(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14 (a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
only (as permitted by Rule 14
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
BOK FINANCIAL CORPORATION
-----------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A (Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (4) and 0-12.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value or transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined);
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11 (a) (2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
March 24, 2005
To Each Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of BOK Financial Corporation to be held this year in the Tulsa Room on the ninth
floor of the Bank of Oklahoma Tower, One Williams Center, Tulsa, Oklahoma on
Tuesday, April 26, 2005, at 11:00 a.m. local time. Details of the business to be
conducted at the annual meeting are given in the attached Notice of Annual
Meeting and Proxy Statement. Also enclosed is our Annual Report to Shareholders,
covering the fiscal year ended December 31, 2004.
We hope that you will be able to attend this meeting, but all
shareholders, whether or not they expect to attend the meeting, are requested to
complete, date and sign the enclosed proxy and return it in the enclosed
envelope as promptly as possible.
We look forward to seeing you at the meeting.
Sincerely,
/s/ George B. Kaiser
_________________________________
George B. Kaiser, Chairman of the
Board of Directors
/s/ Stanley A. Lybarger
_________________________________
Stanley A. Lybarger, President and
Chief Executive Officer
IF YOU PLAN TO ATTEND THE 2005 ANNUAL MEETING OF SHAREHOLDERS OF BOK
FINANCIAL CORPORATION, PLEASE TAKE NOTE OF THE FOLLOWING: Due to security
measures in place at the Bank of Oklahoma Tower, it will be necessary for you to
check in at the Williams security desk on the plaza level of the Tower. You will
be required to surrender your driver's license in exchange for a visitor pass.
Your driver's license will be returned to you when you depart the building and
return the visitor pass.
BOK FINANCIAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on April 26, 2005
Each Shareholder:
Notice is hereby given that the Annual Meeting of Shareholders of BOK
Financial Corporation (the "Company" or "BOK Financial"), an Oklahoma
corporation, will be held in the Tulsa Room on the ninth floor of the Bank of
Oklahoma Tower, One Williams Center, Tulsa, Oklahoma on April 26, 2005, at 11:00
a.m. local time, for the following purposes:
1. To fix the number of directors to be elected at twenty-two
(22) and to elect twenty-two (22) persons as directors for a
term of one year or until their successors have been elected
and qualified; and,
2. To transact such other business as may properly be brought
before the Annual Meeting or any adjournment or adjournments
thereof.
The meeting may be adjourned from time to time and, at any reconvened
meeting, action with respect to the matters specified in this notice may be
taken without further notice to shareholders unless required by the Bylaws.
The Board recommends that shareholders vote FOR the director nominees
named in the accompanying proxy statement.
Only shareholders of record at the close of business on March 1, 2005,
shall be entitled to receive notice of, and to vote at, the annual meeting. A
complete list of shareholders entitled to vote will be available for inspection
at our offices, Bank of Oklahoma Tower, One Williams Center, Tulsa 74172.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Frederic Dorwart
Frederic Dorwart, Secretary
March 24, 2005
Tulsa, Oklahoma
1
BOK FINANCIAL CORPORATION
Bank of Oklahoma Tower
Tulsa, Oklahoma 74172
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
To be held April 26, 2005
General
The enclosed proxy is solicited on behalf of the Board of Directors of
BOK Financial Corporation for use at our annual meeting of shareholders. The
annual meeting will be held on Tuesday, April 26, 2005, at 11:00 a.m. local time
in the Tulsa Room on the ninth floor of the Bank of Oklahoma Tower, One Williams
Center, Tulsa, Oklahoma.
These proxy materials will be mailed on or about March 24, 2005 to
holders of record of common stock as of the close of business on March 1, 2005.
Voting by proxy
You may vote at the annual meeting by completing, signing and returning
the enclosed proxy card. If not revoked, your proxy will be voted at the annual
meeting in accordance with your instructions marked on the proxy card. If you
fail to mark your proxy with instructions, your proxy will be voted as follows:
o FOR the election of the twenty-two (22) nominees for director listed in
this Proxy Statement.
As to any other matter that may be properly brought before the annual
meeting, your proxy will be voted as the Board of Directors may recommend. If
the Board of Directors makes no recommendation, your proxy will be voted as the
proxy holder named in your proxy card deems advisable. The Board of Directors
does not know of any other matter that is expected to be presented for
consideration at the annual meeting.
Any shareholder executing a proxy retains the right to revoke it any
time prior to exercise at the annual meeting. A proxy may be revoked by delivery
of written notice of revocation to the Secretary of BOK Financial, by execution
and delivery of a later proxy or by voting the shares in person at the annual
meeting. If not revoked, all shares represented by properly executed proxies
will be voted as specified therein.
Voting and quorum requirements at the meeting
Only holders of shares of common stock at the close of business on
March 1, 2005, (the "record date") are entitled to notice of and to vote at the
annual meeting. On the record date, there were 59,499,273 shares of common stock
entitled to vote.
You will have one vote for each share of common stock held by you on
the record date.
In order to have a meeting it is necessary that a quorum be present.
The presence in person or by proxy of the holders of one-third of the
outstanding shares of common stock is necessary to constitute a quorum at the
annual meeting. Abstentions and broker non-votes will be counted for purposes of
determining the presence or absence of a quorum. Abstentions and broker
non-votes will not be counted as having voted either for or against a proposal.
The affirmative vote of the holders of a majority of the shares present
or represented at the meeting in which a quorum is present that actually vote
for or against the matter is required. Directors are elected by a plurality
vote, meaning that the twenty-two (22) nominees receiving the highest number of
votes FOR will be elected as directors.
2
George B. Kaiser currently owns approximately 67.2% of the outstanding
common stock and plans to vote in person at the meeting.
Solicitation of proxies
We are paying for all our costs incurred in soliciting proxies for
the annual meeting. In addition to solicitation by mail, we may use our
directors, officers and regular employees to solicit proxies by telephone or
otherwise. These personnel will not be specifically compensated for these
services. We will pay persons holding shares of common stock for the benefit of
others, such as nominees, brokerage houses, banks, and other fiduciaries, for
the expense of forwarding solicitation materials to the beneficial owner.
Annual report
Our Annual Report to Shareholders, covering the fiscal year ended
December 31, 2004, including audited financial statements, is enclosed. No parts
of the Annual Report are incorporated in this Proxy Statement or are deemed to
be a part of the material for the solicitation of proxies.
3
Security Ownership of Certain Beneficial Owners and Management
As of March 1, 2005, there were 59,499,273 shares of common stock
issued and outstanding. Mr. Kaiser is the only shareholder known by BOK
Financial to be the beneficial owner of more than five percent (5%) of its
outstanding common stock. The following table sets forth, as of March 1, 2005,
the beneficial ownership of common stock of BOK Financial, by each director and
nominee, the chief executive officer (Mr. Lybarger) and the four other executive
officers named in the Summary Compensation Table appearing at page 16 below,
and, as a group, all of such persons and other executive officers not named in
the table.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class(2)
------------------------ ------------------- ----------------
Gregory S. Allen 595 *
C. Fred Ball, Jr. 53,202(3) *
Sharon J. Bell 85,068(4) *
Peter C. Boylan, III 1,504 *
Steven G. Bradshaw 42,887(5) *
Chester Cadieux, III 127 *
Joseph E. Cappy 2,839(6) *
Paula Marshall-Chapman 385 *
William E. Durrett 120,919(7) *
Daniel H. Ellinor 4,344(8) *
Robert G. Greer 23,655(9) *
David F. Griffin 39,119(10) *
V. Burns Hargis 55,059(11) *
E. Carey Joullian, IV 3,383(12) *
George B. Kaiser 44,645,364(13) 67.2%
Judith Z. Kishner 128 *
David L. Kyle 1,965 *
Robert J. LaFortune 127,703 *
Stanley A. Lybarger 189,427(14) *
Steven J. Malcolm 628 *
Steven E. Moore 2,144 *
Steven E. Nell 29,362(15) *
W. Jeffrey Pickryl 35,123(16) *
James A. Robinson 29,991 *
L. Francis Rooney, III 562,483(17) 1.0%
Kathryn L. Taylor 0 *
All directors, nominees and 46,057,404 69.1%
executive officers as a group
(26 persons including the above)
* Less than one percent (1%)
(1) Except as otherwise indicated, all shares are beneficially owned and
the sole investment and voting power is held by the person named.
(2) All percentages are rounded to the nearest tenth, and are based upon
the number of shares outstanding as of the date set forth above. For
purposes of computing the percentages of the outstanding shares owned
by the persons described in the table, any shares such persons are
deemed to own by having a right to acquire such shares by exercise of
an option are included, but shares acquirable by other persons by the
exercise of stock options are not included.
(3) Includes options to purchase 39,207 shares of BOKF common stock
immediately exercisable. Also includes 4,000 shares owned by Mr. Ball
and Charlotte Ball, 5,267 shares owned by C. Fred Ball, Jr. IRA, and
4,728 shares held in the BOk Thrift Plan.
4
(4) Includes 2,791 shares owned by spouse. Also includes (i) 18,440 shares
owned by the J. A. Chapman and Leta M. Chapman Trust (1949), of which
Ms. Bell is individual trustee, and 21,329 shares owned by the Leta
McFarlin Chapman Trust (1974), of which Ms. Bell is co-trustee.
(5) Includes options to purchase 35,189 shares of BOKF common stock
immediately exercisable. Also includes 7,155 shares owned
by Mr. Bradshaw and Marla Bradshaw, and 543 shares held in the BOk
Thrift Plan.
(6) All shares are indirectly owned by Joseph E. Cappy Trust.
(7) Includes 5,787 shares indirectly owned by William E. Durrett Revocable
Trust, 112,238 shares indirectly owned by American Fidelity Assurance
Company, 1,121 shares indirectly owned by CPROP, INC., 199 shares
indirectly owned by CELP, and 1,574 shares indirectly owned by CAMCO.
(8) Includes options to purchase 2,153 shares of BOKF common stock
immediately exercisable. Also includes 16 shares held in the
BOk Thrift Plan.
(9) Includes options to purchase 909 shares of BOKF common stock
immediately exercisable. Also includes 8,162 shares indirectly owned by
Robert G. Greer, IRA, and 6,220 shares owned by Mr. Greer's spouse,
Joan Philen Greer.
(10) Includes 38,794 shares indirectly owned by Doppler Investments, L.P.
(11) Includes options to purchase 46,601 shares of BOKF common stock
immediately exercisable. Also includes 1,496 shares held in
the BOk Thrift Plan.
