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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998 Commission file number 333-60313
BANK ONE CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 31-0738296
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One First National Plaza
Chicago, Illinois 60670
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (312) 732-4000
Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange
Title of Each Class on which Registered
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Common Stock, $0.01 par value New York Stock Exchange
Chicago Stock Exchange
Preferred Stock with Cumulative and Adjustable
Dividends, Series B ($100 stated value), $0.01 par
value New York Stock Exchange
Preferred Stock with Cumulative and Adjustable
Dividends, Series C ($100 stated value), $0.01 par
value New York Stock Exchange
7 1/2% Preferred Purchase Units New York Stock Exchange
7 1/4% Subordinated Debentures Due 2004 New York Stock Exchange
8.10% Subordinated Notes Due 2002 New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
Corporation at December 31, 1998, was approximately $60,200,000,000 (based on
the average price of such stock on February 26, 1999). At December 31, 1998,
the Corporation had 1,177,310,348 shares of its Common Stock, $0.01 par value,
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's definitive proxy statement dated March 30,
1999, are incorporated by reference into Part III hereof.
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BANK ONE CORPORATION
Form 10-K Index
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Page
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PART I
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Item 1. Business..................................................... 2
Description of Business...................................... 2
Employees.................................................... 5
Competition.................................................. 5
Monetary Policy and Economic Controls........................ 5
Supervision and Regulation................................... 5
Financial Review............................................. 10
Item 2. Properties................................................... 87
Item 3. Legal Proceedings............................................ 87
Item 4. Submission of Matters to a Vote of Security Holders.......... 87
Executive Officers of the Registrant..................................... 87
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters..................................................... 88
Item 6. Selected Financial Data...................................... 88
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 88
Item 7A. Quantitative and Qualitative Disclosures About Market Risk... 88
Item 8. Financial Statements and Supplementary Data.................. 88
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 89
PART III
Item 10. Directors and Executive Officers of the Registrant........... 89
Item 11. Executive Compensation....................................... 89
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 89
Item 13. Certain Relationships and Related Transactions............... 89
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 89
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PART I
Item 1. Business
DESCRIPTION OF BUSINESS
General
BANK ONE CORPORATION (the "Corporation") is a multibank holding company
registered under the Bank Holding Company Act of 1956 (the "BHC Act"), and is
headquartered in Chicago, Illinois. The Corporation was incorporated in
Delaware on April 9, 1998, to effect the merger (the "Merger") of BANC ONE
CORPORATION ("BANC ONE"), an Ohio corporation and registered bank holding
company, and First Chicago NBD Corporation ("FCN"), a Delaware corporation and
registered bank holding company. The Merger was effected in two steps. First,
BANC ONE reincorporated in Delaware by merging with and into the Corporation,
its wholly owned subsidiary; immediately following that merger, FCN merged
with and into the Corporation. The Merger became effective on October 2, 1998.
Prior to the Merger, BANC ONE was a registered bank holding company that had
been incorporated in the State of Delaware in 1968 and reincorporated in Ohio
in 1989. FCN was the corporation resulting from the merger, effective December
1, 1995, of First Chicago Corporation, a Delaware corporation and registered
bank holding company, with and into NBD Bancorp, Inc., a Delaware corporation
and registered bank holding company. FCN had been incorporated under the laws
of the State of Delaware in 1972.
Through its bank subsidiaries (collectively, the "Banks"), the Corporation
provides domestic retail banking, finance and credit card services; worldwide
corporate and institutional banking services; and trust and investment
management services. The Corporation operates banking offices in Arizona,
Colorado, Florida, Illinois, Indiana, Kentucky, Louisiana, Michigan, Ohio,
Oklahoma, Texas, Utah, West Virginia and Wisconsin. The Corporation also owns
nonbank subsidiaries that engage in businesses related to banking and finance,
including credit card and merchant processing, consumer and education finance,
mortgage lending and servicing, insurance, venture capital, investment and
merchant banking, trust, brokerage, investment management, leasing, community
development and data processing.
Like its predecessors, the Corporation continually evaluates its business
operations and organizational structures, and routinely explores opportunities
to (i) acquire financial institutions and other financial services-related
businesses or assets, and (ii) enter into strategic alliances to expand the
scope of its services and its customer base. When consistent with its overall
business strategy, the Corporation also will sell assets or exit certain
businesses or markets. In June 1998, BANC ONE completed its acquisition of
First Commerce Corporation ("First Commerce"), a Louisiana-based multi-bank
holding company with total assets of approximately $9.3 billion. In December
1998, through a joint venture with Boston EquiServe Limited Partnership, the
Corporation formed EquiServe Limited Partnership, the largest provider of
corporate shareholder services in the United States. Pursuant to the
Corporation's strategy, begun in 1997, to streamline its retail delivery
structure (the "Retail Delivery Initiative"), the Corporation sold 117 banking
centers in 1998 and has entered into agreements to sell 22 banking centers
during the first half of 1999. Additional banking center sales will be
considered in the future. In addition, as a condition of regulatory approval
of the First Commerce acquisition, in September 1998, the Corporation sold 25
Louisiana banking centers. Similarly, as a condition of regulatory approval of
the Merger, the Corporation announced the sale of 51 banking centers in six
local banking markets in Indiana. That sale, to Union Planters Corporation,
was completed during the first quarter of 1999.
Lines of Business
The Corporation engages primarily in five lines of business--Commercial
Banking, Credit Card, Retail Banking, Finance One and Investment Management--
as well as proprietary investment activities.
Commercial Banking
The Commercial Banking Group provides a broad range of corporate financial
products to large and mid-sized corporations, financial institutions,
governmental entities, nonprofit organizations and private banking
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customers. The Corporation is one of the leading commercial banking
organizations in the United States, ranking as the number-one commercial and
middle market bank in the Midwest, and the number-three commercial bank in the
United States.
One of the Corporation's subsidiaries, First Chicago Capital Markets, Inc.,
is a primary government bond dealer and is principally responsible for
syndicating bank loans and for activities in the following types of
securities: corporate, asset backed, municipal and United States government
agency securities. Activities include
trading, sales, underwriting, research, and maintaining an active secondary
market with national sales distribution.
Through a number of its subsidiaries, the Corporation also develops, markets
and delivers cash management, operating, clearing and other noncredit products
and services, both overseas and domestically. These include money transfer,
collection, disbursement, documentary, remittance, trade finance, real estate
and lease financing, and international securities clearing services.
The Commercial Banking Group's customers include large and midsized
companies that have greater than $5 million in annual sales and are located in
various geographic segments throughout the United States and the world.
Commercial Banking specializes in creating custom banking solutions to meet
the unique financial needs of companies within the financial services, health
care, retailing, communications, energy and utilities, and auto industries.
Commercial Banking increasingly serves companies through its international
product delivery system, which provides them with the tools they need to
prosper in global markets. This global approach to relationship management and
customer service relies on a network of offices, branches, subsidiaries,
affiliates and representative offices across the United States and in 13
locations abroad.
The Commercial Banking Group also provides specialized financial solutions
and integrated wealth- management strategies to high net worth individuals,
their families and their businesses. Private banking services range from
traditional banking and credit services to custom-tailored financial planning,
tax counseling, investment advisory services, estate planning, and trust and
custody services.
Credit Card
The Corporation's Credit Card operations extend nationwide and to Canada and
the United Kingdom. A member of both the Visa(R) and MasterCard(R)
associations, the Corporation issues credit cards primarily through its
subsidiary, First USA Bank, N.A. ("First USA"). At December 31, 1998, Credit
Card had more than 56 million cardmembers; with more than $70 billion in
managed credit card receivables, the Corporation was the nation's largest
Visa(R) and MasterCard(R) lender.
Retail Banking
The Retail Group provides depository and related bank and financial products
and services to individuals and small business customers in 14 states. The
Group operates about 2,000 banking centers, providing a full range of consumer
loan, deposit and other credit-related products. In addition, services are
provided through 24-hour telephone banking centers, a nationwide network of
automated teller machines ("ATMs") and online banking. In 1998, the Retail
Group announced a strategic alliance with the Internet portal, Excite(R), to
expand its existing online banking services. The Corporation is the third
largest provider of loans to small businesses in the nation, and also provides
small businesses with credit, deposit and cash management services. Through
its consumer lending unit, the Retail Group delivers consumer loan products,
including home equity loans and lines. Home equity loans have become one of
the fastest-growing forms of personal credit in the United States, and the
Corporation is a major provider through services such as Bank One Loan-By-
Phone(R), which provides expedited approval of creditworthy applications. The
ONE Card, issued through the Retail Group, is one of the country's leading
debit cards for individuals, with 4.2 million cards in circulation.
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Finance One
The Finance One Group engages in consumer finance, mortgage lending, and
financing through third-party intermediaries, such as automobile dealers,
mortgage brokers and university financial aid offices, and does business in
all 50 states. The Group is organized into two divisions, consumer financial
services and indirect financial services.
The Consumer Financial Services Division includes Banc One Financial
Services, Inc., a consumer finance company that specializes in real estate-
secured debt consolidation loans, and Banc One Mortgage Corporation, which
originates residential first mortgages. Other businesses within this division
include broker-originated home equity loans, home improvement loans, student
loans and tax refund anticipation loans.
The Indirect Financial Services Division provides automobile loans and
leases, and recreational vehicle and marine loans, to consumers through a
nationwide network of dealers. The division also provides wholesale services
to the dealers, principally floor plan (inventory) financing and commercial
real estate loans.
Investment Management
The Investment Management Group provides investment and insurance services
to individuals and institutions. Asset management and financial planning are
among the Group's core activities. Assets are managed by the Group's
investment advisory firm, Banc One Investment Advisors Corporation, a
registered investment advisor. The Group also provides investment-related
services, including retirement and custody services, securities lending,
mortgage services and global corporate trust. The Group's insurance companies
make available a range of insurance products, such as credit insurance,
selected life insurance products, and annuities. The Group ranks as one of the
nation's top 30 asset managers, with more than $120 billion in assets under
management. After the investment management businesses of BANC ONE and FCN are
integrated, the Group will advise one of the 25 largest mutual fund complexes
in the country, the One Group Mutual Funds.
Proprietary Investments
Primarily through certain of its nonbank subsidiaries, the Corporation
engages in various noncustomer-oriented investment activities, including the
Corporate Investments growth equity, tax-oriented and value-oriented
portfolios.
Growth equity investments include various forms of equity funding for
acquisitions, management buyouts, growing businesses and small business
ventures. Tax-oriented investment activities include investing in and advising
on leases for commercial aircraft, and major industrial and power production
facilities and equipment. Investments also are made in alternative energy
programs and affordable housing projects qualifying for tax credits under
federal tax laws. Value-oriented investments include positions in value
investment markets, such as loans, trade claims and securities of distressed
companies. In addition, such activities include investing in securities of
companies whose debt trades below full face value of the claim, below-
investment-grade tranches of commercial mortgage-backed securities, asset-
backed securities, subordinated debt and other securities.
Risk Management Governance
The Corporation's risk management processes are governed by a decision-
making hierarchy that elevates key strategic and policy decisions to higher
authorities. The highest decision-making committee within the hierarchy
(excluding committees of the Board of Directors) is the Executive Risk
Management Committee, which determines the Corporation's risk/return profiles.
This committee includes, among others, the Chairman, the Chief Executive
Officer, the Vice Chairmen, the Chief Risk Management Officer and the Chief
Financial Officer.
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The Executive Risk Management Committee is supported by the Commercial
Banking Risk Management Committee, which approves material product risk and
portfolio management initiatives for large corporate and middle market
businesses; the Consumer Banking Risk Management Committee, which serves in a
similar role for consumer lines of business; the Market and Investment Risk
Management Committee, which approves policies for trading, investment and
capital markets activities; and the Operating Risk Forum, which assesses
operating risk issues for the Corporation.
EMPLOYEES
As of December 31, 1998, the Corporation and its subsidiaries had 91,310
employees on a full-time-equivalent basis.
COMPETITION
The Corporation and its subsidiaries face active competition in all of their
principal activities, not only from commercial banks, but also from savings
and loan associations, credit unions, finance companies, mortgage companies,
leasing companies, insurance companies, mutual funds, securities brokers and
dealers, other domestic and foreign financial institutions, and various
nonfinancial institutions.
MONETARY POLICY AND ECONOMIC CONTROLS
The earnings of the Banks, and therefore the earnings of the Corporation,
are affected by the policies of regulatory authorities, including the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). An
important function of the Federal Reserve Board is to promote orderly economic
growth by influencing interest rates and the supply of money and credit. Among
the methods that have been used to achieve this objective are open market
operations in United States government securities, changes in the discount
rate for member bank borrowings, and changes in reserve requirements against
bank deposits. These methods are used in varying combinations to influence
overall growth and distribution of bank loans, investments and deposits,
interest rates on loans and securities, and rates paid for deposits.
The Federal Reserve Board's monetary policies strongly influence the
behavior of interest rates and can have a significant effect on the operating
results of commercial banks. Global financial market turmoil in 1998
contributed to the decision of the Federal Reserve Board to reduce short-term
interest rates somewhat toward the end of the year.
The effects of the various Federal Reserve Board policies on the future
business and earnings of the Corporation cannot be predicted. Other economic
controls also have affected the Corporation's operations in the past. The
Corporation cannot predict the nature or extent of any effects that possible
future governmental controls or legislation might have on its business and
earnings.
SUPERVISION AND REGULATION
The following discussion sets forth certain material elements of the
regulatory framework applicable to bank holding companies and their
subsidiaries and provides certain specific information relevant to the
Corporation. The regulatory framework is intended primarily to protect
depositors and the federal deposit insurance funds and not security holders.
To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to those
provisions. A change in the statutes, regulations or regulatory policies
applicable to the Corporation or its subsidiaries may have a material effect
on the business of the Corporation.
General
As a bank holding company, the Corporation is subject to regulation under
the BHC Act, and to inspection, examination and supervision by the Federal
Reserve Board. Under the BHC Act, bank holding companies
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generally may not own or control more than 5% of the voting shares or
substantially all the assets of any company, including a bank, without the
Federal Reserve Board's prior approval. In addition, bank holding companies
generally may engage, directly or indirectly, only in banking and such other
activities as are determined by the Federal Reserve Board to be closely
related to banking.
Various governmental requirements, including Sections 23A and 23B of the
Federal Reserve Act, as amended, limit borrowing by the Corporation and its
nonbank subsidiaries from the Banks. These requirements also limit various
other transactions between the Corporation and its nonbank subsidiaries, on
the one hand, and the Banks, on the other. For example, Section 23A limits to
no more than 10% of its total capital the aggregate outstanding amount of any
bank's loans and other "covered transactions" with any particular nonbank
affiliate, and limits to no more than 20% of its total capital the aggregate
outstanding amount of any bank's covered transactions with all of its nonbank
affiliates. Section 23A also generally requires that a bank's loans to its
nonbank affiliates be secured, and Section 23B generally requires that a
bank's transactions with its nonbank affiliates be on arm's-length terms.
Most of the Banks are national banking associations and, as such, are
subject to regulation primarily by the Office of the Comptroller of the
Currency ("OCC") and, secondarily, by the Federal Deposit Insurance
Corporation ("FDIC") and the Federal Reserve Board. The Corporation's state-
chartered Banks are subject to regulation by the Federal Reserve Board and the
FDIC and, in addition, by their respective state banking departments. The
Banks' operations in other countries are subject to various restrictions
imposed by the laws of those countries.
Liability for Bank Subsidiaries
The Federal Reserve Board has adopted a policy stating that a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to maintain resources adequate to support
each such subsidiary bank. This support may be required at times when the
Corporation may not have the resources to provide it. In addition, Section 55
of the United States National Bank Act (the "NBA") permits the OCC to order
the pro rata assessment of shareholders of a national bank whose capital has
become impaired. If a shareholder fails within three months to pay such an
assessment, the OCC can order the sale of the shareholder's stock to cover the
deficiency. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank would be assumed by the bankruptcy
trustee and entitled to priority of payment.
Under the terms of the Federal Deposit Insurance Act, the FDIC can hold any
FDIC-insured depository institution liable for any loss the FDIC incurs, or
reasonably expects to incur, in connection with (a) the "default" of any
commonly controlled FDIC-insured depository institution or (b) any assistance
provided by the FDIC to any commonly controlled depository institution that is
"in danger of default." An institution is deemed in "default," for this
purpose, if it is placed in conservatorship or receivership, and "in danger of
default" if a "default" is likely to occur absent regulatory assistance. All
of the Banks are FDIC-insured depository institutions.
Capital Requirements
The Corporation is subject to capital requirements and guidelines imposed on
bank holding companies by the Federal Reserve Board. The OCC, the FDIC and the
Federal Reserve Board impose similar capital requirements and guidelines on
the Banks within their respective jurisdictions. These capital requirements
establish higher capital standards for banks and bank holding companies that
assume greater risks. For this purpose, a bank holding company's or a bank's
assets and certain specified off-balance-sheet commitments are assigned to
four risk categories, each weighted differently based on the level of credit
risk that is ascribed to such assets or commitments. In addition, risk-
weighted assets are adjusted for low-level recourse and market-risk-equivalent
assets. A bank holding company's or a bank's capital, in turn, is divided into
three tiers: core
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("Tier 1") capital, which includes common equity, non-cumulative perpetual
preferred stock and a limited amount of cumulative perpetual preferred stock
and related surplus (excluding auction rate issues), and minority interests in
equity accounts of consolidated subsidiaries, less goodwill, certain
identifiable intangible assets and certain other assets; supplementary ("Tier
2") capital, which includes, among other items, perpetual preferred stock not
meeting the Tier 1 definition, mandatory convertible securities, subordinated
debt and allowances for loan and lease losses, subject to certain limitations,
less certain required deductions; and market risk ("Tier 3") capital, which
includes qualifying unsecured subordinated debt.
The Corporation, like other bank holding companies, is required to maintain
Tier 1 and total capital (the sum of Tier 1, Tier 2 and Tier 3 capital) equal
to at least 4% and 8% of its total risk-weighted assets, respectively. At
December 31, 1998, the Corporation met both requirements, with Tier 1 and
total capital equal to 7.9% and 11.3% of its total risk-weighted assets,
respectively. Each of the Banks was in compliance with its applicable minimum
capital requirement at December 31, 1998.
The Federal Reserve Board, the FDIC and the OCC have adopted rules to
incorporate market and interest-rate risk components into their risk-based
capital standards. Amendments to the risk-based capital requirements,
incorporating market risk, became effective January 1, 1998. Under these
market risk requirements, capital is allocated to support the amount of market
risk related to a financial institution's ongoing trading activities.
The Federal Reserve Board also requires bank holding companies to maintain a
minimum "leverage ratio" (Tier 1 capital to adjusted average assets). The
guidelines provide for a minimum leverage ratio of 3% for bank holding
companies that have the highest regulatory rating or have implemented the
risk-based capital measures for market risk, or 4% for holding companies that
do not meet either of these requirements. Each of the Banks is subject to
similar requirements adopted by the applicable federal regulatory agency. At
December 31, 1998, the Corporation's leverage ratio was 8.0%. Each of the
Banks was in compliance with its applicable leverage ratio requirement as of
December 31, 1998.
Each federal banking regulator may set capital requirements higher than the
minimums noted above for holding companies or institutions whose circumstances
warrant it. For example, institutions experiencing or anticipating significant
growth may be expected to maintain capital ratios, including tangible capital
positions, well above the minimum levels. Furthermore, the Federal Reserve
Board has indicated that it will consider a "tangible Tier 1 capital leverage
ratio" (deducting all intangibles) and other measures of capital strength in
evaluating proposals for expansion or new activities. No federal banking
regulator has, however, imposed any such special capital requirement on the
Corporation or the Banks.
Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described below.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized), and requires the respective federal regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions depending on the category in
which an institution is classified. Failure to meet the capital guidelines
could also subject a depository institution to capital raising requirements.
An "undercapitalized" depository institution must develop a capital
restoration plan, and its parent holding company must guarantee that bank's
compliance with the plan. The liability of the parent holding company under
any such guarantee is limited to the lesser of 5% of the depository
institution's assets at the time it became "undercapitalized" or the amount
needed to comply with the plan. Furthermore, in the event of the bankruptcy of
the parent holding company, such guarantee would take priority over the
parent's general unsecured creditors. In addition, FDICIA requires the various
regulatory agencies to
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prescribe certain non-capital standards for safety and soundness relating
generally to operations and management, asset quality and executive
compensation, and it permits regulatory action against a financial institution
that does not meet such standards.
As of December 31, 1998, each Bank was "well capitalized," based on the
"prompt corrective action" ratios and guidelines described above. It should be
noted, however, that a Bank's capital category is determined solely for the
purpose of applying the OCC's (or the FDIC's) "prompt corrective action"
regulations; the capital category may not constitute an accurate
representation of the Bank's overall financial condition or prospects.
Dividend Restrictions
Various provisions of federal and state law limit the amount of dividends
the Banks can pay to the Corporation without regulatory approval. For example,
approval generally is required for any national bank, or any state chartered
bank that is a member of the Federal Reserve System, to pay any dividend that
would cause the bank's total dividends paid during any calendar year to exceed
the sum of the bank's net income during such calendar year plus the bank's
retained net income for the prior two calendar years. Such a bank also
generally may not pay any dividend exceeding its undivided profits then on
hand without regulatory approval. At January 1, 1999, $2.0 billion of the
total stockholders' equity of the Banks was available for payment of dividends
to the Corporation without approval by the applicable regulatory authority.
In addition, federal bank regulatory agencies have authority to prohibit the
Banks from engaging in unsafe or unsound practices in conducting their
business. The payment of dividends, depending upon the financial condition of
the bank in question, could be deemed to constitute an unsafe or unsound
practice. The ability of the Banks to pay dividends in the future is
currently, and could be further, influenced by bank regulatory policies and
capital guidelines.
Deposit Insurance Assessments
The deposits of each of the Banks are insured up to regulatory limits by the
FDIC and, accordingly, are subject to deposit assessments to maintain the Bank
Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF")
administered by the FDIC. The FDIC has adopted regulations establishing a
permanent risk-related deposit insurance assessment system. Under the system,
the FDIC places each insured bank in one of nine risk categories based on (a)
the bank's capitalization and (b) supervisory evaluations provided to the FDIC
by the institution's primary federal regulator. Each insured bank's insurance
assessment rate is then determined by the risk category in which it is
classified.
The annual insurance premiums on bank deposits insured by the BIF and the
SAIF vary, from $0.00 per $100 of deposits, for banks classified in the
highest capital and supervisory evaluation categories, to $0.27 per $100 of
deposits, for banks classified in the lowest capital and supervisory
evaluation categories.
The Deposit Insurance Funds Act of 1996 provides for assessment to be
imposed on insured depository institutions with respect to deposits insured by
the BIF and the SAIF (in addition to assessments currently imposed on
depository institutions with respect to BIF- and SAIF-insured deposits) to pay
for the cost of Financing Corporation ("FICO") funding. The FDIC's 1998 FICO
assessment rates were approximately $0.012 per $100 annually for BIF-
assessable deposits and $0.061 per $100 annually for SAIF-assessable deposits.
The Banks held approximately $10.7 billion of SAIF-assessable deposits as of
December 31, 1998. The FICO assessments do not vary depending upon a
depository institution's capitalization or supervisory evaluations.
Depositor Preference Statute
Federal legislation has been enacted providing that deposits and certain
claims for administrative expenses and employee compensation against an
insured depository institution would be afforded a priority over other general
unsecured claims against such institution, including federal funds and letters
of credit, in the liquidation or other resolution of the institution by any
receiver.
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Brokered Deposits
Under FDIC regulations, no FDIC-insured depository institution can accept
brokered deposits unless it (a) is well capitalized, or (b) is adequately
capitalized and receives a waiver from the FDIC. In addition, these
regulations prohibit any depository institution that is not well capitalized
from (i) paying an interest rate on deposits in excess of 75 basis points over
certain prevailing market rates, or (ii) offering "pass through" deposit
insurance on certain employee benefit plan accounts unless it provides certain
notice to affected depositors.
Interstate Banking
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 ("Riegle-Neal"), subject to certain concentration limits and other
requirements, (a) bank holding companies such as the Corporation are permitted
to acquire banks and bank holding companies located in any state; (b) any bank
that is a subsidiary of a bank holding company is permitted to receive
deposits, renew time deposits, close loans, service loans and receive loan
payments as an agent for any other bank subsidiary of the holding company, and
(c) banks are permitted to acquire branch offices outside their home states by
merging with out-of-state banks, purchasing branches in other states, and
establishing de novo branch offices in other states; provided that, in the
case of any such purchase or opening of individual branches, the host state
has adopted legislation "opting in" to those provisions of Riegle-Neal; and,
provided that, in the case of a merger with a bank located in another state,
the host state has not adopted legislation "opting out" of that provision of
Riegle-Neal. The Corporation might use its authority under Riegle-Neal to
acquire banks in additional states and to consolidate its bank subsidiaries
under a smaller number of separate charters.
Other
The Corporation's nonbank subsidiaries and banking-related business units
are subject to regulation by various state and federal regulatory agencies and
self-regulatory organizations. Activities subject to such regulation include
investment management, investment advisory services, commodities and
securities brokerage, insurance services and products, municipal securities
dealing and transfer agency services.
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FINANCIAL REVIEW
Index To Financial Review
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Selected Financial Data.................................................... 11
Earnings Analysis.......................................................... 12
Business Segments.......................................................... 19
Risk Management............................................................ 23
Liquidity Risk Management.................................................. 23
Market Risk Management..................................................... 24
Credit Risk Management..................................................... 28
Derivative Financial Instruments........................................... 34
Year 2000 Readiness Disclosure............................................. 36
Capital Management......................................................... 36
Forward-Looking Statements................................................. 39
Consolidated Financial Statements.......................................... 41
Notes to Consolidated Financial Statements................................. 45
Report of Independent Public Accountants................................... 76
Selected Statistical Information........................................... 77
</TABLE>
10
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
(In millions, except ratios 1998 1997 1996 1995 1994
and per-share data) -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income and Expense:
Net interest income--tax-
equivalent basis............ $ 9,469 $ 9,619 $ 9,417 $ 8,042 $ 7,917
Provision for credit losses.. 1,408 1,988 1,716 1,067 558
Noninterest income........... 8,071 6,694 5,994 5,478 4,327
Restructuring charges and
merger-related costs........ 1,231 337 -- 267 --
Operating expense (1)........ 10,314 9,403 8,681 7,948 7,729
Net income................... 3,108 2,960 3,231 2,675 2,493
Per Common Share Data:
Net income, basic............ $ 2.65 $ 2.48 $ 2.64 $ 2.17 $ 2.00
Net income, diluted.......... 2.61 2.43 2.57 2.12 1.96
Cash dividends declared...... 1.52 1.38 1.24 1.13 1.03
Book value................... 17.31 16.03 16.64 15.28 14.19
Balance Sheet:
Loans........................ 155,398 159,579 153,496 138,478 125,145
Deposits..................... 161,542 153,726 145,206 145,343 142,443
Long-term debt (2)........... 22,298 21,546 15,363 12,582 10,275
Total assets................. 261,496 239,372 225,822 228,298 215,860
Common stockholders' equity.. 20,370 18,724 18,856 17,345 15,647
Total stockholders' equity... 20,560 19,050 19,507 18,143 16,568
Performance Ratios:
Return on average assets..... 1.30% 1.29% 1.43% 1.19% 1.20%
Return on average common
equity...................... 15.9 15.8 17.5 15.7 15.6
Net interest margin.......... 4.52 4.75 4.70 4.07 4.30
Efficiency ratio............. 65.8 59.7 56.3 60.8 63.1
Credit Quality:
Net charge-offs to average
loans....................... 0.97% 1.21% 1.04% 0.59% 0.48%
Allowance for credit losses
to loans outstanding........ 1.46 1.77 1.75 1.75 1.75
Nonperforming assets to loans
and other real estate owned. 0.53 0.42 0.40 0.55 0.60
Common Stock Data:
Average shares outstanding,
basic....................... 1,170 1,176 1,199 1,198 1,211
Average shares outstanding,
diluted..................... 1,189 1,213 1,254 1,248 1,252
Stock price, year-end........ $ 51.06 $ 49.37 $ 39.09 $ 31.10 $ 20.97
Stock dividends.............. 10% -- 10% -- 10%
Dividend payout ratio........ 58% 61% 38% 40% 44%
</TABLE>
- --------
(1) Noninterest expense reduced by restructuring charges and merger-related
costs, including certain integration costs.
(2) Includes trust preferred capital securities.
11
<PAGE>
Earnings Analysis
Introduction
To better understand underlying trends and performance, the Corporation has
excluded restructuring and merger-related costs as well as the effects of
unusual events or transactions, to present financial performance on an
"operating" basis. Operating results should be reviewed in conjunction with
reported results.
For funding and risk-management purposes, the Corporation periodically
securitizes loans, primarily in support of credit card activities. The
accounting for securitizations complicates the understanding of underlying
trends in net interest income, net interest margin and noninterest income, as
well as the underlying growth rates of reported loans. For a more complete
understanding, these trends are also reviewed on a "managed" basis, which adds
data on securitized credit card loans to reported data on loans. Results on a
managed basis, where presented, should be read in conjunction with reported
results.
Management's discussion and analysis may contain forward-looking statements
that are provided to assist in the understanding of anticipated future
financial performance. However, such performance involves risks and
uncertainties that may cause actual results to differ materially from those
expressed in forward-looking statements. See pages 39-40 for a full discussion
of such factors.
Summary of Financial Results
The Corporation's reported 1998 net income was $3.108 billion, or $2.61 per
share, up from $2.960 billion, or $2.43 per share in 1997, and compared with
$3.231 billion, or $2.57 per share, in 1996. The following table summarizes
the key financial lines and ratios on a reported basis for the years
presented.
<TABLE>
<CAPTION>
1998 1997 1996
(In millions, except per-share data) ------- ------ ------
<S> <C> <C> <C>
Net interest income--tax-equivalent basis.............. $ 9,469 $9,619 $9,417
Provision for credit losses............................ 1,408 1,988 1,716
Noninterest income..................................... 8,071 6,694 5,994
Noninterest expense.................................... 11,545 9,740 8,681
Net income............................................. 3,108 2,960 3,231
Earnings per share
Basic................................................ 2.65 2.48 2.64
Diluted.............................................. 2.61 2.43 2.57
Return on assets....................................... 1.30% 1.29% 1.43%
Return on common equity................................ 15.9 15.8 17.5
Net interest margin.................................... 4.52 4.75 4.70
Efficiency ratio....................................... 65.8 59.7 56.3
</TABLE>
Adjustments to Operating Results on a Managed Basis
In arriving at managed operating results for the periods presented, the
Corporation has adjusted reported results as follows:
. To reflect securitized credit card receivables as on-balance-sheet loans;
. To exclude restructuring and merger-related costs associated with the
FCN, First Commerce and First USA transactions, which totaled $1.166
billion in 1998 and $467 million in 1997, on a pretax basis;
. To exclude gains generated in 1998 from the sale of banking facilities
associated with the Retail Delivery Initiative totaling $259 million, on a
pretax basis; and
12
<PAGE>
. To exclude other pretax charges of $175 million, associated with the
restructuring of the Corporation's Rapid Cash retail business initiative
and an impairment charge related to the Corporation's auto lease
portfolio.
The following table reconciles reported results with operating results for
the years presented.
<TABLE>
<CAPTION>
1998 1997 1996
--------------- -------------- --------------
Net EPS, Net EPS, Net EPS,
(In millions, except per-share Income diluted Income diluted Income diluted
data) ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Reported......................... $3,108 $2.61 $2,960 $2.43 $3,231 $2.57
Restructuring and merger-related
costs........................... 824 0.69 329 0.27 -- --
Gains from Retail Delivery
Initiative...................... (181) (0.15) -- -- -- --
Other charges.................... 118 0.10 -- -- -- --
------ ----- ------ ----- ------ -----
Operating........................ $3,869 $3.25 $3,289 $2.70 $3,231 $2.57
====== ===== ====== ===== ====== =====
</TABLE>
A more detailed discussion of restructuring and merger-related costs and
other charges begins on page 17.
Summary of Operating Results on a Managed Basis
Earnings on an operating basis were $3.869 billion, or $3.25 per share, in
1998, compared with $3.289 billion, or $2.70 per share, in 1997, up 18% and
20%, respectively. Operating earnings for 1996 were $3.231 billion or $2.57
per share. The following table summarizes the key financial lines from an
operating perspective on a managed basis.
<TABLE>
<CAPTION>
1998 1997 1996
(In millions, except per-share data) ------- ------- -------
<S> <C> <C> <C>
Net interest income--tax-equivalent basis............ $13,828 $12,950 $11,997
Provision for credit losses.......................... 3,914 3,869 3,172
Noninterest income................................... 6,070 5,380 4,859
Noninterest expense.................................. 10,315 9,409 8,670
Net income........................................... 3,869 3,289 3,231
Earnings per share
Basic.............................................. 3.29 2.76 2.64
Diluted............................................ 3.25 2.70 2.57
Return on assets..................................... 1.39% 1.26% 1.28%
Return on common equity.............................. 19.8 17.6 17.5
Net interest margin.................................. 5.56 5.50 5.28
Efficiency ratio..................................... 51.8 51.3 51.4
</TABLE>
The Corporation's operating results for 1998 reflect positive fundamental
performance, including:
. Strong managed net interest margin of 5.56%, up from 5.50% in 1997 and
5.28% in 1996;
. Average managed loan growth of 6% over 1997 levels, with credit card
loans leading the increase;
. Sound credit quality, as exhibited by continued strong credit ratios; and
. Improved managed fee-based revenue, with overall growth of 13% generated
by increases in each major fee category.
Net Interest Income
Net interest income includes fundamental spreads on earning assets as well
as such items as loan fees, cash interest collections on problem loans,
dividend income, interest reversals, and income or expense on derivatives used
to manage interest rate risk. Net interest margin measures how efficiently the
Corporation uses its earning assets and underlying capital.
13
<PAGE>
In order to understand fundamental trends in net interest income, average
earning assets and net interest margins, it is useful to analyze financial
performance on a managed portfolio basis, which treats loans sold in credit
card securitization transactions as if they had not been sold.
<TABLE>
<CAPTION>
1998 1997 1996
(In millions) -------- -------- --------
<S> <C> <C> <C>
Managed
Net interest income--tax-equivalent basis....... $ 13,828 $ 12,950 $ 11,997
Average earning assets.......................... 248,621 235,420 227,421
Net interest margin............................. 5.56% 5.50% 5.28%
Reported
Net interest income--tax-equivalent basis....... $ 9,469 $ 9,619 $ 9,417
Average earning assets.......................... 209,514 202,334 200,259
Net interest margin............................. 4.52% 4.75% 4.70%
</TABLE>
Managed net interest income increased 7% in 1998 compared with 1997. This
growth was primarily attributable to a $13.2 billion, or 6%, increase in
average earning assets. In addition, net interest margin improved to 5.56%,
reflecting continued growth in higher-spread consumer loans, as well as
deposit growth. Average managed loans increased $11.9 billion, with higher-
margin credit card loans accounting for $5.7 billion of the increase. Average
commercial loans grew 7% in 1998, predominantly reflecting growth in the
middle market segment. Average other consumer loans were essentially flat
compared with 1997. Planned sales of residential mortgage loans were offset by
growth in other segments of the consumer loan portfolio.
Managed net interest income for 1997 increased $953 million, or 8%, from
1996, due primarily to an $8.0 billion increase in average earning assets. The
managed net interest margin for 1997 increased to 5.50% from 5.28% in 1996,
reflecting the growth in and positive effect of higher-margin credit card and
consumer loans, as well as a decline in the level of lower-margin investment
securities.
Noninterest Income
In order to provide more meaningful trend analysis, credit card fee revenue
and total noninterest income in the following table are shown on a managed
basis. Credit card fee revenue excludes the net credit card servicing revenue
(spread income less credit costs) associated with securitized credit card
receivables.
<TABLE>
<CAPTION>
Percent
Increase (Decrease)
---------------------
1998 1997 1996 1997-1998 1996-1997
(Dollars in millions) ------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Trading profits.................. $ 149 $ 117 $ 72 27% 63%
Equity securities gains.......... 250 334 332 (25) 1
Investment securities gains...... 155 101 44 53 130
------ ------ ------ --------- ---------
Market-driven revenue.......... 554 552 448 -- 23
Credit card revenue (1).......... 1,424 1,194 996 19 20
Fiduciary and investment
management fees................. 807 746 700 8 7
Service charges on deposits...... 1,255 1,219 1,129 3 8
Other service charges and
commissions..................... 1,390 1,172 1,037 19 13
------ ------ ------ --------- ---------
Managed fee-based revenue...... 4,876 4,331 3,862 13 12
Other............................ 640 497 549 29 (9)
------ ------ ------ --------- ---------
Managed noninterest income--
operating basis............... 6,070 5,380 4,859 13 11
Gains--Retail Delivery
Initiative...................... 259 -- -- N/M N/M
Other charges.................... (110) -- -- N/M N/M
------ ------ ------ --------- ---------
Managed noninterest income--
reported basis................ $6,219 $5,380 $4,859 16% 11%
====== ====== ====== ========= =========
</TABLE>
- --------
(1) Net credit card servicing revenue totaled $1.852 billion in 1998, $1.314
billion in 1997 and $1.135 billion in 1996.
N/M--Not meaningful.
14
<PAGE>
Managed noninterest income increased 16% in 1998, following an 11% increase
in 1997. In both periods, fee-based revenue contributed to the year-over-year
improvements in noninterest income. In 1998, $259 million in gains from
banking center sales associated with the Retail Delivery Initiative also
contributed to the growth in noninterest income.
Market-Driven Revenue
- ---------------------
Market-driven revenue for 1998 reflected an economic environment that
included global market volatility and uncertainty. The mix of market-driven
revenue changed compared with 1997, as improvements in both trading profits
and investment securities gains were offset by the year-over-year decline in
equity securities gains. While more sensitive to changes in market conditions
than other noninterest income components, market-driven revenue remains a core
component of the commercial business and an important contributor to overall
earnings growth.
Trading profits on an operating basis increased 27% to $149 million, up from
$117 million in 1997 and $72 million in 1996. Both derivative and foreign
exchange trading generated favorable results in 1998. Derivative trading
results in 1997 were negatively affected by losses recognized in specific
portfolio positions, as well as by a volatile interest rate environment.
Foreign exchange trading benefited from the volatility in foreign currency
markets experienced in 1998 and 1997. The following table provides additional
details on total revenue from trading businesses.
Trading Revenue (Including Related Net Interest Income)
<TABLE>
<CAPTION>
1998 1997 1996
(In millions) ---- ---- ----
<S> <C> <C> <C>
Foreign exchange and derivatives................................ $ 84 $ 72 $ 63
Fixed income and derivatives.................................... 51 11 48
Other trading................................................... 177 142 104
---- ---- ----
Total....................................................... $312 $225 $215
==== ==== ====
</TABLE>
Equity securities gains totaled $250 million in 1998, down from $334 million
in 1997 and $332 million in 1996. Equity securities gains were particularly
strong in the first half of 1998, and included a $65 million gain on the sale
of a single investment in the electrical supply industry. Equity market
volatility and uncertainty in the second half of the year dampened full-year
1998 results. Investment securities gains totaled $155 million in 1998,
compared with $101 million in 1997 and $44 million in 1996. The higher
investment securities gains in 1998 and 1997 primarily resulted from more
active management of the investment portfolio, with a focus on government and
mortgage-backed securities.
Managed Fee-Based Revenue
- -------------------------
Managed fee-based revenue grew 13% in 1998, following 12% growth in 1997.
Each major category of fee-based revenue posted increases in both 1998 and
1997.
Credit card fees rose 19% to $1.424 billion in 1998, reflecting higher
levels of interchange and cardholder fees, partially offset by reduced gains
on credit card securitizations. Credit card receivables growth in both periods
produced higher levels of account- and transaction-based fee revenue. In
addition, ongoing pricing changes initiated in 1996 continued to generate
increased fee levels. Securitization-related gains totaled $134 million in
1998, $188 million in 1997 and $4 million in 1996. In December 1996, the
Corporation sold an interest in its merchant processing business to a third
party. As a result, the Corporation's remaining interest was recorded using
the equity method of accounting, and credit card fee revenue decreased by $93
million in 1997.
Fiduciary and investment management fees include revenue generated by
traditional trust products and services, investment management activities and
the shareholder services business. Revenues from the shareholder services
business were $94 million in 1998, $98 million in 1997 and $88 million in
1996. This relative
15
<PAGE>
consistency was achieved despite industry consolidation and price competition.
In December 1998, the Corporation combined its shareholder services business
with that of Boston EquiServe Limited Partnership, creating the nation's
largest corporate shareholder services provider. The Corporation began
recognizing its proportionate share of the partnership's net earnings in other
noninterest income in December 1998. In 1996, the Corporation decided to exit
its stand-alone global custody and master trust businesses; the exit was
completed in the second quarter of 1997. Revenues from these activities
totaled approximately $11 million for 1997 and $54 million for 1996.
Service charges on deposit accounts, which include deficient balance fees,
increased 3% to $1.255 billion for 1998, following an 8% increase in 1997.
Growth in cash management fees was a contributing factor, due in part to the
extensive cross-selling of product offerings across various customer segments.
Other service charges and commissions increased 19% over 1997 levels. Loan
syndication fees increased, as transaction flow grew in late 1998 in response
to market liquidity concerns that affected commercial customers. Continued
growth in other fee revenue from retail product areas, including home mortgage
and investment management, also contributed to this excellent performance.
On an operating basis, other noninterest income increased $143 million or
29% from 1997, and included gains on sales of loans of $286 million for 1998,
$107 million for 1997 and $166 million for 1996. Other noninterest income for
1996 included a gain of $107 million from the sale of a portion of the
Corporation's investment in its merchant processing segment of the credit card
business. Reported other noninterest income in 1998 included $259 million in
gains from banking center sales associated with the Retail Delivery
Initiative, as well as charges totaling $110 million for asset valuation
adjustments, primarily associated with the Corporation's auto leasing
portfolio.
Noninterest Expense
On an operating basis, noninterest expense in 1998 was $10.314 billion, up
10% from $9.403 billion in 1997. Operating expense for 1997 was 8% higher than
in 1996. Growth in identified businesses, specifically credit card,
contributed to the year-over-year growth in operating expense. Technology
initiatives, including Year 2000 readiness, systems and other reengineering
projects, also added to the overall expense growth.
<TABLE>
<CAPTION>
Percent
Increase (Decrease)
---------------------
1998 1997 1996 1997-1998 1996-1997
(Dollars in millions) ------- ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits
Salaries...................... $ 3,770 $3,551 $3,363 6% 6%
Employee benefits............. 707 673 663 5 2
------- ------ ------
Total salaries and employee
benefits................... 4,477 4,224 4,026 6 5
Net occupancy and equipment
expense........................ 845 739 738 14 --
Depreciation and amortization... 680 693 694 (2) --
Outside service fees and
processing..................... 1,349 1,145 956 18 20
Marketing and development....... 1,024 837 568 22 47
Communication and
transportation................. 781 711 652 10 9
Other........................... 1,262 1,054 1,047 20 1
Less: Merger-related integration
included above................. (104) -- -- N/M N/M
------- ------ ------ --------- ---------
Noninterest expense--operating
basis.......................... 10,314 9,403 8,681 10 8
Merger-related and restructuring
costs.......................... 1,166 337 -- N/M N/M
Other business restructuring
costs.......................... 65 -- -- N/M N/M
------- ------ ------ --------- ---------
Noninterest expense--reported
basis.......................... $11,545 $9,740 $8,681 19% 12%
======= ====== ====== ========= =========
</TABLE>
- --------
N/M -- Not meaningful.
16
<PAGE>
Salary and benefit costs were $4.477 billion in 1998, up 6% compared with
$4.224 billion in 1997. The increases in 1998 and 1997 reflect staffing
increases to support growth in certain business activities as well as annual
salary increases and higher performance-based initiatives in certain business
units.
Occupancy and equipment expense was up 14 percent over 1997 levels,
reflecting the outsourcing of various property management services and the
implementation and ongoing support of an expanded ATM delivery network,
including the Rapid Cash retail banking initiative. Expense growth in this
area was mitigated by banking center sales associated with the Retail Delivery
Initiative. This initiative was restructured at the end of 1998, resulting in
$65 million of restructuring costs, which should produce future expense
savings in this area.
Outside service fees and processing expense increased 18% in 1998 and 20% in
1997 and included consulting and implementation costs incurred to support Year
2000 readiness, as well as other technology and reengineering initiatives in
various businesses. Increased credit card transaction volume and account
generation required higher levels of support and processing costs.
Year 2000 readiness costs totaled $185 million in 1998 and $50 million in
1997, and are included in various noninterest expense categories. See "Year
2000 Readiness Disclosure" on page 36.
Marketing and development expense increased significantly in both 1998 and
1997. Credit card marketing efforts accounted for much of the increase. A
record 10.1 million new accounts were added in 1998, higher than the 9.7
million new accounts added in 1997.
Other operating expense increased significantly during 1998, reflecting the
cost to support growth in transaction-driven business activities and the
higher level of technology-driven and business reengineering project
initiatives.
Applicable Income Taxes
The following table shows the Corporation's income before income taxes,
applicable income taxes and effective tax rate for each of the past three
years.
<TABLE>
<CAPTION>
1998 1997 1996
(Dollars in millions) ------ ------ ------
<S> <C> <C> <C>
Income before income taxes.............................. $4,465 $4,427 $4,842
Applicable income taxes................................. 1,357 1,467 1,611
Effective tax rates..................................... 30.4% 33.1% 33.3%
</TABLE>
Tax expense for all three years included benefits for tax-exempt income,
tax-advantaged investments and general business tax credits offset by the
effect of nondeductible expenses, including goodwill. An increasing level of
transaction activity in tax-advantaged products during 1998 produced a lower
effective tax rate than in prior periods.
Merger-Related Costs and Other Charges
BANC ONE/FCN Merger
- -------------------
The Corporation estimates that net restructuring charges and merger-related
costs of approximately $1.25 billion ($837 million after-tax) will be incurred
in connection with the BANC ONE/FCN Merger. Actions incorporated in the
business combination and restructuring plan are targeted for implementation
over a 12-18 month period following the Merger. Merger-related and
restructuring costs recorded in the fourth quarter of 1998 totaled $984
million ($697 million after-tax), or 59 cents per share, consisting of a
restructuring charge of $636 million and merger-related costs of $348 million.
An additional $526 million of merger-related costs is expected to be incurred
during 1999. Gains on the required Indiana banking center divestitures, which
were completed during the 1999 first quarter, were approximately $260 million.
The $636 million restructuring charge included $421 million of personnel-
related expenses, $80 million of transaction costs and $135 million of exit
costs, including asset write-offs and the settlement or recognition of
17
<PAGE>
obligations under existing contractual arrangements. Personnel-related items
consisted primarily of severance and benefits costs for separated employees,
and costs associated with the "change in control" provisions included in
certain of the Corporation's stock plans. The benefit package available to
affected employees has been approved by management and communicated on a
corporate-wide basis. Trends in total headcount for the Corporation will
reflect growth in support of line of business strategies and reductions based
on eliminated positions resulting from the Merger. The net reduction in full-
time positions is expected to represent about 4-5% of September 30, 1998,
headcount over the next year. Facilities and equipment costs include the net
cost associated with the closing and divestiture of identified banking
facilities, and from the consolidation of headquarters and operational
facilities. Other merger-related transaction costs include investment banking
fees, registration and listing fees, and various accounting, legal and other
related transaction costs.
Merger-related costs of $348 million included $294 million related to the
accounting consequences of changes in business practices. Of this total, $260
million resulted from the modification, in light of the Merger, of a
contractual relationship to purchase credit card accounts. Previously
capitalized costs under this account sourcing agreement will be amortized over
a one-year period. On a going forward basis, such costs will be expensed as
incurred. Merger-related costs also included $54 million of business and
systems integration costs. Additional costs, totaling approximately $526
million, are estimated to be incurred during 1999.
First Commerce Corporation Acquisition
- --------------------------------------
In connection with the First Commerce acquisition, the Corporation
identified second quarter 1998 restructuring and merger-integration charges of
$182 million ($127 million after-tax), or 10 cents per share, of which $127
million was recorded as a restructuring charge, $44 million represented
integration costs and $11 million was associated with Year 2000 compliance.
The restructuring charge of $127 million associated with the First Commerce
acquisition consisted of employee benefits, severance and retention costs, and
other merger-related costs.
First USA, Inc. Acquisition
- ---------------------------
In connection with the First USA acquisition, the Corporation recognized
second quarter 1997 merger-related costs and restructuring charges of $371
million ($261 million after-tax), or 21 cents per share, of which $241 million
was recorded as a separate component of noninterest expense and $130 million
as additional provision for credit losses.
The restructuring costs associated with the First USA acquisition totaled
$241 million and consisted of employee benefits, severance and stock option
vesting costs; professional services costs; premiums to redeem preferred
securities of a subsidiary trust; asset-related write-downs and other
transaction-related costs.
The $130 million additional provision for credit losses primarily reflected
the reclassification of $2.0 billion of credit card loans previously
classified as held for sale to the loan portfolio, in connection with the
effort to consolidate the BANC ONE and First USA credit card master trusts,
and to conform credit card charge-off policies.
Other Charges
- -------------
The Corporation recorded other charges totaling $175 million ($118 million
after-tax), or 10 cents per share, in the fourth quarter of 1998, resulting
from its continuing review of the strategies and practices of its ongoing
businesses. These charges included $110 million in asset valuation
adjustments, primarily reflecting an estimate of impairment inherent in the
Corporation's auto lease portfolio, resulting from recent changes in both
business dynamics and economic factors. In addition, the Corporation
restructured its Rapid Cash business to position it for future growth and
profitability. Costs totaling $65 million were incurred, including write-offs
of certain ATM assets and the restructuring or settlement of vendor contracts.
In the second quarter of 1997, the Corporation recorded restructuring
charges totaling $96 million ($68 million after-tax), or 6 cents per share, to
streamline the retail delivery system by consolidating approximately 200
banking centers over a 12-month period and to halt development of the
Strategic Banking System, a retail deposit banking system.
18
<PAGE>
Business Segments
Highlights
The 1998 financial performance of the Corporation's major business lines--
Commercial Banking, and the consumer units of Credit Card, Retail Banking and
Finance One--are summarized below. Detailed descriptions of the major business
lines can be found beginning on page 2. The results of Investment Management,
a key product line that includes insurance sales, are allocated to Commercial
Banking, Credit Card and Retail Banking where the relevant customer business
resides. For reference, the earnings of Investment Management are also shown
separately. Previous years' results for all business lines are not available.
<TABLE>
<CAPTION>
Managed Average
Average Common
Net Assets Equity
Income ($MM) ROE ($B) ($B)
------------ --- ------- -------
<S> <C> <C> <C> <C>
Commercial Banking............................ $1,510 20% $146.7 $ 7.5
Credit Card................................... 1,162 20 62.7 5.7
Retail Banking................................ 592 21 32.8 2.9
Finance One................................... 313 18 34.1 1.7
Other activities/unallocated.................. 292 N/A 2.6 1.7
------ --- ------ -----
Total Operating............................. 3,869 20 278.9 19.5
Merger-related and special items.............. (761) -- -- --
------ --- ------ -----
Total BANK ONE.............................. $3,108 16% $278.9 $19.5
====== === ====== =====
Investment Management (included above)........ $ 250 35% $ -- $ 0.7
</TABLE>
- --------
N/A--Not applicable
Business Segment Management
The Corporation manages its lines of business based on risk, return and
growth. The reported returns on equity are on a risk-adjusted basis, with risk
being differentiated through the capital allocation process. Therefore,
returns will tend to converge within a relatively limited range. The capital
framework is based on a targeted AA debt rating for the Corporation, which is
considerably more conservative than that of peer competitors in most business
lines. Ongoing capital allocation to business lines will be based not only on
risk, but on growth expectations as well. Businesses with higher growth
potential will attract more capital and resources than those with lower growth
rates. Overall, this discipline aims to support superior growth and superior
total returns for the Corporation.
Description of Methodology
Although the Corporation's internal profitability reporting systems were not
combined in 1998, the line-of-business results were developed under a
consistent management accounting framework. A comprehensive project was
initiated in the second half of 1998 to evaluate the management accounting
practices of both predecessor organizations against the industry's "best
practices." This study will continue in 1999 to achieve common standards for
management reporting across the Corporation. Where significant differences in
methodology existed, conforming adjustments were made in 1998 results. Further
policy refinements may cause restatements of 1998 data in future reporting
periods.
Key elements of the management reporting process include:
. Funds Transfer Pricing--To determine net interest income for the
business units, a detailed process of charging/crediting for
assets/liabilities is employed. This system is designed to be consistent
with the Corporation's asset and liability management principles.
19
<PAGE>
. Cost Allocation--Costs of support units are fully allocated to the
business lines. Allocation processes will become more standardized in
1999 for these indirect expenses and overhead costs.
. Capital Attribution--Common equity is assigned to the business units
based on the underlying risk of their activities. Four forms of risk are
measured: credit, market, operational and lease residual. The risk
tolerance used in this framework is consistent with that required for a
AA debt rating. See page 37 for more information on economic capital.
Other Disclosure Issues
More detailed results for the lines of business follow, preceded by
explanatory comments.
. The merger-related and special charges, and banking center gains in 1998
totaling $1.082 billion pretax are not attributed to any line of
business; results are presented on an operating basis. See "Merger-
Related Costs and Other Charges" beginning on page 17 for additional
disclosure regarding these items.
. All disclosures are on a managed basis; securitized credit card
receivables, and related income statement line items, are presented as
if these were on-balance-sheet loans.
. The "other" category includes noncore business activities, predominantly
investments, as well as unallocated capital and certain one-time
corporate items.
The "Earnings Analysis" section beginning on page 12 provides more
information about the reconciliation of reported results to operating or
managed results.
<TABLE>
<CAPTION>
Commercial Banking 1998 Results
- --------------------------------------------------------------------------------
(In millions)
<S> <C>
Net interest income (FTE).......................................... $ 2,944
Provision for credit losses........................................ 224
Noninterest income................................................. 2,417
Noninterest expense................................................ 3,015
Net income......................................................... 1,510
Return on equity................................................... 20%
Efficiency ratio................................................... 56%
<CAPTION>
(In billions)
<S> <C>
Average loans...................................................... $ 77.1
Average assets..................................................... 146.7
Average common equity.............................................. 7.5
</TABLE>
- --------
FTE--Fully taxable equivalent.
Commercial Banking is the Corporation's largest earnings contributor,
serving business customers ranging in size from middle market to mid-sized
companies to large corporations. Commercial Banking also serves high-net-worth
customers in its private banking division. Product offerings in this business
line include traditional credit products, corporate finance, treasury
services, investment management and capital markets products. Other
contributors to Commercial Banking's earnings are the results of leveraged and
equipment leasing, proprietary investing and venture capital activities.
Credit risk constitutes the largest portion of the capital assigned to this
business.
For 1998, net income was $1.510 billion and return on equity reached 20%.
Looking ahead to the next two years, Commercial Banking aims to grow earnings
consistently 10-15% and produce returns of 15-20%.
20
<PAGE>
Consumer Businesses
The Corporation serves a number of different consumer customer markets with
a variety of products and through multiple delivery channels. For 1998, this
business was managed in three separate segments: Credit Card, Retail Banking
and Finance One. As the Corporation's strategy evolves, changes may be made in
this organizational structure.
<TABLE>
<CAPTION>
Credit Card 1998 Results
- -------------------------------------------------------------------------------
(In millions)
<S> <C>
Net interest income (FTE)......................................... $ 6,450
Provision for credit losses....................................... 3,302
Noninterest income................................................ 1,473
Noninterest expense............................................... 2,847
Net income........................................................ 1,162
Return on managed receivables..................................... 1.9%
Return on equity.................................................. 20%
Efficiency ratio.................................................. 36%
<CAPTION>
(In billions)
<S> <C>
Average loans..................................................... $61.0
Average assets.................................................... 62.7
Average common equity............................................. 5.7
</TABLE>
The world's leading credit card company, First USA contributed $1.162
billion, or 30% of corporate earnings for 1998. Return on managed receivables
was 1.9%. Innovative marketing--including an aggressive Internet strategy--is
expected to generate continued double-digit growth in outstandings. Credit
Card's near-term earnings targets are net income growth of 15-20% and return
on equity of 20-25%.
Capital is maintained at 9% of managed receivables. Many competitors in the
credit card business have debt ratings well below AA and, on average, carry
capital ratios of 5-6% of managed receivables. On this capitalization basis,
the return on equity for Credit Card would have been about 30% for 1998.
<TABLE>
<CAPTION>
Retail Banking 1998 Results
- --------------------------------------------------------------------------------
(In millions)
<S> <C>
Net interest income (FTE).......................................... $3,159
Provision for credit losses........................................ 131
Noninterest income................................................. 1,449
Noninterest expense................................................ 3,573
Net income......................................................... 592
Return on equity................................................... 21%
Efficiency ratio................................................... 78%
(In billions)
Average loans...................................................... $ 28.3
Average assets..................................................... 32.8
Average deposits................................................... 91.4
Average common equity.............................................. 2.9
</TABLE>
With average loans of more than $28 billion and deposits of $91 billion
generated through an extensive banking center network, ATMs, online banking
and other channels, the Retail Banking Group is one of the nation's premier
providers of financial services to individuals and small businesses. It earned
$592 million for 1998 and generated a 21% return on equity. More than half of
the capital allocation is related to operational risk and goodwill. Earnings
growth is targeted at 10-15% for the 1999 and 2000 time periods, which is
expected to be produced largely by merger synergies and gains in cost
efficiency. The return on equity goal is 15-20%.
21
<PAGE>
<TABLE>
<CAPTION>
Finance One 1998 Results
- --------------------------------------------------------------------------------
(In millions)
<S> <C>
Net interest income (FTE).......................................... $1,131
Provision for credit losses........................................ 299
Noninterest income................................................. 338
Noninterest expense................................................ 691
Net income......................................................... 313
Return on equity................................................... 18%
Efficiency ratio................................................... 47%
(In billions)
Average loans...................................................... $33.3
Average assets..................................................... 34.1
Average common equity.............................................. 1.7
</TABLE>
In 1998, the activities of Finance One--direct and indirect auto financing,
secured consumer finance, mortgage lending and other forms of secured
financing--produced net income of $313 million, or 8% of corporate operating
earnings. Return on equity was 18% and average loans grew to $33 billion.
Finance One looks for continued earnings growth of 15-20% in the next two
years and ongoing returns of 15-20%.
<TABLE>
<CAPTION>
Investment Management 1998 Results
- --------------------------------------------------------------------------------
(In millions)
<S> <C>
Total revenue...................................................... $1,194
Noninterest expense................................................ 811
Net income......................................................... 250
Return on equity................................................... 35%
Efficiency ratio................................................... 68%
<CAPTION>
(In billions)
<S> <C>
Assets under management ........................................... $122.3
Average common equity.............................................. 0.7
<CAPTION>
(In millions)
<S> <C>
Net income attribution:
Commercial......................................................... $ 135
Credit Card........................................................ 68
Retail Banking..................................................... 47
</TABLE>
Investment Management products are sold to retail and institutional
customers across the Corporation's business lines. Mutual funds, insurance,
annuities, and personal and corporate trust services form the core of this
business, which produced $250 million in net income for 1998. This business
plans to grow earnings 20-25% and generate a return on equity of 25% or
greater. Investment Management attracts a small amount of operational risk
capital.
<TABLE>
<CAPTION>
1998 Results
--------------------------------------
Other Activities and
Corporate/Unallocated Other Activities Corporate/Unallocated
- --------------------------------------- ---------------- ---------------------
(In millions)
<S> <C> <C>
Net interest income (FTE).............. $ 54 $ 90
Provision for credit losses............ -- (42)
Noninterest income..................... 251 142
Noninterest expense.................... 157 32
Net income............................. 97 195
<CAPTION>
(In billions)
<S> <C> <C>
Average loans.......................... 0.2 --
Average assets......................... 2.6 --
Average common equity.................. 0.2 1.5
</TABLE>
22
<PAGE>
The earnings of other activities totaled $97 million, derived principally
from noncore investing. Capital of $1.5 billion is not specifically assigned
to business units. This amount includes capital to cover corporate structural
interest-rate risk. Also, certain gains on sales of premises and other
corporate assets, as well as tax credits, are included in the
Corporate/Unallocated category.
See Note 6--Operating Segments for additional disclosure regarding the
Corporation's business segments.
Risk Management
The Corporation's various business activities generate liquidity, market and
credit risks.
. Liquidity risk is the possibility of being unable to meet all current and
future financial obligations in a timely manner.
. Market risk is the possibility that changes in future market rates or
prices will make the Corporation's positions less valuable.
. Credit risk is the possibility of loss from a customer's failure to
perform according to the terms of a transaction.
Compensation for assuming these risks is reflected in interest income,
trading profits and fee income. In addition, these risks are factored into the
allocation of capital to support various business activities, as discussed in
the "Capital Management" section, beginning on page 36.
The Corporation is a party to transactions involving financial instruments
that create risks that may or may not be reflected on a traditional balance
sheet. These financial instruments can be subdivided into three categories:
. Cash financial instruments, which are generally characterized as on-
balance-sheet transactions, and include loans, bonds, stocks and
deposits.
. Credit-related financial instruments, which include such instruments as
commitments to extend credit and standby letters of credit.
. Derivative financial instruments, which include such instruments as
interest rate, foreign exchange, equity price and commodity price
contracts, including forwards, swaps and options.
The Corporation's risk management policies are intended to identify, monitor
and limit exposure to liquidity, market and credit risks that arise from each
of these financial instruments.
Liquidity Risk Management
Liquidity is managed in order to preserve stable, reliable and cost-
effective sources of cash to meet all current and future financial obligations
in a timely manner. The Corporation considers strong capital ratios, credit
quality and core earnings as essential to retaining high credit ratings and,
consequently, cost-effective access to market liquidity. In addition, a
portfolio of liquid assets, consisting of federal funds sold, deposit
placements and selected highly marketable investment securities, is maintained
to meet short-term demands on liquidity.
The Consolidated Statement of Cash Flows, on page 44, presents data on cash
and cash equivalents provided and used in operating, investing and financing
activities.
The Corporation's ability to attract wholesale funds on a regular basis and
at a competitive cost is fostered by strong ratings from the major credit
rating agencies. As of December 31, 1998, the Corporation and its principal
banks had the following long- and short-term debt ratings.
Credit Ratings
<TABLE>
<CAPTION>
Senior
Short-Term Long-
Debt Term Debt
December 31, 1998 ------------ -----------
S & S &
P Moody's P Moody's
---- ------- --- -------
<S> <C> <C> <C> <C>
The Corporation (Parent)............................... A-1 P-1 A+ Aa3
Principal Banks........................................ A-1+ P-1 AA- Aa2
</TABLE>
The Treasury department is responsible for identifying, measuring and
monitoring the Corporation's liquidity profile. The position is evaluated
monthly by analyzing the composition of the liquid asset portfolio,
23
<PAGE>
performing various measures to determine the sources and stability of the
wholesale purchased funds market, tracking the exposure to off-balance-sheet
draws on liquidity, and monitoring the timing differences in short-term cash
flow obligations.
Access to a variety of funding markets and customers in the retail and
wholesale sectors is vital both to liquidity management and to cost
minimization. A large retail customer deposit base is one of the significant
strengths of the Corporation's liquidity position. In addition, a diversified
mix of short- and long-term funding sources from the wholesale markets is
maintained through active participation in global capital markets and by
securitizing and selling assets such as credit card receivables.
The following table shows the total funding source mix for the periods
indicated.
Deposits and Other Purchased Funds
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
December 31 (In millions) -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Domestic offices
Demand........................... $ 39,854 $ 35,954 $ 33,479 $ 31,653 $ 30,463
Savings.......................... 62,645 58,946 56,359 52,463 51,637
Time
Under $100,000................. 24,483 28,815 30,955 31,184 29,267
$100,000 and over.............. 11,819 11,329 10,312 10,753 10,780
Foreign offices.................... 22,741 18,682 14,101 19,290 20,296
-------- -------- -------- -------- --------
Total deposits............... 161,542 153,726 145,206 145,343 142,443
Federal funds purchased and
securities under repurchase
agreements........................ 23,164 20,346 21,662 24,906 23,613
Commercial paper................... 2,113 1,507 2,446 941 1,479
Other short-term borrowings........ 14,824 11,299 10,593 12,781 12,006
Long-term debt (1)................. 22,298 21,546 15,363 12,582 10,275
-------- -------- -------- -------- --------
Total other purchased funds.. 62,399 54,698 50,064 51,210 47,373
-------- -------- -------- -------- --------
Total........................ $223,941 $208,424 $195,270 $196,553 $189,816
======== ======== ======== ======== ========
</TABLE>
- --------
(1) Includes trust preferred capital securities.
Market Risk Management
Overview
Market risk refers to potential losses arising from changes in interest
rates, foreign exchange rates, equity prices, commodity prices and other
market-driven rates, prices or volatilities. The Corporation has developed
risk-management policies to monitor and limit exposure to market risk. Through
its trading activities, the Corporation strives to take advantage of profit
opportunities available in interest and exchange rate movements. In asset and
liability management activities, policies are in place that are designed to
closely manage structural interest rate and foreign exchange rate risk.
Disclosures about the fair value of financial instruments, which reflect
changes in market prices and rates, can be found in Note 21--Fair Value of
Financial Instruments.
Trading Activities
The Corporation's trading activities are primarily customer-oriented. Cash
instruments are sold to satisfy customers' investment needs. Derivative
contracts are initially entered into to satisfy the risk management needs of
customers. In general, the Corporation then enters into offsetting positions
to reduce market risk. In order to accommodate customers, an inventory of
capital markets instruments is carried, and access to market liquidity is
24
<PAGE>
maintained by making bid-offer prices to other market makers. The Corporation
may also take proprietary positions in various capital markets cash
instruments and derivatives, and these positions are designed to profit from
anticipated changes in market factors.
Many trading positions are kept open for brief periods of time, often less
than one day. Other positions may be held for longer periods. Trading
positions are valued at estimated fair value. Realized and unrealized gains
and losses on these positions are included in noninterest income as trading
profits.
The Corporation manages its market risk through a value-at-risk measurement
and control system, through stress testing, and through dollar limits imposed
on trading desks and individual traders. Value-at-risk is intended to measure
the maximum fair value the Corporation could lose on a trading position, given
a specified confidence level and time horizon. The overall market risk that
any line of business can assume, as measured by value-at-risk, is approved by
the Risk Management Committee of the Board of Directors. Value-at-risk limits
and exposure are monitored on a daily basis for each significant trading
portfolio. Stress testing is similar to value-at-risk except that the
confidence level is geared to capture more extreme, less frequent market
events.
The following table shows average, high and low value-at-risk derived from
the four quarter-ends of 1998, along with value-at-risk figures for December
31, 1998, and December 31, 1997. The activities covered by the table include
trading activities and certain other activities, primarily investment
securities classified as available-for-sale, that are managed principally as
trading risk. During 1998, the Corporation modified the confidence level used
for the calculation of value-at-risk to 99% from 99.87%. This change was made
to make the value-at-risk figures more comparable to those of other financial
institutions, and to gain consistency with regulatory requirements. All
amounts in the following table are calculated at the 99% confidence level.
Value-At-Risk
<TABLE>
<CAPTION>
1998 1998 1998 December 31, December 31,
Average High Low 1998 1997
(In millions) ------- ---- ---- ------------ ------------
<S> <C> <C> <C> <C> <C>
Risk Type
Interest rate..................... $23 $27 $16 $27 $20
Exchange rate..................... 2 2 1 2 5
Equity............................ 2 3 1 2 2
Commodity......................... -- 1 -- -- 1
Diversification benefit........... (2) (2)
--- ---
Aggregate portfolio market risk..... $29 $26
=== ===
</TABLE>
The Corporation's value-at-risk calculation measures potential losses in
fair value using a 99% confidence level and a one-day time horizon. Value-at-
risk is calculated using various statistical models and techniques for cash
and derivative positions including options. Through the use of observed
statistical correlations, the Corporation is able to recognize risk-reducing
diversification benefits across certain trading portfolios. However, the
reported value-at-risk remains somewhat overstated because not all offsets and
correlations are fully considered in the calculation.
Interest rate risk was the predominant type of market risk incurred during
1998. As of December 31, 1998, before taking diversification benefits into
account, approximately 87% of primary market risk exposures were related to
interest rate risk. Exchange rate, equity and commodity risks accounted for
6%, 6% and 1%, respectively, of primary market risk exposures.
Approximately 49% of interest rate risk was generated by U.S. Treasury
securities and mortgage-backed securities. Interest rate derivatives accounted
for 21% of total interest rate risk. About 11% of interest rate risk was
generated by municipal securities, and 10% by corporate securities. The
remaining interest rate risk was derived from money market, foreign exchange
and various other trading activities.
25
<PAGE>
Within the category of exchange rate risk, 82% of the risk was generated by
foreign exchange spot, forward and option trading. Of the exchange rate risk
arising from these activities, 60% related to major currency exposures and 40%
to minor currencies. The remaining exchange rate risk was largely from
interest rate and equity derivatives trading.
Equity price risk was primarily generated by equity derivatives trading
activities in Chicago, London and Tokyo.
Commodity price risk was generated by the Corporation's commodity
derivatives desk in Chicago, which specializes in those products eligible for
bank trading under regulatory requirements.
At December 31, 1998, market risk exposures were 11% higher than at year-end
1997. This increase is attributable to a 35% increase in reported interest
rate risk, primarily reflecting increased positions in U. S. Treasury,
mortgage-backed and municipal securities. It should also be noted that
increased market volatility in the second half of 1998 had the effect of
increasing value-at-risk calculations, which are a function of historical
volatility.
Structural Interest Rate Risk Management
Interest rate risk exposure in the Corporation's non-trading activities
(i.e., asset liability management ("ALM") position) is created from repricing,
option and basis risks that exist in on- and off-balance-sheet positions.
Repricing risk occurs when interest-rate-sensitive financial asset or
liability positions reprice at different times as interest rates change. Basis
risk arises from a shift in the relationship of the rates on different
financial instruments. Option risk is due to "embedded options" often present
in customer products including interest rate, prepayment and early withdrawal
options; administered interest rate products; deposit products with no
contractual maturity structure; and certain off-balance sheet sensitivities.
These embedded option positions are complex risk positions that are difficult
to offset completely and, thus, represent the primary risk of loss to the
Corporation.
The Corporation's policies strictly limit which business units are permitted
to assume interest rate risk. The level of interest rate risk that can be
taken is closely monitored and managed by a comprehensive risk control
process. The Market and Investment Risk Management Committee, consisting of
senior executives of the finance group, credit and market risk oversight
units, and line of business units, are responsible for establishing the market
risk parameters acceptable for the Corporation's ALM position. Through these
parameters the Committee balances the return potential of the ALM position
against the desire to limit volatility in earnings and/or economic value. The
ALM position is measured and monitored using sophisticated and detailed risk
management tools, including earnings simulation modeling and economic value of
equity sensitivity analysis, to capture both near-term and longer-term
interest rate risk exposures. The Committee establishes the risk measures,
risk limits, policy guidelines and the internal control mechanisms
(collectively referred to as the Interest Rate Risk Policy) for managing
overall ALM exposure. The Interest Rate Risk Policy is reviewed and approved
by a committee of the Board of Directors.
Earnings simulation analysis, or earnings-at-risk, measures the sensitivity of
pretax earnings to various interest rate movements. The base-case scenario is
established using the forward yield curve. The comparative scenarios assume an
immediate parallel shock of the forward curve in increments of plus or minus 100
basis point rate movements. Additional scenarios are analyzed, including more
gradual rising or falling rate changes and non-parallel rate shifts. The
interest rate scenarios are used for analytical purposes and do not necessarily
represent management's view of future market movements. Estimated earnings for
each scenario are calculated over a forward-looking 12 month horizon.
26
<PAGE>
The Corporation's earnings sensitivity profile as of year-end 1998 and 1997
is stated below.
<TABLE>
<CAPTION>
Immediate
Change in Rates
---------------
-100 bp +100 bp
Pretax earnings change ------- -------
<S> <C> <C>
December 31, 1998............................................... 1.5% (1.8)%
==== ======
December 31, 1997............................................... 1.7% (1.4)%
==== ======
</TABLE>
Assumptions are made in modeling the sensitivity of earnings to interest
rate changes. For residential mortgage whole loans, mortgage-backed securities
and collateralized mortgage obligations, the earnings simulation model
captures the expected prepayment behavior under changing interest rate
environments. Additionally, the model measures the impact of interest rate
caps and floors on adjustable-rate products. Assumptions regarding the
interest rate or balance behavior of indeterminate maturity products (savings,
money market, NOW and demand deposits) reflect management's best estimate of
expected future behavior. Sensitivity of service fee income to market interest
rate levels, such as those related to securitized credit card receivables and
cash management products, is included as well.
For some embedded option positions, the risk exposure occurs at a time
period beyond the 12 months captured in earnings sensitivity analysis.
Management utilizes a market value of equity sensitivity technique to capture
the risk in these longer-term risk positions. This analysis involves
calculating future cash flows over the full life of all current assets,
liabilities and off-balance-sheet positions under hundreds of different rate
paths. The discounted present value of all cash flows represents the
Corporation's economic value of equity. The change in this economic value of
equity to shifts in the yield curve allows management to measure longer-term
repricing and option risk in the portfolio. Interest rate risk in trading
activities and other activities, primarily certain investment securities
classified as available-for-sale, is managed principally as trading risk.
Access to the derivatives market is an important element in maintaining the
Corporation's desired interest rate risk position. In general, the assets and
liabilities generated through ordinary business activities do not naturally
create offsetting positions with respect to repricing, basis or maturity
characteristics. Using off-balance-sheet instruments, principally plain
vanilla interest rate swaps (ALM swaps), the interest rate sensitivity of
specific on-balance-sheet transactions, as well as pools of assets or
liabilities, is adjusted to maintain the desired interest rate risk profile.
At December 31, 1998, the notional value of ALM interest rate swaps totaled
$26.1 billion, including $13.5 billion against specific transactions and $12.6
billion against specific pools of assets or liabilities.
Asset and Liability Management Derivatives--Notional Principal
<TABLE>
<CAPTION>
Pay Fixed
Receive Fixed Receive
December 31, 1998 (In Pay Floating Floating Basis Swaps
millions) --------------- --------------- ------------- Total
Specific Pool Specific Pool Specific Pool Swaps
-------- ------ -------- ------ -------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Swaps associated with:
Loans.................. $ -- $5,327 $ 341 $2,825 $ -- $400 $ 8,893
Investment securities.. 273 -- 1,213 -- 154 -- 1,640
Deposits............... 20 3,421 -- -- -- -- 3,441
Funds borrowed
(including long-term
debt)................. 11,060 -- 375 100 50 552 12,137
------- ------ ------ ------ ---- ---- -------
Total................ $11,353 $8,748 $1,929 $2,925 $204 $952 $26,111
======= ====== ====== ====== ==== ==== =======
</TABLE>
27
<PAGE>
Swaps used to adjust the interest rate sensitivity of specific transactions
will not need to be replaced at maturity, since the corresponding asset or
liability will mature along with the swap. However, swaps against the asset
and liability pools will have an impact on the overall risk position as they
mature and may need to be reissued to maintain the same interest rate risk
profile. These swaps could create modest earnings sensitivity to changes in
interest rates.
The notional amounts, expected maturity, and weighted average pay and
receive rates for the ALM swap position at December 31, 1998, are summarized
below. For generic swaps, the maturities are contractual. In the table below,
the variable interest rates--which generally are the prime rate, federal funds
rate or the one-month, three-month and six-month London interbank offered
rates ("LIBOR") in effect on the date of repricing--are assumed to remain
constant. However, interest rates will change and consequently will affect the
related weighted average information presented in the table.
Asset and Liability Management Swaps--Maturities and Rates
<TABLE>
<CAPTION>
December 31, 1998 (Dollars 1999 2000 2001 2002 2003 Thereafter Total
in millions) ------- ------ ------ ------ ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive fixed/pay floating
swaps
Notional amount......... $ 8,452 $2,117 $1,754 $1,422 $2,056 $4,300 $20,101
Weighted average
Receive rate.......... 6.16% 6.27% 6.64% 6.84% 6.26% 6.70% 6.39%
Pay rate.............. 5.36% 5.22% 5.34% 5.48% 5.42% 5.41% 5.34%
Pay fixed/receive floating
swaps
Notional amount......... $ 1,622 $1,560 $ 305 $ 629 $ 266 $ 472 $ 4,854
Weighted average
Receive rate.......... 5.37% 5.38% 5.43% 5.39% 5.53% 5.25% 5.38%
Pay rate.............. 6.13% 6.10% 6.21% 5.89% 6.14% 6.05% 6.09%
Basis swaps
Notional amount......... $ 755 $ 197 $ 50 $ -- $ -- $ 154 $ 1,156
------- ------ ------ ------ ------ ------ -------
Total notional amount..... $10,829 $3,874 $2,109 $2,051 $2,322 $4,926 $26,111
======= ====== ====== ====== ====== ====== =======
</TABLE>
Foreign Exchange Risk Management
Whenever possible, foreign currency-denominated assets are funded with
liability instruments denominated in the same currency. If a liability
denominated in the same currency is not immediately available or desired, a
forward foreign exchange contract is used to fully hedge the risk due to
cross-currency funding.
To minimize the earnings and capital impact of translation gains or losses
measured on an after-tax basis, the Corporation uses forward foreign exchange
contracts to hedge the exposure created by investments in overseas branches
and subsidiaries.
Credit Risk Management
The Corporation has developed policies and procedures to manage the level
and composition of risk in its credit portfolio. The objective of this credit
risk management process is to quantify and manage credit risk on a portfolio
basis as well as to reduce the risk of a loss resulting from a customer's
failure to perform according to the terms of a transaction.
Customer transactions create credit exposure that is reported both on and
off the balance sheet. On-balance-sheet credit exposure includes such items as
loans. Off-balance-sheet credit exposure includes unfunded credit commitments
and other credit-related financial instruments. Credit exposure resulting from
derivative financial instruments are reported both on and off the balance
sheet; see page 35 for more details.
28
<PAGE>
Selected Statistical Information
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
(Dollars in millions) -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
At year-end
Loans outstanding.......... $155,398 $159,579 $153,496 $138,478 $125,145
Nonperforming loans........ 729 609 536 661 614
Other real estate owned.... 90 61 71 99 140
Nonperforming assets....... 819 670 607 760 754
Allowance for credit
losses.................... 2,271 2,817 2,687 2,422 2,192
Nonperforming assets/loans
outstanding and other real
estate owned.............. 0.53% 0.42% 0.40% 0.55% 0.60%
Allowance for credit
losses/loans outstanding.. 1.46 1.77 1.75 1.75 1.75
Allowance for credit
losses/nonperforming
loans..................... 312 463 501 366 357
For the year
Average loans.............. $154,952 $155,926 $146,094 $130,614 $117,145
Net charge-offs............ 1,498 1,887 1,522 768 561
Net charge-offs/average
loans..................... 0.97% 1.21% 1.04% 0.59% 0.48%
</TABLE>
For analytical purposes, the Corporation's portfolio is divided into
commercial, consumer and credit card segments.
Loan Composition
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
December 31 (In millions) -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Commercial
Domestic
Commercial..................... $ 53,362 $ 48,458 $ 44,791 $ 40,587 $ 36,914
Real estate
Construction................. 5,108 4,639 4,387 3,820 3,191
Other........................ 17,787 16,545 16,016 15,106 14,105
Lease financing................ 6,236 4,537 4,258 3,335 2,631
Foreign.......................... 5,945 5,127 4,160 3,984 3,452
-------- -------- -------- -------- --------
Total commercial........... 88,438 79,306 73,612 66,832 60,293
Consumer
Residential real estate.......... 12,215 15,221 14,862 14,665 13,651
Home equity...................... 13,589 12,867 12,079 9,384 7,823
Automotive (1)................... 20,634 17,998 17,293 15,946 16,030
Student.......................... 3,129 3,219 3,304 2,856 2,779
Other............................ 8,359 8,303 7,491 7,270 7,309
-------- -------- -------- -------- --------
Total consumer............. 57,926 57,608 55,029 50,121 47,592
Credit card (2).................... 9,034 22,665 24,855 21,525 17,260
-------- -------- -------- -------- --------
Total...................... $155,398 $159,579 $153,496 $138,478 $125,145
======== ======== ======== ======== ========
</TABLE>
- --------
(1) Includes auto lease receivables.
(2) During 1998, the Corporation's certificated retained interest in credit
card securitizations were reclassified to investment securities--
available-for-sale. At December 31, 1998, the certificated retained
interest totaled $16.7 billion.
29
<PAGE>
Allowance for Credit Losses
The allowance for credit losses is maintained at a level that in
management's judgment is adequate to provide for estimated probable credit
losses inherent in various on- and off-balance-sheet financial instruments.
The level of the allowance reflects management's formal review and analysis of
potential credit losses, as well as prevailing economic conditions.
Analysis of Allowance for Credit Losses
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
(In millions) ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year................ $2,817 $2,687 $2,422 $2,192 $2,222
Provision for credit losses............... 1,408 1,988 1,716 1,067 558
Charge-offs
Commercial
Domestic
Commercial.......................... 222 200 174 137 118
Real estate
Construction....................... 3 3 3 7 4
Other.............................. 25 19 28 41 54
Lease financing..................... 20 12 15 13 9
Foreign............................... 52 -- 2 1 9
------ ------ ------ ------ ------
Total commercial.................... 322 234 222 199 194
Consumer
Residential mortgage.................. 26 18 8 9 10
Home equity........................... 48 34 24 9 8
Automotive............................ 281 311 248 165 123
Other................................. 246 256 209 127 102
------ ------ ------ ------ ------
Total consumer...................... 601 619 489 310 243
Credit card............................. 1,022 1,544 1,216 616 522
------ ------ ------ ------ ------
Total charge-offs................... 1,945 2,397 1,927 1,125 959
Recoveries
Commercial
Domestic
Commercial.......................... 68 97 87 105 119
Real estate
Construction....................... 3 6 10 6 8
Other.............................. 23 29 27 21 23
Lease financing..................... 5 3 4 6 4
Foreign............................... 1 12 15 9 44
------ ------ ------ ------ ------
Total commercial.................... 100 147 143 147 198
Consumer
Residential mortgage.................. 4 7 4 5 8
Home equity........................... 7 7 4 4 3
Automotive............................ 113 122 98 70 63
Other................................. 64 63 55 39 40
------ ------ ------ ------ ------
Total consumer...................... 188 199 161 118 114
Credit card............................. 159 164 101 92 86
------ ------ ------ ------ ------
Total recoveries.................... 447 510 405 357 398
Net charge-offs........................... 1,498 1,887 1,522 768 561
Other..................................... (456) 29 71 (69) (27)
------ ------ ------ ------ ------
Balance, end of year...................... $2,271 $2,817 $2,687 $2,422 $2,192
====== ====== ====== ====== ======
</TABLE>
As part of the BANC ONE/FCN Merger integration, the accounting and credit
practices associated with the Credit Card businesses were conformed, including
the balance sheet classification of the Corporation's investment in its
interest (seller's interest) in securitized credit card receivables, the
timing of charge-offs and
30
<PAGE>
the appropriate reserves that should be maintained against remaining credit
risk. Conforming these practices in the fourth quarter of 1998 resulted in the
transfer of $375 million from the allowance for credit losses to a securities
valuation account. As a result, such investment securities (seller's interest
and the interest only strip) are carried at fair value. The remaining transfer
was primarily related to First USA's contribution of its $1.6 billion private-
label credit card portfolio to a new joint venture formed with GE Capital
Corporation. During 1997, an additional $130 million provision for credit
losses was taken as a result of the reclassification of credit card loans and
to conform credit card charge-off policies.
Nonperforming Assets
At December 31, 1998, nonperforming assets totaled $819 million, compared
with $670 million at year-end 1997 and $607 million at year-end 1996.
