury rate which affects the value of the mortgage servicing hedges.
Derivative financial instruments and other financial instruments used for
purposes other than trading are included in this simulation. In addition,
sensitivity of fee income to market interest rate levels, such as those related
to cash management services and mortgage servicing, are included. The model
incorporates management's assumptions regarding the level of interest rate or
balance changes on indeterminable maturity deposits (demand deposits,
interest-bearing transaction accounts and savings accounts) for a given level of
market rate changes. The assumptions have been developed through a combination
of historical analysis and future expected pricing behavior. Interest rate swaps
on all products are included to the extent that they are effective in the
12-month simulation period. Additionally, changes in prepayment behavior of
mortgage-backed securities, residential mortgage loans and mortgage servicing in
each rate environment are captured using industry estimates of prepayment speeds
for various coupon segments of the portfolio. Finally, the impact of planned
growth and new business activities is factored into the simulation model. At
December 31, 1998 and 1997, this modeling indicated interest rate sensitivity as
follows:
<TABLE>
<CAPTION>
Table 19 Interest Rate Sensitivity
(Dollars in Thousands) 200 bp Increase 200 bp Decrease Most Likely
----------------------- ----------------------- -----------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Anticipated impact over the next twelve months:
Net interest revenue $ 2,314 $ 2,801 $ (3,932) $ (1,880) $ (1,013) $ 814
1.1% 1.5% (1.9)% (1.0)% (0.5)% 0.4%
--------- --------- --------- --------- --------- ---------
Net income $ 1,847 $ 4,844 $ (4,114) $ (23,706) $ (41) $ 492
2.0% 6.7% (4.5)% (32.7)% 0.0% 0.7%
--------- --------- --------- --------- --------- ---------
Economic value of equity $ (79,092) $ 20,264 $ 3,763 $ 7,780 $ 10,096 $ (2,719)
(10.1)% 3.0% 0.5% 1.1% 1.3% (0.4)%
--------- --------- --------- --------- --------- ---------
</TABLE>
The estimated effect of changes in interest rates on net interest revenue or net
income is not projected to be significant within the +/-200 basis point range of
assumptions. However, this modeling indicated that under the 200 basis point
increase scenario, BOK Financial's economic value of equity would decrease by
$79.1 million due primarily to the effect of rising interest rates on the value
of the securities portfolio.
Throughout 1997 and into the first quarter of 1998, management recognized
that BOK Financial had a significant risk of loss on its capitalized mortgage
servicing rights in a declining interest rate environment. During the second
quarter of 1998, a program to hedge this exposure through the use of futures
contracts, call options and put options was developed. These derivatives are
based upon 10-year U.S. Treasury securities. The changes in value of these
derivatives have a highly correlated, inverse relation to changes in value of
the mortgage servicing rights. The interest rate sensitivity of the mortgage
servicing portfolio and the related hedge is modeled over a range of + or - 50
basis points. At December 31, 1998, the pre-tax results of this modeling are as
follows:
<TABLE>
<CAPTION>
Table 20 Mortgage Servicing Interest Rate Sensitivity
(In Thousands)
50 bp Increase 50 bp Decrease
-------------- --------------
<S> <C> <C>
Anticipated change in:
Mortgage servicing
rights $ 11,886 $ (15,680)
Hedging instruments (11,567) 11,960
------------ ------------
Net $ 319 $ (3,720)
============ ============
</TABLE>
The simulations used to manage market risk are based on numerous
assumptions regarding the effect of changes in interest rates on the timing and
extent of repricing characteristics, future cash flows and customer behavior.
These assumptions are inherently uncertain and, as a result, the model cannot
precisely estimate net interest revenue, net income or economic value of equity
or precisely predict the impact of higher or lower interest rates on net
interest revenue, net income or economic value of equity. Actual results will
differ from simulated results due to timing, magnitude and frequency of interest
rate changes and changes in market conditions and management strategies, among
other factors.
BOK Financial uses interest rate swaps, a form of off-balance sheet
derivative product, in managing its interest rate sensitivity. These products
are generally used to more closely match interest paid on certain long-term
certificates of deposit and subordinated debt with earning assets. During 1998,
income from these swaps exceeded the cost of the swaps by $1.7 million. Credit
risk from these swaps is closely monitored and counterparties to these contracts
are selected on the basis of their credit worthiness, among other factors.
Derivative products are not used for speculative purposes. See Note 14 to the
Consolidated Financial Statements for additional information.
23
<PAGE> 27
Trading Activities
BOK Financial enters into trading account activities both as an
intermediary for customers and for its own account. As an intermediary, BOK
Financial will take positions in securities, generally mortgage-backed
securities, government agency securities, and municipal bonds. These securities
are purchased for resale to customers, which include individuals, corporations,
foundations, and financial institutions. BOK Financial will also take trading
positions in U.S. Treasury securities, mortgage-backed securities, municipal
bonds, and financial futures for its own account through either BOk or BOSC,
Inc. These positions are taken with the objective of generating trading profits.
Both of these activities involve interest rate risk.
A variety of methods are used to manage the interest rate risk of trading
activities. These methods include a daily marking of all positions to market
value, independent verification of inventory pricing, and positions limits for
each type of trading activity. Hedges in either the futures or cash markets may
be used to reduce the risk associated with some trading positions. The Risk
Management Department monitors trading activity daily and reports to senior
management and the Risk Oversight and Audit Committee of the BOK Financial Board
of Directors on any exceptions to trading position limits and risk management
policy exceptions.
During 1998, BOK Financial adopted a Value at Risk ("VAR") methodology to
measure the market risk inherent in its trading. VAR is calculated based upon
historical simulations over the past five years. It represents an amount of
market loss that is likely to be exceeded only one out of every 100 two-week
periods. Trading positions are managed within guidelines approved by the Board
of Directors. These guidelines limit the nominal aggregate trading positions to
$360 million and the VAR to $5.6 million. At December 31, 1998, the nominal
aggregate trading position was $109 million and the VAR was $3.1 million. The
year-end position was near the high VAR for the year.
NEW ACCOUNTING STANDARDS
During 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133")
which is required to be adopted in years beginning after June 15, 1999. FAS 133
permits early adoption as of the beginning of any fiscal quarter that begins
after June 1998. BOK Financial expects to adopt FAS 133 effective January 1,
2000. FAS 133 will require the recognition of all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through income. If the derivative is a hedge, depending on the nature of
the hedge, changes in the fair value of the derivatives will either be offset
against changes in fair value of the hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
BOK Financial has not yet determined what the effect of FAS 133 will be on
its earnings and financial position.
24
<PAGE> 28
REPORT OF MANAGEMENT ON FINANCIAL STATEMENTS
Management is responsible for the consolidated financial statements which
have been prepared in accordance with generally accepted accounting principles.
In management's opinion, the consolidated financial statements present fairly
the financial conditions, results of operations and cash flows of BOK Financial
and its subsidiaries at the dates and for the periods indicated.
BOK Financial and its subsidiaries maintain a system of internal accounting
controls designed to provide reasonable assurance that transactions are executed
in accordance with management's general or specific authorization, and are
recorded as necessary to maintain accountability for assets and to permit
preparation of financial statements in accordance with generally accepted
accounting principles. This system includes written policies and procedures, a
corporate code of conduct, an internal audit program and standards for the
hiring and training of qualified personnel.
The Board of Directors of BOK Financial maintains a Risk Oversight and Audit
Committee consisting of outside directors that meet periodically with management
and BOK Financial's internal and independent auditors. The Committee considers
the audit and nonaudit services to be performed by the independent auditors,
makes arrangements for the internal and independent audits and recommends BOK
Financial's selection of independent auditors. The Committee also reviews the
results of the internal and independent audits, considers and approves certain
of BOK Financial's accounting principles and practices, and reviews various
shareholder reports and other reports and filings.
Ernst & Young LLP, certified public accountants, have been engaged to audit
the consolidated financial statements of BOK Financial and its subsidiaries.
Their audit is conducted in accordance with generally accepted auditing
standards and their report on BOK Financial's consolidated financial statements
is set forth below.
REPORT OF INDEPENDENT AUDITORS
We have audited the accompanying consolidated balance sheets of BOK
Financial Corporation as of December 31, 1998 and 1997, and the related
consolidated statements of earnings, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
BOK Financial Corporation at December 31, 1998 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Tulsa, Oklahoma
January 26, 1999
25
<PAGE> 29
BOK FINANCIAL CORPORATION
<TABLE>
<CAPTION>
Consolidated Statements of Earnings
(In Thousands Except Share Data)
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
INTEREST REVENUE
Loans $ 258,974 $ 227,044 $ 196,309
Taxable securities 108,727 97,416 77,588
Tax-exempt securities 16,003 16,809 14,665
------------ ------------ ------------
Total securities 124,730 114,225 92,253
------------ ------------ ------------
Trading securities 1,046 287 340
Funds sold and resell agreements 1,837 2,992 1,630
------------ ------------ ------------
Total interest revenue 386,587 344,548 290,532
------------ ------------ ------------
INTEREST EXPENSE
Deposits 130,021 122,042 118,066
Borrowed funds 64,621 62,740 45,027
Subordinated debenture 9,693 4,166 --
------------ ------------ ------------
Total interest expense 204,335 188,948 163,093
------------ ------------ ------------
NET INTEREST REVENUE 182,252 155,600 127,439
PROVISION FOR LOAN LOSSES 14,451 9,026 4,267
------------ ------------ ------------
NET INTEREST REVENUE AFTER PROVISION FOR LOAN LOSSES 167,801 146,574 123,172
------------ ------------ ------------
OTHER OPERATING REVENUE
Brokerage and trading revenue 15,301 9,556 7,896
Transaction card revenue 24,426 19,339 14,298
Trust fees and commissions 29,939 24,062 21,638
Service charges and fees on deposit accounts 32,187 28,651 24,104
Mortgage banking revenue 41,733 32,235 26,234
Leasing revenue 7,111 5,861 2,236
Other revenue 11,237 10,013 10,769
------------ ------------ ------------
Total fees and commissions 161,934 129,717 107,175
------------ ------------ ------------
Gain on student loan sales 1,548 1,311 1,069
Loss on branch sales -- -- (325)
Gain (loss) on securities 9,337 (1,329) (2,607)
------------ ------------ ------------
Total other operating revenue 172,819 129,699 105,312
------------ ------------ ------------
OTHER OPERATING EXPENSE
Personnel expense 105,995 87,728 71,945
Business promotion 8,040 8,657 6,372
Contribution of stock to BOk Charitable Foundation 2,257 3,638 --
Professional fees and services 9,657 6,769 5,406
Net occupancy, equipment and data processing expense 42,819 35,614 30,831
FDIC and other insurance 1,260 1,293 1,740
Special deposit insurance assessment -- -- 3,820
Printing, postage and supplies 9,196 7,783 6,792
Net gains and operating expenses on repossessed assets (480) (3,849) (4,552)
Amortization on intangible assets 9,371 8,824 5,411
Write-off of core deposit intangible assets related to SAIF-insured deposits -- -- 3,821
Mortgage banking costs 25,949 19,968 15,473
Provision for impairment of mortgage servicing rights (2,290) 4,100 361
Other expense 16,881 14,641 11,608
------------ ------------ ------------
Total other operating expense 228,655 195,166 159,028
------------ ------------ ------------
INCOME BEFORE TAXES 111,965 81,107 69,456
Federal and state income tax 37,249 16,482 15,329
------------ ------------ ------------
NET INCOME $ 74,716 $ 64,625 $ 54,127
============ ============ ============
EARNINGS PER SHARE(1,2):
Basic:
Net income $ 1.62 $ 1.40 $ 1.17
============ ============ ============
Diluted:
Net income $ 1.44 $ 1.25 $ 1.06
============ ============ ============
AVERAGE SHARES USED IN COMPUTATION(1, 2):
Basic 45,101,378 45,102,967 44,997,016
Diluted 51,773,048 51,616,188 51,143,696
------------ ------------ ------------
</TABLE>
(1) Shares and per share data have been restated to reflect the 2-for-1 stock
split in the form of a 100% stock dividend on February 22, 1999.
(2) Shares and per share data have been restated to reflect the 3% stock
dividend paid in November 1998.
See accompanying notes to consolidated financial statements.
26
<PAGE> 30
<TABLE>
<CAPTION>
Consolidated Balance Sheets
(In Thousands Except Share Data)
DECEMBER 31,
--------------------------
1998(1) 1997(1,2)
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 426,265 $ 371,321
Funds sold and resell agreements 9,151 18,005
Trading securities 41,138 4,999
Securities:
Available for sale 2,219,636 1,749,411
Investment (fair value: 1998 - $227,754; 1997 - $214,125) 227,777 213,111
----------- -----------
Total securities 2,447,413 1,962,522
----------- -----------
Loans 3,551,941 2,765,093
Less reserve for loan losses 64,931 53,101
----------- -----------
Net loans 3,487,010 2,711,992
----------- -----------
Premises and equipment, net 81,965 65,478
Accrued revenue receivable 62,630 50,754
Excess cost over fair value of net assets acquired and core deposit premiums (net of
accumulated amortization: 1998 - $48,953; 1997 - $39,582) 95,935 67,796
Mortgage servicing rights, net 69,224 83,890
Real estate and other repossessed assets 4,600 5,258
Other assets 84,017 57,627
----------- -----------
Total assets $ 6,809,348 $ 5,399,642
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing demand deposits $ 1,126,860 $ 881,029
Interest-bearing deposits:
Transaction 1,420,573 1,124,288
Savings 146,751 106,900
Time 1,685,046 1,615,862
----------- -----------
Total deposits 4,379,230 3,728,079
----------- -----------
Funds purchased and repurchase agreements 1,039,533 631,815
Other borrowings 660,347 394,087
Subordinated debenture 146,921 148,356
Accrued interest, taxes and expense 57,357 39,998
Other liabilities 20,846 21,830
----------- -----------
Total liabilities 6,304,234 4,964,165
----------- -----------
Shareholders' equity:
Preferred stock 25 23
Common stock ($.00006 par value; 2,500,000,000 shares authorized; issued:
1998 - 45,061,350; 1997 - 43,951,494) 1 1
Capital surplus 233,024 208,327
Retained earnings 261,822 218,629
Treasury stock (shares at cost: 1998 - 23,792; 1997 - 132,754) (565) (2,190)
Accumulated other comprehensive income 10,807 10,691
Notes receivable from exercise of stock options -- (4)
----------- -----------
Total shareholders' equity 505,114 435,477
----------- -----------
Total liabilities and shareholders' equity $ 6,809,348 $ 5,399,642
=========== ===========
</TABLE>
(1) Shares have been restated to reflect the 2-for-1 stock split in the form of
a 100% stock dividend on February 22, 1999.
(2) Shares have been restated to reflect the 3% stock dividend paid in November
1998.
See accompanying notes to consolidated financial statements.
27
<PAGE> 31
BOK FINANCIAL CORPORATION
Consolidated Statements of Changes in Shareholders' Equity
(In Thousands)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------- ---------------------
Shares Amount Shares(3,4) Amount
------- ------- ----------- -------
<S> <C> <C> <C> <C>
December 31, 1995 250,000 $ 23 40,831 $ 1
Comprehensive income:
Net income -- -- -- --
Other comprehensive income, net of tax:
Unrealized gain on securities available for sale -- -- -- --
Total comprehensive income
Director retainer shares -- -- 15 --
Exercise of stock options -- -- 82 --
Payments on stock options notes receivable -- -- -- --
Cash dividends paid on preferred stock -- -- -- --
Dividends paid in shares of common stock:
Preferred stock -- -- 139 --
Common stock -- -- 1,230 --
------- ------- ------- -------
December 31, 1996 250,000 23 42,297 1
Comprehensive income:
Net income -- -- -- --
Other comprehensive income, net of tax:
Unrealized gain on securities available for sale -- -- -- --
Total comprehensive income
Director retainer shares -- -- 17 --
Issuance of common stock to Thrift Plan -- -- 36 --
Exercise of stock options -- -- 216 --
Payments on stock options notes receivable -- -- -- --
Dividends paid in shares of common stock:
Preferred stock -- -- 107 --
Common stock -- -- 1,278 --
------- ------- ------- -------
December 31, 1997 250,000 23 43,951 1
Comprehensive income:
Net income -- -- -- --
Other comprehensive income, net of tax:
Unrealized gain on securities available for sale -- -- -- --
Total comprehensive income
Director retainer shares -- -- 12 --
Issue preferred stock -- 2 -- --
Treasury stock purchase -- -- -- --
Issuance of common stock to Thrift Plan -- -- -- --
Exercise of stock options -- -- 234 --
Payments on stock options notes receivable -- -- -- --
Preferred stock dividend -- -- -- --
Dividends paid in shares of common stock:
Preferred stock -- -- 69 --
Common stock -- -- 795 --
------- ------- ------- -------
December 31, 1998 250,000 $ 25 45,061 $ 1
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
(1) DECEMBER 31,
--------------------------
1998 1997 1996
--------------------------
<S> <C> <C> <C>
Reclassification adjustment:
Unrealized gains on available for sale securities $6,347 $8,160 $1,866
Less reclassification adjustment for gains (losses)
realized and included in net income, net of tax 6,231 (1,059) (2,033)
------ ------ ------
Net unrealized gains on securities $ 116 $9,219 $3,899
====== ====== ======
</TABLE>
(2) Notes receivable from exercise of stock options.