(12) Includes 1,785 shares indirectly owned by JCAP, LLC.
(13) Mr. Kaiser's address is P. O. Box 21468, Tulsa, OK 74121-1468. Includes
6,907,075 shares which Mr. Kaiser may acquire through conversion of
249,490,880 shares of BOK Financial Series A Preferred Stock. Shares of
Series A Preferred Stock may be converted to Common Stock at any time
at the option of the holder, at a ratio of 1 share of Common Stock for
each 36.12 shares of Series A Preferred Stock which has been adjusted
to account for the two for one stock split which was issued February
22, 1999, and also gives effect to the 1 for 100 reverse stock split of
Common Stock effected December 17, 1991, and the November 18, 1993,
November 17, 1994, November 27, 1995, November 27, 1996, November 26,
1997, November 25, 1998, October 18, 1999, May 18, 2001, May 13, 2002,
May 30, 2003,and May 31, 2004 BOKF 3% Common Stock Dividends payable by
the issuance of BOKF Common Stock.
(14) Includes options to purchase 103,794 shares of BOKF Common Stock
immediately exercisable. Also includes 22,610 shares indirectly owned
by Marcia Lybarger Living Trust, 7,744 shares indirectly owned by
Stanley A. Lybarger, IRA, and 24 shares held in the BOk Thrift Plan.
(15) Includes options to purchase 23,635 shares of BOKF common stock
immediately exercisable. Also includes 330 shares held in
the BOk Thrift Plan.
(16) Includes options to purchase 20,737 shares of BOKF common stock
immediately exercisable. Also includes 10,198 shares indirectly owned
by W. Jeffery Pickryl IRA, and 4,188 shares held in the BOk Thrift
Plan.
(17) All shares are indirectly owned by Rooney Family Investments, LTD.
5
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees and vote required to elect nominees
A board of twenty-two (22) directors is to be elected at the annual
meeting. The twenty-two (22) nominees for director who receive the highest
number of affirmative votes of the shares voting shall be elected as directors.
You may vote the number of shares of common stock you own for up to twenty-two
(22) persons. Unless you otherwise instruct by marking your proxy card, the
proxy holders will vote the proxies received by them FOR the election of each of
the twenty-two (22) nominees named below.
If at the time of the annual meeting any of the nominees is unwilling
or unable to serve, all proxies received will be voted in favor of the remainder
of those nominated and for such substitute nominees, if any, as shall be
designated by the board and nominated by any of the proxies named in the
enclosed proxy form. We have no reason to believe that any of the nominees will
be unable or unwilling to serve if elected.
Term of office
The term of office of each person elected as a director will continue
until the next annual meeting of shareholders or until his successor has been
elected and qualified.
Family relationships
There are no family relationships by blood, marriage or adoption
between any director or executive officer of the company and any other director
or executive officer of the company.
Information about nominees
Certain information concerning the nominees to the Board of Directors
of the company is set forth below based on information supplied by the nominees.
All information is as of March 1, 2005. All references in this Proxy Statement
to "BOk" shall mean Bank of Oklahoma, National Association and all references to
"BOT" shall mean Bank of Texas, National Association, both of which are banking
subsidiaries of BOK Financial Corporation.
Principal Occupation, Business First Year
Experience During Last 5 Years, and Became a
Name Age Directorships of Other Public Companies Director
Gregory S. Allen 42 President and CEO, Advance Food Company (manufacturer and marketer Nominee
of value-added food products). Mr. Allen has served as President
of Advance Food Company since 1998.
C. Fred Ball, Jr. 60 Chairman of BOT; previously, Mr. Ball served as Executive Vice 1999
President of Comerica Bank-Texas and later President of Comerica
Securities, Inc., where he was employed from 1991 until joining
Bank of Texas in 1997.
Sharon J. Bell 53 Attorney and Managing Partner, Rogers and Bell (Tulsa, Oklahoma); 1993
Trustee and General Counsel, Chapman-McFarlin Interests; formerly a
Director and President of Red River Oil Company (oil and gas
exploration and development).
6
Peter C. Boylan, III 41 Mr. Boylan has served as CEO of Boylan Partners, LLC (investment Nominee
management and advisory organization) since March 2004. From April
2002 through March 2004, Mr. Boylan served as Director, President
and Chief Operating Officer of Liberty Broadband Interactive
Television, Inc. (broadband interactive television technology
company providing services and products to cable and satellite
television operators worldwide), a company controlled by Liberty
Media Corporation. Prior to April 2002, Mr. Boylan was
Co-President, Co-Chief Operating Officer, Member of the Office of
the Chief Executive Officer, and Director of Gemstar-TV Guide
International, Inc. (media, entertainment, technology and
communications company). Prior to the merger of Gemstar
Development Limited and TV Guide, Inc., in 2000, Mr. Boylan served
as President, Member of the Office of the Chairman and Director of
TV Guide, Inc.
Chester Cadieux, III 38 President, CEO and Director of QuikTrip Corporation (a gasoline and Nominee
retail convenience chain) since 2002. Prior to becoming President
and CEO, Mr. Cadieux served as Vice President of Sales at QuikTrip
Corporation.
Joseph E. Cappy 70 Retired Chairman and Chief Executive Officer of Dollar Thrifty 2001
Automotive Group (holding company that rents automobiles to leisure
travelers through its subsidiaries, Dollar Rent A Car Systems,
Inc., and Thrifty Rent-A-Car System, Inc.); former Vice President
of DaimlerChrysler Corporation beginning in August 1987 with
responsibility for rental car operations from June 1993 until
December 1997. Formerly, President, Chief Executive Officer and
Director of American Motors Corporation and General Marketing
Manager of Ford Motor Company's Lincoln-Mercury Division.
Paula Marshall-Chapman 51 Chief Executive Officer, The Bama Companies, Inc. (manufacturer and 2003
marketer of food products); Ms. Marshall-Chapman is also a director
of Helmerich and Payne, Inc. (oil and gas drilling contractor) and
American Fidelity Corporation (insurance holding company). She is
also a former director of the Federal Reserve Bank of Kansas City.
William E. Durrett 74 Senior Chairman of the Board and Director of American Fidelity 1991
Corporation (insurance holding company), and American Fidelity
Assurance Company (a registered investment advisor). Mr. Durrett is
also a director of Oklahoma Gas & Electric Company and past Chairman of
the Board of Integris Health.
Robert G. Greer 70 Vice Chairman, BOT; formerly Chairman of the Board, Bank of
Tanglewood, N.A., since 1996; Chairman of the Board of Tanglewood 2003
Bank, N.A. and Vice Chairman of the Board of Northern Trust Bank of
Texas; Mr. Greer is also a director for Jefferson-Pilot Corporation
and its subsidiary (Jefferson-Pilot Financial) since 1975.
7
David F. Griffin 39 President, Griffin Communications, L.L.C. (owns and operates CBS 2003
affiliated television stations in Oklahoma); formerly President and
General Manager, KWTV-9 (Oklahoma City).
V. Burns Hargis 59 Vice Chairman, BOK Financial and BOk and Director of BOSC, Inc.; 1993
formerly, Attorney and Shareholder of the law firm of McAfee & Taft
(Oklahoma City, Oklahoma).
E. Carey Joullian, IV 44 President and Chief Executive Officer of Mustang Fuel Corporation 1995
and subsidiaries; President and Manager, Joullian & Co., L.L.C.
George B. Kaiser 62 Chairman of the Board of BOK Financial and BOk; President and 1990
principal owner of Kaiser-Francis Oil Company (independent oil and
gas exploration and production company), and Fountains Continuum of
Care, Inc., (senior housing communities).
Judith Z. Kishner 57 Manager, Zarrow Family Office, LLC; Secretary and Treasurer for 2004
Anne & Henry Zarrow Foundation (a charitable foundation); Trustee
for Zarrow Families Foundation; currently on the Board of Directors
for Anne and Henry Zarrow Foundation, Tulsa Recreational Center for
the Physically Limited, Tulsa City-County Library Commission,
Chairman for the Nature Conservancy of Oklahoma, National
Conference for Community and Justice, Friends of Fairgrounds
Foundation and Alzheimer's Association.
David L. Kyle 52 Chairman, President, Chief Executive Officer and Director of ONEOK, 2001
Inc. (energy company engaged in production, gathering, storage,
transportation, distribution and marketing of fuels); formerly,
president and Chief Operating Officer of ONG Transmission Company
and Oklahoma Natural Gas Company; Director, American Gas
Association and Southern Gas Association.
Robert J. LaFortune 78 Self-employed in the investment and management of personal 1993
financial holdings. Mr. LaFortune is also a director of Apco
Argentina, Inc.
Stanley A. Lybarger 55 President and Chief Executive Officer of BOK Financial and BOk; 1991
previously President of BOk Oklahoma City Regional Office and
Executive Vice President of BOk with responsibility for corporate
banking.
Steven J. Malcolm 56 Chairman, President and Chief Executive Officer of The Williams 2002
Companies, Inc. (energy holding company); formerly, President and
Chief Executive Officer of Williams Energy Services after serving as
senior vice president and general manager of Midstream Gas and Liquids
for Williams Energy Services.
8
Steven E. Moore 58 Chairman, President and Chief Executive Officer of OGE Energy Corp. 1998
(holding company for OG&E Electric Services, Enogex Inc. and
Origen, Inc.); Director, Oklahoma City Chamber of Commerce,
Oklahoma State Chamber of Commerce, and Edison Electric Institute.
James A. Robinson 76 Self-employed in the investment and management of personal 1993
financial holdings; formerly engaged in the practice of law,
general counsel for BOk, and banking.
L. Francis Rooney, III 51 Chairman of the Board and Chief Executive Officer, Rooney Holdings, 1995
Inc. (a holding company, the assets of which include Manhattan
Construction Company, a construction and construction management
company).
Kathryn L. Taylor 49 Oklahoma State Secretary of Commerce and Tourism since 2003; Nominee
formerly President, Lobeck-Taylor Foundation and partner with the
law firm of Crowe & Dunlevy, a professional corporation.