Nonperforming assets at December 31, 1998, included $729 million of
nonperforming loans and $90 million of other real estate owned.
Nonaccrual loans at year-end 1998 included $41 million of foreign loans,
compared with $26 million of foreign loans at year-end 1997.
The following table shows a breakout of nonperforming assets for the past
five years.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
December 31 (Dollars in millions) ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Nonaccrual loans...................... $ 729 $608 $528 $637 $584
Accrual renegotiated loans............ -- 1 8 24 30
------ ----- ----- ----- -----
Total nonperforming loans (1)..... 729 609 536 661 614
Other real estate owned............... 90 61 71 99 140
------ ----- ----- ----- -----
Total nonperforming assets........ $ 819 $670 $607 $760 $754
====== ===== ===== ===== =====
Nonperforming assets/loans outstanding
and other real estate owned.......... 0.53% 0.42% 0.40% 0.55% 0.60%
====== ===== ===== ===== =====
</TABLE>
- --------
(1) The amount of interest on nonperforming loans that would have been
recorded in 1998 totaled $76 million. Of this amount, $28 million was
actually recorded in 1998.
Consumer Risk Management
Consumer loans consist of credit card receivables as well as residential
mortgage and home equity loans, automobile financing, student loans and other
forms of consumer installment credit. The consumer and credit card loan
portfolio decreased during the year to $67.0 billion at year-end 1998.
Including securitized credit card receivables, the consumer portfolio
increased $10.3 billion, or 9%, to $128.0 billion at December 31, 1998.
Consumer and Credit Card Loans
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
December 31 (In millions) -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Credit card (1)...................... $ 9,034 $ 22,665 $ 24,855 $21,525 $17,260
Residential real estate.............. 12,215 15,221 14,862 14,665 13,651
Home equity.......................... 13,589 12,867 12,079 9,384 7,823
Automotive (2)....................... 20,634 17,998 17,293 15,946 16,030
Student.............................. 3,129 3,219 3,304 2,856 2,779
Other consumer....................... 8,359 8,303 7,491 7,270 7,309
-------- -------- -------- ------- -------
Total owned........................ 66,960 80,273 79,884 71,646 64,852
Securitized credit card.............. 60,993 37,414 29,303 25,179 15,955
-------- -------- -------- ------- -------
Total managed...................... $127,953 $117,687 $109,187 $96,825 $80,807
======== ======== ======== ======= =======
</TABLE>
- --------
(1) During 1998, the Corporation's certificated retained interest in credit
card securitizations were reclassified to investment securities--
available-for-sale. At December 31, 1998, the certificated retained
interest totaled $16.7 billion.
(2) Includes auto lease receivables.
31
<PAGE>
Consumer risk management uses sophisticated risk assessment tools across
each of the consumer lines of business, including credit cards, loans secured
by real estate, automobile loans and leases, and other unsecured loans. With
these tools, management targets the product and price offering that best
matches the consumer risk profile.
Management continues to proactively manage the risk/reward relationship of
each consumer loan portfolio segment, such that profitability targets and
required rates of return on investment are achieved.
For the credit card portfolio, loss potential is tested using expected
levels of losses based on delinquencies and other risk characteristics of the
portfolio. For the other segments of the consumer portfolio, reserve factors
are based on historical loss rates, delinquency trends and other relevant risk
factors.
Managed Credit Card Receivables
<TABLE>
<CAPTION>
1998 1997 1996
(Dollars in millions) ------- ------- -------
<S> <C> <C> <C>
Average balances
Credit card loans................................... $15,628 $22,880 $22,926
Securitized credit card receivables................. 44,904 31,992 26,533
------- ------- -------
Total average managed credit card receivables..... $60,532 $54,872 $49,459
======= ======= =======
Total net charge-offs (including securitizations)..... $ 3,369 $ 3,391 $ 2,609
======= ======= =======
Net charge-offs/average total managed receivables..... 5.57% 6.18% 5.28%
Credit card delinquency rate at period end
30 or more days..................................... 4.47 4.90 4.96
90 or more days..................................... 1.98 2.11 2.07
</TABLE>
Managed credit card receivables (i.e., those held in the portfolio and those
sold to investors through securitization) were $70.0 billion at December 31,
1998, up 17% from year-end 1997. Average managed credit card receivables were
$60.5 billion for 1998, up 10% from 1997. The Corporation purchased the credit
card operations of Chevy Chase Bank, FSB, including $4.8 billion of managed
credit card loans, on September 30, 1998.
The managed credit card charge-off rate of 5.57% in 1998 was down from 6.18%
in 1997, including the effect of charge-off policy conformance changes in the
fourth quarter of 1998. Without conforming such practices, the 1998 charge-off
ratio would have been 5.74%, still improved from that of 1997. In addition,
30- and 90-day delinquency rates at year-end 1998 improved from those of a
year ago.
For 1999, credit card performance is expected to remain stable or improve
modestly. Debt service burdens have eased following the decline in interest
rates during 1998 and continued real wage growth. The growth rate of personal
bankruptcies slowed in 1998, but bankruptcy filings remain at historically
high levels. Competition for new creditworthy customers remains intense.
Management continues to review credit limits, close high-risk unprofitable
accounts, tighten new account solicitation criteria, monitor authorization
criteria, and review policies and procedures for delinquency management and
collection.
Other Consumer Loans
<TABLE>
<CAPTION>
1998 1997 1996
(Dollars in millions) ------- ------- -------
<S> <C> <C> <C>
Average balances..................................... $57,206 $56,410 $51,792
======= ======= =======
Total net charge-offs................................ $ 413 $ 420 $ 328
======= ======= =======
Net charge-offs/average balances..................... 0.72% 0.74% 0.63%
======= ======= =======
</TABLE>
Other consumer loans, primarily loans secured by real estate as well as auto
loans and leases, continued to exhibit sound credit quality. The net charge-
off rate for non-credit card consumer loans in 1998 was 0.72%, down
32
<PAGE>
two basis points from 1997. The composition of the consumer loan portfolio
provides broad diversification of risk from both a product and geographic
perspective. Centralized underwriting and sophisticated risk-assessment tools
and collection practices contributed to this sound credit performance.
Commercial Risk Management
The commercial risk portfolio includes all domestic and foreign commercial
credit exposure. Credit exposure includes the credit risks associated with
both on- and off-balance-sheet financial instruments.
Commercial loans increased 12% from $79.3 billion at December 31, 1997, to
$88.4 billion at December 31, 1998. Nonperforming commercial assets increased
$149 million to $819 million at year-end 1998, from $670 million at December
31, 1997. Commercial net charge-offs were $222 million, or 0.27% of average
loans, in 1998, compared with $87 million, or 0.11%, in 1997.
In the commercial portfolio, credit quality is rated according to defined
levels of credit risk. The lower categories of credit risk are equivalent to
the four bank regulatory classifications: Special Mention, Substandard,
Doubtful and Loss. These categories define levels of credit deterioration at
which it may be increasingly difficult for the Corporation to be repaid fully
without restructuring the credit.
Each quarter, the Corporation conducts an asset-by-asset review of
significant lower-rated credit or country exposure. Potential losses are
identified during this review, and reserves are adjusted accordingly.
Commercial Real Estate
Commercial real estate consists primarily of loans secured by real estate as
well as certain loans that are real estate-related. A loan is categorized as
real estate-related when 80% or more of the borrower's revenues are derived
from real estate activities and the loan is not collateralized by cash or
marketable securities.
At December 31, 1998, commercial real estate loans totaled $22.9 billion, or
26% of commercial loans, compared with $21.2 billion, or 27% of commercial
loans, at December 31, 1997. During 1998, net charge-offs in the commercial
real estate portfolio segment were $2 million, compared with net recoveries of
$13 million in 1997. Nonperforming commercial real estate assets, including
other real estate owned, totaled $337 million, or 1.5% of related assets, at
December 31, 1998, compared with $280 million, or 1.3% of related assets, at
December 31, 1997.
Foreign Outstandings
At December 31, 1998, there were no countries for which cross-border and net
local currency claims exceeded 1% of total assets. The table below presents a
breakout of foreign outstandings for year-end 1997 and 1996, when such
outstandings to Japan exceeded 1.0% of total assets. The amounts have been
prepared using the Federal Financial Institutions Examination Council's
reporting guidelines. Under the guidelines, local country claims, which
include both local and nonlocal currency activity, are reported net of local
country liabilities. Included in claims are loans, balances with banks,
acceptances, securities, equity investments, accrued interest and other
monetary assets. The 1997 cross-border claims presented below included $641
million of current credit exposure on derivative contracts, net of master
netting agreements. Current credit exposure on derivative contracts is not
included in the reported 1996 amounts.
<TABLE>
<CAPTION>
Cross-Border Claims
------------------------- Total Cross-
Governments Net Local Border & Net
& Official Country Local Country
December 31 Banks Institutions Other Claims Claims
(In millions) ----------- ------ ------------ ----- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Japan (1)........ 1997 $4,225 $-- $386 $-- $4,611
1996 3,782 -- 22 -- 3,804
</TABLE>
- --------
(1) At year-end 1997 and 1996, local country claims were reduced by local
country liabilities of $83 million and $161 million, respectively.
33
<PAGE>
At December 31, 1998, Germany was the only country for which cross-border
and net local country claims totaled between 0.75% and 1.0% of total assets.
Such outstandings totaled $2.194 billion and included $982 million of current
credit exposure on derivative contracts.
At December 31, 1997, and December 31, 1996, there were no countries for
which cross-border and net local country claims totaled between 0.75% and 1.0%
of total assets.
Derivative Financial Instruments
The Corporation uses a variety of derivative financial instruments in its
trading, asset and liability management, and corporate investment activities.
These instruments include interest rate, currency, equity and commodity swaps,
forwards, spot, futures, options, caps, floors, forward rate agreements, and
other conditional or exchange contracts, and include both exchange-traded and
over-the-counter contracts. See Note 20(c), beginning on page 69, for a
discussion of the nature and terms of derivative financial instruments.
Notional Principal or Contractual Amounts of Derivative Financial Instruments
The following tables represent the gross notional principal or contractual
amounts of outstanding derivative financial instruments used in certain
activities. These amounts indicate the volume of transaction activity, and
they do not represent the market or credit risk associated with these
instruments. In addition, such volumes do not reflect the netting of
offsetting transactions.
<TABLE>
<CAPTION>
Asset and
Liability
Trading Management Total
December 31, 1998 (In billions) ------- ---------- ------
<S> <C> <C> <C>
Interest rate contracts.............................. $1,182 $26 $1,208
Foreign exchange contracts........................... 251 3 254
Equity contracts..................................... 9 -- 9
Commodity contracts.................................. 2 -- 2
------ --- ------
Total............................................ $1,444 $29 $1,473
====== === ======
<CAPTION>
December 31, 1997 (In billions)
<S> <C> <C> <C>
Interest rate contracts.............................. $ 826 $37 $ 863
Foreign exchange contracts........................... 422 2 424
Equity contracts..................................... 12 -- 12
Commodity contracts.................................. 3 -- 3
------ --- ------
Total............................................ $1,263 $39 $1,302
====== === ======
</TABLE>
Accounting for Derivative Financial Instruments
Derivative financial instruments used in trading activities are valued at
estimated fair value. Such instruments include swaps, forwards, spot, futures,
options, caps, floors and forward rate agreements and other conditional or
exchange contracts in the interest rate, foreign exchange, equity and
commodity markets. The estimated fair values are based on quoted market prices
or pricing and valuation models on a present value basis using current market
information. Realized and unrealized gains and losses are included in
noninterest income as trading profits. Where appropriate, compensation for
credit risk and ongoing servicing is deferred and recorded as income over the
terms of the derivative financial instruments.
Derivative financial instruments used in ALM activities, principally
interest rate swaps, are typically classified as synthetic alterations or
anticipatory hedges and are required to meet specific criteria. Such interest
rate swaps are designated as ALM derivatives, and are linked to and adjust the
interest rate sensitivity of a specific asset, liability, firm commitment, or
anticipated transaction or a specific pool of transactions with similar risk
characteristics. Interest rate swaps that do not meet these and the following
criteria are designated as derivatives used in trading activities and are
accounted for at estimated fair value.
34
<PAGE>
Synthetic Alteration--(1) the asset or liability to be converted creates
exposure to interest rate risk; (2) the swap is effective as a synthetic
alteration of the balance sheet item; (3) the start date of the swap does not
extend beyond that point in time at which it is believed that modeling systems
produce reliable interest rate sensitivity information; and (4) the related
balance sheet item, from trade date to final maturity, has sufficient balances
for alteration.
Anticipatory Hedge--(1) the transaction to be hedged creates exposure to
interest rate risk; (2) the swap acts to reduce inherent rate risk by moving
closer to being insensitive to interest rate changes; (3) the swap is
effective as a hedge of the transaction; (4) the significant characteristics
and expected terms of the anticipated transaction are identified; and (5) it
is probable that the anticipated transaction will occur.
Income or expense on most ALM derivatives used to manage interest rate
exposure is recorded on an accrual basis, as an adjustment to the yield of the
linked exposures over the periods covered by the contracts. This matches the
income recognition treatment of that exposure, generally assets or liabilities
carried at historical cost, that are recorded on an accrual basis. If an
interest rate swap is terminated early or dedesignated as an ALM derivative,
any unrecognized gain or loss at that point in time is deferred and amortized
as an adjustment of the yield on the linked interest rate exposure position
over the remaining periods originally covered by the swap. If all or part of a
linked position is terminated, e.g., a linked asset is sold or prepaid, or if
the amount of an anticipated transaction is likely to be less than originally
expected, the related pro rata portion of any unrecognized gain or loss on the
swap is recognized in earnings at that time, and the related pro rata portion
of the swap is subsequently accounted for at estimated fair value.
Purchased option, cap and floor contracts are reported in derivative product
assets, and written option, cap and floor contracts are reported in derivative
product liabilities. For other derivative financial instruments, an unrealized
gain is reported in derivative product assets, and an unrealized loss is
reported in derivative product liabilities. However, fair value amounts
recognized for derivative financial instruments executed with the same
counterparty under a legally enforceable master netting arrangement are
reported on a net basis. Cash flows from derivative financial instruments are
reported net as operating activities.
Income Resulting from Derivative Financial Instruments
A discussion of the Corporation's income from derivatives used in trading
activities is included in the "Trading Revenue" table on page 15.
The Corporation uses interest rate derivative financial instruments to
reduce structural interest rate risk and the volatility of net interest
margin. Net interest margin reflects the effective use of these derivatives.
Without their use, net interest income would have been lower by $78 million in
1998, lower by $54 million in 1997 and higher by $16 million in 1996.
Deferred gains, net of deferred losses, on interest rate swaps terminated
early or dedesignated as ALM derivatives totaled $178 million as of December
31, 1998. This amount will be amortized as an adjustment to interest income or
expense on the linked interest rate exposure position. The net adjustment will
be $55 million in 1999, $48 million in 2000, $35 million in 2001 and $40
million thereafter.
Credit Exposure Resulting from Derivative Financial Instruments
The Corporation maintains risk management policies that monitor and limit
exposure to credit risks. For a further discussion of credit risks, see the
"Credit Risk Management" section, beginning on page 28.
Credit exposure from derivative financial instruments arises from the risk
of a customer default on the derivative contract. The amount of loss created
by the default is the replacement cost or current fair value of the defaulted
contract. The Corporation utilizes master netting agreements whenever possible
to reduce its credit exposure from customer default. These agreements allow
the netting of contracts with unrealized losses against
35
<PAGE>
contracts with unrealized gains to the same customer, in the event of a
customer default. The table below shows the impact of these master netting
agreements.
<TABLE>
<CAPTION>
1998 1997
December 31 (In millions) -------- --------
<S> <C> <C>
Gross replacement cost....................................... $ 25,411 $ 15,052
Less: Adjustment due to master netting agreements.......... (17,692) (10,035)
-------- --------
Current credit exposure...................................... 7,719 5,017
Less: Unrecognized net gains due to nontrading activity.... (765) (394)
-------- --------
Balance sheet exposure....................................... $ 6,954 $ 4,623
======== ========
</TABLE>
Current credit exposure represents the total loss that the Corporation would
have suffered had every counterparty been in default on those dates. These
amounts are reduced by the unrealized and unrecognized gains on derivatives
used in asset and liability management activities to arrive at the balance
sheet exposure.
Year 2000 Readiness Disclosure
The Corporation continues to execute project plans established by its
predecessor companies to assure Year 2000 readiness. Project costs are
estimated to reach $350 million over the life of the project. Year 2000 costs
incurred through year-end 1998 were approximately $235 million.
The inventory and assessment phase has been completed for all information
and non-information technology. At December 31, 1998, 87% of the Corporation's
affected information technology applications were tested and returned to
production. The Corporation expects that all information technology
applications, systems and equipment will be Year 2000 compliant by mid-1999.
Ongoing facilities and equipment improvements are expected to result in Year
2000 readiness for non-information systems technology by mid-1999.
Year 2000 readiness is highly dependent on external entities and is not
limited to operating risk. The Corporation is working extensively with
external entities to ensure that their systems will be Year 2000 compliant;
however, the Corporation bears risk and could be adversely affected if outside
parties, such as customers, vendors, utilities and government agencies, do not
appropriately address Year 2000 readiness issues. In addition, the Corporation
may have increased credit risk related to customers whose ability to repay
debt is impaired due to Year 2000 readiness costs or risk or whose collateral
becomes impaired due to lack of Year 2000 readiness.
Detailed contingency plans exist for critical business system applications
to mitigate potential problems or delays associated with systems replacements
or vendor delivery dates. Critical business processes have been identified,
and the most reasonable recovery strategies have been selected. Contingency
plans have been documented and validated for effectiveness. The Corporation
will continue to review and validate the scope and content of its contingency
plans throughout 1999.
Capital Management
Capital represents the stockholders' investment on which the Corporation
strives to generate attractive returns. It is the foundation of a cohesive
risk management framework and links return with risk. Capital supports
business growth and provides protection to depositors and creditors.
Key capital management objectives are to:
. generate attractive returns to enhance shareholder value;
. maintain a capital base commensurate with overall risk profile;
. maintain strong capital ratios relative to peers; and
. meet or exceed all regulatory guidelines.
36
<PAGE>
In conjunction with the annual financial planning process, a capital plan is
established to ensure that the Corporation and all of its subsidiaries have
capital structures consistent with prudent management principles and
regulatory requirements.
Economic Capital
An important aspect of risk management and performance measurement is the
ability to evaluate the risk and return of a business unit, product or
customer consistently across all lines of business. Accordingly, the
Corporation is developing an economic capital framework to attribute capital
based on the amount and type of risk inherent in its underlying businesses.
The capital allocation used in the "Business Segments" section, beginning on
page 19, reflects the first phase in the development of this framework. The
new capital framework under development will include features from each, and
will also draw upon leading industry practices in risk measurement. Under the
new process, the following principles will be maintained:
. An equal amount of capital will be assigned for each measured unit of
risk.
. Risk is defined in terms of "unexpected" losses over the life of the
exposure, measured at a confidence interval consistent with that level of
capitalization necessary to achieve a targeted debt rating, currently AA.
Unexpected losses are in excess of those normally incurred and for which
reserves are maintained.
. Business units will be assessed a uniform charge against allocated
capital, representing the Corporation's hurdle rate on equity
investments. Returns on capital in excess of the hurdle rate contribute
to increases in shareholder value.
Four forms of risk will be measured--credit, market, operational and lease
residual. Credit capital will be determined through an analysis of both
historical loss experience and market expectations. Market risk capital will
be set consistent with exposure limits established by the Corporation's risk
oversight committees. Operational risk is intended to incorporate event and
technology risks, as well as the general business risks arising from operating
leverage. It will be determined by examining the capital structure of publicly
traded companies engaged in comparable business activities, and by reviewing
the business-specific costs surrounding operational enterprises. Finally,
residual risk covers the potential for losses arising from the disposition of
assets returned at the end of lease contracts. This price risk will be
analyzed based upon historical loss experiences and market factors, as well as
by reviewing event-specific scenarios.
Selected Capital Ratio Review
The Corporation aims to maintain regulatory capital ratios, including those
of the principal banking subsidiaries, in excess of the well-capitalized
guidelines under federal banking regulations. The Corporation has maintained a
well-capitalized regulatory position over the past four years. In addition,
the principal banking subsidiaries of the Corporation have met or exceeded the
well-capitalized guidelines for the past two years, as shown in Note 13--
Dividends and Capital Restrictions.
The tangible common equity to managed assets ratio is also monitored, with a
current target range of 5-7%. This ratio adds securitized credit card loans to
reported total assets and is calculated net of total intangible assets.
37
<PAGE>
Selected Capital Ratios
<TABLE>
<CAPTION>
Well-Capitalized
Corporate Regulatory
1998 1997 1996 1995 Targets Guidelines
December 31 ---- ---- ---- ---- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Risk-based capital ratios
(1)
Tier 1.................... 7.9% 8.2% 9.5% 9.0% -- 6.0%
Total..................... 11.3 12.3 13.6 13.0 -- 10.0
Leverage ratio (1)(2)....... 8.0 7.8 8.9 7.8 -- 3.0
Tangible common
equity/tangible managed
assets..................... 5.8 6.2 6.9 6.4 5-7% --
Double leverage ratio (1)... 108 107 107 108 120%* --
Dividend payout ratio....... 58 61 38 40 35-40% --
Common equity/total assets.. 7.8 7.8 8.3 7.6 -- --
Tangible common equity
ratio...................... 6.8 7.2 7.8 7.1 -- --
Stockholders' equity/total
assets..................... 7.9 8.0 8.6 7.9 -- --
</TABLE>
- --------
(1) Includes trust preferred capital securities.
(2) Minimum regulatory guideline is 3.0%.
*less than or equal to
The components of the Corporation's regulatory risk-based capital and risk-
weighted assets are shown below:
<TABLE>
<CAPTION>
1998 1997 1996 1995
December 31 (In millions) -------- -------- -------- --------
<S> <C> <C> <C> <C>
Regulatory risk-based capital
Tier 1 capital.............................. $ 19,495 $ 17,958 $ 19,241 $ 16,862
Tier 2 capital.............................. 8,295 9,000 8,196 7,504
-------- -------- -------- --------
Total capital........................... $ 27,790 $ 26,958 $ 27,437 $ 24,366
======== ======== ======== ========
Total risk-weighted assets.................. $244,473 $219,557 $202,213 $186,758
======== ======== ======== ========
</TABLE>
In arriving at Tier 1 and total capital, such amounts are reduced by
goodwill and other nonqualifying intangible assets as shown below:
Intangible Assets
<TABLE>
<CAPTION>
1998 1997 1996 1995
December 31 (In millions) ------ ------ ------- -------
<S> <C> <C> <C> <C>
Goodwill.......................................... $1,075 $1,120 $ 920 $ 808
Other nonqualifying intangibles................... 637 109 61 97
------ ------ ------- -------
Subtotal...................................... 1,712 1,229 981 905
Qualifying intangibles............................ 984 473 278 391
------ ------ ------- -------
Total intangibles............................. $2,696 $1,702 $ 1,259 $ 1,296
====== ====== ======= =======
</TABLE>
The increase in identified intangible assets primarily relates to the credit
card business, reflecting premiums associated with credit card portfolio
acquisitions and credit card affinity arrangements.
Dividends
The Corporation's common dividend policy reflects its earnings outlook,
desired payout ratios, the need to maintain an adequate capital level and
alternative investment opportunities. The common dividend payout ratio is
currently targeted in the range of 35-40% of operating earnings over time. In
January 1999, the Corporation increased its quarterly common cash dividend to
$0.42 per share. This represented a 10.5% increase over the previous $0.38 per
share dividend rate.
On January 20, 1998, and January 23, 1996, BANC ONE declared a 10% common
stock dividend to shareholders of record on February 12, 1998, and February
21, 1996, respectively.
38
<PAGE>
Double Leverage
Double leverage is the extent to which the Corporation's debt is used to
finance investments in subsidiaries. Currently, the Corporation intends to
limit its double leverage to no more than 120% at any time. Double leverage
was 108% at December 31, 1998, and 107% at December 31, 1997. Trust Preferred
Capital Securities of $1.003 billion were included in capital for purposes of
this calculation.
Other Capital Activities
BANC ONE and FCN rescinded their stock repurchase programs on May 14, 1997,
and April 10, 1998, respectively.
On April 16, 1998, the Corporation redeemed all of the shares of its Series
C Convertible Preferred Stock at the redemption price of $51.05 per share plus
the amount of any dividends accrued and unpaid.
On November 17, 1997, the Corporation redeemed all shares outstanding of its
8.45% Cumulative Preferred Stock, Series E, and the corresponding redemptions
of the related depositary shares, each representing a one-twenty-fifth
interest in a share of the Series E Preferred Stock. The redemption price was
$25.27 per depositary share, which included accrued and unpaid dividends of
$0.27 per depositary share.
On May 2, 1997, the Corporation redeemed all shares outstanding of its 6
1/4% mandatory convertible preferred stock. The liquidation value was $31.875
per share. All of the mandatory convertible preferred stock was converted to
shares of the Corporation's common stock.
On April 1, 1997, the Corporation redeemed all shares outstanding of its 5
3/4% Cumulative Convertible Preferred Stock, Series B, and the corresponding
redemption of the related depositary shares, each representing a one-hundredth
interest in a share of the Convertible Preferred Stock. The redemption price
was approximately $52.44 per depositary share, which included accrued and
unpaid dividends of approximately $0.72 per depositary share. Essentially all
of the Series B Preferred Stock was converted to shares of the Corporation's
common stock prior to the redemption date.
During 1998 and 1997, the Corporation strengthened its capital position
through the issuance of $500 million and $900 million, of subordinated debt,
respectively.
Forward-Looking Statements
Certain statements contained in this Annual Report on Form 10-K that are not
statements of historical fact constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"),
including, without limitation, the statements specifically identified as
forward-looking statements within this document. In addition, certain
statements in future filings by the Corporation with the Securities and
Exchange Commission, in press releases, and in oral and written statements
made by or with the approval of the Corporation which are not statements of
historical fact constitute forward-looking statements within the meaning of
the Act. Examples of forward-looking statements include, but are not limited
to: (i) projections of revenues, income or loss, earnings or loss per share,
the payment or nonpayment of dividends, capital structure and other financial
items; (ii) statements of plans and objectives of the Corporation or its
management or Board of Directors, including those relating to products or
services; (iii) statements of future economic performance; and (iv) statements
of assumptions underlying such statements. Words such as "believes,"
"anticipates," "expects," "intends," "targeted" and similar expressions are
intended to identify forward-looking statements but are not the exclusive
means of identifying such statements.
In particular, the Annual Report on Form 10-K contains forward-looking
statements that include, but are not limited to: (i) anticipated trends in the
credit card industry, especially pertaining to credit card losses; (ii) the
adequacy of the allowance for credit losses; (iii) interest rate risk
management; (iv) Year 2000 readiness issues; and (v) the effect of legal
proceedings on the Corporation's consolidated financial position, liquidity or
results of
39
<PAGE>
operations. The Annual Report on Form 10-K also contains forward-looking
statements with respect to the BANC ONE/FCN Merger.
Forward-looking statements involve risks and uncertainties that may cause
actual results to differ materially from those in such statements. Factors
that could cause actual results to differ from those discussed in the forward-
looking statements include, but are not limited to: (i) local, regional and
international economic conditions; (ii) the effects of and changes in trade,
monetary and fiscal policies and laws, including interest rate policies of the
Federal Reserve Board; (iii) inflation, interest rate, market and monetary
fluctuations; (iv) the timely development and acceptance of new products and
services and perceived overall value of these products and services by users;
(v) changes in consumer spending, borrowing and saving habits; (vi)
technological changes (including Year 2000 readiness issues); (vii)
acquisitions and integration of acquired businesses; (viii) the ability to
increase market share and control expenses; (ix) changes in the competitive
environment among financial services companies; (x) the effect of changes in
laws and regulations (including laws and regulations concerning taxes,
banking, securities and insurance) with which the Corporation and its
subsidiaries must comply; (xi) the effect of changes in accounting policies
and practices, as may be adopted by the regulatory agencies as well as the
Financial Accounting Standards Board; (xii) changes in the Corporation's
organization, compensation and benefit plans; (xiii) the costs and effects of
litigation and of unexpected or adverse outcomes in such litigation; and (xiv)
the Corporation's success at managing the risks involved in the foregoing.
Factors pertaining to the BANC ONE/FCN Merger that could cause actual
results to differ from those contemplated by such forward-looking statements
include, but are not limited to: (i) the magnitude and timing of expected cost
savings, revenue enhancements, and restructuring and merger-integration
charges being materially different from those anticipated; and (ii) costs or
difficulties related to the integration of the businesses of BANC ONE and FCN
being greater than expected.
Such forward-looking statements speak only as of the date on which such
statements are made. The Corporation undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made, or to reflect the occurrence of unanticipated
events.
40
<PAGE>
Consolidated Balance Sheet
BANK ONE CORPORATION and Subsidiaries
<TABLE>
<CAPTION>
1998 1997
December 31 (Dollars in millions) -------- --------
<S> <C> <C> <C> <C>
Assets
Cash and due from banks.............................. $ 19,878 $ 15,380
Interest-bearing due from banks...................... 4,642 6,910
Federal funds sold and securities under resale
agreements.......................................... 9,862 9,168
Trading assets....................................... 5,345 5,246
Derivative product assets............................ 6,954 4,623
Investment securities (fair value--$44,852 in 1998
and $26,054 in 1997)................................ 44,852 26,039
Loans (net of unearned income--$3,707 in 1998 and
$3,049 in 1997)
Commercial......................................... 88,438 79,306
Consumer........................................... 57,926 57,608
Credit card........................................ 9,034 22,665
Allowance for credit losses.......................... (2,271) (2,817)
-------- --------
Loans, net......................................... 153,127 156,762
Bank premises and equipment, net..................... 3,340 3,426
Customers' acceptance liability...................... 333 741
Other assets......................................... 13,163 11,077
-------- --------
Total assets..................................... $261,496 $239,372
======== ========
Liabilities
Deposits
Demand............................................. $ 39,854 $ 35,954
Savings............................................ 62,645 58,946
Time............................................... 36,302 40,144
Foreign offices.................................... 22,741 18,682
-------- --------
Total deposits................................... 161,542 153,726
Federal funds purchased and securities under
repurchase agreements............................... 23,164 20,346
Other short-term borrowings.......................... 16,937 12,806
Long-term debt....................................... 21,295 20,543
Guaranteed preferred beneficial interest in the
Corporation's junior subordinated debt.............. 1,003 1,003
Acceptances outstanding.............................. 333 741
Derivative product liabilities....................... 7,147 4,629
Other liabilities.................................... 9,515 6,528
-------- --------
Total liabilities................................ 240,936 220,322
Stockholders' Equity
Preferred stock...................................... 190 326
Common stock--$0.01 par value........................ 12 12
<CAPTION>
Number of Common Shares (in 1998 1997
thousands) --------- ---------
<S> <C> <C> <C> <C>
Authorized....................... 2,500,000 2,500,000
Issued........................... 1,179,297 1,218,812
Outstanding...................... 1,177,310 1,168,189
Surplus.............................................. 10,769 12,584
Retained earnings.................................... 9,528 8,063
Accumulated other adjustments to stockholders'
equity.............................................. 239 209
Deferred compensation................................ (94) (137)
Treasury stock at cost, 1,987,000 shares in 1998 and
50,623,000 shares in 1997........................... (84) (2,007)
-------- --------
Total stockholders' equity....................... 20,560 19,050
-------- --------
Total liabilities and stockholders' equity....... $261,496 $239,372
======== ========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
41
<PAGE>
Consolidated Income Statement
BANK ONE CORPORATION and Subsidiaries
<TABLE>
<CAPTION>
1998 1997 1996
For the Year (In millions, except per-share data) ------- ------- -------
<S> <C> <C> <C>
Interest Income
Loans, including fees.................................... $14,106 $14,790 $13,828
Bank balances............................................ 331 451 465
Federal funds sold and securities under resale
agreements.............................................. 423 350 546
Trading assets........................................... 367 330 423
Investment securities--taxable........................... 2,136 1,443 1,609
Investment securities--tax-exempt........................ 161 181 193
------- ------- -------
Total................................................ 17,524 17,545 17,064
Interest Expense
Deposits................................................. 4,943 4,991 4,857
Federal funds purchased and securities under repurchase
agreements.............................................. 1,090 1,073 1,268
Other short-term borrowings.............................. 737 786 799
Long-term debt........................................... 1,407 1,234 895
------- ------- -------
Total................................................ 8,177 8,084 7,819
Net Interest Income...................................... 9,347 9,461 9,245
Provision for credit losses.............................. 1,408 1,988 1,716
------- ------- -------
Net Interest Income After Provision for Credit Losses.... 7,939 7,473 7,529
Noninterest Income
Trading profits.......................................... 141 117 72
Equity securities gains.................................. 250 334 332
Investment securities gains.............................. 155 101 44
------- ------- -------
Market-driven revenue.................................. 546 552 448
Credit card revenue...................................... 3,276 2,508 2,131
Fiduciary and investment management fees................. 807 746 700
Service charges and commissions.......................... 2,645 2,391 2,166
------- ------- -------
Fee-based revenue...................................... 6,728 5,645 4,997
Other income............................................. 797 497 549
------- ------- -------
Total................................................ 8,071 6,694 5,994
Noninterest Expense
Salaries and employee benefits........................... 4,477 4,224 4,026
Net occupancy and equipment expense...................... 845 739 738
Depreciation and amortization............................ 680 693 694
Outside service fees and processing...................... 1,349 1,145 956
Marketing and development................................ 1,024 837 568
Communication and transportation......................... 781 711 652
Merger-related and restructuring charges................. 1,062 337 --
Other.................................................... 1,327 1,054 1,047
------- ------- -------
Total................................................ 11,545 9,740 8,681
Income Before Income Taxes............................... 4,465 4,427 4,842
Applicable income taxes.................................. 1,357 1,467 1,611
------- ------- -------
Net Income............................................... $ 3,108 $ 2,960 $ 3,231
======= ======= =======
Net Income Attributable to Common Stockholders' Equity... $ 3,094 $ 2,921 $ 3,170
======= ======= =======
Earnings Per Share
Basic.................................................. $ 2.65 $ 2.48 $ 2.64
Diluted................................................ $ 2.61 $ 2.43 $ 2.57
</TABLE>
The accompanying notes are an integral part of this statement.
42
<PAGE>
Consolidated Statement of Stockholders' Equity
BANK ONE CORPORATION and Subsidiaries
<TABLE>
<CAPTION>
Accumulated
Other
Adjustments to Total
Preferred Common Retained Stockholders' Deferred Treasury Stockholders'
Stock Stock Surplus Earnings Equity Compensation Stock Equity
(In millions) --------- ------ ------- -------- -------------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance--December 31,
1995................... $ 798 $12 $10,683 $ 7,269 $ 245 $ (69) $ (795) $18,143
Net income.............. 3,231 3,231
Change in fair value,
investment securities--
available-for-sale, net
of taxes............... (156) (156)
Translation gain(loss),
net of taxes........... (1) (1)
-------
Net income and changes
in accumulated other
adjustments to
stockholders' equity... 3,074
Cash dividends declared
On common stock........ (587) (587)
On preferred stock..... (16) (16)
On common stock by
pooled affiliates..... (545) (545)
On preferred stock by
pooled affiliates..... (45) (45)
Conversion of preferred
stock.................. (147) 44 (25) 125 (3)
Issuance of stock....... (25) 85 60
Acquisition of
subsidiaries........... 71 657 728
Purchase of common
stock.................. (1,415) (1,415)
Purchase of treasury
stock.................. 91 91
Cancellation of shares
held in treasury....... (790) 790 --
Awards granted, net of
forfeitures and
amortization........... (12) (12)
Other................... 47 (13) 34
----- --- ------- ------- ----- ----- ------- -------
Balance--December 31,
1996................... 651 12 10,030 9,373 88 (94) (553) 19,507
Net income.............. 2,960 2,960
Change in fair value,
investment securities--
available-for-sale, net
of taxes............... 122 122
Translation gain(loss),
net of taxes........... (1) (1)
-------
Net income and changes
in accumulated other
adjustments to
stockholders'equity.... 3,081
Cash dividends declared
On common stock........ (769) (769)
On preferred stock..... (12) (12)
On common stock by
pooled affiliates..... (568) (568)
On preferred stock by
pooled affiliates..... (27) (27)
Conversion of preferred
stock.................. (225) (67) 292 --
Redemption of preferred
stock.................. (100) (100)
Issuance of stock....... 56 (4) 77 129
Acquisition of
subsidiaries........... 51 487 538
Conversion of stock
appreciation rights to
stock options.......... 10 10
Purchase of common
stock.................. (2,752) (2,752)
Cancellation of shares
held in treasury....... (442) 442 --
10% common stock
dividend at fair market
value.................. 2,890 (2,890) --
Awards granted, net of
forfeitures and
amortization........... (14) (14)
Other................... 56 (29) 27
----- --- ------- ------- ----- ----- ------- -------
Balance--December 31,
1997................... 326 12 12,584 8,063 209 (137) (2,007) 19,050
Net income.............. 3,108 3,108
Change in fair value,
investment securities--
available-for-sale, net
of taxes............... 15 15
Translation gain(loss),
net of taxes........... 15 15
-------
Net income and changes
in accumulated other
adjustments to
stockholders' equity... 3,138
Cash dividends declared
On common stock........ (1,228) (1,228)
On preferred stock..... (5) (5)
On common stock by
pooled affiliates..... (401) (401)
On preferred stock by
pooled affiliates..... (9) (9)
Conversion of preferred
stock.................. (136) 136 --
Issuance of stock....... (189) 430 241
Acquisition of
subsidiaries........... 2 2
Purchase of common
stock.................. (375) (375)
Cancellation of shares
held in treasury....... (1,866) 1,866 --
Awards granted, net of
forfeitures and
amortization........... 29 29
Other................... 104 14 118
----- --- ------- ------- ----- ----- ------- -------
Balance--December 31,
1998................... $ 190 $12 $10,769 $ 9,528 $ 239 $ (94) $ (84) $20,560
===== === ======= ======= ===== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
43
<PAGE>
Consolidated Statement of Cash Flows
BANK ONE CORPORATION and Subsidiaries
<TABLE>
<CAPTION>
1998 1997 1996
For the Year (In Millions) -------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income...................................... $ 3,108 $ 2,960 $ 3,231
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for credit losses.................... 1,408 1,988 1,716
Depreciation and amortization.................. 680 693 694
Equity securities gains........................ (250) (334) (332)
Investment securities gains.................... (155) (101) (44)
Net (increase) decrease in trading assets...... (180) 67 3,017
Net (increase) decrease in net derivative
product assets................................ 187 246 (251)
Gain on sale of banks and branch offices....... (343) (60) (31)
Net (increase) in other assets................. (2,290) (1,901) (339)
Net increase (decrease) in other liabilities... (35) 934 (422)
Merger-related and restructuring charges....... 1,026 337 --
Other noncash adjustments...................... 1,112 306 277
-------- -------- --------
Net cash provided by operating activities....... 4,268 5,135 7,516
Cash Flows from Investing Activities:
Net (increase) decrease in federal funds sold
and securities under resale agreements......... (695) (4,252) 7,511
Securities available for sale:
Purchases...................................... (27,077) (24,479) (10,655)
Maturities..................................... 7,336 5,109 7,023
Sales.......................................... 18,543 22,006 8,107
Securities held to maturity:
Purchases...................................... -- (503) (1,790)
Maturities..................................... 104 582 1,041
Credit card receivables securitized............. 10,323 7,365 7,259
Net (increase) in loans......................... (20,427) (14,413) (20,667)
Loan recoveries................................. 447 510 405
Additions to bank premises and equipment........ (824) (633) (657)
Net cash and cash equivalents due to mergers,
acquisitions and dispositions.................. (2,337) 128 (116)
All other investing activities, net............. (4,854) (486) 1
-------- -------- --------
Net cash (used in) investing activities......... (19,461) (9,066) (2,538)
Cash Flows from Financing Activities:
Net increase in deposits........................ 10,548 8,705 363
Net increase (decrease) in federal funds
purchased and securities under repurchase
agreements..................................... 2,819 (1,319) (3,244)
Net increase (decrease) in other short-term
borrowings..................................... 3,992 (234) (682)
Proceeds from issuance of long-term debt........ 19,062 23,455 6,005
Repayment of long-term debt..................... (18,062) (17,767) (3,991)
Cash dividends paid............................. (1,322) (1,380) (1,180)
Proceeds from issuance of common and treasury
stock.......................................... 161 27 76
Purchase of treasury stock...................... (375) (2,789) (1,479)
Payment for redemption of preferred stock....... -- (100) --
All other financing activities, net............. (4) (2,554) (4,256)
-------- -------- --------
Net cash provided by (used in) financing
activities..................................... 16,819 6,044 (8,388)
Effect of Exchange Rate Changes on Cash and Cash
Equivalents.................................... 604 (92) (63)
Net Increase (Decrease) in Cash and Cash
Equivalents.................................... 2,230 2,021 (3,473)
Cash and Cash Equivalents at Beginning of Year.. 22,290 20,269 23,742
-------- -------- --------
Cash and Cash Equivalents at End of Year........ $ 24,520 $ 22,290 $ 20,269
======== ======== ========
Other Cash Flow Disclosures:
Interest paid.................................. $ 8,281 $ 8,077 $ 7,957
State and federal income taxes paid............ 680 842 1,304
</TABLE>
The accompanying notes are an integral part of this statement.
44
<PAGE>
Notes to Consolidated Financial Statements
BANK ONE CORPORATION and Subsidiaries
NOTE 1--Summary of Significant Accounting Policies
Consolidated financial statements of the Corporation have been prepared in
conformity with generally accepted accounting principles. Management is
required to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes that could differ from actual
results. Certain prior-year financial statement information has been
reclassified to conform with the current year's financial statement
presentation. Consolidated financial statements for all periods presented have
been restated to include the results of operations, financial position and
changes in cash flows for each acquisition accounted for as a pooling of
interests. Adjustments have been made to conform accounting policies upon
integration of each acquired entity.
(a) Principles of Consolidation
The Corporation's consolidated financial statements include all accounts of
the Corporation (the "Parent Company") and all significant majority-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
(b) Trading Activities
Trading assets and liabilities are carried at fair value. Realized and
unrealized gains and losses related to trading activities are included in
noninterest income as trading profits.
Trading profits include interest rate, exchange rate, equity price and
commodity price trading results from both cash and derivative financial
instruments. More information on the Corporation's trading revenue is shown in
the "Trading Revenue" table on page 15.
(c) Investment Securities
Debt and equity investment securities classified as available-for-sale are
carried at fair value. Fair value for venture capital investments that are
publicly traded is estimated using quoted market prices adjusted for market
liquidity and sale restrictions. Fair value for venture capital investments
that are not publicly traded is estimated based on the investees' financial
results, conditions and prospects, values of comparable public companies,
market liquidity and sales restrictions. Unrealized and realized gains and
losses related to venture capital investments and realized gains and losses,
including other than temporary impairments, on other available-for-sale equity
securities are included in noninterest income as equity securities gains.
Unrealized gains and losses, net of taxes, on all other available-for-sale
securities are included in accumulated other adjustments to stockholders'
equity. Realized gains and losses, including other than temporary impairments,
on held-to-maturity and available-for-sale investment debt securities are
included in investment securities gains. The security with the highest cost is
used to calculate realized gains or losses unless specific securities are
identified.
Debt securities classified as held-to-maturity are carried at cost. The
interest method is used to amortize premiums or accrete discounts.
(d) Loans
Loans typically are carried at cost. Unearned income includes deferred loan
origination fees reduced by loan origination costs. Loans held for sale are
carried at the lower of cost or fair value. Unrealized losses and realized
gains or losses resulting from loan sales typically are included in other
income.
45
<PAGE>
Loan origination and commitment fees typically are deferred and amortized
over the life of the related loan. Loan origination fees and costs on credit
card and other revolving loans are typically deferred and amortized into
interest income using a straight-line method over one year. Other credit-
related fees, such as syndication management fees, commercial letter of credit
fees, and fees on unused, available lines of credit, are recorded as service
charges and commissions as earned.
Loans, including lease financing receivables, are considered nonperforming
when placed on nonaccrual status, or when renegotiated at terms that represent
an economic concession to the borrower. Nonperforming loans are generally
identified as impaired loans.
Management places a commercial loan on nonaccrual status when the collection
of contractual principal or interest is deemed doubtful or it becomes 90 days
or more past due and is not well-secured and in the process of collection.
Accrued but uncollected interest is reversed and charged against interest
income. Subsequently, the commercial loan is accounted for on a cash basis.
Cash payments received are recognized either as interest income or as a
reduction of principal when collection of principal is doubtful. A commercial
loan is returned to accrual status only when all the principal and interest
amounts contractually due are reasonably assured of repayment within a
reasonable time frame and when the borrower has demonstrated payment
performance. Subsequently, the commercial loan is accounted for on an accrual
basis.
A charge-off on a commercial loan is recorded in the reporting period in
which either an event occurs that confirms the existence of a loss or it is
determined that a loan or a portion of a loan is uncollectible.
Consumer loans are typically charged off rather than placed on nonaccrual
status. The timing and amount of the charge-off will depend on the type of
consumer loan, giving consideration to available collateral. A credit card
loan is charged off after it becomes approximately 180 days past due or
earlier in the event of bankruptcy notification. Other consumer loans have
delinquency periods ranging from approximately 120 to 180 days past due prior
to a charge-off being recorded. In certain circumstances, charge-offs are
recorded only after obtaining control of the underlying collateral, which
could exceed 180 days. Accrued but uncollected interest on a consumer loan
generally is reversed against interest income when the loan is charged off.
An economic concession on a renegotiated loan may represent forgiveness of
principal and/or interest or a below-market interest rate offered to the
borrower to maximize recovery of the loan. Generally, this occurs when the
borrower's cash flow is insufficient to service the loan under its original
terms. Subject to the above nonaccrual policy, interest on these loans is
accrued at the reduced rates.
(e) Allowance for Credit Losses
Management maintains the allowance for credit losses at a level it believes
is adequate to provide for estimated probable credit losses inherent in on-
and off-balance-sheet credit exposure. The allowance for credit losses
attributable to off-balance-sheet credit exposure is not material. Management
judges adequacy by formally reviewing and analyzing potential problem credits,
which entails assessing current and historical loss experience, loan portfolio
trends, prevailing economic and business conditions, specific loan review and
other relevant factors. The allowance for credit losses is increased by
provisions for credit losses charged to expense and is decreased by charge-
offs, net of recoveries.
(f) Loan Securitizations
The Corporation actively packages and sells loan receivables, primarily
credit card receivables, as securities to investors. From these
securitizations, the Corporation receives (1) a fee for servicing loans and
(2) net interest revenues generated by the loans in excess of the interest due
investors and net credit losses. Fees that are received in excess of the
contractual servicing rate, as well as the excess net interest revenue, are
considered financial assets, effectively interest-only strips.
Certain estimates are inherent in determining the fair value of the
interest-only strip, including interest rates, charge-offs and receivable
lives. These estimates and assumptions are subject to change.
46
<PAGE>
Upon securitization, a gain on the sale of the receivables transferred is
recorded in credit card revenue. The Corporation's retained interest resulting
from credit card securitizations includes both the interest-only strip and its
interest (seller's interest) in the securitized receivables. The retained
interest is included in investment securities--available-for-sale. Transaction
costs are generally deferred and amortized as a reduction to credit card
revenue over the terms of the related securitizations.
(g) Mortgage Banking Activities
Servicing rights, which are acquired through purchase or originated and
retained after the underlying mortgage loans are transferred through sale or
securitization, are separately recognized in other assets. Mortgage servicing
assets are amortized into service charges and commissions in proportion to,
and over the period of, the estimated net servicing income on the underlying
mortgage loans or securities. Mortgage servicing assets are stratified by both
product type and interest rate range for purposes of evaluating and measuring
impairment based on their fair value. Any impairment resulting from declines
in fair value are included in service charges and commissions.
(h) Other Real Estate Owned
Other real estate owned includes assets that have been received in
satisfaction of debt. Other real estate is initially recorded and subsequently
carried at the lower of cost or fair value less estimated selling costs. Any
valuation adjustments required at the date of transfer are charged to the
allowance for credit losses. Subsequently, unrealized losses and realized
gains and losses on sale typically are included in other income. Operating
results from other real estate are recorded in other noninterest expense.
(i) Intangible Assets
Intangible assets include goodwill resulting from acquisitions accounted for
by the purchase method and identifiable intangible assets, such as customer
lists, core deposits and credit card relationships. Goodwill is equal to an
acquired company's acquisition cost less the net fair value amount assigned to
identifiable assets acquired and liabilities assumed.
Intangible assets are reported in other assets and are amortized into other
noninterest expense on an accelerated or straight-line basis over the period
the Corporation expects to benefit from such assets. Goodwill is amortized
over estimated periods ranging from five to 40 years. Refer to Note 4--
Acquisitions for further details. Intangible assets are periodically reviewed
for possible impairment.
(j) Derivative Financial Instruments
For a discussion of the Corporation's accounting policies for derivative
financial instruments, see the "Derivative Financial Instruments" section,
beginning on page 34.
(k) Foreign Currency Translation
If a foreign installation's functional currency is the U.S. dollar, then its
local currency financial statements are remeasured to U.S. dollars.
Remeasurement effects and the results of related hedging transactions are
included in other income.
If a foreign installation's functional currency is its local currency, then
its local currency financial statements are translated to U.S. dollars.
Translation adjustments, related hedging results and applicable income taxes
are included in accumulated other adjustments to stockholders' equity.
(l) Income Taxes
Deferred tax assets and liabilities are determined based on temporary
differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect
47
<PAGE>
when the differences are expected to reverse. The effect on deferred tax
assets and liabilities of a change in rates is recognized as income or expense
in the period that includes the enactment date.
(m) Cash Flow Reporting
The Corporation uses the indirect method, which reports cash flows from
operating activities by adjusting net income to reconcile to net cash flows
from operating activities. Cash and cash equivalents consist of cash and due
from banks, whether interest-bearing or not. Net reporting of cash
transactions has been used when the balance sheet items consist predominantly
of maturities of three months or less, or where otherwise permitted. Other
items are reported on a gross basis.
(n) Stock-Based Compensation
In 1996, the Corporation adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation." Under the
provisions of this Statement, the Corporation elected to retain its current
method of measuring and recognizing costs related to employee stock
compensation plans under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and to disclose the pro forma
effect of applying the fair value method contained in SFAS No. 123.
Information on the Corporation's stock-based compensation plans is included in
Note 17--Stock-Based Compensation.
(o) New Accounting Pronouncements
In October 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," which became effective January 1, 1999. The Statement requires
the Corporation to classify as trading assets any retained mortgage-backed
securities that it commits to sell before or during the securitization
process. This Statement is not expected to have a material effect on the
Corporation's consolidated financial position and results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes new accounting
and reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those derivatives at fair value.
The accounting for the gains or losses resulting from changes in the value of
those derivatives will depend on the intended use of the derivative and
whether it qualifies for hedge accounting. This Statement will significantly
change the accounting treatment for derivatives the Corporation uses in its
asset and liability management activities. The transition adjustments
resulting from adopting this Statement will be reported in net income or
accumulated other adjustments to stockholders' equity, as appropriate, as the
effect of a change in accounting principle and presented in a manner similar
to the cumulative effect of a change in accounting principle. The Corporation
is required to adopt this Statement on January 1, 2000. The Corporation is in
the process of evaluating the impact of this new Statement.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." SFAS No. 132 supersedes the
disclosure requirements in SFAS No. 87, "Employers' Accounting for Pensions,"
No. 88, "Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits," and No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The Corporation
adopted SFAS No. 132 on December 31, 1998. Pension and other postretirement
benefits disclosures have been revised in accordance with SFAS No. 132. The
statement had no effect on the Corporation's consolidated financial position
or results of operations since it only addresses disclosure requirements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This Statement requires certain
disclosures about an entity's operating segments in annual and
48
<PAGE>
interim financial reports. It also requires certain related disclosures about
products and services, geographic areas and major customers. The Corporation
adopted SFAS No. 131 on December 31, 1998.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." The Corporation adopted SFAS No. 130 on January 1, 1998. The
Statement defines comprehensive income as including net income and certain
other items that affect stockholders' equity. The other items include "fair
value adjustment on investment securities available for sale" and "accumulated
translation adjustment," which are reported in "Accumulated other adjustments
to stockholders' equity" on the Corporation's Consolidated Balance Sheet. The
Corporation has elected to disclose these items in its Notes to Consolidated
Financial Statements. Since the Statement solely relates to display and
disclosure requirements, it had no effect on the Corporation's financial
results.
NOTE 2--Earnings Per Share
In 1997, the Corporation adopted SFAS No. 128, "Earnings Per Share." As
required, all prior periods presented were restated. The Statement replaces
primary earnings per share ("EPS") with earnings per common share ("Basic
EPS"). Basic EPS is computed by dividing income available to common
stockholders by the average number of common shares outstanding for the
period.
The Statement also requires presentation of EPS assuming dilution. The
diluted EPS calculation includes shares that could be issued under outstanding
stock options and employee stock purchase plans, and common shares that would
result from the conversion of convertible preferred stock and convertible
debentures. In the diluted calculation, net income is not reduced by dividends
related to convertible preferred stock, since such dividends would not be paid
if the preferred stock were converted to common stock. In addition, interest
on convertible debentures (net of tax) is added to net income, since this
interest would not be paid if the debentures were converted to common stock.
<TABLE>
<CAPTION>
1998 1997 1996
(In millions) ------ ------ ------
<S> <C> <C> <C>
Basic:
Net income........................................... $3,108 $2,960 $3,231
Preferred stock dividends............................ (14) (39) (61)
------ ------ ------
Net income attributable to common stockholders'
equity.............................................. $3,094 $2,921 $3,170
====== ====== ======
Diluted:
Net income........................................... $3,108 $2,960 $3,231
Interest on convertible debentures, net of tax....... 7 7 6
Preferred stock dividends excluding dividends on
convertible preferred stock......................... (12) (19) (20)
------ ------ ------
Diluted income available to common stockholders...... $3,103 $2,948 $3,217
====== ====== ======
Average shares outstanding............................. 1,170 1,176 1,199
Dilutive Shares:
Stock options........................................ 12 17 15
Convertible preferred stock.......................... 1 14 35
Convertible debentures............................... 4 4 4
Employee stock purchase plans........................ 2 2 1
------ ------ ------
Average shares outstanding, assuming full dilution... 1,189 1,213 1,254
====== ====== ======
Earnings per share:
Basic................................................ $ 2.65 $ 2.48 $ 2.64
------ ------ ------
Diluted.............................................. $ 2.61 $ 2.43 $ 2.57
====== ====== ======
</TABLE>
49
<PAGE>
NOTE 3--BANC ONE/FCN Merger
On October 2, 1998, BANC ONE and FCN each merged into the Corporation, at
that time a wholly owned subsidiary of BANC ONE formed in 1998 to effect the
Merger. Each share of BANC ONE common stock was converted into one share of
the Corporation's common stock. Each share of FCN common stock was converted
into the right to receive 1.62 shares of the Corporation's common stock. In
aggregate, 291 million shares of FCN were converted into 471 million shares of
the Corporation's common stock. Each share of preferred stock of FCN
outstanding immediately prior to the Merger was converted into one share of a
series of corresponding preferred stock of the Corporation with substantially
the same terms. The transaction was accounted for as a pooling of interests.
Previously reported financial information for BANC ONE and FCN is shown in
the table below.
<TABLE>
<CAPTION>
1997 1996
(In millions) ------- -------
<S> <C> <C>
Revenue
BANC ONE...................................................... $13,219 $12,099
FCN........................................................... 10,098 10,117
Net Income
BANC ONE...................................................... $ 1,306 $ 1,673
FCN........................................................... 1,525 1,436
</TABLE>
To conform with consistent methods of accounting, reclassifications of
certain revenue and expense items were made. In addition, the accounting
treatment for the postretirement transition obligation identified with the
implementation of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," has been conformed. The December 31, 1994,
balance of retained earnings was decreased by $70 million to reflect a
consistent up-front recognition of the postretirement transition obligation.
Noninterest expense was reduced by $6 million, and net income was increased by
$4 million for each year presented.
NOTE 4--Acquisitions
On September 30, 1998, the Corporation purchased the credit card operation
of Chevy Chase Bank, FSB. The portfolio included $4.8 billion in managed
credit card loans and 2.8 million Visa(R) and Master Card(R) credit card
accounts. At the purchase date, a credit card account premium of $291 million
was recognized on the balance sheet and is being amortized over seven years
using the straight-line method.
On June 12, 1998, the Corporation completed its acquisition of First
Commerce Corporation ("First Commerce") located in New Orleans, Louisiana,
resulting in the issuance of approximately 56 million shares of the
Corporation's common stock valued at $3.5 billion for all the outstanding
shares of First Commerce common stock, in a tax-free exchange. Each share of
First Commerce common stock was exchanged for 1.408 shares of the
Corporation's common stock. First Commerce was a multi-bank holding company
with total assets of approximately $9.3 billion and stockholders' equity of
approximately $805 million at June 12, 1998. The acquisition was accounted for
as a pooling of interests.
On June 27, 1997, the Corporation completed its acquisition of First USA,
Inc. ("First USA"). The Corporation issued approximately 163 million shares of
the Corporation's common stock for all the outstanding common stock of First
USA in a tax-free exchange. Each share of First USA common stock was exchanged
for the right to receive 1.1659 shares of the Corporation's common stock.
First USA, a financial services company specializing in the credit card
business, had $24.6 billion in managed credit card receivables and 17.8
million cardholders at June 27, 1997, compared to $22.2 billion in managed
credit card receivables and 15.9 million cardholders at December 31, 1996.
First USA had total assets of $10.9 billion and $10.3 billion at June 30,
1997, and December 31, 1996, respectively, and stockholders' equity of $1.2
billion at both June 27, 1997, and December 31, 1996. The acquisition was
accounted for as a pooling of interests.
On June 1, 1997, the Corporation acquired all of the outstanding shares of
Liberty Bancorp, Inc. ("Liberty"), a multi-bank holding company headquartered
in Oklahoma City, Oklahoma, in exchange for
50
<PAGE>
11.9 million shares of the Corporation's common stock valued at $483 million.
The acquisition was accounted for as a purchase. Excess cost over net assets
purchased of $267 million was recognized in the second quarter of 1997 and is
being amortized over 25 years using the straight-line method. Liberty had $2.9
billion in assets at May 31, 1997, and 29 banking offices primarily in
Oklahoma City and Tulsa. The pro forma effect on prior-period results of
operations is not significant.
NOTE 5--Merger-Related and Restructuring Charges
a) BANC ONE/FCN Merger
The Corporation estimates that restructuring charges and merger-related
costs of approximately $1.25 billion ($837 million after-tax) will be incurred
in connection with the BANC ONE/FCN Merger. Actions incorporated in the
business combination and restructuring plan principally are targeted for
implementation over a 12-18 month period following the Merger. Merger-related
and restructuring costs recorded in the fourth quarter of 1998 totaled $984
million ($697 million after-tax), or 59 cents per share, consisting of a
restructuring charge of $636 million and merger-related costs of $348 million.
An additional $526 million of merger-related costs is expected to be incurred
during 1999. Gains on the required Indiana banking center divestitures are
anticipated to total approximately $260 million in 1999.
The restructuring charge included $421 million of personnel-related
expenses, $80 million of transaction costs and $135 million of exit costs,
including asset write-offs and the settlement or recognition of obligations
under existing contractual arrangements. Personnel-related items consisted
primarily of severance and benefits costs for separated employees, and costs
associated with the "change in control" provisions included in certain of the
Corporation's stock plans. The benefit package to be made available to
affected employees has been approved by management and communicated on a
corporate-wide basis. Trends in total headcount for the Corporation will
reflect growth in support of line of business strategies and reductions based
on eliminated positions resulting from the Merger. The net reduction in full-
time positions is expected to represent about 4-5% of September 30, 1998,
headcount over the next year. Facilities and equipment costs include the net
cost associated with the closing and divestiture of identified banking
facilities, and the consolidation of headquarters and operational facilities.
Other merger-related transaction costs include investment banking fees,
registration and listing fees, and various accounting, legal and other related
transaction costs.
Merger-related costs of $348 million included $294 million related to the
accounting consequences of changes in business practices. Of this total, $260
million resulted from the modification, in light of the Merger, of a
contractual relationship to purchase credit card accounts. Previously
capitalized costs under this account sourcing agreement will be amortized over
a one-year period. On a going forward basis, such costs will be expensed as
incurred. Merger-related costs also included $54 million of business and
systems integration costs. Additional costs of this nature, totaling
approximately $526 million, will be incurred during 1999.
The following table provides details on merger-related and restructuring
charges recorded in 1998 in connection with the BANC ONE/FCN Merger.
<TABLE>
<CAPTION>
1998 Initial Amount Reserve Balance
Expense Reserve Utilized December 31, 1998
(In millions) ------- ------- -------- -----------------
<S> <C> <C> <C> <C>
Restructuring Charges
Personnel-related................... $421 $421 $114 $307
Facilities and equipment............ 135 135 135 --
Other transaction costs............. 80 -- -- --
---- ---- ---- ----
Total restructuring charges..... 636 $556 $249 $307
==== ==== ====
Merger-Related Costs
Accounting consequence of changes in
business practice.................. 294
Ongoing integration costs........... 54
----
Total merger-related costs...... 348
----
Total........................... $984
====
</TABLE>
51
<PAGE>
b) First Commerce Acquisition
In connection with the First Commerce acquisition, the Corporation
identified restructuring and merger integration charges of $182 million ($127
million after-tax), of which $127 million was recorded as a restructuring
charge, $44 million represented integration costs and $11 million was
associated with Year 2000 compliance. The restructuring charge of $127 million
associated with the First Commerce acquisition consisted of employee benefits
and severance costs and other merger-related costs.
The following table provides details on merger-related and restructuring
charges recorded in 1998 in connection with the First Commerce acquisition.
<TABLE>
<CAPTION>
1998 Initial Amount Reserve Balance
Expense Reserve Utilized December 31, 1998
(In millions) ------- ------- -------- -----------------
<S> <C> <C> <C> <C>
Restructuring Charges
Personnel-related.................... $ 77 $ 77 $67 $10
Facilities and equipment............. 32 32 13 19
Other................................ 18 18 15 3
---- ---- --- ---
Total restructuring charges...... 127 $127 $95 $32
==== === ===
Merger-related costs................. 55
----
Total............................ $182
====
</TABLE>
The remaining balance of this reserve has been identified with specific
actions and will be fully utilized in 1999.
c) First USA Acquisition
In connection with the First USA acquisition, the Corporation recognized
second quarter 1997 merger-related costs and restructuring charges of $371
million ($261 million after-tax), or 21 cents per share, of which $241 million
was recorded as a separate component of noninterest expense and $130 million
was recorded as additional provision for credit losses.
The restructuring charge associated with the First USA acquisition totaled
$241 million and consisted of employee benefits, severance and stock option
vesting costs; professional services costs; premiums to redeem preferred
securities of subsidiary trust; asset-related write-downs and other merger-
related costs.
The $130 million additional provision for credit losses primarily reflected
the reclassification of $2 billion of credit card loans previously classified
as held for sale to the loan and lease portfolio in connection with the effort
to consolidate the BANC ONE and First USA credit card master trusts, and to
conform credit card charge-off policies.
This reserve had been fully utilized at December 31, 1998.
d) Other Charges
The Corporation recorded other charges totaling $175 million ($118 million
after-tax), or 10 cents per share, in the fourth quarter of 1998, resulting
from its continuing review of the strategies and practices of its ongoing
businesses. These charges included $110 million in asset valuation
adjustments, primarily reflecting an estimate of impairment inherent in the
Corporation's auto lease portfolio, resulting from recent changes in business
dynamics and economic factors. In addition, the Corporation restructured its
Rapid Cash business to position it for future growth and profitability. Costs
totaling $65 million were incurred in connection with this business
restructuring, including write-offs of certain automated teller machine assets
and the restructuring or settlement of vendor contracts.
In the second quarter of 1997, the Corporation recorded restructuring
charges totaling $96 million ($68 million after-tax), or 6 cents per share, to
streamline the retail delivery system by consolidating approximately 200
banking centers over a 12-month period and to halt development of the
Strategic Banking System, a retail deposit banking system.
52
<PAGE>
NOTE 6--Operating Segments
See the "Business Segments" section beginning on page 19 for additional
disclosure regarding the Corporation's operating segments.
Operating segments disclosures are presented for 1998 only. Due to the BANC
ONE/FCN Merger, segment results for prior years are not available. The
information presented is consistent with the content of operating segments
data provided to the Corporation's executive management. The Corporation's
executive management currently does not use product group revenues to assess
consolidated results. Aside from investment management and insurance products,
product offerings are tailored to specific customer segments. As a result, the
aggregation of product revenues and related profit measures across lines of
business is not available.
Aside from the United States, no single country or geographic region
generates a significant portion of the Corporation's revenues or assets. In
addition, there are no significant single customer concentrations of revenue
or profitability.
NOTE 7--Investment Securities
The amortized cost and estimated fair value of available-for-sale and held-
to-maturity securities and the related unrealized gains and losses were as
follows:
<TABLE>
<CAPTION>
Investment Securities--Available-for-Sale
-------------------------------------------------------------
Gross Unrealized Gross Unrealized Fair Value
December 31, 1998 (In Amortized Cost Gains Losses (Book Value)
millions) -------------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury........... $ 4,496 $ 66 $ 12 $ 4,550
U.S. government
agencies............... 10,469 108 18 10,559
States and political
subdivisions........... 1,980 84 -- 2,064
Retained interest in
securitized credit card
receivables............ 17,544 201 375 17,370
Other debt securities... 8,174 72 75 8,171
Equity securities
(1)(2)................. 2,094 115 71 2,138
------- ---- ---- -------
Total............... $44,757 $646 $551 $44,852
======= ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
Investment Securities--Held-to-Maturity
-----------------------------------------------------------
Amortized Cost Gross Unrealized Gross Unrealized
December 31, 1997 (In (Book Value) Gains Losses Fair Value
millions) -------------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
States and political
subdivisions........... $451 $27 $ 6 $472
All other............... 334 3 9 328
---- --- --- ----
Total............... $785 $30 $15 $800
==== === === ====
</TABLE>
<TABLE>
<CAPTION>
Investment Securities--Available-for-Sale
-------------------------------------------------------------
Gross Unrealized Gross Unrealized Fair Value
Amortized Cost Gains Losses (Book Value)
-------------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury........... $ 7,829 $104 $ 13 $ 7,920
U.S. government
agencies............... 8,543 134 33 8,644
States and political
subdivisions........... 1,893 63 1 1,955
Other debt securities... 4,951 21 23 4,949
Equity securities
(1)(2)................. 1,654 176 44 1,786
------- ---- ---- -------
Total............... $24,870 $498 $114 $25,254
======= ==== ==== =======
</TABLE>
- --------
(1) The fair values of certain securities for which market quotations were not
available were estimated. In addition, the fair values of certain
securities reflect liquidity and other market-related factors.
(2) Includes investments accounted for at fair value, in keeping with
specialized industry practice.
53
<PAGE>
The maturity distribution of debt investment securities is shown below. The
distribution of mortage-backed securities and collateralized mortgage
obligations is based on average expected maturities. Actual maturities may
differ because issuers may have the right to call or prepay obligations.
<TABLE>
<CAPTION>
Amortized Cost Fair Value
December 31, 1998 (In millions) -------------- ----------
<S> <C> <C>
Due in one year or less............................... $20,986 $20,942
Due after one year through five years................. 12,081 12,160
Due after five years through ten years................ 2,743 2,764
Due after ten years................................... 6,853 6,848
------- -------
$42,663 $42,714
======= =======
</TABLE>
In connection with the BANC ONE/FCN Merger, a $656 million transfer was made
in 1998 to reclassify debt investment securities from held-to-maturity to
available-for-sale. In connection with the First USA merger, a $3.6 billion
transfer was made in 1997 to reclassify debt investment securities from held-
to-maturity to available-for-sale. The reclassifications were made to maintain
an interest rate risk position that existed prior to each business
combination.
During 1998, the Corporation reclassified $9.5 billion from loans, and $468
million from other assets, to investment securities available-for-sale. The
amounts transferred represent the Corporation's retained interests in its
securitized credit card receivables.
NOTE 8--Loans
<TABLE>
<CAPTION>
1998 1997
December 31, (In millions) -------- --------
<S> <C> <C>
Commercial
Domestic
Commercial................................................. $ 53,362 $ 48,458
Real estate
Construction............................................. 5,108 4,639
Other.................................................... 17,787 16,545
Lease financing............................................ 6,236 4,537
Foreign...................................................... 5,945 5,127
-------- --------
Total commercial....................................... 88,438 79,306
Consumer
Residential real estate...................................... 12,215 15,221
Home equity.................................................. 13,589 12,867
Automotive................................................... 20,634 17,998
Student...................................................... 3,129 3,219
Other........................................................ 8,359 8,303
-------- --------
Total consumer......................................... 57,926 57,608
Credit Card.................................................... 9,034 22,665
-------- --------
Total loans............................................ 155,398 159,579
Less: Allowance for credit losses...................... 2,271 2,817
-------- --------
Total loans, net....................................... $153,127 $156,762
======== ========
</TABLE>
Loans available for sale totaled $5.4 billion at December 31, 1998, and $3.2
billion at December 31, 1997.
54
<PAGE>
The Corporation's primary goal in managing credit risk is to minimize the
impact of default by an individual borrower or group of borrowers. As a
result, the Corporation strives to maintain a loan portfolio that is diverse
in terms of loan type, industry, borrower and geographic concentrations. As of
December 31, 1998 and 1997, there were no significant loan concentrations with
any single borrower, industry or geographic segment.
The Corporation's impaired loan information is outlined in the tables below.
A loan is considered impaired when it is probable that all principal and
interest amounts due will not be collected in accordance with the loan's
contractual terms. Certain loans, such as loans carried at the lower of cost
or fair value or small-balance homogeneous loans (e.g., credit card and
installment credit) are exempt from impairment determinations for disclosure
purposes. Impairment is recognized to the extent that the recorded investment
of an impaired loan or pool of loans exceeds its value either based on the
loan's underlying collateral or the calculated present value of projected cash
flows discounted at the contractual interest rate. Loans having a significant
recorded investment are measured on an individual basis, while loans not
having a significant recorded investment are grouped and measured on a pool
basis.
<TABLE>
<CAPTION>
1998 1997
December 31, (In millions) ---- ----
<S> <C> <C>
Impaired loans with related allowance.................................. $471 $380
Impaired loans with no related allowance (1)........................... 258 193
---- ----
Total impaired loans............................................... $729 $573
==== ====
Allowance on impaired loans (2)........................................ $112 $ 84
==== ====
</TABLE>
- --------
(1) Impaired loans for which the discounted cash flows, collateral value or
market price equals or exceeds the carrying value of the loan do not
require an allowance under SFAS No. 114.
(2) The allowance for impaired loans is included in the Corporation's overall
allowance for credit losses.
<TABLE>
<CAPTION>
1998 1997 1996
(In millions) ---- ---- ----
<S> <C> <C> <C>
Average balance of impaired loans............................ $638 $534 $582
Interest income recognized on impaired loans................. 38 29 23
</TABLE>
NOTE 9--Allowance for Credit Losses
Changes in the allowance for credit losses for the three years ended
December 31, 1998, were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(In millions) ------- ------- -------
<S> <C> <C> <C>
Balance, beginning of year........................... $ 2,817 $ 2,687 $ 2,422
Additions (deductions)
Charge-offs........................................ (1,945) (2,397) (1,927)
Recoveries......................................... 447 510 405
------- ------- -------
Net charge-offs.................................... (1,498) (1,887) (1,522)
Provision for credit losses........................ 1,408 1,988 1,716
Other................................................ (456) 29 71
------- ------- -------
Balance, end of year................................. $ 2,271 $ 2,817 $ 2,687
======= ======= =======
</TABLE>
The composition of the 1998 other adjustments to the allowance for credit
losses is addressed in the paragraph immediately following the table titled
"Analysis of Allowance for Credit Losses," beginning on page 30.
NOTE 10--Long-term Debt
Long-term debt consists of borrowings having an original maturity of greater
than one year. Original issue discount and deferred issuance costs are
amortized into interest expense over the terms of the related notes. Long-term
debt at December 31, 1998 and 1997, was as follows:
55
<PAGE>
<TABLE>
<CAPTION>
Effective
Rate (1) 1998 1997
(In millions) --------- ------- -------
<S> <C> <C> <C>
Parent Company
Subordinated debt
9% notes due 1999................................. 8.22% $ 200 $ 200
9 7/8% notes due 2000............................. 10.10 100 99
9 1/5% notes due 2001............................. 9.20 5 5
9 1/4% notes due 2001............................. 9.26 100 100
10 1/4% notes due 2001............................ 10.30 100 100
11 1/4% notes due 2001............................ 8.35 96 96
7 1/4% notes due 2002 (2)......................... 7.35 347 347
8 7/8% notes due 2002............................. 6.34 100 100
8 1/10% notes due 2002............................ 6.84 200 200
8 1/4% notes due 2002............................. 6.11 100 100
8.74% notes due 2003 (2).......................... 8.74 170 170
7 5/8% notes due 2003............................. 7.67 200 199
6 7/8% notes due 2003............................. 6.90 200 200
Floating rate notes due 2003 (3).................. 5.94 150 150
7 1/4% debentures due 2004........................ 7.27 200 200
Floating rate notes due 2005 (3).................. 6.25 96 96
7% notes due 2005................................. 7.07 297 297
6 1/8% notes due 2006............................. 5.68 150 150
7% notes due 2006................................. 7.00 149 149
7 1/8% notes due 2007............................. 7.15 199 199
7 6/10% notes due 2007 (2)........................ 7.62 397 397
6 3/8% notes due 2009............................. 5.41 198 198
9 7/8% equity commitment notes due 2009 (2)....... 10.02 53 195
10% notes due 2010................................ 10.10 198 198
9 9/10% notes due 2019............................ 9.90 142 --
7 1/2% preferred purchase units due 2023.......... 5.45 150 150
7 3/4% notes due 2025 (2)......................... 7.77 294 294
7 5/8% notes due 2026 (2)......................... 7.65 491 491
8% notes due 2027 (2)............................. 8.05 490 490
9 7/8% equity commitment notes due 1999........... 9.90 200 200
Convertible debentures 12 3/4% Series A........... 12.75 23 --
Convertible debentures 12 3/4% Series B........... 12.75 49 --
Senior debt
8 1/2% notes due 1998............................. -- -- 100
Medium-term notes................................. 5.51 8,152 5,015
Other............................................. -- 1 1
------- -------
Total Parent Company............................ 13,997 10,886
Subsidiaries
Bank notes, various rates and maturities.......... 5.67 4,883 7,597
Subordinated 7 3/8% notes due 2002................ 4.96 149 149
Subordinated 6 1/4% notes due 2003................ 6.25 200 200
Subordinated 6 5/8%-7.65% notes due 2003.......... 5.40-6.95 452 451
Subordinated 6% notes due 2005.................... 6.01 148 148
Subordinated 8 1/4% notes due 2024................ 8.25 250 250
Convertible debentures 12 3/4% Series A........... -- 27
Convertible debentures 12 3/4% Series B........... -- 54
Subordinated 6 1/4% notes due 2008................ 5.98-5.99 496 --
Capitalized lease and others, at various rates and
maturities....................................... various 720 781
------- -------
Total subsidiaries.............................. 7,298 9,657
------- -------
Total long-term debt............................ $21,295 $20,543
======= =======
</TABLE>
- --------
(1) The effective rate includes amortization of premium or discount. Interest
rate swap agreements have been entered into that have altered the stated
interest rate for certain of the borrowings to variable interest rates.
The effective rates include the impact of these swap agreements at
December 31, 1998. The terms to maturity of the swaps are shorter than or
equal to the altered borrowings.
(2) The notes are not subject to redemption and impose certain limitations
relating to funded debt, liens and the sale or issuance of capital stock
of significant bank subsidiaries.
(3) The floating rate notes due in 2003 have an interest rate priced at the
greater of 4 1/4% or the three-month LIBOR plus 1/8%. The floating rate
notes due in 2005 have an interest rate of the greater of 5 1/4% or the
three-month LIBOR rate plus 1/4%.
56
<PAGE>
Aggregate annual repayments of long-term debt at December 31, 1998:
<TABLE>
<CAPTION>
Total
(In millions) -------
<S> <C>
1999.................................................................... $ 5,235
2000.................................................................... 4,415
2001.................................................................... 2,427
2002.................................................................... 2,163
2003.................................................................... 2,021
Thereafter.............................................................. 5,034
-------
Total............................................................... $21,295
=======
</TABLE>
NOTE 11--Guaranteed Preferred Beneficial Interest in the Corporation's Junior
Subordinated Debt
The $1.003 billion of Guaranteed Preferred Beneficial Interest in the
Corporation's Junior Subordinated Debt ("Trust Preferred Capital Securities")
represents the net proceeds from the issuance of preferred capital securities
by First Chicago NBD Institutional Capital A (the "Series A Trust"), First
Chicago NBD Institutional Capital B (the "Series B Trust"), and First Chicago
NBD Capital I (the "Series I Trust") and First USA Capital Trust I. Each of
the trusts is a statutory business trust organized for the sole purpose of
issuing capital securities and investing the proceeds thereof in junior
subordinated debentures of the Corporation ("Junior Subordinated Debt"). The
preferred capital securities represent preferred individual beneficial
interests in the respective trusts and are subject to mandatory redemption
upon repayment of the Junior Subordinated Debt. The common securities of each
trust are owned by the Corporation. The Corporation's obligations under the
Junior Subordinated Debt and other relevant agreements, in aggregate,
constitute a full and unconditional guarantee by the Corporation of each
respective trust's obligations under the preferred securities issued by such
trust.
The Series A Trust issued $500 million in aggregate liquidation amount of
7.95% preferred capital securities on December 1, 1996. The sole asset of the
Series A Trust is $515 million principal amount of 7.95% Junior Subordinated
Debt that will mature on December 1, 2026, and is redeemable prior to maturity
at the option of the Corporation on or after December 1, 2006.
The Series B Trust issued $250 million in aggregate liquidation amount of
7.75% preferred capital securities on December 1, 1996. The sole asset of the
Series B Trust is $258 million principal amount of 7.75% Junior Subordinated
Debt that will mature on December 1, 2026, and is redeemable prior to maturity
at the option of the Corporation on or after December 1, 2006.
The Series I Trust issued $250 million in aggregate liquidation amount of
floating rate preferred capital securities in January 1997. The sole asset of
the Series I Trust is $258 million principal amount of floating rate Junior
Subordinated Debt of the Corporation, bearing interest at an annual rate equal
to three-month LIBOR plus 0.55% that will mature on February 1, 2027, and is
redeemable at the option of the Corporation on or after February 1, 2007.
The First USA Capital Trust I issued $200 million in aggregate liquidation
amount of 9.33% preferred capital securities on December 20, 1996. The sole
asset of the First USA Capital Trust I was $200 million principal amount of
9.33% Junior Subordinated Debt. In June 1997, the Corporation paid a premium
of $36 million to redeem $193 million of those securities.
The Trust Preferred Capital Securities are tax-advantaged issues and qualify
as Tier 1 capital. Distributions on these securities are included in interest
expense on long-term debt.
NOTE 12--Stock Dividends, Preferred Stock and Convertible Preferred Stock
On January 20, 1998, and January 23, 1996, the Corporation declared 10%
common stock dividends to BANC ONE shareholders of record on February 12,
1998, and February 21, 1996, respectively. Accordingly, all common stock share
data have been adjusted to include the effect of such stock dividends.
57
<PAGE>
The Corporation is authorized to issue 50,000,000 shares of preferred stock,
$0.01 par value. The Board of Directors is authorized to fix the particular
designations, preferences, rights, qualifications and restrictions for each
series of preferred stock issued. All preferred shares rank prior to common
shares both as to dividends and liquidation, but have no general voting
rights. The dividend rate on each of the cumulative adjustable rate series is
based on stated value and adjusted quarterly, based on a formula that
considers the interest rates for selected short- and long-term U.S. Treasury
securities prevailing at the time the rate is set.
<TABLE>
<CAPTION>
Issued and Outstanding Carrying Amount
December 31 December 31 (In millions)
Stated ----------------------- -------------------------
Value 1998 1997 1998 1997
------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Preferred Stock
Series B............ $ 100 1,191,000 1,191,000 $119 $ 119
Series C............ 100 713,800 713,800 71 71
Series C
Convertible........ No par -- 2,707,917 -- 136
</TABLE>
The minimum, maximum and current dividend rates for individual series of
preferred stock are presented in the following table.
<TABLE>
<CAPTION>
Stated Annual Dividend Rate
Shares Value Per ----------------------- Redemption
Outstanding Share Maximum Minimum Current Price (1)
December 31, 1998 ----------- --------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cumulative Adjustable
Rate (2)
Series B.............. 1,191,000 $100.00 12.0% 6.0% 6.0% $100.00
Series C.............. 713,800 100.00 12.5 6.0 6.5 100.00
</TABLE>
- --------
(1) Plus accrued and unpaid dividends.
(2) Currently redeemable.
On April 16, 1998, the Corporation redeemed all of the shares of its Series
C Convertible Preferred Stock at the redemption price of $51.05 per share plus
the amount of any dividends accrued and unpaid.
All shares of the Corporation's 8.45% Cumulative Preferred Stock, Series E
($625 stated value), and the related depositary shares, were redeemed on
November 17, 1997, at the price of $25.27 per depositary share, including
accrued and unpaid dividends of $0.27 per depositary share.
All shares of First USA's 6 1/4% mandatory convertible preferred stock were
redeemed by First USA on May 2, 1997, and converted into the Corporation's
common stock in connection with the acquisition on June 27, 1997. Dividends at
an annual rate of $1.99 per share on the preferred stock were cumulative and
payable quarterly in arrears. The preferred stock had a liquidation value of
$31.875 per share and was convertible into 0.833 shares of the Corporation's
common stock.
On April 1, 1997, the Corporation redeemed all shares of its 5 3/4%
Cumulative Convertible Preferred Stock, Series B ($5,000 stated value), and
the related depositary shares, at the price of $51.725 per depositary share
plus an accrued and unpaid dividend of $0.71875 per depositary share. Each
such depositary share was convertible into 1.6876 shares of the Corporation's
common stock at the option of the holder, and, in 1997, approximately 3.1
million depositary shares were converted into approximately 5.2 million shares
of common stock. In total, substantially all of the 4.0 million depositary
shares had been converted into 6.7 million common shares. Resultant fractional
shares were paid in cash.
NOTE 13--Dividends and Capital Restrictions
The Corporation's national bank subsidiaries are subject to two statutory
limitations on their ability to pay dividends. Under the first, dividends
cannot exceed the level of undivided profits. In addition, a national bank
cannot declare a dividend, without regulatory approval, in an amount in excess
of its net income for the current year combined with the combined net profits
for the preceding two years. State bank subsidiaries may also be
58
<PAGE>
subject to limitations on dividend payments. The amount of dividends available
from certain nonbank subsidiaries that are subject to dividend restrictions is
regulated by the governing agency to which they report.
Based on these statutory requirements, the bank affiliates could, in the
aggregate, have declared additional dividends of up to approximately $2.0
billion without regulatory approval at January 1, 1999. The payment of
dividends by any bank may also be affected by other factors, such as the
maintenance of adequate capital.
The bank affiliates are subject to various regulatory capital requirements
that may require them to maintain minimum ratios of total and Tier 1 capital
to risk-weighted assets and of Tier 1 capital to average assets. Failure to
meet minimum capital requirements results in certain actions by bank
regulators that could have a direct material effect on the bank affiliates'
financial statements. As of December 31, 1998, management believed that each
of the bank affiliates met all capital adequacy requirements to which it is
subject and is correctly categorized as well-capitalized under the regulatory
framework for prompt corrective action. There are no conditions or events
since that categorization that management believes have changed the
institution's category. For more information, see the "Supervision and
Regulation--Capital Requirements" section, beginning on page 6.