(3) Shares and per share data have been restated to reflect the 2-for-1 stock
split in the form of a 100% stock dividend on February 22, 1999.
(4) Shares and per share data have been restated to reflect the 3% stock
dividend paid in November 1998.
See accompanying notes to consolidated financial statements.
28
<PAGE> 32
<TABLE>
<CAPTION>
Accumulated
Other Treasury Stock
Comprehensive Capital Retained ---------------------- Notes
Income Surplus Earnings Shares(3,4) Amount Receivable(2) Total
- ------------- -------- --------- ----------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C>
$ (2,427) $157,395 $ 146,727 -- $ -- $(154) $ 301,565
-- -- 54,127 -- -- -- 54,127
3,899 -- -- -- -- -- 3,899
---------
58,026
---------
-- 173 -- -- -- -- 173
-- 569 -- 34 (419) -- 150
-- -- -- -- -- 67 67
-- -- (3) -- -- -- (3)
-- 1,500 (1,500) -- -- -- --
-- 16,456 (16,459) -- (9) -- (12)
-------- -------- --------- ---- -------- ----- ---------
1,472 176,093 182,892 34 (428) (87) 359,966
-- -- 64,625 -- -- -- 64,625
9,219 -- -- -- -- -- 9,219
---------
73,844
---------
-- 256 -- -- -- -- 256
-- 715 -- -- -- -- 715
-- 2,315 -- 95 (1,681) -- 634
-- -- -- -- -- 83 83
-- 1,500 (1,500) -- -- -- --
-- 27,448 (27,388) 4 (81) -- (21)
-------- -------- --------- ---- -------- ----- ---------
10,691 208,327 218,629 133 (2,190) (4) 435,477
-- -- 74,716 -- -- -- 74,716
116 -- -- -- -- -- 116
---------
74,832
---------
-- 292 -- -- -- -- 292
-- -- -- -- -- -- 2
-- -- -- 386 (9,138) -- (9,138)
-- 94 -- (56) 1,204 -- 1,298
-- 3,791 -- 78 (1,421) -- 2,370
-- -- -- -- -- 4 4
-- -- (1) -- -- -- (1)
-- 1,500 (1,500) -- -- -- --
-- 19,020 (30,022) (517) 10,980 -- (22)
-------- -------- --------- ---- -------- ----- ---------
$ 10,807 $233,024 $ 261,822 24 $ (565) $ -- $ 505,114
======== ======== ========= ==== ======== ===== =========
</TABLE>
29
<PAGE> 33
BOK FINANCIAL CORPORATION
Consolidated Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 74,716 $ 64,625 $ 54,127
Adjustments to reconcile net income to net cash provided by operating activities:
Provisions for loan losses 14,451 9,026 4,281
Provisions for mortgage servicing rights (2,290) 4,100 361
Depreciation and amortization 39,439 32,389 23,693
Write-off of core deposit intangible assets -- -- 3,821
Net amortization of securities
discounts and premiums 609 2,926 2,935
Net gain on sale of assets (22,918) (7,632) (2,803)
Contribution of stock to BOk Charitable Foundation 2,257 3,638 --
Mortgage loans originated for resale (894,822) (830,132) (714,447)
Proceeds from sale of mortgage loans held for resale 886,185 850,366 693,012
(Increase) decrease in trading securities (36,139) 1,455 1,323
(Increase) decrease in accrued revenue receivable (11,867) 883 (4,899)
(Increase) decrease in other assets (14,866) 6,607 (2,499)
Increase (decrease) in accrued interest, taxes and expense 14,598 (12,909) (3,644)
Increase in other liabilities 3,102 3,847 1,033
----------- ----------- ---------
Net cash provided by operating activities 52,455 129,189 56,294
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available-for-sale securities 1,816,796 1,026,464 484,436
Proceeds from maturities of investment securities 33,163 25,904 25,284
Proceeds from maturities of available-for-sale securities 489,765 231,267 226,162
Purchases of investment securities (48,791) (40,701) (44,890)
Purchases of available for sale securities (2,767,039) (1,390,255) (801,999)
Loans originated or acquired net of principal collected (680,437) (256,328) (201,139)
Proceeds from sales of assets 60,361 14,048 30,547
Purchases of assets (44,376) (74,341) (36,802)
Cash and cash equivalents of subsidiaries and branches acquired and sold, net 311,977 12,365 (200)
----------- ----------- ---------
Net cash used by investing activities (828,581) (451,577) (318,601)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, transaction
deposits, and savings accounts 106,649 126,326 211,353
Net increase (decrease) in certificates of deposit 48,322 (592) 107,693
Net increase (decrease) in other borrowings 673,978 68,406 (1,502)
Repayment of subordinated debenture -- (20,000) --
Issuance of subordinated debt -- 168,356 --
Repurchase of subordinated debt (1,538) -- --
Issuance of preferred, common and treasury stock, net 3,940 1,584 311
Purchase of treasury stock (9,138) -- --
Dividends on preferred stock (1) -- (3)
Payments on notes receivable 4 83 67
----------- ----------- ---------
Net cash provided by financing activities 822,216 344,163 317,919
----------- ----------- ---------
Net increase in cash and cash equivalents 46,090 21,775 55,612
Cash and cash equivalents at beginning of period 389,326 367,551 311,939
----------- ----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 435,416 $ 389,326 $ 367,551
=========== =========== =========
CASH PAID FOR INTEREST $ 174,060 $ 186,339 $ 163,777
=========== =========== =========
CASH PAID FOR TAXES 29,569 20,167 21,375
=========== =========== =========
NET LOANS TRANSFERRED TO REPOSSESSED REAL ESTATE 2,772 2,584 2,043
=========== =========== =========
PAYMENT OF DIVIDENDS IN COMMON STOCK 31,500 28,948 17,956
=========== =========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Consolidated Financial Statements of BOK Financial Corporation ("BOK
Financial") have been prepared in conformity with generally accepted accounting
principles, including general practices of the banking industry. The
consolidated financial statements include the accounts of BOK Financial and its
subsidiaries, principally Bank of Oklahoma, N.A. and its subsidiaries ("BOk"),
Bank of Texas, N.A., Bank of Arkansas, N.A., and Bank of Albuquerque, N.A.
Certain prior year amounts have been reclassified to conform to current year
classifications.
NATURE OF OPERATIONS
BOK Financial, through its subsidiaries, provides a wide range of financial
services to commercial and industrial customers, other financial institutions
and consumers throughout Oklahoma, Northwest Arkansas, North Texas and Northern
New Mexico. These services include depository and cash management; lending and
lease financing; mortgage banking; securities brokerage, trading and
underwriting; and personal and corporate trust.
USE OF ESTIMATES
Preparation of BOK Financial's consolidated financial statements requires
management to make estimates of future economic activities, including interest
rates, loan collectibility and prepayments and cash flows from customer
accounts. These estimates are based upon current conditions and information
available to management. Actual results may differ significantly from these
estimates.
ACQUISITIONS
Assets and liabilities acquired by purchase are recorded at fair values on
the acquisition dates. Intangible assets are amortized using straight-line and
accelerated methods over the estimated benefit periods. These periods range from
7 to 25 years for goodwill and 7 to 10 years for core deposit intangibles. The
net book values of intangible assets are evaluated for impairment when economic
conditions indicate an impairment may exist. The Consolidated Statements of
Earnings include the results of purchases from the dates of acquisition. The
financial statements of companies acquired in pooling-of-interests transactions
are combined with the Consolidated Financial Statements of BOK Financial at
historical cost as if the mergers occurred at the beginning of the earliest
period presented.
CASH EQUIVALENTS
Due from banks, funds sold (generally federal funds sold for one-day
periods) and resell agreements (which generally mature within one to 30 days)
are considered cash equivalents.
SECURITIES
Securities are identified as trading, investment (held to maturity) or
available for sale at the time of purchase based upon the intent of management,
liquidity and capital requirements, regulatory limitations and other relevant
factors. Trading securities, which are acquired for profit through resale, are
carried at market value with unrealized gains and losses included in current
period earnings. Investment securities are carried at amortized cost.
Amortization is computed by methods which approximate level yield and is
adjusted for changes in prepayment estimates. Securities identified as available
for sale are carried at fair value. Unrealized gains and losses are recorded,
net of deferred income taxes, as accumulated other comprehensive income in
shareholders' equity. Realized gains and losses on sales of securities are based
upon the amortized cost of the specific security sold.
LOANS
Loans are either secured or unsecured based on the type of loan and the
financial condition of the borrower. Repayment is generally expected from cash
flow or proceeds from the sale of selected assets of the borrower. BOK Financial
is exposed to risk of loss on loans due to the borrower's difficulties, which
may arise from any number of factors including problems within the respective
industry or local economic conditions. Access to collateral, in the event of
borrower default, is reasonably assured through adherence to applicable lending
laws and through sound lending standards and credit review procedures.
Interest is accrued at the applicable interest rate on the principal amount
outstanding. Loans are placed on nonaccrual status when, in the opinion of
management, full collection of principal or interest is uncertain, generally
when the collection of principal or interest is 90 days or more past due.
Interest previously accrued but not collected is charged against interest income
when the loan is placed on nonaccrual status. Payments on nonaccrual loans are
applied to principal or reported as interest income, according to management's
judgment as to the collectibility of principal.
Loan origination and commitment fees, and direct loan origination costs when
significant, are deferred and amortized as an adjustment to yield over the life
of the loan or over the commitment period, as applicable.
During 1997, BOK Financial adopted Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" ("FAS 125"). FAS 125 established new rules
for determining whether a transfer of financial assets, such as loans,
constitutes a sale and, if so, the determination of any resulting gains or
losses. BOK Financial has modified its loan participation agreements to be in
accordance with the sales criteria of FAS 125.
Mortgage loans held for sale are carried at the lower of aggregate cost or
market value, including estimated losses on unfunded commitments and gains or
losses on related forward sales contracts.
31
<PAGE> 35
RESERVE FOR LOAN LOSSES
The adequacy of the reserve for loan losses is assessed by management based
upon an ongoing quarterly evaluation of the probable estimated losses inherent
in the portfolio, and includes probable losses on both outstanding loans and
unused commitments to provide financing. A consistent methodology has been
developed that includes reserves assigned to specific criticized loans, general
reserves that are based upon a statistical migration analysis for each category
of loans, and other allocated reserves that are based upon an analysis of
current economic conditions, loan concentrations, portfolio growth, and other
relevant factors. The reserve for loan losses related to loans that are
identified for evaluation in accordance with Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("FAS
114"), is based on discounted cash flows using the loan's initial effective
interest rate or the fair value of the collateral for certain collateral
dependent loans. Loans are considered to be impaired when it becomes probable
that BOK Financial will be unable to collect all amounts due according to the
contractual terms of the loan agreement. This is substantially the same criteria
used to determine when a loan should be placed on nonaccrual status. This
evaluation is inherently subjective as it requires material estimates including
the amounts and timing of future cash flows expected to be received on impaired
loans that may be susceptible to significant change.
In accordance with the provisions of FAS 114, management has excluded small
balance, homogeneous loans from the impairment evaluation specified in FAS 114.
Such loans include 1-4 family mortgage loans, consumer loans, and commercial
loans with committed amounts less than $1 million. The adequacy of the reserve
for loan losses applicable to these loans is evaluated in accordance with
standards established by the banking regulatory authorities and adopted as
policy by BOK Financial.
A provision for loan losses is charged against earnings in amounts necessary
to maintain an adequate reserve for loan losses. Loans are charged off when the
loan balance or a portion of the loan balance is no longer covered by the paying
capacity of the borrower based on an evaluation of available cash resources and
collateral value. Loans are evaluated quarterly and charge offs are taken in the
quarter in which the loss is identified. Additionally, all unsecured or
under-secured loans which are past due by 180 days or more are charged off
within 30 days. Recoveries of loans previously charged off are added to the
reserve.
REAL ESTATE AND OTHER REPOSSESSED ASSETS
Real estate and other repossessed assets are assets acquired in partial or
total forgiveness of debt. These assets are carried at the lower of cost, which
is determined by fair value at date of foreclosure or current fair value less
estimated selling costs. Income generated by these assets is recognized as
received, and operating expenses are recognized as incurred.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed on a straight-line
basis over the estimated useful lives of the assets or, for leasehold
improvements, over the shorter of the estimated useful lives or remaining lease
terms. During 1998, BOK Financial adopted Statement of Position 98-1,
"Accounting for the Cost of Computer Software Developed or Obtained for Internal
Use." The statement requires the capitalization of certain costs incurred to
acquire, develop and install computer software subject to certain conditions.
Previously, only costs to acquire software were capitalized. All other costs,
including installation costs, were charged to expense. Upgrades and enhancements
to existing software will generally continue to be charged to expense. The
current year effect of this statement was not material.
MORTGAGE SERVICING RIGHTS
Capitalized mortgage servicing rights are carried at the lower of cost or
fair value. Cost is determined by acquisition amount minus accumulated
amortization plus/minus deferred loss/gain on hedges. Amortization is determined
in proportion to the projected cash flows over the estimated lives of the
servicing portfolios. The actual cash flows are dependent upon the prepayment of
the mortgage loans and may differ significantly from the estimates.
Fair value is determined by discounting the estimated cash flows of
servicing revenue, less projected servicing costs, using risk-adjusted rates,
which is the assumed market rate for these instruments. Prepayment assumptions
are based on industry consensus provided by independent reporting sources.
Changes in current interest rates may significantly affect these assumptions by
changing loan refinancing activity. Fair value for capitalized servicing rights
is based upon an interest rate stratification. Separate prepayment assumptions
are then used to project net cash flows by interest rate strata within each
portfolio. A valuation allowance is provided when the net amortized cost of each
interest rate strata exceeds the calculated fair value.
Originated mortgage servicing rights are recognized when either mortgage
loans are originated pursuant to an existing plan for sale or, if no such plan
exists, when the mortgage loans are sold. Substantially all fixed rate mortgage
loans originated by BOK Financial are sold under existing commitments. The fair
value of the originated servicing rights is determined at closing based upon
current market rates.
HEDGING OF MORTGAGE SERVICING RIGHTS
BOK Financial enters into futures contracts and call and put options on
futures contracts to hedge against the risk of loss on mortgage servicing rights
due to accelerated loan prepayments during periods of falling interest rates.
Contracts on underlying securities which are expected to have a similar duration
to the mortgage servicing portfolio, such as 10-year U.S. Treasury notes, are
used for these hedges. The combination of contracts selected is based upon an
analysis of the expected range of market value changes over a probable range of
interest rates to achieve a high degree of correlation between changes in the
fair value of the mortgage servicing rights and changes in the market value of
the contracts. These contracts are designated as hedges on the trade date.
Transaction fees are charged to expense when incurred. Premiums paid or received
on option contracts are deferred and amortized against mortgage banking costs
over the life of the options. Both unrealized and realized gains and losses on
futures contracts and option contracts are deferred as part of the capitalized
mortgage servicing rights. These deferred gains and losses are amortized over
the estimated life of the loan servicing portfolio. Changes in the fair value of
the contracts and changes in the market value of the mortgage servicing rights
are reviewed at least monthly to determine whether a high degree of correlation
exists on a statistically valid basis. If correlation criteria are not met, the
contracts are no longer accounted for as a hedge. In such circumstances, any
remaining unamortized deferred gains or losses are recognized in current income.
32
<PAGE> 36
INTEREST RATE SWAPS AND FORWARD COMMITMENTS
BOk uses interest rate swaps and forward sales contracts as part of its
interest rate risk management strategy. Interest rate swaps are used primarily
to modify the interest expense of certain long-term, fixed rate certificates of
deposit and long-term subordinated debenture. Amounts payable to or receivable
from the counterparties are reported in interest expense using the accrual
method. In the event of the early redemption of hedged obligations, any realized
or unrealized gain or loss from the swaps would be recognized in income
coincident with the redemption. The fair value of the swap agreements and
changes in the fair value due to changes in market interest rates are not
recognized in the financial statements.
Forward sales contracts are used to hedge existing and anticipated loans in
conjunction with mortgage banking activities. The fair value of these
instruments is included in determining the adjustment of the loan held for sale
portfolio to the lower of cost or market. Gains or losses on closed contracts
are recognized when the underlying assets are disposed. The cost of terminating
these contracts prior to their expiration dates is expensed when incurred.
FEDERAL AND STATE INCOME TAXES
BOK Financial utilizes the liability method in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based upon
the difference between the values of the assets and liabilities as reflected in
the financial statement and their related tax basis using enacted tax rates in
effect for the year in which the differences are expected to be recovered or
settled. As changes in tax law or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
BOK Financial and its subsidiaries file consolidated tax returns. The
subsidiaries provide for income taxes on a separate return basis, and remit to
BOK Financial amounts determined to be currently payable.
EMPLOYEE BENEFIT PLANS
BOK Financial sponsors various plans, including a defined benefit pension
plan ("Pension Plan"), a qualified profit sharing plan ("Thrift Plan"), and
employee health care plans. Employer contributions to the Thrift Plan, which
match employee contributions subject to percentage and years of service limits,
are expensed when incurred. Pension Plan costs, which are based upon actuarial
computations of current costs, are expensed annually. Unrecognized prior service
cost and net gains or losses are amortized on a straight-line basis over the
estimated remaining lives of the participants. BOK Financial recognizes the
expense of health care benefits on the accrual method. Employer contributions to
the Pension Plan and various health care plans are in accordance with Federal
income tax regulations.