9
Compensation of Directors
All non-officer directors of BOK Financial and BOk receive a single
retainer of $7,500 per year, payable quarterly in arrears in BOK Financial
common stock in accordance with the BOKF Directors Stock Compensation Plan,
whether serving on one or more of the boards of directors. Director compensation
shares are issued to each director on or before the 15th day following the end
of each calendar quarter during which such director served as a member of the
Board of Directors of BOK Financial or BOk. The BOKF Directors Stock
Compensation Plan further provides that the issuance price for the director
compensation shares is the average of the mid-points between the highest price
and the lowest price at which trades occurred on NASDAQ on the five trading days
immediately preceding the end of the calendar quarter. All non-officer directors
also are paid $500 in cash for each board of directors or committee meeting
attended (provided only one fee is paid when two or more committees meet
contemporaneously) and $1,000 in cash for each committee meeting chaired. No
such fees are paid for meetings not attended. Beginning in 2005, the Chairman of
the Risk and Audit Committee shall receive $250 each quarterly earnings release
conference and upon application subject to the discretion of the Committee, $250
for each additional substantive conference with the Company's independent
auditors or management respecting the duties and responsibilities of the
Committee.
Controlled Company Exemption
The Board of Directors has determined that BOK Financial is a
"controlled company," as defined in Rule 4350(c)(5) of the listing standards of
the National Association of Securities Dealers, Inc. ("NASD"), based on Mr.
Kaiser's beneficial ownership of approximately 67.2% of the outstanding common
stock. Accordingly, BOK Financial is exempt from certain requirements of the
NASD listing standards, including the requirement to maintain a majority of
independent directors on the Company's Board of Directors and the requirements
regarding the determination of compensation of executive officers and the
nomination of directors by independent directors. Nevertheless, the Company does
maintain a substantial majority of independent directors, determines upper level
management compensation through an independent board committee and nominates new
board members through board consensus.
Committees of the Board of Directors
The Risk Oversight and Audit Committee, Independent Compensation
Committee and Credit Committee are described below.
Risk Oversight and Audit Committee
During 2004, the Board of Directors of BOK Financial Corporation had a
standing Risk Oversight and Audit Committee (the "Audit Committee") comprised
solely of independent directors. The Board of Directors adopted a revised Audit
Committee charter that complies with Rule 4350(d)(1) of the NASD listing
standards which is attached hereto as Appendix A. The Audit Committee has the
responsibility and authority set forth in Rule 4350(d)(3) of the NASD listing
standards under the revised charter. Among other things, the Audit Committee
will be responsible for overseeing the accounting and financial reporting
processes of the Company and the audits of the financial statements of the
Company. The Audit Committee is also directly responsible for the appointment,
compensation, retention and oversight of the work of the Company's independent
auditors, including the resolution of disagreements between management and the
auditors regarding financial reporting. Additionally, the Audit Committee
approves all related party transactions that are required to be disclosed
pursuant to Item 404 of Regulation S-K.
The current members of the Audit Committee are Messrs. Joullian
(Chairman), Cappy, Kyle and Malcolm. The Board of Directors has designated Mr.
Joullian as its "audit committee financial expert," as defined in Item 401(h)(2)
of Regulation S-K. Mr. Joullian is an "independent director" as defined in Rule
4200(a)(15) of the NASD listing standards. The Audit Committee held five
meetings in fiscal 2004 and intends to meet at least five times in fiscal 2005.
The Report of the Audit Committee is on page 11 of this proxy statement.
10
Independent Compensation Committee
In December 2002, the Board of Directors established an Independent Compensation
Committee, consisting of independent directors, to administer a performance
based compensation plan for senior executives in accordance with the provisions
of Section 162(m) of the Internal Revenue Code. The Independent Compensation
Committee consists of Messrs. Cappy (Chairman), Griffin and Kyle. Compensation
of the Chief Executive Officer, the direct reports to the Chief Executive
Officer and other officers participating in the Company's incentive plan are
reviewed by the Independent Compensation Committee. Compensation for all other
officers is, in practice, determined by the Chief Executive Officer and Mr.
Kaiser, the Chairman of the Board. The Independent Compensation Committee Report
on Executive Compensation may be found on page 21 of this proxy statement.
Credit Committee
The purpose of the Credit Committee is to review and report to the
Board of Directors regarding the quality of the Company's credit portfolio and
trends affecting the credit portfolio. It also oversees the effectiveness and
administration of credit-related policies and reviews the adequacy of the
allowance for loan losses. The members of the Credit Committee are Messrs.
Rooney (Chairman), Griffin, Hargis, Kaiser, LaFortune, Lybarger and
Marshall-Chapman. The Credit Committee met eleven times during fiscal 2004 and
plans to meet at least eleven times in fiscal 2005.
Director Nominations
While the Board of Directors does not have a standing nomination
committee, director candidates identified by management and members of the Board
of Directors are discussed at virtually every Board of Directors meeting. The
Board has no written policy on qualifications of directors; however, the
understood expectation is that directors will have all of the following
characteristics: (i) Impeccable integrity; (ii) Strong sense of professionalism;
and, (iii) Capability of serving the interests of stockholders, and several of
the following characteristics: (i) Prominence in the community; (ii) Significant
relations with one of the Company's subsidiary banks; (iii) Ability to represent
the views of under-represented constituencies in the Company's market areas;
(iv) Financial analytical skill and expertise; and, (v) Vision for social
trends.
The Board of Directors will consider director candidates recommended
by stockholders if provided with the following: (i) evidence in accordance with
Rule 14a-8 of compliance with stockholder eligibility requirements; (ii) the
written consent of the candidate(s) for nomination as a director and
verification as to the accuracy of the biographical and other information
submitted in support of the candidate; (iii) a resume or other written statement
of the qualifications of the candidate(s) for nomination as a director; and,
(iv) all information regarding the candidate(s) and the submitting stockholder
that would be required to be disclosed in a proxy statement filed with the SEC
if the candidate(s) were nominated for election to the Board of Directors. Any
recommendations received from stockholders will be evaluated in the same manner
that potential nominees suggested by board members, management or other parties
are evaluated. The Board of Directors encourages shareholder director candidate
recommendations.
Any stockholder that wishes to present a director candidate for
consideration should submit the information identified above pursuant to the
procedures set forth below under "Communication with the Board of Directors."
Attendance of Meetings
The entire Board of Directors of BOK Financial met five times during
2004. All directors of BOK Financial attended 75% of all meetings of the Board
of Directors and committees on which they served, except Mr. Kyle who was unable
to attend 75% of the meetings due to business conflicts. Although BOK Financial
does not have a policy with respect to attendance by the Directors at the Annual
Meeting of Stockholders, Directors are
11
encouraged to attend. Eighteen of the nineteen members of the Board of Directors
attended the 2004 Annual Meeting of Stockholders. The Board of Directors intends
to meet at least four times in 2005.
Independent Director Meetings
The Board of Directors has adopted a policy of regularly scheduled
executive sessions where independent directors will meet separate from
management. The independent directors plan to meet in executive session after
all regularly scheduled Board of Director meetings. The independent Directors
held four executive sessions during 2004. The presiding Director at the
executive sessions is Mr. Kaiser. Shareholders of the Company may communicate
their concerns to the non-management Directors in accordance with the procedures
described below under "Communications with the Board of Directors."
Communication with the Board of Directors
The Board of Directors of BOK Financial believes that it is important
for stockholders to have a process to send communications to the Board.
Accordingly, stockholders who wish to communicate with the Board of Directors,
or a particular Director, may do so by sending a letter to the Investor
Relations Manager of BOK Financial at P.O. Box 2300, Tulsa, Oklahoma 74192. The
mailing envelope should contain a clear notation indicating that the enclosed
letter is a "Stockholder-Board Communication" or "Stockholder-Director
Communication." Such letters should identify the author as a stockholder and
state whether the intended recipients are all members of the Board of Directors
or certain specified individual Directors. The Investor Relations Manager and
the General Counsel will independently review the content of the letters.
Communications which are constructive suggestions for the conduct of the
business or policies of the Company will be promptly delivered to the identified
Director or Directors. Communications which are complaints about specific
incidents involving banking or brokerage service will be directed to the
appropriate business unit for review. Director nominations will be reviewed for
compliance with the requirements identified in the section of this proxy
entitled "Director Nominations", and if meeting such requirements, promptly
forwarded to the Director or Directors identified in the communication.
Report of the Risk Oversight and Audit Committee
The Risk Oversight and Audit Committee (the Committee) oversees BOK the
Company's financial reporting process on behalf of the Board of Directors. In
fulfilling its oversight responsibilities, the Committee discussed and reviewed
the Company's consolidated financial statements included in the Annual Report
with management and reviewed internal control over financial reporting with
management and the internal auditors. This review included discussions with
management regarding the quality, not just the acceptability, of accounting
policies. It also included the reasonableness of significant judgments, the
clarity of disclosures in the consolidated financial statements and the
effectiveness of internal control over financial reporting. Management has the
primary responsibility for establishing and maintaining internal control over
financial reporting and for assessing the effectiveness of internal control over
financial reporting. The Committee reviewed internal audit reports on the
effectiveness of management's assessment process, discussed internal control
matters with management, and reviewed the Company's compliance with legal and
regulatory requirements as necessary.
The Committee discussed and reviewed with Ernst & Young, LLP, the
independent registered public accounting firm, their opinion on the conformity
of the Company's consolidated financial statements with accounting principles
generally accepted in the United States. This discussion included their
judgments as to the quality, not just the acceptability, of the Company's
accounting policies. This discussion covered the required communications under
audit standards established by the Public Company Accounting Oversight Board
(United States), including PCAOB Auditing Standard No. 2, An Audit of Internal
Control over Financial Reporting and Standard No. 61, Communications with Audit
Committees. The Committee has reviewed the auditors' independence and obtained
written representation from Ernst & Young, LLP regarding independence matters,
in accordance with Independence Standards Board Standard No. 1. In conducting
this review, the
12
Committee considered whether any non-audit services were compatible with
maintaining the auditor's independence.
The Committee meets at least quarterly with the Company's internal
auditors and the independent registered public accounting firm regarding the
overall scope and plans for their respective audits. These meetings are
conducted with and without management present and the Committee discusses the
results of the audits, including the auditor's evaluation of internal control
over financial reporting.
Each of the members of the Audit Committee qualifies as an
"independent" Director under the current listing standards of the National
Association of Securities Dealers (NASD). The Board of Directors has appointed
E. Carey Joullian IV as the "audit committee financial expert".
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited consolidated financial statements be included in the Annual
Report on Form 10-K for the year ended December 31, 2004, for filing with the
Securities and Exchange Commission.