The actual and required capital amounts and ratios for the Corporation and
its principal banking subsidiaries are presented in the table below.
<TABLE>
<CAPTION>
To Be Categorized
Actual Adequately Capitalized
--------------- -------------------------
Capital Capital Capital Capital
December 31, 1998 (Dollars in Amount Ratio Amount Ratio
millions) ------- ------- ------------- -----------
<S> <C> <C> <C> <C>
Risk adjusted capital (to risk-
weighted assets):
The Corporation (consolidated)..... $27,790 11.3% $ 19,558 8.0%
The First National Bank of Chicago. 7,113 10.5 5,418 8.0
Bank One, N.A...................... 2,766 10.8 2,057 8.0
Bank One, Texas, N.A............... 2,476 10.9 1,820 8.0
NBD Bank (Michigan)................ 2,397 10.8 1,774 8.0
FCC National Bank.................. 1,461 13.6 860 8.0
Bank One, Arizona, N.A............. 2,273 10.7 1,695 8.0
First USA Bank, N.A................ 1,666 19.8 674 8.0
Tier 1 capital (to risk-weighted
assets):
The Corporation (consolidated)..... 19,495 7.9 9,779 4.0
The First National Bank of Chicago. 4,821 7.1 2,709 4.0
Bank One, N.A...................... 1,840 7.2 1,028 4.0
Bank One, Texas, N.A............... 1,601 7.0 910 4.0
NBD Bank (Michigan)................ 1,549 7.0 887 4.0
FCC National Bank.................. 1,203 11.2 430 4.0
Bank One, Arizona, N.A............. 1,408 6.6 847 4.0
First USA Bank, N.A................ 1,407 16.7 337 4.0
Tier 1 leverage (to average
assets):
The Corporation (consolidated)..... 19,495 8.0 7,246 3.0
The First National Bank of Chicago. 4,821 7.3 2,632 4.0
Bank One, N.A...................... 1,840 7.2 1,029 4.0
Bank One, Texas, N.A............... 1,601 6.5 989 4.0
NBD Bank (Michigan)................ 1,549 7.1 870 4.0
FCC National Bank.................. 1,203 11.8 407 4.0
Bank One, Arizona, N.A............. 1,408 7.8 723 4.0
First USA Bank, N.A................ 1,407 19.0 296 4.0
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
To Be Categorized
Actual Adequately Capitalized
--------------- -------------------------
Capital Capital Capital Capital
December 31, 1997 (Dollars in Amount Ratio Amount Ratio
millions) ------- ------- ------------- -----------
<S> <C> <C> <C> <C>
Risk adjusted capital (to risk-
weighted assets):
The Corporation (consolidated)..... $26,958 12.3% $ 17,565 8.0%
The First National Bank of Chicago. 6,006 11.0 4,368 8.0
Bank One, N.A...................... 2,688 10.6 2,026 8.0
Bank One, Texas, N.A............... 2,348 11.4 1,646 8.0
NBD Bank (Michigan)................ 2,881 13.5 1,705 8.0
FCC National Bank.................. 1,471 14.3 825 8.0
Bank One, Arizona, N.A............. 1,409 10.8 1,045 8.0
First USA Bank, N.A................ 1,382 13.1 844 8.0
Tier 1 capital (to risk-weighted
assets):
The Corporation (consolidated)..... 17,958 8.2 8,782 4.0
The First National Bank of Chicago. 4,207 7.7 2,184 4.0
Bank One, N.A...................... 1,695 6.7 1,013 4.0
Bank One, Texas, N.A............... 1,507 7.3 823 4.0
NBD Bank (Michigan)................ 1,914 9.0 853 4.0
FCC National Bank.................. 1,194 11.6 412 4.0
Bank One, Arizona, N.A............. 883 6.8 523 4.0
First USA Bank, N.A................ 1,106 10.5 422 4.0
Tier 1 leverage (to average
assets):
The Corporation (consolidated)..... 17,958 7.8 9,181 4.0
The First National Bank of Chicago. 4,207 7.6 2,207 4.0
Bank One, N.A...................... 1,695 6.9 983 4.0
Bank One, Texas, N.A............... 1,507 6.8 887 4.0
NBD Bank (Michigan)................ 1,914 8.9 864 4.0
FCC National Bank.................. 1,194 12.6 378 4.0
Bank One, Arizona, N.A............. 883 6.1 579 4.0
First USA Bank, N.A................ 1,106 12.9 344 4.0
</TABLE>
Federal banking law also restricts each bank subsidiary from extending
credit to the Corporation in excess of 10% of the subsidiary's capital stock
and surplus, as defined. Any such extensions of credit are subject to strict
collateral requirements.
NOTE 14--Supplemental Disclosures for Statement of Cash Flows
In connection with the BANC ONE/FCN Merger, a $656 million transfer was made
in 1998 to reclassify debt investment securities from held-to-maturity to
available-for-sale. A similar transfer of $3.6 billion was made in 1997 in
connection with the First USA merger. The reclassifications were made to
maintain an interest rate risk position that existed prior to each business
combination.
During 1998, the Corporation reclassified $9.5 billion from loans, and $468
million from other assets, to investment securities available for sale. The
amounts transferred represent the Corporation's retained interests in its
securitized credit card receivables.
Loans transferred to other real estate owned totaled $239 million, $169
million and $107 million in 1998, 1997 and 1996, respectively.
In 1997 and 1996, the Corporation issued common stock in purchase
transactions with a market value of $538 million and $711 million,
respectively.
In 1997 and 1996, $154 million and $45 million, respectively, of the
Corporation's Cumulative Convertible Preferred Stock, Series B, were converted
into common stock. See Note 12--Stock Dividends, Preferred Stock and
Convertible Preferred Stock for more details.
60
<PAGE>
NOTE 15--Supplemental Disclosures for Accumulated Other Adjustments to
Stockholders' Equity
<TABLE>
<CAPTION>
1998 1997 1996
(In millions) ----- ---- ----
<S> <C> <C> <C>
Accumulated Other Adjustments to Stockholders' Equity
Fair value adjustment on investment securities--
available-for-sale
Balance, beginning of period.......................... $ 203 $ 81 $237
Change in fair value, net of taxes of $72 in 1998, $101
in 1997, $(69) in 1996................................ 120 188 (128)
Reclassification adjustment, net of taxes of $(57) in
1998, $(35) in 1997, $(16) in 1996.................... (105) (66) (28)
----- ---- ----
Balance, end of period................................. 218 203 81
Accumulated translation adjustment
Balance, beginning of period........................... 6 7 8
Translation gain(loss), net of taxes................... 15 (1) (1)
----- ---- ----
Balance, end of period................................. 21 6 7
----- ---- ----
Total accumulated other adjustments to stockholders'
equity.................................................. $ 239 $209 $ 88
===== ==== ====
</TABLE>
NOTE 16--Employee Benefits
(a) Pension Plans
The Corporation has various non-contributory pension plans covering
substantially all salaried employees.
The tables below set forth the Corporation's qualified plans' change in
benefit obligation, change in plan assets, and funded status.
<TABLE>
<CAPTION>
1998 1997
(In millions) ------ ------
<S> <C> <C>
Change in benefit obligation
Benefit obligation, January 1................................... $2,277 $2,308
Service cost.................................................... 127 103
Interest cost................................................... 163 175
Actuarial loss(gain)............................................ 42 50
Plan change..................................................... (14) (162)
Benefits paid................................................... (215) (197)
------ ------
Benefit obligation, December 31................................. 2,380 2,277
------ ------
Change in plan assets
Fair value of plan assets, January 1............................ 3,194 2,896
Actual return on plan assets.................................... 622 463
BANK ONE contribution........................................... 16 33
Benefits paid................................................... (215) (198)
------ ------
Fair value of plan assets, December 31.......................... 3,617 3,194
------ ------
Funded status................................................... 1,237 917
Unrecognized net actuarial loss(gain)........................... (659) (350)
Unrecognized prior service cost................................. (83) (75)
Unrecognized net transition asset............................... (34) (48)
------ ------
Prepaid pension costs, December 31.............................. $ 461 $ 444
====== ======
</TABLE>
Plan assets include 1.0 million shares of the Corporation's common stock at
December 31, 1998, with a fair value of approximately $53 million, and 1.5
million shares at December 31, 1997, with a fair value of approximately $76
million.
61
<PAGE>
The table below sets forth net periodic pension cost for 1998, 1997 and 1996
for the Corporation's qualified and nonqualified pension plans.
<TABLE>
<CAPTION>
1998 1997 1996
(In millions) ----- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned during the period.............. $ 135 $110 $119
Interest cost on benefit obligation.......................... 172 185 169
Expected return on plan assets............................... (271) (249) (274)
Amortization of prior service cost........................... (2) 9 11
Recognized actuarial (gain)loss.............................. 1 1 39
Amortization of transition asset............................. (13) (13) (10)
----- ---- ----
Net periodic pension cost.................................... $ 22 $ 43 $ 54
===== ==== ====
</TABLE>
The accrued pension liability for the Corporation's nonqualified pension
plans was $92 million at December 31, 1998, and $82 million at December 31,
1997. Such plans are unfunded.
The table below sets forth the assumptions used in determining the
Corporation's benefit obligation and net periodic pension cost for both
qualified and nonqualified pension plans.
<TABLE>
<CAPTION>
1998 1997 1996
----- -------- --------
<S> <C> <C> <C>
Actuarial assumptions:
Weighted average discount rate for benefit 7.00% 7.00% to 7.00% to
obligation.......................................... 7.25% 7.75%
Weighted average rate of compensation increase....... 5.00% 5.00% to 5.00% to
5.25% 5.25%
Expected long-term rate of return on plan assets..... 9.50% 8.00% to 8.00% to
9.50% 9.50%
</TABLE>
(b) Postretirement Benefits Other Than Pensions
The Corporation sponsors postretirement life insurance plans and provides
health care benefits for certain retirees and grandfathered employees when
they retire. The postretirement life insurance benefit is noncontributory,
while the health care benefits are contributory.
62
<PAGE>
The table below sets forth the Corporation's postretirement benefit plans'
change in benefit obligation and funded status at December 31, 1998 and 1997.
There are no plan assets.
<TABLE>
<CAPTION>
1998 1997
(In millions) ----- -----
<S> <C> <C>
Change in benefit obligation
Benefit obligation, January 1.................................... $ 239 $ 235
Service cost..................................................... 6 6
Interest cost.................................................... 17 17
Actuarial loss................................................... 7 7
Benefits paid.................................................... (18) (20)
Plan change...................................................... (61) --
Curtailment...................................................... -- (6)
----- -----
Benefit obligation, December 31.................................. 190 239
----- -----
Change in plan assets
Fair value of plan assets, January 1............................. -- --
Employer contribution............................................ 18 20
Benefits paid.................................................... (18) (20)
----- -----
Fair value of plan assets, December 31........................... -- --
----- -----
Funded status.................................................... (190) (239)
Unrecognized net actuarial loss.................................. 6 4
Unrecognized prior service cost.................................. (59) 3
----- -----
Accrued postretirement benefit costs, December 31................ $(243) $(232)
===== =====
</TABLE>
Net periodic cost for postretirement health care and life insurance benefits
during 1998, 1997 and 1996 include the following:
<TABLE>
<CAPTION>
1998 1997 1996
(In millions) ---- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned during the period................... $ 6 $ 6 $ 4
Interest cost on accumulated postretirement benefit obligation.... 17 17 8
Recognized actuarial (gain)....................................... -- (1) --
Curtailment gain.................................................. -- (6) --
--- --- ---
Net periodic postretirement benefit cost........................ $23 $16 $12
=== === ===
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% at December 31, 1998, and ranged
from 7.00-7.25% at December 31, 1997.
For measurement purposes, an annual rate of increase ranging from 6.00-7.00%
was assumed for 1998 in the cost of covered health care benefits; this range
was assumed to decrease gradually to as low as 5.00-5.50% in the years 2000
and 2001 and thereafter. These assumptions have a significant effect on the
amounts reported. Accordingly, the table below sets forth the effect of a
1.00% change in the assumed health care cost trend rates.
<TABLE>
<CAPTION>
1% point increase 1% point decrease
(In millions) ----------------- -----------------
<S> <C> <C>
Effect on 1998 service and interest cost
components................................ $ 1.7 $ (1.4)
Effect on December 31, 1998, accumulated
postretirement benefit obligation......... $16.0 $(11.4)
</TABLE>
63
<PAGE>
(c) 401(k) Plans
The Corporation sponsors various 401(k) plans that cover substantially all
of its employees. The Corporation is required to make contributions to the
plans in varying amounts. The expense related to these plans was $89 million
in 1998, $78 million in 1997 and $64 million in 1996.
NOTE 17--Stock-Based Compensation
The Corporation utilizes several types of stock-based awards as part of its
overall compensation program. In addition, the Corporation provides employees
the opportunity to purchase its shares through various employee stock purchase
plans. The Corporation's stock-based compensation plans provide for the
granting of awards to purchase or receive common shares and include limits as
to the aggregate number of shares available for grants and the total number of
shares available for grants of stock awards in any one year. The compensation
cost that has been charged against income for the Corporation's stock-based
compensation plans was $52 million for 1998, $71 million for 1997 and $44
million for 1996. As a result of the respective changes in control of FCN and
First Commerce, $113 million was recorded as a restructuring charge related to
the immediate vesting of certain restricted and performance shares. See Note
1(n) on page 48 for the Corporation's accounting policies relating to stock-
based compensation.
(a) Performance Shares
The Corporation provides performance-based stock awards for certain of its
senior managers. The level of performance shares eventually distributed
depends on the achievement of specific performance criteria that are set at
the grant date. The ultimate expense attributable to these shares is based on
the market value of the shares distributed at the end of the defined
performance period. The expense associated with such awards is recognized over
the defined performance period. As a result of the respective changes in
control of FCN and First Commerce, all performance share awards originally
granted by these entities immediately vested, and the maximum performance
standards were deemed to have been achieved.
(b) Restricted Shares
Restricted shares granted to key officers of the Corporation require them
either to continue employment for a stated number of years from the grant date
before restrictions on the shares are released or more generally place
restrictions related to the attainment of specified performance criteria over
the restriction period. The market value of the restricted shares as of the
date of grant is amortized to compensation expense ratably over the period the
shares remain restricted. Holders of restricted stock receive dividends and
have the right to vote the shares. As a result of the respective changes in
control of FCN and First Commerce, substantially all outstanding restricted
stock issued by these entities vested immediately.
(c) Stock Options and Stock Appreciation Rights (SARs)
The Corporation's stock option plans generally provide that the exercise
price of any stock option or SAR may not be less than the fair market value of
the common stock on the date of grant.
There are a number of stock option plans, and they have distinct provisions.
Awards generally vest over a period of three to four years, and expense is
recognized over the vesting period. Options are not exercisable for at least
one year from the date of grant and have a maximum term of eight to 20 years.
Some option plans include the right to receive additional options if certain
criteria are met. The vesting period for such additional options is six
months. As a result of the change in control at FCN and First Commerce, all
outstanding stock options issued at these entities vested and became
exercisable immediately.
64
<PAGE>
The following tables summarize stock option and SAR activity for 1998 and
1997, respectively, and provide details of stock options outstanding at
December 31, 1998, for the Corporation:
<TABLE>
<CAPTION>
1998 1997
---------------------- ------------------------
Wtd. Avg. Shares Wtd. Avg.
Shares Exercise Price and SARs Exercise Price
(Shares in thousands) ------ -------------- -------- --------------
<S> <C> <C> <C> <C>
Outstanding at January 1......... 40,798 $26.60 45,001 $18.91
Granted.......................... 8,896 54.79 12,251 40.40
Exercised........................ (9,902) 20.29 (15,242) 14.84
Forfeited........................ (1,545) 37.77 (1,212) 29.80
------ ------ ------- ------
Outstanding at December 31....... 38,247 $34.34 40,798 $26.60
====== ====== ======= ======
Exerciseable at December 31...... 22,983 $29.30 18,275 $19.31
====== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exerciseable
(Shares in thousands) -------------------------------- ---------------------
Number Wtd. Wtd. Avg. Wtd.
Outstanding Avg. Remaining Avg.
Dec. 31, Exercise Contractual Number Exercise
Range of Exercise Prices 1998 Price Life Exerciseable Price
- ------------------------ ----------- -------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Less than $10.00........ 391 $ 8.77 2.4 years 391 $ 8.77
$10.00-$20.00........... 7,494 17.00 4.5 7,491 17.00
$20.01-$30.00........... 9,439 24.86 7.8 5,861 24.47
$30.01-$40.00........... 8,279 35.62 9.6 4,288 35.75
$40.01-$50.00........... 7,214 46.64 13.1 3,852 47.69
Greater than $50.01..... 5,430 58.33 13.8 1,100 56.59
------ ------ --------- ------ ------
Total................. 38,247 $34.34 9.4 years 22,983 $29.30
====== ====== ========= ====== ======
</TABLE>
(d) Employee Stock Purchase Plans
The Corporation sponsors various employee stock purchase plans designed to
encourage employee stock ownership. The Corporation does not recognize any
compensation expense with respect to these plans. The general provisions of
such plans are as follows:
One of the stock purchase plans allowed eligible employees to make deposits
to a savings account for two years. The employee then had the option to
withdraw the savings in cash or purchase shares of the Corporation at a fixed,
discounted price determined at the beginning of the savings period. The last
offering period under this plan expired on September 30, 1998, at which time
approximately 3.7 million shares were issued to participating employees.
Another stock purchase plan affords eligible employees the opportunity to
purchase and sell shares on the open market at current market prices, with no
commission or administrative fees on the purchase of shares.
Finally, a third stock purchase plan allows eligible employees the
opportunity to purchase shares on a quarterly basis at a 15% discount from the
market price at the date of enrollment or the market price at the end of the
quarter, whichever is lower. The employee is allowed to make deposits of up to
20% of his/her earnings to a noninterest-bearing account each quarter to
purchase shares of the Corporation.
(e) Pro Forma Costs of Stock-Based Compensation
The grant date fair values of stock options granted under the Corporation's
various stock option plans and employee stock purchase and savings plan were
estimated using the Black-Scholes option-pricing model. This model was
developed to estimate the fair value of traded options, which have different
characteristics than employee stock options, and changes to the subjective
input assumptions can result in materially different fair market value
estimates. Therefore, the Black-Scholes model may not necessarily provide a
reliable single measure of the fair value of employee stock options and
purchase rights.
65
<PAGE>
The following table summarizes stock-based compensation grants and their
related weighted average grant-date fair values for the years ended December
31:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
Number Wtd. Avg. Number Wtd. Avg. Number Wtd. Avg.
of Grant-Date of Grant-Date of Grant-Date
Shares Fair Value Shares Fair Value Shares Fair Value
(Shares in Thousands) ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Stock option plans....... 8,896 $12.03 12,251 $ 9.65 14,259 $ 5.28
Restricted shares........ 651 56.54 953 36.22 1,047 25.39
Performance shares....... -- -- 642 36.40 785 25.00
Employee stock purchase
plans (1)............... -- -- 76 5.73 3,961 3.57
</TABLE>
- --------
(1) Estimated number of shares employees could purchase under the plans.
The following assumptions were used to determine the Black-Scholes weighted
average grant-date fair value of stock option awards and conversions in 1998,
1997 and 1996: (1) expected dividend yields ranged from 0.67% to 4.48%, (2)
expected volatility ranged from 18.74% to 32.95%, (3) risk-free interest rates
ranged from 4.36% to 6.97% and (4) expected lives ranged from 4.2 years to 9.0
years.
The following assumptions were used to determine the Black-Scholes weighted
average grant-date fair value of employees' purchase rights under the employee
stock purchase plans in 1997 and 1996, respectively: (1) expected dividend
yields of 2.54% and 3.70%, (2) expected volatility of 22.70% and 18.82%, (3)
risk-free interest rates of 5.73% and 6.10% and (4) expected lives of 1.3 and
2.2 years.
Had the compensation cost for the Corporation's stock-based compensation
plans been determined in accordance with the fair value based accounting
method provided by SFAS No. 123, the net income and earnings per share
implications for the years ended December 31, 1998, 1997 and 1996 would have
been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
Pro As Pro As Pro As
(In millions, except per- Forma(1) Reported Forma(1) Reported Forma(1) Reported
share data) -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income............... $3,034 $3,108 $2,929 $2,960 $3,210 $3,231
Net income per common
share, basic............ 2.58 2.65 2.46 2.48 2.63 2.64
Net income per common
share, diluted.......... 2.55 2.61 2.40 2.43 2.55 2.57
</TABLE>
- --------
(1) The above pro forma information may not be representative of the pro forma
impact in future years.
As a result of the change in control of FCN and First Commerce, additional
compensation expense of $21 million, associated with the accelerated vesting
of stock options, was included in 1998 pro forma net income under SFAS No.
123.
NOTE 18--Income Taxes
The components of total applicable income tax expense in the consolidated
income statement for the years ended December 31, 1998, 1997 and 1996, are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
(In millions) ------ ------ ------
<S> <C> <C> <C>
Income tax expense:
Current
Federal................................................ $ 801 $ 826 $1,216
Foreign................................................ 4 12 17
State.................................................. 98 84 108
------ ------ ------
Total................................................ 903 922 1,341
Deferred
Federal................................................ 424 488 254
State.................................................. 30 57 16
------ ------ ------
Total................................................ 454 545 270
------ ------ ------
Applicable income taxes.................................... $1,357 $1,467 $1,611
====== ====== ======
</TABLE>
66
<PAGE>
The tax effects of fair value adjustments on securities available-for-sale,
foreign currency translation adjustments, and certain tax benefits related to
stock options are recorded directly to stockholders' equity. The net tax
expense (benefit) recorded directly in stockholders' equity amounted to $(66)
million in 1998, $(28) million in 1997 and $9 million in 1996.
A summary reconciliation of the differences between applicable income taxes
and the amounts computed at the applicable regular federal tax rate of 35% is
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
(In millions) ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Statutory tax rate................... $1,563 35.0% $1,549 35.0% $1,695 35.0%
Increase (reduction) resulting from:
State income taxes, net of federal
income tax benefit................ 83 1.9 92 2.1 81 1.7
Tax-exempt interest................ (58) (1.3) (88) (2.0) (98) (2.0)
Tax credits........................ (94) (2.1) (51) (1.2) (40) (0.8)
Nontaxable liquidating
distributions..................... (142) (3.2) (56) (1.3) -- --
Other, net......................... 5 0.1 21 0.5 (27) (0.6)
------ ---- ------ ---- ------ ----
Applicable income taxes.............. $1,357 30.4% $1,467 33.1% $1,611 33.3%
====== ==== ====== ==== ====== ====
</TABLE>
A net deferred tax liability is included in other liabilities in the
consolidated balance sheet as a result of temporary differences between the
carrying amounts of assets and liabilities in the financial statements and
their related tax bases. The components of the net deferred tax liability as
of December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
(In millions) ------ ------
<S> <C> <C>
Deferred tax liabilities
Deferred income on lease financing............................. $2,887 $2,294
Prepaid pension costs.......................................... 99 117
Securitizations of credit card receivables..................... 142 227
Other.......................................................... 852 685
------ ------
Gross deferred tax liabilities................................. 3,980 3,323
Deferred tax assets
Allowance for credit losses.................................... 874 1,032
Restructure reserves........................................... 276 27
Alternative minimum tax credit carryforward.................... 116 71
Other.......................................................... 535 490
------ ------
Gross deferred tax assets...................................... 1,801 1,620
Valuation allowance............................................ -- --
------ ------
Gross deferred tax assets, net of valuation allowance.......... 1,801 1,620
------ ------
Net deferred tax liability....................................... $2,179 $1,703
====== ======
</TABLE>
NOTE 19--Lease Commitments
The Corporation has entered into a number of operating and capitalized lease
agreements for premises and equipment. The minimum annual rental commitments
under these leases are shown below.
<TABLE>
<CAPTION>
(In millions)
<S> <C>
1999..................................................................... $ 283
2000..................................................................... 244
2001..................................................................... 199
2002..................................................................... 173
2003..................................................................... 143
2004 and thereafter...................................................... 807
------
$1,849
======
</TABLE>
67
<PAGE>
Occupancy expense has been reduced by rental income from premises leased to
others in the amount of $101 million in 1998, $107 million in 1997 and $71
million in 1996. Rental expense under operating leases approximated $356
million in 1998, $320 million in 1997 and $310 million in 1996.
NOTE 20--Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business, the Corporation is a party to financial
instruments containing credit and/or market risks that are not required to be
reflected in a balance sheet. These financial instruments include credit-
related instruments as well as certain derivative instruments. The Corporation
has risk-management policies to identify, monitor and limit exposure to
credit, liquidity and market risks.
The following disclosures represent the Corporation's credit exposure,
assuming that every counterparty to financial instruments with off-balance-
sheet credit risk fails to perform completely according to the terms of the
contracts, and that the collateral and other security, if any, proves to be of
no value to the Corporation.
This note does not address the amount of market losses the Corporation would
incur if future changes in market prices make financial instruments with off-
balance-sheet market risk less valuable or more onerous.
(a) Collateral and Other Security Arrangements
The credit risk of both on- and off-balance-sheet financial instruments
varies based on many factors, including the value of collateral held and other
security arrangements. To mitigate credit risk, the Corporation generally
determines the need for specific covenant, guarantee and collateral
requirements on a case-by-case basis, depending on the nature of the financial
instrument and the customer's creditworthiness. The Corporation may also
receive comfort letters and oral assurances. The amount and type of collateral
held to reduce credit risk varies but may include real estate, machinery,
equipment, inventory and accounts receivable, as well as cash on deposit,
stocks, bonds and other marketable securities that are generally held in the
Corporation's possession or at another appropriate custodian or depository.
This collateral is valued and inspected on a regular basis to ensure both its
existence and adequacy. Additional collateral is requested when appropriate.
(b) Credit-Related Financial Instruments
The table below summarizes credit-related financial instruments, including
both commitments to extend credit and letters of credit.
<TABLE>
<CAPTION>
1998 1997
December 31 (In billions) ------ ------
<S> <C> <C>
Unused credit card lines......................................... $259.0 $221.1
Unused loan commitments.......................................... 114.1 99.2
Standby letters of credit and foreign office guarantees.......... 14.0 12.9
Commercial letters of credit..................................... 1.2 1.1
</TABLE>
Since many of the unused commitments are expected to expire unused or be
only partially used, the total amount of unused commitments in the preceding
table does not necessarily represent future cash requirements.
Credit card lines allow customers to use a credit card to buy goods or
services and to obtain cash advances. However, the Corporation has the right
to change or terminate any terms or conditions of a customer's credit card
account, upon notification to the customer. Loan commitments are agreements to
make or acquire a loan or lease as long as the agreed-upon terms (e.g.,
expiry, covenants or notice) are met. The Corporation's commitments to
purchase or extend loans help its customers meet their liquidity needs.
68
<PAGE>
Standby letters of credit and foreign office guarantees are issued in
connection with agreements made by customers to counterparties. If the
customer fails to comply with the agreement, the counterparty may enforce the
standby letter of credit or foreign office guarantee as a remedy. Credit risk
arises from the possibility that the customer may not be able to repay the
Corporation for standby letters of credit or foreign office guarantees. At
December 31, 1998 and 1997, standby letters of credit and foreign office
guarantees had been issued for the following purposes.
<TABLE>
<CAPTION>
1998 1997
December 31 (In millions) ------- -------
<S> <C> <C>
Financial....................................................... $11,843 $10,831
Performance..................................................... 2,140 2,100
------- -------
Total (1)................................................... $13,983 $12,931
======= =======
</TABLE>
- --------
(1) Includes $1.4 billion at December 31, 1998, and $1.2 billion at December
31, 1997, participated to other institutions.
At December 31, 1998, $10.2 billion of standby letters of credit and foreign
office guarantees was due to expire within three years, and $3.8 billion was
to expire after three years.
Commercial letters of credit are issued or confirmed to ensure payment of
customers' payables or receivables in short-term international trade
transactions. Generally, drafts will be drawn when the underlying transaction
is consummated as intended. However, the short-term nature of this instrument
serves to mitigate the risk associated with these contracts.
(c) Derivative Financial Instruments
The Corporation enters into a variety of derivative financial instruments in
its trading, asset and liability management, and corporate investment
activities. These instruments offer customers protection from rising or
falling interest rates, exchange rates, equity prices and commodity prices.
They can either reduce or increase the Corporation's exposure to such changing
rates or prices.
Following is a brief description of such derivative financial instruments.
. Interest rate forward and futures contracts represent commitments either
to purchase or sell a financial instrument at a specified future date for
a specified price, and may be settled in cash or through delivery.
. An interest rate swap is an agreement in which two parties agree to
exchange, at specified intervals, interest payment streams calculated on
an agreed-upon notional principal amount with at least one stream based
on a specified floating rate index.
. Interest rate options are contracts that grant the purchaser, for a
premium payment, the right either to purchase or sell a financial
instrument at a specified price within a specified period of time or on a
specified date from or to the writer of the option.
. Interest rate caps and floors are contracts with notional principal
amounts that require the seller, in exchange for a fee, to make payments
to the purchaser if a specified market interest rate exceeds the fixed
cap rate or falls below the fixed floor rate on specified future dates.
. Forward rate agreements are contracts with notional principal amounts
that settle in cash at a specified future date based on the differential
between a specified market interest rate and a fixed interest rate.
. Foreign exchange contracts represent swap, spot, forward, futures and
option contracts to exchange currencies.
. Equity price contracts represent swap, forward, futures, cap, floor and
option contracts that derive their value from underlying equity prices.
. Commodity price contracts represent swap, futures, cap, floor and option
contracts that derive their value from underlying commodity prices.
69
<PAGE>
The Corporation's objectives and strategies for using derivative financial
instruments for structural interest rate risk management and foreign exchange
risk management are discussed on pages 26 to 28.
Balance sheet exposure for derivative financial instruments includes the
amount of recognized gains in the market valuation of those contracts. Those
amounts fluctuate as a function of maturity, interest rates, foreign exchange
rates, equity prices and commodity prices.
The credit risk associated with exchange-traded derivative financial
instruments is limited to the relevant clearinghouse. Options written do not
expose the Corporation to credit risk, except to the extent of the underlying
risk in a financial instrument that the Corporation may be obligated to
acquire under certain written put options. Caps and floors written do not
expose the Corporation to credit risk.
On some derivative financial instruments, the Corporation may have
additional risk. This is due to the underlying risk in the financial
instruments that the Corporation may be obligated to acquire, or the risk that
the Corporation will deliver under a contract but that the customer will fail
to deliver the countervailing amount. The Corporation believes that its credit
and settlement procedures minimize these risks.
Not all derivative financial instruments have off-balance-sheet market risk.
Market risk associated with options purchased and caps and floors purchased is
recorded in the balance sheet.
The table on page 34 reports the Corporation's gross notional principal or
contractual amounts of derivative financial instruments as of December 31,
1998, and December 31, 1997. These instruments include swaps, forwards, spot,
futures, options, caps, floors, forward rate agreements, and other conditional
or exchange contracts. The amounts do not represent the market or credit risk
associated with these contracts, as previously defined, but rather give an
indication of the volume of the transactions.
NOTE 21--Fair Value of Financial Instruments
The Corporation is required to disclose the estimated fair value of its
financial instruments in accordance with SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments." These disclosures do not attempt to estimate
or represent the Corporation's fair value as a whole. The disclosure excludes
assets and liabilities that are not financial instruments as well as the
significant unrecognized value associated with core deposits and credit card
relationships.
Fair value amounts disclosed represent point-in-time estimates that may
change in subsequent reporting periods due to market conditions or other
factors. Estimated fair value amounts in theory represent the amounts at which
financial instruments could be exchanged or settled in a current transaction
between willing parties. In practice, however, this may not be the case due to
inherent limitations in the methodologies and assumptions used to estimate
fair value. For example, quoted market prices may not be realized because the
financial instrument may be traded in a market that lacks liquidity; or a fair
value derived using a discounted cash flow approach may not be the amount
realized because of the subjectivity involved in selecting underlying
assumptions, such as projecting cash flows or selecting a discount rate. The
fair value amount also may not be realized because it ignores transaction
costs and does not include potential tax effects. The Corporation does not
plan to dispose of, either through sale or settlement, the majority of its
financial instruments at these estimated fair values.
70
<PAGE>
The following table summarizes the carrying values and estimated fair values
of financial instruments as of December 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
-------------------- -------------------
Estimated
Carrying Estimated Carrying Fair
Value Fair Value Value Value
(In millions) -------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Financial assets
Cash and other short-term financial
instruments (a).................... $ 34,715 $34,715 $ 32,199 $ 32,199
Trading assets (a).................. 5,345 5,345 5,246 5,246
Investment securities (b)........... 44,852 44,852 26,039 26,054
Loans (c)........................... 155,398 154,521 159,579 160,859
Allowance for credit losses......... (2,271) -- (2,817) --
-------- ------- -------- --------
Loans, net.......................... 153,127 154,521 156,762 160,859
Derivative product assets
Trading purposes (1)(f)........... 6,765 6,765 4,449 4,449
Other than trading purposes (f)... 189 954 174 568
-------- ------- -------- --------
Total derivative product assets. 6,954 7,719 4,623 5,017
Financial instruments in other
assets(a).......................... 2,060 2,060 4,026 4,026
Financial liabilities
Deposits (d)........................ 161,542 161,659 $153,726 $153,981
Securities sold but not yet
purchased (a)...................... 966 966 2,373 2,373
Other short-term financial
instruments (a).................... 39,468 39,468 31,520 31,520
Long-term debt (2)(e)............... 22,298 23,229 21,546 22,253
Derivative product liabilities
Trading purposes (1)(f)........... 6,923 6,923 4,595 4,595
Other than trading purposes (f)... 224 238 34 95
-------- ------- -------- --------
Total derivative product
liabilities.................... 7,147 7,161 4,629 4,690
Financial instruments in other
liabilities (a).................... 1,136 1,136 1,271 1,271
</TABLE>
- --------
(1) The estimated average fair values of derivative financial instruments used
in trading activities during 1998 were $4.6 billion classified as assets
and $4.6 billion classified as liabilities.
(2) Includes trust preferred capital securities.
Estimated fair values are determined as follows:
(a) Financial Instruments Whose Carrying Value Approximates Fair Value
A financial instrument's carrying value approximates its fair value when the
financial instrument has an immediate or short-term maturity (generally one
year or less), or is carried at fair value.
Quoted market prices or dealer quotes typically are used to estimate fair
values of trading securities and securities sold but not yet purchased.
Commitments to extend credit and letters of credit typically result in loans
with a market interest rate when funded. The recorded book value of deferred
fee income approximates the fair value.
(b) Investment Securities
Quoted market prices typically are used to estimate the fair value of debt
investment securities. Quoted market prices for similar securities are used to
estimate fair value when a quoted market price is not available for a specific
debt investment security. See Note 1(c), on page 45, for the methodologies
used to determine the fair value of equity investment securities.
71
<PAGE>
(c) Loans
The loan portfolio was segmented based on loan type, credit quality and
repricing characteristics. Carrying values are used to estimate fair values of
certain variable rate loans with no significant credit concerns and frequent
repricing. A discounted cash flow method was used to estimate the fair value
of other loans. Discounting was based on the contractual cash flows, and
discount rates typically are based on the year-end yield curve plus a spread
that reflects pricing on loans with similar characteristics, adjusted for
servicing costs. If applicable, prepayment assumptions are factored into the
fair value determination based on historical experience and current economic
and lending conditions.
(d) Deposits
The amount payable on demand at the report date is used to estimate fair
value of demand and savings deposits with no defined maturity. A discounted
cash flow method is used to estimate the fair value of fixed-rate time
deposits. Discounting was based on the contractual cash flows and the current
rates at which similar deposits with similar remaining maturities would be
issued, adjusted for servicing costs. Carrying value typically is used to
estimate the fair value of floating-rate time deposits.
(e) Long-Term Debt
Quoted market prices or the discounted cash flow method was used to estimate
the fair value of the Corporation's fixed-rate long-term debt. Discounting was
based on the contractual cash flows and the current rates at which debt with
similar terms could be issued. Carrying value typically is used to estimate
the fair value of floating-rate long-term debt.
(f) Derivative Product Assets and Liabilities
Quoted market prices or pricing and valuation models were used to estimate
the fair value of derivative product assets and liabilities. Assumptions input
into models were based on current market information.
NOTE 22--Related Party Transactions
Certain executive officers, directors and their related interests are loan
customers of the Corporation's affiliates. The Securities and Exchange
Commission (the "Commission") has determined that, with respect to the
Corporation and significant subsidiaries (as defined by the Commission),
disclosure of borrowings by directors and executive officers and certain of
their related interests should be made if the loans are greater than 5% of
stockholders' equity, in the aggregate. These loans in aggregate were not
greater than 5% of stockholders' equity at December 31, 1998 or 1997.
NOTE 23--Pledged Assets
Assets having a book value of $38.2 billion as of December 31, 1998, and
$32.6 billion as of December 31, 1997, were pledged as collateral for
repurchase agreements, off-balance sheet investment products, governmental and
trust department deposits in accordance with federal and state requirements,
and for other purposes required by law.
The Corporation's bank affiliates are required to maintain average
noninterest-bearing cash balances, in accordance with Federal Reserve Board
regulations. The average required reserve balances were $3.5 billion in 1998
and $3.4 billion in 1997.
NOTE 24--Contingent Liabilities
The Corporation and certain of its affiliates have been named as defendants
in various legal proceedings, including certain class actions, arising out of
the normal course of business, and the Corporation has received
72
<PAGE>
certain tax deficiency assessments. Since the Corporation and certain of its
subsidiaries, which are regulated by one or more federal and state regulatory
authorities, are the subject of numerous examinations and reviews by such
authorities, the Corporation is and will be, from time to time, normally
engaged in various disagreements with regulators, related primarily to banking
matters. Management believes that liabilities arising from these proceedings,
if any, will not have a material adverse effect on the consolidated financial
position, liquidity or results of operations of the Corporation.
NOTE 25--BANK ONE CORPORATION (Parent Company Only)
Condensed Financial Statements
Condensed Balance Sheet
<TABLE>
<CAPTION>
1998 1997
December 31 (In millions) ------- -------
<S> <C> <C>
Assets
Cash and due from banks
Bank subsidiaries............................................. $ 4 $ 9
Other......................................................... 2 --
Interest-bearing due from banks
Bank subsidiaries............................................. 1,818 843
Other......................................................... 10 9
Investment securities--available-for-sale....................... 72 82
Loans and receivables--subsidiaries
Bank subsidiaries............................................. 5,720 4,529
Nonbank subsidiaries.......................................... 6,894 5,083
Investment in subsidiaries
Bank subsidiaries............................................. 21,325 17,193
Nonbank subsidiaries.......................................... 1,723 4,218
Other assets.................................................... 474 312
------- -------
Total assets................................................ $38,042 $32,278
======= =======
Liabilities
Short-term borrowings
Nonbank subsidiaries.......................................... $ 106 $ 131
Other......................................................... 1,191 726
Long-term debt
Nonbank subsidiaries.......................................... 1,028 1,027
Other......................................................... 14,004 10,892
Other liabilities............................................... 1,153 452
------- -------
Total liabilities........................................... 17,482 13,228
Stockholders' equity............................................ 20,560 19,050
------- -------
Total liabilities and stockholders' equity.................. $38,042 $32,278
======= =======
</TABLE>
73
<PAGE>
BANK ONE CORPORATION (Parent Company Only)
Condensed Income Statement
<TABLE>
<CAPTION>
1998 1997 1996
For the Year (In millions) ------ ------- ------
<S> <C> <C> <C>
Operating Income
Dividends
Bank subsidiaries..................................... $4,087 $ 4,243 $2,065
Nonbank subsidiaries.................................. 359 491 159
Interest income
Bank subsidiaries..................................... 478 209 164
Nonbank subsidiaries.................................. 247 244 185
Other................................................. 8 44 37
Management and other fees from affiliates............... 606 589 181
Other income
Nonbank subsidiaries.................................. -- -- (2)
Other................................................. 26 19 13
------ ------- ------
Total............................................... 5,811 5,839 2,802
Operating Expense
Interest expense
Nonbank subsidiaries.................................. 80 85 11
Other................................................. 863 708 553
Merger-related charges.................................. 675 -- --
Salaries and employee benefits.......................... 209 230 139
Professional fees and services.......................... 76 244 148
Marketing and development............................... 60 92 38
Other expense........................................... 373 128 104
------ ------- ------
Total............................................... 2,336 1,487 993
Income Before Income Taxes and Equity in Undistributed
Net Income of Subsidiaries.............................. 3,475 4,352 1,809
Applicable income taxes (benefit)....................... (284) (73) (192)
------ ------- ------
Income Before Equity in Undistributed Net Income of
Subsidiaries........................................... 3,759 4,425 2,001
Equity in undistributed net income of subsidiaries
Bank subsidiaries..................................... (420) 320 268
Nonbank subsidiaries.................................. (231) (1,785) 962
------ ------- ------
Net Income.............................................. $3,108 $ 2,960 $3,231
====== ======= ======
</TABLE>
74
<PAGE>
BANK ONE CORPORATION (Parent Company Only)
Condensed Statement of Cash Flows
<TABLE>
<CAPTION>
1998 1997 1996
For the Year (In millions) ------- ------- -------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income........................................... $ 3,108 $ 2,960 $ 3,231
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in net income of subsidiaries............... (3,965) (3,199) (3,333)
Dividends received from subsidiaries............... 4,446 4,618 2,147
Other noncash adjustments.......................... 17 (103) (86)
------- ------- -------
Total adjustments.................................. 498 1,316 (1,272)
------- ------- -------
Net cash provided by operating activities............ 3,606 4,276 1,959
Cash Flows from Investing Activities
Net (increase) in loans to subsidiaries.............. (3,024) (4,186) (846)
Net (increase) decrease in capital investments in
subsidiaries........................................ (1,559) 33 (453)
Purchase of investment securities--available-for-
sale................................................ (38) (329) (194)
Proceeds from sales and maturities of investment
securities--available-for-sale...................... 44 322 150
Sale of premises and equipment....................... -- (23) (70)
Other, net........................................... -- (27) 8
------- ------- -------
Net cash (used in) investing activities.............. (4,577) (4,210) (1,405)
Cash Flows from Financing Activities
Net increase (decrease) in commercial paper and
short-term borrowings............................... 443 (1,124) 934
Proceeds from issuance of long-term debt............. 3,387 5,306 1,993
Redemption and repayment of long-term debt........... (350) (552) (492)
Dividends paid....................................... (1,322) (1,380) (1,180)
Proceeds from issuance of common and treasury stock.. 161 27 76
Purchase of treasury stock........................... (375) (2,789) (1,479)
Payment for redemption of preferred stock............ -- (100) --
Other financing activities, net...................... -- (60) 126
------- ------- -------
Net cash provided by (used in) financing activities.. 1,944 (672) (22)
Net Increase (Decrease) in Cash and Cash Equivalents. 973 (606) 532
Cash and Cash Equivalents at Beginning of Year....... 861 1,467 935
------- ------- -------
Cash and Cash Equivalents at End of Year............. $ 1,834 $ 861 $ 1,467
======= ======= =======
Other Cash Flow Disclosures
Interest paid........................................ $ 923 $ 752 $ 555
Income tax payment (receipt)......................... (50) 122 383
</TABLE>
In connection with issuances of commercial paper, the Corporation has an
agreement providing future credit availability (back-up lines of credit) with
non-affiliated banks. The agreements aggregated $300 million at December 31,
1998. The commitment fee paid under these agreements was 0.07%. The back-up
lines of credit, together with overnight money market loans, short-term
investments and other sources of liquid assets, exceeded the amount of
commercial paper issued at December 31, 1998.
75
<PAGE>
Report of Independent Public Accountants
To the Stockholders and Board of Directors
of BANK ONE CORPORATION:
We have audited the accompanying consolidated balance sheets of BANK ONE
CORPORATION
(a Delaware corporation) and subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of BANK ONE CORPORATION's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BANK ONE
CORPORATION and subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Chicago, Illinois,
January 14, 1999
76
<PAGE>
Selected Statistical Information
BANK ONE CORPORATION and Subsidiaries
Investment Securities
<TABLE>
<CAPTION>
1998 1997 1996
December 31 (In millions) ------- ------- -------
<S> <C> <C> <C>
Available-for-sale
U.S. Treasury......................................... $ 4,550 $ 7,920 $ 8,389
U.S. government agencies.............................. 10,559 8,644 8,794
States and political subdivisions..................... 2,064 1,955 2,383
Retained interest in securitized credit card
receivables.......................................... 17,370 N/A N/A
Other debt securities................................. 8,171 4,949 2,562
Equity securities..................................... 2,138 1,786 1,416
------- ------- -------
Total available-for-sale.......................... 44,852 25,254 23,544
Held-to-maturity
States and political subdivisions..................... -- 451 689
All other............................................. -- 334 3,709
------- ------- -------
Total held-to-maturity.............................. -- 785 4,398
------- ------- -------
Total............................................. $44,852 $26,039 $27,942
======= ======= =======
</TABLE>
- --------
N/A-- Not applicable.
Maturity of Debt Investment Securities
As of December 31, 1998, debt investment securities had the following
maturity and yield characteristics:
<TABLE>
<CAPTION>
Due in 1 year Due after 1 year Due after 5 years Due after
or less through 5 years through 10 years 10 years Total
------------- ------------------ ------------------ ------------ -------------
Book Book Book Book Book
Value Yield Value Yield Value Yield Value Yield Value Yield
------- ----- --------- -------- --------- -------- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury........... $ 1,365 5.69% $ 3,100 5.97% $ 2 5.67% $ 83 3.67% $ 4,550 5.84%
U.S. government
agencies............... 718 5.09 3,731 6.14 1,220 6.44 4,890 6.45 10,559 6.25
States and political
subdivisions........... 331 7.89 1,058 6.37 409 6.88 266 6.87 2,064 6.78
Other debt securities... 18,528 10.18 4,271 5.12 1,133 6.28 1,609 6.45 25,541 8.91
------- --------- --------- ------ -------
Total.................. $20,942 9.68 $ 12,160 5.75 $ 2,764 6.43 $6,848 6.43 $42,714 7.83
======= ========= ========= ====== =======
</TABLE>
77
<PAGE>
Securitization of Credit Card Receivables
The Corporation continues to service credit card accounts even after
receivables are securitized. Net interest income and certain fee revenue on
the securitized portfolio are not recognized; however, these are offset by
servicing fees as well as by lower provisions for credit losses.
For analytical purposes only, the following table shows income statement
line items adjusted for the net impact of securitization of credit card
receivables.
<TABLE>
<CAPTION>
1998
----------------------------------
Credit Card
Reported Securitizations Managed
(In millions) -------- --------------- --------
<S> <C> <C> <C>
Net interest income--tax-equivalent basis.. $ 9,469 $ 4,359 $ 13,828
Provision for credit losses................ 1,408 2,506 3,914
Noninterest income......................... 8,071 (1,852) 6,219
Noninterest expense........................ 11,545 1 11,546
Net income................................. 3,108 -- 3,108
Total average loans........................ 154,952 44,904 199,856
Total average earning assets............... 209,514 39,107 248,621
Total average assets....................... 239,790 39,107 278,897
Net interest margin........................ 4.52% 11.15% 5.56%
Delinquency and charge-off rates:
Credit card delinquencies over 30 days as a
percentage of ending credit card loan
balances.................................. 3.34% 4.64% 4.47%
Credit card delinquencies over 90 days as a
percentage of ending credit card loan
balances.................................. 1.41% 2.06% 1.98%
Net credit card charge-offs as a percentage
of average credit card loan balances...... 5.52% 5.58% 5.57%
</TABLE>
<TABLE>
<CAPTION>
1997
----------------------------------
Credit Card
Reported Securitizations Managed
(In millions) -------- --------------- --------
<S> <C> <C> <C>
Net interest income--tax-equivalent basis.. $ 9,619 $ 3,331 $ 12,950
Provision for credit losses................ 1,988 2,011 3,999
Noninterest income......................... 6,694 (1,314) 5,380
Noninterest expense........................ 9,740 6 9,746
Net income................................. 2,960 -- 2,960
Total average loans........................ 155,926 31,992 187,918
Total average earning assets............... 202,334 33,086 235,420
Total average assets....................... 229,882 31,992 261,874
Net interest margin........................ 4.75% 10.07% 5.50%
Delinquency and charge-off rates:
Credit card delinquencies over 30 days as a
percentage of ending credit card loan
balances.................................. 4.61% 5.07% 4.90%
Credit card delinquencies over 90 days as a
percentage of ending credit card loan
balances.................................. 1.94% 2.22% 2.11%
Net credit card charge-offs as a percentage
of average credit card loan balances...... 6.03% 6.29% 6.18%
</TABLE>
78
<PAGE>
Maturity Distribution and Interest Rate Sensitivity of Loans
The following table shows a distribution of the maturity of loans and, for
those loans due after one year, a breakdown between those loans that have
floating interest rates and those that have predetermined interest rates. The
amounts exclude domestic consumer loans and domestic lease financing
receivables.
<TABLE>
<CAPTION>
One Year One to Over
or Less Five Years Five Years Total
December 31, 1998 (In millions) -------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Domestic
Commercial............................ $24,973 $23,719 $4,670 $53,362
Real estate........................... 7,769 11,762 3,364 22,895
------- ------- ------ -------
Total domestic...................... 32,742 35,481 8,034 76,257
Foreign................................. 4,536 1,097 312 5,945
------- ------- ------ -------
Total............................... $37,278 $36,578 $8,346 $82,202
======= ======= ====== =======
Loans with floating interest rates...... $26,724 $4,763 $31,487
Loans with predetermined interest rates. 9,854 3,583 13,437
------- ------ -------
Total............................... $36,578 $8,346 $44,924
======= ====== =======
</TABLE>
Loans 90 Days or More Past Due and Still Accruing Interest
Loans that were 90 or more days past due and still accruing interest totaled
$1,159 million, $994 million, $918 million, $628 million and $439 million at
December 31, 1998, 1997, 1996, 1995 and 1994, respectively.
Allocated Allowance for Credit Losses
While the allowance for credit losses is available to absorb credit losses
in the entire portfolio, the tables below present an estimate of the allowance
for credit losses allocated by loan type and the percentage of loans in each
category to total loans.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
December 31 (Dollars in millions) ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Commercial.............................. $1,632 $1,520 $1,412 $1,519 $1,482
Consumer................................ 440 484 345 241 230
Credit Card............................. 199 813 930 662 480
------ ------ ------ ------ ------
Total............................... $2,271 $2,817 $2,687 $2,422 $2,192
====== ====== ====== ====== ======
Percentage of loans to total loans
Commercial.............................. 57% 50% 48% 48% 48%
Consumer................................ 37 36 36 36 38
Credit Card............................. 6 14 16 16 14
------ ------ ------ ------ ------
Total............................... 100% 100% 100% 100% 100%
====== ====== ====== ====== ======
</TABLE>
Allocation for potential losses not specifically identified has been
included in the commercial segment.
79
<PAGE>
Deposits
The following tables show a maturity distribution of domestic time
certificates of deposit of $100,000 and over, other domestic time deposits of
$100,000 and over, and deposits in foreign offices, predominantly in amounts in
excess of $100,000, at December 31, 1998.
Domestic Time Certificates of Deposit of $100,000 and Over
<TABLE>
<CAPTION>
Amount Percent
(Dollars in millions) ------- -------
<S> <C> <C>
Three months or less............................................ $ 5,135 50%
Over three months to six months................................. 844 8
Over six months to twelve months................................ 1,445 14
Over twelve months.............................................. 2,800 28
------- ---
Total....................................................... $10,224 100%
======= ===
Domestic Other Time Deposits of $100,000 and Over
<CAPTION>
Amount Percent
(Dollars in millions) ------- -------
<S> <C> <C>
Three months or less............................................ $ 962 60%
Over three months to six months................................. 334 21
Over six months to twelve months................................ 154 10
Over twelve months.............................................. 145 9
------- ---
Total....................................................... $ 1,595 100%
======= ===
Foreign Offices
<CAPTION>
Amount Percent
(Dollars in millions) ------- -------
<S> <C> <C>
Three months or less............................................ $22,603 99%
Over three months to six months................................. 82 1
Over six months to twelve months................................ 14 --
Over twelve months.............................................. 42 --
------- ---
Total....................................................... $22,741 100%
======= ===
</TABLE>
80
<PAGE>
Short-Term Borrowings
Borrowings with original maturities of one year or less are classified as
short-term. The following is a summary of short-term borrowings for each of the
three years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
(Dollars in millions) ------- ------- -------
<S> <C> <C> <C>
Federal funds purchased
Outstanding at year-end........................... $12,112 $ 8,361 $11,462
Weighted average rate at year-end................. 4.65% 6.08% 5.85%
Daily average outstanding for the year............ $ 9,262 $ 8,819 $ 9,411
Weighted average rate for the year................ 5.24% 5.50% 5.67%
Highest outstanding at any month-end.............. $12,112 $ 9,317 $11,462
Securities under repurchase agreements
Outstanding at year-end........................... $11,052 $11,985 $10,200
Weighted average rate at year-end................. 4.43% 5.48% 5.33%
Daily average outstanding for the year............ $12,423 $11,611 $14,560
Weighted average rate for the year................ 4.87% 5.07% 5.04%
Highest outstanding at any month-end.............. $15,676 $13,539 $20,746
Bank notes
Outstanding at year-end........................... $10,321 $ 7,361 $ 7,130
Weighted average rate at year-end................. 5.22% 5.80% 5.54%
Daily average outstanding for the year............ $ 8,175 $ 8,711 $10,071
Weighted average rate for the year................ 5.52% 5.84% 5.57%
Highest outstanding at any month-end.............. $10,321 $ 9,877 $11,760
Commercial paper
Outstanding at year-end........................... $ 2,113 $ 1,506 $ 2,445
Weighted average rate at year-end................. 4.54% 5.83% 5.39%
Daily average outstanding for the year............ $ 1,882 $ 2,415 $ 2,012
Weighted average rate for the year................ 5.58% 5.56% 5.32%
Highest outstanding at any month-end.............. $ 2,491 $ 2,937 $ 2,618
Other short-term borrowings
Outstanding at year-end........................... $ 4,503 $ 3,939 $ 3,464
Weighted average rate at year-end................. 4.51% 4.71% 5.44%
Daily average outstanding for the year............ $ 3,733 $ 3,003 $ 3,161
Weighted average rate for the year................ 4.86% 4.77% 4.12%
Highest outstanding at any month-end.............. $ 7,202 $ 4,804 $ 5,441
Total short-term borrowings
Outstanding at year-end........................... $40,101 $33,152 $34,701
Weighted average rate at year-end................. 4.73% 5.63% 5.56%
Daily average outstanding for the year............ $35,475 $34,559 $39,215
Weighted average rate for the year................ 5.15% 5.38% 5.27%
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
Common Stock and Stockholder Data (1)(2) ------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Market price
High for the year...................... $64.78 $54.37 $43.53 33.16 31.41
Low for the year....................... 37.58 35.57 28.41 20.77 19.95
At year-end............................ 51.06 49.37 39.09 31.10 20.97
Book value (at year-end)................. 17.31 16.03 16.64 15.28 14.19
Dividend payout ratio.................... 58% 61% 38% 40% 44%
</TABLE>
- --------
(1) There were 131,280 common stockholders of record as of December 31, 1998.
(2) The principal market for the Corporation's common stock is the New York
Stock Exchange (the "NYSE"). In addition to the NYSE, the Corporation's
common stock is listed on the Chicago Stock Exchange.
81
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
Financial Ratios ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income as a percentage of:
Average stockholders' equity.................. 15.8% 15.6% 17.1% 15.3% 15.1%
Average common stockholders' equity........... 15.9 16.0 17.8 16.1 16.1
Average total assets.......................... 1.3 1.3 1.4 1.2 1.2
Average earning assets........................ 1.5 1.5 1.6 1.4 1.4
Stockholders' equity at year-end as a percentage
of:
Total assets at year-end...................... 7.9 8.0 8.6 7.9 7.7
Total loans at year-end....................... 13.2 11.9 12.7 13.1 13.2
Total deposits at year-end.................... 12.7 12.4 13.4 12.5 11.6
Average stockholders' equity as a percentage of:
Average assets................................ 8.2 8.2 8.4 7.8 7.9
Average loans................................. 12.7 12.2 12.9 13.4 14.1
Average deposits.............................. 13.1 12.9 13.2 12.3 12.2
Income to fixed charges:
Excluding interest on deposits................ 2.3x 2.4x 2.6x 2.2x 2.6x
Including interest on deposits................ 1.5x 1.5x 1.6x 1.5x 1.6x
</TABLE>
82
<PAGE>
Quarterly Financial Data
<TABLE>
<CAPTION>
1998 1997
(In millions, except -------------------------------------- --------------------------------------
ratios Fourth Third Second First Fourth Third Second First
and per-share data) -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income and Expense:
Net interest income--
tax-equivalent basis... $ 2,368 $ 2,402 $ 2,379 $ 2,320 $ 2,332 $ 2,427 $ 2,448 $ 2,412
Provision for credit
losses................. 272 345 400 391 448 477 591 472
Noninterest income...... 2,068 1,999 2,088 1,916 1,866 1,828 1,500 1,500
Restructuring charges
and merger-related
costs.................. 1,049 -- 182 -- -- -- 337 --
Operating expense(1).... 2,807 2,539 2,537 2,431 2,448 2,458 2,300 2,197
Net income.............. 226 1,054 895 933 890 850 428 792
Per Common Share Data:
Net income, basic....... $ 0.19 $ 0.90 $ 0.76 $ 0.80 $ 0.76 $ 0.72 $ 0.36 $ 0.66
Net income, diluted..... 0.19 0.89 0.75 0.78 0.75 0.70 0.35 0.64
Cash dividends declared. 0.38 0.38 0.38 0.38 0.345 0.345 0.345 0.345
Book value.............. 17.31 17.37 16.72 16.26 16.03 16.51 16.43 16.51
Balance Sheet:
Loans:
Managed................ $216,391 $203,443 $200,726 $197,067 $196,993 $192,975 $189,428 $184,124
Reported............... 155,398 154,057 160,023 158,387 159,579 157,351 158,626 154,172
Deposits................ 161,542 148,924 154,507 153,817 153,726 150,796 152,672 146,397
Long-term debt(2)....... 22,298 22,141 22,248 22,289 21,546 21,667 19,329 16,426
Total assets............ 261,496 238,658 244,178 240,560 239,372 235,629 237,270 230,077
Common stockholders'
equity................. 20,370 20,428 19,575 18,945 18,724 18,398 18,509 18,566
Total stockholders'
equity................. 20,560 20,618 19,765 19,235 19,050 18,862 18,983 19,052
Performance Ratios:
Return on average
assets................. 0.37% 1.77% 1.49% 1.59% 1.52% 1.45% 0.75% 1.43%
Return on common equity. 4.4 20.7 18.6 20.3 19.1 18.3 8.9 17.0
Net interest margin:
Managed................ 5.67 5.63 5.42 5.51 5.36 5.49 5.54 5.63
Reported............... 4.40 4.61 4.53 4.54 4.55 4.70 4.85 4.93
Efficiency ratio:
Managed................ 75.4 50.8 53.4 50.2 51.9 51.8 59.2 49.9
Reported............... 86.9 57.7 60.9 57.4 58.3 57.8 66.8 56.2
Equity Ratios:
Regulatory leverage
ratio.................. 8.0 8.5 8.0 7.9 7.8 7.9 8.1 8.6
Risk-based capital:
Tier 1 ratio........... 7.9 8.6 8.3 8.3 8.2 8.3 8.4 9.2
Total capital ratio.... 11.3 12.4 12.3 12.5 12.3 12.4 12.6 13.2
Credit Quality:
Net charge-offs to
average loans.......... 0.80 0.89 1.12 1.05 1.19 1.23 1.25 1.19
Ending allowance to
loans.................. 1.46 1.79 1.72 1.76 1.77 1.80 1.80 1.76
Nonperforming assets to
loans and other real
estate owned........... 0.53 0.52 0.44 0.50 0.42 0.43 0.44 0.38
Common Stock Data:
Average shares
outstanding, basic..... 1,175 1,172 1,169 1,165 1,169 1,177 1,172 1,183
Average shares
outstanding, diluted... 1,188 1,188 1,189 1,191 1,196 1,209 1,196 1,235
Stock price:
High................... $ 55.00 $ 61.50 $ 65.63 $ 63.94 $ 54.37 $ 52.10 $ 45.57 $ 44.77
Low.................... 36.06 37.75 54.94 44.66 43.01 43.24 35.57 35.80
Close.................. 51.06 42.44 55.81 63.25 49.37 50.91 44.04 36.14
</TABLE>
- --------
(1) Noninterest expense reduced by restructuring charges and merger-related
costs, including certain integration costs.
(2) Includes trust preferred capital securities.
83
<PAGE>
Average Balances/Net Interest Margin/Rates
BANK ONE CORPORATION and Subsidiaries
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------
(Income and rates on tax- 1998 1997
equivalent basis) -------------------------- --------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(Dollars in millions) -------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Short-term investments.... $ 14,632 $ 754 5.15% $ 14,412 $ 801 5.56%
Trading assets............ 6,203 366 5.90 5,616 331 5.89
Investment securities (1)
U.S. government and
federal agencies........ 16,683 1,102 6.61 18,851 1,273 6.75
States and political
subdivisions............ 2,211 176 7.96 2,648 220 8.31
Other (2)................ 14,833 1,101 7.42 4,881 246 5.04
-------- ------- ----- -------- ------- -----
Total investment
securities............ 33,727 2,379 7.05 26,380 1,739 6.59
Loans (3)
Commercial............... 82,118 6,382 7.77 76,636 6,108 7.97
Consumer................. 57,206 5,360 9.37 56,410 5,324 9.44
Credit Card.............. 15,628 2,405 15.39 22,880 3,400 14.86
-------- ------- ----- -------- ------- -----
Total loans............ 154,952 14,147 9.13 155,926 14,832 9.51
Total earning assets
(4)................... 209,514 17,646 8.42 202,334 17,703 8.75
Allowance for credit
losses................... (2,731) (2,751)
Other assets.............. 33,007 30,299
-------- --------
Total assets........... $239,790 $229,882
======== ========
Deposits--interest-bearing
Savings.................. $ 20,710 $ 470 2.27% $ 22,408 $ 519 2.32%
Money market............. 39,115 1,458 3.73 34,565 1,302 3.77
Time..................... 38,211 2,066 5.41 41,894 2,315 5.53
Foreign offices (5)...... 18,489 949 5.13 16,476 855 5.19
-------- ------- ----- -------- ------- -----
Total deposits--
interest-bearing...... 116,525 4,943 4.24 115,343 4,991 4.33
Federal funds purchased
and securities under
repurchase agreements.... 21,685 1,090 5.03 20,430 1,073 5.25
Other short-term
borrowings............... 13,790 737 5.34 14,129 786 5.56
Long-term debt (6)........ 22,089 1,407 6.37 18,945 1,234 6.51
-------- ------- ----- -------- ------- -----
Total interest-bearing
liabilities........... 174,089 8,177 4.70 168,847 8,084 4.79
Demand deposits........... 33,647 31,199
Other liabilities......... 12,323 10,889
Preferred stock........... 223 487
Common stockholders'
equity................... 19,508 18,460
-------- --------
Total liabilities and
stockholders' equity.. $239,790 $229,882
======== ========
Interest income/earning
assets................... $17,646 8.42% $17,703 8.75%
Interest expense/earning
assets................... 8,177 3.90 8,084 4.00
------- ----- ------- -----
Net interest margin....... $ 9,469 4.52% $ 9,619 4.75%
======= ===== ======= =====
</TABLE>
- --------
(1) The combined amounts for investment securities available-for-sale and held-
to-maturity are based on their respective carrying values. Based on the
amortized cost of investment securities available-for-sale, the combined
average balance for 1998, 1997, 1996 and 1995 would be $33,415 million,
$26,246 million, $28,613 million and $32,841 million, respectively, and the
average earned rate in 1998, 1997, 1996 and 1995 would be 7.12%, 6.63%,
6.73% and 6.72%, respectively.
(2) The Corporation's undivided interest in securitized credit card receivables
was reclassified from loans to investment securities during 1998. Such
amounts averaged $5,798 million for 1998.
(3) Nonperforming loans are included in average balances used to determine
rates.
(4) Includes tax-equivalent adjustments based on federal income tax rate of
35%.
(5) Includes international banking facilities' deposit balances in domestic
offices and balances of Edge Act and overseas offices.
(6) Includes trust preferred capital securities.
84
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------------------------------------------------
1996 1995 1994
----------------------------------------------------- --------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$18,040 $ 1,010 5.60% $ 26,737 $ 1,608 6.01% $ 24,095 $ 1,075 4.46%
7,366 425 5.77 7,643 505 6.61 5,327 306 5.74
20,562 1,451 7.06 24,520 1,635 6.67 28,037 1,699 6.06
3,191 224 7.02 3,162 317 10.03 3,527 348 9.87
5,006 252 5.03 5,081 254 5.00 5,838 180 3.08
-------- ------- ----- -------- ------- ----- -------- ------- -----
28,759 1,927 6.70 32,763 2,206 6.73 37,402 2,227 5.95
71,376 5,691 7.97 64,876 5,346 8.24 57,431 4,179 7.28
51,792 4,811 9.29 48,156 4,432 9.20 43,556 3,786 8.69
22,926 3,371 14.70 17,582 2,419 13.76 16,158 2,206 13.65
-------- ------- ----- -------- ------- ----- -------- ------- -----
146,094 13,873 9.50 130,614 12,197 9.34 117,145 10,171 8.68
200,259 17,235 8.60 197,757 16,516 8.35 183,969 13,779 7.49
(2,577) (2,241) (2,236)
27,946 28,591 26,343
-------- -------- --------
$225,628 $224,107 $208,076
======== ======== ========
$21,346 $ 491 2.30% $ 28,861 $ 724 2.51% $ 29,678 $ 683 2.30%
33,763 1,194 3.54 22,926 934 4.07 23,631 622 2.63
43,169 2,355 5.46 45,015 2,567 5.70 40,250 1,726 4.29
15,772 817 5.18 17,248 993 5.76 13,542 604 4.46
-------- ------- ----- -------- ------- ----- -------- ------- -----
114,050 4,857 4.26 114,050 5,218 4.58 107,101 3,635 3.39
23,971 1,267 5.29 27,936 1,671 5.98 24,617 1,064 4.32
15,244 799 5.24 13,228 753 5.69 12,394 544 4.39
13,277 895 6.74 11,637 832 7.15 9,613 619 6.44
-------- ------- ----- -------- ------- ----- -------- ------- -----
166,542 7,818 4.69 166,851 8,474 5.08 153,725 5,862 3.81
29,279 27,817 28,362
10,907 11,972 9,520
757 880 996
18,143 16,587 15,473
-------- -------- --------
$225,628 $224,107 $208,076
======== ======== ========
$17,235 8.60% $16,516 8.35% $13,779 7.49%
7,818 3.90 8,474 4.28 5,862 3.19
------- ----- ------- ----- ------- -----
$ 9,417 4.70% $ 8,042 4.07% $ 7,917 4.30%
======= ===== ======= ===== ======= =====
</TABLE>
85
<PAGE>
Analysis of Changes in Net Interest Income
The following table shows the approximate effect on net interest income of
volume and rate changes for 1998 and 1997. For purposes of this table, changes
that are not due solely to volume or rate changes are allocated to volume.
<TABLE>
<CAPTION>
1998 over 1997 1997 over 1996
------------------- -------------------
Volume Rate Total Volume Rate Total
Year Ended December 31 (In millions) ------ ---- ----- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in interest income
Short-term investments................. $ 11 $(58) $ (47) $(202) $(7) $(209)
Trading assets......................... 35 -- 35 (103) 9 (94)
Investment securities
U.S. government and federal agency... (144) (27) (171) (117) (61) (178)
States and political subdivisions.... (35) (9) (44) (41) 37 (4)
Other................................ 694 161 855 (6) -- (6)
Loans
Commercial........................... 423 (149) 274 419 (2) 417
Consumer............................. 74 (38) 36 435 78 513
Credit Card.......................... (1,112) 117 (995) (7) 36 29
----- -----
Total.............................. (57) 468
Increase (decrease) in interest expense
Deposits
Savings.............................. (39) (10) (49) 25 3 28
Money market......................... 169 (13) 156 29 79 108
Time................................. (200) (49) (249) (70) 30 (40)
Foreign offices...................... 103 (9) 94 37 1 38
Federal funds purchased and securities
under repurchase agreements........... 62 (45) 17 (186) (8) (194)
Other short-term borrowings............ (19) (30) (49) (60) 47 (13)
Long-term debt......................... 200 (27) 173 370 (31) 339
----- -----
Total.............................. 93 266
----- -----
Increase (decrease) in net interest
income.................................. $(150) $ 202
===== =====
</TABLE>
86
<PAGE>
Item 2. Properties
The Corporation's headquarters are in Chicago, Illinois. The 60-story
building, located in the center of the Chicago "Loop" business district, is
master-leased and has 1,750,000 square feet of space, of which the Corporation
occupies approximately 57%; the balance is subleased to other tenants.
The Corporation and its subsidiaries occupy more than 3,000 owned or leased
properties--including banking centers, operations facilities and commercial
banking offices--in 34 states and the District of Columbia. In addition, the
Corporation has foreign offices in major cities in Canada, Mexico, Europe,
Asia and Australia. These offices all are located in leased premises.
Item 3. Legal Proceedings
The information required by this Item is set forth in Note 24 to the
Consolidated Financial Statements, beginning on page 72 of this Form 10-K, and
is expressly incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
<TABLE>
<CAPTION>
Current Position Held with the Corporation and
Name and Age Effective Date First Elected to Office Indicated
- ------------ ------------------------------------------------
<S> <C>
Verne G. Istock (58) Director and Chairman of the Board (10/2/98)
John B. McCoy (55) Director, Chief Executive Officer and President (4/9/98)
Richard J. Lehmann (54) Director (4/9/98) and Vice Chairman of the Board (10/2/98)
David J. Vitale (52) Director and Vice Chairman of the Board (10/2/98)
Marvin W. Adams (41) Executive Vice President (12/15/98) and Chief Technology
Officer (10/2/98)
William P. Boardman (57) Senior Executive Vice President (12/15/98)
and Head of Acquisitions (10/2/98)
Sherman I. Goldberg (56) Executive Vice President (12/15/98), General Counsel
and Secretary (10/2/98)
W. G. Jurgensen (47) Executive Vice President (12/15/98) and Head of
Commercial Bank Products (10/2/98)
David J. Kundert (56) Executive Vice President (12/15/98) and Head of
Investment Management (10/2/98)
Timothy P. Moen (46) Executive Vice President (12/15/98) and Head of
Human Resources (10/2/98)
Susan S. Moody (45) Executive Vice President (12/15/98) and Head of
Commercial Bank Relationships (10/2/98)
Robert A. O'Neill, Jr.
(45) Executive Vice President and General Auditor (1/19/99)
Robert A. Rosholt (49) Executive Vice President (12/15/98) and Chief Financial
Officer (10/2/98)
Ronald G. Steinhart (58) Executive Vice President (12/15/98) and Head of Commercial
Bank--Real Estate and Private Banking (10/2/98)
Kenneth T. Stevens (47) Executive Vice President (12/15/98) and Head of Retail
(10/2/98)
Richard W. Vague (43) Executive Vice President (12/15/98) and Head of Credit Card
(10/2/98)
Richard R. Wade (46) Executive Vice President (12/15/98) and Head of
Risk Management (10/2/98)
Donald A. Winkler (50) Executive Vice President (12/15/98) and Head of Finance One
(10/2/98)
</TABLE>
87
<PAGE>
Except as follows, each of the executive officers has served as an officer
of the Corporation or a subsidiary, or their respective predecessors, for more
than five years.
Mr. Adams joined BANC ONE in 1994, serving as President of Financial Card
Services until 1996. Following a brief period as Chief Financial Officer of
Frontier Communications Corporation, Mr. Adams returned to BANC ONE as Chief
Technology Officer in 1997. Prior to joining BANC ONE, Mr. Adams was an
officer of Xerox Corporation, serving as Vice President of Worldwide
Engineering Systems since 1991.
Mr. Stevens joined BANC ONE as Chairman and Chief Executive Officer of the
Retail Group in 1996. Prior to joining BANC ONE, Mr. Stevens served as
President and Chief Operating Officer (1994-1996) and Executive Vice President
(1993-1994) of Taco Bell Corporation. Prior to that time, Mr. Stevens served
as Senior Vice President and Treasurer (1992-1993) and Senior Vice President,
Strategic Planning, of PepsiCo, Inc.
Mr. Vague has been Chairman of the Board and Chief Executive Officer of
First USA Bank, N.A., since October 1995. Mr. Vague also served as President
and Chief Executive Officer of First USA Bank from 1987 through October 1995.
Mr. Vague was a co-founder of First USA, Inc., and served as its President,
from June 1990 until July 1997, when it was acquired by BANC ONE.
Executive officers of the Corporation serve until the annual meeting of the
Board of Directors (May 18, 1999).
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information required by this Item is set forth in this Form 10-K in the
"Common Stock and Stockholder Data" table on page 81 and the "Quarterly
Financial Data" table on page 83, and is expressly incorporated herein by
reference.
Item 6. Selected Financial Data
The information required by this Item is set forth in this Form 10-K in the
"Selected Financial Data" table on page 11 and the "Financial Ratios" table on
page 82, and is expressly incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this Item is set forth on pages 11 to 40 of this
Form 10-K, and is expressly incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this Item is set forth on pages 24 to 28 of this
Form 10-K, and is expressly incorporated herein by this reference.
Item 8. Financial Statements and Supplementary Data
The information required by this Item is set forth in this Form 10-K in the
"Selected Financial Data" table on page 11, the "Selected Statistical
Information" table on page 29, the "Loan Composition" table on page 29, the
Consolidated Financial Statements and the Notes thereto on pages 41 to 75, the
"Report of Independent Public Accountants" on page 76 and the "Selected
Statistical Information" section on pages 77 to 86, and is expressly
incorporated herein by reference.
88
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The information required by this item has been previously reported in BANC
ONE's Current Report on Form 8-K dated July 24, 1998, and is expressly
incorporated herein by reference.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item pertaining to executive officers of
the Corporation is set forth on pages 87 and 88 of this Form 10-K under the
heading "Executive Officers of the Registrant," and is expressly incorporated
herein by reference. The information required by this Item pertaining to
directors of the Corporation and to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is set forth under the headings "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance,"
respectively, in the Corporation's definitive proxy statement dated March 30,
1999, and is expressly incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item is set forth under the headings
"Compensation of Executive Officers," "Director Meeting Attendance and Fee
Arrangements" and "Committees of the Board of Directors--Organization,
Compensation and Nominating Committee--Committee Interlocks and Insider
Participation" in the Corporation's definitive proxy statement dated March 30,
1999, and is expressly incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is set forth under the heading
"Beneficial Ownership of the Corporation's Common Stock" in the Corporation's
definitive proxy statement dated March 30, 1999, and is expressly incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is set forth under the headings
"Committees of the Board of Directors--Organization, Compensation and
Nominating Committee--Committee Interlocks and Insider Participation" and
"Transactions with Directors, Executive Officers, Stockholders and Associates"
in the Corporation's definitive proxy statement dated March 30, 1999, and is
expressly incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheet--December 31, 1998 and 1997................. 41
Consolidated Income Statement--Three Years Ended December 31, 1998..... 42
Consolidated Statement of Stockholders' Equity--Three Years Ended
December 31, 1998..................................................... 43
Consolidated Statement of Cash Flows--Three Years Ended December 31,
1998.................................................................. 44
Notes to Financial Statements.......................................... 45
</TABLE>
(2) Financial Statement Schedules.
All schedules normally required by Form 10-K are omitted, since either they
are not applicable or the required information is shown in the financial
statements or the notes thereto.
89
<PAGE>
(3) Exhibits.
<TABLE>
<C> <S> <C>
3(A). Restated Certificate of Incorporation of the Corporation,
as amended.
3(B). By-Laws of the Corporation, as amended.
4. Instruments defining the rights of security holders, in-
cluding indentures.+
10(A). Agreement and Plan of Reorganization, dated as of April
10, 1998, by and among BANC ONE CORPORATION, First Chicago
NBD Corporation and BANK ONE CORPORATION, as amended.
10(B). Form of BANK ONE CORPORATION Stock Performance Plan.*
10(C). BANK ONE CORPORATION Director Stock Plan.*
10(D). BANK ONE CORPORATION 401(k) Restoration Plan.*
10(E). BANK ONE CORPORATION Cash Balance Restoration Plan.*
10(F). BANK ONE CORPORATION Supplemental Executive Retirement
Plan.*
10(G). First Chicago NBD Corporation Deferred Compensation Plan.*
10(H). First Chicago NBD Corporation Supplemental Savings and In-
vestment Plan.*
10(I). First Chicago NBD Corporation Supplemental Personal Pen-
sion Account Plan.*
10(J). Form of Individual Change of Control Employment Agree-
ment.*
10(K). First Chicago NBD Corporation Plan for Deferring the Pay-
ment of Directors' Fees [Exhibit 10(D) to FCN's 1995 An-
nual Report on Form 10-K (File No. 1-7127) incorporated
herein by reference].*
10(L). Form of First Chicago NBD Corporation Executive Estate
Plan [Exhibit 10(C) to FCN's 1997 Annual Report on Form
10-K (File No. 1-7127) incorporated herein by reference].*
10(M). First Chicago NBD Corporation Financial Planning Program
for Executives [Exhibit 10(D) to FCN's 1996 Annual Report
on Form 10-K (File No. 1-7127) incorporated herein by ref-
erence].*
10(N). First Chicago NBD Corporation Long-Term Disability Resto-
ration Plan [Exhibit 10(F) to FCN's 1996 Annual Report on
Form 10-K (File No. 1-7127) incorporated herein by refer-
ence].*
10(O). First Chicago NBD Corporation Senior Management Annual In-
centive Plan [Exhibit 10(Z) to FCN's 1995 Annual Report on
Form 10-K (File No. 1-7127) incorporated herein by refer-
ence].*
10(P). First Chicago Corporation Stock Incentive Plan.*
10(Q). NBD Bancorp, Inc. Performance Incentive Plan, as amended.*
10(R). NBD Bancorp, Inc. Benefit Protection Trust Agreement [Ex-
hibit 10(Q) to FCN's 1996 Annual Report on Form 10-K (File
No. 1-7127) incorporated herein by reference].*
10(S). BANC ONE CORPORATION Investment Option Plan.*
10(T). BANC ONE CORPORATION Amended 1994 Key Executive Management
Incentive Compensation Plan.*
10(U). BANC ONE CORPORATION Amended and Restated Dividend Equiva-
lent Unit Plan.*
10(V). 1998 BANC ONE Performance Improvement Plan.*
10(W). Amended and Restated BANC ONE CORPORATION Compensation De-
ferral Plan.*
10(X). BANC ONE CORPORATION Executive Life Insurance Plan.*
</TABLE>
90
<PAGE>
<TABLE>
<C> <S> <C>
10(Y). Amended and Restated BANC ONE CORPORATION Directors De-
ferred Compensation Plan.*
10(Z). Revised and Restated BANC ONE CORPORATION 1989 Stock In-
centive Plan [Exhibit 10.8 to BANC ONE's 1997 Annual Re-
port on Form 10-K (File No. 1-8552) incorporated herein by
reference].*
10(AA). Revised and Restated BANC ONE CORPORATION 1995 Stock In-
centive Plan.*
10(BB). Agreement dated October 2, 1995 between BANC ONE CORPORA-
TION and Richard J. Lehmann [Exhibit 10(o) to BANC ONE's
1995 Annual Report on Form 10-K (File No. 1-8552) incorpo-
rated herein by reference].*
10(CC). Description of BANC ONE CORPORATION 1997 "Special Recogni-
tion Awards" Program [Exhibit 10.16 to BANC ONE's 1997 An-
nual Report on Form 10-K (File No. 1-8552) incorporated
herein by reference].*
10(DD). First USA Deferred Compensation Plan and Trust.*
10(EE). First USA Savings Restoration Plan.*
10(FF). First USA, Inc. 1994 Restricted Stock Plan.*
10(GG). Management Security Plan of First USA Financial, Inc. and
Subsidiary and Affiliated Companies.*
10(HH). First USA Supplemental Executive Retirement Plan.*
10(II). First USA, Inc. Employee Stock Purchase Plan, as amended.*
10(JJ). First USA, Inc. 1991 Stock Option Plan, as amended.*
10(KK). First USA, Inc. Paymentech 1996 Stock Option Plan.*
10(LL). First USA, Inc. Management Investors Stock Option Plan.*
10(MM). First USA, Inc. Management Investors Performance Stock Op-
tion Plan.*
10(NN). First USA, Inc. Annual Incentive Plan.*
10(OO). The Valley National Bank of Arizona Supplemental Excess
Benefit Retirement Plan.*
10(PP). Valley National Corporation 401(+) (TM) Executive Deferred
Compensation Plan.*
10(QQ). American Fletcher Corporation Deferred Compensation Plan.*
10(RR). Agreement dated June 5, 1997 among First USA, Inc., BANC
ONE CORPORATION and Richard W. Vague.*
12. Statements re computation of ratios.
21. Subsidiaries of the Corporation.
23. Consents of experts and counsel.
27. Financial Data Schedule.
</TABLE>
91
<PAGE>
(b) The Corporation filed the following Current Reports on Form 8-K during the
quarter ended December 31, 1998:
<TABLE>
<CAPTION>
Date Item Reported
---- -------------
<S> <C>
October 2, 1998 Announcement of completion of Merger, effective October
2, 1998, and Securities Exchange Act of 1934
registration.
October 6, 1998 Supplemental financial information as of December 31,
1997 and 1996, and the three-year period then ended, and
as of June 30, 1998 and 1997, and the six-month period
then ended. (As amended by the Corporation's Current
Report on Form 8-K/A dated October 16, 1998.)
October 22, 1998 Third quarter earnings of BANC ONE and FCN.
November 13, 1998 Supplemental financial information as of September 30,
1998 and 1997, and for the nine months then ended.
November 20, 1998 Supplemental financial information for the seven calendar
quarters in the period from January 1, 1997, through
September 30, 1998.
December 16, 1998 Reaffirmation of net restructuring and merger-related
costs; announcement of additional non-cash charge in 1998
fourth quarter; and announcement of an expected 1999
first quarter gain.
</TABLE>
- --------
+ The Corporation hereby agrees to furnish to the Commission upon request
copies of instruments defining the rights of holders of long-term debt of
the Corporation and its consolidated subsidiaries; the total amount of
such debt does not exceed 10% of the total assets of the Corporation and
its subsidiaries on a consolidated basis.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K.
92
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, this 16th day of
February, 1999.
BANK ONE CORPORATION
(Registrant)
/s/ John B. McCoy
By: __________________________________
John B. McCoy
Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Corporation and in the capacities indicated, this 16th day of February, 1999.
/s/ John H. Bryan /s/ William T. McCormick, Jr.
- ------------------------------------- -------------------------------------
John H. Bryan William T. McCormick, Jr.
Director Director
/s/ Siegfried Buschmann /s/ John B. McCoy
- ------------------------------------- -------------------------------------
Siegfried Buschmann John B. McCoy
Director Director
/s/ James S. Crown /s/ Thomas E. Reilly, Jr.
- ------------------------------------- -------------------------------------
James S. Crown Thomas E. Reilly, Jr.
Director Director
/s/ Bennett Dorrance /s/ John W. Rogers, Jr.
- ------------------------------------- -------------------------------------
Bennett Dorrance John W. Rogers, Jr.
Director Director
/s/ Maureen A. Fay /s/ Thekla R. Shackelford
- ------------------------------------- -------------------------------------
Maureen A. Fay Thekla R. Shackelford
Director Director
/s/ John R. Hall /s/ Alex Shumate
- ------------------------------------- -------------------------------------
John R. Hall Alex Shumate
Director Director
/s/ Verne G. Istock /s/ Frederick P. Stratton, Jr.