EXECUTIVE BENEFIT PLANS
BOK Financial has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals the market price of
the underlying stock options on the date of grant, no compensation expense is
recorded. BOK Financial has adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("FAS 123"), included in Note 12.
FIDUCIARY SERVICES
Fees and commissions on approximately $14.4 billion of assets managed by BOK
Financial under various fiduciary arrangements are recognized on the accrual
method.
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share," ("FAS 128"). FAS 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the FAS 128
requirements. The average number of shares outstanding has been restated for the
effects of stock dividends.
COMPREHENSIVE INCOME
As of January 1, 1998, BOK Financial adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS
130 establishes new rules for reporting and display of comprehensive income and
its components; however, the adoption of FAS 130 had no impact on BOK
Financial's net income or shareholders' equity. FAS 130 requires unrealized
gains or losses on available-for-sale securities to be included in other
comprehensive income. The components of comprehensive income are disclosed in
the Consolidated Statements of Changes in Shareholders' Equity.
SEGMENT DISCLOSURES
On December 31, 1998, BOK Financial adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 131 established standards for reporting
information about operating segments and related disclosures about products and
services, geographic areas and major customers. BOK Financial operates four
principal lines of business - corporate banking, consumer banking, mortgage
banking and trust services which account for more than 75% of total revenue. The
disclosures required by FAS 131 have been included in Note 17.
EFFECT OF PENDING STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133").
FAS 133, which requires BOK Financial to recognize all derivatives on the
balance sheet at fair value, is effective for years beginning after June 15,
1999. FAS 133 permits early adoption as of the beginning of any fiscal quarter
that begins after June 1998. BOK Financial expects to adopt FAS 133 effective
January 1, 2000. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of derivatives are either offset against the
change in fair value of the assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portions of a derivative's change in
fair value will be immediately recognized in earnings. BOK Financial has not yet
determined what effect the adoption of this statement will have on its results
of operations or financial positions.
33
<PAGE> 37
(2) ACQUISITIONS
On December 4, 1998, BOK Financial, through Bank of Albuquerque, paid a
premium of $34 million to Bank of America to assume the deposits and to acquire
the premises and equipment and certain loans at 17 branches, primarily in
Albuquerque, New Mexico. Bank of Albuquerque accounted for the transaction as a
purchase with the premium being first allocated to core deposit premium and the
remainder to goodwill. The core deposit intangible will be amortized over the
estimated life of the deposit relationships by an accelerated method. Goodwill
will be amortized over fifteen years on the straight-line method.
During the first quarter of 1997, BOK Financial completed the acquisitions
of Park Cities Bancshares, Inc. and its subsidiary, First National Bank of Park
Cities, Dallas, Texas (collectively "Park Cities") and First Texcorp, Inc. and
its subsidiary First Texas Bank, Dallas, Texas (collectively "First Texas").
On February 12, 1997, BOK Financial issued notes totaling $10.9 million and
$40 million in cash to acquire all outstanding common shares of Park Cities and
on March 4, 1997, BOK Financial paid $39.3 million to acquire all outstanding
common shares of First Texas. Both of these acquisitions were accounted for by
the purchase method of accounting. Allocation of the purchase price to the net
assets acquired were as follows (in thousands):
<TABLE>
<CAPTION>
Aggregate
Bank of Acquisitions
Albuquerque 1997
----------- ------------
<S> <C> <C>
Cash and cash equivalents: $ 9,029 $ 91,581
Securities -- 148,472
Loans 144,209 137,838
Less reserve for loan losses -- (2,525)
--------- ---------
Loans, net 144,209 135,313
Premises and equipment 11,205 5,141
Core deposit premium 13,495 11,109
Other assets 233 9,382
--------- ---------
Total assets acquired 178,171 400,998
Deposits:
Noninterest bearing 47,361 123,716
Interest bearing 418,490 221,016
--------- ---------
Total deposits 465,851 344,732
Borrowed funds -- 623
Other liabilities 9 2,793
--------- ---------
Net assets purchased/
(liabilities assumed) (287,689) 52,850
Less: Purchase price (267,189) 90,118
--------- ---------
Goodwill $ 20,500 $ 37,268
========= =========
</TABLE>
On December 30, 1998, BOK Financial agreed to issue approximately 2.4
million shares of common stock to acquire First Bancshares of Muskogee, Inc. and
its subsidiary, First National Bank and Trust Company of Muskogee (collectively
"First Muskogee"). At December 31, 1998, First Muskogee had total assets of $250
million and total deposits of $228 million. For the years ended December 31,
1998 and 1997, respectively, First Muskogee recorded net income of $4.9 million
and $3.5 million. Completion of the merger is expected in the first quarter of
1999 subject to regulatory approval and to qualification for accounting as a
pooling of interests. The following unaudited Condensed Consolidated Pro Forma
Statement of Earnings for BOK Financial presents the effects on income had these
acquisitions described above occurred at the beginning of 1998 and 1997.
Condensed Consolidated Pro Forma Statements of Earnings
For the Years ended December 31, 1998 and 1997
(In Thousands, Except Per share Date)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Net interest revenue $203,157 $176,120
Provision for loan losses 15,600 10,640
--------- ---------
Net interest revenue after provision
for loan losses 187,557 165,480
Other operating revenue 180,437 137,466
Other operating expense 248,326 215,488
--------- ---------
Income before taxes 119,668 87,458
Federal and state income tax 38,341 17,604
--------- ---------
Net income $ 81,327 $ 69,854
========= =========
Earnings per share:
Basic net income $ 1.68 $ 1.44
Diluted net income 1.50 1.29
--------- ---------
Average shares used in computation:
Basic 47,426 47,405
Diluted 54,169 53,984
</TABLE>
BOK Financial also completed the acquisition of Leo Oppenheim & Co., a
public finance firm, and a branch office in Bartlesville, Oklahoma during 1998.
These acquisitions, which were not material to BOK Financial's financial
position or results of operations, provided net cash of $35.8 million and
deposits of $30.3 million.
During the first quarter of 1999, BOK Financial announced that it had
reached definitive agreements to pay approximately $76 million to acquire three
banks in Dallas, Texas, in separate transactions. The three banks have total
assets of approximately $393 million and 1998 net income of $1.95 million. These
acquisitions, which will be accounted for as purchases, are expected to be
completed by June 30, 1999, pending regulatory approval.
Since 1991, BOK Financial acquired deposits insured by the Savings and Loan
Insurance Fund ("SAIF") totaling approximately $843 million. In conjunction with
these acquisitions, core deposit intangible assets which represent the future
earnings potential of these funds, were recorded. In determining the value of
these core deposit intangible assets, assumptions were made regarding the
returns which were expected to be earned over the costs which would be incurred,
including interest expense, processing costs and deposit insurance premiums.
During 1995, the FDIC made a change in deposit insurance premiums which
significantly decreased the value of deposits insured by SAIF. The premium
assessed on deposits insured by the Bank Insurance Fund ("BIF") was reduced to
three basis points (.03%) while the premium assessed on SAIF insured deposits
remained at 23 basis points (.23%). Legislation to resolve this difference had
been expected from Congress at December 31, 1995. However, at the end of the
first quarter of 1996, the expected legislation had been removed from the agenda
and the resolution of the differential between rates assessed on SAIF insured
deposits compared to BIF insured deposits was uncertain. This uncertainty, in
addition to heightened competitive pressures caused the spreads between the
actual returns and costs to decrease. These conditions caused the value of these
core deposit intangible assets to be impaired and a write down of $3.8 million
was recognized in the second quarter of 1996.
34
<PAGE> 38
(3) SALE OF ASSETS TO RELATED PARTY
During April 1991, BOk sold to BOK Financial's principal shareholder, George
B. Kaiser ("Kaiser"), and related business entities certain loans, repossessed
real estate and the rights to future recoveries on certain charge-offs.
Recoveries collected by BOk and paid to Kaiser were $3.2 million, $829
thousand and $3.3 million for 1998, 1997 and 1996, respectively.
(4) SECURITIES
INVESTMENT SECURITIES
The amortized cost and fair values of investment securities are as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------------------
1998 1997
-------------------------------------------- --------------------------------------------
Gross Unrealized Gross Unrealized
Amortized Fair ------------------- Amortized Fair ------------------
Cost Value Gain Loss Cost Value Gain Loss
--------- -------- ------- ------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 600 $ 600 $ -- $ -- $ 850 $ 845 $ -- $ (5)
Municipal and other tax exempt 184,988 184,521 1,159 (1,626) 164,379 164,873 1,453 (959)
Mortgage-backed U.S. agency
securities 30,385 30,829 452 (8) 46,849 47,374 555 (30)
Other debt securities 11,804 11,804 -- -- 1,033 1,033 -- --
-------- -------- ------- ------- -------- -------- ------ -----
Total $227,777 $227,754 $ 1,611 $(1,634) $213,111 $214,125 $2,008 $(994)
======== ======== ======= ======= ======== ======== ====== =====
</TABLE>
The amortized cost and fair values of investment securities at December 31,
1998, by contractual maturity, are as shown in the following table (dollars in
thousands):
<TABLE>
<CAPTION>
Weighted
Less than One to Five to Over Average
One Year Five Years Ten Years Ten Years Total Maturity
--------- ---------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasuries:
Amortized cost $ 600 $ -- $ -- $ -- $ 600 .097
Fair value 600 -- -- -- 600
Nominal yield 5.19% -- -- -- 5.19%
Municipal and other tax exempt:
Amortized cost 24,854 110,389 46,628 3,117 184,988 3.61
Fair value 24,708 110,314 46,221 3,278 184,521
Nominal yield(1) 6.95% 7.06% 7.38% 9.63% 7.17%
Other debt securities:
Amortized cost 1,178 776 9,850 -- 11,804 5.50
Fair value 1,178 776 9,850 -- 11,804
Nominal yield(1) 5.81% 6.43% 6.75% -- 6.64%
------- -------- ------- ------ -------- -----
Total fixed maturity securities:
Amortized cost $26,632 $111,165 $56,478 $3,117 197,392 3.71
Fair value 26,486 111,090 56,071 3,278 196,925
Nominal yield 6.86% 7.05% 7.27% 9.63% 7.13%
======= ======== ======= ======
Mortgage-backed securities:
Amortized cost 30,385 --(2)
Fair value 30,829
Nominal yield(3) 7.07%
--------
Total investment securities:
Amortized cost $227,777
Fair value 227,754
Nominal yield 7.12%
========
</TABLE>
(1) Calculated on a taxable equivalent basis using a 39% effective tax rate.
(2) The average expected lives of mortgage-backed securities were 4.3 years
based upon current prepayment assumptions.
(3) The nominal yield on mortgage-backed securities is based upon prepayment
assumptions at the purchase date. Actual yields earned may differ
significantly based upon actual prepayments.
35
<PAGE> 39
AVAILABLE FOR SALE SECURITIES
The amortized cost and fair value of available-for-sale securities are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------------------------
1998 1997
-------------------------------------------- --------------------------------------------
Gross Unrealized Gross Unrealized
Amortized Fair ------------------- Amortized Fair ------------------
Cost Value Gain Loss Cost Value Gain Loss
---------- -------- ------- -------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ 158,314 $ 158,945 $ 1,009 $ (378) $ 277,618 $ 278,402 $ 989 $ (205)
Municipal and other tax exempt 86,647 87,526 1,153 (274) 107,196 108,720 1,949 (425)
Mortgage-backed securities:
U. S. agencies 1,813,036 1,823,230 12,278 (2,084) 1,210,322 1,215,867 7,315 (1,770)
Other 1,772 1,762 -- (10) 2,183 2,185 2 --
---------- ---------- ------- -------- ---------- -------- ------- -------
Total mortgage-backed securities 1,814,808 1,824,992 12,278 (2,094) 1,212,505 1,218,052 7,317 (1,770)
---------- ---------- ------- -------- ---------- -------- ------- -------
Other debt securities 456 462 6 -- 4,480 4,498 18 --
Equity securities and mutual funds 141,727 147,711 8,041 (2,057) 130,196 139,739 10,164 (621)
---------- ---------- ------- -------- ---------- -------- ------- ------
Total $2,201,952 $2,219,636 $22,487 $ (4,803) $1,731,995 $1,749,411 $20,437 $(3,021)
========== ========== ======= ======== ========== ========== ======= =======
</TABLE>
The amortized cost and fair values of available-for-sale securities at
December 31, 1998, by contractual maturity, are as shown in the following table
(dollars in thousands):
<TABLE>
<CAPTION>
Weighted
Less than One to Five to Over Average
One Year Five Years Ten Years Ten Years Total Maturity
--------- ---------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasuries:
Amortized cost $109,813 $ 48,501 $ -- $ -- $ 158,314 1.70
Fair value 110,289 48,656 -- -- 158,945
Nominal yield 5.73% 4.76% -- -- 5.43%
Municipal and other tax exempt:
Amortized cost 7,390 60,013 9,908 9,336 86,647 4.29
Fair value 7,352 60,255 10,168 9,751 87,526
Nominal yield(1) 6.83% 7.49% 8.48% 9.56% 7.77%
Other debt securities:
Amortized cost -- -- 125 331 456 10.79
Fair value -- -- 126 336 462
Nominal yield -- -- 7.51% 7.73% 7.67%
-------- -------- ------- ------- --------- -----
Total fixed maturity securities:
Amortized cost $117,203 $108,514 $10,033 $ 9,667 245,417 2.63
Fair value 117,641 108,911 10,294 10,087 246,933
Nominal yield 5.80% 6.27% 8.47% 9.49% 6.26%
======== ======== ======= ======= =========
Mortgage-backed securities:
Amortized cost 1,814,808 --(2)
Fair value 1,824,992
Nominal yield(4) 6.09%
---------
Equity securities and mutual funds:
Amortized cost 141,727 --(3)
Fair value 147,711
Nominal yield 2.87%
---------
Total available-for-sale securities:
Amortized cost $2,201,952
Fair value 2,219,636
Nominal yield 5.90%
==========
</TABLE>
(1) Calculated on a taxable equivalent basis using a 39% effective tax rate.
(2) The average expected lives of mortgage-backed securities were 4.0 years
based upon current prepayment assumptions.
(3) Primarily common stock and preferred stock of U.S. Government agencies with
no stated maturity.
(4) The nominal yield on mortgage-backed securities is based upon prepayment
assumptions at the purchase date. Actual yields earned may differ
significantly based upon actual prepayments.
36
<PAGE> 40
Sales of available-for-sale securities resulted in gains and losses as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---------- ----------- ---------
<S> <C> <C> <C>
Proceeds $1,816,796 $ 1,026,464 $ 484,436
Gross realized gains 15,508 3,159 328
Gross realized losses 6,171 4,488 2,935
Related federal and state
income tax expense (benefit) 3,106 (270) (574)
---------- ----------- ---------
</TABLE>
Securities with amortized costs of $1.6 billion and $1.2 billion at December
31, 1998 and 1997, respectively, were pledged to secure securities repurchase
agreements, public and trust funds on deposit and for other purposes as required
by law.
(5) LOANS
Significant components of the loan portfolio are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------------------
1998 1997
---------------------------------------------- -------------------------------------------
Fixed Variable Non- Fixed Variable Non-
Rate Rate accrual Total Rate Rate accrual Total
---------- ---------- ------- ---------- -------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $ 287,841 $1,645,129 $ 8,386 $1,941,356 $204,641 $1,282,042 $12,717 $1,499,400
Commercial real estate 242,334 500,035 1,684 744,053 153,611 321,230 2,960 477,801
Residential mortgage 298,966 181,203 1,928 482,097 192,208 224,490 2,441 419,139
Residential mortgage - held for sale 98,616 -- -- 98,616 78,669 -- -- 78,669
Consumer 204,262 80,439 1,118 285,819 168,896 120,539 649 290,084
---------- ---------- ------- ---------- -------- ---------- ------- ----------
Total $1,132,019 $2,406,806 $13,116 $3,551,941 $798,025 $1,948,301 $18,767 $2,765,093
========== ========== ======= ========== ======== ========== ======= ==========
Foregone interest on nonaccrual loans $ 2,173 $ 2,882
========== ==========
</TABLE>
The majority of the commercial and consumer loan portfolios and
approximately 64% of the residential mortgage loan portfolio (excluding loans
held for sale) are loans to businesses and individuals in Oklahoma. This
geographic concentration subjects the loan portfolio to the general economic
conditions within this area.
Within the commercial loan classification, loans to energy-related
businesses total $467.3 million, or 13% of total loans. Other notable segments
include wholesale/ retail, $264.7 million; manufacturing, $240.6 million;
agriculture, $155.1 million, which includes $137.5 million loans to the cattle
industry; and services, $615.3 million, which include nursing homes of $56.9
million, hotels of $119.5 million and healthcare of $71.6 million. Commercial
real estate loans are primarily secured by properties located in the Tulsa or
Oklahoma City, Oklahoma metropolitan areas. The major components of these
properties are multifamily residences, $178.2 million; construction and land
development, $172.3 million; retail facilities, $133.2 million; and office
buildings, $154.0 million.
Included in loans at December 31 are loans to executive officers, directors
or principal shareholders of BOK Financial, as defined in Regulation S-X of the
Securities and Exchange Commission. Such loans have been made on substantially
the same terms as those prevailing at the time for loans to other customers in
comparable transactions.