E. Carey Joullian IV, Committee Chairman
David L. Kyle
Steven J. Malcolm
Joseph E. Cappy
Principal Accountant Fees and Services
AUDIT FEES. Fees paid to Ernst & Young, LLP ("EY") for the audit of the
annual consolidated financial statements included in BOK Financial's Annual
Report on Form 10-K, for the review of the consolidated financial
statements included in BOK Financial's Forms 10-Q for the quarters included
in the years ended December 31, 2004 and 2003 and for the audit function,
were $821,500 and $573,400 respectively.
AUDIT-RELATED FEES. Fees paid to EY for the audit of BOK Financial's
employee benefit plans, testing the results of our system conversion and
other audit related functions were $83,600 and $165,495 respectively, for
the years ended December 31, 2004, and 2003.
TAX FEES. Fees paid to EY associated with tax return preparation and tax
planning were $26,050 and $60,950 respectively, for the years ended
December 31, 2004, and 2003.
ALL OTHER FEES. Fees paid to EY were $5,800 and $4,500 respectively, for
each of the years ended December 31, 2004 and December 31, 2003.
The Audit Committee has also met and discussed with management and with
its legal and accounting advisors the new rules and regulations under the
Sarbanes-Oxley Act of 2002 and related SEC and Nasdaq rules. Such rules require
that the Audit Committee pre-approve all audit and non-audit services provided
by the Company's independent auditor. The Audit Committee has adopted a formal
policy on auditor independence requiring the approval by the Audit Committee of
all professional services rendered by BOK Financial's independent auditor prior
to the commencement of the specified services. Since these rules became
effective, 100% of the services described in "Audit Fees", "Audit-Related Fees",
"Tax Fees" and "All Other Fees" were approved by the Audit Committee in
accordance with BOK Financial's formal policy on auditor independence and
approval of fees.
13
Shareholder Return Performance Graph
The BOKF Common Stock (with non-detachable rights to purchase fifteen
additional BOKF Common shares at $0.054625 per share) was registered pursuant to
the Securities Exchange Act of 1934 and listed for trading on NASDAQ on
September 5, 1991. The BOKF shares traded with the rights attached through
October 28, 1991. The BOKF shares traded ex-rights from and after the opening or
trading on October 29, 1991. Set forth below is a line graph comparing the
change in cumulative shareholder return on the Common Stock of BOK Financial
against the cumulative total shareholders return of the NASDAQ Index, the NASDAQ
Bank Index, and the KBW 50 Bank Index for the period commencing December 31,
1999 and ending December 31, 2004.*
Comparison of Cumulative Total Return
Comparison of Cumulative Total Return Graph shown here. Data points reflected in
indexes below.
=========================== ============ ============= ============= ============= ============ =============
12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
=========================== ============ ============= ============= ============= ============ =============
BOKF 100.00 $105.18 $160.79 $170.39 $209.99 $272.62
--------------------------- ------------ ------------- ------------- ------------- ------------ -------------
NASDQ Bank Stocks 100.00 $114.23 $123.68 $126.65 $162.92 $186.45
--------------------------- ------------ ------------- ------------- ------------- ------------ -------------
KBW 50 Bank 100.00 $120.06 $115.11 $107.00 $143.42 $157.83
--------------------------- ------------ ------------- ------------- ------------- ------------ -------------
NASDQ (CRSP U.S. Company) 100.00 $60.31 $47.84 $33.07 $49.45 $53.81
=========================== ============ ============= ============= ============= ============ =============
* Graph assumes value of an investment in the Company's Common Stock
for each index was $100 on December 31, 1999. The KBW 50 Bank index is the
Keefe, Bruyette & Woods, Inc. index, which is available only for calendar
quarter end periods. No dividends were paid on BOK Financial Common Stock except
(i) on November 17, 1993, the Company paid a 3% dividend on BOK Financial Common
Stock outstanding as of November 9, 1993, payable in kind by the issuance of BOK
Financial Stock, (ii) on November 17, 1994, the Company paid a 3% dividend on
BOK Financial Common Stock outstanding as of November 8, 1994, payable in kind
by the issuance of BOK Financial Common Stock, (iii) on November 27, 1995, the
Company paid a 3% dividend on BOK Financial Common Stock outstanding as of
November 17, 1995, payable in kind by the issuance of BOK Financial Common
Stock, (iv) on November 27, 1996, the Company paid a 3% dividend on BOK
Financial Common Stock outstanding as of November 18, 1996, payable in kind by
the issuance of BOK Financial Common Stock, (v) on November 26, 1997, the
Company paid a 3% dividend on BOK Financial Common Stock outstanding as of
November 17, 1997, payable in kind by the issuance of BOK Financial Common
Stock, (vi) on November 25, 1998, the Company paid a 3% dividend on BOK
Financial Common Stock outstanding as of November 13, 1998, (vii) on October 18,
1999, the Company paid a 3% dividend on BOK Financial Common Stock outstanding
as of October 5, 1999, (viii) on May 18, 2001, the Company paid a 3% dividend on
BOK Financial Common Stock outstanding as of May 7, 2001, and on May 29, 2002,
the Company paid a 3% dividend on BOK Financial Common Stock outstanding as of
May 13, 2002, (ix) on April 29, 2003, the Company paid a 3% dividend on BOK
Financial Common Stock outstanding as of May 12, 2003, (x) and on May 31, 2004,
the Company paid a 3% dividend on BOK Financial Common Stock outstanding as of
May 10, 2004. The graph has been adjusted to reflect a two-for-one Common Stock
split in the form of a 100% stock dividend paid on February 22, 1999.
14
Executive Officers
Certain information concerning the executive officers of BOK Financial,
BOk, BOT, Bank of Albuquerque, N.A., Bank of Arkansas, N.A., Colorado State Bank
and Trust, N.A., and BOSC, Inc. is set forth below:
C. Fred Ball, Jr., age 60, is Chairman and Chief Executive Officer of
the Bank of Texas and is responsible for all banking activities in the State of
Texas for BOKF. Before joining Bank of Texas in 1997, he was Executive Vice
President of Comerica Bank-Texas and later President of Comerica Securities,
Inc.
Steven G. Bradshaw, age 45, is Senior Executive Vice President of BOk,
Manager of Consumer Banking & Wealth Management and Chairman of BOSC, Inc.
Before joining BOK Financial, Mr. Bradshaw spent six years managing the
brokerage operation at Sooner Federal. Mr. Bradshaw has been with BOKF for 13
years.
Charles E. Cotter, age 51, Executive Vice President and Chief Credit
Officer for Bank of Oklahoma, and Manager of Credit Administration Division.
Previously, Mr. Cotter acted as Credit Concurrence Officer responsible for the
approval of commercial loans, the Manager of the Specialized Lending Department
and the Merchant Banking Department. Mr. Cotter has accumulated a total of 27
years of banking experience at Bank of Oklahoma and Fidelity Bank, a bank
acquired by Bank of Oklahoma.
Jeffery R. Dunn, age 42, is Chairman, President and Chief Executive
Officer of Bank of Arkansas, N.A.; previously, Mr. Dunn served as Senior Vice
President of Commercial Lending. He has been with BOk for 17 years.
Paul M. Elvir, age 64, is Executive Vice President and Manager of the
BOk Operations and Technology Division. Mr. Elvir began working for BOk in July
1997. Previously, Mr. Elvir was President of Liberty Payments Services, Inc.
("LPSI"), a subsidiary of Banc One Services Corporation. Prior to serving as
President of LPSI, Mr. Elvir served as an Executive Vice President of Banc One
Services Corporation.
Daniel H. Ellinor, age 43, is Senior Executive Vice President,
Commercial Banking, Oklahoma and Arkansas. Mr. Ellinor joined BOk in 2003.
Previously, he served as regional president for Compass Bank in Dallas, where he
oversaw Compass' North Texas operations. Prior to that time, Mr. Ellinor was
Bank of America's market executive for the North Texas Commercial Banking
Division.
Mark W. Funke, age 49, is President, BOk Oklahoma City and Commercial
Banking Manager, Oklahoma City. Mr. Funke is also responsible for BOk's Business
Banking Group, which manages BOk's statewide small business banking efforts, and
all of its Community Banking Offices. He is also responsible for Bank of
Arkansas, N.A. and serves as a director. He joined BOk in 1984 as Vice President
in the financial institutions department and was named to his current position
in 1997. Before joining BOk, he was a commercial lender with Republic Bank in
Houston for seven years.
Robert G. Greer, age 70, is Vice Chairman of BOT. Mr. Greer was
formerly Chairman of the Board, Bank of Tanglewood, N.A. and Vice Chairman of
the Board of Northern Trust Bank of Texas. Mr. Greer has also been a director
for Jefferson Pilot Corporation since 1975.
V. Burns Hargis, age 59, is Vice Chairman, BOK Financial and BOk and
Director of BOSC, Inc. Mr. Hargis joined BOk in November 1997. Previously, Mr.
Hargis was an attorney with the law firm of McAfee & Taft (Oklahoma City,
Oklahoma).
H. James Holloman, age 53, is Executive Vice President of BOk and
Manager of the Trust Division. Before joining BOk, he spent 12 years at First
Union National Bank in Charlotte, North Carolina. Mr. Holloman has been with BOk
since 1985.
15
James L. Huntzinger, age 54, is Chief Investment Officer of BOk. Mr.
Huntzinger was previously Financial Manager, Capital Markets and Chief
Investment Officer of the Trust Division. He has been with BOk since 1982.
Stacy C. Kymes, age 34, is Senior Vice President and Corporate
Controller for BOK Financial. Previously Mr. Kymes served as Chief Auditor of
BOK Financial. Mr. Kymes joined BOK Financial in 1996. Prior to joining BOK
Financial he was with the public accounting firm of KPMG LLP.
Stanley A. Lybarger, age 55, is President and Chief Executive Officer
of BOK Financial and BOk. Mr. Lybarger has been with BOk for 30 years.
Previously, he was President of Bank of Oklahoma's Oklahoma City Regional Office
and Executive Vice President of Bank of Oklahoma with responsibility for
corporate banking.
John C. Morrow, age 49, is Senior Vice President and serves as Director
of Financial Accounting and Reporting. He joined BOK Financial in 1993. He was
previously with Ernst & Young LLP for 10 years.