- ------------------------------------- -------------------------------------
Verne G. Istock Frederick P. Stratton, Jr.
Director Director
/s/ Laban P. Jackson, Jr. /s/ John C. Tolleson
- ------------------------------------- -------------------------------------
Laban P. Jackson, Jr. John C. Tolleson
Director Director
/s/ John W. Kessler /s/ David J. Vitale
- ------------------------------------- -------------------------------------
John W. Kessler David J. Vitale
Director Director
/s/ Richard J. Lehmann /s/ Robert D. Walter
- ------------------------------------- -------------------------------------
Richard J. Lehmann Robert D. Walter
Director Director
/s/ William G. Lowrie /s/ Robert A. Rosholt
- ------------------------------------- -------------------------------------
William G. Lowrie Robert A. Rosholt
Director Principal Financial Officer
/s/ Richard A. Manoogian /s/ William J. Roberts
- ------------------------------------- -------------------------------------
Richard A. Manoogian William J. Roberts
Director Principal Accounting Officer
93
<PAGE>
EXHIBIT 3(A)
RESTATED CERTIFICATE OF INCORPORATION
OF
BANK ONE CORPORATION
BANK ONE CORPORATION, a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), originally filed its Certificate
of Incorporation on April 9, 1998, under the name "Hornet Reorganization
Corporation." This Restated Certificate of Incorporation (the "Restated
Certificate") has been duly adopted in accordance with Section 245 of the
General Corporation Law of the State of Delaware. The Restated Certificate only
restates and integrates and does not further amend the provisions of the
Corporation's Certificate of Incorporation, as amended (the "Certificate"), and
there is no discrepancy between the provisions of the Certificate and the
provisions of the Restated Certificate. The Certificate is hereby restated to
read in its entirety as follows:
FIRST. The name of the corporation is
BANK ONE CORPORATION.
SECOND. The address of its registered office in the State of Delaware is
1209 Orange Street, County of New Castle, Wilmington, Delaware 19801. The name
of its registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is two billion five hundred fifty
million (2,550,000,000) shares which shall be divided into two classes as
follows:
(a) Two billion five hundred million (2,500,000,000) shares of common
stock, par value $0.01 per share("Common Stock"); and
(b) Fifty million (50,000,000) shares of Preferred Stock, par value $0.01
per share ("Preferred Stock").
The designations, voting powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions of the above classes of stock and other general provisions relating
thereto shall be as follows:
PART I
PREFERRED STOCK
(a) Shares of Preferred Stock may be issued in one or more series at such
time or times and for such consideration or considerations as the Board of
Directors may determine. All shares
<PAGE>
of any one series shall be of equal rank and identical in all respects except
that the dates from which dividends accrue or accumulate with respect thereto
may vary.
(b) The Board of Directors is expressly authorized at any time, and from
time to time, to provide for the issuance of shares of Preferred Stock in one or
more series, with such voting powers, full or limited, or without voting powers,
and with such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions providing for
the issue thereof adopted by the Board of Directors, and as are not stated and
expressed in this Restated Certificate, or any amendment thereto, including (but
without limiting the generality of the foregoing) the following:
(i) The distinctive designation and number of shares comprising
such series, which number may (except where otherwise provided by the Board of
Directors in creating such series) be increased or decreased (but not below the
number of shares then outstanding) from time to time by action of the Board of
Directors.
(ii) The dividend rate or rates on the shares of such series and
the relation which such dividends shall bear to the dividends payable on any
other class of capital stock or on any other series of Preferred Stock, the
terms and conditions upon which and the periods in respect of which dividends
shall be payable, whether and upon what conditions such dividends shall be
cumulative and, if cumulative, the date or dates from which dividends shall
accumulate.
(iii) Whether the shares of such series shall be redeemable, and,
if redeemable, whether redeemable for cash, property or rights, including
securities of any other corporation, at the option of either the holder or the
corporation or upon the happening of a specified event, the limitations and
restrictions with respect to such redemption, the time or times when, the price
or prices or rate or rates at which, the adjustments with which and the manner
in which such shares shall be redeemable, including the manner of selecting
shares of such series for redemption if less than all shares are to be redeemed.
(iv) The rights to which the holders of shares of such series
shall be entitled, and the preferences, if any, over any other series (or of any
other series over such series), upon the voluntary or involuntary liquidation,
dissolution, distribution or winding up of the corporation, which rights may
vary depending on whether such liquidation, dissolution, distribution or winding
up is voluntary or involuntary, and, if voluntary, may vary at different dates.
(v) Whether the shares of such series shall be subject to the
operation of a purchase, retirement or sinking fund, and, if so, whether and
upon what conditions such purchase, retirement or sinking fund shall be
cumulative or noncumulative, the extent to which and the manner in which such
fund shall be applied to the purchase or redemption of the shares of such series
for retirement or to other corporate purposes and the terms and provisions
relative to the operation thereof.
(vi) Whether the shares of such series shall be convertible into
or exchangeable for shares of any other class or of any other series of any
class of capital stock of the corporation, and, if so convertible or
exchangeable, the price or prices or the rate or rates of conversion or exchange
and the method, if any, of adjusting the same, and any other terms and
conditions of such conversion or exchange.
2
<PAGE>
(vii) The voting powers, full and/or limited, if any, of the
shares of such series, and whether and under what conditions the shares of such
series (along or together with the shares of one or more other series having
similar provisions) shall be entitled to vote separately as a single class, for
the election of one or more additional directors of the corporation in case of
dividend arrearages or other specified events, or upon other matters.
(viii) Whether the issuance of any additional shares of such
series, or of any shares of any other series, shall be subject to restrictions
as to issuance, or as to the powers, preferences or rights of any such other
series.
(ix) Any other preferences, privileges and powers and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of such series, as the Board of Directors may deem advisable and
as shall not be inconsistent with the provisions of this Restated Certificate.
(c) Unless and except to the extent otherwise required by law or provided
in the resolution or resolutions of the Board of Directors creating any series
of Preferred Stock pursuant to this Part I, the holders of the Preferred Stock
shall have no voting power with respect to any matter whatsoever. In no event
shall the Preferred Stock be entitled to more than one vote in respect of each
share of stock.
(d) Shares of Preferred Stock redeemed, converted, exchanged, purchased,
retired or surrendered to the corporation, or which have been issued and
reacquired in any manner, may, upon compliance with any applicable provisions of
the General Corporation Law of the State of Delaware, be given the status of
authorized and unissued shares of Preferred Stock and may be reissued by the
Board of Directors as part of the series of which they were originally a part or
may be reclassified into and reissued as part of a new series or as a part of
any other series, all subject to the protective conditions or restrictions of
any outstanding series of Preferred Stock.
(e) Pursuant to the authority conferred by this Article FOURTH upon the
Board of Directors, the two series of Preferred Stock described in Annexes A and
B, which are attached hereto and incorporated herein by reference, have been
designated by the Board of Directors, each such series consisting of such number
of shares, and having such relative rights, preferences and limitations thereof
as are stated and expressed in such Annexes A and B with respect to such series.
PART II
COMMON STOCK
(a) Except as otherwise required by law or by any amendment to this
Restated Certificate, each holder of Common Stock shall have one vote for each
share of stock held by him on all matters voted upon by the stockholders.
(b) Subject to the preferential dividend rights, if any, applicable to
shares of Preferred Stock and subject to applicable requirements, if any, with
respect to the setting aside of sums for purchase, retirement or sinking funds
for Preferred Stock, the holders of Common Stock shall be
3
<PAGE>
entitled to receive, to the extent permitted by law, such dividends as may be
declared from time to time by the Board of Directors.
(c) In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the corporation, after distribution in
full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled to receive
all of the remaining assets of the corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively. The Board of Directors may distribute
in kind to the holders of Common Stock such remaining assets of the corporation,
or may sell, transfer, or otherwise dispose of all or any part of such remaining
assets to any corporation, trust or entity, or any combination thereof, and may
sell all or any part of the consideration so received and distribute any balance
thereof in kind to holders of Common Stock. The merger or consolidation of the
corporation into or with any other corporation, or the merger of any other
corporation into it, or any purchase or redemption of shares of stock of the
corporation of any class, shall not be deemed to be a dissolution, liquidation
or winding up of the corporation for the purposes of this paragraph.
(d) Such numbers of shares of Common Stock as may from time to time be
required for such purpose shall be reserved for issuance (i) upon conversion of
any shares of Preferred Stock or any obligation of the corporation convertible
into shares of Common Stock which is at the time outstanding or issuable upon
exercise of any options or warrants at the time outstanding and (ii) upon
exercise of any options or warrants at the time outstanding to purchase shares
of Common Stock.
PART III
GENERAL PROVISIONS
(a) At any meeting of stockholders, the presence in person or by proxy of
the holders of record of a majority of the outstanding shares of stock of the
corporation entitled to be voted at such meeting shall constitute a quorum for
all purposes, except as otherwise provided by this Restated Certificate or
required by applicable law.
(b) Subject to the protective conditions or restrictions of any
outstanding series of Preferred Stock, any amendment to this Restated
Certificate which shall increase or decrease the authorized capital stock of any
class or classes may be adopted by the affirmative vote of the holders of a
majority of the stock of the corporation entitled to vote.
(c) No holder of stock of any class of the corporation shall be entitled
as a matter of right to purchase or subscribe for any part of any unissued stock
of any class, or of any additional stock of any class of capital stock of the
corporation, or of any bonds, certificates of indebtedness, debentures, or other
securities, whether or not convertible into stock of the corporation, now or
hereafter authorized, but any such stock or other securities may be issued and
disposed of pursuant to resolution by the Board of Directors to such persons,
firms, corporations or associations and upon such terms and for such
consideration (not less than the par value or stated value thereof) as the Board
of Directors in the exercise of its discretion may determine and may
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be permitted by law without action by the stockholders. The Board of Directors
may provide for payment therefor to be received by the corporation in cash,
personal property, real property (or leases thereof) or services. Any and all
shares of stock so issued for which the consideration so fixed has been paid or
delivered, shall be deemed fully paid and not liable to any further call or
assessment.
FIFTH. Subject to any provision contained in any resolution of the Board
of Directors adopted pursuant to Part I of Article Fourth of this Restated
Certificate requiring an increase or increases in the number of directors, the
number of directors constituting the Board of Directors shall be that number as
shall be fixed from time to time in the manner provided by Article Tenth of this
Restated Certificate and by By-laws in conformity therewith. Election of
directors need not be by written ballot unless the By-laws of the corporation
shall so provide.
In addition to all of the powers conferred by statute, the Board of
Directors is expressly authorized to make, alter or repeal the By-laws of the
corporation.
Wherever the term "Board of Directors" is used in this Restated
Certificate, such term shall mean the Board of Directors of the corporation;
provided, however, that, to the extent any committee of directors of the
corporation is lawfully entitled to exercise the powers of the Board of
Directors, such committee may exercise any right or authority of the Board of
Directors under this Restated Certificate.
SIXTH. No contract or transaction between the corporation and one or more
of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
SEVENTH. (a) The corporation shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is
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or was a director, officer or employee of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, to
the fullest extent permitted by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) or any other applicable laws
as presently or hereinafter in effect against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection therewith. Without limiting the generality of the
foregoing, the corporation may enter into one or more agreements with any person
that provide for indemnification greater or different than that provided in this
Article Seventh.
(b) Expenses incurred by a director, officer or employee in defending a
civil or criminal action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director, officer or employee to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
(c) The indemnification and advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to which a person
seeking indemnification and advancement of expenses may be entitled under any
statute, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefits of the
heirs, executors and administrators of such a person.
(d) For the purposes of this Article Seventh, references to "the
corporation" include, in addition to the resulting or surviving corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article Seventh
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had continued.
(e) Neither the corporation nor its directors or officers nor any person
acting on its behalf shall be liable to any person for any determination as to
the existence or absence of conduct that would provide a basis for making or
refusing to make any payment under this Article Seventh, in reliance upon the
advice of counsel.
(f) A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholder, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which the director derived
any improper personal benefit. If the General
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Corporation Law of the State of Delaware is hereafter amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.
(g) Neither the amendment nor repeal of this Article Seventh, nor the
adoption of any provision of this Restated Certificate inconsistent with this
Article Seventh, shall eliminate or reduce the effect of this Article Seventh in
respect of any matter occurring, or any cause of action, suit or claim that
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
EIGHTH. The corporation shall have perpetual existence.
NINTH. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate, in the manner now
or hereafter prescribed by the laws of Delaware, and all rights conferred herein
upon stockholders and directors are granted subject to this reservation.
TENTH. Board of Directors.
(a) Number, Election and Terms of Directors: The business and affairs of
the corporation shall be managed by or under the direction of a Board of
Directors. The number of the directors of the corporation shall be fixed from
time to time by resolution adopted by the affirmative vote of a majority of the
entire Board of Directors of the corporation, except that the minimum number of
directors shall be fixed at no less than eleven (11) and the maximum number of
directors shall be fixed at no more than thirty (30). At each annual meeting of
stockholders, successors of the directors shall be elected for a term expiring
at the annual meeting next following such annual meeting.
(b) Stockholder Nomination of Director Candidates: Nominations for
election to the Board of Directors of the corporation at a meeting of
stockholders may be made by the Board of Directors, on behalf of the Board of
Directors by any nominating committee appointed by the Board of Directors, or by
any stockholder of the corporation entitled to vote for the election of
directors at the meeting. Nominations, other than those made by or on behalf of
the Board of Directors, shall be made by notice in writing delivered to or
mailed, postage prepaid, and received by the Secretary of the corporation at
least 60 days but no more than 90 days prior to the anniversary date of the
immediately preceding Annual Meeting of Stockholders. The notice shall set forth
(i) the name and address of the stockholder who intends to make the nomination;
(ii) the name, age, business address and, if known, residence address of each
nominee; (iii) the principal occupation or employment of each nominee; (iv) the
number of shares of stock of the corporation which are beneficially owned by
each nominee and by the nominating stockholder; (v) any other information
concerning the nominee that must be disclosed of nominees in proxy solicitation
pursuant to Regulation 14A of the Securities Exchange Act of 1934 (or any
subsequent provisions replacing such Regulation); and (vi) the executed consent
of each nominee to serve as a director of the corporation, if elected. The
chairman of the meeting of stockholders may, if the
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facts warrant, determine that a nomination was not made in accordance with the
foregoing procedures, and if the chairman should so determine, the chairman
shall so declare to the meeting and the defective nomination shall be
disregarded.
(c) Newly Created Directorships and Vacancies: Newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum, or by a sole
remaining director. A director, including any director chosen to fill a newly
created directorship or any vacancy, shall hold office until the next annual
meeting following his election or appointment to the Board of Directors, as
applicable, and until such director's successor shall have been elected and
qualified. In no case will a decrease in the number of directors shorten the
term of any incumbent director.
(d) Preferred Stock: Notwithstanding the foregoing paragraphs, whenever
the holders of any one or more classes or series of Preferred Stock issued by
the corporation shall have the right, voting separately by class or series, to
elect directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of the Certificate of Incorporation applicable
thereto. The then authorized number of directors of the corporation shall be
increased by the number of additional directors to be elected, and such
directors so elected shall not be divided into classes pursuant to this Article
Tenth unless expressly provided by such terms.
ELEVENTH. Stockholder Action.
Any action required or permitted to be taken by any stockholders of the
corporation must be effected at a duly called annual or special meeting of such
stockholders and may not be effected by any consent in writing by such
stockholders. Except as may be otherwise required by law, special meetings of
stockholders of the corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the Board of Directors.
Notwithstanding anything contained in this Restated Certificate or the By-laws
of the corporation to the contrary, the affirmative vote of at least 80% of the
voting power of all the shares of the corporation entitled to vote generally in
the election of directors, voting together as a single class, shall be required
to alter, amend or adopt any provision inconsistent with the purpose and intent
of this Article Eleventh.
TWELFTH. (a) In addition to any affirmative vote required by law or by or
under this Restated Certificate or the By-laws and except as otherwise expressly
herein provided in this Article Twelfth, the approval or authorization of a
Business Combination (which together with certain other terms used in this
Article, are hereinafter defined) shall require the affirmative vote of a
majority of the voting power of all the shares of Voting Stock held by
stockholders other than an Interested Stockholder, with which or by or on whose
behalf, directly or indirectly, a Business Combination is proposed, voting
together as a single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required or that a lesser
percentage or separate class vote may be otherwise required.
(b) The provisions of paragraph (a) of this Article Twelfth shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law or by or
under any other provision of this Restated
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Certificate, or the By-laws of the corporation, or otherwise, if all the
conditions specified in either of the following paragraphs First or Second are
met:
First: The Business Combination shall have been approved by a majority
(whether such approval is made prior to or subsequent to the acquisition of
beneficial ownership of the Voting Stock that caused the Interested Stockholder
to become an Interested Stockholder) of the Continuing Directors; or
Second: All of the following conditions shall have been met:
(1) The aggregate amount of the cash, and the Fair Market Value as of the
date of the consummation of the Business Combination of consideration other than
cash, to be received per share by holders of Common Stock in such Business
Combination shall be at least equal to the highest amount determined under
subparagraphs (i) and (ii) below:
(i) The highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf
on the Interested Stockholder for any shares of Common Stock in connection with
the acquisition by the Interested Stockholder of beneficial ownership of shares
of Common Stock (a) within the two-year period immediately prior to the first
public announcement of the proposed Business Combination (the "Announcement
Date") or (b) in the transaction in which it became an Interested Stockholder,
whichever is higher; and
(ii) The Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder became an
Interested Stockholder (the "Determination Date"), whichever is higher.
All per share prices shall be adjusted to reflect any intervening stock
splits, stock dividends, and reverse stock splits.
(2) The aggregate amount of the cash, and the Fair Market Value as of the
date of the consummation of the Business Combination of consideration other than
cash, to be received per share by holders of shares of any class or series of
outstanding Voting Stock, other than Common Stock, shall be at least equal to
the highest amount determined under clauses (i), (ii), and (iii) below.
(i) The highest per share price (including any brokerage
commissions, transfer taxes, and soliciting dealers' fees) paid by or on behalf
of the Interested Stockholder for any share of such class or series of Voting
Stock in connection with the acquisition by the Interested Stockholder of
beneficial ownership of shares of such class or series of Voting Stock (a)
within the two-year period immediately prior to the Announcement Date or (b) in
the transaction in which it became an Interested Stockholder, whichever is
higher.
(ii) The Fair Market Value per share of such class or series of
Voting Stock on the Announcement Date or on the Determination Date, whichever is
higher; and
(iii) The highest preferential amount per share to which the
holders of shares of such class or series of Voting Stock would be entitled, if
any, in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the corporation, regardless of whether the Business Combination to
be consummated constitutes such an event.
All per share prices shall be adjusted for intervening stock splits, stock
dividends, and reverse stock splits.
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The provisions of this paragraph 2 shall be required to be met with respect
to every class or series of outstanding Voting Stock, whether or not the
Interested Stockholder has previously acquired beneficial ownership of any
shares of a particular class or series of Voting Stock.
(3) After such Interested Stockholder has become an Interested Stockholder
and prior to the consummation of such Business Combination: (i) except as
approved by a majority of the Continuing Directors, there shall have been no
failure to declare and pay at the regular date therefor any full periodic
dividends (whether or not cumulative) in accordance with the terms of any
outstanding Preferred Stock; (ii) there shall have been (a) no reduction in the
annual rate of dividend paid on the Common Stock (except as necessary to reflect
any stock split, stock dividend or subdivision of the Common Stock), except as
approved by a majority of the Continuing Directors, and (b) an increase in such
annual rate of dividends as necessary to reflect any reclassification (including
any reverse stock split), recapitalization, reorganization, or any similar
transaction which has the effect of reducing the number of outstanding shares of
Common Stock, unless the failure so to increase such annual rate is approved by
a majority of the Continuing Directors, and (iii) such Interested Stockholder
shall have not become the beneficial owner of any additional shares of Voting
Stock except as part of the transaction which results in such Interested
Stockholder becoming an Interested Stockholder and except in a transaction that,
after giving effect thereto, would not result in any increase in the Interested
Stockholder's percentage of beneficial ownership of any class or series of
capital stock.
(4) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges, or other financial assistance or any tax credits
or other tax advantages provided by the corporation, whether in anticipation of
or in connection with such Business Combination or otherwise.
(5) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934 and the rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to stockholders of the
corporation at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to such Act or subsequent provisions).
(6) Such Interested Stockholder shall not have made any major change in
the corporation's business or equity capital structure without the approval of a
majority of the Continuing Directors.
(c) For the purposes of this Article Twelfth:
(i) The term "Business Combination" shall mean:
(A) any merger or consolidation of the corporation or any Subsidiary (as
hereinafter defined) with (x) any Interested Stockholder or (y) any other
company (whether or not such other company is an Interested Stockholder) which
is, or after such merger or consolidation would be, an Affiliate or Associate of
an Interested Stockholder; or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or a series
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of transactions) with or for the benefit of any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder involving any Substantial
Part of the assets, securities or commitments of the corporation, any Subsidiary
or any Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder; or
(C) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(D) any reclassification of securities (including any reverse stock
split), or recapitalization of the corporation or any merger or consolidation of
the corporation with any of its Subsidiaries or any other transaction (whether
or not with or otherwise involving an Interested Stockholder) that has the
effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class or series of Voting Stock, or any securities
convertible into Voting Stock, or into equity securities of any Subsidiary, that
is beneficially owned by an Interested Stockholder or any Affiliate or Associate
of any Interested Stockholder; or
(E) any agreement, contract, or other arrangement providing for any one or
more of the actions specified in the foregoing clauses (a) through (d).
(ii) The term "Voting Stock" shall mean all outstanding shares of
capital stock of the corporation of whatever class or series which is entitled
to vote under any circumstances in the election of directors of the corporation.
(iii) A "person" shall mean any individual, firm, corporation,
partnership, trust or other entity and shall include any group comprised of any
person and any other person with whom such person or any Affiliate or Associate
of such person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting, or disposing of
Voting Stock.
(iv) "Interested Stockholder" shall mean any person (other than
the corporation or any Subsidiary and other than any profit-sharing, employee
stock ownership or other employee benefit plan of the corporation or any
Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who or which:
(A) is a person who is the beneficial owner, directly or indirectly, of
more than 10% of the voting power of the then outstanding Voting Stock; or
(B) is an Affiliate or Associate of the corporation and at any time within
the two-year period immediately prior to the date in question was the beneficial
owner of 10% or more of the voting power of the then outstanding Voting Stock;
or
(C) is an assignee of or has otherwise succeeded to any shares of Voting
Stock which were at any time within the two-year period immediately prior to the
date in question beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of the
Securities Act of 1933, as amended.
(v) A person shall be a "beneficial owner" of any Voting Stock:
(A) which such person or any of its Affiliates or Associates beneficially
owns, directly or indirectly; or
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(B) which such person or any of its Affiliates or Associates has (1) the
right to acquire (whether such right is exercisable immediately or only after
the passage of time), pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (2) the right to vote pursuant to any agreement, arrangement or
understanding; or
(C) which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Voting Stock. For the purposes of
determining whether a person is an Interested Stockholder pursuant to paragraph
(c)(iv) of this Article, the number of shares of capital stock deemed to be
outstanding shall include shares deemed beneficially owned by such person
through application of paragraph (c)(v) of this Article but shall not include
any other shares of Voting Stock that may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(vi) An "Affiliate" of, or a person "affiliated" with, a
specified person, is a person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified.
(vii) "Associate" used to indicate a relationship with any person,
means (1) any corporation or organization (other than the corporation or a
majority-owned subsidiary of the corporation) of which such person is an officer
or partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities, (2) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity, and (3) any relative or spouse of
such person, or any relative of such spouse, who has the same home as such
person.
(viii) "Subsidiary" means any company of which a majority of any
class of equity security is owned, directly or indirectly, by the corporation.
(ix) The term "Substantial Part" shall mean an amount equal to or
greater than an amount equal to fifteen (15) percent of the stockholders' equity
of the corporation as reflected in the most recent fiscal year-end consolidated
balance sheet of the corporation.
(x) "Continuing Director" means any member of the Board of
Directors of the corporation (the "Board") while such person is a member of the
Board, who is not an Affiliate or Associate or representative of the Interested
Stockholder and was a member of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a Continuing
Director, while such successor is a member of the Board, who is not an Affiliate
or Associate or representative of the Interested Stockholder and is recommended
to succeed the Continuing Director by a majority of Continuing Directors then on
the Board.
(xi) "Fair Market Value" means (a) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite
Tape for the New York Stock Exchange, or if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or if such
stock is not listed on any
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such exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations System or any
system then in use, or if no such quotations are available, the Fair Market
Value on the date in question of a share of such stock as determined by a
majority of the Continuing Directors in good faith and (b) in the case of
property other than cash or stock, the Fair Market Value of such property on the
date in question as determined in good faith by a majority of Continuing
Directors then on the Board.
(xii) In the event of any Business Combination in which the
corporation survives, the phrase "consideration other than cash to be received"
as used in paragraphs (b) Second (1) and (2) of this Article shall include the
shares of Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
(d) The Board shall have the power and duty to determine for the purposes
of this Article Twelfth, on the basis of information known to it after
reasonable inquiry (i) whether a person is an Interested Stockholder; (ii) the
number of shares of Voting Stock beneficially owned by any person; (iii) whether
a person is an Affiliate or Associate of another; (iv) whether the requirements
of paragraph (b) Second of this Article have been met with respect to any
Business Combination; and (v) whether any sale, lease, exchange, mortgage,
pledge, transfer or other disposition or security arrangement, investment, loan,
advance, guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one transaction or
a series of transactions) with or for the benefit of any Interested Stockholder
or any Affiliate or Associate of any Interested Stockholder involving any
assets, securities or commitments of the corporation, any Subsidiary, or any
Interested Stockholder, or any Affiliate or Associate of any Interested
Stockholder constitutes a Substantial Part. Any such determination made in good
faith shall be binding and conclusive on all parties.
(e) The Board of Directors shall not approve, adopt or recommend any
proposal to enter into a Business Combination, or any offer of any person, other
than the corporation, to make a tender or exchange offer for any capital stock
of the corporation, unless and until the Board of Directors shall first
establish a procedure for evaluating, and shall have evaluated, the proposal or
offer, and determined that it would be in compliance with all applicable laws
and in the best interests of the corporation and its stockholders. In
connection with its evaluation, the Board of Directors may seek and obtain the
advice of independent investment counsel, may seek and rely upon an opinion of
legal counsel and other independent advisers, and may test such compliance with
laws in any state or federal court or before any state or federal administrative
agency which may have appropriate jurisdiction. In connection with its
evaluation as to the best interests of the corporation and its stockholders, the
Board of Directors shall consider all factors which it deems relevant, or the
stockholders might deem relevant, including without limitation: (i) the
adequacy and fairness of the consideration to be received by the corporation
and/or its stockholders considering the future prospects for the corporation and
its business, historical trading prices of the corporation's capital stock, the
price that might be achieved in a negotiated sale of the corporation as a whole,
and premiums over trading prices which have been proposed or offered with
respect to the securities of other companies in the past in connection with
similar offers; (ii) the business, financial condition and earnings prospects of
the acquiring person or entity and the competence, experience and integrity of
the acquiring person or entity and their or its management, and (iii) the
potential social and economic impact of the offer and its consummation
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on the communities in which the corporation and its subsidiaries operate or are
located and upon the corporation, its subsidiaries, and their employees,
depositors, and loan and other customers.
(f) The Board of Directors shall not approve, adopt or recommend any offer
of any person, other than the corporation, to make a tender or exchange offer
for any capital stock of the corporation in which the Fair Market Value per
share of the consideration to be received by one or more stockholders is
substantially more than the Fair Market Value per share of the consideration to
be received by other stockholders holding shares of the same class and series,
or any tender or exchange offer the consummation of which is reasonably likely,
in the good faith determination of the Board of Directors, in one transaction or
a series of transactions, to have that result.
(g) Nothing contained in this Article Twelfth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
(h) The fact that any Business Combination complies with the provisions of
paragraph (b)(2) of this Article Twelfth shall not be construed to impose any
fiduciary duty, obligation, or responsibility on the Board of Directors, or any
member thereof, to approve such Business Combination or recommend its adoption
or approval to the stockholders of the corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
(i) Notwithstanding any other provisions of this Restated Certificate or
the By-laws of the corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Restated Certificate or the By-laws of
the corporation), the affirmative vote of the holders of at least 80% of the
voting power of all the shares of the Voting Stock, voting together as a single
class, shall be required to alter, amend or adopt any provisions inconsistent
with or to repeal this Article Twelfth; provided, however, that if such action
has been proposed, directly or indirectly, on behalf of an Interested
Stockholder, it must also be approved by the affirmative vote of a majority of
the voting power of all the shares of Voting Stock held by stockholders other
than such Interested Stockholder.
THIRTEENTH. This Restated Certificate of Incorporation shall be effective
upon its filing with the Secretary of State of the State of Delaware in
accordance with the General Corporation Law of the State of Delaware.
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IN WITNESS WHEREOF, BANK ONE CORPORATION has caused its corporate seal to be
hereunto affixed and this Restated Certificate of Incorporation to be signed by
M. Eileen Kennedy, its Treasurer, and the same to be attested by Ilona M. Berry,
its Assistant Secretary, this 20th day of October, 1998.
BANK ONE CORPORATION
BY: /s/ M. Eileen Kennedy
-------------------------
Treasurer
(CORPORATE SEAL)
ATTEST:
BY: /s/ Ilona M. Berry
--------------------------------
Assistant Secretary
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Annex A
- -------
PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS, SERIES B
(Par Value $.01 per share)
OF
BANK ONE CORPORATION
(a) Designation.
The designation of the series of Preferred Stock created by this resolution
shall be "Preferred Stock with Cumulative and Adjustable Dividends, Series B"
(hereinafter called this "Series") and the number of shares constituting this
Series is 1,191,000. Shares of this Series shall have a stated value of $100
per share. The number of authorized shares of this Series may be reduced by
further resolution duly adopted by the Board and by the filing of a certificate
pursuant to the provisions of the General Corporation Law of the State of
Delaware stating that such reduction has been so authorized, but the number of
authorized shares of this Series shall not be increased.
(b) Dividend Rate.
(1) Dividend rates on the shares of this Series shall be for each
quarterly dividend period (hereinafter referred to as a "Quarterly Dividend
Period"; and any Quarterly Dividend Period being hereinafter individually
referred to as a "Dividend Period" and collectively referred to as "Dividend
Periods"), which Quarterly Dividend Periods shall commence on March 1, June 1,
September 1 and December 1 in each year and shall end on and include the day
next preceding the first day of the next Quarterly Dividend Period, at a rate
per annum of the stated value thereof 3.75% below the Applicable Rate (as
defined in paragraph (2) of this Section (b)) in respect of such Quarterly
Dividend Period. Anything to the contrary herein notwithstanding, the dividend
rate for any Quarterly Dividend Period shall in no event be less than 6.00% or,
greater than 12.00% per annum. Such dividends shall be cumulative from September
1, 1998, and shall be payable, when and as declared by the Board, on the last
day of February, May, August and November of each year, commencing the last day
of November, 1998. Each such dividend shall be paid to the holders of record of
shares of this Series as they appear on the stock register of the Corporation on
such record date, not exceeding 30 days preceding the payment date thereof, as
shall be fixed by the Board. Dividends on account of arrears for any past
Dividend Periods may be declared and paid at any time, without reference to any
regular dividend payment date, to holders of record on such date, not exceeding
45 days preceding the payment date thereof, as may be fixed by the Board.
(2) Except as provided below in this paragraph, the "Applicable Rate" for
any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such Dividend Period. In the event that the
Corporation determines in good faith that for any reason one or more of such
rates cannot be determined for any Quarterly Dividend Period, then the
Applicable Rate for such Dividend Period shall be the higher of whichever of
such rates can be so determined. In the event that the Corporation determines in
good faith that none of such rates
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can be determined for any Quarterly Dividend Period, then the Applicable Rate in
effect for the preceding Dividend Period shall be continued for such Dividend
Period.
(3) Except as provided below in this paragraph, the "Treasury Bill Rate"
for each Quarterly Dividend Period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period as provided below) for three-month U.S. Treasury bills,
as published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day of
February, May, August or November, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum market discount rate during such Calendar Period, then the Treasury Bill
Rate for such Dividend Period shall be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period as provided below) for three-month U.S. Treasury bills,
as published weekly during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the Corporation. In the
event that a per annum market discount rate for three-month U.S. Treasury bills
shall not be published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar Period,
then the Treasury Bill Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only one such rate shall be
published during the relevant Calendar Period as provided below) for all of the
U.S. Treasury bills then having maturities of not less than 80 nor more than 100
days, as published during such Calendar Period by the Federal Reserve Board or,
if the Federal Reserve Board shall not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that for
any reason no such U.S. Treasury Bill Rates are published as provided above
during such Calendar Period, then the Treasury Bill Rate for such Dividend
Period shall be the arithmetic average of the per annum market discount rates
based upon the closing bids during such Calendar Period for each of the issues
of marketable noninterest-bearing U.S. Treasury securities with a maturity of
not less than 80 nor more than 100 days from the date of each such quotation, as
quoted daily for each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Corporation by at least
three recognized U.S. Government securities dealers selected by the Corporation.
In the event that the Corporation determines in good faith that for any reason
the Corporation cannot determine the Treasury Bill Rate for any Quarterly
Dividend Period as provided above in this paragraph, the Treasury Bill Rate for
such Dividend Period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for each
of the issues of marketable interest-bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
(4) Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly
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<PAGE>
per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average
Yield, if only one such Yield shall be published during the relevant Calendar
Period as provided below), as published weekly by the Federal Reserve Board
during the Calendar Period immediately prior to the ten calendar days
immediately preceding the last day of February, May, August or November, as the
case may be, prior to the Quarterly Dividend Period for which the dividend rate
on this Series is being determined. In the event that the Federal Reserve Board
does not publish such a weekly per annum Ten Year Average Yield during such
Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if
only one such Yield shall be published during the relevant Calendar Period as
provided below), as published weekly during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that a per annum Ten Year Average Yield shall not be
published by the Federal Reserve Board or by any Federal Reserve Bank or by any
U.S. Government department or agency during such Calendar Period, then the Ten
Year Constant Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum average yields to maturity (or
the one weekly average yield to maturity, if only one such yield shall be
published during the relevant Calendar Period as provided below) for all of the
actively traded marketable U.S. Treasury fixed interest rate securities (other
than Special Securities) then having maturities of not less than eight nor more
than twelve years, as published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board shall not publish such yields, by
any Federal Reserve Bank or by any U.S. Government department or agency selected
by the Corporation. In the event that the Corporation determines in good faith
that for any reason the Corporation cannot determine the Ten Year Constant
Maturity Rate for any Quarterly Dividend Period as provided above in this
paragraph, then the Ten Year Constant Maturity Rate for such Dividend Period
shall be the arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for each of the issues
of actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date not less than eight
nor more than twelve years from the date of each such quotation, as quoted daily
for each business day in New York City (or less frequently if daily quotations
shall not be generally available) to the Corporation by at least three
recognized U.S. Government securities dealers selected by the Corporation.
(5) Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day of
February, May, August or November, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum Twenty Year Average Yield during such Calendar Period, then the Twenty
Year Constant Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly during such Calendar
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<PAGE>
Period by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that a per annum Twenty Year
Average Yield shall not be published by any Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Twenty Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the average yield to maturity, if only one such
yield shall be published during the relevant Calendar Period as provided below)
for all of the actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) then having maturities of not less
than eighteen nor more than twenty-two years, as published during such Calendar
Period by the Federal Reserve Board or, if the Federal Reserve Board shall not
publish such yields, by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Corporation. In the event that the
Corporation determines in good faith that for any reason the Corporation cannot
determine the Twenty Year Constant Maturity Rate for any Quarterly Dividend
Period as provided above in this paragraph, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
per annum average yields to maturity based upon the closing bids during such
Calendar Period for each of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) with a
final maturity date not less than eighteen nor more than twenty-two years from
the date of each such quotation, as quoted daily for each business day in New
York City (or less frequently if daily quotations shall not be generally
available) to the Corporation by at least three recognized U.S. Government
securities dealers selected by the Corporation.
(6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
(7) The dividend rate with respect to each Quarterly Dividend Period will
be calculated as promptly as practicable by the Corporation according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new Quarterly Dividend Period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of shares of this Series.
(8) For purposes of this Section (b), the term
(i) "Calendar Period" shall mean 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the
option of the holder, be surrendered at face value in payment of any Federal
estate tax or which provide tax benefits to the holder and are priced to reflect
such tax benefits or which were originally issued at a deep or substantial
discount;
(iii) "Ten Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of ten years); and
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<PAGE>
(iv) "Twenty Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of 20 years).
(9) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to this Series for any period unless full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(10) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided in
paragraph (9) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this Series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of this Series shall have been
paid for all past dividend payment periods.
(11) Dividends payable on each share of this Series for each full
Quarterly Dividend Period shall be computed by dividing the dividend rate for
such Quarterly Dividend Period by four and applying such rate against the stated
value per share of this Series. Dividends payable on this Series for any period
less than a full Quarterly Dividend Period shall be computed on the basis of a
360 day year consisting of 30 day months.
(c) Redemption.
(1) The Corporation, at its option, may redeem shares of this Series, as
a whole or in part, at any time or from time to time, at a redemption price of
$100 per share, plus, in each case, accrued and unpaid dividends thereon to the
date fixed for redemption.
(2) In the event that fewer than all the outstanding shares of this
Series are to be redeemed, the number of shares to be redeemed shall be
determined by the Board and the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Board or by any other method as may be
determined by the Board in its sole discretion to be equitable.
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<PAGE>
(3) In the event the Corporation shall redeem shares of this Series,
notice of such redemption shall be given by first class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the redemption date, to
each holder of record of the shares to be redeemed, at such holder's address as
the same appears on the stock register of the Corporation. Each such notice
shall state: (i) the redemption date; (ii) the number of shares of this Series
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any shares
of this Series; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of this Series pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
this Series.
(d) Conversion or Exchange.
The holders of shares of this Series shall not have any rights herein to
convert such shares into or exchange such shares for shares of any other class
or classes or of any other series of any class or classes of capital stock of
the Corporation.
(e) Voting.
The shares of this Series shall not have any voting powers either general
or special, except that
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66-
2/3% of all of the shares of this Series at the time outstanding, given in
person or by proxy, either in writing or by a vote at a meeting called for the
purpose at which the holders of shares of this Series shall vote together as a
separate class, shall be necessary for authorizing, effecting or validating the
amendment,
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alteration, or repeal of any of the provisions of the Restated Certificate or of
any certificate amendatory thereof or supplemental thereto (including any
Certificate of Designation, Preferences and Rights or any similar document
relating to any series of Preferred Stock) which would adversely affect the
preferences, rights, powers or privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66-
2/3% of all of the shares of this Series and all other series of Preferred Stock
ranking on a parity with shares of this Series, either as to dividends or upon
liquidation, at the time outstanding, given in person or by proxy, either in
writing or by a vote at a meeting called for the purpose at which the holders of
shares of this Series and such other series of Preferred Stock shall vote
together as a single class without regard to series, shall be necessary for
authorizing, effecting or validating the creation, authorization or issue of any
shares of any class of stock of the Corporation ranking prior to the shares of
this Series as to dividends or upon liquidation, or the reclassification of any
authorized stock of the Corporation into any such prior shares, or the creation,
authorization or issue of any obligation or security convertible into or
evidencing the right to purchase any such prior shares;
(3) If at any time a default in preference dividends on the Preferred
Stock shall exist, the number of directors constituting the Board of Directors
of the Corporation shall be increased by two, and the holders of the Preferred
Stock of all series shall have the right at an annual or special meeting of
stockholders, voting together as a single class without regard to series, to the
exclusion of the holders of Common Stock, to elect two directors of the
Corporation to fill such newly created directorships. Such right shall continue
until there are no dividends in arrears upon the Preferred Stock. Each director
elected by the holders of shares of Preferred Stock (herein called a "Preferred
Director") shall continue to serve as such director until the next annual
meeting, notwithstanding that prior to such time a default in preference
dividends shall cease to exist. Any Preferred Director may be removed by, and
shall not be removed except by, the vote of the holders of record of the
outstanding shares of Preferred Stock, voting together as a single class without
regard to series, at a meeting of the stockholders, or of the holders of shares
of Preferred Stock, called for that purpose. So long as a default in any
preference dividends on the Preferred Stock shall exist, (A) any vacancy in the
office of a Preferred Director may be filled (except as provided in the
following clause (B)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (B) in the case of the
removal of any Preferred Director, the vacancy may be filled by the vote of the
holders of the outstanding shares of Preferred Stock, voting together as a
single class without regard to series, at the same meeting at which such removal
shall be voted. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred Director.
Whenever the term of office of the Preferred Directors shall end and a default
in preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes hereof, a "default in preference dividends" on the Preferred
Stock shall be deemed to have occurred whenever the amount of accrued dividends
upon any series of the Preferred Stock shall be equivalent to six full quarter-
yearly dividends or more, and, having so occurred, such default shall be deemed
to exist thereafter until, but only until, all accrued dividends on all shares
of Preferred Stock of each and every series then outstanding shall have been
paid to the end of the last preceding quarterly dividend period.
(f) Liquidation Rights.
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(1) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made on
the Common Stock or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $100 per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holders of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends, Series C (Without Par
Value), the Corporation's 5 3/4% Cumulative Convertible Preferred Stock, Series
B (Stated Value $5,000 per share), or if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the
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case may be, in proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as between the
holders of such stock and the holders of shares of this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the holders of shares of
this Series shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes.
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Annex B
- -------
THE PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS,
SERIES C
(Par Value $.01 per share)
OF
BANK ONE CORPORATION
(a) Designation.
The designation of the series of Preferred Stock created by this resolution
shall be "Preferred Stock with Cumulative and Adjustable Dividends, Series C"
(hereinafter called this "Series") and the number of shares constituting this
Series is 713,800. Shares of this Series shall have a stated value of $100 per
share. The number of authorized shares of this Series may be reduced by further
resolution duly adopted by the Board and by the filing of a certificate pursuant
to the provisions of the General Corporation Law of the State of Delaware
stating that such reduction has been so authorized, but the number of authorized
shares of this Series shall not be increased.
(b) Dividend Rate.
(1) Dividend rates on the shares of this Series shall be for each
quarterly dividend period (hereinafter referred to as a "Quarterly Dividend
Period"; and any Quarterly Dividend Period being hereinafter individually
referred to as a "Dividend Period" and collectively referred to as "Dividend
Periods"), which Quarterly Dividend Periods shall commence on, March 1, June 1,
September 1 and December 1 in each year and shall end on and include the day
next preceding the first day of the next Quarterly Dividend Period, at a rate
per annum of the stated value thereof 1.80% below the Applicable Rate (as
defined in paragraph (2) of this Section (b)) in respect of such Quarterly
Dividend Period. Anything to the contrary herein notwithstanding, the dividend
rate for any Quarterly Dividend Period shall in no event be less than 6.50% or
greater than 12.50% per annum. Such dividends shall be cumulative from September
1, 1998 and shall be payable, when and as declared by the Board, on the last day
of February, May, August and November of each year, commencing the last day of
November, 1998. Each such dividend shall be paid to the holders of record of
shares of this Series as they appear on the stock register of the Corporation on
such record date, not exceeding 30 days preceding the payment date thereof, as
shall be fixed by the Board. Dividends on account of arrears for any past
Dividend Periods may be declared and paid at any time, without reference to any
regular dividend payment date, to holders of record on such date, not exceeding
45 days preceding the payment date thereof, as may be fixed by the Board.
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<PAGE>
(2) Except as provided below in this paragraph, the "Applicable Rate" for
any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such Dividend Period. In the event that the
Corporation determines in good faith that for any reason one or more of such
rates cannot be determined for any Quarterly Dividend Period, then the
Applicable Rate for such Dividend Period shall be the higher of whichever of
such rates can be so determined. In the event that the Corporation determines
in good faith that none of such rates can be determined for any Quarterly
Dividend Period, then the Applicable Rate in effect for the preceding Dividend
Period shall be continued for such Dividend Period.
(3) Except as provided below in this paragraph, the "Treasury Bill Rate"
for each Quarterly Dividend Period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period as provided below) for three-month U.S. Treasury bills,
as published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day of
February, May, August or November, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum market discount rate during such Calendar Period, then the Treasury Bill
Rate for such Dividend Period shall be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period as provided below) for three-month U.S. Treasury bills,
as published weekly during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the Corporation. In the
event that a per annum market discount rate for three-month U.S. Treasury bills
shall not be published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar Period,
then the Treasury Bill Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only one such rate shall be
published during the relevant Calendar Period as provided below) for all of the
U.S. Treasury bills then having maturities of not less than 80 nor more than 100
days, as published during such Calendar Period by the Federal Reserve Board or,
if the Federal Reserve Board shall not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason no such U.S. Treasury Bill Rates are published as provided above
during such Calendar Period, then the Treasury Bill Rate for such Dividend
Period shall be the arithmetic average of the per annum market discount rates
based upon the closing bids during such Calendar Period for each of the issues
of marketable noninterest-bearing U.S. Treasury securities with a maturity of
not less than 80 nor more than 100 days from the date of each such quotation, as
quoted daily for each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Corporation by at least
three recognized U.S. Government securities dealers selected by the Corporation.
In the event that the Corporation determines in good faith that for any reason
the Corporation cannot determine the Treasury Bill Rate for any Quarterly
Dividend Period as provided above in this paragraph, the Treasury Bill Rate for
such Dividend Period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for each
of the issues of marketable interest-
26
<PAGE>
bearing U.S. Treasury securities with a maturity of not less than 80 nor more
than 100 days from the date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily quotations shall not
be generally available) to the Corporation by at least three recognized U.S.
Government securities dealers selected by the Corporation.
(4) Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or the
one weekly per annum Ten Year Average Yield, if only one such Yield shall be
published during the relevant Calendar Period as provided below), as published
weekly by the Federal Reserve Board during the Calendar Period immediately prior
to the ten calendar days immediately preceding the last day of February, May,
August or November, as the case may be, prior to the Quarterly Dividend Period
for which the dividend rate on this Series is being determined. In the event
that the Federal Reserve Board does not publish such a weekly per annum Ten Year
Average Yield during such Calendar Period, then the Ten Year Constant Maturity
Rate for such Dividend Period shall be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten
Year Average Yield, if only one such Yield shall be published during the
relevant Calendar Period as provided below), as published weekly during such
Calendar Period by any Federal Reserve Bank or by any U.S. Government department
or agency selected by the Corporation. In the event that a per annum Ten Year
Average Yield shall not be published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield to maturity, if only
one such yield shall be published during the relevant Calendar Period as
provided below) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) then having maturities
of not less than eight nor more than twelve years, as published during such
Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board
shall not publish such yields, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event that
the Corporation determines in good faith that for any reason the Corporation
cannot determine the Ten Year Constant Maturity Rate for any Quarterly Dividend
Period as provided above in this paragraph, then the Ten Year Constant Maturity
Rate for such Dividend Period shall be the arithmetic average of the per annum
average yields to maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) with a final maturity
date not less than eight nor more than twelve years from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
(5) Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day of
February, May,
27
<PAGE>
August or November, as the case may be, prior to the Quarterly Dividend Period
for which the dividend rate on this Series is being determined. In the event
that the Federal Reserve Board does not publish such a weekly per annum Twenty
Year Average Yield during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum Twenty Year Average Yields (or the one weekly
per annum Twenty Year Average Yield, if only one such Yield shall be published
during the relevant Calendar Period as provided below), as published weekly
during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event that a
per annum Twenty Year Average Yield shall not be published by any Federal
Reserve Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum average yields to maturity (or the one weekly
average yield to maturity, if only one such yield shall be published during the
relevant Calendar Period as provided below) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) then having maturities of not less than eighteen nor more than
twenty-two years, as published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board shall not publish such yields, by
any Federal Reserve Bank or by any U.S. Government department or agency selected
by the Corporation. In the event that the Corporation determines in good faith
that for any reason the Corporation cannot determine the Twenty Year Constant
Maturity Rate for any Quarterly Dividend Period as provided above in this
paragraph, then the Twenty Year Constant Maturity Rate for such Dividend Period
shall be the arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for each of the issues
of actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date not less than
eighteen nor more than twenty-two years from the date of each such quotation, as
quoted daily for each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Corporation by at least
three recognized U.S. Government securities dealers selected by the Corporation.
(6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
(7) The dividend rate with respect to each Quarterly Dividend Period will
be calculated as promptly as practicable by the Corporation according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new Quarterly Dividend Period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of shares of this Series.
(8) For purposes of this Section (b), the term
(i) "Calendar Period" shall mean 14 calendar days;
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<PAGE>
(ii) "Special Securities" shall mean securities which can, at the
option of the holder, be surrendered at face value in payment of any Federal
estate tax or which provide tax benefits to the holder and are priced to reflect
such tax benefits or which were originally issued at a deep or substantial
discount;
(iii) "Ten Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of ten years); and
(iv) "Twenty Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of 20 years).
(9) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to this Series for any period unless full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(10) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided in
paragraph (9) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of this Series shall have been
paid for all past dividend payment periods.
(11) Dividends payable on each share of this Series for each full
Quarterly Dividend Period shall be computed by dividing the dividend rate for
such Quarterly Dividend Period by four and applying such rate against the stated
value per share of this Series. Dividends payable on this Series for any period
less than a full Quarterly Dividend Period shall be computed on the basis of a
360 day year consisting of 30 day months.
(c) Redemption.
29
<PAGE>
(1) The Corporation, at its option, may redeem shares of this Series, as a
whole or in part, at any time or from time to time, at a redemption price of
$100 per share, plus, in each case, accrued and unpaid dividends thereon to the
date fixed for redemption.
(2) In the event that fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board and the shares to be redeemed shall be determined by lot or pro rata
as may be determined by the Board or by any other method as may be determined by
the Board in its sole discretion to be equitable.
(3) In the event the Corporation shall redeem shares of this Series,
notice of such redemption shall be given by first class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the redemption date, to
each holder of record of the shares to be redeemed, at such holder's address as
the same appears on the stock register of the Corporation. Each such notice
shall state: (i) the redemption date; (ii) the number of shares of this Series
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any shares
of this Series; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of this Series pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
this Series.
(d) Conversion or Exchange.
The holders of shares of this Series shall not have any rights herein to
convert such shares into or exchange such shares for shares of any other class
or classes or of any other series of any class or classes of capital stock of
the Corporation.
30
<PAGE>
(e) Voting.
The shares of this Series shall not have any voting powers either general
or special, except that
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66-
2/3% of all of the shares of this Series at the time outstanding, given in
person or by proxy, either in writing or by a vote at a meeting called for the
purpose at which the holders of shares of this Series shall vote together as a
separate class, shall be necessary for authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of the Restated
Certificate or of any certificate amendatory thereof or supplemental thereto
(including any Certificate of Designation, Preferences and Rights or any similar
document relating to any series of Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66-
2/3% of all of the shares of this Series and all other series of Preferred Stock
ranking on a parity with shares of this Series, either as to dividends or upon
liquidation, at the time outstanding, given in person or by proxy, either in
writing or by a vote at a meeting called for the purpose at which the holders of
shares of this Series and such other series of Preferred Stock shall vote
together as a single class without regard to series, shall be necessary for
authorizing, effecting or validating the creation, authorization or issue of any
shares of any class of stock of the Corporation ranking prior to the shares of
this Series as to dividends or upon liquidation, or the reclassification of any
authorized stock of the Corporation into any such prior shares, or the creation,
authorization or issue of any obligation or security convertible into or
evidencing the right to purchase any such prior shares;
(3) If at any time a default in preference dividends on the Preferred
Stock shall exist, the number of directors constituting the Board of Directors
of the Corporation shall be increased by two, and the holders of the Preferred
Stock of all series shall have the right at an annual or special meeting of
stockholders, voting together as a single class without regard to series, to the
exclusion of the holders of Common Stock, to elect two directors of the
Corporation to fill such newly created directorships. Such right shall continue
until there are no dividends in arrears upon the Preferred Stock. Each director
elected by the holders of shares of Preferred Stock (herein called a "Preferred
Director") shall continue to serve as such director until the next annual
meeting, notwithstanding that prior to such time a default in preference
dividends shall cease to exist. Each director elected by the holders of shares
of Preferred Stock (herein called a "Preferred Director") shall continue to
serve as such director until the next annual meeting, notwithstanding that prior
to such time a default in preference dividends shall cease to exist. Any
Preferred Director may be removed by, and shall not be removed except by, the
vote of the holders of record of the outstanding shares of Preferred Stock,
voting together as a single class without regard to series, at a meeting of the
stockholders, or of the holders of shares of Preferred Stock, called for that
purpose. So long as a default in any preference dividends on the Preferred Stock
shall exist, (A) any vacancy in the office of a Preferred Director may be filled
(except as provided in the following clause (B)) by an instrument in writing
signed by the remaining Preferred Director and filed with the Corporation and
(B) in the case of the removal of any Preferred Director, the vacancy may be
filled by the vote of the holders of the outstanding shares of Preferred Stock,
voting together as a single class without regard to series, at the same meeting
at which such
31
<PAGE>
removal shall be voted. Each director appointed as aforesaid by the remaining
Preferred Director shall be deemed, for all purposes hereof, to be a Preferred
Director. Whenever the term of office of the Preferred Directors shall end and a
default in preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes hereof, a "default in preference dividends" on the Preferred
Stock shall be deemed to have occurred whenever the amount of accrued dividends
upon any series of the Preferred Stock shall be equivalent to six full quarter-
yearly dividends or more, and, having so occurred, such default shall be deemed
to exist thereafter until, but only until, all accrued dividends on all shares
of Preferred Stock of each and every series then outstanding shall have been
paid to the end of the last preceding quarterly dividend period.
(f) Liquidation Rights.
(1) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made on
the Common Stock or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $100 per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
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<PAGE>
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holders of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends, Series B (Without Par
Value), or if the holders of such stock shall be entitled to the receipt of
dividends or of amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in proportion to their respective
dividend rates or liquidation prices, without preference or priority, one over
the other, as between the holders of such stock and the holders of shares of
this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the holders of shares of
this Series shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes.
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<PAGE>
EXHIBIT 3(B)
BY-LAWS
OF
BANK ONE CORPORATION
(A Delaware Corporation)
As Amended and Restated Effective as of October 2, 1998
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the Corporation is
- -----------------------------
located at 1209 Orange Street, Wilmington, Delaware 19801. The Corporation may,
by resolution of the Board of Directors, change the location to any other place
in Delaware.
Section 2. Other Offices. The Corporation may have such other offices, within
- -------------------------
or without the State of Delaware, as the Board of Directors may from time to
time establish.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meetings. The annual meeting of the stockholders for the
- ---------------------------
election of directors and for the transaction of any other business as may
properly come before the meeting shall be held on the third Tuesday in May of
each year or on such other date as from time to time may be designated by the
Board of Directors.
Section 2. Special Meetings. A special meeting of the stockholders may be
- ----------------------------
called at any time only by the Board of Directors pursuant to a resolution
approved by a majority of the Board of Directors.
Section 3. Place of Meetings. The Board of Directors may designate any place,
- -----------------------------
either within or without the State of Delaware, as the place of meeting for any
annual meeting or for any special meeting of stockholders.
Section 4. Notice of Meetings. Written notice stating the place, date and hour
- ------------------------------
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by or under the direction of the
Secretary, to each stockholder of record entitled to vote at such meeting.
Except as otherwise required by statute, the written notice shall be given not
less than ten nor more than sixty days before the date of the meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the
<PAGE>
meeting pursuant to the Corporation's notice of meeting. Attendance of a
person at a meeting of stockholders shall constitute a waiver of notice of such
meeting, except when the stockholder attends for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any previously
scheduled meeting of the stockholders may be postponed, and (unless the
Certificate of Incorporation otherwise provides) any special meeting of the
stockholders may be cancelled, by resolution of the Board of Directors upon
public notice given prior to the date previously scheduled for such meeting of
stockholders.
Section 5. Quorum. Except as otherwise required by statute, the presence at
- ------------------
any meeting, in person or by proxy, of a majority of the shares then issued and
outstanding and entitled to vote shall be necessary and sufficient to constitute
a quorum for the transaction of business. The Chairman of the meeting or a
majority of the shares so represented may adjourn the meeting from time to time,
whether or not there is such a quorum. The stockholders present at a duly
called meeting at which a quorum is present may continue to transact business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum.
Section 6. Voting Lists. The officer who has charge of the stock ledger of the
- ------------------------
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders of record entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder of record
who is present.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time or
- ------------------------------
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 8. Proxies. Each stockholder of record entitled to vote at a meeting
- -------------------
of stockholders may authorize another person or persons (but no more than two)
to act for him by proxy, but no such proxy shall be voted or acted upon other
than at the meeting specified in the proxy or any adjournment of such meeting.
Section 9. Voting Rights. Except as otherwise provided by statute or by the
- -------------------------
Certificate of Incorporation, and subject to the provisions of Article VI of
these By-Laws, each stockholder of record shall at every meeting of the
stockholders be entitled to one vote for each share of the capital stock having
voting power held by such stockholder.
-2-
<PAGE>
Section 10. Notice of Stockholder Business and Nominations.
- -----------------------------------------------------------
A. Annual Meetings of Stockholders.
-----------------------------------
(1) Nominations of persons for election to the Board of Directors of
the Corporation may be made at an annual meeting of stockholders
pursuant to the procedures set forth in the Certificate of
Incorporation. Proposals of other business to be considered by
the stockholders may be made at an annual meeting of
stockholders (a) pursuant to the Corporation's notice of
meeting, (b) by or at the direction of the Board of Directors or
(c) by any stockholder of the Corporation who was a stockholder
of record at the time of giving of notice provided for in this
By-Law, who is entitled to vote at the meeting and who complies
with the notice procedures set forth in this By-Law.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of
paragraph (A)(1) of this By-Law, the stockholder must have given
timely notice thereof in writing to the Secretary of the
Corporation and such business must otherwise be a proper matter
for stockholder action. To be timely, a stockholder's notice
shall be delivered to or mailed, postage prepaid, and received
by the Secretary at the principal executive offices of the
Corporation at least 60 days but no more than 90 days prior to
the anniversary date of the immediately preceding annual meeting
of stockholders; provided, however, that in the event that the
date of the annual meeting is more than 30 days before or more
than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than
the close of business on the 90th day prior to such annual
meeting and not later than the close of business on the later of
the 60th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of
such meeting is first made by the Corporation. In no event
shall the public announcement of an adjournment of an annual
meeting commence a new time period for the giving of a
stockholder's notice as described above. Such stockholder's
notice shall set forth (a) as to director nominations, that
information which is required by the Certificate of
Incorporation; (b) as to any business, other than the nomination
of director candidates, that the stockholder proposes to bring
before the meeting, a brief description of the business desired
to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any,
on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made (i) the name
and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii)
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the class and number of shares of the Corporation which are
owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this By-Law to the contrary, in the event that the
number of directors to be elected to the Board of Directors of
the Corporation is increased and there is no public announcement
by the Corporation naming all of the nominees for director or
specifying the size of the increased Board of Directors at least
70 days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice required by this By-Law
shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it
shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business
on the 10th day following the day on which such public
announcement is first made by the Corporation.
B. Special Meetings of Stockholders.
------------------------------------
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant
to the Corporation's notice of meeting. Nominations of persons for
election to the Board of Directors of the Corporation may be made at
a special meeting of stockholders (a) by the Board of Directors, on
behalf of the Board of Directors by any nominating committee
appointed by the Board of Directors, or (b) provided that the Board
of Directors has determined that directors shall be elected at such
meeting, by any stockholder of the Corporation entitled to vote for
the election of directors at the meeting. In the event the
Corporation calls a special meeting of stockholders for the purpose
of electing one or more directors to the Board of Directors, any
such stockholder may nominate a person or persons (as the case may
be), for election to such position(s) as specified in the
Corporation's notice of meeting, if the stockholder's notice
required by paragraph (A)(2) of this By-Law shall be delivered to
the Secretary at the principal executive offices of the Corporation
not earlier than the 90th day prior to such special meeting and not
later than the close of business on the later of the 60th day prior
to such special meeting or the 10th day following the day on which
public announcement is first made of the date of the special meeting
and of the nominees proposed by the Board of Directors to be elected
at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the
giving of a stockholder's notice as described above.
C. General.
-----------
(1) Only such persons who are nominated in accordance with the
procedures set forth in the Certificate of Incorporation and
this By-Law shall be eligible to serve as directors and only
such business shall be conducted at a
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<PAGE>
meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in this By-
Law. Whenever the language of a proposed resolution is included
in a written notice of a meeting of stockholders the resolution
may be adopted at such meeting with only such clarifying or
other amendments as do not enlarge its original purpose without
further notice to stockholders not present in person or by
proxy. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the Chairman of the meeting
shall have the power and duty to determine whether any business
proposed to be brought before the meeting was made or proposed,
as the case may be, in accordance with the procedures set forth
in this By-Law and, if any proposed nomination or business is
not in compliance with the Certificate of Incorporation or this
By-Law, to declare that such defective proposal or nomination
shall be disregarded.
(2) For purposes of this By-Law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or
15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-Law, a
stockholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder
with respect to the matters set forth in this By-Law. Nothing
in this By-Law shall be deemed to affect any rights (i) of
stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act or (ii) of the holders of any series of Preferred
Stock to elect directors under specified circumstances.
Section 11. Required Vote. Except as otherwise required by statute or by the
- --------------------------
Certificate of Incorporation, in all matters other than the election of
directors, the affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall decide any question brought before a meeting of the stockholders at which
a quorum is present.
Section 12. Elections of Directors. Elections of directors shall be by ballot,
- -----------------------------------
and, subject to the rights of the holders of any series of Preferred Stock to
elect directors under specified circumstances, a plurality of the votes cast
thereat shall elect directors.
Section 13. Inspectors of Elections; Opening and Closing the Polls. The Board
- -------------------------------------------------------------------
of Directors by resolution shall appoint one or more inspectors, which inspector
or inspectors may include individuals who serve the Corporation in other
capacities, including, without limitation, as officers, employees, agents or
representatives, to act at the meetings of stockholders and make a written
report thereof. One or more persons may be designated as alternate inspectors
to replace any inspector who fails to act. If no inspector or alternate has
been appointed to act or is able to act at
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<PAGE>
a meeting of stockholders, the Chairman of the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before discharging his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by law. The Chairman of
the meeting shall fix and announce at the meeting the date and time of the
opening and the closing of the polls for each matter upon which the stockholders
will vote at a meeting.
ARTICLE III
Board of Directors
Section 1. General Powers. The business of the Corporation shall be managed by
- --------------------------
the Board of Directors, except as otherwise provided by statute or by the
Certificate of Incorporation.
Section 2. Number. The number of the Directors of the Corporation shall be
- ------------------
fixed from time to time by resolution adopted by the affirmative vote of a
majority of the entire Board of Directors of the Corporation, except that the
minimum number of directors shall be fixed at no less than eleven (11) and the
maximum number of directors shall be fixed at no more than thirty (30). At each
annual meeting of stockholders, successors of the directors shall be elected for
a term expiring at the annual meeting next following such annual meeting.
Section 3. Election and Term of Office. Except as otherwise provided in these
- ---------------------------------------
By-laws, directors shall be elected at the annual meeting of stockholders.
Newly created directorships resulting from any increase in the number of
directors and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum, or by a sole remaining director. A director,
including any director chosen to fill a newly created directorship or any
vacancy, shall hold office until the next annual meeting following his election
or appointment to the Board of Directors, as applicable, and until such
director's successor shall have been elected and qualified. In no case will a
decrease in the number of directors shorten the term of any incumbent director.
Section 4. First Meetings. The first meeting of each newly elected Board of
- --------------------------
Directors shall be held without notice immediately after the annual meeting of
the stockholders for the purpose of the organization of the Board, the election
of officers, and the transaction of such other business as may properly come
before the meeting.
Section 5. Regular Meetings. Regular meetings of the Board of Directors may be
- ----------------------------
held without notice at such times and at such places, within or without the
State of Delaware, as shall from time to time be determined by the Board.
Section 6. Special Meetings. Special meetings of the Board of Directors may be
- ----------------------------
called by the Chairman of the Board or the President. Such meetings shall be
held at such times and at such places, within or without the State of Delaware,
as shall be determined by the officer calling the meeting. Notice of any
special meeting of directors shall be given to each director at his business or
residence in writing by hand delivery, first-class or overnight mail or courier
service, telegram
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<PAGE>
or facsimile transmission, or orally by telephone. If mailed by first-class
mail, such notice shall be deemed adequately delivered when deposited in the
United States mails so addressed, with postage thereon prepaid, at least two (2)
days before such meeting. If by telegram, overnight mail or courier service,
such notice shall be deemed adequately delivered when the telegram is delivered
to the telegraph company or the notice is delivered to the overnight mail or
courier service company at least twenty-four (24) hours before such meeting. If
by facsimile transmission, such notice shall be deemed adequately delivered when
the notice is transmitted at least twelve (12) hours before such meeting. Such
notice need not state the purposes of the meeting. Any or all directors may
waive notice of any meeting, either before or after the meeting. Attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except when the director attends for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Section 7. Quorum, Required Vote, and Adjournment. The presence, at any
- --------------------------------------------------
meeting, of a majority of the whole Board shall be necessary and sufficient to
constitute a quorum for the transaction of business. Except as otherwise
required by statute or by the Certificate of Incorporation, the vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum, a
majority of the directors present at the time and place of any meeting may
adjourn such meeting from time to time until a quorum is present.
Section 8. Consent of Directors in Lieu of Meeting. Any action required or
- ---------------------------------------------------
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all the members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
Section 9. Participation in Meetings by Telephone. A member of the Board or
- --------------------------------------------------
any committee thereof may participate in a meeting of such Board or committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this section shall constitute presence in
person at such meeting.
Section 10. Compensation. The Board of Directors may authorize the payment to
- -------------------------
directors of a fixed fee and expenses for attendance at meetings of the Board or
any committee thereof, and annual fees for service as directors. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
ARTICLE IV
Board Committees
Section 1. Designation and Membership. The Board of Directors may designate
- --------------------------------------
one or more regular and special committees, consisting of directors, officers or
other persons, which shall have and may exercise such powers and functions as
the Board may prescribe in the management of the business and affairs of the
Corporation; provided, however, that no committee shall have power
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<PAGE>
or authority in reference to the following matters: (a) approving or adopting,
or recommending to the stockholders, any action or matter expressly required by
the Delaware General Corporation Law to be submitted to stockholders for
approval or (b) adopting, amending or repealing any By-Law of the Corporation.
Such committees shall keep regular minutes of their proceedings and report the
same to the Board of Directors when required. The Board of Directors may from
time to time suspend, alter, continue or terminate any such committee or the
powers and functions thereof. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitutes a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such absent
or disqualified member.
Section 2. Executive Committee. There shall be an Executive Committee, which,
- -------------------------------
during intervals between regular meetings of the Board of Directors and to the
extent permitted by law, the Certificate of Incorporation and these By-Laws,
shall have and may exercise all the powers of the Board of Directors in the
management of the business and affairs of the Corporation.
ARTICLE V
Officers
Section 1. Number, Election, Term of Office and Qualification. The number,
- --------------------------------------------------------------
titles and duties of the officers shall be determined by the Board of Directors
from time to time, subject to the provisions of applicable law, the Certificate
of Incorporation, and these By-Laws. Each officer shall be elected in the
manner prescribed by the Board of Directors and shall hold office until such
officer's successor is elected and qualified or until such officer's death,
resignation or removal. The election of officers shall be held annually at the
first meeting of the Board of Directors held after each annual meeting of
stockholders, subject to the power of the Board of Directors to designate any
office at any time and elect any person thereto. The officers shall include a
Chairman of the Board and a President, and may include one or more Vice Chairmen
of the Board, one or more Vice Presidents, a Secretary, a Treasurer, and such
other officers as the Board of Directors may determine. The same person may
hold any two or more offices, and in any such case, these By-Laws shall be
construed and understood accordingly; provided that the same person may not hold
the offices of Chairman of the Board and Secretary or President and Secretary.
No officer other than the Chairman of the Board, President or Vice Chairman of
the Board need be a director of the Corporation.
Section 2. Removal. Any officer or agent may be removed at any time, with or
- -------------------
without cause, by the Board of Directors.
Section 3. Vacancies. Any vacancy occurring in any office of the Corporation
- ---------------------
may be filled for the unexpired term in the manner prescribed by these By-Laws
for the regular election to such office.
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<PAGE>
Section 4. Chief Executive Officer. The Board of Directors shall designate one
- -----------------------------------
of the officers to be the Chief Executive Officer. Subject to the direction and
under the supervision of the Board of Directors, the Chief Executive Officer
shall have general charge of the business, affairs and property of the
Corporation, and control over its officers, agents and employees.
Section 5. The Secretary. The Secretary shall keep the minutes of the
- -------------------------
proceedings of the stockholders and of the Board of Directors in one or more
books to be kept for that purpose. The Secretary shall have custody of the seal
of the Corporation, and the Secretary, and any Assistant Secretary, shall have
authority to cause such seal to be affixed to any instrument requiring it and
when so affixed, it may be attested by the signature of the Secretary or
Assistant Secretary. The Secretary shall, in general, perform all duties and
have all powers incident to the office of Secretary and shall perform such other
duties and have such other powers as may from time to time be assigned to the
Secretary by these By-Laws, by the Board of Directors or by the Chief Executive
Officer.
Section 6. Treasurer. The Treasurer shall have custody of the corporate funds
- ---------------------
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation. The Treasurer shall cause
all moneys and other valuable effects to be deposited in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. The Treasurer shall cause the funds of the Corporation to be
disbursed when such disbursements have been duly authorized, taking proper
vouchers for such disbursements, and shall render to the Chief Executive Officer
and the Board of Directors, whenever requested, an account of all transactions
conducted by the Treasurer for the Corporation and of the financial condition of
the Corporation. The Treasurer shall, in general, perform all duties and have
all powers incident to the office of Treasurer and shall perform such other
duties and have such other powers as may from time to time be assigned to the
Treasurer by these By-Laws, by the Board of Directors or by the Chief Executive
Officer.
ARTICLE VI
Fixing Record Date
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty days nor less than ten days before the date of such meeting, nor
more than sixty days prior to any other action. If no record date is fixed, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is held
and the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
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<PAGE>
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VII
Execution of Documents and Instruments
Section 1. Execution of Documents and Instruments Generally. Any officer of
- ------------------------------------------------------------
the Corporation and such other persons as may be authorized by the Chairman of
the Board, the President, or any Vice Chairman of the Board from time to time
are severally and respectively authorized to execute documents and to take
actions in the Corporation's name in connection with transactions conducted in
the ordinary course of the Corporation's business. With respect to all other
transactions, all documents, instruments or writings of any nature shall be
signed, executed, verified, acknowledged and delivered by such officer or
officers or such agent or agents of the Corporation and in such manner as the
Board of Directors from time to time may determine.
Section 2. Checks, Drafts, Etc. All notes, drafts, acceptances, checks,
- -------------------------------
endorsements, and all evidence of indebtedness of the Corporation whatsoever,
shall be signed by such officer or officers or such agent or agents of the
Corporation and in such manner as the Board of Directors from time to time may
determine. Endorsements for deposit to the credit of the Corporation in any of
its duly authorized depositories shall be made in such manner as the Board of
Directors from time to time may determine.
Section 3. Proxies and Consents. Proxies to vote and written consent with
- --------------------------------
respect to shares of stock of other corporations owned by or standing in the
name of the Corporation may be executed and delivered from time to time on
behalf of the Corporation by the Chairman, the President, any Vice Chairman, any
Vice President, the Secretary or the Treasurer of the Corporation, or by any
other person or persons duly authorized by the Board of Directors.
ARTICLE VIII
Capital Stock
Section 1. Stock Certificates. The interest of every holder of stock in the
- ------------------------------
Corporation shall be evidenced by a certificate or certificates signed by, or in
the name of the Corporation by the Chairman, President, Vice Chairman or a Vice
President, and by the Secretary or an Assistant Secretary of the Corporation
certifying the number of shares owned by him in the Corporation and in such form
not inconsistent with the Certificate of Incorporation or applicable law as the
Board of Directors may from time to time prescribe. If such certificate is
countersigned (1) by a transfer agent, whether or not a subsidiary of the
Corporation, other than the Corporation or its employee, or (2) by a registrar,
whether or not a subsidiary of the Corporation, other than the Corporation or
its employee, the signatures of the officers of the Corporation may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer at the date of issue.
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<PAGE>
Section 2. Transfer of Stock. Shares of stock of the Corporation shall be
- -----------------------------
transferred on the books of the Corporation only by the holder of record thereof
or by his attorney duly authorized in writing, upon surrender to the Corporation
of the certificates for such shares endorsed by the appropriate person or
persons, with such evidence of the authenticity of such endorsement, transfer,
authorization and other matters as the Corporation may reasonably require, and
accompanied by all necessary stock transfer tax stamps. In that event it shall
be the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction on its books.
Section 3. Rights of Corporation with Respect to Registered Owners. Prior to
- -------------------------------------------------------------------
the surrender to the Corporation of the certificates for shares of stock with a
request to record the transfer of such shares, the Corporation may treat the
registered owner as the person entitled to receive dividends, to vote, to
receive notifications, and otherwise to exercise all the rights and powers of an
owner.
Section 4. Transfer Agents and Registrars. The Board of Directors may make
- ------------------------------------------
such rules and regulations as it may deem expedient concerning the issuance and
transfer of certificates for shares of the stock of the Corporation and may
appoint transfer agents or registrars or both, and may require all certificates
of stock to bear the signature of either or both. Nothing herein shall be
construed to prohibit the Corporation or any subsidiary of it from acting as its
own transfer agent or registrar at any of its offices.
Section 5. Lost, Destroyed and Stolen Certificates. Where the owner of a
- ---------------------------------------------------
certificate for shares claims that such certificate has been lost, destroyed or
wrongfully taken, the Corporation shall issue a new certificate in place of the
original certificate if the owner satisfies such reasonable requirements,
including evidence of such loss, destruction, or wrongful taking, as may be
imposed by the Corporation, including but without limitation, the delivery to
the Corporation of an indemnity bond satisfactory to it.
ARTICLE IX
Indemnification
Section 1. Contract Right. The right to indemnification conferred in the
- --------------------------
Certificate of Incorporation and this By-Law shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition, such advances
to be paid by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the claimant requesting such
advance or advances from time to time; provided, however, that the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this By-Law or otherwise.
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<PAGE>
Section 2. Submission of Claim. To obtain indemnification under this By-Law, a
- -------------------------------
claimant shall submit to the Corporation a written request, including therein or
therewith such documentation and information as is reasonably available to the
claimant and is reasonably necessary to determine whether and to what extent the
claimant is entitled to indemnification. In the event the determination of
entitlement to indemnification is to be made by Independent Counsel (as
hereinafter defined) as set forth in the Certificate of Incorporation, the
Independent Counsel shall be selected by the Board of Directors unless there
shall have occurred within two years prior to the date of the commencement of
the action, suit or proceeding for which indemnification is claimed a "Change of
Control" as defined in the Corporation's Stock Performance Plan, in which case
the Independent Counsel shall be selected by the claimant unless the claimant
shall request that such selection be made by the Board of Directors. If it is
so determined that the claimant is entitled to indemnification, payment to the
claimant shall be made within 10 days after such determination.
Section 3. Unpaid Claim. If a claim under Section 1 of this By-Law is not paid
- ------------------------
in full by the Corporation within thirty days after a written claim pursuant to
Section 2 of this By-Law has been received by the Corporation, the claimant may
at any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed. It shall also be a defense if indemnification is not permissible under
applicable banking statutes or regulations. The burden of proving any such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, Independent Counsel or stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the General Corporation
Law of the State of Delaware, nor an actual determination by the Corporation
(including its Board of Directors, Independent Counsel or stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 4. Binding Determination. If a determination shall have been made
- ---------------------------------
pursuant to Section 2 of this By-Law that the claimant is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding commenced pursuant to Section 3 of this By-Law.
Section 5. Binding Effect on Corporation. The Corporation shall be precluded
- -----------------------------------------
from asserting in any judicial proceeding commenced pursuant to Section 3 of
this By-Law that the procedures and presumptions of this By-Law are not valid,
binding and enforceable and shall stipulate in such proceeding that the
Corporation is bound by all the provisions of this By-Law.
Section 6. Non-exclusivity. The right to indemnification and the payment of
- ---------------------------
expenses incurred in defending a proceeding in advance of its final disposition
conferred in this By-Law shall not be exclusive of any other right which any
person may have or hereafter acquire under any
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<PAGE>
statute, provision of the Certificate of Incorporation, By-Laws, agreement, vote
of stockholders or Disinterested Directors or otherwise. No repeal or
modification of this By-Law shall in any way diminish or adversely affect the
rights of any director, officer, employee or agent of the Corporation hereunder
in respect of any occurrence or matter arising prior to any such repeal or
modification.
Section 7. Employees and Agents. The Corporation may, to the extent authorized
- --------------------------------
from time to time by the Board of Directors, grant rights to indemnification,
and rights to be paid by the Corporation the expenses incurred in defending any
proceeding in advance of its final disposition, to any employee or agent of the
Corporation to the fullest extent of the provisions of this By-Law with respect
to the indemnification and advancement of expenses of directors and officers of
the Corporation.
Section 8. Validity. If any provision or provisions of this By-Law shall be
- --------------------
held to be invalid, illegal or unenforceable for any reason whatsoever: (1) the
validity, legality and enforceability of the remaining provisions of this By-Law
(including, without limitation, each portion of any Section of this By-Law
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself held to be invalid, illegal or unenforceable) shall not in any way
be affected or impaired thereby; and (2) to the fullest extent possible, the
provisions of this By-Law (including, without limitation, each such portion of
any Section of this By-Law containing any such provision held to be invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
Section 9. Definitions. For purposes of this By-Law:
- -----------------------
A. "Disinterested Director" means a director of the Corporation who is
not and was not a party to the matter in respect of which
indemnification is sought by the claimant.
B. "Independent Counsel" means a law firm, a member of a law firm, or
an independent practitioner, that is experienced in matters of
corporation law and shall include any person who, under the
applicable standards of professional conduct then prevailing, would
not have a conflict of interest in representing either the
Corporation or the claimant in an action to determine the claimant's
rights under this By-Law.
Section 10. Notice. Any notice, request or other communication required or
- ------------------
permitted to be given to the Corporation under this By-Law shall be in writing
and either delivered in person or sent by telecopy, telex, telegram, overnight
mail or courier service, or certified or registered mail, postage prepaid,
return receipt requested, to the Secretary of the Corporation and shall be
effective only upon receipt by the Secretary.
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<PAGE>
ARTICLE X
Seal
The corporate seal, subject to alteration by the Board of Directors, shall be in
the form of a circle and shall bear the name of the Corporation and the year of
its incorporation and shall indicate its formation under the laws of the State
of Delaware. Such seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
ARTICLE XI
Fiscal Year
The fiscal year of the Corporation shall be the calendar year except as
otherwise provided by the Board of Directors.
ARTICLE XII
Amendments
The By-Laws of the Corporation may be amended or repealed, or new By-Laws not
inconsistent with law or any provision of the Certificate of Incorporation, as
amended, may be made and adopted by a majority vote of the whole Board of
Directors at any regular or special meeting of the Board.
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<PAGE>
EXHIBIT 10(A)
AGREEMENT AND PLAN OF REORGANIZATION
by and among
BANC ONE CORPORATION,
FIRST CHICAGO NBD CORPORATION
and
HORNET REORGANIZATION CORPORATION
Dated as of April 10, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
AGREEMENT AND PLAN OF REORGANIZATION
ARTICLE I
THE FIRST STEP MERGER
Page
----
1.1 The First Step Merger.............................. 2
1.2 Effective Time..................................... 2
1.3 Effects of the Second Step Merger.................. 2
1.4 Conversion of BANC ONE Common Stock................ 2
1.5 Newco Common Stock................................. 3
1.6 Dissenting Shares.................................. 3
1.7 Options............................................ 4
1.8 Certificate of Incorporation....................... 4
1.9 By-Laws............................................ 4
1.10 Board of Directors; Management..................... 4
ARTICLE II
THE SECOND STEP MERGER
2.1 The Second Step Merger............................. 5
2.2 Effective Time..................................... 5
2.3 Effects of the Second Step Merger.................. 5
2.4 Conversion of FCN Common Stock;
FCN Preferred Stock............................ 5
2.5 Newco Common Stock................................. 7
2.6 Options............................................ 7
2.7 Certificate of Incorporation....................... 8
2.8 By-Laws............................................ 8
2.9 Tax and Accounting Consequences.................... 8
2.10 Management Succession.............................. 8
2.11 Board of Directors................................. 8
2.12 Headquarters of Surviving Corporation.............. 8
ARTICLE III
EXCHANGE OF SHARES
3.1 Newco to Make Shares Available.................... 9
3.2 Exchange of Shares................................ 9
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<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FCN
4.1 Corporate Organization.............................. 11
4.2 Capitalization...................................... 12
4.3 Authority; No Violation............................. 14
4.4 Consents and Approvals.............................. 15
4.5 Reports............................................. 15
4.6 Financial Statements................................ 16
4.7 Broker's Fees....................................... 17
4.8 Absence of Certain Changes or Events................ 17
4.9 Legal Proceedings................................... 17
4.10 Taxes and Tax Returns............................... 18
4.11 Employees........................................... 19
4.12 SEC Reports......................................... 21
4.13 Compliance with Applicable Law...................... 21
4.14 Certain Contracts................................... 22
4.15 Agreements with Regulatory Agencies................. 22
4.16 Other Activities of FCN and its
Subsidiaries.................................... 23
4.17 Investment Securities............................... 24
4.18 Interest Rate Risk Management Instruments........... 24
4.19 Undisclosed Liabilities............................. 24
4.20 Insurance........................................... 24
4.21 Environmental Liability............................. 25
4.22 State Takeover Laws; FCN Certificate
of Incorporation................................ 25
4.23 Year 2000........................................... 25
4.24 Reorganization; Pooling of Interests................ 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BANC ONE AND NEWCO
5.1 Corporate Organization.............................. 26
5.2 Capitalization...................................... 27
5.3 Authority; No Violation............................. 29
5.4 Consents and Approvals.............................. 30
5.5 Reports............................................. 30
5.6 Financial Statements................................ 31
5.7 Broker's Fees....................................... 32
5.8 Absence of Certain Changes or Events................ 32
5.9 Legal Proceedings................................... 32
5.10 Taxes and Tax Returns............................... 33
5.11 Employees........................................... 34
5.12 SEC Reports......................................... 36
5.13 Compliance with Applicable Law...................... 36
5.14 Certain Contracts................................... 36
5.15 Agreements with Regulatory Agencies................. 37
5.16 Other Activities of BANC ONE and its
Subsidiaries.................................... 38
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<PAGE>
5.17 Investment Securities............................... 38
5.18 Interest Rate Risk Management Instruments........... 39
5.19 Undisclosed Liabilities............................. 39
5.20 Insurance........................................... 39
5.21 Environmental Liability............................. 39
5.22 State Takeover Laws................................. 40
5.23 Interim Operations of Newco......................... 40
5.24 Year 2000........................................... 40
5.25 Reorganization; Pooling of Interests................ 40
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Businesses Prior to the
Effective Time................................... 41
6.2 Forbearances........................................ 41
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters.................................. 44
7.2 Access to Information............................... 45
7.3 Stockholders' Approvals............................. 46
7.4 Legal Conditions to Merger.......................... 46
7.5 Affiliates; Publication of Combined
Financial Results.............................. 47
7.6 Stock Exchange Listing.............................. 47
7.7 Employee Benefit Plans; Certain Insurance........... 47
7.8 Indemnification; Directors' and Officers'
Insurance...................................... 48
7.9 Additional Agreements............................... 50
7.10 Advice of Changes................................... 51
7.11 Dividends........................................... 51
7.12 Authorized Stock of Newco........................... 51
7.13 Pooling of Interests................................ 51
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation
To Effect the Second Step Merger.............. 51
8.2 Conditions to Obligations of BANC ONE
and Newco..................................... 53
8.3 Conditions to Obligations of FCN.................... 54
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<PAGE>
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination........................................ 55
9.2 Effect of Termination.............................. 56
9.3 Amendment.......................................... 56
9.4 Extension; Waiver.................................. 56
ARTICLE X
GENERAL PROVISIONS
10.1 Closing............................................ 57
10.2 Nonsurvival of Representations, Warranties
and Agreements..................................... 57
10.3 Expenses........................................... 57
10.4 Notices............................................ 57
10.5 Interpretation..................................... 58
10.6 Counterparts....................................... 58
10.7 Entire Agreement................................... 58
10.8 Governing Law...................................... 58
10.9 Severability....................................... 58
10.10 Publicity.......................................... 59
10.11 Assignment; Third Party Beneficiaries.............. 59
10.12 Certain Agreements of Newco........................ 59
Exhibit A - Form of Certificate of Incorporation
of Surviving Corporation
Exhibit B - Form of Bylaws of Surviving Corporation
Exhibit C - BANC ONE Option Agreement
Exhibit D - FCN Option Agreement
Exhibit 6.5(a)(1) - Form of Affiliate Letter Addressed
to BANC ONE
Exhibit 6.5(a)(2) - Form of Affiliate Letter Addressed
to FCN
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<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Section Page No.