Information relating to loans to executive officers, directors or principal
shareholders is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Beginning balance $ 65,666 $ 53,476
Advances 7,883 30,934
Payments (12,927) (17,749)
Adjustments (1,385) (995)
-------- --------
Ending balance $ 59,237 $ 65,666
======== ========
</TABLE>
Adjustments are primarily due to certain individuals being included for the
first time or no longer being included as an executive officer or director of
BOK Financial.
The activity in the reserve for loan losses is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Beginning balance $ 53,101 $ 45,148 $ 38,287
Provision for loan losses 14,451 9,026 4,267
Loans charged off (7,478) (9,203) (6,510)
Recoveries 4,857 5,605 9,104
Addition due to acquisitions -- 2,525 --
-------- -------- --------
Ending balance $ 64,931 $ 53,101 $ 45,148
======== ======== ========
</TABLE>
37
<PAGE> 41
At December 31, 1998 and 1997, respectively, the recorded investment in
loans that are considered to be impaired under FAS 114 was $10.4 million and
$15.8 million (all of which were on a nonaccrual basis). Included in this amount
at December 31, 1998, is $2.6 million of impaired loans for which the related
specific reserve for loan losses is $1.4 million and $7.8 million that did not
have a specific related reserve for loan losses. At December 31, 1997, this
amount included $2.5 million of impaired loans for which the related allowance
for credit loss was $851 thousand and $13.3 million that did not have a related
allowance for credit losses. The average recorded investments in impaired loans
during the years ended December 31, 1998 and 1997 were approximately $12.8
million and $18.5 million, respectively. Interest income recognized on impaired
loans during 1998 and 1997 was not significant.
(6) PREMISES AND EQUIPMENT
Premises and equipment at December 31 are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Land $ 14,374 $ 11,820
Buildings and improvements 43,174 42,443
Furniture and equipment 66,036 45,904
-------- --------
Subtotal 123,584 100,167
-------- --------
Less accumulated depreciation
and amortization 41,619 34,689
-------- --------
Total $ 81,965 $ 65,478
======== ========
</TABLE>
Depreciation and amortization of premises and equipment were $8.2 million,
$7.8 million and $6.9 million for the years ended December 31, 1998, 1997 and
1996, respectively.
(7) MORTGAGE BANKING ACTIVITIES
BOK Financial engages in mortgage-banking activities through the BOK
Mortgage Division of BOk. Residential mortgage loans held for sale totaled $98.6
million and $78.7 million and outstanding mortgage loan commitments totaled
$239.0 million and $164.2 million, respectively, at December 31, 1998 and 1997.
Mortgage loan commitments are generally outstanding for 60 to 90 days and are
subject to both credit and interest rate risk. Credit risk is managed through
underwriting policies and procedures, including collateral requirements, which
are generally accepted by the secondary loan markets. Exposure to interest rate
fluctuations is partially hedged through the use of mortgage-backed securities
forward sales contracts. These contracts set the price for loans which will be
delivered in the next 60 to 90 days. At December 31, 1998, forward sales
contracts totaled $172.7 million. Mortgage loans held for sale are carried at
the lower of aggregate cost or market value, including estimated losses on
unfunded commitments and gains or losses on forward sales contracts.
At December 31, 1998, BOk owned the rights to service 84,958 mortgage loans
with outstanding principal balances of $6.4 billion, including $130 million
serviced for BOk, and held related funds for investors and borrowers of $153.8
million. The weighted average interest rate and remaining term was 7.56% and 279
months, respectively. Mortgage loans sold with recourse totaled $5.4 million at
December 31, 1998. At December 31, 1997, BOk owned the rights to service
mortgage loans with outstanding principal balances of $7.0 billion and held
related funds for investors and borrowers of $99.5 million.
The portfolio of mortgage servicing rights exposes BOk to interest rate
risk. During periods of falling interest rates, mortgage loan prepayments
increase. This reduces the value of the mortgage servicing rights. BOk uses a
combination of futures contracts and options related to 10-year U.S. Treasury
securities to hedge this risk. The value of these derivative instruments moves
inversely to the value of the mortgage servicing rights. See Note 1 for specific
accounting policies for mortgage servicing rights and the related hedges.
38
<PAGE> 42
Activity in capitalized mortgage servicing rights and related valuation
allowance during 1998, 1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
Capitalized Mortgage Servicing Rights
------------------------------------- Valuation Hedging
Purchased Originated Total Allowance Gain/Loss Net
--------- ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 49,532 $ 1,641 $ 51,173 $ (539) $ -- $ 50,634
Additions 16,874 3,984 20,858 -- -- 20,858
Amortization expense (9,150) (437) (9,587) -- -- (9,587)
Provision for impairment -- -- -- (361) -- (361)
-------- -------- --------- --------- -------- --------
Balance at December 31, 1996 57,256 5,188 62,444 (900) -- 61,544
Additions 33,238 6,013 39,251 -- -- 39,251
Amortization expense (11,533) (1,272) (12,805) -- -- (12,805)
Provision for impairment -- -- -- (4,100) -- (4,100)
-------- -------- --------- --------- -------- --------
Balance at December 31, 1997 78,961 9,929 88,890 (5,000) -- 83,890
Additions 9,443 14,355 23,798 -- -- 23,798
Amortization expense (15,185) (3,085) (18,270) -- 739 (17,531)
Provision for impairment -- -- -- 2,290 -- 2,290
Impairment charge-off (2,710) -- (2,710) 2,710 -- --
Realized hedge gains -- -- -- -- (22,705) (22,705)
Unrealized hedge gains -- -- -- -- (518) (518)
-------- -------- --------- --------- -------- --------
Balance at December 31, 1998 $ 70,509 $ 21,199 $ 91,708 $ -- $(22,484) $ 69,224
======== ======== ========= ========= ======== ========
Estimated fair value of mortgage servicing rights at:
December 31, 19961 $ 75,660 $ 8,576 $ 84,236 $ 84,236
December 31, 19971 $ 86,335 $ 14,022 $ 100,357 $100,357
December 31, 19981 $ 66,663 $ 23,527 $ 90,190 $ 90,190
-------- -------- --------- --------- -------- --------
</TABLE>
(1) Excludes approximately, $18 million, $19 million and $9 million at December
31, 1996, 1997 and 1998, respectively, of loan servicing rights on mortgage
loans originated prior to the adoption of FAS 122.
Fair value is determined by discounting the projected net cash flows.
Significant assumptions are:
Discount rate - Risk adjusted rates by loan product, ranging from 9.00% to
14.5%.
Prepayment rate - Industry consensus annual prepayment estimates ranging
from 10.89% to 67.41% from an independent reporting source based upon loan
interest rate, original term and loan type.
Loan servicing costs - $50 per conventional loan and $60 per government
insured loan.
Stratification of the mortgage loan servicing portfolio, outstanding
principal of loans serviced, and related hedging information by interest rate at
December 31, 1998 follows (in thousands):
<TABLE>
<CAPTION>
< 6.50% 6.50% - 7.49% 7.50% - 8.49% => 8.50% Total
-------- ------------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Cost less accumulated amortization $ 3,003 $ 41,639 $ 41,850 $ 5,216 $ 91,708
Deferred hedge gains -- (9,999) (12,485) -- (22,484)
-------- ----------- ----------- -------- ----------
Adjusted cost 3,003 31,640 29,365 5,216 69,224
Fair value 3,502 42,936 36,806 6,946 90,190
-------- ----------- ----------- -------- ----------
Impairment $ -- $ -- $ -- $ -- $ --
======== =========== =========== ======== ==========
Outstanding principal of loans serviced $233,284 $ 2,297,250 $ 2,655,297 $542,238 $5,728,069(1)
======== =========== =========== ======== ==========
</TABLE>
(1) Excludes outstanding principal of $647,170 for loans serviced by BOk for
which there is no capitalized mortgage servicing rights.
(8) DEPOSITS
Interest expense on deposits is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Transaction deposits $ 36,425 $ 33,091 $ 28,336
Savings 2,373 2,367 2,464
Time:
Certificates of
deposits under $100,000 41,219 41,699 44,531
Certificates of deposits
$100,000 and over 39,136 33,607 31,728
Other time deposits 10,868 11,278 11,007
-------- -------- --------
Total time 91,223 86,584 87,266
======== ======== ========
Total $130,021 $122,042 $118,066
======== ======== ========
</TABLE>
The aggregate amounts of time deposits in denominations of $100,000 or more
at December 31, 1998 and 1997 were $724.6 million and $709.6 million,
respectively.
Time deposits expected to mature in less than one year are $1.3 billion, in
one to five years are $358.3 million, and in over five years are $.6 million.
Interest expense on time deposits during 1998 and 1997 was reduced by net
income from interest rate swaps of $.5 million and $.9 million, respectively.
39
<PAGE> 43
(9) OTHER BORROWINGS
Information relating to other borrowings is summarized as follows (dollars
in thousands):
<TABLE>
<CAPTION>
Daily average Rate at Maximum
Period-End -------------------- end of outstanding at
Balance Balance Rate year any month-end
---------- ---------- ---- ---- -------------
<S> <C> <C> <C> <C> <C>
1998:
FUNDS PURCHASED AND
REPURCHASE AGREEMENTS $1,039,533 $ 731,381 5.38% 4.98% $ 1,039,533
OTHER 807,268 563,188 6.20 5.98 807,268
---------- ----------
TOTAL $1,846,801 $1,294,569 5.74 5.41 1,846,801
========== ========== ==== ==== =============
1997:
Funds purchased and
repurchase agreements $ 631,815 $ 703,496 5.53% 5.83%$ 822,109
Other 542,443 449,348 6.23 4.50 548,355
---------- ----------
Total $1,174,258 $1,152,844 5.80 5.22 1,287,295
========== ========== ==== ==== =============
1996:
Funds purchased and
repurchase agreements $ 669,176 $ 558,940 5.49% 5.91%$ 669,176
Other 277,128 235,775 6.08 6.00 354,712
---------- ----------
Total $ 946,304 $ 794,715 5.67 5.94 946,304
========== ========== ==== ==== =============
</TABLE>
Other borrowings at December 31, 1998 included $563.7 million in advances
from the Federal Home Loan Bank. These advances, which are used for funding
purposes, include term funds of $320.7 million bearing interest from 5.07% -
7.80%. Of these term funds, $228.0 million mature in 1999, $16.8 million mature
in 2000, $19.4 million mature in 2001, $17.8 million mature in 2002, and $38.7
million mature thereafter. In accordance with policies of the Federal Home Loan
Bank, BOk has granted a blanket pledge of eligible assets (generally
unencumbered U.S. Treasury and mortgage-backed securities, 1-4 family loans and
multifamily loans) as collateral for these advances. The unused credit available
to BOk at December 31, 1998 pursuant to the Federal Home Loan Bank's collateral
policies is $53 million.
BOK Financial had unsecured lines of credit available from commercial banks
at December 31, 1998 of $100 million, with $92 million outstanding. Interest
which is based on LIBOR is paid monthly. Principal is due no later than
September 1999.
BOK Financial filed a shelf registration statement with the Securities and
Exchange Commission for the issuance of up to $250 million of senior debt
securities during the fourth quarter of 1998. These securities will be direct,
unsecured obligations, and are not insured by the Federal Deposit Insurance
Corporation or guaranteed by any governmental agency. None of this debt has been
issued at December 31, 1998.
BOk issued $150 million of subordinated debentures in 1997 at a discounted
cost of 7.2%, which had a balance at December 31, 1998 of $146.9 million and
will mature in 2007. Interest expense on the subordinated debenture was reduced
by net income from interest rate swaps of $1.2 million during 1998.
Funds purchased generally mature within one to 90 days from the transaction
date. At December 31, 1998, securities sold under agreements to repurchase
totaled $728.4 million with related accrued interest payable of $2.6 million.
Additional information relating to repurchase agreements at December 31, 1998 is
as follows (dollars in thousands):
<TABLE>
<CAPTION>
Carrying Market Repurchase Average
Security Sold/Maturity Value Value Liability(1) Rate
---------------------- -------- -------- ------------ -------
<S> <C> <C> <C> <C>
U.S. Treasury Securities:
Overnight $ 22,128 $ 22,253 $ 9,037 4.74%
U.S. Agency Securities:
Overnight 250,491 252,009 248,354 4.69
Term of up to 30 days 1,036 1,040 1,882 4.70
Term of 30 to 90 days 507,966 509,092 471,739 5.33
-------- -------- --------
Total Agency Securities 759,493 762,141 721,975 4.89
-------- -------- --------
Total $781,621 $784,394 $731,012 5.05
======== ======== ========
</TABLE>
(1) BOK Financial maintains control over the securities underlying overnight
repurchase agreements and generally transfers control over securities
underlying longer term dealer repurchase agreements to the respective
counterparty.
On March 4, 1997, BOK Financial issued a $20.0 million subordinated
debenture to Kaiser and repaid it on August 13, 1997. The interest rate was
fixed at LIBOR.
40
<PAGE> 44
(10) FEDERAL AND STATE INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1997
------- -------
<S> <C> <C>
Deferred tax liabilities:
Pension contributions in excess of book
expense $ 3,000 $ 2,500
Securities valuation adjustments 11,300 10,100
Mortgage servicing 12,600 7,000
Other 2,900 3,000
------- -------
Total deferred tax liabilities 29,800 22,600
------- -------
Deferred tax assets:
Loan loss reserve 24,500 20,000
Valuation adjustments 19,100 9,000
Book expense in excess of tax 4,900 4,900
Other 4,500 3,300
------- -------
Total deferred tax assets 53,000 37,200
------- -------
Deferred tax assets in excess of
deferred tax liabilities $23,200 $14,600
======= =======
</TABLE>
The significant components of the provision for income taxes attributable to
continuing operations for BOK Financial are shown below (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- ------- --------
<S> <C> <C> <C>
Current:
Federal $ 41,415 $ 9,631 $ 16,623
State 4,937 1,333 2,399
-------- ------- --------
Total current 46,352 10,964 19,022
-------- ------- --------
Deferred:
Federal (7,699) 4,667 (3,380)
State (1,404) 851 (313)
-------- ------- --------
Total deferred (9,103) 5,518 (3,693)
-------- ------- --------
Total income tax $ 37,249 $16,482 $ 15,329
======== ======= ========
</TABLE>
The reconciliations of income attributable to continuing operations computed
at the U.S. federal statutory tax rates to income tax expense are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Amount:
Federal statutory tax $ 39,188 $ 28,387 $ 24,310
Tax exempt revenue (4,110) (4,219) (3,958)
Effect of state income taxes,
net of federal benefit 3,533 2,184 2,086
Goodwill amortization 2,296 2,267 1,411
Utilization of tax credits (750) (774) (1,488)
Reduction of tax reserve -- (9,000) --
Portion of reduction in
valuation allowance
impacting tax expense -- -- (6,200)
Other, net (2,908) (2,363) (832)
-------- -------- --------
Total $ 37,249 $ 16,482 $ 15,329
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Percent of pretax income:
Federal statutory rate 35% 35% 35%
Tax-exempt revenue (4) (5) (6)
Effect of state income
taxes,
net of federal benefit 3 3 3
Goodwill amortization 3 3 2
Utilization of tax credits (1) (1) (2)
Reduction of tax reserve -- (11) --
Portion of reduction in
valuation allowance
impacting tax expense -- -- (9)
Other, net (3) (4) (1)
---- ---- ----
Total 33% 20% 22%
==== ==== ====
</TABLE>
As of December 31, 1997, the Internal Revenue Service closed its examination of
BOk and BOK Financial for 1992 and 1993, respectively. As a result of the
outcome of these examinations, BOK Financial realized a $9 million tax reserve
that was no longer needed, which was credited against current federal income tax
expense in 1997. In addition, the Internal Revenue Service has closed its
examination for 1994 and 1995 with no material impact on the financial
statements.
41
<PAGE> 45
(11) EMPLOYEE BENEFITS
BOK Financial sponsors a defined benefit Pension Plan for all employees who
satisfy certain age and service requirements. The following table presents
information regarding this plan (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Change in projected benefit obligation:
Projected benefit obligation, at beginning of year $ 13,313 $ 11,331
Service cost 2,145 1,772
Interest cost 897 812
Actuarial loss 592 425
Benefits paid (1,325) (1,027)
-------- --------
Projected benefit obligation at end of year $ 15,622 $ 13,313
======== ========
Change in plan assets:
Plan assets at fair value, at beginning of year $ 17,102 $ 13,261
Actual return on plan assets 2,681 2,776
Company contributions 1,961 2,092
Benefits paid (1,325) (1,027)
-------- --------
Plan assets at fair value at end of year $ 20,419 $ 17,102
======== ========
Reconciliation of prepaid (accrued) and total
amount recognized:
Benefit obligation $(15,622) $(13,313)
Fair value of assets 20,419 17,102
-------- --------
Funded status of the plan 4,797 3,789
Unrecognized net loss 1,154 1,567
Unrecognized prior service cost 801 860
-------- --------
Prepaid pension costs $ 6,752 $ 6,216
======== ========
Components of net periodic benefit costs:
Service cost $ 2,145 $ 1,772
Interest cost 897 812
Expected return on plan assets (1,638) (1,390)
Amortization of unrecognized amounts:
Net loss 90 171
Prior service cost 60 60
-------- --------
Net periodic pension cost $ 1,554 $ 1,425
======== ========
Weighted-average assumptions as of December 31:
Discount rate 7.00% 7.00%
Expected return on plan assets 10.00% 10.00%
Rate of compensation increase 5.25% 5.25%
</TABLE>
Assets of the Pension Plan consist primarily of shares in cash management
funds, common stock and bond funds, and guaranteed investment contract funds.