Steven E. Nell, age 43, is Executive Vice President and Chief Financial
Officer for BOK Financial and BOk. Mr. Nell previously served as Senior Vice
President and Corporate Controller for BOK Financial. He joined BOK Financial in
1992. He was previously with Ernst & Young LLP for 8 years.
W. Jeffrey Pickryl, age 53, is Senior Executive Vice President/Regional
Banks for BOK Financial. Mr. Pickryl was previously an Executive Vice President
for BOk, responsible for Commercial Banking in Tulsa, as well as statewide
energy and real estate lending. Before joining BOk in 1997, he was president and
Chief Credit Officer for Liberty Bancorp, Inc., where he worked for 14 years and
Trust Company of Tulsa, N.A. He had previously worked at Arizona Bank in
Phoenix.
Paul A. Sowards, age 52, is President of Bank of Albuquerque. Before
joining Bank of Albuquerque in March 2000, Mr. Sowards was President of Bank of
America in New Mexico. Prior to his election as President in New Mexico, Mr.
Sowards was Executive Vice President and Commercial Banking Market Manager,
responsible for commercial lending, treasury management and capital markets.
Thomas S. Swiley, age 55, is President and Director of Bank of Texas.
Prior to joining Bank of Texas in March 2001, Mr. Swiley was Managing Director
and Credit Products Executive, with responsibility for the Southwest region, for
Bank of America.
Gregory K. Symons, age 52, is Chairman and Chief Executive Officer,
Colorado State Bank and Trust and is responsible for commercial banking. He
previously served as Chairman and Chief Executive Officer of Bank of Albuquerque
and was responsible for commercial banking in New Mexico. He previously served
as a Senior Vice President for BOk. Mr. Symons has been with BOK Financial for
27 years.
James F. Ulrich, age 53, is Chairman and Chief Executive Officer for
Bank of Albuquerque. Before assuming his current position, Mr. Ulrich served as
Senior Vice President, Investor Relations and Mergers and Acquisitions. Prior to
that time, Mr. Ulrich served as director of Human Resources and Manager, Tulsa
Metropolitan Commercial Lending Department. Mr. Ulrich has been with BOK
Financial since 1982.
16
Executive Compensation
The following table sets forth summary information concerning the
compensation of those persons who were, at December 31, 2004, (i) the Chief
Executive Officer and (ii) the four other most highly compensated executive
officers of the Company. These five officers are hereafter referred to
collectively as the "Named Executive Officers."
Summary Compensation Table(1)
Annual Compensation Long Term Awards (2)
----------------------------------------------- -----------------------------------------
Name and
Principal Position Restricted
------------------ Other Annual Stock Options/ All Other
Year Salary ($) Bonus ($) Compensation ($) Awards ($)(3) SARs (#) Compensation(4)
---- ----------- --------- ---------------- -------- -------- ----------
Stanley A. Lybarger 2004 $693,000 $950,000 $3,567,736(5) $0 125,996 $22,550
President & Chief Executive 2003 625,000 375,000 1,619,417(6) 1,022,490 111,676 22,000
Officer, BOK Financial 2002 625,000 175,000 1,311,889 0 16,568 22,000
and BOk
Steven G. Bradshaw 2004 280,000 151,624 340,021(7) 140,988 17,364 16,400
Senior Executive Vice 2003 280,000 100,000 197,772 140,009 18,151 14,870
President, Consumer Banking 2002 195,000 90,000 145,405 0 19,660 14,000
and Wealth Management, BOk
Daniel H. Ellinor (8) 2004 325,000 150,000(9) 0 162,802 14,786 0
Senior Executive Vice 2003 300,000 0 0 77,400 15,073 0
President, BOk
Steven E. Nell 2004 250,000 168,000 155,472(10) 0 25,249 16,400
Executive Vice President and 2003 210,000 75,000 158,369 104,988 13,052 16,000
Chief Financial Officer, BOK 2002 170,000 60,000 106,159 0 12,731 13,200
Financial and BOk
W. Jeffrey Pickryl 2004 325,000 141,648 961,619 0 39,127 20,500
Senior Executive Vice 2003 325,000 125,000 235,035 0 40,984 20,000
President, Regional Banks 2002 218,000 130,000 113,257 0 28,612 20,000
for BOK Financial
(1) No Long Term Incentive Plan payouts were made in 2002, 2003 or 2004 and
therefore no columns are included for such items in the Summary
Compensation Table.
(2) After giving effect to November 18, 1993, November 17, 1994, November 27,
1995, November 27, 1996, November 26, 1997, November 25, 1998, October 18,
1999, May 1, 2001, May 13, 2002, May 15, 2003 and May 31, 2004 3% BOK
Financial common stock dividends payable in kind in BOK Financial common
stock.
(3) Represents performance shares in the form of restricted stock issued
pursuant to the BOK Financial 2003 Executive Incentive Plan ("Incentive
Plan"). Performance shares vest only on the fifth anniversary of the last
day of the year for which the shares were issued. Shares may not be sold
until three years after the shares vest unless, following such sale, the
executive would own that number of shares of BOK Financial common stock
provided for in any Executive Management BOKF Common Stock Ownership
Guidelines which may be established by the Independent Compensation
Committee. The number of performance shares issued in any one year may be
increased or decreased based upon two performance measures: 1) Company
earnings per share measured against peer group earnings per share and 2)
business unit actual controllable value added measured against business
unit planned controllable value added and attainment of individually
established goals; provided however, that the performance measure for the
Chief Executive Officer is based solely on the earnings per share measure.
Pre-established performance targets and goals are determined by the
Independent Compensation Committee and target achievement measure is based
upon a trailing three year average. Individual executive performance shares
may be increased in an amount not to exceed 50% of target compensation and
decreased to 0% of target compensation based upon a Long Term Incentive
matrix established by the Independent Compensation Committee. The
determination of whether the number of shares will be increased or
decreased for any fiscal year will be
17
determined on the second anniversary of the end of the year in respect of
which the performance shares were issued. The value of the performance
shares is based upon the market price of BOK Financial common stock on the
date of grant.
(4) Amounts shown in this column are derived from the following: (i) Mr.
Lybarger, $12,000, 2002; $12,000, 2003; $12,300, 2004 - Company payment to
the defined benefit plan which is further described on page 18 of this
proxy ("DBP"); $10,000, 2002, $10,000, 2003; $10,250, 2004- Company
matching contributions to 401(K) Thrift Plan which is further described on
page 19 of this proxy ("DCP"); (ii) Mr. Bradshaw, $7,650, 2002; $8,000,
2003; $8,200, 2004 - DBP; $7,650, 2002; $8,000, 2003; $8,200, 2004 - DCP;
(iii) Mr. Nell, $6,600, 2002; $8,000, 2003; $8,200, 2004 - DBP; $6,600,
2002; $8,000, 2003; $8,200, 2004 - DCP; and, (iv) Mr. Pickryl, $14,000,
2002; $14,000, 2003; $14,350, 2004 - DBP; $6,000, 2002; $6,000, 2003;
$6,150, 2004 - DCP.
(5) Includes $3,567,736 in stock option exercise income which has been deferred
at the election of Mr. Lybarger.
(6) Includes $1,619,417 stock option exercise income which has been deferred at
the election of Mr. Lybarger.
(7) Includes $181,185 in stock option exercise income which has been deferred
at the election of Mr. Bradshaw.
(8) Mr. Ellinor became employed by BOk in 2003.
(9) Includes $50,000 in bonus income which Mr. Ellinor elected to defer.
(10) Includes $141,638 in stock option exercise income which has been deferred
at the election of Mr. Nell.
The following table sets forth certain information concerning stock options
granted to the Named Executive Officers for services rendered during the 2004
fiscal year. (1)
Options/SAR Grants in Last Fiscal Year
Exercise or % of Total Options/SARs Total Grant
Grant Options/SARs Base Price Granted to Employees Expiration Date Present
Name No. Granted (#)(1) ($/Sh)(2) in Fiscal Year Date Value $(3)
---- --- ----------- ------ -------------- ---- -------
Stanley A. Lybarger 1 8,785 $45.43 0.97 % (2) $ 52,622
2 8,280 49.09 0.92 (2) 54,565
3 8,039 49.00 0.89 (2) 52,897
4 100,892(4) 47.34 11.15 (2) 1,103,758
Steven G. Bradshaw 1 1,054 45.43 0.12 (2) 6,313
2 1,159 49.09 0.13 (2) 7,638
3 2,412 49.00 0.27 (2) 15,871
4 12,739(4) 47.34 1.41 (2) 139,365
Daniel H. Ellinor 4 14,786(4) 47.34 1.63 (2) 161,759
Steven E. Nell 1 791 45.43 0.90 (2) 4,738
2 745 49.09 0.08 (2) 4,910
3 965 49.00 0.11 (2) 6,350
4 22,748(4) 47.34 2.51 (2) 248,863
W. Jeffrey Pickryl 1 3,514 45.43 0.39 (2) 21,049
2 3,147 49.09 0.35 (2) 20,739
3 2,894 49.00 0.32 (2) 19,043
4 29,572(4) 47.34 3.27 (2) 323,518
-------------------------------------------
(1) Options related to compensation for services rendered in 2004 were
awarded on four occasions: November 2, 2004 ("Grant #1"); December 2,
2004 ("Grant #2"); December 23, 2004 ("Grant #3"); and, January 7, 2005
("Grant #4"). Grants 1, 2 and 3 were awarded pursuant to the BOKF 2001
Stock Option Plan; Grant 4 was awarded pursuant to the BOKF 2003 Stock
Option Plan.
(2) o All Grant #1 options vest and become exercisable on November 2, 2006
and expire 45 days after vesting.
o All Grant #2 options vest and become exercisable on December 2, 2006,
and expire 45 days after vesting.
o All Grant #3 options vest and become exercisable on December 23, 2006,
and expire 45 days after vesting.
18
o One-seventh of the Grant #4 options vest and become exercisable on
January 7 of each year, commencing on January 7, 2006; provided,
however, that no options may be exercised until the performance period
ends and the Independent Compensation Committee certifies that the
pre-established goals were met. Grant #4 vested options expire three
years after vesting.
(3) Present value at date of grant is based on the Black-Scholes Option Pricing
Model adopted for use in valuing exercise stock
options based on the following assumptions:
o Grant #1: 17.8 volatility factor, 2.83% risk free rate of return,
$45.43 underlying price, no dividends;
o Grant #2: 17.8 volatility factor, 3.06% risk free rate of return,
$49.09 underlying price, no dividends;
o Grant #3: 17.8 volatility factor, 3.06% risk free rate of return,
$49.00 underlying price, no dividends;
o Grant #4: 16.8 volatility factor, weighted average 3.69% risk free
rate of return, $47.34 underlying price, no dividends.