------- -------
<S> <C> <C>
Agreement............................ Preamble.............. 1
BANC ONE............................. Preamble.............. 1
BANC ONE 10-K........................ 5.6................... 31
BANC ONE Articles.................... 5.1(a)................ 26
BANC ONE Bank Subsidiary............. 5.16(b)............... 38
BANC ONE Benefit Plans............... 5.11(a)............... 34
BANC ONE Capital Stock............... 5.2(a)................ 27
BANC ONE Class A Preferred Stock..... 5.2(a)................ 27
BANC ONE Class B Preferred Stock..... 5.2(a)................ 27
BANC ONE Common Certificate.......... 1.4(b)................ 2
BANC ONE Common Stock................ 1.4(a)................ 2
BANC ONE Contract.................... 5.14(a)............... 36
BANC ONE Disclosure Schedule......... Article V............. 26
BANC ONE ERISA Affiliate............. 5.11(a)............... 34
BANC ONE Option Agreement............ Recitals.............. 1
BANC ONE Preferred Stock............. 5.2(a)................ 27
BANC ONE Regulatory Agreement........ 5.15.................. 37
BANC ONE Reports..................... 5.12.................. 36
BANC ONE Rights...................... 5.2(a)................ 27
BANC ONE Series C Preferred.......... 5.2(a)................ 27
BANC ONE Stock Plans................. 1.7................... 4
BHC Act.............................. 4.1(a)................ 11
CERCLA............................... 4.21.................. 25
Certificate.......................... 2.4(f)................ 7
Certificate of Merger................ 2.2................... 5
Claim................................ 7.8(a)................ 48
Closing.............................. 10.1.................. 57
Closing Date......................... 10.1.................. 57
Code................................. 1.7................... 4
Common Certificate................... 2.4(d)................ 6
Confidentiality Agreement............ 7.2(b)................ 46
Delaware Secretary................... 1.2................... 2
DGCL................................. 1.1................... 2
Dissenting Shares.................... 1.6................... 3
DPC Shares........................... 1.4(c)................ 3
Effective Time....................... 2.2................... 5
ERISA................................ 4.11(a)............... 19
ESPSP................................ 4.2(a)................ 12
Exchange Act......................... 4.6................... 16
Exchange Agent....................... 3.1................... 9
Exchange Fund........................ 3.1................... 9
Exchange Ratio....................... 2.4(a)................ 5
FCN.................................. Preamble.............. 1
FCN Bank Subsidiary.................. 4.16(b)............... 23
FCN Benefit Plans.................... 4.11(a)............... 19
FCN Capital Stock.................... 2.4(a)................ 5
FCN Certificate of
Incorporation...................... 4.1(a)................ 11
FCN Common Stock..................... 2.4(a)................ 5
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
FCN Contract......................... 4.14(a)............... 22
FCN Disclosure Schedule.............. Article IV............ 11
FCN ERISA Affiliate.................. 4.11(a)............... 19
FCN Option Agreement................. Recitals.............. 1
FCN Preferred Stock.................. 2.4(c)................ 6
FCN Regulatory Agreement............. 4.15.................. 22
FCN Reports.......................... 4.12.................. 21
FCN Rights........................... 4.2(a)................ 12
FCN Series B Preferred............... 2.4(b)................ 5
FCN Series C Preferred............... 2.4(c)................ 6
FCN Stock Plans...................... 2.6(a)................ 7
Federal Reserve Board................ 4.4(i)................ 15
First Commerce Merger Agreement...... 5.2(a)................ 27
First Effective Time................. 1.2................... 2
First Merger Exchange Ratio.......... 1.4(a)................ 2
First Step Merger.................... Recitals.............. 1
GAAP................................. 2.9................... 8
Governmental Entity.................. 4.4(viii)............. 16
Indemnified Parties.................. 7.8(a)................ 48
Insurance Amount..................... 7.8(b)................ 50
Injunction........................... 8.1(e)................ 52
IRS.................................. 4.10(a)............... 18
Joint Proxy Statement................ 4.4(iii).............. 15
Liens................................ 4.2(b)................ 14
Material Adverse Effect.............. 4.1(a)................ 12
Merger............................... Recitals.............. 1
New Benefit Plans.................... 7.7(a)................ 48
Newco................................ Preamble.............. 1
Newco Capital Stock.................. 2.4(a)................ 5
Newco Certificate of Incorporation... 5.1(a)................ 26
Newco Common Stock................... 1.4(a)................ 2
Newco New Preferred Stock............ 2.4(c)................ 6
Newco Series B Adjustable Preferred.. 2.4(b)................ 5
Newco Series C Adjustable Preferred.. 2.4(c)................ 6
NYSE................................. 3.2(e)................ 10
OCC.................................. 4.5(iv)............... 16
OGCL................................. 1.1................... 2
Ohio Secretary....................... 1.2................... 2
Option Agreements.................... Recitals.............. 1
Preferred Stock Certificate.......... 2.4(f)................ 7
Regulations.......................... 5.1(a)................ 26
Regulatory Agencies.................. 4.5(v)................ 16
Requisite Regulatory Approvals....... 8.1(c)................ 52
Roney Agreement...................... 4.2(a)................ 13
S-4.................................. 4.4(iii).............. 15
SBA.................................. 4.4(v)................ 15
SEC.................................. 4.4(iii).............. 15
Second Step Merger................... Recitals.............. 1
Securities Act....................... 4.12.................. 21
SRO.................................. 4.4(vi)............... 15
State Approvals...................... 4.4(ii)............... 15
State Regulator...................... 4.5(iii).............. 15
Subsidiary........................... 4.1(a)................ 12
Surviving Corporation................ Recitals.............. 1
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Tax.................................. 4.10(b)............... 19
Taxes................................ 4.10(b)............... 19
Trust Account Shares................. 1.4(c)................ 3
Trust Activities..................... 4.16(b)............... 23
Year 2000 Issues..................... 4.23.................. 25
Year 2000 Deficiency Notification
Letter............................. 4.23.................. 25
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 10, 1998 (this
"Agreement"), by and among BANC ONE CORPORATION, an Ohio corporation ("BANC
ONE"), HORNET REORGANIZATION CORPORATION, a Delaware corporation ("Newco"), and
FIRST CHICAGO NBD CORPORATION, a Delaware corporation ("FCN").
WHEREAS, the Boards of Directors of FCN, BANC ONE and Newco have determined
that it is in the best interests of their respective companies and their
stockholders to consummate the business combination transaction provided for
herein in which (x) BANC ONE will, subject to the terms and conditions set forth
herein, merge with and into Newco (the "First Step Merger") so that Newco is the
surviving corporation in the First Step Merger, and (b) immediately thereafter
FCN will, subject to the terms and conditions set forth herein, merge with and
into Newco (the "Second Step Merger" and, together with the First Step Merger,
the "Merger"), so that Newco is the surviving corporation (hereinafter sometimes
referred to in such capacity as the "Surviving Corporation") in the Second Step
Merger; and
WHEREAS, it is the intent of the respective Boards of Directors of BANC ONE
and FCN that the Merger be structured as a "merger of equals" of BANC ONE and
FCN and that the Surviving Corporation be governed and operated on this basis;
and
WHEREAS, as a condition to, and immediately after the execution of, this
Agreement, BANC ONE and FCN are entering into a BANC ONE stock option agreement
(the "BANC ONE Option Agreement") in the form attached hereto as Exhibit C; and
WHEREAS, as a condition to, and immediately after the execution of, this
Agreement, BANC ONE and FCN are entering into a FCN stock option agreement (the
"FCN Option Agreement"; and together with the BANC ONE Option Agreement, the
"Option Agreements") in the form attached hereto as Exhibit D; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
1
<PAGE>
ARTICLE I
THE FIRST STEP MERGER
1.1 The First Step Merger. Subject to the terms and conditions of this
Agreement, in accordance with the General Corporation Law of the State of Ohio
(the "OGCL") and the General Corporation Law of the State of Delaware (the
"DGCL"), at the First Effective Time, BANC ONE shall merge with and into Newco.
Newco shall be the surviving corporation in the First Step Merger, and shall
continue its corporate existence under the laws of the State of Delaware. Upon
consummation of the First Step Merger, the separate corporate existence of BANC
ONE shall terminate.
1.2 Effective Time. The First Step Merger shall become effective as set
forth in the certificate of merger which shall be filed with the Secretary of
State of the State of Ohio (the "Ohio Secretary") and the certificate of merger
which shall be filed with the Secretary of State of the State of Delaware (the
"Delaware Secretary") on the Closing Date. The term "First Effective Time"
shall be the date and time when the First Step Merger becomes effective, as set
forth in the certificates of merger referred to in this Section 1.2.
1.3 Effects of the First Step Merger. At and after the First Effective
Time, the First Step Merger shall have the effects set forth in Section 1701.82
of the OGCL and Sections 259 and 261 of the DGCL.
1.4 Conversion of BANC ONE Common Stock. (a) At the First Effective
Time, by virtue of the First Step Merger and without any action on the part of
BANC ONE, Newco or the holders of capital stock of BANC ONE or Newco, each share
of the common stock, without par value, of BANC ONE (the "BANC ONE Common
Stock") issued and outstanding immediately prior to the First Effective Time
(other than Dissenting Shares and shares of BANC ONE Common Stock held in BANC
ONE's treasury or directly or indirectly by BANC ONE or any of its wholly owned
Subsidiaries or Newco (except for Trust Account Shares and DPC shares) shall be
converted into one share (the "First Merger Exchange Ratio") of the common
stock, without par value, of Newco (the "Newco Common Stock").
(b) All of the shares of BANC ONE Common Stock converted into the right to
receive Newco Common Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist as of
the First Effective Time, and each certificate (each a "BANC ONE Common
Certificate") previously representing any such shares of BANC ONE Common Stock
shall thereafter represent, without the requirement of any exchange thereof,
only the number of shares of Newco Common Stock into which the shares of BANC
ONE Common
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<PAGE>
Stock represented by such BANC ONE Common Certificate have been converted
pursuant to this Section 1.4.
(c) At the First Effective Time, all shares of BANC ONE Common Stock that
are owned by BANC ONE as treasury stock and all shares of BANC ONE Common Stock
that are owned, directly or indirectly, by BANC ONE or any of its wholly owned
Subsidiaries or Newco (other than shares of BANC ONE Common Stock held, directly
or indirectly, in trust accounts, managed accounts and the like or otherwise
held in a fiduciary capacity that are beneficially owned by third parties (any
such shares, and shares of Newco Common Stock and FCN Common Stock which are
similarly held, whether held directly or indirectly by BANC ONE, Newco or FCN,
as the case may be, being referred to herein as "Trust Account Shares") and
other than any shares of BANC ONE Common Stock held by BANC ONE or FCN or any of
their respective Subsidiaries or Newco in respect of a debt previously
contracted (any such shares of BANC ONE Common Stock, and shares of FCN Common
Stock and Newco Common Stock which are similarly held, whether held directly or
indirectly by BANC ONE, Newco or FCN or any of their respective Subsidiaries,
being referred to herein as "DPC Shares")) shall be cancelled and shall cease to
exist and no stock of Newco or other consideration shall be delivered in
exchange therefor. All shares of Newco Common Stock that are owned by BANC ONE
or any of its wholly-owned Subsidiaries (other than Trust Account Shares and DPC
Shares) shall become treasury stock of Newco.
1.5 Newco Common Stock. At and after the First Effective Time, each share
of Newco Common Stock issued and outstanding immediately prior to the First
Effective Time shall be cancelled and retired and shall resume the status of
authorized and unissued shares of Newco Common Stock, and no shares of Newco
Common Stock or other securities of Newco shall be issued in respect thereof.
1.6 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of BANC ONE Common Stock which are outstanding immediately
prior to the First Effective Time and with respect to which dissenters' rights
shall have been properly demanded in accordance with Section 1701.85 of the OGCL
("Dissenting Shares") shall not be converted into Newco Common Stock; instead,
the holders thereof shall be entitled to payment of the appraised value of such
Dissenting Shares in accordance with the provisions of Section 1701.85 of the
OGCL; provided, however, that (i) if any holder of Dissenting Shares shall
subsequently deliver a written withdrawal of his demand for appraisal of such
shares, or (ii) if any holder fails to establish his entitlement to dissenters'
rights as provided in Section 1701.85 of the OGCL, such holder or holders (as
the case may be) shall forfeit the right to appraisal of such shares of BANC ONE
Common Stock and each of such shares shall thereupon be deemed to have been
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<PAGE>
converted into Newco Common Stock, as provided in Section 1.4(a) hereof.
1.7 Options. At the First Effective Time, each option granted by BANC ONE
to purchase shares of BANC ONE Common Stock which is outstanding and unexercised
immediately prior thereto shall cease to represent a right to acquire shares of
BANC ONE Common Stock and shall be converted automatically into an option to
purchase a number of shares of Newco Common Stock equal to the number of shares
of BANC ONE Common Stock subject to such option immediately prior to the First
Effective Time at an exercise price per share of Newco Common Stock equal to the
exercise price per share of BANC ONE Common Stock in effect immediately prior to
the First Effective Time and otherwise subject to the terms of the appropriate
BANC ONE Benefit Plan pursuant to which such options have been granted (such
plans collectively the "BANC ONE Stock Plans") under which such option was
issued and the agreements evidencing grants thereunder. The adjustment provided
herein with respect to any options which are "incentive stock options" (as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code")) shall be and is intended to be effected in a manner which is consistent
with Section 424(a) of the Code. The duration and other terms of the new option
shall be the same as the original option except that all references to BANC ONE
shall be deemed to be references to Newco.
1.8 Certificate of Incorporation. Subject to the terms and conditions of
this Agreement, at the First Effective Time, the Certificate of Incorporation of
the surviving corporation in the First Step Merger shall be substantially in the
form attached hereto as Exhibit A, with such changes thereto as shall be
mutually agreed upon by BANC ONE and FCN, until thereafter amended in accordance
with applicable law.
1.9 By-Laws. Subject to the terms and conditions of this Agreement, at
the First Effective Time, the By-Laws of the surviving corporation in the First
Step Merger shall be in substantially the form attached hereto as Exhibit B,
with such changes as may be mutually agreed upon by BANC ONE and FCN, until
thereafter amended in accordance with applicable law.
1.10 Board of Directors; Management. From and after the First Effective
Time, until duly changed pursuant hereto or in accordance with applicable law,
the directors of BANC ONE shall be the directors of Newco, and the officers of
BANC ONE shall be the officers of Newco.
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<PAGE>
ARTICLE 2
THE SECOND STEP MERGER
2.1 The Second Step Merger. Subject to the terms and conditions of this
Agreement, in accordance with the DGCL, at the Effective Time, FCN shall merge
with and into Newco. Newco shall be the Surviving Corporation in the Second
Step Merger, and shall continue its corporate existence under the laws of the
State of Delaware. Upon consummation of the Second Step Merger, the separate
corporate existence of FCN shall terminate.
2.2 Effective Time. The Second Step Merger shall become effective as set
forth in the certificate of merger (the "Certificate of Merger") which shall be
filed with the Delaware Secretary on the Closing Date. The term "Effective
Time" shall be the date and time when the Second Step Merger becomes effective,
as set forth in the Certificate of Merger.
2.3 Effects of the Second Step Merger. At and after the Effective Time,
the Second Step Merger shall have the effects set forth in Sections 259 and 261
of the DGCL.
2.4 Conversion of FCN Common Stock; FCN Preferred Stock. At the Effective
Time, by virtue of the Second Step Merger and without any action on the part of
BANC ONE, Newco, FCN or the holder of any of the following securities:
(a) Subject to Section 3.2(e), each share of the common stock, par value
$1.00 per share, of FCN (the "FCN Common Stock" and, together with the FCN
Preferred Stock, the "FCN Capital Stock") issued and outstanding immediately
prior to the Effective Time (other than shares of FCN Capital Stock held in
FCN's treasury or directly or indirectly by BANC ONE, Newco or FCN or any of
their respective wholly owned Subsidiaries (except for Trust Account Shares and
DPC shares) shall be converted into the right to receive 1.62 shares (the
"Exchange Ratio") of Newco Common Stock (the Newco Common Stock and the Newco
New Preferred Stock (as defined Section 2.4(c)) being referred to herein as the
"Newco Capital Stock")).
(b) Each share of FCN Preferred Stock with Cumulative and Adjustable
Dividends, Series B, without par value (the "FCN Series B Preferred"), issued
and outstanding immediately prior to the Effective Time shall be converted into
the right to receive one share of preferred stock with cumulative and adjustable
dividends of Newco designated as the Preferred Stock with Cumulative and
Adjustable Dividends, Series B, of Newco (the "Newco Series B Adjustable
Preferred"). The terms of the Newco Series B Adjustable Preferred shall be
substantially the same as the terms of the FCN Series B Preferred.
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<PAGE>
(c) Each share of FCN Preferred Stock with Cumulative and Adjustable
Dividends, Series C, without par value (the "FCN Series C Preferred" and,
together with the FCN Series B Preferred, the "FCN Preferred Stock"), issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive one share of preferred stock with cumulative and adjustable
dividends of Newco designated as the Preferred Stock with Cumulative and
Adjustable Dividends, Series C, of Newco (the "Newco Series C Adjustable
Preferred" and, together with the Newco Series B Adjustable Preferred, the
"Newco New Preferred Stock"). The terms of the Newco Series C Adjustable
Preferred shall be substantially the same as the terms of the FCN Series C
Preferred.
(d) All of the shares of FCN Common Stock converted into the right to
receive Newco Common Stock pursuant to this Article II shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist as of
the Effective Time, and each certificate (each a "Common Certificate")
previously representing any such shares of FCN Common Stock shall thereafter
represent only the right to receive (i) a certificate representing the number of
whole shares of Newco Common Stock and (ii) cash in lieu of fractional shares
into which the shares of FCN Common Stock represented by such Common Certificate
have been converted pursuant to this Section 2.4 and Section 3.2(e). Common
Certificates previously representing shares of FCN Common Stock shall be
exchanged for certificates representing whole shares of Newco Common Stock and
cash in lieu of fractional shares issued in consideration therefor upon the
surrender of such Common Certificates in accordance with Section 3.2, without
any interest thereon. If, prior to the Effective Time, the outstanding shares
of FCN Common Stock or BANC ONE Common Stock (or, following the consummation of
the First Step Merger, the outstanding shares of Newco Common Stock) shall have
been increased, decreased, changed into or exchanged for a different number or
kind of shares or securities as a result of a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
similar change in capitalization (other than solely as a result of the First
Step Merger), an appropriate and proportionate adjustment shall be made to the
Exchange Ratio and to the FCN Maximum Share Amount.
(e) At the Effective Time, all shares of FCN Common Stock that are owned
by FCN as treasury stock and all shares of FCN Common Stock that are owned,
directly or indirectly, by BANC ONE, Newco or FCN or any of their respective
wholly owned Subsidiaries (other than Trust Account Shares and DPC Shares) shall
be cancelled and shall cease to exist and no stock of Newco or other
consideration shall be delivered in exchange therefor. All shares of Newco
Common Stock that are owned by FCN or any of its wholly-owned Subsidiaries
(other than Trust
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<PAGE>
Account Shares and DPC Shares) shall become treasury stock of Newco.
(f) All of the shares of FCN Preferred Stock converted into Newco New
Preferred Stock pursuant to this Article II shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist as of the Effective
Time, and each certificate (each a "Preferred Stock Certificate"; and together
with a Common Certificate, a "Certificate") previously representing any such
shares of FCN Preferred Stock shall thereafter represent the right to receive a
certificate representing the number of shares of corresponding Newco New
Preferred Stock into which the shares of FCN Preferred Stock represented by such
Preferred Stock Certificate have been converted pursuant to this Section 2.4.
Preferred Stock Certificates previously representing shares of FCN Preferred
Stock shall be exchanged for certificates representing shares of corresponding
Newco New Preferred Stock issued in consideration therefor upon the surrender of
such Preferred Stock Certificates in accordance with Section 3.2 hereof, without
any interest thereon.
2.5 Newco Common Stock. At and after the Effective Time, each share of
Newco Common Stock issued and outstanding immediately prior to the Closing Date
shall remain an issued and outstanding share of common stock of the Surviving
Corporation and shall not be affected by the Second Step Merger.
2.6 Options. (a) At the Effective Time, each option granted by FCN to
purchase shares of FCN Common Stock which is outstanding and unexercised
immediately prior thereto shall cease to represent a right to acquire shares of
FCN Common Stock and shall be converted automatically into an option to purchase
shares of Newco Common Stock in an amount and at an exercise price determined as
provided below (and otherwise, in the case of options, subject to the terms of
the FCN Benefit Plans pursuant to which such options have been issued (such
plans collectively the "FCN Stock Plans") and the agreements evidencing grants
thereunder)):
(i) The number of shares of Newco Common Stock to be subject to the
new option shall be equal to the product of the number of shares of FCN
Common Stock subject to the original option and the Exchange Ratio,
provided that any fractional shares of Newco Common Stock resulting from
--------
such multiplication shall be rounded to the nearest whole share; and
(ii) The exercise price per share of Newco Common Stock under the
new option shall be equal to the exercise price per share of FCN Common
Stock under the original option divided by the Exchange Ratio, provided
--------
that such
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exercise price shall be rounded down to the nearest whole cent.
(b) The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the the Code) shall be
and is intended to be effected in a manner which is consistent with Section
424(a) of the Code. The duration and other terms of the new option shall be the
same as the original option except that all references to FCN shall be deemed to
be references to Newco.
2.7 Certificate of Incorporation. Subject to the terms and conditions of
this Agreement, at the Effective Time, the Certificate of Incorporation of Newco
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law.
2.8 By-Laws. Subject to the terms and conditions of this Agreement, at
the Effective Time, the By-Laws of Newco shall be the By-Laws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
2.9 Tax and Accounting Consequences. It is intended that the First Step
Merger and the Second Step Merger shall each constitute a reorganization within
the meaning of Section 368(a) of the Code, that this Agreement shall constitute
a "plan of reorganization" for the purposes of Sections 354 and 361 of the Code
and that the Merger be accounted for as a "pooling of interests" under generally
accepted accounting principles ("GAAP").
2.10 Management Succession. At the Effective Time, Verne G. Istock shall
be Chairman of the Board of the Surviving Corporation and John B. McCoy shall be
the President and Chief Executive Officer of the Surviving Corporation.
2.11 Board of Directors. (a) From and after the Effective Time, until duly
changed in compliance with applicable law and the Certificate of Incorporation
and Bylaws of the Surviving Corporation, the Board of Directors of the Surviving
Corporation shall consist of 22 persons, including Messrs. Istock and McCoy, 10
additional persons to be named by Mr. McCoy and the Board of Directors of BANC
ONE, and 10 additional persons to be named by Mr. Istock and the Board of
Directors of FCN.
(b) From and after the Effective Time, the representatives of BANC ONE
and FCN shall be represented in proportion to the aggregate representation set
forth above on all committees of the Board of Directors of the Surviving
Corporation.
2.12 Headquarters of Surviving Corporation. At the Effective Time, the
location of the headquarters and principal
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executive offices of the Surviving Corporation shall be that of the headquarters
and principal executive offices of FCN as of the date of this Agreement.
ARTICLE III
EXCHANGE OF SHARES
3.1 Newco to Make Shares Available. At or prior to the Effective Time,
Newco shall deposit, or shall cause to be deposited, with First Chicago Trust
Company of New York, or another bank or trust company reasonably acceptable to
each of BANC ONE and FCN (the "Exchange Agent"), for the benefit of the holders
of Certificates, for exchange in accordance with this Article III, certificates
representing the shares of Newco Common Stock and Newco New Preferred Stock, and
cash in lieu of any fractional shares (such cash and certificates for shares of
Newco Common Stock and Newco New Preferred Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund"), to be issued pursuant to Section 2.4 and paid pursuant to
Section 3.2(a) in exchange for outstanding shares of FCN Capital Stock.
3.2 Exchange of Shares. (a) As soon as practicable after the Effective
Time, and in no event later than five business days thereafter, the Exchange
Agent shall mail to each holder of record of one or more Certificates a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing the
shares of Newco Common Stock, Newco New Preferred Stock and any cash in lieu of
fractional shares into which the shares of FCN Common Stock or FCN Preferred
Stock represented by such Certificate or Certificates shall have been converted
pursuant to this Agreement. Upon proper surrender of a Certificate for exchange
and cancellation to the Exchange Agent, together with such properly completed
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor, as applicable, (i) a certificate
representing that number of whole shares of Newco Common Stock or Newco New
Preferred Stock to which such holder of FCN Common Stock or FCN Preferred Stock
shall have become entitled pursuant to the provisions of Article II and (ii) a
check representing the amount of any cash in lieu of fractional shares which
such holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article III, and the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or accrued
on any cash in lieu of fractional shares or on any unpaid dividends and
distributions payable to holders of Certificates.
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<PAGE>
(b) No dividends or other distributions declared with respect to Newco
Common Stock or Newco New Preferred Stock shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Article III. After the surrender of a
Certificate in accordance with this Article III, the record holder thereof shall
be entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
Newco Common Stock or Newco New Preferred Stock represented by such Certificate.
(c) If any certificate representing shares of Newco Common Stock or Newco
New Preferred Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered shall be
properly endorsed (or accompanied by an appropriate instrument of transfer) and
otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate representing shares of Newco
Common Stock or Newco New Preferred Stock in any name other than that of the
registered holder of the Certificate surrendered, or required for any other
reason, or shall establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of FCN of the shares of FCN Common Stock or FCN Preferred Stock
which were issued and outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates representing such shares are presented
for transfer to the Exchange Agent, they shall be cancelled and exchanged for
certificates representing shares of Newco Common Stock or Newco New Preferred
Stock as provided in this Article III.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Newco Common Stock shall
be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Newco Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of
Newco. In lieu of the issuance of any such fractional share, Newco shall pay to
each former stockholder of FCN who otherwise would be entitled to receive such
fractional share an amount in cash determined by multiplying (i) the average of
the closing-sale prices of BANC ONE Common Stock on the New York Stock Exchange,
Inc. (the "NYSE") as reported by The Wall Street Journal for the five trading
-----------------------
days immediately preceding the
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<PAGE>
date of the Effective Time by (ii) the fraction of a share (rounded to the
nearest thousandth when expressed in decimal form) of Newco Common Stock to
which such holder would otherwise be entitled to receive pursuant to Section
1.4.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of FCN for 12 months after the Effective Time shall be paid to
Newco. Any former stockholders of FCN who have not theretofore complied with
this Article III shall thereafter look only to Newco for payment of the shares
of Newco Common Stock or Newco New Preferred Stock, cash in lieu of any
fractional shares and any unpaid dividends and distributions on the Newco Common
Stock or Newco New Preferred Stock deliverable in respect of each share of FCN
Common Stock or FCN Preferred Stock, as the case may be, such stockholder holds
as determined pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of BANC ONE, Newco, FCN, the
Exchange Agent or any other person shall be liable to any former holder of
shares of FCN Common Stock or FCN Preferred Stock for any amount delivered in
good faith to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if reasonably required by
Newco, the posting by such person of a bond in such amount as Newco may
determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the shares of Newco
Capital Stock and any cash in lieu of fractional shares deliverable in respect
thereof pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FCN
Except as disclosed in the FCN disclosure schedule delivered to BANC ONE
concurrently herewith (the "FCN Disclosure Schedule") FCN hereby represents and
warrants to BANC ONE as follows:
4.1 Corporate Organization. (a) FCN is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
FCN has the corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
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qualification necessary, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect on FCN. As used in this Agreement, the
term "Material Adverse Effect" means, with respect to BANC ONE, FCN or the
Surviving Corporation, as the case may be, a material adverse effect on (i) the
business, operations, results of operations or financial condition of such party
and its Subsidiaries taken as a whole or (ii) the ability of such party to
consummate the transactions contemplated hereby. As used in this Agreement, the
word "Subsidiary" when used with respect to any party, means any bank,
corporation, partnership, limited liability company, or other organization,
whether incorporated or unincorporated, which is consolidated with such party
for financial reporting purposes. FCN is duly registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHC Act").
True and complete copies of the Restated Certificate of Incorporation (the "FCN
Certificate of Incorporation") and By-Laws of FCN, as in effect as of the date
of this Agreement, have previously been made available by FCN to BANC ONE.
(b) Each FCN Subsidiary (i) is duly organized and validly existing as a
bank, corporation, partnership or limited liability company under the laws of
its jurisdiction of organization, (ii) is duly qualified to do business and in
good standing in all jurisdictions (whether federal, state, local or foreign)
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and in which the failure to be so qualified would
have a Material Adverse Effect on FCN and (iii) has all requisite corporate
power and authority to own or lease its properties and assets and to carry on
its business as now conducted.
(c) The minute books of FCN accurately reflect in all material respects
all corporate actions held or taken since January 1, 1996 of its stockholders
and Board of Directors (including committees of the Board of Directors of FCN).
4.2 Capitalization. (a) The authorized capital stock of FCN consists of
(i) 750,000,000 shares of FCN Common Stock, of which, as of March 31, 1998,
287,187,823 shares were issued and outstanding and 32,321,153 shares were held
in treasury, and (ii) 10,000,000 shares of FCN Preferred Stock, of which, as of
the date hereof, (A) 1,191,000 shares were designated, issued and outstanding as
FCN Series B Preferred, (B) 713,800 shares were designated, issued and
outstanding as FCN Series C Preferred, (C) 160,000 shares were designated and no
shares were issued and outstanding as 8.45% Cumulative Preferred Stock, Series
E, stated value $625 per share, and (D) 40,000 shares were designated and no
shares were issued and outstanding as 5 3/4% Cumulative Convertible Preferred
Stock, Series B, stated value $5,000 per share. All of the issued and
outstanding shares of FCN Capital Stock have been duly authorized and validly
issued and are fully paid, nonassessable
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<PAGE>
and free of preemptive rights, with no personal liability attaching to the
ownership thereof. As of the date of this Agreement, except pursuant to the
terms of (i) the FCN Option Agreement, (ii) options issued pursuant to the FCN
Stock Plans, (iii) the FCN 7 1/2% preferred purchase units due May 10, 2023 and
(iv) the Asset Purchase Agreement, dated as of November 18, 1997, between FCN
and Roney & Co., L.L.C. (the "Roney Agreement"), FCN does not have and is not
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of FCN Capital Stock or any other equity securities of FCN or any securities
representing the right to purchase or otherwise receive any shares of FCN Common
Stock or FCN Preferred Stock (collectively, including the items contemplated by
clauses (i) through (iv) of this sentence, the "FCN Rights"). As of the date of
this Agreement, no shares of FCN Capital Stock are reserved for issuance, except
for 63,582,286 shares of FCN Common Stock reserved for issuance upon exercise of
the FCN Option Agreement, shares of FCN Common Stock reserved for issuance in
connection with FCN Employee Stock Purchase and Savings Plan (the "ESPSP"),
shares of FCN Common Stock reserved for issuance in connection with the FCN
Dividend Reinvestment Plan, 13,100,000 shares of FCN Common Stock reserved for
issuance upon the exercise of stock options pursuant to the FCN Stock Plans and
shares of FCN Common Stock reserved for issuance in connection with the Roney
Agreement. Since December 31, 1997, FCN has not issued any shares of its capital
stock or any securities convertible into or exercisable for any shares of its
capital stock, other than pursuant to the FCN Option Agreement, the ESPSP, the
FCN Dividend Reinvestment Plan, the exercise of employee stock options granted
prior to such date, the FCN Stock Performance Plan and the Roney Agreement.
Assuming compliance by BANC ONE and Newco with Articles I and II of this
Agreement, after the Effective Time, there will not be any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character by which FCN or any of its Subsidiaries or their respective successors
will be bound calling for the purchase or issuance of any shares of the capital
stock of FCN. FCN has previously provided BANC ONE with a list of the option
holders, the date of each option to purchase FCN Common Stock granted, the
number of shares subject to each such option, the expiration date of each such
option, and the price at which each such option may be exercised under an
applicable FCN Stock Plan. In no event will the aggregate number of shares of
FCN Common Stock outstanding at the Effective Time (including all shares of FCN
Common Stock subject to FCN Rights other than the FCN Option Agreement) exceed
the number specified in Section 4.2(a) of the FCN Disclosure Schedule.
(b) FCN owns, directly or indirectly, all of the issued and outstanding
shares of capital stock or other equity ownership interests of each of the FCN
Subsidiaries, free and clear
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<PAGE>
of any liens, pledges, charges, encumbrances and security interests whatsoever
("Liens"), and all of such shares or equity ownership interests are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. No FCN Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase or issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the right to purchase
or otherwise receive any shares of capital stock or any other equity security of
such Subsidiary.
4.3 Authority; No Violation. (a) FCN has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of FCN. The Board of Directors of
FCN has directed that this Agreement and the transactions contemplated hereby be
submitted to FCN's stockholders for approval at a meeting of such stockholders
and, except for the adoption of this Agreement by the affirmative vote of the
holders of a majority of the outstanding shares of FCN Common Stock, no other
corporate proceedings on the part of FCN are necessary to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by FCN and (assuming due authorization,
execution and delivery by BANC ONE and Newco) constitutes a valid and binding
obligation of FCN, enforceable against FCN in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by FCN nor the
consummation by FCN of the transactions contemplated hereby, nor compliance by
FCN with any of the terms or provisions hereof, will (i) violate any provision
of the FCN Certificate of Incorporation or By-Laws or (ii) assuming that the
consents and approvals referred to in Section 4.4 are duly obtained, (x) violate
any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to FCN or any of its Subsidiaries or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of FCN or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which FCN or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or
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affected, except (in the case of clause (y) above) for such violations,
conflicts, breaches or defaults which, either individually or in the aggregate,
will not have or be reasonably likely to have a Material Adverse Effect on FCN.
4.4 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHC Act and approval of such
applications and notices, (ii) the filing of any required applications or
notices with any state or foreign agencies and approval of such applications and
notices (the "State Approvals"), (iii) the filing with the Securities and
Exchange Commission (the "SEC") of a joint proxy statement in definitive form
relating to the meetings of BANC ONE's shareholders and FCN's stockholders to be
held in connection with this Agreement and the transactions contemplated hereby
(the "Joint Proxy Statement") and the registration statement on Form S-4 (the
"S-4") in which the Joint Proxy Statement will be included as a prospectus, (iv)
the filing of the Certificate of Merger with the Delaware Secretary pursuant to
the DGCL, and certificate of merger with the Ohio Secretary pursuant to the OGCL
and a certificate of merger with the Delaware Secretary pursuant to the DGCL in
respect of the First Step Merger, (v) any notices to or filings with the Small
Business Administration ("SBA"), (vi) any consents, authorizations, approvals,
filings or exemptions in connection with compliance with the applicable
provisions of federal and state securities laws relating to the regulation of
broker-dealers or investment advisers, and federal commodities laws relating to
the regulation of futures commission merchants and the rules and regulations
thereunder and of any applicable industry self-regulatory organization ("SRO"),
and the rules of the NYSE, or which are required under consumer finance,
mortgage banking and other similar laws, (vii) such filings and approvals as are
required to be made or obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of the shares of Newco Common
Stock pursuant to this Agreement and (viii) the approval of this Agreement by
the requisite vote of the stockholders of BANC ONE and FCN, no consents or
approvals of or filings or registrations with any court, administrative agency
or commission or other governmental authority or instrumentality (each a
"Governmental Entity") or with any third party are necessary in connection with
(A) the execution and delivery by FCN of this Agreement and (B) the consummation
by FCN of the Second Step Merger and the other transactions contemplated hereby.
4.5 Reports. FCN and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since January 1,
1996 with (i) the Federal Reserve Board, (ii) the Federal Deposit Insurance
Corporation, (iii) any state regulatory authority
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(each a "State Regulator"), (iv) the Office of the Comptroller of the Currency
(the "OCC"), (v) the SEC and (vi) any SRO (collectively "Regulatory Agencies"),
and all other reports and statements required to be filed by them since January
1, 1996, including, without limitation, any report or statement required to be
filed pursuant to the laws, rules or regulations of the United States, any
state, or any Regulatory Agency, and have paid all fees and assessments due and
payable in connection therewith, except where the failure to file such report,
registration or statement or to pay such fees and assessments, either
individually or in the aggregate, will not have a Material Adverse Effect on
FCN. Except for normal examinations conducted by a Regulatory Agency in the
regular course of the business of FCN and its Subsidiaries, no Regulatory Agency
has initiated any proceeding or, to the best knowledge of FCN, investigation
into the business or operations of FCN or any of its Subsidiaries since January
1, 1996, except where such proceedings or investigation are not likely, either
individually or in the aggregate, to have a Material Adverse Effect on FCN.
There is no unresolved violation, criticism, or exception by any Regulatory
Agency with respect to any report or statement relating to any examinations of
FCN or any of its Subsidiaries which, in the reasonable judgment of FCN, is
likely, either individually or in the aggregate, to have a Material Adverse
Effect on FCN.
4.6 Financial Statements. FCN has previously made available to BANC ONE
copies of the consolidated balance sheets of FCN and its Subsidiaries as of
December 31, for the fiscal years 1996 and 1997, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
fiscal years 1995 through 1997, inclusive, as reported in FCN's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 filed with the SEC under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each
case accompanied by the audit report of Arthur Andersen LLP, independent public
accountants with respect to FCN. The December 31, 1997 consolidated balance
sheet of FCN (including the related notes, where applicable) fairly presents the
consolidated financial position of FCN and its Subsidiaries as of the date
thereof, and the other financial statements referred to in this Section 4.6
(including the related notes, where applicable) fairly present the results of
the consolidated operations and changes in stockholders' equity and consolidated
financial position of FCN and its Subsidiaries for the respective fiscal periods
or as of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto; and each of such statements
(including the related notes, where applicable) has been prepared in all
material respects in accordance with GAAP consistently applied during the
periods involved, except, in each case, as
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indicated in such statements or in the notes thereto. The books and records of
FCN and its Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions. The reserve for possible loan
and lease losses shown on the December 31, 1997 consolidated balance sheet of
FCN is adequate in all material respects under the requirements of GAAP to
provide for possible losses, net of recoveries relating to loans previously
charged off, on loans outstanding (including, without limitation, accrued
interest receivable) as of December 31, 1997.
4.7 Broker's Fees. Except as set forth in the engagement letter
agreements between FCN and each of Lazard Freres & Co. LLC and Goldman, Sachs &
Co., true and complete copies of which have previously been provided to BANC
ONE, neither FCN nor any FCN Subsidiary nor any of their respective officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with the Second Step
Merger or related transactions contemplated by this Agreement or the Option
Agreements.
4.8 Absence of Certain Changes or Events. (a) Except as publicly
disclosed in FCN Reports filed prior to the date hereof, since December 31,
1997, no event or events have occurred which have had, individually or in the
aggregate, a Material Adverse Effect on FCN.
(b) Except as publicly disclosed in FCN Reports filed prior to the date
hereof, since December 31, 1997, FCN and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary and usual course.
(c) Since December 31, 1997, neither FCN nor any of its Subsidiaries has
(i) except for such actions as are in the ordinary course of business consistent
with past practice or except as required by applicable law, (A) increased the
wages, salaries, compensation, pension, or other fringe benefits or perquisites
payable to any executive officer, employee, or director from the amount thereof
in effect as of December 31, 1997, or (B) granted any severance or termination
pay, entered into any contract to make or grant any severance or termination
pay, or paid any bonuses aggregating in excess of 5% of FCN's 1997 salary and
employee benefits expenses, other than customary year-end bonuses for fiscal
1997, or (ii) suffered any strike, work stoppage, slowdown, or other labor
disturbance which is likely, either individually or in the aggregate, to have a
Material Adverse Effect on FCN.
4.9 Legal Proceedings. (a) Neither FCN nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of FCN's knowledge,
threatened, material legal,
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administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature against FCN or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement or the FCN Option Agreement as to which there is
a reasonable probability of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect on FCN.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those that apply to similarly situated bank holding
companies or banks) imposed upon FCN, any of its Subsidiaries or the assets of
FCN or any of its Subsidiaries which has had, or might reasonably be expected to
have, a Material Adverse Effect on FCN.
4.10 Taxes and Tax Returns. (a) Each of FCN and its Subsidiaries has
duly filed all federal, state, county, foreign and, to the best of FCN's
knowledge, local information returns and tax returns required to be filed by it
on or prior to the date hereof (all such returns being accurate and complete in
all material respects) and has duly paid or made provisions for the payment of
all Taxes and other governmental charges which have been incurred or are due or
claimed to be due from it by federal, state, county, foreign or local taxing
authorities on or prior to the date of this Agreement (including, without
limitation, if and to the extent applicable, those due in respect of its
properties, income, business, capital stock, deposits, franchises, licenses,
sales and payrolls) other than (i) Taxes or other charges which are not yet
delinquent or are being contested in good faith and have not been finally
determined, or (ii) information returns, tax returns, Taxes or other
governmental charges the failure to file, pay or make provision for, either
individually or in the aggregate, are not likely, in the reasonable judgment of
FCN, to have a Material Adverse Effect on FCN. The income tax returns of FCN
and its Subsidiaries have been examined by the Internal Revenue Service (the
"IRS") and any liability with respect thereto has been satisfied for all years
to and including 1982, and either no material deficiencies were asserted as a
result of such examination for which FCN does not have adequate reserves or all
such deficiencies were satisfied. To the best of FCN's knowledge, there are no
material disputes pending, or claims asserted for, Taxes or assessments upon FCN
or any of its Subsidiaries for which FCN does not have adequate reserves, nor
has FCN or any of its Subsidiaries given any currently effective waivers
extending the statutory period of limitation applicable to any federal, state,
county or local income tax return for any period. In addition, (A) proper and
accurate amounts have been withheld by FCN and its Subsidiaries from their
employees for all prior periods in compliance in all material respects with the
tax withholding provisions of applicable federal, state and local laws, except
where failure to do so would not have a Material Adverse
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Effect on FCN, (B) federal, state, county and local returns which are accurate
and complete in all material respects have been filed by FCN and its
Subsidiaries for all periods for which returns were due with respect to income
tax withholding, Social Security and unemployment taxes, except where failure to
do so would not have a Material Adverse Effect on FCN, (C) the amounts shown on
such federal, state, local or county returns to be due and payable have been
paid in full or adequate provision therefor has been included by FCN in its
consolidated financial statements as of December 31, 1997, except where failure
to do so would not have a Material Adverse Effect on FCN and (D) there are no
Tax liens upon any property or assets of FCN or its Subsidiaries except liens
for current taxes not yet due or liens that would not have a Material Adverse
Effect on FCN. Neither FCN nor any of its Subsidiaries has been required to
include in income any adjustment pursuant to Section 481 of the Code by reason
of a voluntary change in accounting method initiated by FCN or any of its
Subsidiaries, and the IRS has not initiated or proposed any such adjustment or
change in accounting method, in either case which has had or is reasonably
likely to have a Material Adverse Effect on FCN. Except as set forth in the
financial statements described in Section 4.6, neither FCN nor any of its
Subsidiaries has entered into a transaction which is being accounted for as an
installment obligation under Section 453 of the Code, which would be reasonably
likely to have a Material Adverse Effect on FCN.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all
federal, state, county, local, and foreign income, excise, gross receipts, gross
income, ad valorem, profits, gains, property, capital, sales, transfer, use,
-- -------
payroll, employment, severance, withholding, duties, intangibles, franchise,
backup withholding, and other taxes, charges, levies or like assessments
together with all penalties and additions to tax and interest thereon.
(c) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by FCN or any Subsidiary of
FCN under any contract, plan, program, arrangement or understanding would be
reasonably likely to have a Material Adverse Effect on FCN.
4.11 Employees. (a) The FCN Disclosure Schedule sets forth a true and
complete list of each material employee or director benefit plan, arrangement or
agreement that is maintained, or conributed to, as of the date of this Agreement
(the "FCN Benefit Plans") by FCN or any of its Subsidiaries or by any trade or
business, whether or not incorporated (a "FCN ERISA Affiliate"), all of which
together with FCN would be deemed a "single employer" within the meaning of
Section 4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
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(b) FCN has heretofore made available to BANC ONE true and complete copies
of each of the FCN Benefit Plans and certain related documents, including, but
not limited to, (i) the actuarial report for such FCN Benefit Plan (if
applicable) for each of the last two years, and (ii) the most recent
determination letter from the IRS (if applicable) for such Plan.
(c) (i) Each of the FCN Benefit Plans has been operated and administered
in all material respects with applicable laws, including, but not limited to,
ERISA and the Code, (ii) each of the FCN Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified,
and there are no existing circumstances or any events that have occurred that
could reasonably be expected to adversely affect the qualified status of any
such plan, (iii) with respect to each Plan which is subject to Title IV of
ERISA, the present value of accrued benefits under such Plan, based upon the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such Plan's actuary with respect to such Plan, did not, as of
its latest valuation date, exceed the then current value of the assets of such
Plan allocable to such accrued benefits, (iv) no FCN Benefit Plan provides
benefits, including, without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees or directors of FCN,
its Subsidiaries or any FCN ERISA Affiliate beyond their retirement or other
termination of service, other than (A) coverage mandated by applicable law, (B)
death benefits or retirement benefits under any "employee pension plan" (as such
term is defined in Section 3(2) of ERISA), (C) deferred compensation benefits
accrued as liabilities on the books of FCN, its Subsidiaries or the FCN ERISA
Affiliates or (D) benefits the full cost of which is borne by the current or
former employee or director (or his beneficiary), (v) no material liability
under Title IV of ERISA has been incurred by FCN, its Subsidiaries or any FCN
ERISA Affiliate that has not been satisfied in full, and no condition exists
that presents a material risk to FCN, its Subsidiaries or any FCN ERISA
Affiliate of incurring a material liability thereunder, (vi) no FCN Benefit Plan
is a "multiemployer pension plan" (as such term is defined in Section 3(37) of
ERISA), (vii) all contributions or other amounts payable by FCN or its
Subsidiaries as of the Effective Time with respect to each FCN Benefit Plan in
respect of current or prior plan years have been paid or accrued in accordance
with GAAP and Section 412 of the Code, (viii) neither FCN, its Subsidiaries nor
any FCN ERISA Affiliate has engaged in a transaction in connection with which
FCN, its Subsidiaries or any FCN ERISA Affiliate reasonably could be subject to
either a material civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code,
and (ix) to the best knowledge of FCN there are no pending, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the
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FCN Benefit Plans or any trusts related thereto which are, in the reasonable
judgment of FCN, likely, either individually or in the aggregate, to have a
Material Adverse Effect on FCN.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) (i) result in any material payment (including,
without limitation, severance, unemployment compensation, "excess parachute
payment" (within the meaning of Section 280G of the Code), forgiveness of
indebtedness or otherwise) becoming due to any director or any employee of FCN
or any of its affiliates from FCN or any of its affiliates under any FCN Benefit
Plan or otherwise, (ii) materially increase any benefits otherwise payable under
any FCN Benefit Plan or (iii) result in any acceleration of the time of payment
or vesting of any such benefits to any material extent.
4.12 SEC Reports. FCN has previously made available to BANC ONE an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1996 by
FCN with the SEC pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act (the "FCN Reports") and prior to the date
hereof and (b) communication mailed by FCN to its stockholders since January 1,
1996 and prior to the date hereof, and no such registration statement,
prospectus, report, schedule, proxy statement or communication contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify information
as of an earlier date. Since January 1, 1996, FCN has timely filed all FCN
Reports and other documents required to be filed by it under the Securities Act
and the Exchange Act, and, as of their respective dates, all FCN Reports
complied in all material respects with the published rules and regulations of
the SEC with respect thereto.
4.13 Compliance with Applicable Law. FCN and each of its Subsidiaries
hold all material licenses, franchises, permits and authorizations necessary for
the lawful conduct of their respective businesses under and pursuant to each,
and have complied in all material respects with and are not in default in any
material respect under any, applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to FCN or any of its
Subsidiaries, except where the failure to hold such license, franchise, permit
or authorization or such noncompliance or default would not, individually or in
the aggregate, have a Material Adverse Effect on FCN.
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4.14 Certain Contracts. (a) Neither FCN nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers or employees, other than in the ordinary course of business consistent
with past practice, (ii) which, upon the consummation or stockholder approval of
the transactions contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from BANC ONE, FCN, the Surviving
Corporation, or any of their respective Subsidiaries to any officer or employee
thereof, (iii) which is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the FCN
Reports, (iv) which materially restricts the conduct of any line of business by
FCN, (v) with or to a labor union or guild (including any collective bargaining
agreement) or (vi) (including any stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan) any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement, or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement. FCN has previously made
available to BANC ONE true and correct copies of all employment and deferred
compensation agreements which are in writing and to which FCN is a party. Each
contract, arrangement, commitment or understanding of the type described in this
Section 4.14(a), whether or not set forth in the FCN Disclosure Schedule, is
referred to herein as an "FCN Contract", and neither FCN nor any of its
Subsidiaries knows of, or has received notice of, any violation of the above by
any of the other parties thereto which, individually or in the aggregate, would
have a Material Adverse Effect on FCN.
(b) (i) Each FCN Contract is valid and binding on FCN or any of its
Subsidiaries, as applicable, and in full force and effect, (ii) FCN and each of
its Subsidiaries has in all material respects performed all obligations required
to be performed by it to date under each FCN Contract, except where such
noncompliance, individually or in the aggregate, would not have a Material
Adverse Effect on FCN, and (iii) no event or condition exists which constitutes
or, after notice or lapse of time or both, would constitute, a material default
on the part of FCN or any of its Subsidiaries under any such FCN Contract,
except where such default, individually or in the aggregate, would not have a
Material Adverse Effect on FCN.
4.15 Agreements with Regulatory Agencies. Neither FCN nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with,
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or is a party to any commitment letter or similar undertaking to, or is subject
to any order or directive by, or has been since January 1, 1996, a recipient of
any supervisory letter from, or since January 1, 1996, has adopted any board
resolutions at the request of any Regulatory Agency or other Governmental Entity
that currently restricts in any material respect the conduct of its business or
that in any material manner relates to its capital adequacy, its credit
policies, its management or its business (each, whether or not set forth in the
FCN Disclosure Schedule, an "FCN Regulatory Agreement"), nor has FCN or any of
its Subsidiaries been advised since January 1, 1996, by any Regulatory Agency or
other Governmental Entity that it is considering issuing or requesting any such
Regulatory Agreement.
4.16 Other Activities of FCN and its Subsidiaries.
(a) Neither of FCN nor any of its Subsidiaries that is not a bank, a bank
operating subsidiary or a bank service corporation, directly or indirectly,
engages in any activity prohibited by the Federal Reserve Board. Without
limiting the generality of the foregoing, any equity investment of FCN and each
Subsidiary that is not a bank, a bank operating subsidiary or a bank service
corporation, is not prohibited by the Federal Reserve Board.
(b) To FCN's knowledge, each FCN Subsidiary which is a bank (a "FCN Bank
Subsidiary") currently performs all personal trust, corporate trust and other
fiduciary activities ("Trust Activities") with requisite authority under
applicable law of Governmental Entities and in accordance in all material
respects with the agreed-upon terms of the agreements and instruments governing
such Trust Activities, sound fiduciary principles and applicable law and
regulation (specifically including, but not limited to, Section 9 of Title 12 of
the Code of Federal Regulations); there is no investigation or inquiry by any
Governmental Entity pending, or to the knowledge of FCN, threatened, against or
affecting FCN, or any Significant Subsidiary thereof relating to the compliance
by FCN or any such Significant Subsidiary (as such term is defined in Rule 1-
02(w) of Regulation S-X of the SEC) with sound fiduciary principles and
applicable regulations; and except where any such failure would not have a
Material Adverse Effect on FCN, each employee of a FCN Bank Subsidiary had the
authority to act in the capacity in which he or she acted with respect to Trust
Activities, in each case, in which such employee held himself or herself out as
a representative of a FCN Bank Subsidiary; and each FCN Bank Subsidiary has
established policies and procedures for the purpose of complying with applicable
laws of Governmental Entities relating to Trust Activities, has followed such
policies and procedures in all material respects and has performed appropriate
internal audit reviews of, and has engaged independent accountants to perform
audits of, Trust Activities, which audits since January 1,
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1996 have disclosed no material violations of applicable laws of Governmental
Entities or such policies and procedures.
4.17 Investment Securities. Each of FCN and its Subsidiaries has good and
marketable title to all securities held by it (except securities sold under
repurchase agreements or held in any fiduciary or agency capacity), free and
clear of any Lien, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent banking practices to secure
obligations of FCN or any of its Subsidiaries. Such securities are valued on
the books of FCN in accordance with GAAP.
4.18 Interest Rate Risk Management Instruments. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of FCN or for the account of
a customer of FCN or one of its Subsidiaries, were entered into in the ordinary
course of business and, to FCN's knowledge, in accordance with prudent banking
practice and applicable rules, regulations and policies of any Regulatory
Authority and with counterparties believed to be financially responsible at the
time and are legal, valid and binding obligations of FCN or one of its
Subsidiaries enforceable in accordance with their terms (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies), and are in full force and effect. FCN and each of its Subsidiaries
have duly performed in all material respects all of their material obligations
thereunder to the extent that such obligations to perform have accrued; and, to
FCN's knowledge, there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
4.19 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of FCN included
in the FCN December 31, 1997 Form 10-K and for liabilities incurred in the
ordinary course of business consistent with past practice, since December 31,
1997, neither FCN nor any of its Subsidiaries has incurred any liability of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either alone or when combined with all
similar liabilities, has had, or could reasonably be expected to have, a
Material Adverse Effect on FCN.
4.20 Insurance. FCN and its Subsidiaries have in effect insurance
coverage with reputable insurers, which in respect of amounts, premiums, types
and risks insured, constitutes reasonably adequate coverage against all risks
customarily insured against by bank holding companies and their subsidiaries
comparable in size and operations to FCN and its Subsidiaries.
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4.21 Environmental Liability. Except as set forth in the FCN Disclosure
Schedule, there are no legal, administrative, arbitral or other proceedings,
claims, actions, causes of action, private environmental investigations or
remediation activities or governmental investigations of any nature seeking to
impose, or that could reasonably result in the imposition, on FCN of any
liability or obligation arising under common law or under any local, state or
federal environmental statute, regulation or ordinance including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), pending or threatened against FCN, which
liability or obligation could reasonably be expected to have a Material Adverse
Effect on FCN. To the knowledge of FCN, there is no reasonable basis for any
such proceeding, claim, action or governmental investigation that would impose
any material liability or obligation that could reasonably be expected to have a
Material Adverse Effect on FCN. FCN is not subject to any agreement, order,
judgment, decree, letter or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any material liability or
obligation that could reasonably be expected to have a Material Adverse Effect
on FCN.
4.22 State Takeover Laws; FCN Certificate of Incorporation. The Board of
Directors of FCN has approved the transactions contemplated by this Agreement
and the Option Agreements (i) for purposes of Section 203(a)(1) of the DGCL such
that the provisions of Section 203(a) of the DGCL and (ii) for purposes of
Article Thirteenth of the FCN Certificate of Incorporation such that the
provisions thereof will not apply to this Agreement or the Option Agreements or
any of the transactions contemplated hereby or thereby.
4.23 Year 2000. None of FCN or any of the FCN Subsidiaries has received,
or reasonably expects to receive, a "Year 2000 Deficiency Notification Letter"
(as such term is employed in the Federal Reserve's Supervision and Regulation
Letter No. SR 98-3(SUP), dated March 4, 1998). FCN has disclosed to BANC ONE a
complete and accurate copy of FCN's plan, including an estimate of the
anticipated associated costs, for addressing the issues ("Year 2000 Issues") set
forth in the statements of the Federal Financial Institutions Examination
Council, dated May 5, 1997, entitled "Year 2000 Project Management Awareness,"
and December 1997, entitled "Safety and Soundness Guidelines Concerning the Year
2000 Business Risk," as such issues affect FCN and its Subsidiaries. Between
the date of this Agreement and the Effective Time, FCN shall use commercially
practicable efforts to implement such plan.
4.24 Reorganization; Pooling of Interests. As of the date of this
Agreement, assuming compliance by BANC ONE and FCN with the covenants and
agreements set forth in Section
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7.13 hereof, FCN has no reason to believe that the Second Step Merger will not
qualify as a "reorganization" within the meaning of Section 368(a) of the Code
and as a "pooling of interests" for accounting purposes.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BANC ONE AND NEWCO
Except as disclosed in the BANC ONE disclosure schedule delivered to FCN
concurrently herewith (the "BANC ONE Disclosure Schedule") BANC ONE and Newco
hereby represent and warrant to FCN as follows:
5.1 Corporate Organization. (a) BANC ONE is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. BANC ONE has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect on BANC ONE. BANC ONE is, and at the
Effective Time Newco will be, duly registered as a bank holding company under
the BHC Act. True and complete copies of the Restated Articles of Incorporation
(the "BANC ONE Articles") and Regulations (the "Regulations") of BANC ONE, and
of the Certificate of Incorporation (the "Newco Certificate of Incorporation")
and By-Laws of Newco, in each case as in effect as of the date of this
Agreement, have previously been made available by BANC ONE to FCN.
(b) Each BANC ONE Subsidiary (i) is duly organized and validly existing as
a bank, corporation, partnership or limited liability company under the laws of
its jurisdiction of organization, (ii) is duly qualified to do business and in
good standing in all jurisdictions (whether Federal, state, local or foreign)
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and in which the failure to be so qualified would
have a Material Adverse Effect on BANC ONE, and (iii) has all requisite
corporate power and authority to own or lease its properties and assets and to
carry on its business as now conducted.
(c) The minute books of each of BANC ONE and Newco accurately reflect in
all material respects all corporate actions held or taken since January 1, 1996
(or the date of its incorporation, in the case of Newco) of its stockholders
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and Board of Directors (including committees of the Board of Directors of BANC
ONE).
5.2 Capitalization. (a) The authorized capital stock of BANC ONE
consists of 950,000,000 shares of BANC ONE Common Stock, of which, as of March
31, 1998, 643,833,890 were issued and outstanding, and 35,000,000 shares of
Preferred Stock, no par value (the "BANC ONE Preferred Stock" and, together with
the BANC ONE Common Stock, the "BANC ONE Capital Stock"), of which (i)
10,000,000 shares were designated and no shares were issued and outstanding as
Class A Preferred Stock ("BANC ONE Class A Preferred Stock"), (ii) 1,000,000
shares were designated and no shares were issued and outstanding as Class B
Preferred Stock ("BANC ONE Class B Preferred Stock") and (iii) 24,000,000 shares
were designated and 1,992,046 were issued and outstanding as Series C $3.50
Cumulative Convertible Preferred Stock, without par value, of BANC ONE (the
"BANC ONE Series C Preferred"). BANC ONE has called the BANC ONE Series C
Prerred for redemption and no shares of BANC ONE Series C Preferred will be
outstanding at the First Effective Time. As of March 31, 1998, 3,742,299 shares
of BANC ONE Common Stock were held in BANC ONE's treasury. As of the date
hereof, no shares of BANC ONE Common Stock or BANC ONE Preferred Stock were
reserved for issuance, except for (i) 19,533,088 shares of BANC ONE Common Stock
issuable upon the exercise of stock options pursuant to the BANC ONE Stock
Plans, (ii) 62,599,680 shares of BANC ONE Common Stock issuable pursuant to the
Agreement and Plan of Merger, dated as of October 20, 1997, by and between BANC
ONE and First Commerce Corporation (the "First Commerce Merger Agreement") and
(iii) the shares of BANC ONE Common Stock issuable pursuant to the BANC ONE
Option Agreement. All of the issued and outstanding shares of BANC ONE Common
Stock and BANC ONE Preferred Stock have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. As of the date of this
Agreement, except for the BANC ONE Option Agreement, the First Commerce Merger
Agreement and the BANC ONE Stock Plans, BANC ONE does not have and is not bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of BANC ONE Common Stock or BANC ONE Preferred Stock or any other equity
securities of BANC ONE or any securities representing the right to purchase or
otherwise receive any shares of BANC ONE Common Stock or BANC ONE Preferred
Stock (collectively, "BANC ONE Rights"). Since December 31, 1997, BANC ONE has
not issued any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock, other than in connection with a
10% stock dividend on the outstanding shares of BANC ONE Common Stock paid on
February 26, 1998 and pursuant to (A) the exercise of employee stock options
granted prior to such date, (B) the conversion of the BANC ONE Series C
Preferred into shares of BANC ONE Common Stock in accordance
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with the terms thereof, (C) the consummation of the merger contemplated by the
First Commerce Merger Agreement and (D) pursuant to the BANC ONE Option
Agreement. BANC ONE has previously provided FCN with a list of the option
holders, the date of each option to purchase BANC ONE Common Stock granted, the
number of shares subject to each such option and the price at which each such
option may be exercised under an applicable BANC ONE Stock Plan. In no event
will the aggregate number of shares of BANC ONE Common Stock outstanding at the
First Effective Time (including all shares of BANC ONE Common Stock subject to
BANC ONE Rights other than the BANC ONE Option Agreement) exceed the number
specified in Section 5.2(a) of the BANC ONE Disclosure Schedule.
(b) The initial authorized capital stock of Newco consists of (i) 1,000
shares of Newco Common Stock, of which (x) as of the date hereof, no shares are
issued and outstanding and (y) immediately prior to the First Effective Time,
100 shares will be issued and outstanding, and (ii) 1,000 shares of preferred
stock, no par value per share, of which no shares are issued and outstanding.
The authorized capital stock of Newco immediately following consummation of the
First Step Merger (and prior to the Effective Time) will be as set forth in the
form of Newco Certificate of Incorporation annexed as Exhibit A hereto. No
change in such capitalization has occurred since such date or will occur prior
to the Effective Time except as provided in or contemplated by this Agreement.
At the Effective Time, no capital stock of Newco (and no options, warrants or
other rights to acquire, and no securities convertible into or exchangeable for,
any such capital stock) will be outstanding other than capital stock, options,
warrants, rights or securities issued or converted at the effective time of the
First Step Merger in respect of BANC ONE Common Stock and any associated rights
issued pursuant to and as described in Article I of this Agreement. The shares
of Newco Capital Stock to be issued pursuant to the Merger will be duly
authorized and validly issued and, at the Effective Time, all such shares will
be fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof.
(c) BANC ONE owns (and will own at the First Effective Time, in the case
of Newco), directly or indirectly, all of the issued and outstanding shares of
capital stock or other ownership interests of each of the BANC ONE Subsidiaries
and Newco, free and clear of any Liens, and all of such shares or ownership
interests are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. No BANC ONE Subsidiary has or is bound by
any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of such Subsidiary or any
securities representing the
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right to purchase or otherwise receive any shares of capital stock or any other
equity security of such Subsidiary. Newco has, and will have prior to the First
Effective Time, no Subsidiaries or material investments of any kind in any
entity.
5.3 Authority; No Violation. (a) Each of BANC ONE and Newco has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of each of BANC ONE and
Newco. As of the First Effective Time, BANC ONE, as sole stockholder of Newco,
will have duly approved this Agreement and the transactions contemplated hereby.
The Board of Directors of BANC ONE has directed that this Agreement and the
transactions contemplated hereby be submitted to BANC ONE's shareholders for
approval at a meeting of such shareholders and, except for (i) the adoption of
this Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of BANC ONE Common Stock, (ii) the issuance to BANC ONE of
shares of Newco Common Stock, (iii) the increase in the number of shares of
authorized capital stock of Newco contemplated by Section 7.12, (iv) the filing
by Newco with the Delaware Secretary of certificates of designations with
respect to the Newco New Preferred Stock and (v) the approval by BANC ONE
contemplated by the prior sentence, no other corporate proceedings on the part
of BANC ONE or Newco are necessary to approve this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of BANC ONE and Newco and (assuming due
authorization, execution and delivery by FCN) constitutes a valid and binding
obligation of each of BANC ONE and Newco, enforceable against each of BANC ONE
and Newco in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by BANC ONE or
Newco, nor the consummation by BANC ONE of the transactions contemplated hereby,
nor compliance by BANC ONE with any of the terms or provisions hereof, will (i)
violate any provision of the BANC ONE Articles or Regulations, or the Newco
Certificate of Incorporation or Bylaws, or (ii) assuming that the consents and
approvals referred to in Section 5.4 are duly obtained, (x) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to BANC ONE or any of its Subsidiaries or any of their respective
properties or assets, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any Lien
upon any of
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the respective properties or assets of BANC ONE or any of its Subsidiaries
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which BANC ONE or any of its Subsidiaries is a party, or by which
they or any of their respective properties or assets may be bound or affected,
except (in the case of clause (y) above) for such violations, conflicts,
breaches or defaults which either individually or in the aggregate will not have
or be reasonably likely to have a Material Adverse Effect on BANC ONE.
5.4 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act and
approval of such applications and notices, (ii) the State Approvals, (iii) the
filing with the SEC of the Joint Proxy Statement and the S-4, (iv) the filing of
the certificates of merger with the Ohio Secretary pursuant to the OGCL and with
the Delaware Secretary in respect of the First Step Merger, and the Certificate
of Merger with the Delaware Secretary pursuant to the DGCL, (v) any notices to
or filings with the SBA, (vi) any consent, authorizations, approvals, filings or
exemptions in connection with compliance with the applicable provisions of
federal and state securities laws relating to the regulation of broker-dealers
or investment advisers, and federal commodities laws relating to the regulation
of futures commission merchants and the rules and regulations thereunder and of
any applicable SRO, and the rules of the NYSE, or which are required under
consumer finance, mortgage banking and other similar laws, (vii) such filings
and approvals as are required to be made or obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of shares of
Newco Common Stock pursuant to this Agreement and (viii) the approval of this
Agreement by the requisite vote of the stockholders of BANC ONE and FCN, no
consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary in connection with (A) the
execution and delivery by BANC ONE or Newco of this Agreement and (B) the
consummation of the Merger and the other transactions contemplated hereby.
5.5 Reports. BANC ONE and each of its Subsidiaries have timely filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since January 1,
1996 with the Regulatory Agencies, and all other reports and statements required
to be filed by them since January 1, 1996, including, without limitation, any
report or statement required to be filed pursuant to the laws, rules or
regulations of the United States, any state, or any Regulatory Agency and have
paid all fees and assessments due and payable in connection therewith, except
where the failure to file such report, registration or statement or to pay such
fees and assessments,
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either individually or in the aggregate, will not have a Material Adverse Effect
on BANC ONE. Except for normal examinations conducted by a Regulatory Agency in
the regular course of the business of BANC ONE and its Subsidiaries, no
Regulatory Agency has initiated any proceeding or, to the best knowledge of BANC
ONE, investigation into the business or operations of BANC ONE or any of its
Subsidiaries since January 1, 1996, except where such proceedings or
investigation are not likely, either individually or in the aggregate, to have a
Material Adverse Effect on BANC ONE. There is no unresolved violation,
criticism, or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of BANC ONE or any of its Subsidiaries
which, in the reasonable judgment of BANC ONE, is likely, either individually or
in the aggregate, to have a Material Adverse Effect on BANC ONE.
5.6 Financial Statements. BANC ONE has previously made available to FCN
copies of the consolidated balance sheets of BANC ONE and its Subsidiaries as of
December 31, for the fiscal years 1996 and 1997, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
fiscal years 1995 through 1997, inclusive, as reported in BANC ONE's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 filed with the
SEC under the Exchange Act (the "BANC ONE 10-K"), in each case accompanied by
the audit report of Coopers & Lybrand L.L.P., independent public accountants
with respect to BANC ONE. The December 31, 1997 consolidated balance sheet of
BANC ONE (including the related notes) fairly presents the consolidated
financial position of BANC ONE and its Subsidiaries as of the date thereof, and
the other financial statements referred to in this Section 5.6 (including the
related notes) fairly present the results of the consolidated operations and
changes in stockholders' equity and consolidated financial position of BANC ONE
and its Subsidiaries for the respective fiscal periods or as of the respective
dates therein set forth; each of such statements (including the related notes)
comply in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto; and each of
such statements (including the related notes) has been prepared in all material
respects in accordance with GAAP consistently applied during the periods
involved, except in each case as indicated in such statements or in the notes
thereto. The books and records of BANC ONE and its Subsidiaries have been, and
are being, maintained in all material respects in accordance with GAAP and any
other applicable legal and accounting requirements and reflect only actual
transactions. The reserve for possible loan and lease losses shown on the
December 31, 1997 consolidated balance sheet of BANC ONE is adequate in all
material respects under the requirements of GAAP to provide for possible losses,
net of recoveries relating to loans previously charged off, on
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loans outstanding (including, without limitation, accrued interest receivable)
as of December 31, 1997.
5.7 Broker's Fees. Except as set forth in the engagement letter
agreements between BANC ONE and each of Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Stanley & Co. Incorporated, true and complete copies of
which have previously been provided to FCN, neither BANC ONE nor any BANC ONE
Subsidiary nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with the Merger or related transactions contemplated
by this Agreement or the Option Agreements.
5.8 Absence of Certain Changes or Events. (a) Except as publicly
disclosed in BANC ONE Reports filed prior to the date hereof, since December 31,
1997, no event has occurred which has had, individually or in the aggregate, a
Material Adverse Effect on BANC ONE.
(b) Except as publicly disclosed in BANC ONE Reports filed prior to the
date hereof, since December 31, 1997, BANC ONE and its Subsidiaries have carried
on their respective businesses in all material respects in the ordinary and
usual course.
(c) Since December 31, 1997, neither BANC ONE nor any of its Subsidiaries
has (i) except for such actions as are in the ordinary course of business
consistent with past practice or except as required by applicable law, (A)
increased the wages, salaries, compensation, pension, or other fringe benefits
or perquisites payable to any executive officer, employee, or director from the
amount thereof in effect as of December 31, 1997, or (B) granted any severance
or termination pay, entered into any contract to make or grant any severance or
termination pay, or paid any bonuses aggregating in excess of 5% of BANC ONE's
1997 salary and employee benefit expenses, other than customary year-end bonuses
for fiscal 1997 or (ii) suffered any strike, work stoppage, slowdown, or other
labor disturbance which, in the reasonable judgment of BANC ONE is likely,
either individually or in the aggregate, to have a Material Adverse Effect on
BANC ONE.
5.9 Legal Proceedings. (a) Neither BANC ONE nor any of its Subsidiaries
is a party to any and there are no pending or, to the best of BANC ONE's
knowledge, threatened, material legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of any
nature against BANC ONE or any of its Subsidiaries or challenging the validity
or propriety of the transactions contemplated by this Agreement or the BANC ONE
Option Agreement as to which there is a reasonable probability of an adverse
determination and which, if adversely determined,
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would, individually or in the aggregate, have a Material Adverse Effect on BANC
ONE.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those that apply to similarly situated bank holding
companies or banks) imposed upon BANC ONE, any of its Subsidiaries or the assets
of BANC ONE or any of its Subsidiaries which has had, or might reasonably be
expected to have, a Material Adverse Effect on BANC ONE or the Surviving
Corporation.
5.10 Taxes and Tax Returns. (a) Each of BANC ONE and its Subsidiaries
has duly filed all federal, state, county, foreign and, to the best of BANC
ONE's knowledge, local information returns and tax returns required to be filed
by it on or prior to the date hereof (all such returns being accurate and
complete in all material respects) and has duly paid or made provisions for the
payment of all Taxes and other governmental charges which have been incurred or
are due or claimed to be due from it by federal, state, county, foreign or local
taxing authorities on or prior to the date of this Agreement (including, without
limitation, if and to the extent applicable, those due in respect of its
properties, income, business, capital stock, deposits, franchises, licenses,
sales and payrolls) other than (i) Taxes or other charges which are not yet
delinquent or are being contested in good faith and have not been finally
determined, or (ii) information returns, tax returns, Taxes or other
governmental charges the failure to file, pay or make provision for, either
individually or in the aggregate, is not likely, in the reasonable judgment of
BANC ONE, to have a Material Adverse Effect on BANC ONE. The income tax returns
of BANC ONE and its Subsidiaries have been examined by the IRS through 1992 and
any liability with respect thereto has been satisfied, and either no material
deficiencies were asserted as a result of such examination for which BANC ONE
does not have adequate reserves or all such deficiencies were satisfied. To the
best of BANC ONE's knowledge, there are no material disputes pending, or claims
asserted for, Taxes or assessments upon BANC ONE or any of its Subsidiaries for
which BANC ONE does not have adequate reserves, nor has BANC ONE or any of its
Subsidiaries given any currently effective waivers extending the statutory
period of limitation applicable to any federal, state, county or local income
tax return for any period. In addition, (A) proper and accurate amounts have
been withheld by BANC ONE and its Subsidiaries from their employees for all
prior periods in compliance in all material respects with the tax withholding
provisions of applicable federal, state and local laws, except where failure to
do so would not have a Material Adverse Effect on BANC ONE, (B) federal, state,
county and local returns which are accurate and complete in all material
respects have been filed by BANC ONE and its Subsidiaries for all periods for
which returns were due with respect to income tax withholding, Social Security
and unemployment taxes,
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except where failure to do so would not have a Material Adverse Effect on BANC
ONE, (C) the amounts shown on such federal, state, local or county returns to be
due and payable have been paid in full or adequate provision therefor has been
included by BANC ONE in its consolidated financial statements as of December 31,
1997, except where failure to do so would not have a Material Adverse Effect on
BANC ONE and (D) there are no Tax liens upon any property or assets of BANC ONE
or its Subsidiaries except liens for current taxes not yet due or liens that
would not have a Material Adverse Effect on BANC ONE. Neither BANC ONE nor any
of its Subsidiaries has been required to include in income any adjustment
pursuant to Section 481 of the Code by reason of a voluntary change in
accounting method initiated by BANC ONE or any of its Subsidiaries, and the IRS
has not initiated or proposed any such adjustment or change in accounting
method, in either case, which has had or is reasonably likely to have a Material
Adverse Effect on BANC ONE. Except as set forth in the financial statements
described in Section 5.6, neither BANC ONE nor any of its Subsidiaries has
entered into a transaction which is being accounted for as an installment
obligation under Section 453 of the Code, which would be reasonably likely to
have a Material Adverse Effect on BANC ONE.
(b) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by BANC ONE or any
Subsidiary of BANC ONE under any contract, plan, program, arrangement or
understanding would be reasonably likely to have a Material Adverse Effect on
BANC ONE.
5.11 Employees. (a) The BANC ONE Disclosure Schedule sets forth a true
and complete list of each material employee benefit plan, arrangement or
agreement that is maintained, or contributed to, as of the date of this
Agreement (the "BANC ONE Benefit Plans") by BANC ONE, any of its Subsidiaries or
by any trade or business, whether or not incorporated (a "BANC ONE ERISA
Affiliate"), all of which together with BANC ONE would be deemed a "single
employer" within the meaning of Section 4001 of ERISA.
(b) BANC ONE has heretofore made available to FCN true and complete copies
of each of the BANC ONE Benefit Plans and certain related documents, including,
but not limited to, (i) the actuarial report for such BANC ONE Benefit Plan (if
applicable) for each of the last two years, and (ii) the most recent
determination letter from the IRS (if applicable) for such BANC ONE Benefit
Plan.
(c) (i) Each of the BANC ONE Benefit Plans has been operated and
administered in all material respects in accordance with applicable laws,
including, but not limited to, ERISA and the Code, (ii) each of the BANC ONE
Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of
the
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Code is so qualified, and there are no existing circumstances or any events that
have occurred that could reasonably be expected to adversely affect the
qualified status of any such Plan, (iii) with respect to each BANC ONE Benefit
Plan which is subject to Title IV of ERISA, the present value of accrued
benefits under such BANC ONE Benefit Plan, based upon the actuarial assumptions
used for funding purposes in the most recent actuarial report prepared by such
BANC ONE Benefit Plan's actuary with respect to such BANC ONE Benefit Plan, did
not, as of its latest valuation date, exceed the then current value of the
assets of such BANC ONE Benefit Plan allocable to such accrued benefits, (iv) no
BANC ONE Benefit Plan provides benefits, including, without limitation, death or
medical benefits (whether or not insured), with respect to current or former
employees or directors of BANC ONE, its Subsidiaries or any BANC ONE ERISA
Affiliate beyond their retirement or other termination of service, other than
(A) coverage mandated by applicable law, (B) death benefits or retirement
benefits under any "employee pension plan" (as such term is defined in Section
3(2) of ERISA), (C) deferred compensation benefits accrued as liabilities on the
books of BANC ONE, its Subsidiaries or the BANC ONE ERISA Affiliates or (D)
benefits the full cost of which is borne by the current or former employee or
director (or his beneficiary), (v) no material liability under Title IV of ERISA
has been incurred by BANC ONE, its Subsidiaries or any BANC ONE ERISA Affiliate
that has not been satisfied in full, and no condition exists that presents a
material risk to BANC ONE, its Subsidiaries or any BANC ONE ERISA Affiliate of
incurring a material liability thereunder, (vi) no BANC ONE Benefit Plan is a
"multiemployer pension plan" (as such term is defined in Section 3(37) of
ERISA), (vii) all contributions or other amounts payable by BANC ONE or its
Subsidiaries as of the Effective Time with respect to each BANC ONE Benefit Plan
in respect of current or prior plan years have been paid or accrued in
accordance with GAAP and Section 412 of the Code, (viii) neither BANC ONE, its
Subsidiaries nor any BANC ONE ERISA Affiliate has engaged in a transaction in
connection with which BANC ONE, its Subsidiaries or any BANC ONE ERISA Affiliate
reasonably could be subject to either a material civil penalty assessed pursuant
to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section
4975 or 4976 of the Code, and (ix) to the best knowledge of BANC ONE there are
no pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the BANC ONE Benefit Plans or any
trusts related thereto which are, in the reasonable judgment of BANC ONE,
likely, either individually or in the aggregate, to have a Material Adverse
Effect on BANC ONE.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) (i) result in any material payment (including,
without limita-
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tion, severance, unemployment compensation, "excess parachute payment" (within
the meaning of Section 280G of the Code), forgiveness of indebtedness or
otherwise) becoming due to any director or any employee of BANC ONE or any of
its affiliates from BANC ONE or any of its affiliates under any BANC ONE Benefit
Plan or otherwise, (ii) materially increase any benefits otherwise payable under
any BANC ONE Benefit Plan or (iii) result in any acceleration of the time of
payment or vesting of any such benefits to any material extent.
5.12 SEC Reports. BANC ONE has previously made available to FCN an
accurate and complete copy of each (a) final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1996 by
BANC ONE with the SEC pursuant to the Securities Act or the Exchange Act (the
"BANC ONE Reports") and prior to the date hereof and (b) communication mailed by
BANC ONE to its stockholders since January 1, 1996 and prior to the date hereof,
and no such registration statement, prospectus, report, schedule, proxy
statement or communication contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading, except that information as of a later date shall
be deemed to modify information as of an earlier date. Since January 1, 1996,
BANC ONE has timely filed all BANC ONE Reports and other documents required to
be filed by it under the Securities Act and the Exchange Act, and, as of their
respective dates, all BANC ONE Reports complied in all material respects with
the published rules and regulations of the SEC with respect thereto.
5.13 Compliance with Applicable Law. BANC ONE and each of its
Subsidiaries hold all material licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to each, and have complied in all material respects with and are not in
default in any material respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to BANC
ONE or any of its Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such noncompliance or default would not,
individually or in the aggregate, have a Material Adverse Effect on BANC ONE.
5.14 Certain Contracts. (a) Neither BANC ONE nor any of its Subsidiaries
is a party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers or employees other than in the ordinary course of business consistent
with past practice, (ii) which, upon the consummation or stockholder approval of
the transactions contemplated by this Agreement will (either alone or upon the
occur-
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rence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from BANC ONE, FCN, the Surviving
Corporation, or any of their respective Subsidiaries to any officer or employee
thereof, (iii) which is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the BANC ONE
Reports, (iv) which materially restricts the conduct of any line of business by
BANC ONE, (v) with or to a labor union or guild (including any collective
bargaining agreement) or (vi) (including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan) any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. BANC ONE has previously made available to FCN true and correct copies
of all employment and deferred compensation agreements which are in writing and
to which BANC ONE is a party. Each contract, arrangement, commitment or
understanding of the type described in this Section 5.14(a), whether or not set
forth in the BANC ONE Disclosure Schedule, is referred to herein as a "BANC ONE
Contract", and neither BANC ONE nor any of its Subsidiaries knows of, or has
received notice of, any violation of the above by any of the other parties
thereto which, individually or in the aggregate, would have a Material Adverse
Effect on BANC ONE.
(b) (i) Each BANC ONE Contract is valid and binding on BANC ONE or any of
its Subsidiaries, as applicable, and in full force and effect, (ii) BANC ONE and
each of its Subsidiaries has in all material respects performed all obligations
required to be performed by it to date under each BANC ONE Contract, except
where such noncompliance, individually or in the aggregate, would not have a
Material Adverse Effect on BANC ONE, and (iii) no event or condition exists
which constitutes or, after notice or lapse of time or both, would constitute, a
material default on the part of BANC ONE or any of its Subsidiaries under any
such BANC ONE Contract, except where such default, individually or in the
aggregate, would not have a Material Adverse Effect on BANC ONE.
5.15 Agreements with Regulatory Agencies. Neither BANC ONE nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been since
January 1, 1996, a recipient of any supervisory letter from, or since January 1,
1996, has adopted any board resolutions at the request of any Regulatory Agency
or other Governmental Entity that currently restricts in any material
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respect the conduct of its business or that in any material manner relates to
its capital adequacy, its credit policies, its management or its business (each,
whether or not set forth in the BANC ONE Disclosure Schedule, a "BANC ONE
Regulatory Agreement"), nor has BANC ONE or any of its Subsidiaries been advised
since January 1, 1996, by any Regulatory Agency or other Governmental Entity
that it is considering issuing or requesting any such Regulatory Agreement.
5.16 Other Activities of BANC ONE and its Subsidiaries.
(a) Neither BANC ONE nor any of its Subsidiaries that is not a bank, a
bank operating subsidiary or a bank service corporation, directly or indirectly
engages in any activity prohibited by the Federal Reserve Board. Without
limiting the generality of the foregoing, any equity investment of BANC ONE and
each Subsidiary that is not a bank, a bank operating subsidiary or a bank
service corporation, is not prohibited by the Federal Reserve Board.