Benefits are based on the employee's age and length of service.
Employee contributions to the Thrift Plan, a defined contribution plan, are
matched by BOK Financial up to 4% of base compensation, based upon years of
service. Participants may direct the investment of their accounts in a variety
of options, including BOK Financial Common Stock. Employer contributions vest
over five years. Expenses incurred by BOK Financial for the Thrift Plan totaled
$1.8 million, $1.4 million and $1.2 million for 1998, 1997 and 1996,
respectively.
BOK Financial also sponsors a defined benefit post-retirement employee
medical plan which pays 50 percent of annual medical insurance premiums for
retirees who meet certain age and service requirements. Assets of the retiree
medical plan consist primarily of shares in a cash management fund. Eligibility
for the post-retirement plan is limited to current retirees and certain
employees currently age 60 or older.
Under various performance incentive plans, participating employees may be
granted awards based on defined formulas or other criteria. Earnings were
charged $11.7 million in 1998, $10.3 million in 1997 and $7.5 million in 1996,
for such awards.
42
<PAGE> 46
(12) EXECUTIVE BENEFIT PLANS
The Board of Directors of BOK Financial has approved various stock option
plans. The number of options awarded and the employees to receive the options
are determined by the Chairman of the Board and the President, subject to
approval of the Board of Directors or a committee thereof.
Options awarded under these plans are subject to vesting requirements.
Generally, one-seventh of the options awarded vest annually and expire three
years after vesting.
The following table presents options outstanding during 1997 and 1998 under
these plans:
<TABLE>
<CAPTION>
Weighted-
Average
Exercise
Number Price
--------- ---------
<S> <C> <C>
Options outstanding at
December 31, 1996 2,313,289 $ 9.49
Options awarded 640,462 18.74
Options exercised (230,850) 8.73
Options forfeited (94,756) 10.18
Options expired (280) 9.18
--------- ---------
Options outstanding at
December 31, 1997 2,627,865 11.79
OPTIONS AWARDED 661,990 22.05
OPTIONS EXERCISED (238,560) 9.20
OPTIONS FORFEITED (165,680) 12.38
OPTIONS EXPIRED (951) 9.24
--------- ---------
OPTIONS OUTSTANDING AT
DECEMBER 31, 1998 2,884,664 14.28
========= =========
OPTIONS VESTED AT
DECEMBER 31, 1998 800,270 10.20
========= =========
</TABLE>
The following table summarizes information concerning currently outstanding
and vested options:
<TABLE>
<CAPTION>
Options Outstanding Options Vested
- ------------------------------------------ ----------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (years) Price Vested Price
-------------- ----------- ------------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
$ 6.28 193,302 2.42 $ 6.28 138,226 $ 6.28
9.33 - 11.24 1,447,006 3.89 10.08 580,568 9.94
18.74 621,506 5.83 18.74 81,476 18.74
22.05 622,850 6.92 22.05 -- --
</TABLE>
Under APB 25 no compensation expense is recognized at the date of grant
since the exercise price of BOK Financial's employee stock option equals the
market price of the underlying stock on the date of grant.
FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires
disclosure of pro forma information regarding net income and earnings per share
as if BOK Financial accounted for employee stock options granted subsequent to
December 31, 1994 under the fair value method of the Statement.
The fair value of these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Average risk-free interest rate 4.71% 5.72% 6.10%
Dividend yield None None None
Volatility factors .198 .200 .190
Weighted-average
expected life 7 years 7 years 8 years
</TABLE>
The weighted-average fair value of options granted during 1998, 1997 and
1996 was $6.04, $5.56 and $3.70, respectively.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because BOK Financial's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The following
table represents the required pro forma disclosures for options granted
subsequent to December 31, 1994:
<TABLE>
<CAPTION>
1998(1) 1997(1) 1996(1)
-------- -------- --------
<S> <C> <C> <C>
Pro forma net income $ 73,698 $ 63,986 $ 53,748
Pro forma earnings per share:
Basic $ 1.60 $ 1.39 $ 1.16
Diluted 1.42 1.24 1.05
</TABLE>
(1) Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
2003.
43
<PAGE> 47
(13) COMMITMENTS AND CONTINGENT LIABILITIES
In the ordinary course of business, BOK Financial and its subsidiaries are
subject to legal actions and complaints. Management believes, based upon the
opinion of counsel, that the actions and liability or loss, if any, resulting
from the final outcomes of the proceedings, will not be material in the
aggregate.
BOk previously reported that it had been sued in an action in the United
States District Court by the mortgagor of a mortgage serviced by BOk Mortgage in
which the plaintiff sought class action certification and alleged BOk improperly
required the mortgagor to maintain an escrow balance in excess of the amount
permitted under the mortgage. That action was dismissed on its merits by the
Court prior to any ruling on the request for class certification. The law firm
representing the plaintiff subsequently filed essentially the same complaint
seeking class action certification in the United States District Court for the
Eastern District of New York on behalf of another mortgagor of a mortgage
serviced by BOk Mortgage. BOk has valid defenses to the plaintiff's claims and
any damages the plaintiff class may have suffered would be immaterial in amount.
BOk is obligated under a long-term lease for its bank premises located in
downtown Tulsa. The lease term, which began November 1, 1976, is for fifty-seven
years with options to terminate at the end of the thirty-seventh and
forty-seventh years. Annual base rent is $3.1 million. BOk subleases portions of
its space for annual rents of $406 thousand each year through 2000. Net rent
expense on this lease was $2.7 million in 1998, $2.7 million in 1997 and $2.7
million in 1996. Total rent expense for BOK Financial was $9.0 million in 1998,
$7.7 million in 1997 and $6.9 million in 1996.
At December 31, 1998, the future minimum lease payments for equipment and
premises under operating leases were as follows: $9.3 million in 1999, $9.1
million in 2000, $8.5 million in 2001, $7.7 million in 2002, $5.3 million in
2003 and a total of $102.3 million thereafter.
BOk and Williams, Inc. guaranteed 30 percent and 70 percent, respectively,
of the $18.7 million debt, which matures May 15, 2007, and operating deficit of
two parking facilities operated by the Tulsa Parking Authority. Total expense
related to this guarantee was $178 thousand in 1998, $226 thousand in 1997 and
zero in 1996.
The Federal Reserve Bank requires member banks to maintain certain minimum
average cash balances. These balances were approximately $83.7 million for 1998
and $78.8 million for 1997.
(14) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
BOK Financial is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers and to manage interest rate risk. Those financial instruments involve,
to varying degrees, elements of credit risk in excess of the amount recognized
in BOK Financial's Consolidated Balance Sheets. Exposure to credit loss in the
event of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit is represented by the
notional amount of those instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. At December 31, 1998, outstanding commitments totaled
$1.7 billion. Since some of the commitments are expected to expire before being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. BOK Financial uses the same credit policies in making
commitments as it does loans. The amount of collateral obtained, if deemed
necessary, is based on management's credit evaluation of the borrower.
Standby letters of credit are conditional commitments issued to guarantee
the performance of a customer to a third party. Since the credit risk involved
in issuing standby letters of credit is essentially the same as that involved in
extending loan commitments, BOK Financial uses the same credit policies in
evaluating the creditworthiness of the customer. Additionally, BOK Financial
uses the same evaluation process in obtaining collateral on standby letters of
credit as it does for loan commitments. At December 31, 1998, outstanding
standby letters of credit totaled $113.0 million.
Commercial letters of credit are used to facilitate customer trade
transactions with the drafts being drawn when the underlying transaction is
consummated. At December 31, 1998, outstanding commercial letters of credit
totaled $5.7 million.
BOK Financial uses interest rate swaps, a form of off-balance-sheet
derivative product, in managing its interest rate risk. These swaps are used
primarily to more closely match the interest paid on certain long-term, fixed
rate certificates of deposit and subordinated debenture with earning assets. BOK
Financial agrees with other parties to exchange, at specified intervals, the
difference between fixed-rate and floating-rate interest amounts calculated by
reference to an agreed-upon notional amount. At December 31, 1998, the notional
amount of BOK Financial's interest rate swaps totaled $241.3 million with
related credit exposure, represented by the fair value of the contracts, of
$10.2 million. During 1998 and 1997, income from the swaps exceeded costs by
$1.7 million and $1.2 million, respectively, which reduced interest expense.
Scheduled repricing periods for the swaps are as follows (notional value in
thousands):
<TABLE>
<CAPTION>
31-90 91-365 Over
days days 1 year Total
--------- ------- --------- ---------
<S> <C> <C> <C> <C>
Pay floating $(115,000) $(7,000) $ -- $(122,000)
Receive fixed 15,000 7,000 100,000 122,000
Pay fixed -- -- (119,278) (119,278)
Receive floating 119,278 -- -- 119,278
--------- ------- --------- ---------
Total $ 19,278 $ -- $ (19,278) $ --
========= ======= ========= =========
</TABLE>
The expiration dates of the swap contracts are designed to match the
estimated maturity dates of the underlying liability and matures as follows:
$22,000 in 1999, $4,316 in 2001, $7,660 in 2002, $41,475 in 2003, $9,004 in
2004, $8,375 in 2005, $16,500 in 2006, $114,384 in 2007 and $17,564 in 2008.
BOK Financial utilized securities forward sales contracts associated with
its mortgage banking activities as described in Note 7.
44
<PAGE> 48
(15) SHAREHOLDERS' EQUITY
PREFERRED STOCK
One billion shares of preferred stock with a par value of $0.00005 per share
are authorized. A single series of 250,000,000 shares designated as Series A
Preferred Stock ("Series A Preferred Stock") is currently issued and
outstanding. The Series A Preferred Stock has no voting rights except as
otherwise provided by Oklahoma corporate law and may be converted into one share
of Common Stock for each 42 shares of Series A Preferred Stock at the option of
the holder. Dividends are cumulative at an annual rate of ten percent of the
$0.06 per share liquidation preference value when declared and are payable in
cash. Aggregate liquidation preference is $15.0 million. During 1998, 1997 and
1996, 68,765 shares, 107,230 shares and 139,344 shares respectively, of BOK
Financial common stock were issued in payment of dividends on the Series A
Preferred Stock in lieu of cash by mutual agreement of BOK Financial and the
holders of the Series A Preferred Stock. Kaiser owns substantially all Series A
Preferred Stock. These shares were valued at $1.5 million in 1998, 1997 and
1996, based on average market price, as defined, for a 65 business day period
preceding declaration.
During 1998, the number of nonvoting units in an entity owned by BOk and
issued to various officers of BOk was increased to 125 from 102. These units are
eligible for an annual, cumulative distribution of $8 per unit and have a
preferred value upon liquidation of $100 per unit.
COMMON STOCK
Common stock consists of 2.5 billion authorized shares, $0.00006 par value.
Holders of common shares are entitled to one vote per share at the election of
the Board of Directors and on any question arising at any shareholders' meeting
and to receive dividends when and as declared. No common stock dividends can be
paid unless all accrued dividends on the Series A Preferred Stock have been
paid. The present policy of BOK Financial is to retain earnings for capital and
future growth, and management has no current plans to recommend payment of cash
dividends on common stock. Additionally, regulations restrict the ability of
national banks and bank holding companies to pay dividends.
During 1998, 1997 and 1996, 3% dividends payable in shares of BOK Financial
common stock were declared and paid. The shares issued were valued at $30.3
million, $27.4 million and $16.5 million, respectively, based on the average
closing bid/ask prices on the day preceding declaration.
All share and per share amounts for all years presented have been
retroactively adjusted for a two-for-one stock split effected in the form of a
stock dividend declared January 26, 1999 for stockholders on record on February
8, 1999.
SUBSIDIARY BANKS
The amounts of dividends which BOK Financial's subsidiary banks can declare
and the amounts of loans the subsidiary banks can extend to affiliates are
limited by various federal and state banking regulations. Generally, dividends
declared during a calendar year are limited to net profits, as defined, for the
year plus retained profits for the preceding two years. The amounts of dividends
are further restricted by minimum capital requirements. Pursuant to the most
restrictive of the regulations at December 31, 1998, BOK Financial's subsidiary
banks could declare dividends up to $63.6 million without prior regulatory
approval. The subsidiary banks declared and paid dividends of $26.3 million in
1998, $69.8 million in 1997, and $31.0 million in 1996.
Loans to a single affiliate may not exceed 10.0% and loans to all affiliates
may not exceed 20.0% of unimpaired capital and surplus, as defined.
Additionally, loans to affiliates must be fully secured. As of December 31, 1998
and 1997, these loans totaled $40.4 million and $28.8 million, respectively.
Total loan commitments to affiliates at December 31, 1998 were $57.0 million.
REGULATORY CAPITAL
Financial institutions are considered to be "well capitalized" pursuant to
the Federal Deposit Insurance Corporation Improvement Act of 1991 if their
Leverage, Tier 1 and Total Capital ratios are at least 5%, 6% and 10%,
respectively. As shown below, BOK Financial's and all banking subsidiaries
capital ratios exceed the regulatory definition of well capitalized.
As defined by regulations, Tier 1 capital consists primarily of common
stockholders' equity less certain intangible assets. Total capital consists
primarily of Tier 1 capital plus preferred stock, subordinated debt and reserves
for loan losses, subject to certain limitations.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1998 1997
--------------------------------------
AMOUNT RATIO Amount Ratio
-------- ----- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets):
Consolidated $610,618 11.96% $552,872 14.54%
BOk 535,070 12.13 464,996 13.35
Bank of Arkansas 11,323 11.33 10,632 16.43
Bank of Texas 55,848 15.81 49,775 26.93
Bank of Albuquerque 40,716 18.87 -- --
Tier I Capital (to Risk Weighted Assets):
Consolidated $398,325 7.80% $356,928 9.39%
BOk 331,426 7.51 280,920 8.06
Bank of Arkansas 10,073 10.08 9,820 15.18
Bank of Texas 51,430 14.56 47,458 25.68
Bank of Albuquerque 40,341 18.70 -- --
Tier I Capital (to Average Assets):
Consolidated $398,325 6.57% $356,928 6.81%
BOk 331,426 6.02 280,920 5.90
Bank of Arkansas 10,073 9.47 9,820 11.51
Bank of Texas 51,430 11.52 47,458 12.16
Bank of Albuquerque 40,341 8.91 -- --
</TABLE>
(1) Bank of Albuquerque was formed in 1998, see Note 2.
45
<PAGE> 49
(16) EARNINGS PER SHARE
The following table presents the computation of basic and diluted earnings per
share (dollars in thousands except share data):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Numerator:
Net income $ 74,716 $ 64,625 $ 54,127
Preferred stock dividends (1,500) (1,500) (1,500)
------------ ------------ ------------
Numerator for basic earnings per share - income
available to common stockholders 73,216 63,125 52,627
------------ ------------ ------------
Effect of dilutive securities:
Preferred stock dividends 1,500 1,500 1,500
------------ ------------ ------------
Numerator for diluted earnings per share - income available
to common stockholders after assumed conversion $ 74,716 $ 64,625 $ 54,127
============ ============ ============
Denominator:
Denominator for basic earnings per share - weighted average shares 45,101,378 45,102,967 44,997,016
Effect of dilutive securities:
Employee stock options 701,406 542,957 176,416
Convertible preferred stock 5,970,264 5,970,264 5,970,264
------------ ------------ ------------
Dilutive potential common shares 6,671,670 6,513,221 6,146,680
------------ ------------ ------------
Denominator for diluted earnings per share - adjusted
weighted average shares and assumed conversions 51,773,048 51,616,188 51,143,696
============ ============ ============
Basic earnings per share $ 1.62 $ 1.40 $ 1.17
============ ============ ============
Diluted earnings per share $ 1.44 $ 1.25 $ 1.06
============ ============ ============
</TABLE>
(17) REPORTABLE SEGMENTS
BOK Financial has four reportable segments: Corporate Banking, Consumer
Banking, Mortgage Banking, and Trust Services. The Corporate Banking segment
consists of eight operating units that provide credit and lease financing,
deposit and cash management, and international collection services to commercial
and industrial customers and to other financial institutions in Oklahoma and
surrounding states. The Consumer Banking segment consists of two operating units
which provide direct and indirect consumer loans and deposit services to
individuals primarily within Oklahoma. The Mortgage Banking segment consists of
two operating units that originate a full range of mortgage products from
federally sponsored programs to "jumbo loans" on higher priced homes in BOK
Financial's primary market areas. The Mortgage Banking segment also services
mortgage loans acquired from throughout the United Sates. The Trust Services
segment consists of one operating unit that provides financial services to both
individual and corporate clients. Individual financial services include personal
trust management, administration of estates and management of investment and
custodial accounts. Individual financial services also includes lending and
investment services to select individuals. Corporate financial services include
administration of employee benefit plans, transfer and paying agent services and
investment advisory services.
BOK Financial identifies reportable segments by type of service provided for
the Mortgage Banking and the Trust Services segments and by type of customer for
the Corporate Banking and Consumer Banking segments.