The actual value, if any, an executive may realize will depend on the
excess of the stock price over the exercise price on the date the
option is exercised, so there is no assurance the value realized by the
named executive will be at or near the value estimated by the
Black-Scholes Model.
(4) Grant #4 Options may be increased or decreased based upon two
performance measures: 1) Company earnings per share measured against
peer group earnings per share and 2) business unit actual controllable
value added measured against business unit planned controllable value
added and attainment of individually established goals; provided,
however, that the only performance measure for the Chief Executive
Officer is the earnings per share measure. Pre-established performance
targets and goals are determined by the Independent Compensation
Committee and target achievement measure is based upon a trailing three
year average. Grant #4 options may be increased in an amount not to
exceed 50% of target long term compensation and decreased in amounts to
0% of target long term compensation based upon a Long Term Incentive
matrix established by the Independent Compensation Committee. The
determination of whether the number of options will be increased or
decreased for any fiscal year will be determined on the second
anniversary of the end of the year in respect of which the options were
issued.
The following table sets forth certain information concerning the
exercise of stock options by the Named Executive Officers during fiscal year
2004 and the 2004 fiscal year-end value of unexercised options.
Aggregated Option/SAR Exercises in
Last Fiscal Year and FY-End Option/SAR Values
Shares Value Number of Unexercised Value of Unexercised In the Money
Acquired on Realized Options/SARs Options/SARs
Name Exercise (#) ($) at FY-End (#) at FY-End ($)(1)
------------------------ ------------- ------------ --------------------------------- ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
Stanley A. Lybarger 136,669 $3,567,736 (2) 96,615 345,432 $2,837,611 $5,247,098
Steven G. Bradshaw 13,807 340,021 (3) 31,763 80,770 879,039 1,431,460
Daniel H. Ellinor 0 0 0 39,327 0 648,760
Steven E. Nell 5,669 155,472 (4) 21,055 64,774 591,843 840,603
W. Jeffrey Pickryl 45,154 961,619 12,813 132,925 321,684 1,730,963
----------------------------------------
(1) Values are calculated by subtracting the exercise or base price from the
fair market value of the stock as of the exercise date or fiscal year-end,
as appropriate.
(2) Includes $3,567,736 in stock option exercise income which has been deferred
at the election of Mr. Lybarger.
(3) Includes $181,185 in stock option exercise income which has been deferred
at the election of Mr. Bradshaw.
(4) Includes $141,638 in stock option exercise income which has been deferred
at the election of Mr. Nell.
19
Defined Benefits Plan
Certain executives of the Company participate in the BOK Financial
Pension Plan (the "Pension Plan"). This plan was established in 1987 as a cash
balance defined benefit pension plan and has remained substantially unchanged
since its inception. Pension Plan benefits are determined based on a
hypothetical account balance that accumulates over time. The account balance
grows each year based on a 5.25% interest credit on prior balances plus an
annual account addition based on the executive's covered pay, age at plan entry
and years of service. The percentage of pay that is added to the executive's
account each year, in addition to the 5.25% interest credit on the prior
balance, is based on the schedule shown below:
Annual Addition Schedule
Years of Service
--------------------------------------------------------------------------------------------
Entry Age Less than 4 4 but less than 10 10 but less than 15 15 or more
-------------------- -------------------- --------------------- ------------------
Under 30 2.5% 3.0% 3.5% 4.5%
30 to 34 3.0% 3.5% 4.0% 5.0%
35 to 39 4.0% 4.5% 5.0% 6.0%
40 to 44 5.5% 6.0% 6.5% 7.5%
45 to 49 6.5% 7.0% 7.5% 8.5%
50 to 54 7.5% 8.0% 8.5% 9.5%
55 to 59 8.0% 8.5% 9.0% 10.0%
60 and over 8.5% 9.0% 9.5% 10.5%
Covered pay generally includes base salary, shift differential and
commissions, but does not include incentive pay and management bonuses. In
addition, covered pay is limited by government regulations to no more than
$205,000. This $205,000 limit is indexed and will be $210,000 in 2005. All five
named executives had their covered pay restricted by this government limit.
There is no supplemental plan to make-up benefits lost due to this government
restriction.
The normal retirement age under the plan is age 65. At that time, a
participant may receive a lump sum equal to their hypothetical account or an
annuity. Various annuity forms are available, but the basic monthly annuity is
equal to the hypothetical account divided by 200. This annuity amount increases
5.25% each year and continues for the participant's life. Other actuarially
equivalent annuity payment forms are also available.
The table below indicates the estimated annual basic annuity that will
be payable to each executive if they retire at age 65. These amounts are the age
65 value and will increase 5.25% per year for as long as the executive remains
alive. The estimates assume that government limits and each executive's pay will
increase by 3.5% per year until age 65 and that each executive will remain
employed by the Company and covered by the plan until their retirement.
Estimated Annual Basic
Executive Benefit at Age 65
------------------------------ ----------------------------
Stanley A. Lybarger $45,229
Steven G. Bradshaw 43,928
Daniel H. Ellinor 44,975
Steven E. Nell 47,338
W. Jeffrey Pickryl 30,830
20
BOk Thrift Plan
Employee contributions to the BOk Thrift Plan are matched by the
Company up to 5% of base compensation, based on years of service. Participants
may direct the investments of their accounts to a variety of options, including
BOK Financial common stock.
Employment Agreements with the Named Executives
An everegreen employment agreement is in effect between BOk and Mr.
Lybarger. Generally, the agreement provides that Mr. Lybarger will continue to
be employed in his present position and at his current rate of compensation. BOk
may terminate the employment agreement and be liable for termination benefits
not to exceed regular compensation and benefit coverage for twelve months (with
termination benefits to be reduced by the amount of compensation received by Mr.
Lybarger from other sources during the seventh through twelfth months after
termination), any unpaid prior year incentive compensation and a pro-rata share
of any current year incentive compensation. In the event of a change of control
of BOk, as defined in the employment agreement, Mr. Lybarger has the option, for
a period of six months after the change of control, to resign and receive the
same termination benefits as described in the preceding sentence in the event of
termination by BOk. Further, if, at such time as Mr. Lybarger reaches age 57 he
has recruited a Chief Operating Officer that is acceptable to the Chairman of
the Board and the Board of Directors, and such COO has completed a minimum of
three years of employment with the Company, then, subject to certain other
requirements and restrictions, all of Mr. Lybarger's stock options shall become
fully vested upon termination of his employment. Mr. Lybarger has agreed to not
compete with the Company for two years follow termination.
An employment agreement is in effect between BOK Financial and Mr.
Bradshaw. The agreement continues until either party terminates the agreement
upon ninety days prior written notice and provides for minimum salary and bonus
amounts. BOK Financial may terminate the agreement without cause subject to
payment of standard severance pay, an amount equal to Mr. Bradshaw's then
current annual salary and other prescribed benefits. BOK Financial may terminate
Mr. Bradshaw for cause, in which event Mr. Bradshaw receives salary and bonus
through the effective date of termination. Mr. Bradshaw agreed not to solicit
Company business for two years following termination for cause and for one year
following termination for any other reason.
An employment agreement is in effect between BOK Financial and Mr.
Ellinor. The agreement continues until either party terminates the agreement
upon ninety days prior written notice and provides for minimum salary and bonus
amounts. BOK Financial may terminate the agreement without cause subject to
payment of standard severance pay, an amount equal to Mr. Ellinor's then current
annual salary and other prescribed benefits. BOK Financial may terminate Mr.
Ellinor for cause, in which event Mr. Ellinor receives salary and bonus through
the effective date of termination. Mr. Ellinor agreed not to solicit Company
business for two years following termination for cause and for one year
following termination for any other reason.
An employment agreement is in effect between BOK Financial and Mr.
Pickryl. The initial term began October 15, 2003 and will end on the third
anniversary of the commencement date, subject to one year automatic renewals
unless either party provides the other written notice of termination ninety days
prior the expiration of the initial term or any renewal term. The agreement
provides for minimum salary and bonus amounts. In the event BOK Financial
terminates Mr. Pickryl without cause, BOK Financial will provide Mr. Pickryl
standard severance pay plus an amount equal to two times Mr. Pickryl's annual
salary if termination occurs during the second year and an amount equal to Mr.
Pickryl's annual salary if during the third year and thereafter, that which Mr.
Pickryl would otherwise be able to receive under a benefit plan. BOK Financial
may terminate Mr. Pickryl for cause, in which event Mr. Pickryl receives salary
and bonus through the effective date of termination. Mr. Pickryl agreed not to
compete with certain BOKF subsidiaries or to solicit the Company's customers for
two years after termination of employment for cause and for one year following
termination without cause. Mr. Pickryl's agreement further provides that in the
event Mr. Pickryl is terminated without cause between the ages of sixty and
sixty-five, the vesting of his options will accelerate.
21
Report on Executive Compensation
Independent Compensation Committee
In December 2002, the Board of Directors established an Independent
Compensation Committee consisting of independent directors, to administer a
performance based compensation plan for senior executives in accordance with the
provisions of Section 162(m) of the Internal Revenue Code. The current members
of the committee are Messrs. Cappy (Chairman), Griffin and Kyle.
The purpose of the Independent Compensation Committee is to establish
performance goals at the beginning of each fiscal year and award incentive
compensation under the BOK Financial Corporation 2003 Executive Incentive Plan,
approved by shareholders at the 2003 Annual Meeting of Shareholders. The goals
of the Independent Compensation Committee are to help the Company compete with
peer institutions in attracting and retaining highly qualified individuals as
executive officers, to pay executive officers based upon their contributions to
the Company's performance, and to comply with Section 162(m) of the Internal
Revenue Code.
Section 162(m) of the Internal Revenue Code limits deductibility for
federal income tax purposes of compensation in excess of $1,000,000 annually
paid to individual executive officers including compensation based on
performance goals, unless certain requirements are met. The BOK Financial
Corporation 2003 Executive Incentive Plan was established and is maintained to
comply with the performance-based exception to limits on deductibility of
executive officer compensation. The Chief Executive Officer, executives who
report directly to the Chief Executive Officer and other selected officers
approved by the Independent Compensation Committee may participate in the Plan.
During 2004, the Independent Compensation Committee engaged an
executive compensation consulting firm to review senior executive management
compensation as compared to its banking institution data. This report, a
comparison of the twenty-six bank peer group, and recommendations from Mr.