(b) To BANC ONE's knowledge, each BANC ONE Subsidiary which is a bank (a
"BANC ONE Bank Subsidiary") currently performs all Trust Activities with
requisite authority under applicable law of Governmental Entities and in
accordance in all material respects with the agreed-upon terms of the agreements
and instruments governing such Trust Activities, sound fiduciary principles and
applicable law and regulation (specifically including, but not limited to,
Section 9 of Title 12 of the Code of Federal Regulations); there is no
investigation or inquiry by any Governmental Entity pending, or, to the
knowledge of BANC ONE, threatened, against or affecting BANC ONE or any
Significant Subsidiary thereof relating to the compliance by BANC ONE or any
such Significant Subsidiary with sound fiduciary principles and applicable
regulations; and except where any such failure would not have a Material Adverse
Effect on BANC ONE, each employee of a BANC ONE Bank Subsidiary had the
authority to act in the capacity in which he or she acted with respect to Trust
Activities, in each case, in which such employee held himself or herself out as
a representative of a BANC ONE Bank Subsidiary; and each BANC ONE Bank
Subsidiary has established policies and procedures for the purpose of complying
with applicable laws of Governmental Entities relating to Trust Activities, has
followed such policies and procedures in all material respects and has performed
appropriate internal audit reviews of, and has engaged independent accountants
to perform audits of, Trust Activities, which audits since January 1, 1996 have
disclosed no material violations of applicable laws of Governmental Entities or
such policies and procedures.
5.17 Investment Securities. Each of BANC ONE and its Subsidiaries has
good and marketable title to all securities held by it (except securities sold
under repurchase agreements or held in any fiduciary or agency capacity), free
and clear
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of any Lien, except to the extent such securities are pledged in the ordinary
course of business consistent with prudent banking practice to secure
obligations of BANC ONE or any of its Subsidiaries. Such securities are valued
on the books of BANC ONE in accordance with GAAP.
5.18 Interest Rate Risk Management Instruments. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of BANC ONE or for the
account of a customer of BANC ONE or one of its Subsidiaries, were entered into
in the ordinary course of business and, to BANC ONE's knowledge, in accordance
with prudent banking practice and applicable rules, regulations and policies of
any Regulatory Authority and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations of BANC ONE
or one of its Subsidiaries enforceable in accordance with their terms (except as
may be limited by bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the availability of
equitable remedies), and are in full force and effect. BANC ONE and each of its
Subsidiaries has duly performed in all material respects all of its material
obligations thereunder to the extent that such obligations to perform have
accrued; and to BANC ONE's knowledge, there are no material breaches, violations
or defaults or allegations or assertions of such by any party thereunder.
5.19 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of BANC ONE
included in the BANC ONE Form 10-K and for liabilities incurred in the ordinary
course of business consistent with past practice, since December 31, 1997,
neither BANC ONE nor any of its Subsidiaries has incurred any liability of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either alone or when combined with all
similar liabilities, has had, or could reasonably be expected to have, a
Material Adverse Effect on BANC ONE.
5.20 Insurance. BANC ONE and its Subsidiaries have in effect insurance
coverage with reputable insurers, which in respect of amounts, premiums, types
and risks insured, constitutes reasonably adequate coverage against all risks
customarily insured against by bank holding companies and their subsidiaries
comparable in size and operations to BANC ONE and its Subsidiaries.
5.21 Environmental Liability. Except as set forth in the BANC ONE
Disclosure Schedule, there are no legal, administrative, arbitral or other
proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably could result in the
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imposition, on BANC ONE of any liability or obligation arising under common law
or under any local, state or federal environmental statute, regulation or
ordinance including, without limitation, CERCLA, pending or threatened against
BANC ONE, which liability or obligation could reasonably be expected to have a
Material Adverse Effect on BANC ONE. To the knowledge of BANC ONE, there is no
reasonable basis for any such proceeding, claim, action or governmental
investigation that would impose any material liability or obligation that could
reasonably be expected to have a Material Adverse Effect on BANC ONE. BANC ONE
is not subject to any agreement, order, judgment, decree, letter or memorandum
by or with any court, governmental authority, regulatory agency or third party
imposing any material liability or obligation that could reasonably be expected
to have a Material Adverse Effect on BANC ONE.
5.22 State Takeover Laws. (a) The Board of Directors of BANC ONE has
approved the transactions contemplated by this Agreement and the Option
Agreements pursuant to (i) Section 1704 of the OGCL such that the provisions
thereof, and (ii) Article Tenth of the BANC ONE Articles such that the
provisions thereof, will not apply to this Agreement or the Option Agreements or
any of the transactions contemplated hereby or thereby.
5.23 Interim Operations of Newco. Newco has been incorporated on behalf
of BANC ONE solely for the purposes of accomplishing the First Step Merger, has
not engaged in any other business activity and has conducted its operations only
as contemplated hereby.
5.24 Year 2000. None of BANC ONE or any of the BANC ONE Subsidiaries has
received, or reasonably expects to receive, a Year 2000 Deficiency Notification
Letter. BANC ONE has disclosed to FCN a complete and accurate copy of BANC
ONE's plan, including an estimate of the anticipated associated costs, for
addressing Year 2000 Issues as such issues affect BANC ONE and its Subsidiaries.
Between the date of this Agreement and the Effective Time, BANC ONE shall use
commercially practicable efforts to implement such plan.
5.25 Reorganization; Pooling of Interests. As of the date of this
Agreement, assuming compliance by BANC ONE and FCN with the covenants and
agreements set forth in Section 7.13 hereof, BANC ONE has no reason to believe
that the Merger will not qualify as a "reorganization" within the meaning of
Section 368(a) of the Code and as a "pooling of interests" for accounting
purposes.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
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6.1 Conduct of Businesses Prior to the Effective Time. During the period
from the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement (including the FCN Disclosure
Schedule and the BANC ONE Disclosure Schedule) or the Option Agreements, each of
BANC ONE and FCN shall, and shall cause each of their respective Subsidiaries
to, (a) conduct its business in the usual, regular and ordinary course
consistent with past practice, (b) use reasonable best efforts to maintain and
preserve intact its business organization, employees and advantageous business
relationships and retain the services of its key officers and key employees and
(c) take no action which would adversely affect or delay the ability of either
BANC ONE or FCN to obtain any necessary approvals of any Regulatory Agency or
other governmental authority required for the transactions contemplated hereby
or to perform its covenants and agreements under this Agreement or the Option
Agreements or to consummate the transactions contemplated hereby or thereby.
6.2 Forbearances. During the period from the date of this Agreement to
the Effective Time, except as set forth in the BANC ONE Disclosure Schedule or
the FCN Disclosure Schedule, as the case may be, and, except as expressly
contemplated or permitted by this Agreement or the Option Agreements, none of
BANC ONE, Newco and FCN shall, and neither BANC ONE nor FCN shall permit any of
their respective Subsidiaries to, without the prior written consent of BANC ONE,
in the case of actions proposed to be undertaken by FCN, or of FCN, in the case
of actions proposed to be undertaken by BANC ONE or Newco:
(a) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money (other than short-
term indebtedness incurred to refinance short-term indebtedness and
indebtedness of FCN or any of its wholly-owned Subsidiaries to FCN or any
of its Subsidiaries, on the one hand, or of BANC ONE or any of its
Subsidiaries to BANC ONE or any of its wholly-owned Subsidiaries, on the
other hand), assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other individual, corporation
or other entity, or make any loan or advance (it being understood and
agreed that incurrence of indebtedness in the ordinary course of business
shall include, without limitation, the creation of deposit liabilities,
purchases of Federal funds, sales of certificates of deposit and entering
into repurchase agreements);
(b) (i) adjust, split, combine or reclassify any capital stock;
(ii) make, declare or pay any dividend, or make any other
distribution on, or directly or indirectly redeem,
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purchase or otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares of
its capital stock (except (A) in the case of FCN, for regular quarterly cash
dividends at a rate not in excess of $0.44 per share of FCN Common Stock and
regular quarterly cash dividends on the FCN Preferred Stock outstanding as of
the date hereof at the rate set forth in the applicable certificate of
designation, (B) in the case of BANC ONE, for regular quarterly cash
dividends on BANC ONE Common Stock at a rate not in excess of $0.38 per share
of BANC ONE Common Stock and regular quarterly cash dividends on the BANC ONE
Preferred Stock outstanding as of the date hereof at the rates set forth in
the BANC ONE Articles for such BANC ONE Preferred Stock, (C) dividends paid
by any of the Subsidiaries of each of BANC ONE and FCN to BANC ONE or FCN or
any of their Subsidiaries, respectively, and dividends paid in the ordinary
course of business consistent with past practice by any subsidiaries (whether
or not wholly owned) of each of BANC ONE and FCN) and (D) in the case of BANC
ONE, for the redemption of all of the shares of BANC ONE Series C Preferred
Stock outstanding as of the date hereof as described in the BANC ONE 10-K;
(iii) grant any stock appreciation rights or grant any individual,
corporation or other entity any right to acquire any shares of its capital
stock (except options converted in connection with the transactions
contemplated by the First Commerce Merger Agreement and for regular periodic
grants of options to purchase stock made in the ordinary course of business
consistent with past practice pursuant to the BANC ONE Stock Plans and the
FCN Stock Plans); or
(iv) issue any additional shares of capital stock except pursuant to
(A) the exercise of stock options or warrants outstanding as of the date
hereof and options issued thereafter in compliance with Section 6.2(b)(iii)
hereof, (B) the Option Agreements, (C) in the case of BANC ONE, the
consummation of the transactions contemplated by the First Commerce Merger
Agreement or (D) in the case of FCN, (x) in the ordinary course of business
and consistent with past practice, in connection with the ESPSP and the FCN
Dividend Reinvestment Plan and (y) the Roney Agreement;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity
other than a Subsidiary, or cancel, release or assign any indebtedness to
any such person or any claims held by any such person, except in the
ordinary course of business consistent with past practice or pursuant to
contracts or agreements in force at the date of this Agreement;
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(d) except for transactions in the ordinary course of business
consistent with past practice or pursuant to contracts or agreements in
force at the date of this Agreement, make any material investment either by
purchase of stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any other individual,
corporation or other entity other than a Subsidiary thereof;
(e) except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any material
contract or agreement, or make any change in any of its material leases or
contracts, other than renewals of contracts and leases without material
adverse changes of terms;
(f) increase in any manner the compensation or fringe benefits of any
of its employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees or become a party to,
amend or commit itself to any pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee other than in the ordinary course of business
consistent with past practice, or accelerate the vesting of, or the lapsing
of restrictions with respect to any stock options or other stock-based
compensation;
(g) solicit, encourage or authorize any individual, corporation or
other entity to solicit or encourage from any third party any inquiries or
proposals relating to the disposition of its business or assets, or the
acquisition of its voting securities, or the merger of it or any of its
Subsidiaries with any corporation or other entity other than as provided by
this Agreement (and each party shall promptly notify the other of all of
the relevant details relating to all inquiries and proposals which it may
receive relating to any of such matters);
(h) settle any claim, action or proceeding involving money damages,
except in the ordinary course of business consistent with past practice;
(i) take any action that would prevent or impede the Second Step
Merger from qualifying (i) for "pooling of interests" accounting treatment
or (ii) as a reorganization within the meaning of Section 368 of the Code;
provided, however, that nothing contained herein shall limit the ability of
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BANC ONE or FCN to exercise its rights under the FCN Option Agreement or
the BANC ONE Option Agreement, as the case may be;
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(j) amend its certificate of incorporation or articles of
incorporation, as the case may be, or its bylaws or regulations, as the
case may be;
(k) other than in prior consultation with the other party to this
Agreement, restructure or materially change its investment securities
portfolio or its gap position, through purchases, sales or otherwise, or
the manner in which the portfolio is classified or reported;
(l) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set
forth in Article VIII not being satisfied or in a violation of any
provision of this Agreement, except, in every case, as may be required by
applicable law;
(m) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP; or
(n) agree to, or make any commitment to, take any of the actions
prohibited by this Section 6.2.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Regulatory Matters. (a) BANC ONE and FCN shall promptly prepare and
file with the SEC the Joint Proxy Statement and BANC ONE and Newco shall
promptly prepare and file with the SEC the S-4, in which the Joint Proxy
Statement will be included as a prospectus. Each of BANC ONE, FCN and Newco
shall use all reasonable efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing, and BANC ONE and
FCN shall thereafter mail or deliver the Joint Proxy Statement to their
respective stockholders. BANC ONE shall also use all reasonable efforts to
obtain all necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement, and FCN
shall furnish all information concerning FCN and the holders of FCN Capital
Stock as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their best
efforts to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all
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third parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including, without
limitation, the Second Step Merger), and to comply with the terms and conditions
of all such permits, consents, approvals and authorizations of all such
Governmental Entities. BANC ONE and FCN shall have the right to review in
advance, and, to the extent practicable, each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all the
information relating to FCN or BANC ONE, as the case may be, and any of their
respective Subsidiaries, which appear in any filing made with, or written
materials submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as promptly
as practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) BANC ONE and FCN shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Joint Proxy Statement, the S-4 or any other statement,
filing, notice or application made by or on behalf of BANC ONE, FCN or any of
their respective Subsidiaries to any Governmental Entity in connection with the
Second Step Merger and the other transactions contemplated by this Agreement.
(d) BANC ONE and FCN shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement which causes
such party to believe that there is a reasonable likelihood that any Requisite
Regulatory Approval will not be obtained or that the receipt of any such
approval will be materially delayed.
7.2 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each of BANC ONE and
FCN, for the purposes of verifying the representations and warranties of the
other and preparing for the Merger and the other matters contemplated by this
Agreement, shall, and shall cause each of their respective Subsidiaries to,
afford to the officers, employees, accountants, counsel and other
representatives of the other party, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period,
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each of BANC ONE and FCN shall, and shall cause their respective Subsidiaries
to, make available to the other party (i) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws or federal or
state banking laws, savings and loan or savings association laws (other than
reports or documents which BANC ONE or FCN, as the case may be, is not permitted
to disclose under applicable law) and (ii) all other information concerning its
business, properties and personnel as such party may reasonably request. Neither
BANC ONE nor FCN nor any of their respective Subsidiaries shall be required to
provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of BANC ONE's or FCN's, as the case may
be, customers, jeopardize the attorney-client privilege of the institution in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Each of BANC ONE and FCN shall hold all information furnished by or on
behalf of the other party or any of such party's Subsidiaries or representatives
pursuant to Section 7.2(a) in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement, dated March
25, 1998, between BANC ONE and FCN (the "Confidentiality Agreement").
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
7.3 Stockholders' Approvals. Each of BANC ONE and FCN shall call a
meeting of its stockholders to be held as soon as reasonably practicable for the
purpose of voting upon the requisite stockholder approvals required in
connection with this Agreement, the First Step Merger and the Second Step
Merger, and each shall use its best efforts to cause such meetings to occur on
the same date. The Board of Directors of each of BANC ONE and FCN shall
recommend to its shareholders the approval of the Merger, this Agreement and the
transactions contemplated hereby.
7.4 Legal Conditions to Merger. Each of BANC ONE and FCN shall, and shall
cause its Subsidiaries to, use their best efforts (a) to take, or cause to be
taken, all actions necessary, proper or advisable to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries with
respect to the First Step Merger and the Second Step Merger and, subject to the
conditions set forth in Article VIII hereof, to consummate the transactions
contem-
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plated by this Agreement, and (b) to obtain (and to cooperate with the other
party to obtain) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity and any other third party which is
required to be obtained by FCN or BANC ONE or any of their respective
Subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement.
7.5 Affiliates; Publication of Combined Financial Results. (a) Each of
BANC ONE and FCN shall use its best efforts to cause each director, executive
officer and other person who is an "affiliate" (for purposes of Rule 145 under
the Securities Act and for purposes of qualifying the Second Step Merger for
"pooling of interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this Agreement, and
prior to the date of the stockholders meetings called by BANC ONE and FCN to
approve this Agreement, a written agreement, in the form of Exhibit 6.5(a)(1) or
(2), as applicable, hereto, providing that such person will not sell, pledge,
transfer or otherwise dispose of any shares of BANC ONE Capital Stock, Newco
Capital Stock or FCN Capital Stock held by such "affiliate" and, in the case of
the "affiliates" of FCN, the shares of Newco Capital Stock to be received by
such "affiliate" in the Second Step Merger: (i) in the case of shares of Newco
Capital Stock to be received by "affiliates" of FCN in the Second Step Merger,
except in compliance with the applicable provisions of the Securities Act and
the rules and regulations thereunder; and (ii) except to the extent and under
the conditions permitted therein, during the period commencing 30 days prior to
the Effective Time and ending at the time of the publication of financial
results covering at least 30 days of combined operations of Newco and FCN.
(b) The Surviving Corporation shall use its best efforts to publish as
promptly as reasonably practical, but in no event later than 90 days after the
end of the first month after the Effective Time in which there are at least 30
days of post-Merger combined operations (which month may be the month in which
the Effective Time occurs), combined sales and net income figures as
contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135.
7.6 Stock Exchange Listing. BANC ONE shall cause the shares of Newco
Common Stock and the Newco New Preferred Stock to be issued in the Merger to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the First Effective Time.
7.7 Employee Benefit Plans; Certain Insurance. (a) From and after the
Effective Time, unless otherwise mutually determined, the FCN Benefit Plans and
BANC ONE Benefit Plans in effect as of the date of this Agreement shall remain
in effect with respect to employees of FCN or Newco (or their
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Subsidiaries), respectively, covered by such plans at the Effective Time until
such time as the Surviving Corporation shall, subject to applicable law, the
terms of this Agreement and the terms of such plans, adopt new benefit plans
with respect to employees of the Surviving Corporation and its Subsidiaries (the
"New Benefit Plans"). Prior to the Closing Date, FCN and BANC ONE shall
cooperate in reviewing, evaluating and analyzing the BANC ONE Benefit Plans and
FCN Benefit Plans with a view towards developing appropriate New Benefit Plans
for the employees covered thereby subsequent to the Second Step Merger. It is
the intention of FCN and BANC ONE to develop New Benefit Plans, as soon as
reasonably practicable after the Effective Time, which, among other things, (i)
treat similarly situated employees on a substantially equivalent basis, taking
into account all relevant factors, including, without limitation, duties,
geographic location, tenure, qualifications and abilities, and (ii) do not
discriminate between employees of the Surviving Corporation who were covered by
FCN Benefit Plans, on the one hand, and those covered by BANC ONE Benefit Plans,
on the other, at the Effective Time.
(b) The foregoing notwithstanding, the Surviving Corporation agrees to
honor in accordance with their terms all benefits vested as of the date hereof
under the BANC ONE Benefit Plans or the FCN Benefit Plans or under other
contracts, arrangements, commitments, or understandings described in the BANC
ONE Disclosure Schedule and the FCN Disclosure Schedule.
(c) Nothing in this Section 7.7 shall be interpreted as preventing the
Surviving Corporation from amending, modifying or terminating any BANC ONE
Benefit Plans, FCN Benefit Plans, or other contracts, arrangements, commitments
or understandings, in accordance with their terms and applicable law.
(d) From and after the Effective Time, the policy of Newco in respect of
directors' and officers' insurance (including but not limited to persons covered
and the scope and amount of coverage thereunder) shall be the same as the policy
of FCN in effect as of the date of this Agreement.
(e) Certain additional agreements of BANC ONE and FCN with respect to
compensation and benefits matters are set forth on Schedule 7.7(e) hereto.
7.8 Indemnification; Directors' and Officers' Insurance. (a) In the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation in which
any individual who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer or
employee of BANC ONE, FCN, Newco or any of their respective Subsidiaries,
including any entity
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specified in the BANC ONE Disclosure or the FCN Disclosure Schedule (the
"Indemnified Parties"), is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director, officer or employee of BANC ONE, FCN, Newco
any of their respective Subsidiaries or any entity specified in the BANC ONE
Disclosure Schedule or the FCN Disclosure Schedule or any of their respective
predecessors or (ii) this Agreement, the Option Agreements or any of the
transactions contemplated hereby or thereby, whether in any case asserted or
arising before or after the Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto. It
is understood and agreed that after the Effective Time, Newco shall indemnify
and hold harmless, as and to the fullest extent permitted by law, each such
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of any
undertaking required by applicable law), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such threatened or actual
claim, action, suit, proceeding or investigation (whether asserted of arising
before or after the Effective Time); and Newco, after consultation with an
Indemnified Party, shall retain counsel and direct the defense thereof,
provided, however, that by virtue of the obligations herein set forth, Newco
- -------- -------
shall not be liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses incurred by any Indemnified Party in connection
with the defense thereof, except that if Newco fails or elects not to assume
such defense or counsel for the Indemnified Parties reasonably advises the
Indemnified Parties that there are issues which raise conflicts of interest
between Newco and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them after consultation with Newco, and Newco
shall pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (B) Newco shall be obligated pursuant to this paragraph to pay for only
one firm of counsel for all Indemnified Parties, unless an Indemnified Party
shall have reasonably concluded, based on the advice of counsel and after
consultation with Newco, that in order to be adequately represented, separate
counsel is necessary for such Indemnified Party, in which case, Newco shall be
obligated to pay for such separate counsel, (C) Newco shall not be liable for
any settlement effected without its prior written consent (which consent shall
not be unreasonably withheld) and (D) Newco shall have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemni-
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fied Party in the manner contemplated hereby is prohibited by applicable law.
Any Indemnified Party wishing to claim Indemnification under this Section 7.8,
upon learning of any such claim, action, suit, proceeding or investigation,
shall notify Newco thereof, provided that the failure to so notify shall not
affect the obligations of Newco under this Section 7.8 except to the extent such
failure to notify materially prejudices Newco. Newco's obligations under this
Section 7.8 continue in full force and effect for a period of six years from the
Effective Time (or the period of the applicable statute of limitations, if
longer); provided, however, that all rights to indemnification in respect of any
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claim (a "Claim") asserted or made within such period shall continue until the
final disposition of such Claim.
(b) BANC ONE (and Newco, from and after the First Effective Time) shall
use its best efforts to cause the individuals serving as officers and directors
of FCN, its Subsidiaries or any entity specified in the FCN Disclosure Schedule
immediately prior to the Effective Time to be covered for a period of six (6)
years from the Effective Time (or the period of the applicable statute of
limitations, if longer) by the directors' and officers' liability insurance
policy maintained by FCN (provided that Newco may substitute therefor policies
--------
of at least the same coverage and amounts containing terms and conditions which
are not less advantageous than such policy) with respect to acts or omissions
occurring prior to the Effective Time which were committed by such officers and
directors in their capacity as such; provided, however, that in no event shall
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Newco be required to expend more than 200% of the current amount expended by FCN
(the "Insurance Amount") to maintain or procure insurance coverage pursuant
hereto and provided further that if Newco is unable to maintain or obtain the
insurance called for by this Section 7.8(b), Newco shall use its best efforts to
obtain as much comparable insurance as available for the Insurance Amount.
(c) In the event Newco or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Newco
assume the obligations set forth in this section.
(d) The provisions of this Section 7.8 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
7.9 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement
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(including, without limitation, any merger between a Subsidiary of FCN, on the
one hand, and a Subsidiary of BANC ONE or Newco, on the other) or to vest the
surviving corporation in the First Step Merger or the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the First Step Merger or the Second Step
Merger, as the case may be, the proper officers and directors of each party to
this Agreement and their respective Subsidiaries shall take all such necessary
action as may be reasonably requested by, and at the sole expense of, BANC ONE.
7.10 Advice of Changes. BANC ONE and FCN shall each promptly advise the
other party of any change or event (i) having a Material Adverse Effect on it or
(ii) which it believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein.
7.11 Dividends. After the date of this Agreement, each of BANC ONE and
FCN shall coordinate with the other the declaration of any dividends in respect
of BANC ONE Common Stock and FCN Common Stock and the record dates and payment
dates relating thereto, it being the intention of the parties hereto that
holders of BANC ONE Common Stock or FCN Common Stock shall not receive two
dividends, or fail to receive one dividend, for any quarter with respect to
their shares of BANC ONE Common Stock and/or FCN Common Stock and any shares of
Newco Capital Stock any such holder receives in exchange therefor in the Second
Step Merger.
7.12 Authorized Stock of Newco. BANC ONE and Newco shall, prior to the
First Effective Time, take such corporate, stockholder and other action as is
required to amend the Newco Certificate of Incorporation in order to authorize
sufficient shares of Newco Capital Stock to complete the transactions
contemplated hereby.
7.13 Pooling of Interests. Each of BANC ONE and FCN shall, prior to the
First Effective Time, coordinate with the other party with respect to the
issuance of, and pursuant thereto shall issue, shares of BANC ONE Common Stock
or FCN Common Stock, as may be appropriate, in such manner, and limited to such
number, as is necessary to reduce the aggregate number of "tainted treasury
shares" of such parties to a number that is consistent with the accounting of
the Merger as a "pooling of interests" under GAAP.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect the Second Step
Merger. The respective obligations of the parties
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to effect the Second Step Merger, and of BANC ONE and Newco to effect the First
Step Merger, shall be subject to the satisfaction at or prior to the Effective
Time (and the First Effective Time, in the case of the consummation of the First
Step Merger) of the following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby, including the Second Step Merger and, in the case of
the holders of BANC ONE Common Stock, the First Step Merger, shall have
been approved and adopted by the respective requisite affirmative votes of
the holders of FCN Common Stock and BANC ONE Common Stock entitled to vote
thereon.
(b) NYSE Listing. The shares of Newco Common Stock and Newco New
Preferred Stockwhich shall be issued to the stockholders of FCN upon
consummation of the Merger shall have been authorized for listing on the
NYSE, subject to official notice of issuance.
(c) Other Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby shall have been obtained and shall
remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired (all such approvals and the expiration
of all such waiting periods being referred to herein as the "Requisite
Regulatory Approvals").
(d) S-4. The S-4 shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the S-4 shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the
consummation of the First Step Merger, the Second Step Merger or any of the
other transactions contemplated by this Agreement shall be in effect. No
statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, materially restricts or makes illegal consummation of the First
Step Merger or the Second Step Merger.
(f) Federal Tax Opinion. FCN and BANC ONE each shall have received an
opinion of Wachtell, Lipton, Rosen & Katz, in form and substance reasonably
satisfactory to BANC ONE and FCN, dated the Closing Date, substantially to
the effect that, on the basis of facts, representations and assumptions set
forth in such opinion
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which are consistent with the state of facts existing at the Effective
Time:
(i) Each of the First Step Merger and the Second Step Merger
will constitute a reorganization under Section 368(a) of the Code;
BANC ONE and Newco will each be a party to the reorganization in
respect of the First Step Merger; and Newco and FCN will each be a
party to the reorganization in respect of the Second Step Merger;
(ii) No gain or loss will be recognized by BANC ONE or Newco as a
result of the First Step Merger or Newco or FCN as a result of the
Second Step Merger;
(iii) No gain or loss will be recognized by stockholders of BANC
ONE who receive solely Newco Capital Stock for their BANC ONE Capital
Stock pursuant to the First Step Merger; and
(iv) No gain or loss will be recognized by the stockholders of
FCN who exchange their FCN Capital Stock solely for Newco Capital Stock
pursuant to the Second Step Merger (except with respect to cash received in
lieu of a fractional share interest in Newco Capital Stock).
In rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers of BANC ONE,
Newco, FCN and others.
(g) Pooling of Interests. BANC ONE and FCN shall each have received a
letter from their respective independent accountants addressed to FCN or
BANC ONE, as the case may be, to the effect that the First Step Merger and
the Second Step Merger, taken together, will qualify for "pooling of
interests" accounting treatment.
8.2 Conditions to Obligations of BANC ONE and Newco. The obligations of
BANC ONE and Newco to effect the First Step Merger, and the obligation of Newco
to effect the Second Step Merger, are also subject to the satisfaction, or
waiver by BANC ONE or Newco, at or prior to the Effective Time, of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of FCN set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date, provided,
however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct unless the failure or
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failures of such representations and warranties to be so true and correct,
individually or in the aggregate, and without giving effect to any
qualification as to materiality set forth in such representations or
warranties, would have a Material Adverse Effect on FCN. BANC ONE shall
have received a certificate signed on behalf of FCN by the Chief Executive
Officer and the Chief Financial Officer of FCN to the foregoing effect.
(b) Performance of Obligations of FCN. FCN shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and BANC ONE shall have
received a certificate signed on behalf of FCN by the Chief Executive
Officer and the Chief Financial Officer of FCN to such effect.
8.3 Conditions to Obligations of FCN. The obligation of FCN to effect the
Second Step Merger is also subject to the satisfaction or waiver by FCN at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of BANC ONE and Newco set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date, provided, however, that for purposes of this paragraph, such
representations and warranties shall be deemed to be true and correct
unless the failure or failures of such representations and warranties to be
so true and correct, individually or in the aggregate, and without giving
effect to any qualification as to materiality set forth in such
representations or warranties, would have a Material Adverse Effect on BANC
ONE. FCN shall have received a certificate signed on behalf of BANC ONE by
the Chief Executive Officer and the Chief Financial Officer of BANC ONE to
the foregoing effect.
(b) Performance of Obligations of BANC ONE. Each of BANC ONE and
Newco shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Closing Date, and FCN shall have received a certificate signed on behalf of
BANC ONE by the Chief Executive Officer and the Chief Financial Officer of
BANC ONE to such effect.
(c) Consummation of the First Step Merger. The First Effective Time
shall have occurred and the First Step Merger shall have been consummated.
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ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time prior to
the First Effective Time, whether before or after approval of the matters
presented in connection with the Second Step Merger by the stockholders of BANC
ONE or FCN:
(a) by mutual consent of BANC ONE and FCN in a written instrument, if
the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either the Board of Directors of BANC ONE or the Board of
Directors of FCN if any Governmental Entity which must grant a Requisite
Regulatory Approval has denied approval of the Merger and such denial has
become final and nonappealable or any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order permanently
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(c) by either the Board of Directors of BANC ONE or the Board of
Directors of FCN if the Second Step Merger shall not have been consummated
on or before the first anniversary of the date of this Agreement, unless
the failure of the Closing to occur by such date shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein;
(d) by either the Board of Directors of BANC ONE or the Board of
Directors of FCN (provided that the terminating party is not then in breach
of any representation, warranty, covenant or other agreement contained
herein) if there shall have been a breach of any of the covenants or
agreements or any of the representations or warranties set forth in this
Agreement on the part of FCN, in the case of a termination by BANC ONE, or
BANC ONE or Newco, in the case of a termination by FCN, which breach,
individually or together with other such breaches, would constitute, if
occurring or continuing on the Closing Date, the failure of the conditions
set forth in Section 8.2 or 8.3, as the case may be, and which is not cured
within 45 days following written notice to the party committing such breach
or by its nature or timing cannot be cured prior to the Closing Date; or
(e) by either BANC ONE or FCN if any approval of the stockholders of
BANC ONE or FCN required for the consummation of the Second Step Merger, or
the approval
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<PAGE>
of the shareholders of BANC ONE required for the consummation of the First
Step Merger, shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or at any
adjournment or postponement thereof.
9.2 Effect of Termination. In the event of termination of this Agreement
by either BANC ONE or FCN as provided in Section 9.1, this Agreement shall
forthwith become void and have no effect, and none of BANC ONE, FCN, Newco, any
of their respective Subsidiaries or any of the officers or directors of any of
them shall have any liability of any nature whatsoever hereunder, or in
connection with the transactions contemplated hereby, except that (i) Sections
7.2(b), 9.2, 10.2 and 10.3 shall survive any termination of this Agreement, and
(ii) notwithstanding anything to the contrary contained in this Agreement,
neither BANC ONE nor FCN shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement.
9.3 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with Merger by the stockholders of BANC ONE and
FCN; provided, however, that after any approval of the transactions contemplated
-------- -------
by this Agreement by the respective stockholders of BANC ONE or FCN, there may
not be, without further approval of such stockholders, any amendment of this
Agreement which changes the amount or the form of the consideration to be
delivered hereunder to the holders of FCN Common Stock, or into which shares of
BANC ONE Capital Stock shall be converted pursuant to the First Step Merger,
other than as contemplated by this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein; provided, however,
-------- -------
that after any approval of the transactions contemplated by this Agreement by
the respective stockholders of BANC ONE or FCN, there may not be, without
further approval of such stockholders, any extension or waiver of this Agreement
or any portion thereof which reduces the amount or changes the form of the
consideration to be delivered to the holders of FCN Common Stock hereunder, or
into which shares of BANC ONE Capital Stock shall be converted pursuant to the
First Step
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<PAGE>
Merger, other than as contemplated by this Agreement. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in a written instrument signed on behalf of such party, but such extension
or waiver or failure to insist on strict compliance with an obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1 Closing. Subject to the terms and conditions of this Agreement and
the Option Agreements, the closing of the Second Step Merger (the "Closing")
will take place at 10:00 a.m. on a date and at a place to be specified by the
parties, which shall be no later than five business days after the satisfaction
or waiver (subject to applicable law) of the latest to occur of the conditions
set forth in Article VIII hereof, unless extended by mutual agreement of the
parties (the "Closing Date").
10.2 Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement (other than the Option
Agreements and the Confidentiality Agreement, which shall terminate in
accordance with terms) shall survive the Effective Time, except for those
covenants and agreements contained herein and therein which by their terms apply
in whole or in part after the Effective Time.
10.3 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, provided, however, that the costs and expenses of
printing and mailing the Joint Proxy Statement, and all filing and other fees
paid to the SEC in connection with the Merger, shall be borne equally by BANC
ONE and FCN.
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to BANC ONE or Newco, to:
BANC ONE CORPORATION
100 East Broad Street
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<PAGE>
Columbus, Ohio 43271
Attn: General Counsel
Fax: (614) 248-2010
and
(b) if to FCN, to:
First Chicago NBD Corporation
One First National Plaza
Chicago, Illinois 60670
Attn: General Counsel
Fax: (312) 732-6393
10.5 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require FCN,
BANC ONE, Newco or any of their respective Subsidiaries or affiliates to take
any action which would violate any applicable law, rule or regulation.
10.6 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
10.7 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof other than the Option
Agreements and the Confidentiality Agreement.
10.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to any
applicable conflicts of law (except to the extent that mandatory provisions of
federal law or of the DGCL or OGCL are applicable).
10.9 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering
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<PAGE>
invalid or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
10.10 Publicity. Except as otherwise required by applicable law or the
rules of the NYSE, none of BANC ONE, Newco or FCN shall, or shall permit any of
its Subsidiaries to, issue or cause the publication of any press release or
other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the consent of FCN, in the case of a proposed accouncement or statement by BANC
ONE or Newco, or BANC ONE, in the case of a proposed announcement or statement
by FCN, which consent shall not be unreasonably withheld.
10.11 Assignment; Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except as otherwise
specifically provided in Section 7.8, this Agreement (including the documents
and instruments referred to herein) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
10.12 Certain Agreements of Newco. Newco hereby consents, effective as of
the First Effective Time, to be sued and served with process in the State of
Ohio and irrevocably appoints the Ohio Secretary as its agent to accept service
of process in any proceeding in the State of Ohio to enforce against it any
obligation of BANC ONE or to enforce the rights of a BANC ONE shareholder who
dissents from the First Step Merger pursuant to Section 1.6.
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<PAGE>
IN WITNESS WHEREOF, BANC ONE, FCN and Newco have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
FIRST CHICAGO NBD CORPORATION BANC ONE CORPORATION
By: Verne G. Istock By: /s/ John B. McCoy
------------------------ -----------------
Chairman, President and Chairman and
Chief Executive Officer Chief Executive Officer
HORNET REORGANIZATION
CORPORATION
By: /s/ John B. McCoy
-----------------
Chairman and
Chief Executive Officer
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AMENDMENT
to
AGREEMENT AND PLAN OF MERGER
AMENDMENT, dated as of July 21, 1998 (this "Amendment") by and among
BANC ONE CORPORATION, an Ohio corporation ("BANC ONE"), BANK ONE CORPORATION, a
Delaware corporation, a wholly-owned subsidiary of BANC ONE ("Newco") (formerly
Hornet Reorganization corporation), and First Chicago NBD Corporation, a
Delaware corporation ("FCN").
WHEREAS, BANC ONE, FCN and Newco have previously entered into that
certain Agreement and Plan of Reorganization, dated as of April 10, 1998 (the
"Agreement"); and
WHEREAS, such persons wish to amend the Agreement, pursuant to
Sections 1.8 and 9.3 of the Agreement, in the manner set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
1. All capitalized terms used and not defined herein shall have the
meanings given them in the Agreement, and each reference in this Amendment to
"this Agreement", "hereof", "herein", "hereunder" or "hereby" and each other
similar reference shall be deemed to refer to the Agreement as amended hereby.
All references to the Agreement in any other agreement between BANC ONE and FCN
relating to the transactions contemplated by the Agreement shall be deemed to
refer to the Agreement as amended hereby.
2. The title of Exhibit A to the Agreement (Form of Certificate of
Incorporation of Surviving Corporation) (the "Form of Certificate") shall be
amended to state in its entirety as follows: "CERTIFICATE OF INCORPORATION OF
BANK ONE CORPORATION".
3. Article FIRST of the Form of Certificate shall be amended to
state in its entirety as follows: "FIRST. The name of the corporation is BANK
ONE CORPORATION."
4. Article FOURTH of the Form of Certificate is hereby amended by
deleting each occurrence of the phrase "without par value" and substituting
therefor the phrase ", par value $.0l per share".
5. Article FOURTH of the Form of Certificate is hereby further
amended by adding the following after paragraph (d) of Part I thereof:
(e) Pursuant to the authority conferred by this Article
FOURTH upon the Board of Directors, the Board of Directors has created
two series of Preferred Stock, in each case par value $.01 per share,
of the Corporation and has stated the designation and number of
shares, and has fixed the relative rights, preferences and
<PAGE>
limitations thereof, in each case as set forth in a Certificate of
Designations filed in the Office of the Secretary of State of Delaware
on ______ 1998, as set forth in Exhibit A and Exhibit B, respectively,
to this Certificate of Incorporation.
6. Article SEVENTH of the Form of Certificate is hereby amended by
deleting such Article SEVENTH in its entirety and substituting therefor the
following:
SEVENTH. (a) The corporation shall indemnify each person who was
or is a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that
he is or was a director, officer or employee of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture or other enterprise, to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as the same exists
or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the corporation to
provide broader indemnification rights than said law permitted the
corporation to provided prior to such amendment) or any other
applicable laws as presently or hereinafter in effect against all
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection therewith. Without limiting the generality of the
foregoing, the corporation may enter into one or more agreements with
any person that provide for indemnification greater or different than
that provided in this Article Seventh.
(b) Expenses incurred by a director, officer or employee in
defending a civil or criminal action, suit or proceeding shall be paid
by the corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of
the director, officer or employee to repay such amount if it shall be
ultimately be determined that he is not entitled to be indemnified by
the corporation.
(c) The indemnification and advancement of expenses provided by
this Article shall not be deemed exclusive of any other rights to
which a person seeking indemnification and advancement of expenses may
be entitled under any statute, by-law, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding
such office, and shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefits of the
heirs, executors and administrators of such a person.
(d) For the purposes of this Article Seventh, references to "the
corporation" include, in addition to the resulting or surviving
corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a
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consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article
Seventh with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its
separate existence had continued.
(e) Neither the corporation nor its directors or officers nor
any person acting on its behalf shall be liable to any person for any
determination as to the existence or absence of conduct that would
provide a basis for making or refusing to make any payment under this
Article Seventh, in reliance upon the advice of counsel.
(f) A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the General Corporation Law of the State of
Delaware or (iv) for any transaction from which the director derived
any improper personal benefit. If the General Corporation Law of the
State of Delaware is hereafter amended to authorize corporate action
further eliminating or limiting the personal liability of directors,
then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the corporation shall not adversely affect any right
or protection of a director of the corporation existing at the time of
such repeal or modification.
(g) Neither the amendment nor repeal of this Article Seventh,
nor the adoption of any provision of this Certificate of Incorporation
inconsistent with this Article Seventh, shall eliminate or reduce the
effect of this Article Seventh in respect of any matter occurring, or
any cause of action, suit or claim that would accrue or arise, prior
to such amendment, repeal or adoption of an inconsistent provision.
7. Article TENTH of the Form of Certificate is hereby amended by
deleting the footnote at the end of paragraph (a) thereof and by inserting the
word "next" immediately before the word "following" in the last sentence of such
paragraph (a).
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8. Article TENTH of the Form of Certificate is hereby further
amended by deleting the second and third sentences of paragraph (c) thereof and
substituting therefor the following: A director, including any director chosen
to fill a newly created directorship or any vacancy, shall hold office until the
next annual meeting following his election or appointment to the Board of
Directors, as applicable, and until such director's successor shall have been
elected and qualified. In no case will a decrease in the number of directors
shorten the term of any incumbent director."
9. Article TENTH of the Form of Certificate is hereby further
amended by deleting paragraphs (d) and (f) thereof and redesignating paragraph
(e) as paragraph (d).
10. Article TWELFTH of the Form of Certificate is hereby amended by
deleting the phrase "this Article Thirteenth" each time it appears and
substituting therefor the phrase "this Article Twelfth".
11. Article THIRTEENTH of the Form of Certificate is hereby amended
by deleting the words "BANC ONE Corporation" and substituting therefor "BANC ONE
CORPORATION", and by deleting the words "Newco Corporation" and substituting
therefor "BANK ONE CORPORATION."
12. The paragraph immediately following Article THIRTEENTH and the
signature block of the Form of Certificate are each hereby amended by deleting
the words "BANC ONE CORPORATION)" occurring therein and substituting therefor
"BANK ONE CORPORATION".
13. The title of Exhibit B to the Agreement (Form of By-Laws of
Surviving Corporation) (the "Form of By-Laws") is hereby amended by deleting the
phrase "BANC ONE CORPORATION" therefrom and substituting therefor the phrase
"BANK ONE CORPORATION."
14. Article III of the Form of By-Laws is hereby amended by deleting
the second sentence of Section 2 thereof and substituting therefor the
following: "At each annual meeting of stockholders, successors of the directors
shall be elected for a term expiring at the annual meeting next following such
annual meeting."
15. Article III of the Form of By-Laws is hereby further amended by
deleting the third and fourth sentences of Section 3 thereof and substituting
therefor the following: "A director, including any director chosen to fill a
newly created directorship or any vacancy, shall hold office until the next
annual meeting following his election or appointment to the Board of Directors,
as applicable, and until such director's successor shall have been elected and
qualified. In no case will a decrease in the number of directors shorten the
term of any incumbent director."
16. This Amendment shall be governed by and construed in accordance
with the laws of the state of Delaware, without regard to the conflict of law
principles thereof.
4
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17. This Amendment may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
5
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18. Except as expressly amended hereby, the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
BANC ONE CORPORATION
By: /s/ John B. McCoy
--------------------------
Name: John B. McCoy
Title: Chairman and Chief Executive Officer
BANK ONE CORPORATION
(formerly Hornet Reorganization
Corporation
By: /s/ John B. McCoy
--------------------------
Name: John B. McCoy
Title: Chairman and Chief Executive Officer
FIRST CHICAGO NBD CORPORATION
By: /s/ Verne G. Istock
--------------------------
Name: Verne G. Istock
Title: Chairman, President and Chief
Executive Officer
[Amendment to Agreement and Plan of Reorganization]
6
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EXHIBIT 10(B)
DRAFT
-----
3-4-99
BANK ONE CORPORATION
STOCK PERFORMANCE PLAN
1. PURPOSE AND HISTORY
The purpose of the BANK ONE CORPORATION Stock Performance Plan is to provide
incentives and rewards for selected employees of the Corporation and its
Subsidiaries (i) to support the execution of the Corporation's business and
human resources strategies and the achievement of its goals and (ii) to
associate the interests of Employees with those of the Corporation's
stockholders. The Plan is an amendment and restatement, effective February 16,
1999, of the First Chicago NBD Corporation Stock Performance Plan, which was
approved by stockholders of First Chicago NBD Corporation on May 10, 1996.
2. DEFINITIONS
(a) "Award" includes, without limitation, stock options (including incentive
stock options under Section 422 of the Code), stock appreciation rights,
performance share or unit awards, dividend or equivalent rights, stock awards,
restricted share or unit awards, or other awards that are valued in whole or
part by reference to, or are otherwise based on, the Corporation's Common Stock
("other Common Stock-based Awards"), all on a stand alone, combination or tandem
basis, as described in or granted under this Plan.
(b) "Award Summary" means a written summary setting forth the terms and
conditions of each Award made under this Plan.
(c) "Board" means the Board of Directors of the Corporation, excluding any
member who is an officer or Employee of the Corporation or who otherwise would
not be considered a disinterested person within the meaning of Rule 16b-3 of the
Securities and Exchange Commission.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(e) "Committee" means the Organization, Compensation and Nominating Committee
of the Board or such other committee of the Board as may be designated by the
Board from time to time to administer this Plan.
(f) "Common Stock" means the Common Stock, par value 1c per share, of the
Corporation.
(g) "Corporation" means BANK ONE CORPORATION, a Delaware corporation.
(h) "Employee" means an employee of BANK ONE CORPORATION or a Subsidiary.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE>
(j) "Fair Market Value" means the average of the highest and the lowest quoted
selling prices on the New York Stock Exchange Composite Transactions Tape on the
relevant valuation date or, if there were no sales on the valuation date, on the
next preceding date on which such selling prices were recorded; provided,
however, that the Committee may modify the definition of Fair Market Value with
respect to any particular Award.
(k) "Participant" means an Employee who has been granted an Award under the
Plan.
(l) "Plan" means this BANK ONE CORPORATION Stock Performance Plan.
(m) "Plan Year" means a twelve-month period beginning with January 1 of each
year.
(n) "Subsidiary" means any corporation or other entity, whether domestic or
foreign, in which the Corporation has or obtains, directly or indirectly, a
proprietary interest of at least 50% by reason of stock ownership or otherwise.
3. ELIGIBILITY
Any Employee selected by the Committee is eligible to receive an Award. In
addition, the Committee may select those former Employees who have a consulting
arrangement with the Corporation or a Subsidiary whom the Committee determines
have a significant responsibility for the success and future growth and
profitability of the Corporation.
4. PLAN ADMINISTRATION
(a) Except as otherwise determined by the Board, the Plan shall be
administered by the Committee. The Board, or the Committee to the extent
determined by the Board, shall periodically make determinations with respect to
the participation of Employees in the Plan and, except as otherwise required by
law or this Plan, the grant terms of Awards including vesting schedules, price,
length of relevant performance, restriction or option period, dividend rights,
post-retirement and termination rights, payment alternatives such as cash,
stock, contingent awards or other means of payment consistent with the purposes
of this Plan, and such other terms and conditions as the Board or the Committee
deems appropriate.
(b) The Committee shall have authority to interpret and construe the
provisions of the Plan and the Award Summaries and make determinations pursuant
to any Plan provision or Award Summary which shall be final and binding on all
persons. No member of the Committee shall be liable for any action or
determination made in good faith, and the members shall be entitled to
indemnification and reimbursement in the manner provided in the Corporation's
Certificate of Incorporation, as it may be amended from time to time.
(c) The Committee may designate persons other than its members to carry out
its responsibilities under such conditions or limitations as it may set, other
than its authority with regard to Awards granted to Employees who are officers
or directors of the Corporation for purposes of Section 16 of the Exchange Act.
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(d) The Committee shall have the authority at any time prior to a Change of
Control (as defined in Action 12(b)) to cancel Awards for reasonable cause and
to provide for the conditions and circumstances under which Awards shall be
forfeited.
5. STOCK SUBJECT TO THE PROVISIONS OF THIS PLAN
(a) The stock subject to the provisions of this Plan shall be shares of
authorized but unissued Common Stock and shares of Common Stock held as treasury
stock, subject to adjustment in accordance with the provisions of Section 10,
and subject to Section 5(b) below, the total number of shares of Common Stock
available for grants of Awards in any Plan Year shall not exceed 2% of the
outstanding Common Stock as reported in the Corporation's Annual Report on Form
10-K for the fiscal year ending immediately prior to such Plan Year.
(b) There shall be available for Awards under the Plan in any Plan Year, in
addition to shares available for grant under paragraph (a) of this Section 5,
all of the following (i) any unused portion of the limit set forth in paragraph
(a) of this Section 5 for any prior Plan Year; (ii) shares represented by Awards
which are cancelled, forfeited, surrendered, terminated, paid in cash or expire
unexercised; (iii) the excess amount of variable Awards which become fixed at
less than their maximum limitations; (iv) any shares of Common Stock that are
used to pay the purchase price or any withholding taxes associated therewith
upon the exercise of an option, to the extent such shares result in the grant of
a replacement option; provided, however, that the total number of shares of
Common Stock which may be available for Awards under the Plan Year may not
exceed 5% of the outstanding Common Stock as reported in the Corporation's
Annual Report on Form 10-K for the fiscal year ending immediately prior to the
applicable Plan Year.
(c) The exercise of an option or stock appreciation right granted in tandem
therewith will reduce proportionately the amount of shares subject to the tandem
stock appreciation right or option. In addition, any shares ceasing to be
subject to the related option or right because such reduction shall not increase
the number of shares of Common Stock available for future Awards granted under
the Plan. The grant of a performance or restricted share unit Award shall be
deemed to be equal to the maximum number of shares which may be issued under the
Award. Where the value of an Award is variable on the date it is granted, the
value shall be deemed to be the maximum limitation of the Award. Awards payable
solely in cash will not reduce the number of shares available for Awards granted
under the Plan.
6. AWARDS UNDER THIS PLAN
As the Board or Committee may determine, the following types of Awards and
other Common Stock-based Awards may be granted under this Plan on a stand alone,
combination or tandem basis:
(a) Stock Option. A right to buy a specified number of shares of Common Stock
at a fixed exercise price during a specified time, all as the Committee may
determine; provided that the exercise price of any option shall not be less that
100% of the Fair Market Value of the Common Stock on the date of grant of such
Award; provided further that no more than 3,240,000 stock options and stock
appreciation rights in the aggregate (except that a stock option issued in
tandem with a stock appreciation right shall be counted as one stock option for
purposes of this maximum) may be granted to any Employee during any five-year
period.
(b) Incentive Stock Option. An award in the form of a stock option which
shall comply with the requirements of Section 422 of the Code or any successor
Section of the Code as it may be amended from time to time. Subject to
adjustment in accordance with the provisions of Section 10, the aggregate
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number of shares which may be subject to incentive stock option Awards under
this Plan shall not exceed 16,200,000 shares, subject in any Plan Year to the
limitations of Section 5 of this Plan.
(c) Stock Appreciation Right. A right to receive the excess of the Fair
Market Value of share of Common Stock on the date the stock appreciation right
is exercised over the Fair Market Value of a share of Common Stock on the date
the stock appreciation right was granted; provided that no more than 3,240,000
stock options and stock appreciation rights in the aggregate (except that a
stock appreciation right issued in tandem with a stock option shall be counted
as one stock option for purposes of this maximum) may be granted to any
Participant during the five-year period.
(d) Restricted and Performance Share. A fixed or variable share or dollar
denominated unit subject to such conditions of vesting, performance and time of
payment as the Committee may determine, which are valued at the Committee's
discretion in whole or in part by reference to, or otherwise based on, the Fair
Market Value of Common Stock and which may be paid in Common Stock, cash or
combination of both.
(e) Restricted and Performance Share Unit. A fixed variable share or dollar
denominated unit subject to conditions of vesting, performance and time of
payment as the Committee may determine, which are valued at the Committee's
discretion in whole or in part by reference to, or otherwise based on, the Fair
Market Value of Common Stock and which may be paid in Common Stock, cash or a
combination of both.
(f) Dividend or Equivalent Right. A right to receive dividends or their
equivalent in value in Common Stock, cash or in a combination of both with
respect to any new or previously existing Award.
(g) Stock Award. An unrestricted transfer of ownership of Common Stock which
may only be made to Employees other than Employees who are offices or directors
of the Corporation for purposes of Section 16 of the Exchange Act.
(h) Other Stock-Based Awards. Other Common Stock-based Awards which are
related to or serve a similar function to those Awards set forth in this Section
6.
No Common Stock shall be issued pursuant to any Award unless consideration at
least equal to the par value thereof has been received by the Corporation in the
form of cash, services rendered or property.
The Committee may from time to time, establish performance criteria with
respect to an Award. The performance criteria or standards may be based upon
(i) earnings per share, (ii) return on average assets or (iii) return on average
equity. Performance standards shall be determined by the Committee in its sole
discretion and may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated and
may be based on or adjusted for any other objective goals, events, or
occurrences established by the Committee, including earnings, earnings growth,
revenues, expenses, stock price, market share, charge-offs, loan loss reserves,
reductions in non-performing assets, return on assets, return on equity or
return on investment, regulatory compliance, satisfactory internal or external
audits, improvement or financial ratings, achievement of balance sheet or income
statement objectives, extraordinary charges, losses from discontinued
operations, restatements and accounting changes and other unplanned special
charges such as restructuring expenses, acquisition expenses including goodwill,
unplanned stock offerings and strategic loan loss provisions. Such performance
standards may be particular to a line of business, subsidiary or other unit or
may be based on the performance of the Corporation generally.
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7. AWARD SUMMARIES
Each Award under the Plan shall be evidenced by an Award Summary. Delivery of
an Award Summary to each Participant shall constitute an agreement, subject to
Section 4(d) and Section 9 hereof, between the Corporation and the Participant
as to the terms and conditions of the Award.
8. OTHER TERMS AND CONDITIONS
(a) Assignability. Except to the extent permitted by Rule 16b-3 under the
Exchange Act, or Section 422 of the Code, and as otherwise provided in the Award
Summary, no Award shall be assignable or transferable except by will, by the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code, and during the lifetime of a Participant, the
Award shall be exercisable only by such Participant or such Participant's
guardian, legal representative, or assignee pursuant to a qualified domestic
relations order. In the event that any Award is thereafter transferred as
permitted by the preceding sentence, the permitted transferee thereof shall be
deemed the Award recipient hereunder. Stock options, incentive stock options
and stock appreciation rights shall be exercisable during the transferee's
lifetime only by the Award recipient or by the Award recipient's guardian, legal
representative or similar person.
(b) Termination of Employment. The Committee shall determine the disposition
of the grant of each Award in the event of the retirement, disability, death or
other termination of a Participant's employment. Whether a transfer from the
Corporation or a Subsidiary which is 100% owned by the Corporation to a
Subsidiary that is less than 100% owned by the Corporation is a "termination of
employment for a Participant" shall be determined by the Committee or its
designate on a case-by-case basis.
(c) Rights As A Stockholder. A Participant shall have no rights as a
stockholder with respect to shares covered by an Award until the date the
Participant or his nominee, or guardian or legal representative is the holder of
record. No adjustment will be made for dividends or other rights for which the
record date is prior to such date.
(d) No Obligation To Exercise. The grant of an Award shall impose no
obligation upon Participant to exercise the Award.
(e) Payments By Participants. The Committee may determine that Awards for
which a payment is due from a Participant may be payable: (i) in U.S. dollars by
personal check, bank draft or money order payable to the order of the
Corporation, by money transfers or direct account debits; (ii) through the
delivery or deemed delivery based on attestation to the ownership of shares of
Common Stock with a Fair Market Value equal to the total payment due from the
Participant; (iii) by a combination of the methods described in (i) and (ii)
above; or (iv) by such other methods as the Committee may deem appropriate.
(f) Withholding. Except as otherwise provided by the Committee, (i) the
deduction of withholding and any other taxes required by law will be made from
all amounts paid in cash and (ii) in the case of payments of Awards in shares of
Common Stock, the Participant shall be required to pay the amount of any taxes
required which equals the amount required to be withheld may be deducted from
the payment. The Committee may provide for shares of Common Stock to be
withheld for tax withholding purposes in excess of the required minimum amount
but not in excess of a Participant's maximum marginal tax rate.
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(g) Restrictions on Sale and Exercise. With respect to Employees who are
officers and directors for purposes of Section 16 of the Exchange Act, and if
required to comply with rules promulgated thereunder, (i) no Award providing for
exercise, a vesting period, a restriction period or the attainment of
performance standards shall permit unrestricted ownership of Common Stock by the
Participant for at least six months from the date of grant, and (ii) Common
Stock acquired pursuant to this Plan (other than Common Stock acquired as a
result of the granting of a "derivative security") may not be sold for at least
six months after acquisition.
9. AMENDMENTS
The Board may alter, amend, suspend or discontinue the Plan or at any time
prior to a Change of Control (as defined in Section 12(b)) and alter or amend
any or all Award Summaries granted under the Plan to the extent permitted by
law. Any such action of the Board may be taken without the approval of the
Corporation's stockholders, but only to the extent that such stockholder
approval is not required by applicable law or regulation, including specifically
Rule 16b-3 of the Securities and Exchange Commission.
10. RECAPITALIZATION
The aggregate number of shares of Common Stock as to which Awards may be
granted to Participants, the number of shares thereof covered by each
outstanding Award, and the price per share thereof in each such Award, shall all
be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a subdivision or consolidation of shares
or other capital adjustment, or the payment of a stock dividend or other
increase or decrease in such shares, effected without receipt of consideration
by the Corporation, or other change in corporate or capital structure; provided,
however, that any fractional shares resulting from any such adjustment shall be
eliminated. The Committee may also make the foregoing changes and any other
changes, including changes in the classes of securities available, to the extent
it is deemed necessary or desirable to preserve the intended benefits of the
Plan for the Corporation and the Participants in the event of any other
reorganization, recapitalization, merger, consolidation, spinoff, extraordinary
dividend or other similar transaction.
11. NO RIGHT TO EMPLOYMENT
No person shall have any claim or right to be granted an Award, and the grant
of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Corporation or a Subsidiary. Further, the
Corporation and each Subsidiary expressly reserve the right at any time to
dismiss a Participant free from any liability, or any claim under the Plan,
except as provided herein or in any Award Summary issued hereunder.
12. CHANGE OF CONTROL
(a) Notwithstanding anything contained in the Plan or any Award Summary to
the contrary, in the event of a Change of Control, as defined below, the
following shall occur with respect to any and all Awards outstanding as of such
Change of Control:
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(i) automatic maximization of performance standards, lapse of all
restrictions and acceleration of any time periods relating to the exercise,
realization or vesting of such Awards so that such Awards may be immediately
exercised, realized or vested in full on or before the relevant date fixed in
the Award Summary;
(ii) performance shares or performance units shall be paid entirely in
cash; provided, however, that if any right granted pursuant to this Section
12(a)(ii) would make a Change of Control transaction ineligible for pooling-
of-interests accounting under APB No. 16 that but for the nature of such grant
would otherwise be eligible for such accounting treatment, the Board or the
officer or officers authorized by a resolution of the Board shall have the
ability to substitute for the cash payable pursuant to such right Common Stock
with a Fair Market Value equal to the cash that would otherwise be payable
thereunder;
(iii) if a Participant's employment terminates for any reason other
than termination for cause or retirement as defined in the relevant Award
Summary or death following a Change of Control, any Options held by the
Participant may be exercised by the Participant until the earlier of three
months after such termination of employment or the expiration date of such
Options; and
(iv) all Awards become noncancellable, except in the case of a
termination for cause, as defined in the relevant Award Summary.
(b) A "Change of Control" of the Corporation shall be deemed to have occurred
upon the happening of any of the following events:
(I) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding shares of Common
Stock of the Corporation (the "Outstanding Corporation Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities"), provided, however, that for
purposes of this subsection (I), the following acquisitions shall not constitute
a Change of Control: (A) any acquisition directly from the Corporation, (B) any
acquisition by the Corporation, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Corporation or any corporation
controlled by the Corporation or (D) any acquisition by any corporation pursuant
to a transaction which complies with clause (A), (B) and (C) of subsection (III)
of this Section 12(b); or
(II) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided, however, that any individual becoming a director subsequent to
that date hereof whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(III) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Corporation (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Outstanding
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Corporation Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Corporation or all substantially the same proportions
as their ownership, immediately prior to such Business Combination of the
Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan
beneficially owns, directly or indirectly, 20% or more of, the corporation
resulting from such Business Combination or the combined voting power of the ten
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (C) at least a majority
of the members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such Business
Combination; or
(IV) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
13. GOVERNING LAW
To the extent that federal laws do not otherwise control, the Plan shall be
construed in accordance with and governed by the law of the State of Delaware.
14. SUPPLEMENTAL PLANS
The Board shall have the authority to adopt plans, supplemental to this Plan,
covering Employees residing outside the United States, including but not limited
to the United Kingdom.
15. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulations, including, with respect to those Employees who are officers or
directors for purposes of Section 16 of the Exchange Act, Rule 16b-3 of the
Securities and Exchange Commission. In case any one or more of the provisions
of this Plan shall be held invalid, illegal or unenforceable in any respect
under applicable law and regulation (including Rule 16b-3), the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby and the invalid, illegal or unenforceable provision
shall be deemed null and void; however, to the extent permissible by law, any
provision which could be deemed null and void shall first be construed,
interpreted or revised retroactively to permit this Plan to be construed in
compliance with all applicable laws (including Rule 16b-3) so as to foster the
intent of this Plan.
16. EFFECTIVE DATE AND TERM
The effective date of this Plan is February 16, 1999.
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EXHIBIT 10(C)
DRAFT - 3/4/99
BANK ONE CORPORATION
DIRECTOR STOCK PLAN
1. PURPOSE AND HISTORY OF THE PLAN
The purpose of the BANK ONE CORPORATION Director Stock Plan (the "Plan") is
to promote the long-term growth of BANK ONE CORPORATION by increasing the
proprietary interest of non-employee directors in BANK ONE CORPORATION and to
attract and retain highly qualified and capable directors. The Plan as set
forth herein is an amendment and restatement, effective April 1, 1999, of the
First Chicago NBD Corporation Director Stock Plan, which was approved by
stockholders of First Chicago NBD Corporation on May 10, 1996.
2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
(a) "Annual Retainer" means the annual compensation paid by the
Corporation, or a subsidiary or affiliate thereof, to a Director for his or her
services as a Director. To the extent a Director receives an additional
retainer as compensation for serving as the chairperson of a committee of the
Board, "Annual Retainer" shall include such additional annual cash amount.
(b) "Award" means an award granted to a Director under the Plan in the
form of Options, Shares, or Stock Units or any combination thereof.
(c) "Award Grant Date" means the date upon which an Award is granted to
the Director.
(d) "Award Summary" means a written summary setting forth the terms and
conditions of each Award made under this Plan.
(e) "Board" means the Board of Directors of the Corporation.
(f) "Change of Control" means a change of control as defined in the BANK
ONE CORPORATION Stock Performance Plan, or any successor thereto.
(g) "Committee" means the Organization, Compensation and Nominating
Committee of the Board, or such other committee of the Board as may be
designated by the Board from time to time to administer the Plan.
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(h) "Corporation" means BANK ONE CORPORATION, a Delaware Corporation, and
its successors.
(i) "Director" means a director serving on the Board who is not also an
employee of the Corporation or any subsidiary or affiliate thereof. "Director"
shall also include a director serving on the board of directors of any
subsidiary or affiliate of the Corporation, provided that (i) the director is
not also an employee of the Corporation or any subsidiary or affiliate thereof,
and (ii) the Board has approved adoption of the Plan by the applicable
subsidiary or affiliate.
(j) "Fair Market Value" means the average of the highest and the lowest
quoted selling prices on the New York Stock Exchange Composite Transactions Tape
on the relevant valuation date or, if there were no sales on the valuation date,
on the next preceding date on which such selling prices were recorded.
(k) "Option" means an option to purchase Shares awarded under Section 8.
Such option shall not be required or construed to satisfy the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended, or any successor
law.
(l) "Optionee" means a Director to whom an Option has been granted or, in
the event of such Director's death prior to the expiration of an Option, such
Director's executor, administrator, beneficiary or similar person.
(m) "Plan" means the BANK ONE CORPORATION Director Stock Plan, as amended
and restated from time to time.
(n) "Plan Year" means the twelve-month period from April 1 to March 31.
(o) "Share" means a share of common stock, $.10 par value per share, of
the Corporation.
(p) "Stock Unit" means the right to receive a Share on a date elected by
the Director pursuant to rules established by the Committee, as well as such
dividend or dividend equivalent rights as may be permitted hereunder.
3. ELIGIBILITY
Directors shall be eligible to participate in the Plan in accordance with
Sections 7 and 8 hereof.
4. PLAN ADMINISTRATION
(a) Administrator of Plan. The Plan shall be administered by the
Committee.
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(b) Authority of Committee. The Committee shall have the sole and
exclusive authority and discretion to (i) interpret and construe the Plan and
Award Summaries; (ii) adopt such rules and procedures as it shall deem necessary
and advisable to implement and administer the Plan; and (iii) designate persons
other than members of the Committee to carry out its responsibilities, subject
to such limitations, restrictions and conditions as the Committee, in its best
judgment, may determine to be in the Corporation's best interests and in
accordance with the purposes of the Plan.
(c) Determination of Committee. A majority of the Committee shall
constitute a quorum at any meeting of the Committee, and all determinations of
the Committee shall be made by a majority of its members. The Committee may make
determinations under the Plan without prior notice and without a meeting,
provided that such determination is made by written consent signed by all
members of the Committee.
(d) Effect of Committee Determinations. No member of the Committee or
the Board shall be personally liable for any action or determination with
respect to the Plan, an Award, or the settlement of a dispute between a Director
and the Corporation, provided that such action or determination is made in good
faith. Any decision or action of the Committee or the Board with respect to any
Award or the administration or interpretation of the Plan shall be conclusive
and binding upon all persons.
5. SHARES SUBJECT TO THE PLAN
Subject to adjustments as provided in Section 13, the aggregate number of
Shares which may be issued pursuant to Awards shall not exceed 1,600,000 Shares.
To the extent that Shares subject to an outstanding Option are not issued or
delivered by reason of the expiration, termination, cancellation or forfeiture
of such Option or by reason of the delivery of Shares to pay all or a portion of
the exercise price of such Option, such Shares shall again be available for
issuance under the Plan.
6. AWARDS UNDER THE PLAN
Awards in the form of Shares shall be granted to Directors in accordance with
Section 7. Awards in the form of Options, Shares or Stock Units, or a
combination thereof, may be granted to Directors in accordance with Section 8.
Each Award granted under Section 8 shall be evidenced by an Award Summary.
Delivery of an Award Summary shall constitute an agreement, subject to Section 3
and Section 10, between the Corporation and the Director as to the terms and
conditions of the Award.
7. ANNUAL STOCK RETAINER
Each Director shall annually receive an Award hereunder in the form of
Shares, subject to the following terms and conditions:
(a) Time of Grant. As of the date of each annual meeting of the
shareholders of the Corporation, each Director shall receive an Award of Shares
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representing his or her annual stock retainer. In the case of a Director who is
appointed to the Board on a date during the Plan Year which follows the date of
the annual meeting of the Corporation's shareholders, the Director shall
receive, as of the date such Director is first appointed to the Board, his or
her annual stock retainer, as prorated in the manner described below.
(b) Number of Shares. The number of Shares granted pursuant to this
Section 7 shall be the number of whole Shares equal to (i) 50% of the Director's
Annual Retainer (without taking into consideration any additional chairperson
retainer(s)), divided by (ii) the Fair Market Value per Share on the Award Grant
Date described in paragraph (a) above (increased to the next whole Share in case
of any fractional Share). In the case of a Director who is appointed to the
Board on a date during the Plan Year which follows the date of an annual meeting
of the Corporation's shareholders, the number of Shares granted pursuant to this
Section 7 shall be calculated in the manner described in the previous sentence,
except that (A) the Fair Market Value per Share shall be determined as of the
date the Director is appointed to the Board, and (B) the number of Shares
granted shall be prorated based upon the number of calendar months during which
such Director will serve on the Board prior to the beginning of the next Plan
Year, with any part of a calendar month counting a whole month.
8. ELECTIVE OPTIONS, SHARES AND STOCK UNITS
Each Director shall be granted Options, Shares or Stock Units, or a
combination thereof, subject to the following terms and conditions:
(a) Time of Grant. As of the date of each annual meeting of shareholders
of the Corporation, an Award shall be granted to each Director who, at least six
(6) months prior thereto, files with the Committee or its designee a written
election to receive such Award in lieu of all or a portion of such Director's
Annual Retainer. Each Director's election shall remain in effect and be
applicable with respect to the Annual Retainer paid in subsequent years in which
the Director serves on the Board, unless the Director files a revised election
pursuant to the first sentence of this Section 8(a). Once made, such election
may only be changed or revoked on or before the date that is six (6) months
before the date of the next occurring annual meeting of the Corporation's
shareholders. In the event a Director does not file a written election in
accordance with the first sentence of this Section 8(a) by reason of becoming a
Director after the date which is six (6) months prior to the annual meeting of
the Corporation's shareholders in any year, an Award may be granted to such
Director pursuant to rules established by the Committee on the first day (the
"Effective Date") which is six (6) months after the date such Director files
with the Committee or its designee a written election to receive such Award in
lieu of all or a portion of such Director's Annual Retainer; provided, however,
that such election may apply only to the portion of such Director's Annual
Retainer multiplied by a fraction, the numerator of which is the number of
months between the effective date of the Director's appointment to the Board and
the last day of the Plan Year during which the Director is appointed to the
Board, and the denominator of which is 12. An election
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made pursuant to the preceding sentence shall be irrevocable during the first
Plan Year in which the Director receives an Award hereunder.
(b) Number of Shares. The number of Shares granted pursuant to Section
8(a) shall be the number of whole Shares (increased to the next highest whole
Share in case of any fractional Share) equal to (i) the amount of the Annual
Retainer that a Director has elected pursuant to Section 8(a) to be payable in
Shares, divided by (ii) the Fair Market Value per Share on the Award Grant Date.
(c) Number and Purchase Price of Options. The number of Shares subject
to an Option granted pursuant to Section 8(a) shall be the number of Shares
which would result in the Option having an equivalent value of the Shares the
Director would have received had the Director elected to receive Shares under
Section 8(b), determined using the Black-Scholes method of valuing stock options
and the Fair Market Value of a Share on the Award Grant Date. The purchase
price per Share under each Option granted shall be 100% of the Fair Market Value
per Share on the Award Grant Date.
(d) Exercise of Options. Each Option shall be fully exercisable on and
after the date which is six (6) months after the Award Grant Date and, subject
to Section 11 shall not be exercisable prior to such date. An Option may be
exercised until the date which is ten (10) years after the Award Grant Date of
such Option. An Option, or portion thereof, may be exercised, in whole or in
part, only with respect to whole Shares.
Shares shall be issued to an Optionee pursuant to the exercise of an Option
only upon receipt by the Corporation from the Optionee of payment in full either
in cash or by submitting acceptable proof to the Committee of the ownership of
Shares which have been owned by the Optionee for at least six (6) months prior
to the date of exercise of the Option, or a combination of cash and Shares, in
an amount or having a combined value equal to the aggregate purchase price for
the Shares subject to the Option or portion thereof being exercised. The Shares
issued to an Optionee for the portion of any Option exercised by submitting
proof of acceptable ownership of Shares shall not exceed the number of Shares
issuable as a result of such exercise (determined as though payment in full
therefor were being made in cash), less the number of Shares for which proof of
ownership is submitted. The value of Shares for which proof of ownership is
submitted in full or partial payment for the Shares purchased upon the exercise
of an Option shall be equal to the aggregate Fair Market Value of such
previously-owned Shares on the date of the exercise of such Option.
(e) Number of Stock Units. The number of Stock Units granted pursuant to
Section 8(a) shall be the number of Stock Units equal to (i) the portion of the
Annual Retainer which the Director has elected pursuant to Section 8(a) to be
payable in Stock Units, divided by (ii) the Fair Market Value of Shares on the
Award Grant Date. While Stock Units remain outstanding, the Director who has
received such Stock Units shall receive, as of each date on which the
Corporation pays a cash dividend on outstanding Shares, additional Stock Units
equal in number to:
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(A) the product of:
(1) the amount of the cash dividend declared by the Corporation
for each outstanding Share of the Corporation, and
(2) the number of Stock Units credited to the Director and still
outstanding,
divided by:
(B) the Fair Market Value of a Share on the date the cash dividend is
paid.
Such additional Stock Units shall be issued as Shares at the same time and in
the same manner as the underlying Stock Units to which they are attributable.
(f) Distribution of Stock Units. Upon a date elected by a Director who
receives an Award of Stock Units under subparagraph (e) above, the Director will
receive one (1) Share for each Stock Unit, including any fractional Stock Units
thereof. In the event of a Director's death prior to the issuance of Shares
attributable to Stock Units, such Shares shall become immediately distributable
to such Director's executor, administrator, beneficiary or similar person.
9. ISSUANCE OF SHARES
Upon the grant of an Award of Shares to a Director, the Shares subject to
such Award shall be credited to a book entry account in the name of the Director
at a trust company designated by the Committee, whereupon the Director shall
become a shareholder of the Corporation with respect to such Shares and shall be
entitled to vote the Shares.
10. NON-TRANSFERABILITY OF OPTIONS AND STOCK UNITS
Options and Stock Units granted under the Plan shall not be transferable by a
Director during his or her lifetime and may not be assigned, exchanged, pledged,
transferred or otherwise encumbered or disposed of except by court order, will
or by the laws of descent and distribution. Notwithstanding the foregoing, in
the event the provisions of Rule 16b-3 of the Securities Exchange Act of 1934,
as amended, allow Options to be transferable, each Option then outstanding shall
become transferable only to the extent set forth under the terms of each Award,
as determined by the Committee. In the event that any Option is thereafter
transferred as permitted by the preceding sentence, the permitted transferee
thereof shall be deemed the Optionee hereunder, notwithstanding the provisions
of subparagraph (l) of Section 1 above. Options shall be exercisable during the
Optionee's lifetime only by the Optionee or by the Optionee's guardian, legal
representative or similar person.
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11. CHANGE OF CONTROL
Upon the occurrence of a Change of Control, any and all outstanding Options
shall become immediately exercisable, and all Stock Units shall become
distributable in Shares; provided, however, that, notwithstanding the foregoing,
no Stock Units shall become distributable in Shares as a result of or in
connection with the actions and transactions contemplated by or effectuated in
connection with the Agreement and Plan of Reorganization by and among BANC ONE
CORPORATION, First Chicago NBD Corporation and BANK ONE CORPORATION (DE).
12. AMENDMENT AND TERMINATION
The Board may amend the Plan from time to time or terminate the Plan at any
time; provided, however, than no action authorized by this Section 12 shall
adversely change the terms and conditions of an outstanding Option or Stock Unit
without the Optionee's consent and, subject to Section 13, the number of Shares
subject to an Option granted under Section 8, the purchase price therefor, the
Award Grant Date and the termination provisions relating to such Option shall
not be amended more than once every six (6) months, other than to comply with
changes in applicable laws and regulations.
13. RECAPITALIZATION
The aggregate number of shares of Common Stock as to which Awards may be
granted to Directors, the number of shares thereof covered by each outstanding
Award, and the price per share thereof in each such Award, shall all be
proportionately adjusted for any increase or decrease in the total number of
Shares issued by the Corporation resulting from a subdivision or consolidation
of Shares or other capital adjustment, or the payment of a stock dividend or
other increase or decrease in the number of such Shares effected without receipt
of consideration by the Corporation, or other change in corporal or capital
structure; provided, however, that any fractional Shares resulting from any such
adjustment shall be eliminated. The Committee may also make the foregoing
changes and any other changes, including changes in the classes of securities
available, to the extent it is deemed necessary or desirable to preserve the
intended benefits of the Plan for the Corporation and the Directors in the event
of any other reorganization, recapitalization, merger, consolidation, spin-off,
extraordinary dividend or other distribution or similar transaction.
14. GOVERNING LAW
To the extent that federal laws do not otherwise control, the Plan shall be
construed in accordance with and governed by the law of the State of Delaware.
15. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulation, including, Section 16 of the Securities Exchange Act of 1934 and
Rule 16b-3 of the Securities and Exchange Commission. If any provision of this
Plan shall be held invalid, illegal or unenforceable in any
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respect under applicable law and regulation (including Rule 16b-3), the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby, and the invalid, illegal or
unenforceable provision shall be deemed null and void; provided however, that,
to the extent permissible by law, any provision which could be deemed null and
void shall first be construed, interpreted or revised retroactively to permit
this Plan to be construed in compliance with all applicable laws (including Rule
16b-3) so as to foster the intent of this Plan.
16. EFFECTIVE DATE AND TERM
The effective date of this amendment and restatement of the Plan is April
1, 1999.
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EXHIBIT 10(D)
BANK ONE CORPORATION
401(k) RESTORATION PLAN
-----------------------
Effective January 1, 1987,
Amended and restated effective January 1, 1998
<PAGE>
BANK ONE CORPORATION
401(k) RESTORATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PURPOSE/CONCEPT/EFFECTIVE DATE............................................. 1
ARTICLE I PARTICIPATION................................................ 2
Section 1.1 Eligibility.................................... 2
Section 1.2 Conditions of Participation.................... 2
Section 1.3 Election to Deferred Compensation.............. 2
Section 1.4 Company Marching Contributions................. 3
Section 1.5 Deferred Accounts.............................. 3
Section 1.6 Statement of Accounts.......................... 3
ARTICLE II BENEFIT DISTRIBUTIONS FROM THE PLAN.......................... 4
Section 2.1 Form of Distribution........................... 4
Section 2.2 Acceleration of Benefit Payments............... 4
Section 2.3 Withholding; Payroll Taxes..................... 4
Section 2.4 Beneficiary Designation........................ 5
ARTICLE III COMMITTEE.................................................... 6
Section 3.1 Appointment of the Committee................... 6
Section 3.2 Committee Procedures........................... 6
ARTICLE IV ADMINISTRATION............................................... 7
Section 4.1 Administrative Powers and Duties............... 7
Section 4.2 Expenses....................................... 7
Section 4.3 Records........................................ 7
Section 4.4 Determinations................................. 8
Section 4.5 Legal Incompetency............................. 8
Section 4.6 Action by the Company.......................... 8
Section 4.7 Exemption from Liability/Indemnification....... 8
Section 4.8 Nonalienation of Benefits...................... 9
ARTICLE V INCLUSION AND WITHDRAWAL OF RELATED COMPANIES................ 10
Section 5.1 Inclusion of Related Companies................. 10
Section 5.2 Withdrawal of Related Companies................ 10
Section 5.3 Sale or Liquidation of Related Companies....... 10
Section 5.4 Transfer Between Participating Companies....... 10
</TABLE>
<PAGE>
TABLE OF CONTENTS (Continued)
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE VI MISCELLANEOUS PROVISIONS..................................... 11
Section 6.1 Employment and Other Rights.................... 11
Section 6.2 Rights and Benefits............................ 11
Section 6.3 Offsets to Benefits............................ 11
Section 6.4 Withholding Deductions......................... 11
Section 6.5 Amendment and Termination...................... 12
Section 6.6 Reorganization of the Company.................. 12
ARTICLE VII DEFINITIONS.................................................. 13
Section 7.1 Bank One (401(k) Savings Plan.................. 13
Section 7.2 Beneficiary.................................... 13
Section 7.3 Board.......................................... 13
Section 7.4 Code........................................... 13
Section 7.5 Committee...................................... 13
Section 7.6 Company........................................ 13
Section 7.7 Compensation................................... 14
Section 7.8 Deferral Agreement............................. 14
Section 7.9 Deferred Accounts.............................. 14
Section 7.10 Employer....................................... 14
Section 7.11 Highly Compensation Employee................... 14
Section 7.12 Participant.................................... 14
Section 7.13 Plan Administrator............................. 15
Section 7.14 Plan Year...................................... 15
Section 7.15 Related Company................................ 15
ARTICLE VIII GENERAL PROVISION............................................ 16
Section 8.1 ERISA Status................................... 16
Section 8.2 Construction................................... 16
Section 8.3 Controlling Law................................ 16
Section 8.4 Effect on Invalidity of Provision.............. 16
</TABLE>
<PAGE>
BANK ONE CORPORATION
401(k) RESTORATION PLAN
Purpose
The purpose of this deferred compensation plan (the "Plan") is to promote the
success of BANK ONE CORPORATION and its subsidiaries, collectively referred to
as the "Company," by providing a means to defer compensation for certain key
employees whose position and responsibility enable them to significantly affect
the profitability, competitiveness and growth of the Company.
Concept
The Plan is designed to provide Participants with a supplemental vehicle through
which to defer compensation and receive Company matching contributions in a
manner similar to salary deferrals under the BANK ONE 401(k) Savings Plan. This
Plan provides the deferral of Compensation in excess of either (i) the BANK ONE
401(k) Savings Plan annual maximum pre-tax salary deferment limit under Code
Section 402(g), or (ii) BANK ONE 401(k) Savings Plan salary deferral limits
pursuant to applicable Federal nondiscrimination requirements.
Up to and including October 1, 1998, the sponsor of this Plan was the BANC ONE
CORPORATION. Effective October 2, 1998, BANC ONE CORPORATION and First Chicago
NBD Corporation were merged into BANK ONE CORPORATION, a bank holding
corporation, incorporated in the State of Delaware. Effective October 2, 1998,
BANK ONE CORPORATION assumed sponsorship of the Plan.
The Plan is a non-funded, supplemental executive deferred compensation plan
structured to benefit Participants in a manner, which provides incentive to
improve the profitability, competitiveness and growth of the Company.
Effective Date
The Plan shall become effective January 1, 1987. The effective date of this
amendment and restatement is January 1, 1998.
<PAGE>
ARTICLE I
PARTICIPATION
Section 1.1 - Eligibility
Eligibility for participation in this Plan shall be determined by the Chief
Executive Officer of the Company in his sole discretion, on an individual basis.
Any management or highly compensated employee of the Company or a Related
Company so designated to participate in this Plan may elect hereunder to defer
future Compensation (as such term is defined in Section 1.19 of the BANK ONE
401(k) Savings Plan) in such amounts as the Participant could contribute through
salary deferral to the BANK ONE (401(k) Savings Plan if such Plan was not
subject to (i) the Maximum pre-tax salary deferral limit under Code Section
402(g), or (ii) the salary deferral limits prescribed by applicable Federal
nondiscrimination requirements, and (iii) the Participant could elect to
participate in the Plan concurrent with initial employment. Such deferral shall
be effective through an applicable referral Agreement delivered personally to
the Plan Administrator if deposited in the mail addressed to the Plan
Administrator at the principal address of the Company.
Section 1.2 - Conditions of Participation
An individual shall not become a Participant hereunder until he or she furnishes
within a reasonable time limit established by the Plan Administrator such
completed and executed elections, Beneficiary designations, consents and other
documents and information prescribed the Plan Administrator. Each person upon
becoming a Participant shall be deemed conclusively, for all purposes, to have
assented to the terms and provisions of this Plan and shall be bound thereby.
Section 1.3 - Election to Deferred Compensation
For the first calendar year in which a Participant is eligible, the election to
defer from one percent (1%) to six percent (6%) of Compensation must be made
before the beginning of the period of service for which the Compensation is
earned.
(b) Each subsequent calendar year, a Participant shall be given the opportunity
to amend his or her existing elections, in writing in a new Deferral Agreement,
before December 31 of such year, the manner and extent (within the limits of the
Plan) to which the Participant's Compensation in respect to the subsequent
calendar year shall be deferred hereunder.
(c) A Participant who has made an effective election with respect to the
deferral of Compensation for a calendar year, may not change that election after
the calendar year has commenced; provided, however, that the deferral under any
Deferral Agreement may be suspended or amended as provided in Section 6.5.
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<PAGE>
Section 1.4 - Company Matching Contributions
Each participating Employer shall cause matching contributions to be credited to
Participant's accounts under this Plan in the same manner an amount as if
Compensation deferrals made pursuant to this Plan were permissible salary
deferrals under the BANK ONE 401(k) Savings Plan.
Section 1.5 - Deferred Accounts
All Compensation which a Participant has elected to defer under the Plan, shall
be credited to the Participant's Deferred Accounts in dollars in the same manner
as through contributed as permissible salary deferrals to the BANK ONE 401(k)
Savings Plan. Separate Deferred Accounts shall be created and maintained by the
Plan Administrator for each Participant to reflect each appropriate allocation
of deferred Compensation and Company matching contributions to accounts and
phantom investment Rinds as though maintained- under the BANK ONE 401(k) Savings
Plan. Such phantom investment funds may be established solely for record keeping
purposes, shall not be required to be informally funded or held in specific
investments or as separated assets and shall meet all the requirements of
Section 6.2 hereof as pertinent to non-funded, non-qualified deferred
compensation plans. Credits and charges shall be made to the Deferred Accounts
in a manner similar to that provided in the BANK ONE 401(k) Savings Plan.