BOK Financial evaluates performance and allocates resources based upon a
measurement of performance after the allocation of certain indirect expenses,
taxes and capital cost. The accounting policies of the reportable segments
generally follow those described in the summary of significant account policies
except interest income is reported on a fully tax-equivalent basis, loan losses
are based on actual net amounts charged off and the amortization of intangible
assets is generally excluded. The cost of funds provided from one segment to
another is transfer-priced at rates that approximate market for funds with
similar duration. Assessment of performance is based on net interest revenue
after internal funds transfer pricing.
Nonreportable business segments include TransFund, BOSC, Inc., Bank of
Arkansas, Bank of Albuquerque, and Bank of Texas. The sources of revenue in
these segments include interest on loans and securities, commissions earned on
securities transactions, securities trading gains or losses, and fees earned on
various banking activities, including merchant discounts, interchange fees, and
deposit account fees.
BOK Financial has not made any significant investments in long-term assets
other than financial instruments, including core deposit intangible assets and
purchased mortgage servicing rights. Substantially all revenue is from domestic
customers. No single external customer accounts for more than 10% of total
revenue.
46
<PAGE> 50
<TABLE>
<CAPTION>
Corporate Consumer Mortgage Trust All
Banking Banking Banking Services Other Total
----------- ----------- --------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1998
Net interest revenue/(expense)
from external sources $ 151,766 $ (40,527) $ 16,133 $ 1,881 $ 52,999 $ 182,252
----------- ----------- --------- -------- --------- -----------
Net interest revenue/(expense)
from internal sources (74,273) 86,817 (9,869) 8,198 (10,873) --
----------- ----------- --------- -------- --------- -----------
Total net interest revenue 77,493 46,290 6,264 10,079 42,126 182,252
Provision for loan losses 63 2,116 130 125 12,017 14,451
Other operating revenue 24,862 23,156 44,379 37,928 33,157 163,482
Securities gains/(losses) -- -- -- -- 9,337 9,337
Other operating expense 42,077 52,395 41,863 35,419 59,191 230,945
Provision for impairment of
mortgage servicing rights -- -- (2,290) -- -- (2,290)
Income taxes 23,331 6,595 4,306 4,897 (1,880) 37,249
----------- ----------- --------- -------- --------- -----------
Net income $ 36,884 $ 8,340 $ 6,634 $ 7,566 $ 15,292 $ 74,716
=========== =========== ========= ======== ========= ===========
Average assets $ 2,171,023 $ 1,904,409 $ 350,362 $295,660 $ 991,337 $ 5,712,791
Average equity 255,108 46,767 30,556 30,188 104,681 467,300
Performance measurements:
Return on assets 1.70% 0.44% 1.89% 2.56% -- 1.31%
Return on equity 14.46% 17.83% 21.71% 25.06% -- 15.99%
Efficiency ratio 41.11% 75.45% 82.66% 73.78% -- 66.14%
</TABLE>
Reconciliation to Consolidated Financial Statements
<TABLE>
<CAPTION>
Other Other
Net Interest Operating Operating Average
Revenue Revenue Expense Assets
------------ --------- --------- ----------
<S> <C> <C> <C> <C>
Total reportable segments $ 140,126 $ 130,325 $169,464 $4,721,454
Total nonreportable segments 28,198 31,419 41,349 646,701
Unallocated items:
Tax-equivalent adjustment (9,293) -- -- --
Funds management 24,365 3,371 11,561 89,272
Contribution to BOk Foundation -- -- 2,257 --
All others, net (1,144) (1,633) 4,024 255,364
--------- --------- -------- ----------
BOK Financial consolidated $ 182,252 $ 163,482 $228,655 $5,712,791
========= ========= ======== ==========
</TABLE>
47
<PAGE> 51
<TABLE>
<CAPTION>
Corporate Consumer Mortgage Trust All
Banking Banking Banking Services Other Total
----------- ----------- --------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Net interest revenue/(expense)
from external sources $ 133,264 $ (43,903) $ 21,897 $ 2,460 $ 41,882 $ 155,600
Net interest revenue/(expense)
from internal sources (67,376) 87,186 (16,798) 5,864 (8,876) --
----------- ----------- --------- -------- --------- -----------
Total net interest revenue 65,888 43,283 5,099 8,324 33,006 155,600
Provision for loan losses (133) 2,520 165` 180 6,294 9,026
Other operating revenue 20,757 21,800 34,208 30,084 24,179 131,028
Securities gains/(losses) -- -- -- -- (1,329) (1,329)
Other operating expense 30,328 50,879 33,204 28,532 48,123 191,066
Provision for impairment of
mortgage servicing rights -- -- 4,100 -- -- 4,100
Income taxes 21,814 5,493 779 3,842 (15,446) 16,482
----------- ----------- --------- -------- --------- -----------
Net income $ 34,636 $ 6,191 $ 1,059 $ 5,854 $ 16,885 $ 64,625
=========== =========== ========= ======== ========= ===========
Average assets $ 1,819,834 $ 1,894,535 $ 386,985 $242,886 $ 746,305 $ 5,090,545
Average equity 210,407 44,600 28,723 24,233 82,015 393,704
Performance measurements:
Return on assets 1.90% 0.33% 0.27% 2.41% -- 1.27%
Return on equity 16.46% 13.88% 3.69% 24.16% -- 16.41%
Efficiency ratio 35.00% 78.18% 84.47% 74.29% -- 68.09%
</TABLE>
Reconciliation to Consolidated Financial Statements
<TABLE>
<CAPTION>
Other Other
Net Interest Operating Operating Average
Revenue Revenue Expense Assets
------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Total reportable segments $ 122,594 $106,849 $147,043 $ 4,344,240
Total nonreportable segments 20,686 22,408 31,004 485,716
Unallocated items:
Tax-equivalent adjustment (9,567) -- -- --
Funds management 23,072 1,001 8,227 (5,385)
Contribution to BOk Foundation -- -- 3,638 --
All others, net (1,185) 770 5,254 265,974
--------- -------- -------- -----------
BOK Financial consolidated $ 155,600 $131,028 $195,166 $ 5,090,545
========= ======== ======== ===========
</TABLE>
48
<PAGE> 52
<TABLE>
<CAPTION>
Corporate Consumer Mortgage Trust All
Banking Banking Banking Services Other Total
----------- ----------- --------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Net interest revenue/(expense)
from external sources $ 108,054 $ (39,914) $ 13,656 $ 2,133 $ 43,510 $ 127,439
Net interest revenue/(expense)
from internal sources (51,605) 84,561 (9,409) 4,485 (28,032) --
----------- ----------- --------- -------- --------- -----------
Total net interest revenue 56,449 44,647 4,247 6,618 15,478 127,439
Provision for loan losses (96) 1,817 119 130 2,297 4,267
Other operating revenue 14,278 19,853 28,189 26,902 18,697 107,919
Securities gains/(losses) -- -- -- -- (2,607) (2,607)
Other operating expense 23,126 49,911 27,750 25,779 32,101 158,667
Provision for impairment of
mortgage servicing rights -- -- 361 -- -- 361
Income taxes 18,421 5,654 1,684 3,011 (13,441) 15,329
----------- ----------- --------- -------- --------- -----------
Net income $ 29,276 $ 7,118 $ 2,522 $ 4,600 $ 10,611 $ 54,127
=========== =========== ========= ======== ========= ===========
Average assets $ 1,449,637 $ 1,963,068 $ 520,559 $219,851 $ 149,312 $ 4,302,427
Average equity 164,214 55,332 26,396 20,898 55,414 322,254
Performance measurements:
Return on assets 2.02% 0.36% 0.48% 2.09% -- 1.26%
Return on equity 17.83% 12.86% 9.55% 22.01% -- 16.80%
Efficiency ratio 32.70% 77.38% 85.55% 76.91% -- 67.57%
</TABLE>
Reconciliation to Consolidated Financial Statements
<TABLE>
<CAPTION>
Other Other
Net Interest Operating Operating Average
Revenue Revenue Expense Assets
------------ --------- --------- ----------
<S> <C> <C> <C> <C>
Total reportable segments $ 111,961 $ 89,222 $ 126,927 $4,153,115
Total nonreportable segments 3,929 16,205 15,769 107,305
Unallocated items:
Tax-equivalent adjustment (8,365) -- -- --
Funds management 22,533 1,312 8,988 (172,008)
All others, net (2,619) 1,180 7,344 214,015
--------- -------- -------- ----------
BOK Financial consolidated $ 127,439 $107,919 $159,028 $4,302,427
========= ======== ======== ==========
</TABLE>
49
<PAGE> 53
(18) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying values and estimated fair values of
financial instruments as of December 31, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
Range of Average Estimated
Carrying Contractual Repricing Discount Fair
Value Yields (in years) Rate Value
----------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1998:
Cash and cash equivalents $ 435,416 -- -- -- $ 435,416
Securities 2,488,551 -- -- -- 2,488,528
Loans:
Commercial 1,941,356 4.50 - 13.69% .60 6.89 - 10.03% 1,944,298
Commercial real estate 744,053 6.08 - 12.93 1.37 8.05 - 9.75 740,034
Residential mortgage 482,097 3.81 - 14.25 3.24 6.62 - 6.95 492,644
Residential mortgage - held for sale 98,616 -- -- -- 98,616
Consumer 285,819 6.40 - 17.90 1.48 7.02 - 12.75 288,423
----------- ------------ --------- ------------ ----------
Total loans 3,551,941 -- -- -- 3,564,015
Reserve for loan losses (64,931) -- -- -- --
----------- ------------ --------- ------------ ----------
Net loans 3,487,010 -- -- -- 3,564,015
Deposits with no stated maturity 2,694,184 -- -- -- 2,694,184
Time deposits 1,685,046 2.03 - 10.00 .62 3.62 - 5.12 1,686,286
Other borrowings 1,699,880 4.76 - 6.95 .24 4.50 - 7.75 1,703,895
Subordinated debt 146,921 7.13 6.27 5.42 - 5.48 158,869
=========== ============ ========= ============ ==========
1997:
Cash and cash equivalents $ 389,326 -- -- -- $ 389,326
Securities 1,967,521 -- -- -- 1,968,535
Loans:
Commercial 1,499,400 4.28 - 15.97% 0.4 7.52 - 10.28% 1,489,902
Commercial real estate 477,801 5.78 - 12.93 1.1 9.15 - 10.00 472,610
Residential mortgage 419,139 3.81 - 14.87 1.6 7.15 - 7.73 425,185
Residential mortgage - held for sale 78,669 -- -- -- 78,669
Consumer 290,084 5.00 - 17.90 1.2 7.75 - 13.50 289,681
----------- ------------ --------- ------------ ----------
Total loans 2,765,093 2,756,047
Reserve for loan losses (53,101) --
----------- ------------ --------- ------------ ----------
Net loans 2,711,992 -- -- -- 2,756,047
Deposits with no stated maturity 2,112,217 -- -- -- 2,112,217
Time deposits 1,615,862 2.71 - 9.81 0.4 4.65 - 5.98 1,606,668
Other borrowings 1,025,902 4.66 - 6.87 0.5 5.25 - 8.50 1,029,773
Subordinated debt 148,356 7.13 6.1 6.49 154,101
=========== ============ ========= ============ ==========
</TABLE>
The preceding table presents the estimated fair values of financial
instruments. The fair values of certain of these instruments were calculated by
discounting expected cash flows, which involved significant judgments by
management and uncertainties. Fair value is the estimated amount at which
financial assets or liabilities could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. Because no
market exists for certain of these financial instruments and because management
does not intend to sell these financial instruments, BOK Financial does not know
whether the fair values shown above represent values at which the respective
financial instruments could be sold individually or in the aggregate.
50
<PAGE> 54
The following methods and assumptions were used in estimating the fair value
of these financial instruments:
CASH AND CASH EQUIVALENTS
The book value reported in the consolidated balance sheet for cash and
short-term instruments approximates those assets' fair values.
SECURITIES
The fair values of securities are based on quoted market prices or dealer
quotes, when available. If quotes are not available, fair values are based on
quoted prices of comparable instruments.
LOANS
The fair value of loans, excluding loans held for sale, are based on
discounted cash flow analyses using interest rates currently being offered for
loans with similar remaining terms to maturity and credit risk, adjusted for the
impact of interest rate floors and ceilings. The fair values of classified loans
were estimated to approximate their carrying values less loan loss reserves
allocated to these loans of $9.6 million and $10.6 million at December 31, 1998
and 1997, respectively. The fair values of residential mortgage loans held for
sale are based upon quoted market prices of such loans sold in securitization
transactions, including related unfunded loan commitments and hedging
transactions.
DEPOSITS
The fair values of time deposits are based on discounted cash flow analyses
using interest rates currently being offered on similar transactions. FAS 107
defines the estimated fair value of deposits with no stated maturity, which
includes demand deposits, transaction deposits, money market deposits and
savings accounts, to equal the amount payable on demand. Although market
premiums paid reflect an additional value for these low cost deposits, FAS 107
prohibits adjusting fair value for the expected benefit of these deposits.
Accordingly, the positive effect of such deposits is not included in this table.
OTHER BORROWINGS AND SUBORDINATED DEBENTURE
The fair values of these instruments are based upon discounted cash flow
analyses using interest rates currently being offered on similar instruments.
OFF-BALANCE-SHEET INSTRUMENTS
The fair values of commercial loan commitments and letters of credit are
based on fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements. The fair values of these
off-balance-sheet instruments were not significant at December 31, 1998 and
1997. Residential mortgage loan commitments are included in determining the fair
value of the mortgage loans held for sale. The fair values of interest rate
swaps are based on pricing models using current assumptions to arrive at
replacement cost. The estimated fair value of interest rate swaps were $10.2
million and $6.6 million at December 31, 1998 and 1997, respectively.
51
<PAGE> 55
(19) PARENT COMPANY ONLY FINANCIAL STATEMENTS
Summarized financial information for BOK Financial - Parent Company Only
follows:
<TABLE>
<CAPTION>
BALANCE SHEETS
(IN THOUSANDS) DECEMBER 31,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 762 $ 627
Securities - available for sale 24,904 30,682
Investment in subsidiaries 572,337 437,553
Other assets 1,907 1,747
--------- ---------
Total assets $ 599,910 $ 470,609
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Other borrowings $ 92,132 $ 32,887
Other liabilities 2,664 2,245
--------- ---------
Total liabilities 94,796 35,132
--------- ---------
Preferred stock 25 23
Common stock 1 1
Capital surplus 233,024 208,327
Retained earnings 261,822 218,629
Treasury stock (565) (2,190)
Accumulated other comprehensive income 10,807 10,691
Notes receivable -- (4)
--------- ---------
Total shareholders' equity 505,114 435,477
--------- ---------
Total liabilities and shareholders' equity $ 599,910 $ 470,609
========= =========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF EARNINGS
(IN THOUSANDS)
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Dividends, interest and fees received from subsidiaries $ 28,518 $ 70,803 $ 31,202
Other operating revenue 1,717 2,612 532
-------- -------- --------
Total revenue 30,235 73,415 31,734
-------- -------- --------
Interest expense 2,469 3,566 819
Personnel expense 579 293 7
Professional fees and services 670 172 177
Contribution of stock to BOk Charitable Foundation 2,257 3,638 --
Other operating expense 116 106 236
-------- -------- --------
Total expense 6,091 7,775 1,239
-------- -------- --------
Income before taxes and equity in undistributed
income of subsidiaries 24,144 65,640 30,495
Federal and state income tax expense (credit) (3,093) (3,657) (4,116)
-------- -------- --------
Income before equity in undistributed income of 27,237 69,297 34,611
subsidiaries
Equity in undistributed income (loss) of subsidiaries 47,479 (4,672) 19,516
-------- -------- --------
Net income $ 74,716 $ 64,625 $ 54,127
======== ======== ========
</TABLE>
52
<PAGE> 56
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 74,716 $ 64,625 $ 54,127
-------- --------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income (loss) of (47,479) 4,672 (19,516)
subsidiaries
Gain on sale of available-for-sale securities -- (1,226) --
Contribution of stock to BOk Charitable
Foundation 2,257 3,638 --
Change in other assets (160) (156) 170
Change in other liabilities 2,593 (3,610) (3,552)
-------- --------- --------
Net cash provided by operating activities 31,927 67,943 31,229
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of available-for-sale -- 12,157 --
securities
Purchases of available-for-sale securities -- (10,000) (22,826)
Investment in subsidiaries (85,842) (104,488) (6,029)
-------- --------- --------
Net cash used in investing activities (85,842) (102,331) (28,855)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings 59,245 32,887 (2,500)
Issuance of preferred, common and treasury stock, net 3,940 1,584 311
Purchase treasury stock (9,138) -- --
Stock dividends on preferred stock (1) -- (3)
Payments on notes receivable 4 83 67
-------- --------- --------
Net cash provided (used) by financing activities 54,050 34,554 (2,125)
-------- --------- --------
Net increase (decrease) in cash and cash equivalents 135 166 249
Cash and cash equivalents at beginning of period 627 461 212
-------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 762 $ 627 $ 461
======== ========= ========
PAYMENT OF DIVIDENDS IN COMMON STOCK $ 31,500 $ 28,948 $ 17,956
======== ========= ========
CASH PAID FOR INTEREST $ 2,364 $ 3,395 $ 827
======== ========= ========
</TABLE>
53
<PAGE> 57
BOK FINANCIAL CORPORATION
ANNUAL FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances,
Average Yields and Rates
<TABLE>
<CAPTION>
(Dollars in Thousands Except Per Share Data) 1998
------------------------------------
AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE(1) RATE
------------------------------------
<S> <C> <C> <C>
ASSETS
Taxable securities $1,767,795 $108,727 6.15%
Tax-exempt securities 324,743 24,801 7.64
--------- -------- -----
Total securities 2,092,538 133,528 6.38
---------- -------- -----
Trading securities 20,038 1,046 5.22
Funds sold and resell agreements 31,550 1,837 5.82
Loans(2,3) 2,978,438 259,469 8.60
Less reserve for loan losses 58,563 -- --
---------- -------- -----
Loans, net of reserve 2,919,875 259,469 8.77(3)
---------- -------- -----
Total earning assets 5,064,001 395,880 7.75(3)
---------- -------- -----
Cash and other assets 648,790
---------- -------- -----
Total assets $5,712,791
========== ======== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Transaction deposits $1,188,779 $ 36,425 3.06%
Savings deposits 112,431 2,373 2.11
Time deposits 1,675,222 91,223 5.45
---------- -------- -----
Total interest-bearing deposits 2,976,432 130,021 4.37
---------- -------- -----
Other borrowings 1,146,165 64,621 5.64
Subordinated debenture 148,404 9,693 6.53
---------- -------- -----
Total interest-bearing liabilities 4,271,001 204,335 4.78
---------- -------- -----
Demand deposits 902,369
Other liabilities 72,121
Shareholders' equity 467,300
---------- -------- -----
Total liabilities and shareholders' equity $5,712,791
========== ======== =====
TAX-EQUIVALENT NET INTEREST REVENUE $191,545 2.97%(3)
TAX-EQUIVALENT NET INTEREST REVENUE TO EARNING ASSETS 3.72(3)
Less tax-equivalent adjustment(1) 9,293
---------- -------- -----
NET INTEREST REVENUE 182,252
Provision for loan losses 14,451
Other operating revenue 172,819
Other operating expense 228,655
---------- -------- -----
INCOME BEFORE TAXES 111,965
Federal and state income tax 37,249
---------- -------- -----
NET INCOME $ 74,716
========== ======== =====
EARNINGS PER AVERAGE COMMON SHARE EQUIVALENT:
Net Income
Basic $ 1.62
--------
Diluted 1.44
--------
</TABLE>
(1) Tax equivalent at the statutory federal and state rates of 38.9% for the
periods presented. The taxable equivalent adjustments shown are for
comparative purposes.