Lybarger, the Chief Executive Officer, was used by the Independent Compensation
Committee to set target compensation, annual performance goals for bonus and
long term incentive compensation and manner of payment of long term incentive
compensation for each participant on an individual basis. The performance goals
for 2004 were based on a combination of (i) Company earnings per share measured
against peer group earnings per share and (ii) business unit performance and
attainment of individual goals. The Independent Compensation Committee believes
that basing executive compensation on earnings per share performance strengthens
the alignment of the interests of the executive officers with those of all
stockholders, while business unit performance measures promote individual
productivity and leadership. The Committee reviewed and approved the calculation
of annual and long-term compensation paid pursuant to the 2004 goals.
The Independent Compensation Committee noted that the Company performed
exceptionally well as it recorded record earnings in 2004. The Committee
believes that the compensation paid during 2004 was fair and reasonable and
served the long term interests of the Company.
INDEPENDENT COMPENSATION COMMITTEE
Joseph E. Cappy, Chairman
David E. Griffin
David L. Kyle
Informal Compensation Committee
Compensation for officers other than the Chief Executive Officer, the
direct reports to the Chief Executive Officer and the other officers reviewed by
the Independent Compensation Committee is, in practice, determined by the Chief
Executive Officer and Mr. Kaiser, the Chairman of the Board.
22
Compensation Committee Interlocks and Insider Participation
None of the members of the Independent Compensation Committee were at
any time officers or employees of the Company or any of its subsidiaries or had
any relationship with the Company requiring disclosure under the Securities and
Exchange Commission regulations. Messrs. Kaiser and Lybarger, who make up the
Informal Compensation Committee which administers all compensation not reviewed
by the Independent Compensation Committee. See "Report of Executive
Compensation" and "Certain Transactions."
Certain Transactions
Certain principal shareholders, directors of the Company and their
associates were customers of and had loan transactions with BOK Financial or its
subsidiaries during 2004. None of them currently outstanding are classified as
nonaccrual, past due, restructured or potential problem loans. All such loans
(i) were made in the ordinary course of business, (ii) were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and (iii)
did not involve more than normal risk of collectibility or present other
unfavorable features at the time the loans were made.
Certain related parties are customers of the Company for services other
than loans, including consumer banking, corporate banking, risk management,
wealth management, brokerage and trading, or fiduciary/trust services. The
Company engages in transactions with related parties in the ordinary course of
business and in compliance with applicable regulation.
BOk leases office space in buildings owned by Mr. Kaiser and
affiliates. These leases expire at various dates through 2008. The aggregate
minimum payments due under these leases are $1,852,070.
In 2004, an affiliate of BOK Financial sold Oklahoma State Income Tax
Credits to (a) Advance Food Company, an affiliate of Gregory Allen, receiving
$1,750,000, (b) Gregory Allen, a Company director, receiving $70,000, (c) George
Kaiser, Chairman of the Board, receiving $5,000,000, (d) Jim Holloman, executive
officer, receiving $30,000, (e) Stan Lybarger, Chief Executive Officer,
receiving $70,000, (f) Burns Hargis, a Company director and executive officer,
receiving $30,000, and (g) Mark Funke, an executive officer, receiving $15,000.
QuikTrip Corporation has entered into a fee sharing agreement with
TransFund, BOk's automated teller machine (ATM) network, respecting transactions
completed at TransFund ATMs placed in QuikTrip locations. In 2004, BOk paid
QuikTrip $1.1 million pursuant to this agreement. Mr. Cadieux, a director
nominee, is President, Chief Executive Officer, a director and a shareholder of
QuikTrip Corporation.
BOk engages in routine energy hedging transactions with Mustang Fuel
Corporation and Mustang Gas Products, LLC on terms offered to customers of BOk
generally. In 2005, Mustang Fuel Corporation hedged 1,163,000 MMbtu of natural
gas and 60,000 barrels of oil and Mustang Gas Products, LLC hedged 9,708,000
gallons of natural gas liquids. The hedges are backed by counter party
contracts. Mr. Joullian, a director of BOK Financial, is the President of both
Mustang Fuel Corporation and Mustang Gas Products, LLC.
All transactions described above between BOKF or a subsidiary and Mr.
Kaiser or a related entity were approved in advance by a majority of the entire
board of BOk or BOKF, as appropriate, (Mr. Kaiser not voting) after review by
the Chief Financial Officer.
23
Insider Reporting Update
Based upon a review of the filings with the Securities and Exchange
Commission and written representations that no other reports were required, we
believe that all of our directors and executive officers complied during fiscal
year 2004 with the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, with the exception of Steven G. Bradshaw, who filed a late
report in August 2004 relating to 6,417 stock options exercised under the
deferred compensation plan in August 2004; Jeffrey Dunn, who filed a late report
in February 2005 relating to 921 shares sold in July 2004, 134 shares sold in
August 2004, 1,049 sold in August 2004, 176 shares sold in November 2004 and 662
shares sold in December 2004; William Durrett, who filed a late report in
February 2005 relating to 10,000 shares sold in January 2004; Paul M. Elvir, who
filed a late report on December 2004 relating to 2,637 stock options exercised
and the subsequent sale of 2,180 shares sold in December 2004; Mark Funke who
filed a late report in August 2004 relating to 8,041 stock options exercised
under the deferred compensation plan in August 2004; filed a late report in
December 2004 relating to 516 shares gifted in November and December 2004; and,
filed a late report in February 2005 relating to 2,987 shares sold in December
2004; Burns Hargis who filed a late report in February 2005 relating to 8,236
shares sold in December 2004 and 160 shares gifted in December 2004; E. Carey
Joullian, IV, who filed a late report in August 2004 relating to 135 shares
gifted in August 2004; and, filed a late report in February 2005 relating to
2,600 shares sold in February 2004; Stacy C. Kymes, who filed a late report in
February 2005 relating to 333 shares sold in December 2004; Robert J. LaFortune,
who filed a late report in February 2005 relating to 550 shares sold in November
2004; Stanley A. Lybarger, who filed a late report in February 2004 relating to
58,797 stock options exercised under the deferred compensation plan in February
2004; W. Jeffrey Pickryl, who filed a late report in February 2004 relating to
6,869 stock options exercised and the subsequent sale of 2,184 shares sold in
February 2004; and, filed a late report in December 2004 relating to 6,294 stock
options exercised and the subsequent sale of 5,171 shares sold in December 2004;
James A. Robinson, who filed a late report in February 2005 relating to 3,875
shares gifted in December 2004; L. Francis Rooney, III, who filed a late report
in October 2004 relating to 2,678 shares sold in October 2004; Gregory Symons,
who filed a late report in October 2004 relating to 1,489 shares sold in October
2004; and, filed a late report on December 2004 relating to 1,656 stock options
exercised in December 2004.
Independent Public Accountants
Ernst & Young LLP, independent public accountants, has been reappointed
by the Board of Directors of the Company as independent auditors for the Company
to examine and report on its financial statements for 2004. Ernst & Young LLP
have been auditors of the accounts of the Company since its inception on October
24, 1990. Representatives of Ernst & Young LLP are expected to be present at the
annual meeting, with the opportunity to make a statement if they desire to do
so, and will be available to respond to appropriate questions.
Proposals of Shareholders
The Board of Directors will consider proposals of shareholders intended
to be presented for action at the Annual Meeting of Shareholders. According to
the rules of the Securities and Exchange Commission, such proposals shall be
included in the Company's Proxy Statement if they are received in a timely
manner and if certain other requirements are met. For a shareholder proposal to
be included in the Company's Proxy Statement relating to the 2006 Annual
Shareholders' Meeting, a written proposal complying with the requirements
established by the Securities and Exchange Commission must be received at the
Company's principal executive offices, located at Bank of Oklahoma Tower, Tulsa,
Oklahoma 74172, no later than December 1, 2005.
24
Other Matters
Management does not know of any matters to be presented for action at
the meeting other than those listed in the Notice of Meeting and referred to
herein. If any other matters properly come before the meeting, it is intended
that the Proxy solicited hereby will be voted in accordance with the
recommendations of the Board of Directors.
COPIES OF THE ANNUAL REPORT ON FORM 10-K AND OTHER DISCLOSURE
STATEMENTS FOR BOK FINANCIAL CORPORATION MAY BE OBTAINED WITHOUT CHARGE TO THE
SHAREHOLDERS BY WRITING TO THE CHIEF FINANCIAL OFFICER, BOK FINANCIAL
CORPORATION, P. O. BOX 2300, TULSA, OKLAHOMA 74192, OR VIA E-MAIL OR THROUGH THE
BOKF WEBSITE LOCATED AT HTTP://WWW.BOKF.COM.
THE COMPANY MAKES AVAILABLE ITS PERIODIC AND CURRENT REPORTS, FREE OF
CHARGE, ON ITS WEB SITE AS SOON AS REASONABLY PRACTICABLE AFTER SUCH MATERIAL IS
ELECTRONICALLY FILED WITH, OR FURNISHED TO, THE SEC AT HTTP://WWW.BOKF.COM.
25
CHARTER
BOK Financial Corporation
Risk Oversight and Audit Committee
This charter governs the operations of the Risk Oversight and Audit Committee
(the "Committee") of BOK Financial Corporation (the "Company"). The Committee
shall discuss, review and reassess the charter at least annually and shall
submit proposed changes to the Board of Directors (the "Board") for approval.
Statement of Policy
The Committee shall provide assistance to the Board of Directors in fulfilling
their oversight responsibility to the shareholders, potential shareholders, the
investment community and others relating to the Company's financial statements
and the financial reporting process, the systems of internal accounting and
financial controls, the risk management function, the loan review function, the
appraisal review function, the internal audit function, the annual independent
audit of the Company's financial statements and the legal compliance and ethics
programs as established by management and the Board. In doing so, it is the
responsibility of the Committee to maintain free and open communication between
the Committee, the independent auditors, the internal auditors, risk management,
loan review, appraisal review, compliance and management of the Company.
I. Audit Committee purpose. The purpose of the Committee is to assist the
Board in their oversight of:
o The integrity of the Company's financial statements;
o The Company's compliance with legal and regulatory requirements;
o The independent auditors' qualifications and independence;
o The performance of the Company's internal audit function; and
o The performance of the Company's independent auditors.
The Committee also prepares the report required by the Securities and
Exchange Commission's ("SEC") proxy rules to be included in the
Company's annual proxy statement, as required by the SEC. It is also
the responsibility of the Committee to oversee the Company's risk
management, loan review, appraisal review and compliance processes.