Section 1.6 - Statement of Accounts
The Plan Administrator shall provide each Participant (or Beneficiary as
applicable), as soon as practical after the close of each Plan Year, a statement
in such form as the Company deems desirable, setting forth the current Plan
account and phantom investment balances to the credit of the Participant.
3
<PAGE>
ARTICLE II
BENEFIT DISTRIBUTIONS FROM THE PLAN
Section 2.1 - Form of Distribution
Distribution from the Plan shall be made and. administered in the same manner
and form and for the same reasons as if made under the BANK ONE 401(k) Savings
Plan; provided, however, that no Plan distributions shall be made in shares of
BANK ONE stock and no Plan distributions shall occur prior to the earlier of (i)
the Participant's Normal Retirement Date (as defined in Section 6.1 of the BANK
ONE 401(k) Savings Plan), or (ii) the date the Participant's employment with the
Company or a Related Company terminates (by to death or otherwise:), except as
provided in Section 2.2 hereof. Distributions from the BANK ONE CORPORATION
Stock Fund shall be paid in cash based upon the market value of a share of BANK
ONE CORPORATION Common Stock on the open market for the shares attributable to
the Participant's interests in the BANK ONE CORPORATION Stock Fund as of the
last New York Stock Exchange trading day immediately prior to the day of
distribution. No shares of BANK ONE CORPORATION stock will be issued to a
Participant in conjunction with the Plan.
Section 2.2 - Acceleration of Benefit Payments
The Company, with the approval of the Committee or the Board, may accelerate the
payment of any amounts held in any Participant's account in the case of
unforeseeable emergencies. An "unforeseeable emergency" is a severe financial
hardship to the Participant or Beneficiary resulting from a sudden and
unexpected illness or accident of the Participant or dependent of the
Participant, loss of Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant. The circumstances which will constitute a
"unforeseeable emergency" will depend upon the facts of each case, but in any
case, payment will not be made to the extent that such hardship is or may be
relieved: (i) Through reimbursement or compensation by insurance or otherwise;
(ii) By liquidation of the Participant's assets, to the extent the liquidation
of such assets would not itself cause severe financial hardships; or (iii) By
cessation of deferrals under the Plan. "Unforeseeable emergency" will not
include the need to send the Participant's child to college or the desire to
purchase a home. Any early distributions must be made under this Section 2.2.
Section 2.3 - Withholding; Payroll Taxes
To the extent required by the law in effect at the time payments are made, the
applicable Employer shall withhold from payments made hereunder any taxes
required to be withheld from an employee's wages.
4
<PAGE>
Section 2.4 - Beneficiary Designation
Each Participant who has Deferred Accounts hereunder may from time to time
designate any person or persons (who may be designated contingently or
successively and who may be an entity other than a natural person) as their
Beneficiary or Beneficiaries to whom Plan benefits are paid if the Participant
dies before receipt of all such benefits. Such Beneficiary designations shall
not be subject to the surviving spouse limitations/requirements applicable to
qualified plans. Each Beneficiary designation shall be filed in the form
prescribed by the Plan Administrator and will be effective only when filed with
the Plan Administrator during the Participant's lifetime. Each beneficiary
designation filed with the Plan Administrator will cancel all Beneficiary
designations previously filed with the Plan Administrator. The revocation of a
Beneficiary designation, no matter how effected, shall not require the consent
of any designated Beneficiary.
If any Participant is not survived by a Beneficiary as designated above, any
death benefit payable thereunder shall be paid to the executor or administrator
of the Participant's estate.
A surviving Beneficiary of a Participant may designate a beneficiary to whom
Plan benefits are to be paid if (i) the Beneficiary's death occurs before
receipt of all benefits otherwise payable and (ii) without survival of a
secondary Beneficiary has also died provided, however, if the surviving
Beneficiary was the Participant's Spouse, no secondary Beneficiary designation
by the Participant shall be effective unless the Spouse consented as required
above. If such a surviving Beneficiary dies before receiving the entire death
benefit and has not designated a Beneficiary (and said Beneficiary is not
survived by a secondary Beneficiary appointed by the Participant and his Spouse,
or the secondary beneficiary has also died), the remainder of such benefits
shall be paid to such Beneficiary's spouse, if living, or otherwise to the
executor or administrator of such Beneficiary's estate.
5
<PAGE>
ARTICLE III
COMMITTEE
Section 3.1 - Appointment of the Committee
The BANK ONE CORPORATION Organization, Compensation and Nominating Committee
(the "Committee") shall administer the Plan in accordance with the intention of
the Board, as expressed herein.
Section 3.2 - Committee Procedures
No Committee member at any time hereunder who is a Participant shall have any
vote in any decision of the Committee made uniquely with respect to such
Committee member or such Committee member's benefits hereunder.
In the event of any disagreement among the Committee members at any time acting
hereunder and authorized to act with respect to any matter, the decision of a
majority of said Committee members authorized to act upon such matter shall be
controlling and shall be binding and conclusive upon all persons, including,
without in any manner limiting the generality of the foregoing, the other
Committee members, the Company, its directors, the Plan Administrator, all
persons at any time in the employ of the company and the Participants and their
Beneficiaries and upon the respect successors, assigns, executors,
administrators, heirs, next-of-kin and distributees of all the foregoing.
All action of the Committee hereunder may be taken with or without a meeting. If
taken without a meeting, the action shall be in writing and signed by a majority
of the members of the Committee.
Subject to the provisions of the first paragraph in this Section 4.2, each
additional and each successor Committee member at any time acting hereunder
shall have all the rights and powers (including discretionary rights and powers)
and all of the privileges and immunities hereby conferred upon the initial
Committee members hereunder, and all of the duties and obligations so imposed
upon the initial Committee members hereunder.
Except as otherwise may be required by any applicable law, no Committee member
at any time acting hereunder shall be required to give any bond or other
security for the faithful performance of duties as such Committee member.
6
<PAGE>
ARTICLE IV
ADMINISTRATION
Section 4.1 - Administrative Powers and Duties
The Board shall designate an officer of the Company to be the "Plan
Administrator" to have the primary administrative responsibility with respect to
the Plan in coordination with and under the direction of the committee. The
Committee and the Plan Administrator shall together administer the Plan and, in
this connection, all policy and discretionary decisions shall be the
responsibility of the committee and all administrative functions shall be the
responsibility of the Plan Administrator who shall perform the same under the
direction of the committee. The Committee shall interpret the provisions of the
Plan where necessary and may adopt procedures for the administration of the Plan
which are consistent with the provisions of the Plan and the rules adopted by
the Committee.
The Committee may retain auditors, accountants, record keepers, legal counsel,
consultants and other counsel selected by it. Any Committee member may himself
act in any such capacity, and any such auditors, accountants, record keepers,
legal counsel, consultants and other counsel may be persons acting in the
similar capacity for the Company and ma be employees of the company. The opinion
of any such auditor, accountant, record keeper, legal counsel, consultant or
other counsel shall be full and complete authority and protection in respect to
any action taken, suffered or omitted by the Committee in good faith and in
accordance with such opinion.
Section 4.2- Expenses
The Company shall charge Participants' Deferral Accounts the reasonable expenses
incurred by the Committee in the administration of the Plan, including the fees
and compensation of the persons referred to in the second paragraph of Section
5.1 and all other expenses incurred in the administration of the Plan, unless
paid by the Company. Any such charges shall reduce the earnings credited to the
Participant's deferral account and shall be applied in a uniform and
nondiscriminatory manner.
Section 4.3 - Records
The Company and the Plan Administrator shall each keep such records and shall
each reasonably give notice to the other of such information, as shall be
proper, necessary or desirable to effectuate the purposes of the Plan, including
without in any manner limiting the generality of the foregoing, records and
information with respect to deferral elections, Deferred Accounts, dates of
employment and termination and determinations made hereunder. Neither the
Company nor the Plan Administrator shall be required to duplicate any records
kept by the other. To the extent that the company and/or the Plan Administrator
shall prescribe forms for use by the Participants and their Beneficiaries in
communicating with the Company or the Plan Administrator, as the case may be,
and shall establish periods during which communications may be received, they
shall respectively be protected in disregarding any notice or communication for
which a form shall so have been prescribed and which shall not be made in such
form and any notice or communication
7
<PAGE>
for the receipt of which a period shall so have been established and which shall
not be received during such period. The Company, the Plan Administrator and the
Committee shall respectively also be protected in acting upon any notice or
other communication purporting to be signed by any person and reasonably
believed to be genuine and accurate, including the Participant's current mailing
address.
Section 4.4 - Determinations
All determinations hereunder made by the Company or the Committee shall be made
in the sole and absolute discretion of the Company or of the Committee, as the
case may be.
In the event that any disputed matter shall arise hereunder, including without
in any manner limiting the generality of the foregoing, any matter relating to
the eligibility of any person to participate under the Plan, the participation
of any person under Plan, the amounts payable to any person under the Plan and
the applicability and the interpretation of the provisions of the Plan, the
decision of the Committee upon such mater shall be binding and conclusive upon
all person, including, without in any manner limiting the generality of the
foregoing, the Company, its directors, the Plan Administrator, all persons at
any time in the employ of the Company, the Participants and their Beneficiaries
and upon the respective successors, assigns, executors, administrators, heirs,
next-of-kin and distributees of all the foregoing.
Section 4.5 - Legal Incompetency
The Committee may direct payment either directly to an incompetent or disabled
person, whether because of minority or mental or physical disability, or to the
guardian of such person, or to the person having custody of such person, without
further liability on the part of the Company, the Committee, the Plan
Administrator, or any person, for the amounts of such payment to the person on
whose account such payment is made.
Section 4.6 - Action by the Company
Any action by the Company under this Plan may be made by resolution of its
Board, or by any persons duly authorized by resolution of said Board to take
such action.
Section 4.7 - Exemption from Liability/Indemnification
The member of the Committee and the Plan Administrator, and each of them, shall
be free from all liability, joint or several, for their acts, omissions and
conduct, and for the acts, omissions and conduct of their duly appointed agents,
in the administration of the Plan, except for those acts of omissions and
conduct resulting from willful misconduct or lack of good faith.
The Company shall indemnify each member of the Committee, the Plan Administrator
and any other employee, officer or director of the Company against any claims,
loss, damage, expense and liability, by insurance or otherwise, reasonably
incurred by the individual in connection with any action or failure to act by
reason of membership on the Committee or performance of an
8
<PAGE>
authorized duty or responsibility for or on behalf of the Company pursuant to
the Plan unless the same is judicially determined to be the result of the
individual's gross negligence or willful misconduct. Such indemnification by the
Company shall be made only to the extent such expense or liability is not
payable to or on behalf such person under any liability insurance coverage. The
foregoing right to indemnification shall be in addition to any other rights to
which any such person may be entitled as a matter of law.
Section 4.8 - Nonalienation of Benefits
Except as otherwise provided by law, no benefit, payment or distribution under
this Plan shall be subject either to the claim of any creditor of Participant or
Beneficiary, or to attachment, garnishment, levy, execution or other legal or
equitable process, by any creditor of such person, and no such person shall have
any right to alienate, commute, anticipate or assign (either at law or equity)
all or any portion of any benefit, payment or distribution under this Plan.
The Plan shall not in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person entitled to benefits
hereunder.
In the event that any Participant's benefits are garnished or attached by order
of any court, the Plan Administrator may elect to bring an action for a
declaratory judgment in a court of competent jurisdiction to determine the
proper recipient of the benefits to be paid by the Plan. During the pendency of
said action, any benefits that become payable may be paid into the court as they
become payable, to be distributed by the court to the recipient as it deems
proper at the close of said action.
9
<PAGE>
ARTICLE V
INCLUSION AND WITHDRAWAL OF RELATED COMPANIES
Section 5.1 - Inclusion of Related Companies
Any Employer which is a Related Company and which is authorized by the Board to
participate in the Plan may elect to participate by action of its own Board of
Directors.
Section 5.2 - Withdrawal of Related Companies
The Company may, at any time in its discretion, determine that an Employer shall
no longer participate in the Plan and may direct that such Employer withdraw
from the Plan. Any Employer may similarly elect to discontinue its participation
in this Plan at any time after the expiration of the sixty (60) day period
immediately following the receipt by the Plan Administrator of the Employer's
written notice of its intention to so withdraw. An Employer may be required to
discontinue its participation if it ceases to be a member of the Company's
controlled group of corporations or otherwise controlled by the Company.
The withdrawal of a participating Employer from the Plan shall not adversely
affect the administration of amounts already credited to the Deferred Account(s)
under the Plan of Participants employed by such Employer, with respect to which,
amounts the Plan shall be continued until all such amounts under the Plan have
been paid by the Employer or otherwise liquidated under applicable law or
judicial judgment.
Section 5.3 - Sale or Liquidation of Related Company
In the event the Company should sell or otherwise directly or indirectly dispose
of sufficient interest in an Employer so that it no longer owns 50% of such
company, or an Employer is liquidated, the Company shall assume and guarantee
payment of such Employer's remaining deferred Compensation obligations under the
Plan.
Section 5.4 - Transfer between Participating Companies
In the event that a Participant's employment is transferred from one
participating Employer to another participating Employer, the transfer shall not
adversely affect the administration of amounts then credited to the Deferred
Account(s) of such Participant on or as of the date of transfer and the
Participant's prior Employer shall remain obligated to pay such deferred
benefits in accordance with the Participant's new participating Employer shall
become obligated under the terms of the Plan to pay any deferred Compensation
amounts credited to Participant's Deferred Account(s) after the date of such
transfer.
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<PAGE>
ARTICLE VI
MISCELLANEOUS PROVISIONS
Section 6.1 - Employment and Other Rights
Nothing contained herein shall require the Company or any Employer or continue
any Participant in its employ, or require any Participant to continue in the
employ of the Company or any Employer, nor does the Plan create any rights of
any Participant or Beneficiary or any obligations on the part of the Company or
any Employer other than those set forth herein. The benefits payable under this
Plan shall be independent of, and in addition to, any other employment
agreements that may exist from time to time concerning any other compensation or
benefits payable by the Company or any Employer.
Section 6.2 - Right to Benefits
The sole interest of each Participant and each Beneficiary of a Participant
under the Plan shall be to receive the deferred Compensation benefits provided
herein as and when the same shall become due and payable in accordance with the
terms hereof and applicable elections hereunder and neither any Participant nor
any Beneficiary of any Participant shall have right, title or interest (legal or
equitable) in or to any of the specific property or assets of the Company or any
participating Employer. All benefits hereunder shall be paid solely from the
general assets of the Company or applicable Employer and no Employer shall
maintain any separate fund or other separated assets of Company or any Employer
be deemed or construed through any of the provision of this Plan to be held in
trust for the benefit of any Participant or designated Beneficiary(ies) or to be
collateral security for the performance of the obligations imposed by this Plan
or the Company or any Employer. The rights of any Participant hereunder and any
Beneficiary of the Participant shall be solely those of an unfunded and
unsecured creditor in respect to the promise of the Company or any Employer, as
applicable, to pay money in the future.
Section 6.3 - Offset to Benefits
Notwithstanding any provisions of the plan to the contrary, the Company or any
Employer may, at the time of distribution in its sole and absolute discretion,
enforce the right to offset any amounts to be paid to a Participant under the
Plan against any debt of the Participant which has been reduced to judgment in
favor of the Company or Employer.
Section 6.4 - Withholding and Deductions
All benefits payments made by the Company or any Employer under the Plan to any
Participant or Beneficiary shall be subject to applicable withholding and to
such other deductions as shall at the time of such payment be required under any
income tax or other law, whether of the United States or any other jurisdiction,
and, in the case of payments to the Beneficiary of a Participant, the delivery
to the Plan Administrator of all necessary waivers and other documents. To the
extent
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that an Employer is required to withhold any current taxes at the time of
deferral of Compensation, such amounts shall be taken out of the portion of the
Participant's current Compensation which is not deferred under this Plan.
Determinations by the Plan Administrator as to withholding shall be binding on
the Participant and applicable Beneficiary(ies).
Section 6.5 - Amendment and Termination
While the Company and the participating Employers intend to continue its Plan
indefinitely, the Plan may be amended, suspended or terminated at any time by
the Board; provided that no such amendment, suspension or termination shall
adversely affect the administration of amounts already credited to Deferred
Accounts under the Plan, with respect to which amounts the Plan shall continue
until all deferred Compensation credited to Deferred Accounts under the Plan
have been paid. In the event it should at any time be determined for any reason
by an applicable agency of the United States Government or by any court of
applicable jurisdiction that the Plan does not qualify under the exclusions of
Section 201(2), Section 301(a)(3) and Section 401(a)(1) of ERISA, the Plan shall
be deemed terminations as of the date of such determination unless alternative
action is taken by the Board.
Section 6.6 - Reorganization of the Company
Neither the Company nor any participating Employer shall merge or consolidate
with any other corporation or organization, or permit its business activities to
be taken over by any other organization unless and until the succeeding or
continuing corporation or other organization shall expressly assume the rights
and obligations of such Employer herein set forth.
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ARTICLE VII
DEFINITIONS
For the purpose of this Plan, the following words and phrases shall have the
meanings indicated, unless the context clearly indicates otherwise:
Section 7.1 - BANK ONE 401(k) Savings Plan
"BANK ONE 401(k) Savings Plan" means the qualified, 401(k) savings plan, the
terms of which are set forth in a plan document originally effective April 1,
1986, as it may be amended or restated from time to time.
Section 7.2 - Beneficiary
"Beneficiary" means the person, persons or entity designated by the Participant
to receive any benefits payable under the Plan pursuant to Section 2.4.
Section 7.3 - Board
"Board" means the Board of Directors of BANK ONE CORPORATION.
Section 7.4 - Code
"Code" means the Internal Revenue Code of 1986.
Section 7.5 - Committee
"Committee" means the BANK ONE CORPORATION Organization, Compensation and
Nominating Committee, appointed pursuant to the BANK ONE CORPORATION Cash
Balance Pension Plan. The committee is authorized to establish Plan policy and
review Plan discretionary decisions pursuant to Article III.
Section 7.6 - Company
"Company" means BANC ONE CORPORATION or in applicable context BANC ONE
CORPORATION and its subsidiaries in the aggregate. Effective October 2, 1998,
"Company" shall mean the BANK ONE CORPORATION and its subsidiaries in the
aggregate.
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Section 7.7 - Compensation
"Compensation" means remuneration in the form described in Section 1.19 of the
BANK ONE 401(k) Savings Plan, but only such Compensation in excess of the limits
for the Plan Year as provided under Code Section 401(a)(17).
Section 7.8 - Deferral Agreement
"Deferral Agreement" means the agreement filed by a Participant to effect
deferrals of compensation hereunder.
Section 7.9 - Deferred Accounts
"Deferred Accounts" means the accounts maintained by the Plan Administrator for
each Participant pursuant to Article II. Separate Deferred Accounts shall be
maintained for each Participant. More than one Deferred Account may be
maintained for each Participant as necessary to reflect the nature of the
account and various fund allocations. A Participant's Deferred Accounts shall be
utilized solely as a device for the measurement and determination of the amounts
to be paid to or on behalf of a Participant pursuant to this Plan. A
Participant's Deferred Accounts shall not constitute or be treated as a trust
fund of any kind.
Section 7.10 - Employee
"Employer" means BANC ONE CORPORATION, and/or an applicable participating
Related Company or any successor to the business thereof. Effective October 2,
1998, "Employer" means BANK ONE CORPORATION, and/or an applicable participating
Related Company or any successor to the business thereof.
Section 7.11 - Participant
"Participant" means any individual who is eligible to defer Compensation
hereunder by designation of the Chief Executive Officer of the Company and who
elects to participate by filing a Deferral Agreement as provided in Article I.
Section 7.12 - Plan Administrator
"Plan Administrator" means the person appointed by the Company to represent the
Company in the administration of this Plan pursuant to the provision of
Article IV.
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Section 7.13 - Plan Year
"Plan Year" means a 12-month period commencing January 1 and ending the
following December 3 1.
Section 7.14 - Related Company
"Related Company" means any corporation which is a member of the controlled
group of corporations of which the Company is the common parent and any other
entity in which the Company owns a 50% or greater interest which is designated
to be a Related Company by the Company.
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ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 - ERISA Status
This Plan shall constitute a plan which is unfunded and which is maintained
primarily for the purpose of providing deferred Compensation benefits for a
select group of management or highly compensated employees within the meaning of
Sections 202(2), 301(a)(3) and 401(a)(1) of ERISA and the ERISA reporting and
disclosure regulations.
Section 8.2 - Construction.
In the construction of the Plan, the masculine shall include the feminine and
the singular the plural in all cases where such meanings would be appropriate.
Section 8.3 - Controlling Law
The law of the State of Ohio shall be the controlling state law in all matters
relating to the Plan and shall apply to the extent that it is not preempted by
the laws of the United States of America.
Section 8.4 - Effect of Invalidity of Provision
If any provision of this Plan is held invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provisions hereof, and this Plan
shall be construed and enforced as if such provisions had not been included.
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EXHIBIT 10(E)
BANK ONE CORPORATION
CASH BALANCE RESTORATION PLAN
As Amended and Restated
Effective as of January 1, 1998
<PAGE>
BANK ONE CORPORATION
CASH BALANCE RESTORATION PLAN
PURPOSE
The purpose of the BANK ONE CORPORATION Cash Balance Restoration Plan (the
"Restoration Plan") which was originally known as the Benefits Equalization Plan
of First Banc Group of Ohio, Inc. and its Subsidiaries adopted by the Board of
Directors of BANC ONE CORPORATION on October 24, 1977 and then the BANK ONE
CORPORATION Supplemental Employees Retirement Plan and amended as of October 21,
1986, January 1, 1989 and April 20, 1992, January 1, 1993, January 1, 1995 and
hereby further amended and restated as of January 1, 1998 is solely to provide
retirement benefits, for employees of BANK ONE CORPORATION and its Related
Corporations, who participate in the BANK ONE CORPORATION Cash Balance Pension
Plan (the "Basic Retirement Plan"), in excess of the limitations on qualified
retirement plan benefits imposed be provisions of Sections 415, 401 (a)(1 7) and
404(l) of the Internal Revenue Code.
Up to and including October 1, 1998, the sponsor of this Restoration Plan was
the BANC ONE CORPORATION. Effective October 2,1998, BANC ONE CORPORATION and
First Chicago NBD Corporation were merged into BANK ONE CORPORATION, a bank
holding corporation, incorporated in the State of Delaware. Effective October 2,
1998, BANK ONE CORPORATION assumed sponsorship of the Restoration Plan.
The Restoration Plan is a non-funded, supplemental deferred compensation plan
structured to benefit Participants in a manner which provides incentive to
improve the profitability, competitiveness and growth of BANK ONE CORPORATION
and its Related Corporations.
Effective Date
The Effective Date of this amended and restated Restoration Plan is January 1,
1998.
ARTICLE I
DEFINITIONS
For the purpose of the Restoration Plan, the following terms shall have the
meanings hereinafter set forth unless the context clearly indicates otherwise:
Section 1.1 - Basic Retirement Plan
"Basic Retirement Plan" means the BANK ONE CORPORATION Cash Balance Pension Plan
first adopted by the Corporation effective January 1, 1947, amended as of
January 1, 1969, January 1, 1989, January 1, 1995, January 1, 1998 and various
dates subsequent thereto, and hereafter amended from time to time, or any
successor thereto.
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Section 1.2 - Basic Retirement Plan Benefit
"Basic Retirement Plan Benefit" means the benefit payable to a Participant
pursuant to the Basic Retirement Plan based on Benefit Service recognized by
said plan for benefit accrual, by reason of his termination of employment with
the Corporation and its Related Corporations.
Section 1.3 - Basic Retirement Plan Surviving Spouse Benefit
"Basic Retirement Plan Surviving Spouse Benefit" means the pre-retirement
survivor's benefit determined pursuant to Article VI of the Basic Retirement
Plan.
Section 1.4 - Benefit Commencement Date
"Benefit Commencement Date" means the first day of the second month following
the termination of employment, or such later date as the Restoration Retirement
Benefit can be determined, on which the participant shall receive payments under
the Restoration Plan.
Section 1.5 -Benefit Service
"Benefit Service" for benefit accrual shall mean the same as defined as defined
in Article I of the Basic Retirement Plan.
Section 1.6 - Board
"Board" means the Board of Directors of BANK ONE CORPORATION or any other
committee appointed by said Board to have the authority of said Board with
respect to this Plan.
Section 1.7 - Change of Control
A "Change of Control" of the Corporation shall be deemed to have occurred upon
the happening of any of the following events:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (I) the then outstanding shares
of common stock of the Corporation (the "Outstanding Corporation Common
Stock") or (II) the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities"), provided,
however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (I) any acquisition
directly from the Corporation, (II) any acquisition by the Corporation,
(III) any acquisition by any corporation controlled by the Corporation or
(IV) any acquisition by any corporation pursuant to the a transaction which
complies with clauses (I), (II) and (III) of this Section 1.7(a); or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Corporation's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of
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the Incumbent Board, but excluding for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless, following such Business
Combination, (I) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 50% of, respectively, the then outstanding shares
of common stock and the combined voting power of the ten outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or though one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Corporation Common Stock and
Outstanding Corporation voting securities, as the case may be (II) no
Person (excluding any corporation resulting from such Business combination
or any employee benefit plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination beneficially owns,
directly or indirectly, 20% or more of, the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business
Combination and (III) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent board at the time of the execution of the initial
agreement or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Corporation of a complete liquidation
or dissolution of the Corporation.
Section 1.8 - Code
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
and any regulations relating thereto.
Section 1.9 - Corporation
"Corporation" means BANC ONE CORPORATION, including all of its Related
Corporations and, to the extent provided in Section 6.5 below, and any successor
corporation or other entity resulting from a merger or consolidation into or
with the Corporation or a transfer or sale of substantially all of the assets of
the Corporation. Effective October 2, 1998, "Corporation" means BANK ONE
CORPORATION, a Delaware corporation, a successor to BANC ONE CORPORATION,
including all of its Related Corporations.
Section 1.10 - Early Retirement Date
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"Early Retirement Date" for a Participant who at termination of employment had
attained age fifty-five (55) and completed ten (10) or more years of Vesting
Service, shall be the first day of any month following termination of employment
and prior to his Normal Retirement Date.
Section 1.11 - Late Retirement Date
"Late Retirement Date" means the first day of the month next following the later
of the Participant's Normal Retirement Date or actual termination of employment
with the Corporation.
Section 1.12 - Normal Retirement Date
"Normal Retirement Date" means the first day of the month next following the
Participant's sixty-fifth (65th) birthday.
Section 1.13 - Participant
"Participant" means a salaried employee of the Corporation: (a) who is in a
select group of management or highly compensated employees; (b) who is a
participant under the Basic Retirement Plan (or any successor to or replacement
of the Basic Retirement Plan); (c) who is eligible to receive a Basic Retirement
Plan retirement, the amount of which is reduced by reason of any limitations on
benefits by the application of Code Sections 415, 401 (a)(17) and 404(l); and
(d) who is nominated for participation by the Chairman of the Board or the Chief
Executive Officer of the Corporation and such nomination is approved in writing
by the Board. Participation shall be effective as of the date so stated in the
Board's written approval.
Section 1.14 - Related Corporation
A subsidiary or any entity which is a member of a common controlled group with
BANK ONE CORPORATION pursuant to Code Section 414 (b), (c), (m), or (o).
Section 1.15 - Plan Administrator
BANK ONE CORPORATION or such individuals(s) or entity appointed Plan
Administrator in accordance with Section 4.1.
Section 1.16 - Restoration Plan
"Restoration Plan" means the BANK ONE CORPORATION Cash Balance Restoration Plan
as described herein.
Section 1.17 - Restoration Retirement Benefit
"Restoration Retirement Benefit" means that benefit, if any, payable to a
Participant pursuant to this Restoration Plan by reason of his termination of
employment with the Corporation.
Section 1.18 - Restoration Surviving Spouse Benefit
"Restoration Surviving Spouse Benefit" means the benefit payable to a Surviving
Spouse pursuant to this Restoration Plan.
Section 1.19 - Surviving Spouse
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"Surviving Spouse" means a person who is married to a Participant at the date of
his death.
Section 1.20 - Vesting Service
"Vesting Service" means the same as defined in Article I of the Basic Retirement
Plan.
ARTICLE II
RESTORATION RETIREMENT BENEFITS
Section 2.1 - Eligibility
To receive a benefit under this Restoration Plan a Participant must qualify for
a benefit under the Basic Retirement Plan, have attained the age of fifty-five
(55) while in active service, completed ten (10) years of Benefit Service and
have terminated his employment relationship with the Corporation. In no event
shall an employee who is not entitled to benefits under the Basic Retirement
Plan be eligible for a benefit under this Restoration Plan.
Section 2.2 - Incorporation of the Basic Retirement Plan
The Basic Retirement Plan, with any amendments thereto in effect, shall be
attached hereto and is hereby incorporated by reference into and shall be a part
of this Restoration Plan as if set forth herein. Any amendment made to the Basic
Retirement Plan shall also. be incorporated by reference into and form. a part
of the Restoration Plan, effective as of the effective date of such amendment.
The Basic Retirement Plan, whenever referred to in this Restoration Plan, shall
mean the Basic Retirement Plan as it exists on the date any determination is
made of benefits payable under this Restoration Plan. All terms used herein
shall have the meanings assigned to them under the provisions of the Basic
Retirement Plan unless otherwise qualified by this Restoration Plan.
Section 2.3 - Amount of Benefit
A Participant who has met the eligibility requirements of Section 2.1 above
shall be entitled to receive a Restoration Retirement Benefit payable on the
Benefit Commencement Date, in an amount equal to the larger of (a) or (b), as
follows, where:
(a) equals (i) minus (ii):
(i) the Basic Retirement Plan Benefit determined under Basic Retirement
Plan to which the Participant would have been entitled if such benefit
was computed without any limitations on benefits imposed by
application of Code Section 415, 4,01(a)(17) or 404(l), and
(ii) the Basic Retirement Plan Benefit payable to the eligible Participant
under the Basic Retirement Plan.
(b) equals a Participant's Restoration Retirement Benefit under the Restoration
Plan determined as of December 31, 1997, before the Restoration Plan was
amended and restated.
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In determining the amount of the Basic Retirement Plan Benefit for purpose of
Subsection (a)(i) for any year, any amount of compensation or bonus that a
Participant has deferred under the BANK ONE CORPORATION Compensation Deferral
Plan and the BANK ONE CORPORATION 401(k) Restoration Plan for the year shall be
considered as part of eligible earnings for the year deferred.
The amounts described herein shall be determined by the same actuarial
adjustments as those specified in the Basic Retirement Plan and computed as of
the date of termination of employment of the Participant with the Corporation.
Section 2.4 - Vesting
In the event that Participant remains an employee of the Corporation after
having attained the age of fifty-five (55) and completed ten (10) years of
Vesting Service, his right to Restoration Benefits shall thereafter be vested,
but no Restoration Benefits shall be payable hereunder to or in respect to him
until the Benefit Commencement Date.
The Chief Executive Officer of the Corporation shall have the authority to vest
any Participant's Restoration Benefits with the approval of the Organization,
Compensation and Nomination Committee.
Section 2.5 - Benefit Election
Participant may elect a Normal Retirement Date, Late Retirement Date, or Early
Retirement Date as defined in the Basic Retirement Plan. Subject to the
provisions of the Basic Retirement Plan, benefits commencing prior to the Normal
Retirement Date shall be actuarially reduced in accordance with provisions of
the Basic Retirement Plan.
Section 2.6 - Form of Distribution
The Restoration Retirement Benefit payable to an eligible Participant shall
generally be paid in a lump sum, which shall be the actuarial equivalent of the
straight life annuity amount calculated in accordance with Section 2.3 herein.
The Participant may elect to have his Restoration Retirement Benefit paid as a
monthly annuity. The available payment forms shall consist of Life only, Life
and 60 months certain or Life and 120 months certain, a 50%, 66%, or 100%
Survivor Annuitant or 3% or 5% increasing annuity option, all as described in
the Basic Retirement Plan. The form of payment requested by Participant shall,
in any event, be the same method of payment elected under the Basic Retirement
Plan and shall be equal to the actuarial equivalent of the straight life annuity
amount calculated in accordance with Section 2.3 herein. Such election will only
be effective if the election to receive an annuity payable on a monthly basis is
made at least six months prior to the effective date of retirement.
Section 2.7 - Commencement of Benefit
Payment of the Restoration Retirement Benefit to a Participant shall commence on
the same date as payment of the Basic Retirement Plan Benefit to the,
Participant commences with the exception that the lump sum form of payment is
elected pursuant to Section 2.6, payment will commence on the Benefit
Commencement Date. Benefits payable in a monthly annuity to recipients under
this Restoration Plan shall cease to be payable, at the same time as benefits
payable under the Basic Retirement Plan to such recipient shall cease, or at
such earlier time as the limitations under Code Section 415 are no longer
applicable.
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ARTICLE III
RESTORATION SURVIVING SPOUSE BENEFIT
Section 3.1 - Eligibility for Restoration Surviving Spouse Benefit
A Restoration Surviving. Spouse Benefit will be paid to the Surviving Spouse
under the terms of this Article, if:
(a) the Participant has attained the age of fifty-five (55) while actively
employed with the Corporation,
(b) the Participant has at least ten (10) years of Benefit Service, and
(c) the Participant dies while actively employed by the Corporation.
Section 3.2 - Amount of Benefit
The amount of the Restoration Surviving Spouse Benefit payable to a Surviving
Spouse shall be equal to:
(a) the amount of the Basic Retirement Plan Surviving Spouse Benefit to which
the Surviving Spouse would have been entitled under the Basic Retirement
Plan if such benefit were computed without giving effect to any limitation
on benefits imposed by application of Code Section 415, 401(a)(17) or
404(l);
MINUS
(b) the amount of the Basic Retirement Plan Surviving Spouse Benefit actually
payable to the Surviving Spouse under the Basic Retirement Plan.
In determining the amount of the Basic Retirement Plan Surviving Spouse Benefit
for purpose of Subsection (a), a Participant's Basic Plan Benefit shall be
determined by including any amount of compensation or bonus that a Participant
had deferred under the BANK ONE CORPORATION Compensation Deferral Plan and the
BANK ONE CORPORATION 401(k) Restoration Plan for the year as part of eligible
earnings for the year deferred or any compensation or bonus that a Participant
had exchanged under the BANK ONE CORPORATION Investment Option Plan for the year
as part of eligible earnings for the year exchanged.
Section 3.3 - Form and Commencement of Benefit
The Restoration Surviving Spouse Benefit shall be computed as of the date of
Participant's death and payable in the form elected by the Participant. If no
election has been made in accordance with procedures set forth by the Plan
Administrator, the Restoration Surviving Spouse Benefit shall be payable in a
lump sum. The amount of the payment shall be determined by the same actuarial
adjustments as specified in the Basic Retirement Plan concerning calculation of
the Surviving Spouse Benefit.
Section 3.4 - Rights to Benefits
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Nothing contained in this Restoration Plan is intended to give or shall give any
spouse or former spouse of a Participant or any other person any right to
benefits under this Restoration Plan by virtue of Code Sections 401(a)(11) and
417 (relating to qualified pre-retirement survivor annuities and qualified joint
and survivor annuities) or Code Sections 401(a)(13)(B) and 414(p) (relating to
qualified domestic relations orders) as amended.
ARTICLE IV
ADMINISTRATION
Section 4.1 - Administrative Powers and Duties
BANK ONE CORPORATION shall be responsible for the general operation and
administration of the Plan and for carrying out the provisions thereof. The
Chief Executive Officer of BANK ONE CORPORATION may, in his discretion, appoint
an employee/employees or an administrative committee in writing to administer
the provisions of this Restoration Plan. The decision of the Plan Administrator
with respect to any questions arising as to the administration or interpretation
of this Restoration Plan, including the discontinuance of any or all of the
provisions thereof, shall be final, conclusive, and binding. If the Restoration
Plan is administered by a committee, such committee may act by a majority of its
members by a vote at a meeting or in writing without a meeting signed by all the
members of the committee.
All provisions set forth in the Basic Retirement Plan with respect to the
administrative powers and duties of the Corporation, expenses of administration,
and procedures for filing claims shall also be applicable with respect to the
Restoration Plan. The Corporation shall be entitled to rely conclusively upon
all tables, valuations, certificates, opinions and reports furnished by any
actuary, accountant, controller, counsel or other person employed or engaged by
the Corporation with respect to the Restoration Plan.
Section 4.2 - Records
The Plan Administrator shall keep such records of such information, necessary or
desirable to effectuate the purpose of the Plan including without in any manner
limiting the generality of the foregoing, records and information with respect
dates of employment and termination and determinations made hereunder. To the
extent that the Plan Administrator shall prescribe forms for use by the
Participants and their Surviving Spouse in communication with the Plan
Administrator and shall establish periods during which communications must be
received, the Plan Administrator shall be protected in disregarding any notice
or communication if such notice or communication is not received in a form
prescribed by the Plan Administrator and not during a period prescribed by the
Plan Administrator. The Corporation and the Plan Administrator shall
respectively also be protected in acting upon any notice or other communication
purporting to be signed by any person and reasonably believed to be genuine and
accurate, including the Participant's current mailing address.
Section 4.3 - Determinations
All determinations hereunder made by the Plan Administrator shall be made in the
sole and absolute discretion of the Plan Administrator
In the event that any disputed matter shall arise hereunder, including, without
in any manner limiting the generality of the foregoing, any matter relating to
the eligibility of any person to participate under the
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Restoration Plan, the participation of any person under the Restoration Plan
and, the amounts payable to any person under the Restoration Plan and the
applicability and the interpretation of the previsions of the Restoration Plan,
the decision of the Corporation upon such matter shall be binding and conclusive
upon all persons, including, without in any manner limiting the generality of
the foregoing, the Corporation, the Participants and their Surviving Spouses and
upon the respective successors, assigns, executors, administrators, heirs, next-
of-kin and distributees of all the foregoing.
Section 4.4 - Claims Procedure
The Plan Administrator shall have discretion regarding benefit determinations.
If required by the Plan Administrator, any person entitled to benefits hereunder
must file a claim with the Plan Administrator upon forms furnished by the Plan
Administrator. Notwithstanding any other provision of the Restoration Plan,
payment of benefits need not be made until receipt of the claim and the
expiration of the time periods specified in the Section 4.4 for rendering a
decision on the claim. In the event a claim is denied, benefits need not be made
or commence until a final decision is reached by the Plan Administrator, subject
to the provisions of Section 4.5.
The Plan Administrator shall notify the claimant of its decision within ninety
(90) days after receipt of the claim. However, if special circumstances require,
the Plan Administrator may defer action on a claim for benefits for an
additional period not to exceed ninety (90) days, and in that case if shall
notify the claimant of the special circumstances involved and time by which it
expects to render a decision.
If the Plan Administrator determines that any benefits claimed should be denied,
it shall give notice to the claimant setting the specific reason or reasons for
the denial and provide a specific reference to the Plan provisions on which the
denial is based. The Plan Administrator shall also describe any additional
information necessary for the claimant to perfect the claim.
Section 4.5 - Appeal and Review Procedure
If a claim has been denied by the Plan Administrator, the claimant shall have
sixty (60) days after receipt of the denial in which to file a notice of appeal
with the Plan Administrator. A final determination by the Plan Administrator
shall be rendered within sixty (60) days after receipt of the claimant's notice
of appeal. Under special circumstances such determination may be delayed for an
additional period not to exceed sixty (60) days, in which case the claimant
shall be notified of the delay prior to the close of the initial sixty (60) day
period. The Plan Administrator's final decision shall set forth the reasons and
the references to the Restoration Plan provisions on which it is based.
Section 4.6 - Facility of Payment
Whenever a person entitled under the Plan to receive any payment of a benefit is
under a legal disability or incapacity or is in any way unable to manage his
financial affairs, the Plan Administrator may, in its discretion, direct
payments on behalf of such person to be made to the incapacitated person's legal
representative, custodian, relative, or other such individual(s) as is (are)
known by the Plan Administrator to be assisting such person. Such decision by
the Plan Administrator shall be made after consultation with those persons, if
any, which may include legal counsel and/or medical personnel, which the Plan
Administrator in his sole discretion determines are necessary in order to make
such decision. Any payment of benefit or installment thereof in accordance with
the provisions of this Section 4.6 shall be a complete discharge of any
liability relating to the making of or entitlement to such payment under the
provisions of the Restoration Plan.
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Section 4.7 - Acceleration of Benefit Payments
The Corporation hereby reserves the right to accelerate the payment of
Restoration Plan distributions without the consent of the Participant or the
Participant's Surviving Spouse, estate or any other person or persons claiming
through or under the Participant. In making such determination, due
consideration may be given to the health, financial circumstances and family
obligations of the Participant. In this regard, the Participant may be
consulted, however, he shall have no voice in the decision reached nor any right
to an accelerated payment. The Corporation's determination shall be final and
conclusive upon the Participant and the Surviving Spouse.
Section 4.8 - Action by the Corporation
Any action by the Corporation under this Restoration Plan may be by resolution
of its Board of Directors, or by any person, persons, duly authorized by
resolution of aid Board to take such action.
Section 4.9 - Exemption from Liability/Indemnification
The persons acting on behalf of the Plan Administrator, shall be free from all
liability, joint or several, for their acts, omissions, and conduct, and for the
acts, omissions and conduct of their appointed agents, in administration of the
Plan, except for those acts or omissions and conduct resulting from willful
misconduct or lack of good faith.
The Corporation shall indemnify the persons acting on behalf of the Plan
Administrator and other employee, officer or director of the Corporation against
any claims, loss, damage, expense and liability, by insurance or otherwise,
reasonably incurred by the individual in connection with any action or failure
to act by reason of performance of an authorized duty or responsibility for or
on behalf of the Corporation pursuant to the Plan unless the same is judicially
determined to be the result of the individual's gross negligence or willful
misconduct. Such indemnification by the Corporation shall be made only to the
extent such expense or liability is not payable to or on behalf of such person
under any liability insurance coverage. The foregoing right to indemnification
shall be in addition to any other rights to which any such person may be
entitled as a matter of law.
Section 4.10 - Non-assignability
No right or benefit under the Restoration Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to
anticipate, alienate, assign, sell pledge, encumber or charge the same shall be
void.
The Restoration Plan shall not in any manner be liable for or subject to the
debts, contracts, liabilities, engagement or torts of any person entitled to
benefits hereunder.
In event that any Participant's benefits are garnished or attached by order of
any court, the Corporation may elect to bring an action for a declaratory
judgment in a court of competent jurisdiction to determine the proper recipient
of the benefits to be paid by the Restoration Plan. During the pendency of said
action, any benefits that become payable may be paid into the court as they
become payable, to be distributed by the court to the recipient as it deems
proper at the close of said action.
10
<PAGE>
ARTICLE V
AMENDMENT OR TERMINATION
Section 5.1 - Amendment and Termination
The Corporation reserves the right in its sole discretion to amend or terminate
this Restoration Plan at any time. In the event of a termination, the
Corporation in its sole discretion may accelerate payment of Restoration
Retirement Benefits pursuant to Section 4.7 to those Participants participating
in the Restoration Plan on the date of such termination, to the extent such
Restoration Retirement Benefits would be otherwise payable as defined in Article
II, determined on the basis that each Participant's presumed retirement date was
the date the Restoration Plan was terminated. However, no amendment or
termination shall affect any Restoration Retirement Benefit then being paid to
Participants or Surviving Spouses under this Restoration Plan as determined
prior to such effective date of the amendment or termination.
Section 5.2 - Change of Control
The Restoration Plan shall not be automatically terminated upon change of
control or by a transfer or sale of assets of the Corporation or by the merger
or consolidation of the Corporation into or with any other Corporation or other
entity when the Corporation is not the surviving or continuing Corporation, but
the Plan shall be continued after such sale, merger or consolidation only if and
to the extent that the transferee, purchaser or successor entity, shall be
obligated to pay Plan benefits to those Participants participating in the
Restoration Plan on the date of such termination, to the extent such Restoration
Retirement Benefits would be otherwise payable as defined in Articles II and
III, determined on the basis that each Participant's presumed termination date
was the date the plan was terminated.
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 - General Conditions
Except as otherwise expressly provided herein, all terms and conditions of the
Basic Retirement Plan applicable to a Basic Retirement Plan Benefit or a Basic
Retirement Plan Surviving Spouse Benefit shall also be applicable to Restoration
Retirement Benefit or a Restoration Surviving Spouse Benefit payable hereunder.
Any Basic Retirement Plan Benefit or Basic Retirement Plan Surviving Spouse
Benefit or any other benefit payable under the Basic Retirement Plan shall be
paid solely in accordance with the terms and conditions of the Basic Retirement
Plan and nothing in this Restoration Plan shall operate or be construed in any
way to modify, amend or affect the terms and provisions of the Basic Retirement
Plan.
Section 6.2 - Rights to Benefits
No Participant or Surviving Spouse shall have any right to a benefit under the
Restoration Plan except in accordance with the terms of the Restoration Plan.
No Participant, Surviving Spouse or any other person shall have any interest in
any particular assets of the Corporation by reason of the right to receive a
benefit under the Restoration Plan and any such Participant,
11
<PAGE>
Surviving Spouse or other person shall have only the rights of a general
unsecured creditor of the Corporation with respect to any rights under the
Restoration Plan.
Nothing contained in the Restoration Plan shall constitute a guaranty by the
Corporation or any other entity or person that the assets of the Corporation
will be sufficient to pay any benefit hereunder.
Section 6.3 - Offsets to Benefits
Notwithstanding any provisions of this Restoration Plan to the contrary, the
Corporation may at the time of distribution, in its sole and absolute
discretion, enforce the right of offset against any amounts paid to a
Participant under the Restoration Plan against any debt of the Participant which
has been reduced to judgment in favor of the Corporation or any of its Related
Corporations.
Section 6.4 - Forfeiture of Benefits
Notwithstanding any provisions of this Restoration Plan to the contrary,
benefits under the Restoration Plan shall be forfeited upon:
(a) termination of employment prior to: attaining the age of 55, having ten
(10) years of Benefit Service, and vesting under Basic Retirement Plan; or
(b) death of a Participant who is not survived by a Surviving Spouse; or
(c) the benefit is unclaimed pursuant to Section 6.6 below.
The Chairman of the Corporation shall have the authority disregard the
provisions of the previous paragraph and vest any Participant's Restoration
Benefits with the approval of the Organization, Compensation and Nomination
Committee.
Section 6.5 - Limitations on Liability
Notwithstanding any of the preceding provisions of the Restoration Plan, neither
the Corporation nor any individual acting as an employee or agent of the
Corporation shall be liable to any Participant, former Participant, Surviving
Spouse or any other person for any claim, loss, liability or expense incurred in
connection with this Restoration Plan.
Section 6.6 - Unclaimed Benefit
Each Participant and Surviving Spouse. of the Participant shall keep the
Corporation informed of his current address and the current address of his
spouse. The Corporation shall not obligated to search for the whereabouts of any
person. If the location of a Participant is not made known to the Corporation
within three (3) years from the date on which payment of the Participant's
Restoration Retirement Benefit may be made, payment may be made as though the
Participant had died at the end of the three-year period. If, within one
additional year after such three-year period has elapsed, or, within three years
after the actual death of a Participant, the Corporation unable to locate any
Surviving Spouse of the Participant then the Corporation shall have no further
obligation to pay any benefit hereunder to such Participant or Surviving Spouse
or any other person and such benefit shall be irrevocably forfeited.
12
<PAGE>
Section 6.7 -ERISA Status
This Restoration Plan shall constitute a plan which unfunded and which is
maintained solely for the purpose of providing benefits in excess of the limits
imposed by Code Sections 415, 401(a)(17) and 404(l) to a select group of
Employees within the meaning of Section 202, 301 and 401 of ERISA and the ERISA
reporting and disclosure regulations.
Section 6.8 - Construction
In the construction of the Restoration Plan, the masculine shall include the
feminine and the singular the plural in all cases unless qualified by the
context. Any headings used herein are included for ease reference only and are
not to be construed so as to alter the terms hereof.
Section 6.9 - Controlling Law
The laws of the State of Ohio shall be controlling in all matters relating to
the Restoration Plan and shall be the controlling state law in all matters
relating to the Restoration Plan and shall apply to the extent that it is not
preempted by the laws of the United States of America.
Section 6.10 - Effect of Invalidity of Provision
If any provision of this Restoration Plan is held invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect any other
provisions hereof, and this Restoration Plan shall be construed and enforced as
if such provision had not been included.
Section 6.11 - Continued Employment
Nothing contained in this Restoration Plan shall be construed as a contract of
employment between the Corporation and any Participant, or as a right of any
Participant to be continued in employment of the Corporation or as a limitation
on the right of the Corporation as a limitation on the right of the Corporation
to discharge any of its employees, with or without cause.
Section 6.12 - Status of Plan
Nothing contained herein shall be construed as providing for assets to be held
in trust or escrow or any other form of asset segregation for the Participant or
for any other person or persons to whom benefits are to be paid pursuant to the
terms of this Restoration Plan, the Participant's only interest hereunder being
the right to receive the benefits set forth herein. To the extent the
Participant or any other person acquires a. right to receive benefits under this
Restoration Plan, such right shall be no greater than the right of unsecured
general creditor of the Corporation.
Section 6.13 - Payments and Expenses
Restoration Retirement Benefits and Restoration Surviving Spouse Benefits
("Benefits") shall be payable by the Corporation from its general assets. The
cost of the Benefits shall be incurred by each Related Corporation, who has
employees participating in this Restoration Plan. Each such Related Corporation
will be regularly assessed and obligated to remit to the Corporation the
actuarially determined amount for the Benefits. Such assessments shall be
accumulated and shall be maintained as general assets of the
13
<PAGE>
Corporation. The Corporation shall maintain appropriate accountings and records
for this Restoration Plan. The expenses of administrating this Restoration Plan
shall be borne by the Corporation.
14
<PAGE>
EXHIBIT 10(F)
BANK ONE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective as of January 1, 1998
in accordance with the Policy Guidelines
adopted by the Board of Directors on July 21, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I ................................................................................. 2
DEFINITIONS ................................................................................. 2
Section 1.1 - Actuarial Equivalent............................................................. 2
Section 1.2 - Appendix A Benefit............................................................... 2
Section 1.3 - Basic Retirement Plan............................................................ 2
Section 1.4 - Benefit Commencement Date........................................................ 2
Section 1.5 - Benefit Service.................................................................. 2
Section 1.6 - Board............................................................................ 2
Section 1.7 - Change of Control................................................................ 3
Section 1.8 - Compensation..................................................................... 4
Section 1.9 - Code............................................................................. 5
Section 1.10 - Corporation...................................................................... 5
Section 1.11 - Final Average Compensation....................................................... 5
Section 1.12 - Grandfathered Participant........................................................ 5
Section 1.13 - Normal Retirement Date........................................................... 5
Section 1.14 - Participant...................................................................... 5
Section 1.15 - Plan Administrator............................................................... 5
Section 1.16 - Points Eligible Participant...................................................... 5
Section 1.17 - Prior Qualified Plan............................................................. 5
Section 1.18 - Related Corporation.............................................................. 5
Section 1.19 - Single Life Annuity.............................................................. 6
Section 1.20 - Supplemental Plan................................................................ 6
Section 1.21 - Supplemental Plan Offset......................................................... 6
Section 1.22 - Supplemental Retirement Benefit.................................................. 6
Section 1.23 - Supplemental Surviving Spouse Benefit............................................ 6
Section 1.24 - Surviving Spouse................................................................. 6
ARTICLE II ................................................................................. 7
SUPPLEMENTAL RETIREMENT BENEFITS.......................................................................... 7
Section 2.1 - Eligibility...................................................................... 7
Section 2.2 - Incorporation of the Basic Retirement Plan....................................... 7
Section 2.3 - Unreduced Supplemental Benefit................................................... 7
Section 2.4 - Reduced Supplemental Benefit..................................................... 8
Section 2.5 - Vesting.......................................................................... 8
Section 2.6 - Form of Distribution............................................................. 8
Section 2.7 - Commencement of Benefit.......................................................... 8
ARTICLE III ................................................................................. 9
SUPPLEMENTAL SURVIVING SPOUSE BENEFIT..................................................................... 9
Section 3.1 - Eligibility for Supplemental Surviving Spouse Benefit............................ 9
Section 3.2 - Determination of the Benefit..................................................... 9
Section 3.3 - Form and Commencement of Benefit................................................. 9
Section 3.4 - Rights to Benefits............................................................... 9
</TABLE>
i
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<TABLE>
<S> <C>
ARTICLE IV................................................................................................. 10
ADMINISTRATION............................................................................................. 10
Section 4.1 - Administration Powers and Details................................................. 10
Section 4.2 - Records........................................................................... 10
Section 4.3 - Determinations.................................................................... 10
Section 4.4 - Claims Procedure.................................................................. 11
Section 4.5 - Appeal and Review Procedure....................................................... 11
Section 4.6 - Facility of Payment............................................................... 11
Section 4.7 - Acceleration of Benefits Payments................................................. 11
Section 4.8 - Action by the Corporation......................................................... 12
Section 4.9 - Exemption from Liability/Indemnification.......................................... 12
Section 4.10 - Non-assignability................................................................. 12
ARTICLE V.................................................................................................. 13
AMENDMENT OR TERMINATION................................................................................... 13
Section 5.1 - Amendment and Termination......................................................... 13
Section 5.2 - Change of Control................................................................. 13
ARTICLE VI................................................................................................. 14
GENERAL PROVISIONS......................................................................................... 14
Section 6.1 - Rights to Benefits................................................................ 14
Section 6.2 - Offsets to Benefits............................................................... 14
Section 6.3 - Forfeiture of Benefits............................................................ 14
Section 6.4 - Forfeiture for Cause.............................................................. 14
Section 6.5 - Limitations on Liability.......................................................... 15
Section 6.6 - Unclaimed Benefit................................................................. 15
Section 6.7 - ERISA Status...................................................................... 15
Section 6.8 - Construction...................................................................... 15
Section 6.9 - Controlling Law................................................................... 15
Section 6.10 - Effect of Invalidity of Provision................................................. 15
Section 6.11 - Continued Employment.............................................................. 16
Section 6.12 - Status of Supplemental Plan....................................................... 16
Section 6.13 - Payments and Expenses............................................................. 16
APPENDIX A................................................................................................. 17
MINIMUM BENEFIT APPLICABLE TO GRANDFATHERED PARTICIPANTS
</TABLE>
ii
<PAGE>
BANK ONE CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PURPOSE
- -------
The purpose of the BANK ONE CORPORATION Supplemental Executive Retirement Plan
(the "Supplemental Plan"), as adopted by the Board of Directors of BANK ONE
CORPORATION and as hereby expressed, is to recognize the value to BANK ONE
CORPORATION and Related Corporations of the past and present services of select
executive management personnel, to encourage their continued service to the
Corporation, and to be able to attract and retain superior executive management
personnel by making more adequate provision for their retirement security than
the BANK ONE CORPORATION Cash Balance Pension Plan (the "Basic Retirement Plan")
provides.
The Supplemental Plan is an unfunded, supplemental deferred compensation plan
structured to benefit Participants in a manner which provides incentive to
improve the profitability, competitiveness and growth of the Corporation.
From January 1, 1998 to October 1, 1998, the sponsor of this Supplemental Plan
was the Banc One Corporation. Effective October 2, 1998, BANC ONE CORPORATION
and First Chicago NBD Corporation were merged into BANK ONE CORPORATION, a bank
holding corporation, incorporated in the State of Delaware. Effective October 2,
1998, BANK ONE CORPORATION assumed sponsorship of the Supplemental Plan.
EFFECTIVE DATE
- --------------
The effective date of this amended and restated Supplemental Plan is January 1,
1998.
<PAGE>
ARTICLE I
DEFINITIONS
For the purpose of the Supplemental Plan, the following terms shall have the
meanings hereinafter set forth unless the context clearly indicates otherwise:
SECTION 1.1 - ACTUARIAL EQUIVALENT
- ----------------------------------
"Actuarial Equivalent" means, with respect to any specified form of benefit, a
benefit commencing at a different date and/or payable in a different form than
the specified benefit, but which has the same actuarial value as the specified
benefit, on the basis of the 1983 Group Annuity Mortality Table (with a 50%150%
weighting of male/female mortality rates, without projection) and an interest
rate equal to the annual rate of interest on 30-year Treasury Constant
Maturities as reported in the Federal Reserve Bulletin for the second calendar
month preceding the calendar quarter in which the determination is being made.
SECTION 1.2 - APPENDIX A BENEFIT
- --------------------------------
"Appendix A Benefit" means, with respect to a Grandfathered Participant, the
benefit determined under Appendix A hereof
SECTION 1.3 - BASIC RETIREMENT PLAN
- -----------------------------------
"Basic Retirement Plan" means the BANK ONE CORPORATION Cash Balance Pension
Plan, an amendment and restatement, effective as of January 1, 1998, of the
qualified defined benefit plan first adopted by the Corporation effective
January 1, 1947, as amended thereafter and as hereafter amended from time to
time, or any successor thereto.
SECTION 1.4 - BENEFIT COMMENCEMENT DATE
- ---------------------------------------
"Benefit Commencement Date" means the date as of which a Participant shall
receive (or begin to receive) benefit payments under this Supplemental Plan and
shall be:
(a) the first day of the second month following the Participant's
termination of employment, or such later date as the Supplemental
Retirement Benefit can be determined; or
(b) such date, subsequent to the date in paragraph (a) above, which the
Participant may request in a writing submitted to the Plan
Administrator; provided, however, that such requested date shall be
effective only if the request is received by the Plan Administrator
at least six (6) months prior to the Participant's effective date of
retirement.
SECTION 1.5 - BENEFIT SERVICE
- -----------------------------
"Benefit Service" for benefit accrual shall mean the same as defined in Article
I of the Basic Retirement Plan.
SECTION 1.6 - BOARD
- -------------------
"Board" means the Board of Directors of the BANK ONE CORPORATION, or such other
committee appointed by the Board which shall have the authority of said Board
with respect to this Plan.
2
<PAGE>
SECTION 1.7 - CHANGE OF CONTROL
- -------------------------------
A "Change of Control" of the Corporation shall be deemed to have occurred upon
the happening of any of the following events:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (I) the then
outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (II) the combined voting
power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities"), provided, however, that
for purposes of this subsection (a), the following acquisitions shall
not constitute a Change of Control: (I) any acquisition directly from
the Corporation, (II) any acquisition by the Corporation, (III) any
acquisition by any corporation controlled by the Corporation or (IV)
any acquisition by any corporation pursuant to the a transaction which
complies with clauses (I), (II) and (III) of this Section 1.7(a); or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination
for election by the Corporation's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board;
or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Corporation (a "Business Combination"), in each case, unless,
following such Business Combination, (I) all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common stock
and the combined voting power of the ten outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such transaction owns the Corporation or all or substantially all of
the Corporation's assets either directly or though one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Corporation Common Stock and Outstanding Corporation
voting securities, as the case may be (II) no Person (excluding any
corporation resulting from such Business combination or any employee
benefit plan (or related trust) of the Corporation or such corporation
resulting from such Business Combination beneficially owns, directly
or indirectly, 20% or more of, the corporation resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities of then outstanding voting securities of
such corporation except to the extent that such ownership existed
prior to the Business Combination and (III) at least a majority of the
members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent board at the
time of the execution of the initial agreement or of the action of the
Board, providing for such Business Combination; or
3
<PAGE>
(d) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
SECTION 1.8 - COMPENSATION
- --------------------------
Except as provided in paragraph (d) below, "Compensation" means the remuneration
determined under paragraphs (a), (b) and (c) below:
(a) For periods beginning on and after January 1, 1998, an employee's
basic salary or wage paid by the Corporation, plus overtime,
commissions, shift and other differential pay, performance-related
bonuses, compensation received as a result of periodic special
incentive programs and any salary deferral amounts under any Code
Section 401(k) or 125 plans of the Corporation. Compensation shall
also include 100% of any base salary deferral amounts made by an
employee under the BANK ONE CORPORATION 401(k) Restoration Plan, or
the Amended and Restated BANK ONE CORPORATION Compensation Deferral
Plan and 100% of bonus deferral amounts under the BANK ONE CORPORATION
401(k) Restoration Plan or the Amended and Restated BANK ONE
CORPORATION Compensation Deferral Plan. Compensation shall also
include 100% of any salary and/or bonus exchanged by an employee for
options under the BANK ONE CORPORATION Investment Option. Compensation
shall not include (i) grants, awards or benefits received under or
attributable to incentive plans such as stock options, stock
appreciation rights, stock awards, or performance shares; (ii) life
insurance, club memberships,. or other benefits which are provided by
the Corporation to the employee and which, f6r purposes of income or
Social Security taxes, constitute imputed income to the employee;
(iii) earnings paid after an employee's termination of employment with
the Corporation (iv) payments made as reimbursement such as employment
bonuses and non-cash prizes; and retention bonuses and (iv) any
payments made pursuant to a change of control agreement.
(b) For periods prior to January 1, 1998, an employee's basic salary or
wage paid by the Corporation plus fifty percent (50%) of overtime,
commissions, shift and other differential pay, accrued bonuses,
compensation received as a result of periodic special incentive
programs and any salary deferral amounts under any Code Section 401(k)
or 125 plans of the Corporation. Compensation shall also include 100%
of any base salary deferral amounts made by an employee under the BANK
ONE CORPORATION 401(k) Restoration Plan or the BANK ONE CORPORATION
Compensation Deferral Plan and 50% of bonus deferral amounts under the
BANK ONE CORPORATION Compensation Deferral Plan. Compensation shall
not include (i) grants, awards or benefits received under or
attributable to incentive plans such as stock options, stock
appreciation rights, stock awards, or performance shares; (ii) life
insurance, club memberships, or other benefits which are provided by
the Corporation to the employee and which, for purposes of income or
Social Security taxes, constitute imputed income to the employee.
(c) For periods before and after January 1, 1998 and with respect to an
employee who transferred directly into the employ of the Corporation
or a Related Corporation from a Related Corporation, applicable
earnings for services rendered to the Related Corporation shall be
treated as Compensation from the Corporation hereunder.
4
<PAGE>
SECTION 1.9 - CODE
- ------------------
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
and any regulations relating thereto.
SECTION 1.10 - CORPORATION
- --------------------------
"Corporation" means BANC ONE CORPORATION, including all of its Related
Corporations and, to the extent provided in Section 5.2 hereof, any successor
corporation or other entity resulting from a merger or consolidation into or
with the Corporation or a transfer or sale of substantially all of the assets of
the Corporation. Effective October 2, 1998, "Corporation" means BANK ONE
CORPORATION, a Delaware corporation, a successor to BANC ONE CORPORATION,
including all of its Related Corporations.
SECTION 1.11 - FINAL AVERAGE COMPENSATION
- -----------------------------------------
One-twelfth (1/12) of the average of the highest consecutive five (5) years'
annual Compensation of the last ten (10) calendar years worked immediately
preceding the Participant's retirement or termination of employment, whichever
first occurs. For a Participant who incurs an Approved Absence or who is rehired
after a Break in Service with his Pre-break Service restored, the Plan Years
prior to and following his Approved Absence or Break in Service shall be,
considered consecutive Plan Years even though they were not contiguous.
SECTION 1.12 - GRANDFATHERED PARTICIPANT
- ----------------------------------------
"Grandfathered Participant" means a Participant who is in active service with
the Corporation on January 1, 1998.
SECTION 1.13 - NORMAL RETIREMENT DATE
- -------------------------------------
"Normal Retirement Date" means the first day of the month next following the
Participant's sixty-fifth (65th) birthday.
SECTION 1.14 - PARTICIPANT
- --------------------------
"Participant" means a salaried employee of the Corporation who: (a) is in a
select group of management or highly compensated employees; (b) is a participant
under the Basic Retirement Plan; and (c) is nominated for participation by the
Chairman of the Board or the Chief Executive Officer of the Corporation and such
nomination is approved in writing by the Board. Participation shall be
-------
effective as of the date so stated in the Board's written approval.
SECTION 1.15 - PLAN ADMINISTRATOR
- ---------------------------------
BANK ONE CORPORATION or such individual(s) or entity appointed Plan
Administrator in accordance with Section 4.1.
SECTION 1.16 - POINTS ELIGIBLE PARTICIPANT
- ------------------------------------------
"Points Eligible Participant" means a Participant who was in active service with
the Corporation on January 1, 1997 and whose base salary, as of such date,
equaled or exceeded $250,000.
SECTION 1.17 - PRIOR QUALIFIED PLAN
- -----------------------------------
"Prior Qualified Plan" means the BANC ONE CORPORATION Retirement Plan as amended
and in effect as of December 31, 1997.
SECTION 1.18 -RELATED CORPORATION
- ---------------------------------
A subsidiary or any entity which is a member of a common controlled group with
BANK ONE CORPORATION pursuant to Code Sections 414(b), (c), (m), or (o).
5
<PAGE>
SECTION 1.19 - SINGLE LIFE ANNUITY
- ----------------------------------
"Single Life Annuity" means a form of distribution which is a level monthly
amount paid for the lifetime of the Participant (or, if applicable under Article
III, for the lifetime of a Surviving Spouse) with no survivor benefits.
SECTION 1.20 - SUPPLEMENTAL PLAN
- --------------------------------
"Supplemental Plan" means the BANK ONE CORPORATION Supplemental Executive
Retirement Plan as described herein, including my appendices and amendments
hereto.
SECTION 1.2. - SUPPLEMENTAL PLAN OFFSET
- ---------------------------------------
"Supplemental Plan Offset" means:
(a) the Accrued Benefit earned by the Participant under the Basic
Retirement Plan as of the date of is termination of employment with
the Corporation, expressed as a Single Life Annuity payable at Normal
Retirement Date;
(b) the estimated federal Social Security old age retirement benefit to
which the Participant would be entitled under the federal Social
Security laws upon proper application therefor as of the Participant's
age sixty-five (65), with reduction for earlier commencement in
accordance with federal Social Security laws; provided, however that
with respect to a Participant who terminates employment with the
Corporation prior to the attainment of age sixty-five (65), such
estimated benefit shall be determined by assuming the Participant has
zero future earnings through his attainment of age sixty-five (65).
(c) Any vested benefit earned by the Participant under the Cash Balance
Restoration Plan, expressed as a Single Life Annuity payable at Normal
Retirement Date.
(d) Any vested benefit earned by a Participant under the plan of an
employer other than Corporation, to the extent the period over which
such benefit was earned is counted as benefit credit in determining
benefits under the BANK ONE CORPORATION Cash Balance Restoration Plan
or the Supplemental Plan.
Notwithstanding any provision of this Supplemental Plan to the contrary, a
Participant's Supplemental Plan offset may increase following the Participant's
termination of employment with the Corporation due to increases in the amount
payable under paragraph (a) above (for reasons including, without limitation,
increases in the maximum benefit which may be paid to the Participant from the
Basic Retirement Plan).
SECTION 1.22 - SUPPLEMENTAL RETIREMENT BENEFIT
- ----------------------------------------------
"Supplemental Retirement Benefit" means that benefit, if any, payable to a
Participant pursuant to this Supplemental Plan by reason of his termination of
employment with the Corporation.
SECTION 1.23 - SUPPLEMENTAL SURVIVING SPOUSE BENEFIT
- ----------------------------------------------------
"Supplemental Surviving Spouse Benefit" means the benefit, if any, payable to a
Surviving Spouse pursuant to this Supplemental Plan by reason of the death of a
Participant while actively employed by the Corporation.
SECTION 1.24 - SURVIVING SPOUSE
- -------------------------------
"Surviving Spouse" means a person who is married to a Participant as of the date
of the Participant's death.
6
<PAGE>
ARTICLE II
SUPPLEMENTAL RETIREMENT BENEFITS
SECTION 2.1 - ELIGIBILITY
- -------------------------
To receive a benefit under this Supplemental Plan, a Participant must qualify
for a benefit under the Basic Retirement Plan and must satisfy the criteria
under (a), (b) or (c) below:
(a) the Participant has attained the age of sixty-five (65) years while in
active service with the Corporation, has completed ten (10) or more
years of Benefit Service and has terminated his employment
relationship with the Corporation;
(b) the Participant is a Points Eligible Participant who has attained the
age of fifty-five (55) years while in active service with the
Corporation, has terminated his employment relationship with the
Corporation at a time at which the sum of his whole age plus years of
Benefit Service with the Corporation equal or exceed eighty-five (85)
and has executed one or more agreements with the Corporation which
condition payment of the Supplemental Plan Benefit on the
Participant's compliance with non-competition provisions set forth in
said agreement(s); or;
(b) The Participant has attained the age of fifty-five (55) years while in
active service with the Corporation, has completed ten (10) or more
years of Benefit Service and has terminated his employment
relationship with the Corporation.
In no event shall an employee who is not entitled to benefits under the Basic
Retirement Plan be eligible for a benefit under this Supplemental Plan. In
addition, the provisions of Sections 6.3 and 6.4 hereof may provide for a
forfeiture of some or all of the interest earned by a Participant under this
Supplemental Plan.
SECTION 2.2 - INCORPORATION OF THE BASIC RETIREMENT PLAN
- --------------------------------------------------------
The Basic Retirement Plan, with any amendments thereto in effect, shall be
attached hereto and is hereby incorporated by reference into and shall be a part
of this Supplemental Plan as if set forth herein. Any amendment made to the
Basic Retirement Plan shall also be incorporated by reference into and form a
part of the Supplemental Plan, effective as of the effective date of such
amendment. The Basic Retirement Plan, whenever referred to in this Supplemental
Plan, shall mean the Basic Retirement Plan as it exists on the date any
determination is made of benefits payable under this Supplemental Plan. All
terms used herein shall have the meanings assigned to them under the provisions
of the Basic Retirement Plan unless otherwise qualified by this Supplemental
Plan.
SECTION 2.3 - UNREDUCED SUPPLEMENTAL BENEFIT
- --------------------------------------------
A Participant who has met the eligibility requirements of Section 2.1 (a) or 2.1
(b) above shall be entitled to receive a Supplemental Retirement Benefit,
expressed as Single Life Annuity payable monthly on and after the Benefit
Commencement Date, in an amount equal to the greater of (a) or (b), as follows,
where:
(a) equals the product of (i) and (ii) minus (iii);
(i) two percent (2.0%) multiplied by the Participant's Final
Average Compensation; the lesser of thirty (30) or the
Participant's years of Benefit Service as of
(ii) the date of determination; and
(iii) the Participant's Supplemental Plan Offset; and
7
<PAGE>
(b) equals, for a Grandfathered Participant, such Participant's Appendix A
Benefit. In no event shall a Participant who is not a Grandfathered
Participant be entitled to an Appendix A Benefit.
SECTION 2.4 - REDUCED SUPPLEMENTAL BENEFIT
- ------------------------------------------
A Participant who has met the eligibility requirements of Section 2.1(c) above
(and who has not otherwise met the requirements of Section 2.1(a) or 2.1(b)
above) shall be entitled to receive a Supplemental Retirement Benefit, expressed
as a Single Life Annuity payable monthly on and after the Benefit Commencement
Date, in an amount equal to the Supplemental Benefit earned by the Participant,
and determined under Section 2.3 hereof, as of his termination of employment
with the Corporation, reduced by five-ninths of one percent (5/9%) for each of
the first sixty (60) calendar months, if any, by which the Participant's Benefit
Commencement Date precedes the Participant's Normal Retirement Date, and by
five-eighteenths of one percent (5/18%) for each such calendar month in excess
of sixty (60) by which the Participant's Benefit Commencement Date precedes his
Normal Retirement Date.
SECTION 2.5 - VESTING
- ---------------------
In the event that Participant remains an employee of the Corporation after have
attained the age of fifty-five (55) and completed ten (10) years of Benefit
Service, his right to Supplemental Benefits shall thereafter be vested, but no
Supplemental Benefits shall be payable hereunder to or in respect to him until
the Benefit Commencement Date.
The Chief Executive Officer of the Corporation shall have the authority to vest
any Participant's Supplemental Benefits with the approval of the Organization,
Compensation and Nomination Committee.
SECTION 2.6 - FORM OF DISTRIBUTION
- ----------------------------------
The Supplemental Retirement Benefit payable to an eligible Participant shall
generally be paid in a lump sum, which shall be the Actuarial Equivalent of the
Single Life Annuity amount calculated in accordance with Section 2.3 or Section
2.4, whichever is applicable.
The Participant may request to have his Supplemental Retirement Benefit paid as
a monthly annuity. The available payment forms shall consist of a Single Life
Annuity, a 60-month or 120-month Certain Annuity, a 50%, 66-2/3%, or 100% Joint
and Survivor Annuity or a 3% or 5% increasing annuity option, all as described
in the Basic Retirement Plan. The form of payment requested by the Participant
shall be equal to the Actuarial Equivalent of the Single Life Annuity amount
calculated in accordance with Section 2.3 or Section 2.4, whichever is
applicable. Such request shall be effective only if the request is received by
the Plan Administrator at least six (6) months prior to the Participant's
effective date of retirement.
SECTION 2.7 - COMMENCEMENT OF BENEFIT
- -------------------------------------
Payment of the Supplemental Retirement Benefit to a Participant shall commence
on the Benefit Commencement Date. In the event the Supplemental Retirement
Benefit is payable in the form of a monthly annuity pursuant to a request under
Section 2.6, payments made to a Participant and, if applicable, to any
Beneficiary shall cease at the time provided for the payment form in effect, as
described in the Basic Retirement Plan.
8
<PAGE>
ARTICLE III
SUPPLEMENTAL SURVIVING SPOUSE BENEFIT
SECTION 3.1 - ELIGIBILITY FOR SUPPLEMENTAL SURVIVING SPOUSE BENEFIT
- -------------------------------------------------------------------
A Supplemental Surviving Spouse Benefit will be pa id to the Surviving Spouse
under the terms of Article, if:
(a) the Participant has attained the age of fifty-five (55) while actively
employed with the Corporation;
(b) the Participant has at ten (10) years of Benefit Service; and
(c) the Participant dies while actively employed by the Corporation.
SECTION 3.2 - DETERMINATION OF THE BENEFIT
- ------------------------------------------
The Supplemental Surviving Spouse Benefit, expressed as an Actuarial Equivalent
Single Life Annuity payable monthly for the Surviving Spouse's lifetime and
commencing at the Participant's Normal Retirement Date, shall be equal to fifty
percent (50%) of the Supplemental Retirement Benefit earned by the Participant
as of his date of death, determined under Section 2.3 or Section 2.4 as
applicable.
SECTION 3.3 - FORM AND COMMENCEMENT OF BENEFIT
- ----------------------------------------------
The Supplemental Surviving Spouse Benefit shall be paid to the Surviving Spouse
as soon as practical following the Participant's death and in the form of
distribution requested by the Participant under Section 2.6. If no effective
form of distribution request has been made by the Participant, the Supplemental
Surviving Spouse Benefit shall be payable to the Surviving Spouse as soon as
practical in the form of a lump sum. The amount of any Supplemental Surviving
Spouse Benefit shall be the Actuarial Equivalent of the benefit determined under
Section 3.2 above and shall be reduced in accordance with the factors set forth
in Section 2.4 hereof in the event the Participant had not satisfied the
requirements of Section 2.1(a) or Section 2.1(b) hereof upon his date of death.
SECTION 3.4 - RIGHTS TO BENEFITS
- --------------------------------
Nothing contained in this Supplemental Plan is intended to give or shall give
any spouse or former spouse of a Participant or any other person any right to
benefits under this Supplemental Plan by virtue of Code Sections 401(a)(11) and
417 (relating to qualified pre-retirement survivor annuities and qualified joint
and survivor annuities) or Code Sections 401(a)(13)(B) and 414(p) (relating to
qualified domestic relations orders) as amended.
9
<PAGE>
ARTICLE IV
ADMINISTRATION
SECTION 4.1 - ADMINISTRATIVE POWERS AND DUTIES
- ----------------------------------------------
BANK ONE CORPORATION shall be responsible for the general operation and
administration of the Supplemental Plan and for carrying out the provisions
thereof. The Board may, in its discretion, appoint in writing, an employer,
employees, or an administrative committee to administer some or all of the
provisions of this Plan and/or to be the formal Plan Administrator. The decision
of the Plan Administrator with respect to any questions arising as to the
administration or interpretation of this Supplemental Plan, including the
discontinuance of any or all of the provisions thereof, shall be final,
conclusive, and binding. If the Supplemental Plan is administered by a
committee, such committee may act by a majority of its members by a vote at a
meeting or in writing without a meeting signed by all the members of the
committee.
All provisions set forth in the Basic Retirement Plan with respect to the
administrative powers and duties of BANK ONE CORPORATION, the Plan Administrator
and the Appeals Committee shall be vested in such respective bodies for purposes
of the Supplemental Plan. In addition, the procedures for filing claims under
the Basic Retirement Plan shall also be applicable with respect to the
Supplemental Plan. The Corporation shall be entitled to rely conclusively upon
all tables, valuations, certificates, opinions and reports furnished by any
actuary, accountant, controller, counsel or other person employed or engaged by
the Corporation with respect to the Supplemental Plan.
SECTION 4.2 - RECORDS
---------------------
The Plan Administrator shall keep such records of such information, necessary or
desirable to effectuate the purpose of the Supplemental Plan including without
in any manner limiting the generality of the foregoing, records and information
with respect to dates of employment and termination and determinations made
hereunder. To the extent that the Plan Administrator shall prescribe forms for
use by the Participants and their Surviving Spouses in communication with the
Plan Administrator, and shall establish periods during which communications must
be received, the Plan Administrator shall be protected in disregarding any
notice or communication for which a form shall have been so prescribed and shall
not be made in such form and any notice or communication for the receipt of
which a period shall so have been established and which shall not be received
during such period. The Corporation, the Plan Administrator and the Appeals
Committee shall, respectively, also be protected in acting upon any notice or
other communication purporting to be signed by any person and reasonably
believed to be genuine and accurate, including the Participant's current mailing
address as provided in the Corporation's records.
SECTION 4.3 - DETERMINATIONS
- ----------------------------
All determinations hereunder made by the Plan Administrator or the Appeals
Committee shall be made in the sole and absolute discretion of the Plan
Administrator or the Appeals Committee, as the case may be.
In the event that any disputed matter shall arise hereunder, including, without
in any manner limiting the generality of the foregoing, any matter relating to
the eligibility of any person to participate under the Supplemental Plan, the
participation of any person under the Supplemental Plan, the amounts payable to
any person under the Supplemental Plan and the applicability and the
interpretation of the provisions of the Supplemental Plan, the decision of the
Plan Administrator upon such matter shall be binding and
10
<PAGE>
conclusive upon all persons, including, without in any manner limiting the
generality of the foregoing, the Corporation, the Participants and their
Surviving Spouses and upon the respective successors, assigns, executors,
administrators, heirs, next-of-kin and distributees of all the foregoing.
SECTION 4.4 - CLAIMS PROCEDURE
- ------------------------------
The Plan Administrator shall have discretion regarding benefit determinations.
If required by the Plan Administrator, any person entitled to benefits hereunder
must file a claim with the Plan Administrator upon forms furnished by the Plan
Administrator. Notwithstanding any other provision of the Plan, payment of
benefits need not be made until receipt of the claim and the expiration of the
time periods specified in the Section 4.4 for rendering a decision on the claim.
In the event a claim is denied, benefits need not be made or commence until a
final decision is reached by the Appeals Committee subject to the provisions of
Section 4.5.
The Plan Administrator shall notify the claimant of its decision within ninety
(90) days after receipt of the claim. However, if special circumstances require,
the Plan Administrator may defer action on a claim for benefits for an
additional period not to exceed ninety (90) days, and in that case it shall
notify the claimant of the special circumstances involved and time by which it
expects to render a decision.
If the Plan Administrator determines that any benefits claimed should be denied,
it shall give notice to the claimant setting the specific reason or reasons for
the denial is based. The Plan Administrator shall also describe any additional
information necessary for the claimant to perfect the claim, why such
information is necessary and shall describe the steps to be taken if the
claimant wishes to appeal the denial.
SECTION 4.5 - APPEAL AND REVIEW PROCEDURE
- -----------------------------------------
If a claim has been denied by the Plan Administrator, the claimant shall have
sixty (60) days after receipt of the denial in which to file a notice of appeal
with the Appeals Committee. A final determination by the Appeals Committee shall
be rendered within sixty (60) days after receipt of the claimant's notice of
appeal. Under special circumstances such determination may be delayed for an
additional period not to exceed sixty (60) days, in which case the claimant
shall be notified of the delay prior to the close of the initial sixty (60) day
period. The Appeals Committee's final decision shall set forth the reasons and
the references to the Plan provisions on which the decision is based.
SECTION 4.6 - FACILITY OF PAYMENT
- ---------------------------------
Whenever a person entitled under the Supplemental Plan to receive any payment of
a benefit is under a legal disability or incapacity or is in any way unable to
manage his financial affairs, the Plan Administrator may, in its discretion,
direct payments on behalf of such person to be made to the incapacitated
person's legal representative, custodian, relative, or other such individual(s)
as is (are) known by the Plan Administrator to be assisting such person. Such
decision by the Plan Administrator shall be made after consultation with that
person, if any, which may include legal counsel and/or medical personnel, whom
the Plan Administrator in his sole discretion determines are necessary in order
to make such decision. Any payment of benefit or installment thereof in
accordance with the provisions of this Section 4.6 shall be a complete discharge
of any liability relating to the making of or entitlement to such payment under
the provisions of the Supplemental Plan.
SECTION 4.7 - ACCELERATION OF BENEFITS PAYMENT
- ----------------------------------------------
The Corporation hereby reserves the right to accelerate the payment of
Supplemental Retirement Benefits or Supplemental Surviving Spouse Benefits
without the consent of the Participant or the Participant's Surviving Spouse,
estate or any other person or persons claiming through or under the Participant.
In making such determination, due consideration may be given to the health,
financial circumstances and
11
<PAGE>
family obligations of the Participant or Surviving Spouse. In this regard, the
Participant may be consulted; provided, however, the Participant shall have no
voice in the decision reached or any right to an accelerated payment. The
Corporation's determination shall be final and conclusive upon the Participant
and the Surviving Spouse.
SECTION 4.8 - ACTION BY THE CORPORATION
- ---------------------------------------
Any action by the Corporation under this Supplemental Plan may be by resolution
of the Board, or by any person or persons, duly authorized by resolution of the
Board to take such action.
SECTION 4.9 - EXEMPTION FROM LIABILITY/INDEMNIFICATION
- ------------------------------------------------------
The members of the Appeals Committee and the persons acting on behalf of the
Corporation and Plan Administrator hereunder, shall be free from all liability,
joint or several, for their acts, omissions, and conduct, and for the acts,
omissions and conduct of their appointed agents, in administration of the
Supplemental Plan, except for those acts or omissions and conduct resulting from
willful misconduct or lack of good faith.
The Corporation shall indemnify each member of the Appeals Committee, the
persons acting on behalf of the Plan Administrator and any other employee,
officer or director of the Corporation against any claims, loss, damage, expense
and liability, by insurance or otherwise, reasonably incurred by the individual
in connection with any action or failure to act by reason of membership on the
Appeals Committee or performance of an authorized duty or responsibility for or
on behalf of the Corporation or Plan Administrator pursuant to the Supplemental
Plan unless the same is judicially determined to be the result of the
individual's gross negligence or willful misconduct. Such indemnification by the
Corporation shall be made only to the extent such expense or liability is not
payable to or on behalf of such person under any liability insurance coverage.
The foregoing right to indemnification shall be in addition to any other rights
to which any such person may be entitled as a matter of law.
Section 4.10 - Non-assignability
- --------------------------------
No right or benefit under the Supplemental Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and
any attempt to anticipate, alienate, assign, sell, pledge, encumber or charge
the same shall be void.