(2) The loan averages included loans on which the accrual of interest has been
discontinued and are stated net of unearned income. See Note 1 of Notes to
the Consolidated Financial Statements for a description of income
recognition policy.
(3) Excludes $3,262 of nonrecurring foregone interest in the 2nd and 3rd
quarters of 1998.
54
<PAGE> 58
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense(1) Rate Balance Expense(1) Rate
- ------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
$1,560,535 $ 97,416 6.24% $1,285,333 $ 77,588 6.04%
344,112 26,137 7.60 305,000 22,801 7.48
---------- ---------- ---- ---------- ---------- ----
1,904,647 123,553 6.49 1,590,333 100,389 6.31
---------- ---------- ---- ---------- ---------- ----
4,785 287 6.00 5,096 340 6.67
52,911 2,992 5.65 29,134 1,630 5.59
2,598,718 227,283 8.75 2,252,216 196,538 8.73
50,091 -- -- 42,074 -- --
---------- ---------- ---- ---------- ---------- ----
2,548,627 227,283 8.92 2,210,142 196,538 8.89
---------- ---------- ---- ---------- ---------- ----
4,510,970 354,115 7.85 3,834,705 298,897 7.79
---------- ---------- ---- ---------- ---------- ----
579,575 467,722
---------- ---------- ---- ---------- ---------- ----
$5,090,545 $4,302,427
========== ========== ==== ========== ========== ====
$1,048,060 $ 33,091 3.16% $ 848,365 $ 28,336 3.34%
106,811 2,367 2.22 101,273 2,464 2.43
1,564,236 86,584 5.54 1,555,073 87,266 5.61
---------- ---------- ---- ---------- ---------- ----
2,719,107 122,042 4.49 2,504,711 118,066 4.71
---------- ---------- ---- ---------- ---------- ----
1,088,470 62,740 5.76 794,715 45,027 5.67
64,374 4,166 6.47 -- -- --
---------- ---------- ---- ---------- ---------- ----
3,871,951 188,948 4.88 3,299,426 163,093 4.94
---------- ---------- ---- ---------- ---------- ----
752,768 621,069
72,122 59,678
393,704 322,254
---------- ---------- ---- ---------- ---------- ----
$5,090,545 $4,302,427
========== ========== ==== ========== ========== ====
$ 165,167 2.97% $ 135,804 2.85%
3.66 3.54
9,567 8,365
---------- ---------- ---- ---------- ---------- ----
155,600 127,439
9,026 4,267
129,699 105,312
195,166 159,028
---------- ---------- ---- ---------- ---------- ----
81,107 69,456
16,482 15,329
---------- ---------- ---- ---------- ---------- ----
$ 64,625 $ 54,127
========== ========== ==== ========== ========== ====
$ 1.40 $ 1.17
---------- ---------- ---- ---------- ---------- ----
1.25 1.06
---------- ---------- ---- ---------- ---------- ----
</TABLE>
55
<PAGE> 59
BOK FINANCIAL CORPORATION
QUARTERLY FINANCIAL SUMMARY - UNAUDITED
Consolidated Daily Average Balances,
Average Yields and Rates
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------
December 31, 1998 September 30, 1998
------------------------------- -------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense(1) Rate Balance Expense(1) Rate
---------- ---------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Taxable securities $1,902,736 $ 29,073 6.06% $ 1,751,428 $27,300 6.18%
Tax-exempt securities(1) 323,147 6,167 7.57 325,413 6,212 7.57
---------- --------- ---- ----------- ------- ----
Total securities 2,225,883 35,240 6.28 2,076,841 33,512 6.40
---------- --------- ---- ----------- ------- ----
Trading securities 19,415 232 4.74 27,389 389 5.63
Funds sold 16,539 242 5.81 25,287 333 5.22
Loans(2), (3) 3,270,560 69,158 8.39 2,978,087 66,503 8.62
Less reserve for loan losses 63,727 59,821
---------- --------- ---- ----------- ------- ----
Loans, net of reserve 3,206,833 69,158 8.56 2,918,266 66,503 8.80(3)
---------- --------- ---- ----------- ------- ----
Total earning assets 5,468,670 104,872 7.61 5,047,783 100,737 7.78(3)
---------- --------- ---- ----------- ------- ----
Cash and other assets 672,352 647,741
---------- --------- ---- ----------- ------- ----
Total assets $6,141,022 $5,695,524
========== ========= ==== =========== ======= ====
LIABILITIES AND SHAREHOLDERS' EQUITY
Transaction deposits $1,236,386 $ 8,967 2.88% $1,187,685 $9,273 3.10%
Savings deposits 119,970 607 2.01 108,911 547 1.99
Other time deposits 1,601,350 21,264 5.27 1,643,596 22,455 5.42
---------- --------- ---- ----------- ------- ----
Total interest-bearing deposits 2,957,706 30,838 4.14 2,940,192 32,275 4.36
---------- --------- ---- ----------- ------- ----
Other borrowings 1,502,825 20,427 5.39 1,152,503 16,830 5.79
Subordinated debenture 147,418 2,333 6.28 148,392 2,529 6.76
---------- --------- ---- ----------- ------- ----
Total interest-bearing liabilities 4,607,949 53,598 4.61 4,241,087 51,634 4.83
---------- --------- ---- ----------- ------- ----
Demand deposits 950,560 904,128
Other liabilities 85,721 78,383
Shareholders' equity 496,792 471,926
---------- --------- ---- ----------- ------- ----
Total liabilities and shareholders' equity $6,141,022 $ 5,695,524
========== ========= ==== =========== ======= ====
TAX-EQUIVALENT NET INTEREST REVENUE(1) $ 51,274 2.99% $49,103 2.95%(3)
TAX-EQUIVALENT NET INTEREST REVENUE(1) TO EARNING ASSETS 3.72 3.72(3)
Less tax-equivalent adjustment(1) 2,299 2,326
---------- --------- ---- ----------- ------- ----
NET INTEREST REVENUE 48,975 46,777
Provision for loan losses 4,027 4,001
Other operating revenue 44,817 42,860
Other operating expense 60,821 56,837
---------- --------- ---- ----------- ------- ----
INCOME BEFORE TAXES 28,944 28,799
Federal and state income tax (benefit) 9,729 10,049
---------- --------- ---- ----------- ------- ----
NET INCOME $ 19,215 $18,750
========== ========= ==== =========== ======= ====
EARNINGS PER AVERAGE COMMON SHARE EQUIVALENT:
NET INCOME
Basic $ .42 $ .41
---------- --------- ---- ----------- ------- ----
Diluted .37 .36
========== ========= ==== =========== ======= ====
</TABLE>
(1) Tax equivalent at the statutory federal and state rates of 38.9% for the
periods presented. The taxable equivalent adjustments shown are for
comparative purposes.
(2) The loan averages included loans on which the accrual of interest has been
discounted and are stated net of unearned income. See Note 1 of Notes to
the Consolidated Financial Statements for a description of income
recognition policy.
(3) Excludes $1,794 of nonrecurring foregone interest in the third quarter 1998
and $1,468 in the second quarter 1998.
56
<PAGE> 60
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------------------------
June 30, 1998 March 31, 1998 December 31, 1997
------------------------------ ------------------------------ ------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense(1) Rate Balance Expense(1) Rate Balance Expense(1) Rate
----------- ---------- ------ ----------- ---------- ------ ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,642,799 $25,119 6.13% $1,772,971 $27,235 6.23% $1,562,445 $24,408 6.20%
321,703 6,173 7.70 328,735 6,248 7.71 331,793 6,666 7.97
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
1,964,502 31,292 6.39 2,101,706 33,483 6.46 1,894,238 31,074 6.51
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
21,408 262 4.91 11,774 163 5.61 6,203 93 5.95
37,728 571 6.07 47,050 691 5.96 53,964 724 5.32
2,838,037 63,072 8.71 2,822,147 60,737 8.73 2,764,436 60,924 8.74
56,423 54,164 53,180
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
2,781,614 63,072 8.88(3) 2,767,983 60,737 8.90 2,711,256 60,924 8.92
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
4,805,252 95,197 7.82(3) 4,928,513 95,074 7.82 4,665,661 92,815 7.89
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
643,626 625,863 618,039
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
$5,448,878 $5,554,376 $5,283,700
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
$1,184,835 $ 9,268 3.14% $1,145,221 $ 8,917 3.16% $1,102,144 $ 8,466 3.05%
111,207 617 2.23 109,560 602 2.23 106,207 596 2.23
1,717,993 23,640 5.52 1,739,816 23,864 5.56 1,582,538 22,037 5.52
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
3,014,035 33,525 4.46 2,994,597 33,383 4.52 2,790,889 31,099 4.42
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
873,616 12,406 5.70 1,051,724 14,958 5.77 1,050,545 15,169 5.73
148,410 2,464 6.66 148,374 2,367 6.47 148,334 2,439 6.52
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
4,036,061 48,395 4.81 4,194,695 50,708 4.90 3,989,768 48,707 4.84
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
895,415 858,340 783,508
61,814 57,095 80,763
455,588 444,246 429,661
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
$5,448,878 $5,554,376 $5,283,700
=========== ======= ==== ========== ======= ==== ========== ======= ====
$46,802 3.01%(3) $44,366 2.92% $44,108 3.05%
3.78(3) 3.65 3.75
2,338 2,330 2,396
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
44,464 42,036 41,712
3,953 2,470 3,500
44,355 40,787 33,521
53,804 57,193 61,277
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
31,062 23,160 10,456
10,624 6,847 (6,362)
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
$20,438 $16,313 $16,818
=========== ======= ==== ========== ======= ==== ========== ======= ====
$ .44 $ .35 $ .36
----------- ------- ---- ---------- ------- ---- ---------- ------- ----
.39 .31 .32
=========== ======= ==== ========== ======= ==== ========== ======= ====
</TABLE>
57
<PAGE> 61
BOK FINANCIAL CORPORATION BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
W. WAYNE ALLEN(1) EUGENE A. HARRIS(2) J. LARRY NICHOLS(1)
Chairman and CEO Executive Vice President President and CEO
Phillips Petroleum Co. BOK Financial Corp. and Devon Energy Corporation
Bank of Oklahoma, N.A.
C. FRED BALL, JR. (3),(4) RONALD J. NORICK(1),(4)
President and CEO HOWARD E. JANZEN(1) Manager
Bank of Texas, N.A. President & CEO Norick Investment Company LLC
Williams Communications
JAMES E. BARNES ROBERT L. PARKER, SR.
Retired Chairman and CEO E. CAREY JOULLIAN, IV(1) Chairman of the Board
MAPCO Inc. President Parker Drilling Company
Mustang Fuel Corporation
SHARON J. BELL(1) JAMES W. PIELSTICKER(1)
Managing Partner GEORGE B. KAISER(1) President
Rogers and Bell Chairman of the Board Arrow Trucking Co.
BOK Financial Corp. and
LUKE R. CORBETT(4) BANK OF OKLAHOMA, N.A. E.C. RICHARDS(1)
Chairman & CEO EVP, Chief Operating Officer
Kerr-McGee Corporation ROBERT J. LAFORTUNE Sooner Pipe and Supply Corp.
Personal Investments
GLENN A. COX(1) JAMES A. ROBINSON
Retired President and COO PHILIP C. LAUINGER, JR. Personal Investments
Phillips Petroleum Company Chairman
Lauinger Publishing Company L. FRANCIS ROONEY, III(1)
DR. ROBERT H. DONALDSON(1) Chairman and CEO
Trustees Professor of STANLEY A. LYBARGER(1) Manhattan Construction Company
Political Science President and CEO
University of Tulsa BOK Financial Corp. and David J. Tippeconnic
Bank of Oklahoma, N.A. President and CEO
WILLIAM E. DURRETT Citgo Petroleum Corporation
Senior Chairman JOHN L. MASSEY(1)
American Fidelity Corp. Chairman of the Board TOM E. TURNER(3)
Durant Bank and Trust Co. Chairman
JAMES O. GOODWIN(1) Bank of Texas, N.A.
CEO FRANK A. MCPHERSON(1)
The Oklahoma Eagle Publishing Co. Retired Chairman and CEO JAMES A. WHITE(2)
Kerr-McGee Corporation Executive Vice President and CFO
D. JOSEPH GRAHAM(2) BOK Financial Corp. and
Vice President and CFO STEVEN E. MOORE Bank of Oklahoma, N.A.
Kaiser-Francis Oil Co. Chairman, President and CEO
OGE Energy Corp. ROBERT L. ZEMANEK(3)
V. BURNS HARGIS(1) President, Energy Delivery
Vice Chairman Central and South West Services, Inc.
BOK Financial Corp. and
Bank of Oklahoma, N.A.
</TABLE>
(1) Director of BOK Financial Corp. and Bank of Oklahoma, N.A.
(2) Director of Bank of Oklahoma, N.A.
(3) Director of BOK Financial Corp. and Bank of Texas, N.A.
(4) Advisory pending election at shareholders meeting April 27.
58
<PAGE> 62
BANK OF TEXAS, N.A. BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
C. THOMAS ABBOTT(2) JAMES J. ELLIS(3) MRS. ROZENE PRIDE(1)
Vice Chairman Partner Private Investor
Bank of Texas, N.A. Ellis/Rosier Associates
WILLIAM E. STAHNKE(3)
CHARLES A. ANGEL, JR.(2) R. WILLIAM GRIBBLE, JR.(2) Vice Chairman
Vice Chairman President Bank of Texas, N.A.
Bank of Texas, N.A. Gribble Oil Company
MRS. JERE W. THOMPSON(3)
C. FRED BALL, JR.(3) J. T. HAIRSTON, JR.(3) Community Leader
President and CEO Retired President
Bank of Texas, N.A. Cullum Companies TOM E. TURNER(3)
Chairman
C. HUSTON BELL(3) JERRY LASTELICK(3) Bank of Texas, N.A.
President Attorney
The Vantage Companies Lastelick, Anderson and Arneson JOHN C. VOGT(2)
District Manager
EDWARD O. BOSHELL, JR. *(3) STANLEY A. LYBARGER(3) International Supply Co.
Partner President and CEO BOK Financial Corp.
Columbia General Investments, LP JAMES A. WHITE(1)
DONALD J. MALOUF*(2) Executive Vice President and CFO
BEN R. BRIGGS(3) Partner BOK Financial Corp.
Owner, Ben R. Briggs Investments Malouf Lynch Jackson
Kessler and Collins Attorneys ROBERT L. ZEMANEK(3)
R. NEAL BRIGHT(3) President, Energy Delivery
Managing Partner JON L. MOSLE, JR.*(3) Central and South West Services, Inc.
Bright and Bright CPA's Director, SW Securities,
Westwood Trust, Aquilla
DUDLEY CHAMBERS(3) Gas Pipe Line and Wiser Oil
Partner, Jackson & Walker, LLP
MICHAEL A. MCBEE(3)
EDWARD F. DORAN, SR.(3) Owner
President McBee Operating Co.
Doran Chevrolet, Inc.
</TABLE>
* Advisory Director for the Bank
(1) Park Cities Bancshares, Inc.