II. Audit Committee membership. The Committee shall be appointed by the Board
and shall be comprised of at least three directors, each of whom is
independent of management and the Company. The Board of Directors may, at
any time, and in its sole discretion, replace a Committee member. Members
shall serve
26
annual terms and shall elect the Chairman of the Committee. Members shall
not serve on more than three public company audit committees
simultaneously.
For independence reasons, members of the Committee shall not accept any
consulting, advisory, or other compensatory fee from the Company, other
than in the member's capacity as a member of the Board and any Board
committee. Members of the Committee may not be an affiliated person of the
Company or its subsidiaries. Members of the Committee must meet the
independence and experience requirements of the SEC, the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), NASDAQ Stock
Market ("NASDAQ"), the Securities Exchange Act of 1934 (the "Exchange Act")
and the Sarbanes-Oxley Act of 2002 ("SOX").All Committee members shall be
financially literate, and at least one member shall have accounting or
related financial management expertise and qualify as an "Audit Committee
Financial Expert as defined under SOX Section 407.
III. Meetings. The Committee shall meet as often as it determines, but not less
frequently than quarterly. The Committee shall also meet privately (i.e.,
without the presence of management or non-independent Board members) with
independent auditors, corporate counsel and the internal auditor. A simple
majority of the members of the Committee shall form a quorum and govern.
The topics discussed by the Committee, as applicable, shall include:
o Annual and quarterly financial statements and related reports and
disclosures, the annual and quarterly reports of internal control,
press releases and other financial information (including "pro forma"
earnings reports) disseminated to the public and to others;
o Any audit problems, including differences in opinion in accounting and
reporting;
o Critical accounting policies and practices, alternative accounting
treatments, the reasons for selecting such policies and their impact
on the fairness of the Company's financial statements;
o Significant estimates made by management in the preparation of
financial reports;
o Off-balance sheet transactions, joint ventures, contingent liabilities
or derivative transactions and their impact on the fairness of
financial statements;
o Material legal matters that may impact the financial statements; and
o The opinions of management and independent auditors on the overall
fairness of the financial statements.
The Chairman of the Committee, with the assistance of the internal auditor,
shall establish a schedule for the meetings, set the agenda for the
meetings, and call special meetings as deemed necessary.
IV. Investigative Authority and Funding. In discharging its oversight role, the
Committee is empowered to investigate any matter brought to its attention
with full access to all books, records, facilities, and personnel of the
Company. The Committee shall have the authority to engage, without the
approval from the Board of Directors, independent legal, accounting and
other advisors, as it deems necessary to carry out its duties. The Company
shall provide appropriate funding, as determined by the Committee, to
compensate the independent auditor, outside legal counsel, or any other
relevant advisors employed by the Committee and to pay ordinary Committee
administrative expenses that are necessary and appropriate in carrying out
its duties.
V. Appointment and retention of auditors. The Committee shall be directly
responsible for the appointment and termination, compensation and oversight
of the work of the independent accounting firm. The Committee shall
pre-approve all audit services to be provided by the independent auditors.
VI. Approval of non-audit services. The Committee shall pre-approve all
non-audit services to be provided by the independent auditors and shall not
engage the independent auditors to perform the specific non-audit
27
services prohibited by law or regulation. The Committee may delegate
pre-approval authority to the Chairman of the Risk Oversight and Audit
Committee. The decisions of the Chairman must be presented to the full
Committee at its next scheduled meeting.
VII. Oversight of auditor quality and independence. At least annually, the
Committee shall obtain and review a report by the independent auditors
describing:
o The firm's internal quality control procedures;
o Any material issue raised by the most recent quality control review or
peer review of the firm, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by the
firm and any steps taken to deal with any such issues; and
o All relationships between the independent auditor and the Company (to
assess the auditor's independence).
VIII.Oversight of independent audit. The Committee is responsible for overseeing
the audit of financial statements and the audit of internal control over
financial reporting, including resolution of disagreements between
management and the auditor regarding financial reporting. The independent
audit must be in accordance with auditing standards established by the
Public Company Accounting Oversight Board ("PCAOB"). The PCAOB standards
incorporate the Statements on Auditing Standards, established by the
American Institute of Certified Public Accountants generally accepted in
the United States.
The Committee shall receive regular reports from the independent auditor on
the critical policies and practices of the Company, and all alternative
treatments of financial information within generally accepted accounting
principals that have been discussed with management. The Committee shall
discuss with the independent auditor, and then disclose, the matters
required to be discussed and disclosed by the Statement on Auditing
Standard Number 61, including any difficulties the independent auditor
encountered in the course of the audit work, any restrictions on the scope
of the independent auditor's activities or on access to requested
information, and any significant disagreements with management. The
Committee shall ascertain annually from the independent auditor whether the
Company has any issues under Section 10A(b) of the Exchange Act.
IX. Hiring former employees of auditors. The Committee shall require that the
hiring of employees or former employees of the independent auditors meet
the SEC regulations, NASDAQ listing standards and SOX, Section 206. The
Committee shall be notified of the hiring of all employees or former
employees of the independent auditors to ensure that the Company is not in
violation of any of the above standards.
X. Independent auditor rotation. As part of the Committee's oversight of
auditor independence, the committee should ascertain whether the accounting
firm is following the rules for audit partner rotation, as required by SOX,
Section 203.
XI. Internal audit and other oversight. The Committee has oversight
responsibilities over internal audit, risk management, loan review,
appraisal review and compliance. In fulfilling this responsibility, the
Committee shall discuss with management and the independent auditors the
overall scope and plans for the departments' respective work. They shall
discuss the effectiveness of the financial accounting and reporting
controls and the Company's system to monitor and manage business risk,
including legal and ethical compliance programs. Further, the Committee
shall meet separately with loan review, appraisal review, internal audit
and the independent auditors with and without management present, to
discuss the results of their examinations. In addition, the Committee shall
oversee the internal real estate appraisal review function and discuss and
review summary reports and reports of any "internally adjusted values".
XII. Financial reporting oversight. The Committee has responsibility for
oversight of financial reporting. Management is responsible for preparing
the Company's financial statements, and the independent auditors
28
are responsible for auditing those financial statements and for reviewing
the Company's unaudited interim financial statements.
The Committee shall discuss and review with management and the independent
auditors the financial statements to be included in the Company's annual
report on Form 10-K (or the annual report to shareholders if distributed
prior to filing of Form 10-K), including their judgment about the quality,
not just acceptability, of accounting principals, the reasonableness of
significant judgments, and the clarity of the disclosures in the financial
statements. Also, the Committee shall discuss the results of the annual
audit and any other matters communicated to the Committee by the
independent auditors.
The Committee or its designate shall discuss and review the interim
financial statements with management and the independent auditors prior to
the filing of the Company's quarterly report on Form 10-Q. Also, the
Committee shall discuss the results of the quarterly review and any other
matters required to be communicated to the Committee by the independent
auditors. The Chairman of the Committee may represent the entire Committee
for the purposes of quarterly reviews and press releases. The Chairman
shall report important matters to the full Committee at the next meeting.
XIII.Review of press releases. The Committee shall review the Company's
"earnings release" information with the independent auditor, internal
auditor and management prior to the actual release of earnings to the
public.
XIV. Internal control and disclosure controls and procedures. The Committee, as
part of its financial reporting oversight, has general responsibility over
internal control. The Committee is not itself responsible for maintaining
effective controls. However, the Committee is responsible for assuring
itself of the quality and effectiveness of internal control systems to
provide reasonable assurance that public disclosures, including financial
statements and reports to regulatory authorities, are accurate, complete
and fair.
The Committee along with the Board is also a critical component of the
Company's internal controls. The Committee's responsibilities over internal
controls shall include:
o Approval of the internal control framework utilized by management;
o Review of internal control plans, including SOX, Section 404, Bank
Secrecy Act / Anti-Money Laundering compliance, audit plans and Trust
minimum audit procedures;
o Review of SOX, Section 404 control deficiencies as defined by the
PCAOB;
o Review of Suspicious Activity Reports ("SARs") and specific matters
that have been elevated to executive management's attention related to
suspicious activity or fraud losses;
o Review of matters requiring attention of the Committee as recommended
by regulatory agencies;
o Review of selected audit reports prepared by internal audit,
compliance and independent auditors;
o Discussions with management regarding efforts to maintain an effective
internal control system;
o Review and approval of related party transactions and insider stock
transactions meeting certain established criteria; and
o Discussions with corporate attorneys regarding any reports of evidence
of a material violation of securities laws or breach of fiduciary
duty.
XV. Risk assessment and management. The Committee shall oversee the Company's
risk management and compliance process. This shall include the review and
approval of significant risk limits and related exceptions. The Committee
shall discuss and review the reports of examination by regulators and the
related management responses. In addition, the Committee shall review and
approve significant Capital
29
Markets policies, including Municipal Securities Rulemaking Board (MSRB)
and Government Securities Act (GSA) policies.
XVI. Complaint system. The Committee shall establish procedures for the receipt,
retention and treatment of complaints regarding accounting, internal
accounting controls or auditing matters and the confidential, anonymous
submission by employees of the issuer of concerns regarding questionable
accounting or auditing matters. Such procedures shall be renewed and
approved as needed.
XVII.Audit Committee staff and advisors. In fulfilling their responsibilities
hereunder, it is recognized that members of the Committee are not full-time
employees of the Company and are not, and do not represent themselves to
be, accountants or auditors by profession in the fields of accounting or
auditing. As such, it is not the duty or responsibility of the Committee or
its members to conduct "field work" or other types of auditing or
accounting reviews or procedures. In performing the duties of a member, a
member shall be entitled to rely on information, opinions, reports or
statements, including financial statements and other financial data in each
case, prepared or presented by:
o One or more officers or employees of this Company whom the member
believes to be reliable and competent as to the matters presented; and
o Counsel, independent accountants or other persons, within or without
the Company, as to matters which the member believes to be within such
a person's professional or expert competence.
The Committee can obtain advice and assistance from outside legal counsel,
accounting or other advisors, and can employ such staff as the Committee
deems necessary to carry out its duties. Those persons can work directly
for the Committee and need not be accountable to either the Company or the
Board of Directors.
XVIII. Audit Committee performance evaluation. The Committee shall perform an
annual self evaluation of its performance. This self evaluation will be
prepared by the Chairman and will be conducted prior to the Company's
filing of the annual report on Form 10-K.
XIX. Reports to Board of Directors. The Committee is responsible for overseeing
the Company's financial reporting process on behalf of the Board and
reporting the results of their activities to the Board.