(2) Bank of Texas, N.A
(3) Park Cities Bancshares, Inc/ Bank of Texas, N.A.
BANK OF ARKANSAS BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
JEFFREY R. DUNN GERALD JONES JERRY D. SWEETSER
Chairman, President and CEO President Sweetser Properties, Inc.
Bank of Arkansas, N.A. Jones Olds-GMC-Buick, Inc.
JAMES A. WHITE
GEORGE C. FAUCETTE, JR. NORMAN W. SMITH Executive Vice President and CFO
Coldwell Banker Faucette Real Estate Executive Vice President BOK Financial Corporation
Bank of Oklahoma, N.A.
</TABLE>
59
<PAGE> 63
MAJOR CUSTOMER SERVICE OFFICES
<TABLE>
<S> <C> <C> <C>
BUSINESS BANKING CORPORATE BANKING BOSC, INC. ENID
CENTERS ALBUQUERQUE (800) 364-1818 2308 N. Van Buren
DALLAS 201 Third Street, N.W., (580) 548-8523
2650 Royal Lane 14th Floor BANCALBUQUERQUE
(972) 443-2800 (505) 222-8444 Investment Center OKLAHOMA CITY
2500 Louisiana Blvd., N.E., Albuquerque COMMERCE CENTER
OKLAHOMA CITY DALLAS 9520 N. May, 2nd Floor
COMMERCE CENTER 5956 Sherry Lane, Ste. 1800 BANCARKANSAS (405) 936-3900
9520 N. May (214) 987-8880 INVESTMENT CENTER
(405) 936-3700 3500 N. College, Fayetteville TULSA
FAYETTEVILLE MIDTOWN
SOUTH OKC 3500 N. College BANCOKLAHOMA 2021 S. Lewis, Suite 200
7701 S. Western (501) 973-2660 Investment Center (918) 748-7244
(405) 616-7500 3045 S. Harvard, Tulsa
OKLAHOMA CITY DOWNTOWN
TULSA BANK OF OKLAHOMA PLAZA BANCTEXAS 320 S. Boston
Brookside Banking Center Robinson at Robert S. Kerr Investment Center (918) 588-6214
3237 S. Peoria (405) 272-2000 6701 Preston Road, Dallas
(918) 746-7400 BROOKSIDE
TULSA INSTITUTIONAL INVESTMENTS 3237 S. Peoria
BANK OF OKLAHOMA TOWER BANK OF OKLAHOMA TOWER (918) 746-7487
CONSUMER BANKING One Williams Center, 8th Floor One Williams Center, 9th Floor
ALBUQUERQUE (918) 588-6000 61ST & YALE
3900 Vassar, N.E. LEO OPPENHEIM DIVISION 6036 S. Yale
(505) 855-0834 BANK OF OKLAHOMA PLAZA (918) 493-5210
Robinson at Robert S. Kerr
OKLAHOMA CITY
WINDSOR HILLS
2601 N. Meridian PRIVATE FINANCIAL
(405) 272-2000 SERVICES
DALLAS
TULSA 6701 Preston Road
BANK OF OKLAHOMA TOWER (214) 525-7600
One Williams Center, 16th Floor
(918) 588-6000 7600 West Northwest Highway
(214) 706-0300
6215 Hillcrest Avenue
(214) 525-5000
</TABLE>
OPERATING SUBSIDIARIES
<TABLE>
<S> <C> <C> <C>
BANK OF ALBUQUERQUE, N.A. BANK OF ARKANSAS, N.A. BANK OF OKLAHOMA, N.A. BANK OF TEXAS, N.A.
ALBUQUERQUE FAYETTEVILLE OKLAHOMA CITY DALLAS
201 Third Street, N.W. 3500 N. College BANK OF OKLAHOMA PLAZA 5956 Sherry Lane, Ste. 1800
14th Floor (501) 973-2660 Robinson at Robert. S. Kerr (214) 987-8880
(505) 222-8444 (405) 272-2000
TULSA
BANK OF OKLAHOMA TOWER
One Williams Center
(918) 588-6000
</TABLE>
60
<PAGE> 64
OTHER OPERATING SUBSIDIARIES
<TABLE>
<S> <C> <C> <C>
BANK OF OKLAHOMA, BANK OF TEXAS, PINE AND LEWIS LITTLE ROCK,
TRUST DIVISION TRUST DIVISION 1604 N. Lewis 11121 N. Rodney Parham Road,
OKLAHOMA CITY DALLAS (918) 588-8608 Suite 10A
COMMERCE CENTER 7600 West Northwest Highway (501) 223-9000
9520 N. May (214) 525-7600 OWASSO
(405) 936-3700 413 E. 2nd Ave. FIRST MORTGAGE
SHERMAN (918) 588-8650 INVESTMENT COMPANY
TULSA 2009 Independence Dr. Lee's Summit, MO
BANK OF OKLAHOMA TOWER (903) 813-5100 BANK OF ALBUQUERQUE 907 S.W. Oldham Parkway
One Williams Center, 10th Floor MORTGAGE GROUP (816) 246-7000
(918) 588-6437 BOK MORTGAGE 2500 Louisiana, N.E.
LAWTON (505) 837-4111 OVERLAND PARK, KS
SOUTHWEST 2602 W. Gore Blvd. 8101 College Blvd., Ste. 285
TRUST COMPANY (580) 250-0070 BANK OF ARKANSAS (913) 338-3321
COMMERCE CENTER MORTGAGE GROUP
9520 N. May, 2nd Floor OKLAHOMA CITY Bentonville Shawnee, KS
(405) 936-3970 5015 N. Pennsylvania 1706 S.E. Walton Blvd., Ste. B 5425 Martindale
(405) 879-8700 (501) 271-6800 (913) 441-5600
TULSA FAYETTEVILLE TOPEKA, KS
COPPER OAKS 1130 Millsap Road 2655 S.W. Wannamaker Road,
7060 S. Yale, Suite 100 (501) 973-2600 Ste. C
(918) 488-7140 (785) 272-0375
</TABLE>
EXECUTIVE OFFICERS
<TABLE>
<S> <C> <C>
GEORGE B. KAISER BANK OF ALBUQUERQUE, N.A. NORMAN W. SMITH
Chairman of the Board Executive Vice President
GREGORY K. SYMONS Consumer Banking
STANLEY A. LYBARGER President
President, Chief Executive Officer CHARLES D. WILLIAMSON
Executive Vice President
V. BURNS HARGIS BANK OF ARKANSAS, N.A. Capital Markets
Vice Chairman
JEFFREY R. DUNN
EUGENE A. HARRIS Chairman, President and CEO BANK OF TEXAS, N.A.
Executive Vice President
Chief Credit Officer TOM E. TURNER
BANK OF OKLAHOMA, N.A. Chairman
JAMES A. WHITE
Executive Vice President PAUL M. ELVIR C. FRED BALL, JR.
Chief Financial Officer Executive Vice President President & CEO
Operations & Technology
FREDERIC DORWART CHARLES T. ABBOTT
Secretary MARK W. FUNKE Vice Chairman
President, Oklahoma City
LOWELL E. FAULKENBERRY CHARLES A. ANGEL, JR.
Senior Vice President H. JAMES HOLLOMAN Vice Chairman
Director, Risk Management Executive Vice President
Trust Division WILLIAM E. STAHNKE
JOHN C. MORROW Vice Chairman
Senior Vice President DAVID L. LAUGHLIN
Director of Financial Accounting President STEVEN D. POOLE
& Reporting BOK Mortgage Executive Vice President
Trust Division Manager
STEVEN E. NELL W. JEFFREY PICKRYL
Senior Vice President Executive Vice President
Corporate Controller Commercial Banking
</TABLE>
61
<PAGE> 65
SHAREHOLDER INFORMATION
BOK Financial is a bank holding company providing financial and related
services to individuals and businesses. It is primarily engaged in commercial
and consumer banking through its two banking subsidiaries. In conducting their
businesses, the banks receive deposits, make loans, provide trust, investment
and corporate services, operate the TransFund interchange of automated teller
machines and generally engage in all aspects of commercial and consumer banking.
<TABLE>
<S> <C>
CORPORATE HEADQUARTERS TRANSFER AGENT AND REGISTRAR
Bank of Oklahoma Tower The Bank of New York
P.O. Box 2300 (800) 524-4458
Tulsa, Oklahoma 74192
(918) 588-6000 Address Shareholders Inquiries to:
Shareholder Relations Department-11E
INDEPENDENT AUDITORS P.O. Box 11258
Ernst & Young LLP Church Street Station
Bank of Oklahoma Tower New York, NY 10286
Tulsa, Oklahoma 74172 E-Mail Address:
(918) 560-3600 [email protected]
LEGAL COUNSEL Send Certificates for Transfer
Frederic Dorwart Lawyers and Address Changes to:
Old City Hall Receive and Deliver Department - 11W
124 E. Fourth St. P.O. Box 11002
Tulsa, Oklahoma 74103-5010 Church Street Station
(918) 583-9922 New York, NY 10286
COMMON SHARES:
National Market Listing, Copies of BOK Financial Corporation's Annual
NASDAQ Symbol: BOKF Report to Shareholders, Form 10-K to the
Number of common shareholders at Securities and Exchange Commission and other
December 31, 1998: 1,198 public financial information are available without
charge upon written request. Analysts,
MARKET MAKERS: shareholders and other investors seeking financial
Bear Stearns & Co. information about BOK Financial Corporation are
Herzog, Heine, Geduld, Inc. invited to contact James A. White, Executive Vice
Howe Barnes Investments President & Chief Financial Officer, (918)
Instinet Corporation 588-6717. News media and others seeking general
Investment Technology Group information should contact Becky J. Frank, Vice
Keefe Bruyette & Woods President, Public Relations manager, (918)
Knight Securities LP 588-6831.
Mayer & Schweitzer, Inc.
Morgan, Keegan & Company
Oppenheimer & Co., Inc.
Salomon Smith Barney
Sherwood Securities
Southwest Securities, Inc.
Troster Singer
</TABLE>
62
<PAGE> 66
BOK FINANCIAL CORPORATION
1998 ANNUAL REPORT
APPENDIX A
<TABLE>
<CAPTION>
Net Income
Graph I
($ Million)
- -------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income $ 74,716 $ 64,625 $ 54,127 $ 49,205 $ 45,065
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Fee Revenue
Graph II
($ Million)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total fee revenue $ 161,934 $ 129,717 $ 107,175 $ 88,040 $ 75,973
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Earnings Per Share
Graph III
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings per share $ 1.44 $ 1.25 $ 1.06 $ 0.96 $ 0.88
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Loan Portfolio Composition
Graph IV
($ Millions)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Consumer $ 285,819 $ 290,084 $ 241,025
Residential mortgage 580,713 497,808 484,152
Commercial RE 744,053 477,801 428,026
Commercial 1,941,356 1,499,400 1,241,377
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Loan Portfolio
Graph V
($ Millions)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total loan portfolio $3,551,941 $2,765,093 $2,394,580 $2,194,368 $1,844,053
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Investments/BOSC fees
Graph VI
($ Millions)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Investments/BOSC fees $ 14,049 $ 9,470 $ 7,672
- -------------------------------------------------------------------------------------------------
</TABLE>
Appendix A, Page 1
<PAGE> 67
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Trust Fees
Graph VII
($ Millions)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Trust fees $ 37,928 $ 30,084 $ 26,902
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Mortgage Banking
Graph VIII
($ Millions)
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Mortgage Banking $ 44,379 $ 34,208 $ 28,189
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Transaction Card Fees
Graph IX
($ Millions)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Transaction card fees $ 24,426 $ 19,339 $ 14,298 $ 11,045 $ 8,474
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Net Interest Revenue, FTE
Graph X
($ Millions)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net interest Revenue, FTE $ 191,545 $ 165,167 $ 135,804 $ 122,302 $ 125,120
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Net Operating Income
Graph XI
($ Millions)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Operating Income $ 125,859 $ 104,918 $ 88,145 $ 71,929 $ 63,302
- -------------------------------------------------------------------------------------------------
</TABLE>
Appendix A, Page 2
<PAGE> 1
BOK FINANCIAL CORPORATION
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
BANKING SUBSIDIARIES
--------------------
Bank of Oklahoma, National Association
Bank of Arkansas, National Association
Bank of Texas, National Association
Bank of Albuquerque, National Association
OTHER SUBSIDIARIES OF BOK FINANCIAL CORPORATION
-----------------------------------------------
BOSC, Inc.
BOK Capital Services Corporation
KCI Leasing Partners I, an Oklahoma Limited Partnership
KCI Leasing Partners II, an Oklahoma Limited Partnership
KCI Leasing Partners III, an Oklahoma Limited Partnership
KCI Leasing Partners IV, an Oklahoma Limited Partnership
Park Cities Bancshares, Inc.
Park Cities Corporation
Sabre 1996 Partnership, an Oklahoma Limited Partnership
SUBSIDIARIES OF BANK OF OKLAHOMA, N.A.
--------------------------------------
Affiliated BancServices, Inc.
Affiliated Financial Holding Company
Affiliated Financial Insurance Agency, Inc.
Affiliated Financial Life Insurance Company
BancOklahoma Agri-Service Corporation
BancOklahoma Mortgage Corporation
BOK Delaware, Inc.
BOK Real Estate Trust
CVV Management, Inc.
CVV Partnership, an Oklahoma General Partnership
Cottonwood Valley Ventures, Inc.
Investment Concepts, Inc.
Pacesetter Leasing Company
Southwest Trust Company
Steven L. Smith Corporation
115 E. Fifth Corp.
SUBSIDIARIES OF BANK OF TEXAS, N.A.
-----------------------------------
Bank of Texas Trust Company, National Association
All subsidiaries are incorporated in Oklahoma, with the exception of Bank
of Oklahoma, National Association, Bank of Arkansas, National
Association, Bank of Texas, National Association, Bank of Texas Trust Company,
National Association, and Bank of Albuquerque, National Association, which are
chartered by the United States of America; Affiliated Financial
Life Insurance Company,which is incorporated in Arizona; Park Cities Bancshares,
Inc. and BOK Real Estate Trust which are incorporated in Texas;
BOK Delaware, Inc., which is incorporated in Delaware;
and Park Cities Corporation, which is
incorporated in Nevada.
<PAGE> 1
BOK FINANCIAL CORPORATION
EXHIBIT 23.0
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated January 26,
1999, with respect to the consolidated financial statements of BOK Financial
Corporation incorporated by reference in the annual report (Form 10-K) for the
year ended December 31, 1998, in the following registration statements:
o Registration Statement (Form S-8, No. 33-44121) pertaining to the
Reoffer Prospectus of the Bank of Oklahoma Master Thrift Plan and Trust
Agreement.
o Registration Statement (Form S-8, No. 33-44122) pertaining to the
Reoffer Prospectus of the BOK Financial Corporation 1991 Special Stock
Option Plan.
o Registration Statement (Form S-8, No. 33-55312) pertaining to the
Reoffer Prospectus of the BOK Financial Corporation 1992 Stock Option
Plan.
o Registration Statement (Form S-8, No. 33-70102) pertaining to the
Reoffer Prospectus of the BOK Financial Corporation 1993 Stock Option
Plan.
o Registration Statement (Form S-8, No. 33-79834) pertaining to the
Reoffer Prospectus of the BOK Financial Corporation 1994 Stock Option
Plan.
o Registration Statement (Form S-8, No. 33-79836) pertaining to the
Reoffer Prospectus of the BOK Financial Corporation Directors' Stock
Compensation Plan.
o Registration Statement (Form S-8, No. 33-32642) pertaining to the
Reoffer Prospectus of BOK Financial Corporation 1998 Stock Option Plan.
/s/ Ernst & Young LLP
Tulsa, Oklahoma
March 22, 1999
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BOK
FINANCIAL CORPORATION'S 10-K FOR THE PERIOD ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000875357
<NAME> BOK FINANCIAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 426,265
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,151
<TRADING-ASSETS> 41,138
<INVESTMENTS-HELD-FOR-SALE> 2,219,636
<INVESTMENTS-CARRYING> 227,777
<INVESTMENTS-MARKET> 227,754
<LOANS> 3,551,941
<ALLOWANCE> 64,931
<TOTAL-ASSETS> 6,809,348
<DEPOSITS> 4,379,230
<SHORT-TERM> 1,622,435
<LIABILITIES-OTHER> 78,203
<LONG-TERM> 224,366
0
25
<COMMON> 3
<OTHER-SE> 505,086
<TOTAL-LIABILITIES-AND-EQUITY> 6,809,348
<INTEREST-LOAN> 258,974
<INTEREST-INVEST> 124,730
<INTEREST-OTHER> 2,883
<INTEREST-TOTAL> 386,587
<INTEREST-DEPOSIT> 130,021
<INTEREST-EXPENSE> 204,335
<INTEREST-INCOME-NET> 182,252
<LOAN-LOSSES> 14,451
<SECURITIES-GAINS> 9,337
<EXPENSE-OTHER> 228,655
<INCOME-PRETAX> 111,965
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,716
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.44
<YIELD-ACTUAL> 3.72
<LOANS-NON> 13,116
<LOANS-PAST> 9,414
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 59,659
<ALLOWANCE-OPEN> 53,101
<CHARGE-OFFS> 7,478
<RECOVERIES> 4,857
<ALLOWANCE-CLOSE> 64,931
<ALLOWANCE-DOMESTIC> 64,931
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 10,969
</TABLE>