The Supplemental Plan shall not in any manner be liable for or subject to the
debts, contracts, liabilities, engagement or torts of any person entitled to
benefits hereunder.
In the event that any Participant's benefits are garnished or attached by order
of any court, the Corporation may elect to bring an action for a declaratory
judgment in a court of competent jurisdiction to determine the proper recipient
of the benefits to be paid by the Supplemental Plan. During the pendency of said
action, any benefits that become payable may be paid into the court as they
become payable, to be distributed by the court to the recipient as it deems
proper at the close of said action.
12
<PAGE>
ARTICLE V
AMENDMENT OR TERMINATION
SECTION 5.1 - AMENDMENT AND TERMINATION
- ---------------------------------------
BANK ONE CORPORATION reserves the right in its sole discretion to amend or
terminate this Supplemental Plan at any time. In the event of a termination,
BANK ONE CORPORATION in its sole discretion may accelerate payment of
Supplemental Retirement Benefits pursuant to Section 4.7 to those Participants
participating in the Supplemental Plan on the date of such termination, to the
extent such Supplemental Retirement Benefits would be otherwise payable as
defined in Article II, determined on the basis that each Participant's presumed
date of termination of employment with the Corporation was the date the
Supplemental Plan was terminated. However, no amendment or termination shall
affect any Supplemental Retirement Benefit then being paid to Participants or
Surviving Spouses under this Supplemental Plan, as determined prior to such
effective date of the amendment or termination.
SECTION 5.2 - CHANGE OF CONTROL
- -------------------------------
The Plan shall not be automatically terminated upon Change of Control or by a
transfer or sale of assets of the Corporation or by the merger or consolidation
of the Corporation into or with any other Corporation or other entity when the
Corporation is not the surviving or continuing Corporation, but the Supplemental
Plan shall be continued after such sale, merger or consolidation only if, and to
the extent, that the transferee, purchaser, or successor entity shall be
obligated to pay Supplemental Retirement Benefits to those Participants
participating in the Supplemental Plan and those Surviving Spouses entitled to
Supplemental Surviving Spouse Benefits on the date of such termination, to the
extent such Plan benefits would be otherwise payable as defined in Articles II
and III, determined, for a Participant, on the basis that each Participant's
presumed date of termination of employment with the Corporation was the date the
Supplemental Plan was terminated.
13
<PAGE>
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.1 - RIGHTS TO BENEFITS
- --------------------------------
No Participant or Surviving Spouse shall have any right to a benefit under the
Supplemental Plan except in accordance with the terms of the Supplemental Plan.
No Participant, Surviving Spouse or any other person shall have any interest in
any particular assets of the Corporation by reason of the right to receive a
benefit under the Supplemental Plan and any such Participant, Surviving Spouse
or other person shall have only the rights of a general unsecured creditor of
the Corporation with respect to any rights under the Supplemental Plan. Nothing
contained in the Supplemental Plan shall constitute a guaranty by the
Corporation or any other entity or person that the assets of the Corporation
will be sufficient to pay any benefit hereunder.
SECTION 6.2 - OFFSETS TO BENEFITS
- ---------------------------------
Notwithstanding any provisions of this Supplemental Plan to the contrary, the
Corporation may at the time of distribution, in its sole and absolute
discretion, enforce the right of offset against any amounts paid to a
Participant under the Supplemental Plan against any debt of the Participant
which has been reduced to judgment in favor of BANK ONE CORPORATION or any of
its Related Corporations.
SECTION 6.3 - FORFEITURE OF BENEFITS
- ------------------------------------
Notwithstanding any provisions of this Supplemental Plan to the contrary,
benefits under the Supplemental Plan shall be forfeited upon:
(a) termination of employment prior to attaining the age of 55, having ten
(10) years of Benefit Service; and vesting under the Basic Retirement
Plan; or
(b) death of a Participant who is not survived by a Surviving Spouse; or
(c) the existence of any circumstances described in Section 6.4 below; or
(d) the benefit being unclaimed pursuant to Section 6.7 below.
The Chairman of the Corporation shall have the authority disregard the
provisions of the previous paragraph and vest any Participant's Supplemental
Benefits with the approval of the Organization, Compensation and Nomination
Committee.
SECTION 6.4 - FORFEITURE FOR CAUSE
- ----------------------------------
Notwithstanding any provision of this Supplemental Plan to the contrary, the
payment of any Supplemental Retirement Benefit or Supplemental Surviving Spouse
Benefit is contingent upon the non-existence of the circumstances described in
this Section 6.4. Any interest earned and/or held under this Supplemental Plan
for the benefit of any Participant who is described in this Section 6.4, or for
the benefit of a Surviving Spouse of any Participant who is described in the
Section 6.4, shall be forfeited and no longer payable to such Participant or to
any person claiming by or through such Participant.
The forfeiture provisions of this Section 6.4 shall apply in the event the Plan
Administrator finds:
(a) that a Participant who has an interest under this Supplemental Plan
has been discharged from employment by the Corporation for theft,
embezzlement, obtaining funds or property under false pretenses or
commission of a felony, misdemeanor or any act evidencing the
Participant's
14
<PAGE>
fraud or dishonesty (including, but not limited to, an act involving
fraud or dishonesty towards the Corporation); or
(b) that a Participant who has an interest under this Supplemental Plan
has been convicted of a felony or misdemeanor involving fraud or
dishonesty on the part of the Participant towards the Corporation.
The provisions of this Section 6.4 shall not be construed to limit the ability
of the Corporation to obtain equitable relief and/or remedies at law to reflect
the business injuries caused or occasioned by one or more of the activities
described above.
SECTION 6.5 - LIMITATIONS ON LIABILITY
- --------------------------------------
Notwithstanding any of the preceding provisions of the Supplemental Plan,
neither the Corporation nor any individual acting as an employee or agent of the
Corporation shall be liable to any Participant, former Participant, Surviving
Spouse or any other person for any claim, loss, liability or expense incurred in
connection with this Supplemental Plan.
SECTION 6.6 - UNCLAIMED BENEFIT
- -------------------------------
Each Participant and Surviving Spouse shall keep the Corporation informed of his
current address. The Corporation shall not obligated to search for the
whereabouts of any person. If the location of a Participant is not made known to
the Corporation within three (3) years from the date on which payment of the
Participant's Supplemental Retirement Benefit may be made, payment may be made
as though the Participant had died at the end of the three-year period. If,
within one additional year after such three-year period has elapsed, or, within
three years after the actual death of a Participant, the Corporation unable to
locate any Surviving Spouse of the Participant then the Corporation shall have
no further obligation to pay any benefit hereunder to such Participant or
Surviving Spouse or any other person and such benefit shall be irrevocably
forfeited.
SECTION 6.7 - ERISA STATUS
- --------------------------
This Supplemental Plan shall constitute a plan which is unfunded and which is
maintained solely for the purpose of providing benefits to a select group of
Employees within the meaning of Section 202, 301 and 401 of ERISA and the ERISA
reporting and disclosure regulations.
SECTION 6.8 - CONSTRUCTION
- --------------------------
In the construction of the Supplemental Plan, the masculine shall include the
feminine and the singular the plural in all cases unless qualified by the
context. Any headings used herein are included for ease reference only are not
to be construed so as to alter the terms hereof.
SECTION 6.9 - CONTROLLING LAW
- -----------------------------
The laws of the State of Ohio shall be controlling in all matters relating to
the Supplemental Plan and shall be the controlling state law in all matters
relating to the Supplemental Plan and shall apply to the extent that they are
not preempted by the laws of the United States of America.
SECTION 6.10 - EFFECT OF INVALIDITY OF PROVISION
- ------------------------------------------------
If any provision of this Supplemental Plan is held invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect any other
provisions hereof, and this Supplemental Plan shall be construed and enforced as
if such provision had not been included herein.
15
<PAGE>
SECTION 6.11 - CONTINUED EMPLOYMENT
- -----------------------------------
Nothing contained in this Supplemental Plan shall be construed as a contract of
employment between the Corporation and any Participant, or as a right of any
Participant to be continued in employment of the Corporation or as a limitation
on the right of the Corporation to discharge or discipline any of its employees,
with or without cause.
SECTION 6.12 - STATUS OF SUPPLEMENTAL PLAN
- ------------------------------------------
Nothing contained herein shall be construed as providing for assets to be held
in trust or escrow or any other form of asset segregation for the Participant or
for any other person or persons to whom benefits are to be paid pursuant to the
terms of this Supplemental Plan, the Participant's only interest hereunder being
a promise by the Corporation to pay benefits determined hereunder which are
accrued by the Participant while he is employed by the Corporation . To the
extent the Participant or any other person acquires a vested right to receive
benefits under this Supplemental Plan, such right shall be no greater than the
right of an unsecured general creditor of the Corporation.
SECTION 6.13 - PAYMENTS AND EXPENSES
- ------------------------------------
Supplemental Retirement Benefits and Supplemental Surviving Spouse Benefits
("Benefits") shall be payable by the Corporation from its general assets. The
cost of the Benefits shall be incurred by the Corporation and each Related
Corporation who has employees participating in this Supplemental Plan. Each such
Related Corporation will be regularly assessed and obligated to remit to the
Corporation the actuarially determined amount for the Benefits. The Corporation
shall maintain appropriate accountings and records for this Supplemental Plan.
The expenses of administering this Supplemental Plan shall be borne by the
Corporation.
IN WITNESS WHEREOF, this Supplemental Plan shall be effective as of January
1, 1998 and has been executed on behalf of the Corporation by its duly appointed
officer as of this 8th day of March, 1999.
BANK ONE CORPORATION
By: /s/
---------------------
Title: Director, Performance, Rewards
and Benefits
Attest: /s/ Othello Williams
-------------------------------
16
<PAGE>
EXHIBIT 10(G)
FIRST CHICAGO NBD CORPORATION
DEFERRED COMPENSATION PLAN
Effective January 1, 1997
<PAGE>
In exercise of the authority delegated to the undersigned by the
Organization, Compensation and Nominating Committee of the Board of Directors of
BANK ONE CORPORATION, the undersigned has caused the attached document, FIRST
CHICAGO NBD CORPORATION DEFERRED COMPENSATION PLAN (Effective January 1, 1997),
to be executed this 21st day of December, 1998.
BANK ONE CORPORATION
By: /s/ Timothy P. Moen
-------------------------------
Timothy P. Moen
Head of Human Resources
<PAGE>
FIRST CHICAGO NBD CORPORATION
DEFERRED COMPENSATION PLAN
Effective January 1, 1997
1. Purpose. The purpose of the First Chicago NBD Corporation Deferred
-------
Compensation Plan (the "Plan") is to provide individuals described in Section 3
who are employees of First Chicago NBD Corporation (the "Corporation") and its
subsidiaries and affiliates (each an "Employer"; collectively, the "Employers")
with the opportunity to elect to defer the payment of all or a portion of their
Covered Compensation.
2. Definitions.
-----------
(a) Beneficiary means any person or entity designated by a Participant
-----------
on a form provided by the Plan Administrator to receive benefits in the event of
the death of the Participant. Each designation shall revoke a Participant's
previous designations and shall be effective only when filed in writing with the
Plan Administrator during the Participant's lifetime. If a Participant fails to
designate a Beneficiary in the manner provided above, the Participant's account
hereunder shall be distributed to the legal representative or representatives of
the Participant's estate.
(b) Board means the Board of Directors of the Corporation, excluding
-----
any member who is an officer or Employee of the Corporation.
(c) Committee means the Organization, Compensation and Nominating
---------
Committee of the Board.
(d) Code means the Internal Revenue Code of 1986, as amended.
----
(e) Corporation means First Chicago NBD Corporation or its successor or
-----------
successors and its fifty percent (50%) or more owned subsidiaries.
<PAGE>
(f) Covered Compensation means the amount of a Participant's annual
--------------------
cash incentive bonus or bi-weekly salary, as well as any other cash
compensation, designated by the Committee as eligible for deferral. The
Committee may express such amount as a whole percentage or a whole dollar
amount, and the Plan Administrator shall communicate such limits to the
Participant prior to his or her enrollment in the Plan.
(g) Effective Date means the effective date of this Plan, January 1,
--------------
1997.
(h) Educational Account means an account established at the election
-------------------
of a Participant, consisting of funds the Participant elects to use for eligible
educational expenses, as provided under Section 5(c) hereof and rules
established by the Plan Administrator for the administration of Educational
Accounts.
(i) Eligible Employee means an Employee who satisfies the
-----------------
requirements of Section 3.
(j) Employee means an individual who is employed by an
--------
Employer.
(k) Exchange Act means the Securities Exchange Act of 1934,
------------
as amended.
(l) FCC Plan means the First Chicago Corporation Compensation
--------
Deferral Plan, as in existence immediately prior to the Effective Date.
(m) Investment Funds means those investment alternatives under the
----------------
Plan which will be used to calculate the periodic investment experience of each
Participant's account and shall be the investment alternatives offered under the
First Chicago NBD Corporation Savings and Investment Plan or any other
investment alternatives designated by the Committee.
(n) NBD Plan means the NBD Bancorp, Inc. Deferred Compensation
--------
Program, as in existence immediately prior to the Effective Date.
<PAGE>
(o) Participant means either (i) an Eligible Employee who has elected
-----------
to defer all or a portion of Covered Compensation, (ii) a former Employee for
whom an account is maintained under the Plan, or (iii) an individual whose
account balance from another deferral plan is transferred to this Plan, as
described in Section 3.
(p) Plan means the First Chicago NBD Corporation Deferred Compensation
----
Plan. This Plan is an amendment and restatement of the NBD Plan and the FCC
Plan.
(q) Plan Administrator means Corporate Compensation; provided,
------------------
however, that, the Committee shall be the Plan Administrator with respect to any
Participant who is an "officer" as defined in Section 16 of the Exchange Act.
3. Eligibility. The Committee shall designate the Employees who are
-----------
eligible to participate in this Plan. In addition, each individual with a
balance under the NBD Plan or FCC Plan in effect prior to January 1, 1997 and
each former Employee for whom an account balance is maintained under the Plan
shall participate in this Plan to the extent of any deferred amounts that remain
unpaid.
Subject to the approval of the Plan Administrator, the Plan may accept
the transfer of (a) any payment that would otherwise by made directly to an
individual under the terms of an agreement in effect between such individual and
the Corporation or an entity acquired by or merged with or into the Corporation;
and (b) an individual's account balance or accrued benefit from another deferral
or severance plan maintained by the Corporation or an entity acquired by or
merged with or into the Corporation at which time the individual will become a
Participant to the extent of the transferred balance. Such transferred balance
shall be credited to the Participant's account under this Plan and shall become
subject to the terms and conditions of this Plan.
<PAGE>
4. Election to Defer Covered Compensation. An Eligible Employee may
--------------------------------------
elect to defer payment of Covered Compensation for a period established by the
Plan Administrator. Such period may be determined by reference to a specific
date or event. The Plan Administrator shall establish guidelines and procedures
regarding an Eligible Employee's right to elect and/or modify an election to
defer the payment of Covered Compensation. The Plan Administrator may revise
such guidelines and procedures from time to time as it deems necessary or
appropriate.
5. Participant's Account.
---------------------
(a) The amount of Covered Compensation that has been deferred shall be
credited to a memorandum or book entry account maintained on behalf of the
Participant. Amounts credited pursuant to this Plan are credited for
bookkeeping purposes only, shall not represent either a cash deposit or actual
shares or units in any of the Investment Funds, shall not give any Participant
any special right in cash or shares held or owned by the Corporation, and shall
not give rise to any cause of action by Participants against the Corporation,
except at such time as the Participant shall become entitled to receive payment
in cash in accordance with the terms of this Plan. The Plan Administrator shall
furnish quarterly statements to Participants showing the balances in each of the
Investment Funds as of the statement date.
(b) Amounts transferred under Section 3 from a plan, program or
arrangement maintained by the Corporation (including a plan maintained solely
for the purpose of providing retirement benefits for Employees in excess of the
limitations imposed by Sections 401(a)(17), 401(k), 402(g) and 415 of the Code)
may, in the Plan Administrator's sole discretion, be aggregated with other
deferred amounts.
<PAGE>
(c) The Plan Administrator may, in its sole discretion, establish
rules under which a Participant may elect to segregate amounts from his or her
account into a separate Educational Account to be used to pay specified
educational expenses. The Participant shall be required to make elections
regarding the establishment of an Educational Account within time periods
established by the Plan Administrator. The Plan Administrator, in its sole
discretion, may aggregate with other deferred amounts any funds previously
designated by a Participant for allocation to an Educational Account, subject to
any restrictions and penalties provided under Section 10(d).
6. Investment of Participant's Account. A Participant shall elect to
-----------------------------------
have his or her account treated as if invested in one (1) or more of the
Investment Funds. The Plan Administrator, in its sole discretion, may allow
Participant to make separate investment elections with respect to amounts
allocated to an Educational Account. The Participant's account will be adjusted
periodically to reflect the investment experience of the Investment Funds that
the Participant elected. Each Participant may file an election with the Plan
Administrator (in the manner prescribed by the Plan Administrator) to reallocate
the investment of his account among the Investment Funds. The frequency, timing
and form of investment reallocation directions shall be determined by the Plan
Administrator. Any "officer," as defined under Section 16 of the Exchange Act,
may not invest his balance in the First Chicago NBD Corporation common stock
alternative. If a Participant fails to make an election under this Section 6,
his or her account shall be treated as though it were invested in the Investment
Fund consisting of shares of a money market fund. In addition and
notwithstanding the foregoing, the Plan Administrator may, in its sole
discretion, elect to treat amounts allocated by a Participant to an Educational
Account as though they were invested in the Investment Fund consisting of shares
of a money market fund.
<PAGE>
7. Investment of Participant's Account - Pre-December 1, 1993
----------------------------------------------------------
Deferred Amounts. Each Participant with amounts deferred under the FCC Plan as
- ----------------
in effect prior to December 1, 1993, shall continue to have the periodic
investment experience of his account attributable to pre-December 1, 1993
deferrals calculated pursuant to the terms of his income deferral election in
effect at the time of his deferral unless such Participant elects to participate
in the Investment Funds (in which case such Participant shall become subject to
Section 6 and may not elect the Pre-December 1, 1993 deferral option).
Notwithstanding the foregoing, effective January 1, 1999, amounts deferred under
the FCC Plan as in effect prior to December 1, 1993 shall become subject to
Section 6 and shall be invested in one of the Investment Funds as provided
thereunder.
8. Benefit. A Participant shall be entitled to a distribution of his
-------
account balance equal to the amount deferred or transferred, adjusted for the
investment experience attributable to such deferred or transferred amounts had
such amounts been invested in the Investment Funds as directed by the
Participant.
9. Distribution of Account Balances Pursuant to Participant's
----------------------------------------------------------
Election. The Plan Administrator, in its sole discretion, shall establish rules
- --------
governing the distribution of a Participant's account, including special rules
governing the distribution of a Participant's remaining account balance at the
time of his or her (a) death or (b) termination of employment prior to
satisfying specified age and service requirements for retirement.
<PAGE>
10. Payments Prior to Death or Termination of Employment.
----------------------------------------------------
(a) In the event of an unforeseeable emergency as determined
hereunder, the Plan Administrator may authorize the distribution of all or a
portion of the Participant's account, without regard to the payment dates
otherwise established by the Plan Administrator under Section 4, but only if the
Plan Administrator determines that such action is necessary to prevent severe
financial hardship to the Participant. Such action shall be taken only if a
Participant (or his legal representatives or successors) shall sign an
application describing fully the circumstances which are deemed to justify the
payment, together with an estimate of the amounts necessary to prevent severe
financial hardship. Each such application shall be approved by the Plan
Administrator, who shall certify that, according to the best of his knowledge
and belief the statements on the application are true. In the case of a
distribution pursuant to this Section 10(a), the Participant may not elect to
defer Covered Compensation for twelve (12) months following receipt of the
payment.
(b) For the purpose of this Section 10, the term "unforeseeable
emergency" shall mean a severe financial hardship to a Participant or his
dependents (as defined in Section 152(a) of the Code), loss of a Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances beyond the Participant's control. Hardship payments shall only be
made to the extent necessary to satisfy the emergency need, and shall not be
made to the extent that the hardship is or may be relieved through other means,
including reimbursement or compensation, by insurance or otherwise, or by
cessation of deferrals pursuant to this Plan.
(c) Upon the request of a Participant, the Plan Administrator may also
authorize the distribution of all or a portion of the Participant's account,
without regard to the payment dates established by the Plan Administrator under
Section 4, provided the portion of the Participant's account from which such
distribution is made is first reduced by an amount that shall equal the greater
<PAGE>
of either (i) ten percent (10%) of the applicable portion of the Participant's
account, or (ii) a "substantial penalty" as determined by the Plan Administrator
upon advice of counsel so as to assure there is no constructive receipt of
Participants' accounts under the Plan.
(d) In the event that a Participant establishes an Educational Account
(as described under Section 5(c) hereof), the Participant may request a
distribution from his or her Educational Account in order to pay eligible
educational expenses. The Plan Administrator shall establish guidelines and
procedures relating to (i) the types and verification of eligible education
expenses, and (ii) requests for payments from an Educational Account. If
amounts remain in a Participant's Educational Account at the close of the period
determined by the Plan Administrator for use thereof, or if the Plan
Administrator determines that amounts paid to a Participant from his or her
Educational Account are not used for eligible educational expenses, the Plan
Administrator may reduce the amount remaining in the Participant's Educational
Account by an amount equal to the greater of (i) the amount remaining in the
Educational Account or so misused by the Participant (as applicable), multiplied
by ten percent (10%), or (ii) a "substantial penalty" as determined by the Plan
Administrator upon advice of counsel so as to assure there is no constructive
receipt of Participants' accounts under the Plan. If the funds remaining in the
Participant's Educational Account are insufficient to make such reduction, the
Plan Administrator shall reduce the Participant's account by the amount
determined under the preceding sentence.
11. Acceleration of Payment. The Chief Executive Officer or Chairman
-----------------------
of the Board of the Corporation may, in his sole discretion, accelerate any
payment under this Plan for any Participants who are not "officers," as defined
under Section 16 of the Exchange Act. The
<PAGE>
Committee may, in its sole discretion, accelerate any payment under this Plan
for Participants who are "officers," as defined under Section 16 of the Exchange
Act.
12. Valuation of Account Prior to Distribution. A Participant's
------------------------------------------
distributable account shall be valued as of the first business day of the month
of payment.
13. Administration. This Plan shall be administered by the Plan
--------------
Administrator, and its decision on any matter involving the interpretation of
the Plan shall be binding on everyone; provided, however, that the Plan
Administrator may not take any action with respect to any benefits payable to
the Plan Administrator under the Plan unless such action could have been taken
even if he were not the Plan Administrator. The Plan Administrator shall have
the full responsibility, power and authority to administer the Plan and, within
the limits provided by the Plan:
(a) To determine, in its sole discretion, all questions arising
concerning the construction and interpretation of the Plan and in its
administration, including, but not by way of limitation, the determination of
the rights of eligibility under the Plan of Employees, Participants, and
Beneficiaries, the amount of their respective benefits and the timing and method
of distribution, and to interpret and remedy, if necessary, ambiguities,
inconsistencies, or omissions;
(b) To adopt such rules and regulations as it may deem reasonably
necessary for the proper and efficient administration of the Plan and consistent
with its purpose;
(c) To enforce the Plan, in accordance with its terms and
with the Plan Administrator's rules and regulations; and
(d) To do all other acts, in its judgment necessary or desirable,
for the proper and advantageous administration of the Plan.
<PAGE>
14. Miscellaneous.
-------------
(a) Prohibition of Alienation. Benefits under the Plan may not be
-------------------------
anticipated, alienated, assigned or encumbered and any attempt to do so shall be
void; except however, to the extent permitted by applicable law, the
Corporation, in its sole discretion, may reduce a Participant's account by any
amounts owing by the Participant to the Corporation.
(b) Litigation by Participants or Other Persons. To the extent
-------------------------------------------
permitted by law, if a legal action begun against the Corporation or an Employee
or director thereof, or the Board, or any member thereof, by or on behalf of any
person results adversely to that person, or if a legal action arises because of
conflicting claims to a grant payable to a Participant or Beneficiary, the cost
to the Corporation or Employee or director thereof, or the Board or any member
thereof, of defending the action will be charged to the extent possible to the
sums, if any, that were involved in the action or were payable to, or on account
of, the Participant or Beneficiary concerned.
(c) Indemnification. Any person who is or was a director, officer, or
---------------
Employee of the Corporation and each member of the Board shall be indemnified
and saved harmless by the Corporation from and against any and all liability or
claims of liability to which such person may be subjected by reason of any act
done or omitted to be done in good faith with respect to the administration of
the Plan, including all expenses reasonably incurred in the Participant's
defense in the event that the Corporation fails to provide such defense.
(d) Rights to Employment. Participation in the Plan shall not confer
--------------------
upon any Participant any right with respect to continued employment by the
Corporation.
(e) Expenses. All expenses of administering the Plan shall
--------
be borne by the Corporation.
<PAGE>
(f) Other Plans. Nothing contained herein shall prevent the
-----------
Corporation from establishing or maintaining other plans in which Participants
in this Plan may also participate.
(g) Facility of Payment. When, in the Plan Administrator's opinion, a
-------------------
Participant or Beneficiary is under a legal disability or incapacitated in any
way so as to be unable to manage the Participant's or Beneficiary's financial
affairs, the Plan Administrator may direct that the amount of the Participant's
or Beneficiary's payment hereunder be made to the Participant's or Beneficiary's
legal representative or to another person for such Participant's or
Beneficiary's benefit, or the Plan Administrator may direct that such amount be
applied for the benefit of the Participant or Beneficiary in any way the Plan
Administrator considers advisable.
(h) Notices. Any communication, statement or notice addressed to a
-------
Participant who is a current Employee at his work location or to a former
Employee at his last post office address shown on his employer's records, will
be binding upon the Participant for all purposes of the Plan. Neither the Plan
Administrator nor the Corporation shall be obliged to search for or ascertain
the whereabouts of any Participant. For purposes of this Section 14(h), the
term "Participant" includes any person entitled by reason of a Participant's
death or legal disability to that Participant's deferred Covered Compensation
under the Plan.
(i) Records. All records held by Corporation Compensation with
-------
respect to an Employee shall be binding upon everyone for purposes of the Plan.
15. Amendment and Termination. The Corporation, by a resolution of
-------------------------
the Committee, may amend or terminate the Plan at any time; provided, however,
that, except as may otherwise be required by law, no such amendment to or
termination of the Plan shall reduce the benefits to which a Participant (or his
Beneficiary) is entitled under the Plan as of the date of such
<PAGE>
amendment or termination. The Chief Executive Officer or the Head of Human
Resources of the Corporation may amend the Plan in any non-material respect.
Whether the amendment is material or not shall be determined by Chief Executive
Officer or Head of Human Resources in his sole discretion.
16. Financing of Plan Benefits. Any benefits payable to a
--------------------------
Participant under the Plan shall be financed from the general assets of his
employer, and no Participant, or group of Participants, shall acquire any claim
upon any specific asset of an employer solely by reason of his being a
Participant in the Plan. This paragraph shall not prohibit the Corporation from
transferring assets to a grantor trust for the purpose of providing benefits
hereunder, which grantor trust shall remain subject to the claims of creditors.
The accounting and recordkeeping of this Plan shall be entirely separate from
any other plan.
17. Gender and Number. Words denoting the masculine gender shall
-----------------
include the feminine and neuter genders, the singular shall include the plural
and the plural shall include the singular wherever required by the context.
18. Benefits Intended for Select Group of Management or Highly
----------------------------------------------------------
Compensated Employees. This Plan is intended to be maintained primarily for the
- ---------------------
purpose of providing deferred compensation for a select group of management or
highly compensated employees and shall be interpreted and administered
accordingly.
<PAGE>
19. Controlling Laws. To the extent not superseded by Federal law,
----------------
the laws of Illinois, without regard to its laws of conflict, shall be
controlling in all matters relating to the Plan.
<PAGE>
EXHIBIT 10(H)
FIRST CHICAGO NBD CORPORATION
SUPPLEMENTAL SAVINGS AND INVESTMENT PLAN
(As Amended and Restated Effective January 1, 1997)
<PAGE>
In exercise of the authority delegated to the undersigned by the
Organization, Compensation and Nominating Committee of the Board of Directors of
First Chicago NBD Corporation, the undersigned has caused the attached document,
FIRST CHICAGO NBD CORPORATION SUPPLEMENTAL SAVINGS AND INVESTMENT PLAN (As
Amended and Restated Effective January 1, 1997), to be executed this ___ day
of ________________________________, 1998.
FIRST CHICAGO NBD CORPORATION
By: /s/ Timothy P. Moen
----------------------------------
Timothy P. Moen
Executive Vice President
2
<PAGE>
FIRST CHICAGO NBD CORPORATION SUPPLEMENTAL SAVINGS
--------------------------------------------------
AND INVESTMENT PLAN
-------------------
(As Amended and Restated Effective January 1, 1997)
1. Purpose. The purpose of the First Chicago NBD Corporation
-------
Supplemental Savings and Investment Plan ("Supplemental Plan") is to provide
supplemental benefits to certain employees described in Section 3 below of First
Chicago NBD Corporation (the "Corporation") and of its subsidiaries and related
entities (each an "Employer"; collectively, the "Employers") who are
participants in the First Chicago NBD Corporation Savings and Investment Plan
("SIP") and whose ability to make contributions to the SIP is limited by
operation of Section 401(a)(17), 401(k)(3), 401(m), 402(g) or 415 of the
Internal Revenue Code of 1986, as amended (the "Code") (which Code Sections, as
used in this Supplemental Plan, shall include any comparable section or sections
of any future legislation that amend, supplement or supersede those sections).
This Supplemental Plan is an amendment and restatement of the First Chicago
Corporation Supplemental Savings Incentive Plan ("FCC Supplemental Plan"). The
rights and benefits of any participant in the FCC Supplemental Plan whose
employment terminated prior to January 1, 1997 will be governed by the FCC
Supplemental Plan as in effect on the date of the participant's termination of
employment.
2. Definitions. Unless the context clearly implies or
-----------
indicates the contrary, a word, term or phrase used or defined in the SIP is
similarly used or defined in the Supplemental Plan. The masculine pronoun
whenever used herein is deemed to include the feminine and the singular shall be
deemed to include the plural whenever the context requires.
1
<PAGE>
3. Eligibility. A participant in the FCC Supplemental Plan on
-----------
December 31, 1996, who remains employed by an Employer on January 1, 1997 shall
become a participant hereunder, and his account under the FCC Supplemental Plan
shall be transferred to and subject to the terms of the Supplemental Plan. Each
other individual who, on or after January 1, 1997, is a participant in the SIP
and whose contributions thereto are limited because of the application of
Section 401(a)(17), 401(k)(3), 401(m), 402(g) or 415 of the Code shall be
eligible to participate in the Supplemental Plan.
4. Participation. An individual eligible to participate
-------------
pursuant to Section 3 above shall participate in the Supplemental Plan
automatically pursuant to his election under the SIP and shall participate in
the same manner with the same rights and under the same terms and conditions as
his participation under the SIP, except as may otherwise be prescribed herein.
The Committee shall notify each participant of his automatic participation.
5. Supplemental Benefit. An allocation shall be made to the
--------------------
Supplemental Plan account of a participant whenever the amount of Before-Tax
Contributions and/or Matching Contributions that would have been made to the SIP
on his behalf are limited by operation of Section 401(a)(17), 401(k)(3), 401(m),
402(g) or 415 of the Code. Such allocation shall equal the amount of Before-Tax
Contributions and/or Matching Contributions that are so limited, adjusted for
the investment results attributable to such contributions had such contributions
been invested in the Investment Funds in the same manner and proportions as
contributions made on his behalf to the SIP were invested under the SIP.
2
<PAGE>
6. Distribution of Account Balances; Normal Form. Except as
---------------------------------------------
provided in Sections 7, 8, 9 or 10 below, a participant's account hereunder
shall be distributed in cash in one lump sum payment as soon as practicable
after a participant's termination of employment, for participant's whose
employment terminates before August 1, 1998; or the close of the calendar year
in which the participant's termination of employment occurs, for participants
whose employment terminates on or after August 1, 1998.
7. Optional Forms of Payment. Instead of a lump sum payment
-------------------------
under Section 6 above, a participant whose account balance exceeds $5,000 (or
such larger amount established by the Committee from time to time), by making a
written election prior to the date his employment terminates in accordance with
rules established by the Committee, may have his account under the Supplemental
Plan: (i) paid in the form of annual or more frequent installments over a period
not less than three nor more than fifteen years, commencing as soon as
practicable after the close of the calendar year in which the participant's
termination of employment occurs; or (ii) transferred as soon as practicable
following his termination of employment to the First Chicago NBD Corporation
Deferred Compensation Plan, provided that he has attained age 55 and completed
at least fifteen Years of Service on the date his employment terminates and. has
satisfied requirements established by the Committee as to minimum account
balances. The Committee shall have complete discretion to establish, change or
eliminate forms of distribution and rules pertaining to the election and timing
of such distributions.
3
<PAGE>
8. Survivor's Benefits. In the case of a participant's death
-------------------
before distribution of his entire account balance under the Supplemental Plan,
any remaining account balance will be distributed to the participant's
Designated Beneficiary (or to the participant's estate if he has no Designated
Beneficiary) in a lump sum as soon as practicable following the participant's
death.
9. Disability Distribution. A participant who is disabled,
-----------------------
within the meaning of Code Section 401(k)(2)(B), may elect an immediate
distribution of his account balance under the Supplemental Plan.
10. Change of Control. In the event of a "Change of Control"
-----------------
of the Corporation, as defined in the First Chicago NBD Corporation Stock
Performance Plan, a participant shall have his account balance distributed to
him in cash in a lump sum (whether or not his employment has terminated) as soon
as practicable following such Change of Control. Notwithstanding the foregoing,
the actions or transactions contemplated by and effectuated in connection with
the agreement and Plan of Reorganization by and between BANC ONE CORPORATION and
the Corporation shall not require the Corporation to make any in-service
distribution to any participant.
11. No Right to Withdrawal or Loans During Employment. Except
-------------------------------------------------
as provided in Sections 9 and 10 above, a participant hereunder shall have no
right to receive any form of distribution, including withdrawals or loans, from
the Supplemental Plan while he is employed by an Employer.
4
<PAGE>
12. Administration. The Supplemental Plan shall be
--------------
administered by the Committee in its sole and absolute discretion, and its
decision on any matter involving the administration and interpretation of the
Supplemental Plan (including, without limitation, all questions of eligibility
to participate in the Supplemental Plan, the right of any individual to receive
Supplemental Plan benefits and the amount and/or form of such benefits) shall be
final and binding on all parties; provided, however, that a Committee member may
not take any action with respect to any benefits payable to him under the
Supplemental Plan unless he could take such action even if he were not a
Committee member.
13. Prohibition of Alienation. Except as to a payment required
-------------------------
under a qualified domestic relations order, as defined in Section 414(p) of the
Code, benefits under the Supplemental Plan may not be anticipated, alienated,
assigned or encumbered and any attempt to do so shall be void.
14. Records. All records held by the Corporation's Human
-------
Resources Department with respect to an employee shall be binding upon everyone
for purposes of the Supplemental Plan.
15. Amendment and Termination. The Corporation, action by the
-------------------------
Organization, Compensation and Nominating Committee of the Board of Directors
or by anyone authorized by the Board of Directors, may amend or terminate the
Supplemental Plan in whole or in part at any time, retroactively or
prospectively; provided, however, that, except as may otherwise be required by
law, no such amendment to or termination of the Supplemental Plan
5
<PAGE>
shall reduce the amount of the benefit to which a participant (or his Designated
Beneficiary) is entitled under the Supplemental Plan as of the date of such
amendment or termination.
16. Financing of Supplemental Plan Benefits. Any benefits
---------------------------------------
payable to a participant under the Supplemental Plan shall be financed from the
general assets of his Employer, and no participant, or group of participants,
shall acquire any claim upon any specific asset of an Employer solely by reason
of his being a participant in the Supplemental Plan. Notwithstanding the
foregoing, the provisions of this section shall not prohibit the Corporation
from transferring assets to a grantor trust for the purpose of providing the
benefits described hereunder, which grantor trust shall remain subject to the
claims of the Corporation's creditors.
17. Benefits Intended for Select Group of Management or Highly
----------------------------------------------------------
Compensated Employees. This Supplemental Plan is intended to be maintained
- ---------------------
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees and shall be interpreted and
administered accordingly.
18. Controlling Laws. To the extent not superseded by Federal
----------------
law, the internal laws of Illinois (and not its laws of conflicts) shall be
controlling in all matters relating to the Supplemental Plan.
6
<PAGE>
EXHIBIT 10(I)
FIRST CHICAGO NBD CORPORATION
SUPPLEMENTAL PERSONAL PENSION ACCOUNT PLAN
------------------------------------------
(As Amended and Restated Effective January 1, 1997)
<PAGE>
FIRST CHICAGO NBD CORPORATION
SUPPLEMENTAL PERSONAL PENSION ACCOUNT PLAN
(As Amended and Restated Effective January 1, 1997)
1. Purpose. The purpose of the First Chicago NBD Corporation Supplemental
Personal Pension Account Plan (the "Supplemental Plan") is to provide benefits
to those participants in the First Chicago NBD Corporation Personal Pension
Account Plan (the "PPAP") whose benefits are reduced by operation of Sections
401(a)(4), 401(a)(17) or 415 of the Internal Revenue Code of 1986, as amended
(the "Code") (or any comparable section or sections of any future legislation
that amend, supplement or supersede said Sections 401(a)(4), 401(a)(17) or 415).
The Supplemental Plan as set forth herein is an amendment, restatement and
continuation, effective January 1, 1997, of the Pension Restoration
/Supplemental Plan for Certain Officers of NBD Bancorp, Inc. and The First
National Bank of Chicago Supplemental Pension Plan, as both were constituted on
December 31, 1996. The rights and benefits of any participant under either such
plan whose employment terminated prior to January 1, 1997 shall be governed by
the respective plan as in effect on the date of the participant's termination of
employment.
2. Supplemental Plan Exhibits and Supplements. The provisions of the
Supplemental Plan may be modified from time to time by Exhibits and Supplements
thereto. The provisions of such Exhibits and Supplements are part of the
Supplemental Plan and supersede the Supplemental Plan to the extent necessary to
eliminate inconsistencies between the Supplemental Plan and each such Exhibit or
Supplement.
3. Definitions. Unless the context clearly implies or indicates to the
contrary, a word, term or phrase used or defined in the PPAP is similarly used
or defined in the Supplemental Plan. The masculine pronoun whenever used herein
is deemed to include the feminine and the singular shall be deemed to include
the plural whenever the context requires.
4. Eligibility. Each individual who, on or after the effective date, is a
participant in the PPAP shall be eligible for a benefit hereunder if (a) such
individual's employment terminates after completing five years of Vesting
Service under the PPAP, or (b) a Change of Control shall have occurred during
the individual's employment with an Employer.
5. Supplemental Benefit. Each eligible individual shall become a
participant hereunder if and when he becomes entitled to a supplemental benefit
determined in accordance with the following:
(a) First, there shall be determined the maximum annual pension
<PAGE>
benefit to which the participant would have been entitled
under the PPAP, as amended and in effect on his employment
termination date or date there is a Change of Control, but
disregarding any limitations on compensation or benefits that
are set forth in the PPAP as of that date pursuant to
Sections 401(a)(17) or 415 of the Code or any limitations on
benefits imposed to comply with Section 401(a)(4) of the
Code;
(b) Then, there shall be determined the maximum annual pension
benefit to which the participant is entitled under the PPAP,
as amended and in effect as of his employment termination
date or date there is a Change of Control, taking into
account any limitations on compensation or benefits that are
set forth in the PPAP as of that date pursuant to Sections
401(a)(17) or 415 of the Code and any limitations on benefits
to comply with Section 401(a)(4) of the Code; and
(c) Finally, the excess, if any, of (a) above over (b) above
shall be the amount of the supplemental benefit payable under
the Supplemental Plan.
6. Payment of Supplemental Plan Benefits; Normal Form. Except as provided
in paragraph 7 or 8 below, payment of a supplemental benefit shall be made in
cash in one lump sum payment as soon as practicable following the earlier of:
(a) a participant's termination of employment, for participants whose employment
terminates before August 1, 1998, or the close of the calendar year in which the
participant's termination of employment occurs, for participants whose
employment terminates on or after August 1, 1998; or (b) a Change of Control;
provided, however, that notwithstanding the foregoing no in-service distribution
of any participant's supplemental benefit shall be required as a result of or in
connection with the actions and transactions contemplated by or effectuated in
connection with the Agreement and Plan or Reorganization by and between BANC ONE
CORPORATION and the Corporation. The amount of the lump sum payment shall be the
actuarial equivalent (determined in the same manner as a lump sum under the
PPAP) of the supplemental benefit to which the participant is entitled under
paragraph 5.
7. Optional Forms of Payment. Instead of a lump sum payment under paragraph
6 above, a participant whose lump sum supplemental benefit exceeds $5,000 (or
such larger amount established by the Committee from time to time), by making a
written election prior to the date his employment terminates in accordance with
rules established by the Committee, may have his supplemental benefit: (a) paid
in any of the forms offered under the PPAP; or (b) transferred to the First
Chicago NBD Corporation Deferred Compensation Plan, provided that, at the time
his employment terminates, he has attained age 55 and completed 15 years of
Vesting Service and satisfied requirements established by the Committee as to
minimum benefits. The
<PAGE>
Committee or its delegate shall have complete discretion to establish, change or
eliminate forms of distribution and the rules pertaining to the election and
timing of such distributions from time to time, with or without notice to
participants.
8. Survivor's Benefits. Upon the death of a participant during his
employment or after the termination of his employment and prior to the date his
supplemental benefit is paid or commences under paragraph 6 or 7 above, the
participant's' Designated Beneficiary will be paid a lump sum benefit equal to
the amount the participant would have been paid under paragraph 6 had his
employment terminated on the date of his death.
9. Non-Duplication of Benefits. In the event that a participant's
employment terminates and he is paid a benefit under the Supplemental Plan and a
supplemental benefit becomes later payable to such participant upon his
subsequent termination of employment, the supplemental benefit then payable
shall be reduced by the actuarial equivalent of any benefit previously paid
under the Supplemental Plan so as to avoid duplication of benefits.
10. Administration. The Supplemental Plan shall be administered by the
Committee in its sole and absolute discretion and its decision on any matter
involving the administration and interpretation of the Supplemental Plan
(including, without limitation, all questions of eligibility to participate in
the Supplemental Plan, the right of any individual to receive Supplemental Plan
benefits and the amount and/or form and election of such benefits) shall be
binding on all parties; provided, however, that a Committee member may not take
any action with respect to any benefits payable to him under the Supplemental
Plan unless he could take such action even if he were not a Committee member.
The Committee may delegate such of its rights, powers and discretions to agents
as it deems desirable.
11. Prohibition of Alienation. Except as to debts owing to the Corporation
or any of its subsidiaries, or payments required under a qualified domestic
relations order, as defined in Section 414(p) of the Code, benefits under the
Supplemental Plan may not be anticipated, alienated, assigned or encumbered and
any attempt to do so shall be void.
12. Records. All records held by the Corporation's Human Resources
Department with respect to any employee shall be binding upon everyone for
purposes of the Supplemental Plan.
13. Amendment and Termination. The Corporation, acting through the
Organization, Compensation and Nominating Committee of its Board of Directors or
by anyone authorized by the Board of Directors, may amend the Supplemental Plan
from time to time and may terminate it at any time, retroactively or
prospectively; provided, however, that, except as may otherwise be required by
law, no such termination shall be permitted upon or following a Change of
Control so long as the PPAP continues without termination and, provided,
further, upon and following any termination of the PPAP, no
<PAGE>
such amendment to or termination of the Supplemental Plan shall reduce the
benefits to which a participant (or his beneficiary) is entitled under the
Supplemental Plan as of the date of such amendment or termination.
14. Financing of Supplemental Plan Benefits. Any benefits payable to a
participant under the Supplemental Plan shall be financed from the general
assets of his Employer, and no participant, or group of participants, shall
acquire any claim upon any specific asset of an Employer solely by reason of his
being a participant in the Supplemental Plan. This paragraph shall not prohibit
the Corporation from transferring assets to a grantor trust for the purpose of
providing benefits hereunder, which grantor trust shall remain subject to the
claims of the Corporation's creditors.
15. Benefits Intended for Select Group of Managers or Highly-Compensated
Employees. This Supplemental Plan is intended to be maintained primarily for the
purpose of providing deferred compensation to a select group of management or
highly compensated employees and shall be administered accordingly.
16. Controlling Laws. To the extent not superseded by Federal law, the laws
of Illinois (except its laws of conflict) shall be controlling in all matters
relating to the Supplemental Plan.
<PAGE>
EXHIBIT 10(J)
FORM OF INDIVIDUAL
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
Each of the following individuals is a party to a Change of Control Employment
Agreement with the Corporation, the form and terms of which are substantially as
attached.
Sherman I. Goldberg
Verne G. Istock
W. G. Jurgensen
Timothy P. Moen
Susan S. Moody
Robert A. Rosholt
David J. Vitale
<PAGE>
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between First Chicago NBD Corporation, a Delaware corporation
(the "Company"), and [Name of Executive] (the "Executive"), dated the ____
---------------------
day of _________, 199_.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
l. Certain Definitions. (a) The "Effective Date" shall mean the first date
-------------------
during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on the
date hereof and ending on the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be automatically extended so as
to terminate three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the Executive that the
Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section
<PAGE>
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the
then outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"), provided, however, that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii) of
subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
2
<PAGE>
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the Executive
-----------------
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the Employment
-------------------
Period, (A) the Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
------------ -----------
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
3
<PAGE>
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall
------------
be awarded, for each fiscal year ending during the Employment Period, an annual
bonus in cash at least equal to the Executive's average bonus under the
Company's annual incentive plans, for the last three full fiscal years prior to
the Effective Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent Average Bonus").
Each such annual bonus shall be paid no later than the end of the third month of
the fiscal year next following the fiscal year for which the annual bonus is
awarded, unless the Executive shall elect to defer the receipt of such annual
bonus.
(iii) Inc entive, Savings and Retirement Plans. During the Employment
----------------------------------------
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
---------------------
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement of all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive shall be
---------------
entitled to fringe
5
<PAGE>
benefits, including, without limitation, tax and financial planning services,
payment of club dues, and, if applicable, use of an automobile and payment of
related expenses, in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in effect for
the Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
--------
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's
------------------------- -------------------
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during the
-----
Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company which
5
<PAGE>
specifically identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the Executive's
duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive; (ii) an y failure by the Company to
comply with any of the provisions of Section 4(b) of this Agreement, other than
an isolated, insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or
location other than as provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business to a substantially greater
extent than required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
6
<PAGE>
(v) any failure by the Company to comply with and satisfy Section 11(c) of
this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause, or by
---------------------
the Executive for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 12(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes to
a showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination. (a) Good Reason: Other Than
-------------------------------------------
for Cause. Death or Disability. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause or Disability or
the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
A. the sum of (l) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (2) the product of (x) the
Recent Average Bonus and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation previously deferred by
7
<PAGE>
the Executive (together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (l), (2) and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (l) two and one-half (2.5) and (2)
the sum of (x) the Executive's Annual Base Salary and (y) the Recent Average
Bonus; and
C. an amount equal to the excess of (a) the actuarial equivalent of the
benefit under the Company's qualified defined benefit retirement plan (the
"Retirement Plan") (utilizing actuarial assumptions no less favorable to the
Executive than those in effect under the Company's Retirement Plan immediately
prior to the Effective Date), and any excess or supplemental retirement plan in
which the Executive participates (together, the "SERP") which the Executive
would receive if the Executive's employment continued for thirty months after
the Date of Termination assuming for this purpose that all accrued benefits are
fully vested, and assuming that the Executive's compensation in each of the
three years is that required by Section 4(b)(i) and Section 4(b)(ii), over (b)
the actuarial equivalent of the Executive's actual benefit (paid or payable), if
any, under the Retirement Plan and the SERP as of the Date of Termination.
(ii) for thirty months after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility.
For purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until thirty months after the Date of Termination and to have
retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the Company and
its affiliated companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
-----
Executive's death
8
<PAGE>
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(b) shall include, without limitation, and
the Executive's estate and/or beneficiaries shall be entitled to receive,
benefits at least equal to the most favorable benefits provided by the Company
and affiliated companies to the estates and beneficiaries of peer executives of
the Company and such affiliated companies under such plans, programs, practices
and policies relating to death benefits, if any, as in effect with respect to
other peer executives and their beneficiaries at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason of
----------
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
(d) Cause: Other than for Good Reason. If the Executive's employment shall
be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor,
9
<PAGE>
subject to Section 12(f) shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments provided
---------------
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the Executive, after taking into
account the Payments and the Gross-Up Payment, would not receive a net after-tax
benefit of at least $50,000 (taking into account both income taxes and any
Excise Tax) as compared to the net after-tax proceeds to the Executive resulting
from an elimination of the Gross-Up Payment and a reduction of the Payment, in
the aggregate, to an amount (the "Reduced Amount") such that the receipt of
Payments would not give
10
<PAGE>
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations required
to be made under this Section 9, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by Arthur Andersen LLP
or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim,
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<PAGE>
and
(iv) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
19. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the
12
<PAGE>
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may otherwise
be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given
by hand delivery to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
-------------------
[Name of Executive]
[Street Address]
[City, State Zip Code]
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<PAGE>
If to the Company:
-----------------
First Chicago NBD Corporation
One First National Plaza
Chicago, IL 60670
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time, in which case the Executive shall have no
further rights under this Agreement. From and after the Effective Date this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
FIRST CHICAGO NBD CORPORATION
By:_____________________________
_________________________________
[Name of Executive]
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<PAGE>
EXHIBIT 10(P)
FIRST CHICAGO CORPORATION
STOCK INCENTIVE PLAN
1. Purpose
The purpose of the First Chicago Corporation Stock Incentive Plan is to
provide incentive and rewards for Employees of the Corporation and its
Subsidiaries (i) to support the execution of the Corporation's business and
human resource strategies and the achievement of its goals and (ii) to associate
the interests of Employees with those of the Corporation's stockholders.
2. Definitions
(a) "Award" includes, without limitation, stock options (including
incentive stock options under Section 422 of the Code), stock appreciation
rights, performance share or unit awards, dividend or equivalent rights, stock
awards, restricted share or unit awards, or other awards that are valued in
whole or in part by reference to, or are otherwise based on, the Corporation's
Common Stock ("other Common Stock-based Awards"), all on a stand alone,
combination or tandem basis, as described in or granted under this Plan.
(b) "Award Summary" means a written summary setting forth the terms and
conditions of each Award made under this Plan.
(c) "Board" means the Board of Directors of the Corporation, excluding any
member who is an officer or employee of the Corporation or who otherwise would
not be considered a disinterested person within the meaning of Rule 16b-3 of the
Securities and Exchange Commission.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(e) "Committee" means the Organization Committee of the Board or such other
committee of the Board as may be designated by the Board from time to time to
administer this Plan.
(f) "Common Stock" means the $5.00 par value Common Stock of the
Corporation.
(g) "Corporation" means First Chicago Corporation, a Delaware corporation.
(h) "Employee" means an employee of First Chicago Corporation or a
Subsidiary.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(j) "Fair Market Value" means the average of the highest and the lowest
quoted selling price on the New York Stock Exchange Composite Transactions Tape
on the relevant valuation
<PAGE>
date or, if there were no sales on the valuation date, on the next preceding
date on which such selling prices were recorded; provided, however, that the
Committee may specify some other definition of Fair Market Value with respect to
any particular Award.
(k) "Participant" means an Employee who has been granted an Award under the
Plan.
(l) "Plan" means this First Chicago Corporation Stock Incentive Plan.
(m) "Plan Year" means a twelve-month period beginning with January 1 of
each year.
(n) "Subsidiary" means any corporation or other entity, whether domestic or
foreign, in which the Corporation has or obtains, directly or indirectly, a
proprietary interest of more than 50% by reason of stock ownership or otherwise.
3. Eligibility
Any Employee selected by the Committee is eligible to receive an Award.
4. Plan Administration
(a) Except as otherwise determined by the Board, the Plan shall be
administered by the Committee. The Board, or the Committee to the extent
determined by the Board, shall periodically make determinations with respect to
the participation of Employees in the Plan and, except as otherwise required by
law or this Plan, the grant terms of Awards including vesting schedules, price,
length of relevant performance, restriction or option period, dividend rights,
post-retirement and termination rights, payment alternatives such as cash,
stock, contingent awards or other means of payment consistent with the purposes
of this Plan, and such other terms and conditions as the Board or the Committee
deems appropriate.
(b) The Committee shall have authority to interpret and construe the
provisions of the Plan and the Award Summaries and make determinations pursuant
to any Plan provision or Award Summary which shall be final and binding on all
persons. No member of the Committee shall be liable for any action or
determination made in good faith, and the members shall be entitled to
indemnification and reimbursement in the manner provided in the Corporation's
Certificate of Incorporation, as it may be amended from time to time.
(c) The Committee may designate persons other than its members to carry out
its responsibilities under such conditions or limitations as it may set, other
than its authority with regard to Awards granted to Employees who are officers
or directors of the Corporation for purposes of Section 16 of the Exchange Act.
(d) The Committee shall have the authority at any time prior to a Change of
Control (as defined in Section 12(b)) to cancel Awards for reasonable cause and
to provide for the conditions and circumstances under which Awards shall be
forfeited.
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<PAGE>
5. Stock Subject To The Provisions Of This Plan
(a) The stock subject to the provisions of this Plan shall be shares of
authorized but unissued Common Stock and shares of Common Stock held as treasury
stock. Subject to adjustment in accordance with the provisions of Section 10,
and subject to Section 5(c) below, the total number of shares of Common Stock
available for grants of Awards in any Plan Year shall not exceed 2% of the
outstanding Common Stock as reported in the Corporation's Annual Report on Form
1O-K for the fiscal year ending immediately prior to such Plan Year.
(b) The exercise of an option or stock appreciation right granted in tandem
therewith will reduce proportionately the amount of shares subject to the tandem
stock appreciation right or option. In addition, any shares ceasing to be
subject to the related option or right because of such reduction shall not
increase the number of shares of Common Stock available for future Awards
granted under the Plan. The grant of a performance or restricted share unit
Award shall be deemed to be equal to the maximum number of shares which may be
issued under the Award. Where the value of an Award is variable on the date it
is granted, the value shall be deemed to be the maximum limitation of the Award.
Awards payable solely in cash will not reduce the number of shares available for
Awards granted under the Plan.
(c) There shall be carried forward and be available for Awards under the
Plan in succeeding Plan Years, in addition to shares available for grant under
paragraph (a) of this Section 5, all of the following: (i) any unused portion of
the limit set forth in paragraph (a) of this Section 5 for a prior Plan Year;
(ii) shares represented by Awards which are cancelled, forfeited, surrendered,
terminated, paid in cash or expire unexercised; (iii) the excess amount of
variable Awards which become fixed at less than their maximum limitations; (iv)
authorized shares as to which options, restricted shares, performance shares or
stock appreciation rights were not granted under either the First Chicago
Corporation 1983 Stock Option Plan or the First Chicago Corporation Strategic
Stock Incentive Plan; and (v) shares under either of those plans subject to
stock options, restricted shares, performance shares or stock appreciation
rights which are forfeited, surrendered, terminated or expire unexercised.
6. Awards Under This Plan
As the Board or Committee may determine, the following types of Awards and
other Common Stock-based Awards may be granted under this Plan on a stand alone,
combination or tandem basis:
(a) Stock Option. A right to buy a specified number of shares of Common
Stock at a fixed exercise price during a specified time, all as the Committee
may determine; provided that the exercise price of any option shall not be less
than 100% of the Fair Market Value of the Common Stock on the date of grant of
the Award.
(b) Incentive Stock Option. An Award in the form of a stock option which
shall comply with the requirements of Section 422 of the Code or any successor
Section as it may be amended from time to time. Subject to adjustment in
accordance with the provisions of Section 10, the
3
<PAGE>
aggregate number of shares which may be subject to incentive stock option Awards
under this Plan shall not exceed 7,000,000 shares, subject in any Plan Year to
the limitations of Section 5 of this Plan.
(c) Stock Appreciation Right. A right to receive the excess of the Fair
Market Value of a share of Common Stock on the date the stock appreciation right
is exercised over the Fair Market Value of a share of Own Stock on the date the
stock appreciation right was granted.
(d) Restricted and Performance Shares. A transfer of Common Stock to a
Participant, subject to such restrictions on transfer or other incidents of
ownership, or subject to specified performance standards, for such periods of
time as the Committee may determine.
(e) Restricted and Performance Share Unit. A fixed or variable share or
dollar denominated unit subject to such conditions of vesting, performance and
time of payment as the Committee may determine, which unit may be paid in Common
Stock, cash or a combination of both.
(f) Dividend or Equivalent Right. A right to receive dividends or their
equivalent in value in Common Stock, cash or in a combination of both with
respect to any new or previously existing Award.
(g) Stock Award. An unrestricted transfer of ownership of Common Stock
which may only be made to Employees other than Employees who are officers or
directors of the Corporation for purposes of Section 16 of the Exchange Act.
(h) Other Stock-Based Awards. Other Common Stock-based Awards which are-
related to or serve a similar function to those Awards set forth in this Section
6.
In addition to granting Awards for purposes of incentive compensation,
Awards may also be made in tandem with or in lieu of current or deferred
Employee compensation. No Common Stock shall be issued pursuant to any Award
unless consideration at least equal to the par value thereof has been received
by the Corporation in the form of cash, services rendered or property.
7. Award Summaries
Each Award under the Plan shall be evidenced by an Award Summary. Delivery
of an Award Summary to each Participant shall constitute an agreement, subject
to Section 4(d) and Section 9 hereof, between the Corporation and the
Participant as to the terms and conditions of the Award.
8. Other Terms and Conditions
(a) Assignability. No Award shall be assignable or transferable except by
will, by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code, and during the lifetime of a
Participant, the Award shall be exercisable only by such
4
<PAGE>
Participant or such Participant's guardian, legal representative or assignee
pursuant to a qualified domestic relations order.
(b) Termination of Employment. The Committee shall determine the
disposition of the grant of each Award in the event of the retirement,
disability, death or other termination of a Participant's employment.
(c) Rights as a Shareholder. A Participant shall have no rights as a
stockholder with respect to shares covered by an Award until the date the
Participant or his nominee, guardian or legal representative is the holder of
record. No adjustment will be made for dividends or other rights for which the
record date is prior to such date.
(d) No Obligation To Exercise. The grant of an Award shall impose no
obligation upon the Participant to exercise the Award.
(e) Payments By Participants. The Committee may determine that Awards for
which a payment is due from a Participant may be payable: (i) in U.S. dollars by
personal check, bank draft or money order payable to the order of the
Corporation, by money transfers or direct account debits; (ii) through the
delivery or deemed delivery based on attestation to the ownership of shares of
Common Stock with a Fair Market Value equal to the total payment due from the
Participant; (iii) by a combination of the methods described in (i) and (ii)
above; or (iv) by such other methods as the Committee may deem appropriate.
(f) Withholding. Except as otherwise provided by the Committee, (i) the
deduction of withholding and any other taxes required by law will be made from
all amounts paid in cash and (ii) in the case of payments of Awards in shares of
Common Stock, the Participant shall be required to pay the amount of any taxes
required to be withheld prior to receipt of such stock, or alternatively, a
number of shares the Fair Market Value of which equals the amount required to be
withheld may be deducted from the payment. The Committee may provide for shares
of Common Stock to be withheld for tax withholding purposes in excess of the
required minimum amount but not in excess of a Participant's maximum marginal
tax rate.
(g) Restrictions On Sale and Exercise. With respect to Employees who are
officers and directors for purposes of Section 16 of the Exchange Act, and if
required to comply with rules promulgated thereunder, (i) no Award providing for
exercise, a vesting period, a restriction period or the attainment of
performance standards shall permit unrestricted ownership of Common Stock by the
Participant for at least six months from the date of grant, and (ii) Common
Stock acquired pursuant to this Plan (other than Common Stock acquired as a
result of the granting of a "derivative security") may not be sold for at least
six months after acquisition.
9. Amendments
The Board may alter, amend, suspend or discontinue the Plan or at any time
prior to a Change of Control (as defined in Section 12(b)) alter or amend any or
all Award Summaries granted under the Plan to the extent permitted by law. Any
such action of the Board may be taken
5
<PAGE>
without the approval of the Corporation's stockholders, but only to the extent
that such stockholder approval is not required by applicable law or regulation,
including specifically Rule 16b-3 of the Securities and Exchange Commission.
10. Recapitalization
The aggregate number of shares of Common Stock as to which Awards may be
granted to Participants, the number of shares thereof covered by each
outstanding Award, and the price per share thereof in each such Award, shall all
be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a subdivision or consolidation of shares
or other capital adjustment, or the payment of a stock dividend or other
increase or decrease in such shares, effected without receipt of consideration
by the Corporation, or other change in corporate or capital structure; provided,
however, that any fractional shares resulting from any such adjustment shall be
eliminated. The Committee may also make the foregoing changes and any other
changes, including changes in the classes of securities available, to the extent
it is deemed necessary or desirable to preserve the intended benefits of the
Plan for the Corporation and the Participants in the event of any other
reorganization, recapitalization, merger, consolidation, spin-off, extraordinary
dividend or other distribution or similar transaction.
11. No Right To Employment
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Corporation or a Subsidiary. Further, the
Corporation and each Subsidiary expressly reserve the right at any time to
dismiss a Participant free from any liability, or any claim under the Plan,
except as provided herein or in any Award Summary issued hereunder.
12. Change of Control
(a) Notwithstanding anything contained in this Plan or any Award Summary to
the contrary, in the event of a Change of Control, as defined below, the
following shall occur with respect to any and all Awards outstanding as of such
Change of Control:
(i) automatic maximization of performance standards, lapse of all
restrictions and acceleration of any time periods relating to the exercise,
realization or vesting of such Awards so that such Awards may be immediately
exercised, realized or vested in full on or before the relevant date fixed in
the Award Summary;
(ii) performance shares or performance units shall be paid entirely in
cash;
(iii) upon exercise of a stock option or an incentive stock option
(collectively an "Option") during the 60-day period from and after the date of a
Change of Control, the Participant exercising the Option may in lieu of the
receipt of Common Stock upon the exercise of the Option, elect by written notice
to the Corporation to receive an amount in cash equal to the excess of the
aggregate Value (as defined below) of the shares of Common Stock covered by the
6
<PAGE>
Option or portion thereof surrendered determined on the date the Option is
exercised, over the aggregate exercise price of the Option (such excess is
referred to herein as the "Aggregate Spread"); provided, however, and
notwithstanding any other provision of the Plan, if the end of such 60-day
period from and after the date of a Change of Control is within six months of
the date of grant of an Option held by a Participant who is an officer or
director of the Corporation (within the meaning of Section 16(b) of the Exchange
Act), such Option shall be cancelled in exchange for a cash payment to the
Participant equal to the Aggregate Spread on the day which is six months and one
day after the date of grant of such Option. As used in this Section 12(a)(iii)
the term "Value" means the higher of (i) the highest Fair Market Value during
the 60-day period from and after the date of a Change of Control and (ii) if the
Change of Control is the result of a transaction or series of transactions
described in paragraphs (i) or (iii) of the definition of Change of Control set
forth in Section 12(b), the highest price per share of the Common Stock paid in
such transaction or series of transactions (which in the case of paragraph (i)
shall be the highest price per share of the Common Stock as reflected in a
Schedule 18D by the person having made the acquisition);
(iv) if a Participant's employment terminates for any reason other
than retirement or death following a Change of Control, any Options held by the
Participant may be exercised by the Participant until the earlier of three
months after such termination of employment or the expiration date of such
Options; and
(v) all Awards become non-cancellable.
(b) A "Change of Control" of the Corporation shall be deemed to have
occurred upon the happening of any of the following events:
(i) the acquisition, other than from the Corporation, by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of Common Stock of the Corporation or the combined voting
power of the then outstanding voting securities of the Corporation entitled to
vote generally in the election of directors, but excluding, for this purpose,
any such acquisition by the Corporation or any of its Subsidiaries, or any
employee benefit plan (or related trust) of the Corporation or its Subsidiaries,
or any corporation with respect to which, following such acquisition, more than
50% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Common Stock and voting securities of the
Corporation immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
then outstanding shares of Common Stock of the Corporation or the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors, as the case may be;
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(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Corporation (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or
(iii) approval by the stockholders of the Corporation of a
reorganization, merger or consolidation of the Corporation, in each case, with
respect to which all or substantially all of the individuals and entities who
were the respective beneficial owners of the Common Stock and voting securities
of the Corporation immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of Common Stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or a complete liquidation or
dissolution of the Corporation or of the sale or other disposition of all or
substantially all of the assets of the Corporation.
13. Governing Law
To the extent that federal laws do not otherwise control, the Plan shall be
construed in accordance with and governed by the law of the State of Delaware.
14. Supplemental Plans
The Board shall have the authority to adopt plans, supplemental to this
Plan, covering Employees residing outside the United States, including but not
limited to the United Kingdom.
15. Savings Clause
This Plan is intended to comply in all aspects with applicable law and
regulation, including, with respect to those Employees who are officers or
directors for purposes of Section 16 of the Exchange Act, Rule 16b-3 of the
Securities and Exchange Commission. In case any one or more of the provisions
of this Plan shall be held invalid, illegal or unenforceable in any respect
under applicable law and regulation (including Rule 16b-3), the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby and the invalid, illegal or unenforceable provision
shall be deemed null and void; however, to the extent permissible by law, any
provision which could be deemed null and void shall first be construed,
interpreted or revised retroactively to permit this Plan to be construed in
compliance with all applicable laws (including Rule 16b-3) so as to foster the
intent of this Plan.
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16. Effective Date and Term
The effective date of this Plan is January 1, 1991, subject to its approval
by the stockholders of the Corporation at the annual meeting to be held on April
12, 1991, or any adjournment thereof. The Plan shall remain in effect until
terminated by the Board.
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EXHIBIT 10(Q)
NBD BANCORP, INC.
PERFORMANCE INCENTIVE PLAN
(As Amended March 21, 1994)
SECTION 1 - PURPOSE
The NBD BANCORP, INC. PERFORMANCE INCENTIVE PLAN (hereinafter called the
"Plan") is a plan to provide long term incentive compensation to certain current
and former key officers and employees of NBD Bancorp, Inc. (hereinafter called
the "Corporation") and of its affiliated entities (hereinafter, including the
Corporation, called "participating affiliates") based upon such officers' and
employees' individual contributions to the long term growth and profitability of
the Corporation, in order to encourage their identity with shareholder concerns
and their current and continuing interest in the development and financial
success of the Corporation. Because it is expected that the efforts of the
officers and employees selected for participation in the Plan will have a
significant impact on the results of the Corporation's operations in future
years, the Plan is intended to assist the Corporation in attracting and
retaining as officers and employees individuals of superior ability and in
motivating their activities on behalf of the Corporation.
SECTION 2 - DEFINITIONS
(a) The term "affiliated entities" shall mean those corporations and
partnerships in which the Corporation owns directly or indirectly a significant
equity interest as defined under generally accepted accounting principles.
(b) The term "Code" shall mean the Internal Revenue Code of 1986, as the
same may be from time to time amended.
(c) The term "Committee" shall mean the Compensation Committee of the Board
of Directors of the Corporation, the members of which shall be "disinterested
persons"' under Rule 16b-3 of the Securities and Exchange Commission (or any
successor regulation issued under federal securities laws) and shall be
ineligible to participate in the Plan.
(d) The term "company stock" shall mean shares of the common capital stock
of the Corporation available for award or awarded, or subject to options or
rights granted, under the Plan.
(e) The term "market value" shall mean for a share of company stock as of
any date the mean between the highest and lowest sale prices for the company
stock as reflected in the New York Stock Exchange Composite Transactions
Quotations for that date, or if there is no sale on such date, then on the next
preceding date on which a sale has occurred.
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(f) The term "options" shall mean collectively the incentive stock options
and the non-qualified options available for grant or granted under Section 10 of
the Plan.
(g) The term "optionee" means any person to whom an option or right has
been granted or who becomes a holder of an option or right under Section 10 of
the Plan.
(h) The term "performance share" shall mean one share of company stock
available for award or awarded under Section 8 of the Plan.
(i) The term "rights" shall mean the stock appreciation rights available
for grant or granted in connection with options under Section 10 of the Plan.
(j) The term "share unit" shall mean a unit available for award under the
Plan having a cash value upon distribution equal to the market value of one
share of company stock on the distribution date.
SECTION 3 - EFFECTIVE DATE AND DURATION
Subject to the approval of the Plan by the shareholders of the Corporation,
the Plan shall be generally effective as of January 1, 1988. The Plan shall
continue until it is terminated by the Board of Directors as provided in
Section 12.
SECTION 4 -ADMINISTRATION
The Committee shall be responsible for the general operation and
administration of the Plan and shall have the authority to interpret the Plan
and to adopt administrative rules and regulations governing its operation.
The Committee may delegate the performance of administrative functions to the
Secretary of the Committee.
SECTION 5 - PARTICIPATION, STOCK AWARDS AND OPTION GRANTS
(a) Each year, the Committee shall designate as participants in the Plan
those officers and employees of the participating affiliates and those former
officers and employees who have a consulting arrangement with the Corporation
whom the Committee determines to have significant responsibility for the success
and future growth and profitability of the Corporation.
(b) Each year, the Committee may award shares of company stock, performance
shares, share units, and/or may grant stock options that qualify as "incentive
stock options" within the meaning of Section 422 of the Code or stock options
that do not qualify as incentive stock options and/or stock appreciation rights
for use in connection with options to each current and former officer and
employee whom it has designated as a participant for such year. Upon the
approval by the Board of Directors of the Corporation of the individual awards
and/or grants, if any, made to executive officers and of the total of all awards
and grants made to all other persons, the determination of the Committee as to
each such award and grant shall become final.
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SECTION 6 - SHARES RESERVED UNDER THE PLAN
There is hereby reserved for award and/or grant under the Plan an aggregate
number of whole shares of company stock equal as nearly as possible to, but not
more than, 5% of the aggregate shares of company stock outstanding on the first
day of January of each year, less the number of shares and share units awarded
or subject to options granted under the Plan during the immediately preceding
four-calendar-year period that have not been forfeited. Of such aggregate
number, no more than 1,000,000 shares of company stock shall be available for
the grant of incentive stock options under the Plan. Shares of company stock
may be authorized but unissued shares, treasury shares, shares acquired in the
open market, or any combination of the foregoing, and if acquired in the open
market, shall be acquired by an agent independent of the participating
affiliates. Any shares of company stock (including performance shares), share
units, or options that are forfeited pursuant to Sections 8(f) or (g), 9(d) or
(e), or 10(h) of the Plan and, to the extent permissible for purposes of
allowing the Plan to continue to be considered as described under Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
shares of company stock that are used for full or partial payment of the
purchase price of shares with respect to which an option is exercised pursuant
to Section 10 of the Plan may thereafter again be awarded or made subject to
grant under the Plan. In the event of any change in the outstanding shares of
the common capital stock of the Corporation by reason of a stock dividend, stock
split, recapitalization, merger, consolidation, combination or exchange of
shares, or other similar change, the Committee may make appropriate adjustments
in the aggregate number of shares of company stock (including performance
shares) and share units already awarded or made subject to options granted or
reserved for award or grant under the Plan, in the prices of options granted, or
provide for the substitution of other securities of the class exchanged for
common capital stock of the Corporation in any merger or consolidation.
SECTION 7 - SHARES AWARDED AND OPTIONS GRANTED UNDER THE PLAN
(a) Shares of company stock (including performance shares), share units,
options and/or rights awarded or granted to a participant may not be sold,
transferred, alienated or assigned (other than by will or the laws of descent
and distribution) during the award period, performance period and/or exercise
period established with respect to such shares, but nothing contained in this
sentence shall preclude the sale or other transfer of shares of company stock
obtained by the proper exercise of any option. During the lifetime of an
optionee, the option or right shall be exercisable only by the optionee
personally or by the optionee's legal representative.
(b) Subject to the vesting provisions of Sections 8(e) and 9(c), shares of
company stock awarded to a participant will become freely transferable by the
participant only at the end of the award period or performance period
established with respect to such shares.
(c) The vesting of awards of shares of company stock (including performance
shares) and/or share units in, and the exercise of options and/or rights by, a
participant under this Plan shall be subject to satisfaction of the conditions
precedent that the participant refrain from engaging in any activity that, in
the opinion of the Committee, is competitive with any activity of the
Corporation or
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any of the participating affiliates (except that employment at the request of
the Corporation with an entity in which the Corporation has, directly or
indirectly, a substantial ownership interest, or other employment specifically
approved by the Committee, shall not be considered to be an activity that is
competitive with any activity of the Corporation or any of the participating
affiliates) and from otherwise acting, either prior to or after termination of
employment, in any manner inimical or in any way contrary to the best interests
of the Corporation and that the participant furnish to the Corporation such
information with respect to the satisfaction of the foregoing conditions
precedent as the Committee shall reasonably request. Any shares of company stock
awarded or issued under the Plan may be made subject to such other conditions or
restrictions as the Committee deems advisable, including without limitation,
provisions to comply with federal and state securities laws.
(d) Whenever shares of company stock are awarded to a participant, such
shares shall be outstanding, and stock certificates may be issued in the name of
the participant or a book entry may be made by the Corporation's stock transfer
agent for the account of the participant, which certificates and/or account
shall bear a legend stating that the shares are issued subject to the
restrictions set forth in the Plan. Any certificates actually issued for shares
of company stock awarded under the Plan shall be deposited for the benefit of
the participant with NBD Bank, N.A., as custodian until such time as the shares
are vested and transferable.
(e) A participant who is awarded shares of company stock under Section 8 or
Section 9 of the Plan shall have full voting rights on such shares, whether or
not the shares are vested or transferable.
(f) Shares of company stock awarded to a participant under Section 8 or
Section 9 of the Plan, whether or not vested or transferable, shall have full
dividend rights with respect to dividends declared after the award, with such
dividends being paid directly to the participant. If all or part of a dividend
is paid in the form of shares of common capital stock of the Corporation, such
shares shall be issued in the same manner, and subject to the same deposit
requirements, vesting provisions and transferability restrictions as the shares
of company stock that are the basis for the dividend. Like requirements,
provisions and restrictions shall be applicable to shares or securities issued
as a result of a merger, consolidation or similar event. A participant to whom
share units have been awarded may be given by the Committee the right to receive
during the performance or award period as additional compensation cash in an
amount equal to the product of (i) the per share dividend on company stock that
is declared after the award of share units and (ii) the number of share units
awarded to such participant, and in such case such sums shall be payable
directly to the participant at the same time as dividends on company stock are
paid.
SECTION 8 - PERFORMANCE AWARDS AND PERIODS
(a) Participants eligible to receive awards of performance shares and/or
share units under the Plan shall be selected by the Committee from among the
more senior officers of the Corporation and its participating affiliates. For
officers who are "covered employees" under Section 162(m) of the Internal
Revenue Code of 1986, as amended, and related regulations, the Committee shall
administer awards under this Section 8 of the Plan in accordance with the
provisions of Appendix A.
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(b) Effective January 1, 1988, and each year thereafter, the Committee
shall establish a performance period of no less than one (1) year and no more
than five (5) years in duration for the award of performance shares, which
period shall begin on the first day of January of the first year of the period
and shall end on the last day of December of the final year of such period. At
the beginning of a performance period, the Committee shall make such award or
awards of performance shares or share units to each selected participant as it
determines. During a performance period the Committee may increase awards of
performance shares or share units to such selected participants whose increased
corporate responsibilities warrant, in the judgment of the Committee, such
increase and may make awards of performance shares or share units to such newly
selected participants whose corporate responsibilities warrant, in the judgment
of the Committee, such award.
(c) As of the beginning of each performance period, the Committee shall
establish one or more business performance goals for that period, and the weight
to be given to each such goal. In setting performance goals, the Committee may
take into account performance in comparison with such peer financial
institutions as may be selected by the Committee for that purpose. The
Committee may, from time to time thereafter, make appropriate adjustments in
performance goals to reflect major unforeseen transactions, events or
circumstances that alter or affect such goals.
(d) As soon as practicable after the end of each performance period, the
Committee shall determine the extent to which the performance goals for that
period were attained and shall make the distributions, if any, prescribed in
Section 8(h).
(e) If a participant has received an award pursuant to the provisions of
Section 8(b) of the Plan and is employed by the participating affiliates at the
end of a performance period and the Committee determines that the performance
goals for such performance period were fully met, the participant shall be fully
vested at the end of the performance period in the number of performance shares
or share units awarded to the participant for that performance period. In the
event that the Committee determines that the performance goals for such
performance period were only partially met or were unmet, then the Committee
will determine what portion of the performance share or share unit award, if
any, will be distributable for such performance period, and the balance of the
participant's performance share or share unit award, if any, shall be forfeited
to the Corporation as of the last day of the performance period. In the event
that the Committee determines that the satisfaction the performance goals for
such performance period so warrant, the Committee may for that performance
period make additional awards of performance shares or share units to such
selected participants as the Committee determines, which additional performance
shares and/or share units shall be fully vested and nonforfeitable.
(f) Unless the Committee provides otherwise, in the event that before the
end of a performance period a participant dies, becomes totally and permanently
disabled, or retires at normal retirement age, or with the consent of the
participating affiliate with which he or she is employed retires at early
retirement age under a retirement plan maintained by a participating affiliate,
the participant, or the participant's beneficiary or estate in the event of the
participant's death, will be vested as of the day on which such death,
disability or retirement occurs in the number of performance shares or share
units the participant would have received had the participant's
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employment with the participating affiliate continued to the end of the
performance period, but proportionately reduced to reflect the shorter period of
employment. The balance of performance shares or share units awarded to the
participant for such performance period shall be forfeited to the Corporation as
of the last day of the performance period. In the event of the death of the
participant before the end of a performance period, the Committee may elect to
advance the distribution date.
(g) Unless the Committee provides otherwise, if a participant should
terminate employment with the participating affiliates before the end of a
performance period for a reason other than death, total and permanent
disability, or retirement, all performance shares or share units awarded to the
participant for which the applicable performance period has not ended shall
automatically be forfeited to the Corporation as of the date of termination of
employment.
(h) Except as otherwise provided for in Section 8(f), distribution of
vested performance shares shall be made as soon as practicable after the last
day of the applicable performance period in the form of full shares of company
stock, with fractional shares, if any, being distributed in cash, and
distribution of vested share units shall be made on the same date to the
participant entitled thereto in cash, or in shares of company stock if the
Committee shall so determine.
SECTION 9 - RESTRICTED AWARDS AND PERIODS
(a) Participants eligible to receive awards of company stock or share units
under this Section 9 shall be selected by the Committee from among the officers
and employees of the Corporation and its participating affiliates and shall
exclude, except by special Committee action, any of the more senior officers
selected for participation in the Plan under Section 8.
(b) Each year, the Committee shall establish one (1) or more award periods
for the shares of company stock to be awarded to those participants selected by
the Committee for such awards under this Section 9 during that year. At the
beginning of an award period, the Committee shall make such award or awards of
shares of company stock and/or share units to each selected participant as it
determines. Each award period must extend for at least twelve (12) months after
the date of the award.
(c) If a participant has received an award pursuant to the provisions of
Section 9(b) of the Plan and is employed by a participating affiliate at the end
of the award period, the participant shall be fully vested, at the end of the
award period, in the shares of company stock or share units awarded to the
participant for that award period.
(d) Unless the Committee provides otherwise, in the event that before the
end of an award period a participant dies, becomes totally and permanently
disabled, or retires at normal retirement age, or with the consent of the
participating affiliate with which he or she is employed retires at early
retirement age under a retirement plan maintained by a participating affiliate,
the participant, or the participant's beneficiary or estate in the event of the
participant's death, will be vested, as of the day on which such death,
disability or retirement occurs, in the number of shares of company stock or
share units the participant would have received had the participant's employment
with the
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participating affiliate continued to the end of the award period, but
proportionately reduced to reflect the shorter period of employment. The balance
of the shares of company stock or share units awarded to the participant shall
be forfeited to the Corporation as of the last day of the award period. The
Committee may provide in such cases for accelerated distribution of awards made
pursuant to the provisions of this Section 9.
(e) Unless the Committee provides otherwise, if a participant should
terminate employment with a participating affiliate before the end of an award
period for a reason other than death, total and permanent disability, or
retirement, all shares of company stock or share units awarded to the
participant for which the applicable award period has not ended shall
automatically be forfeited to the Corporation as of the date of his or her
termination of employment.
(f) Except as otherwise provided for in Section 9(d), distribution of
vested awards of company stock shall be made as soon as practicable after the
last day of the applicable award period in the form of full shares of company
stock, with fractional shares, if any, being awarded in cash, and distribution
of vested share units shall be made on the same date to the participant entitled
thereto in cash, or in shares of company stock if the Committee shall so
determine.
SECTION 10 - GRANTS OF OPTIONS AND RIGHTS
(a) Participants eligible to receive grants of options and/or rights under
this Section 10 shall be selected by the Committee from among the officers and
employees of the Corporation and its participating affiliates and from former
officers and employees who have a consulting arrangement with the Corporation,
and may include officers selected for participation under Section 8 or officers
and employees selected for participation under Section 9 of the Plan. The
Committee may grant more than one option or right to any eligible current or
former officer or employee; but no more than five-tenths of one percent (0.5%)
of the average of the aggregate shares of company stock outstanding on the first
day of January of each of the preceding five years shall be granted subject to
option and/or right during each rolling five-year period to any individual
current or former officer or employee.
(b) The Committee shall determine the eligible participants to whom, and
the time or times at which, options and rights will be granted, the number of
shares to be subject to each option, the duration of each option or right, the
time or times within which the option or right may be exercised, the
cancellation of the option or right (with the consent of the holder thereof) and
the other conditions of the grant of the option or right. The provisions and
conditions of the grants of options and rights need not be the same with respect
to each optionee or with respect to each option or each right.
(c) Except as otherwise specifically provided herein, options granted
pursuant to the Plan shall be subject to the following terms and conditions:
(i) Option Price. At the time the Committee approves the grant, the
------------
Committee shall determine the option price that shall be not less than one
hundred percent (100%) of the market value of the company stock on the date of
Committee approval of the grant.
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(ii) Payment. The option price shall be paid in full at the time of
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exercise. No shares shall be issued until full payment has been received
therefor. Payment may be in cash or, with the prior approval of and upon the
conditions established by the Committee, by delivery of shares of company stock
owned by the optionee; provided, however, that company stock acquired by the
optionee through the exercise of an incentive stock option may not be used for
payment prior to the expiration of the holding periods prescribed in Section
422(a)(1) of the Code. If payment is made by the delivery of shares of company
stock, the value of the shares on the date of exercise shall be the market value
on such day.
(iii) Duration of Options. The duration of options shall be determined by
-------------------
the Committee, but in no event shall the maximum duration of an incentive stock
option exceed ten (10) years from the date of its grant.
(iv) Restoration Options. The Committee may provide that an option
-------------------
include the right to receive a restoration option. An option that provides for
the grant of a restoration option shall entitle the participant, upon exercise
of the option prior to retirement of the participant and payment of the option
price in shares of company stock that have been owned by the participant for not
less than six months prior to the date of exercise, to receive a restoration
option. In addition to any other terms and conditions the Committee deems
appropriate, the restoration option shall be subject to the following terms: the
number of shares shall not exceed the number of whole shares delivered in
payment of the original option, the date of grant will be the date of the
exercise of the original option, the exercise price shall not be less than 100%
of the market value of the company stock on the date of the grant of the
restoration option, the option may not be exercised for at least six months
after grant, the option term will not extend beyond the term of the original
option, and the restoration option shall be a non-qualified option.
(v) Other Terms and Conditions. Options may contain such other
--------------------------
provisions, not inconsistent with the provisions of the Plan, as the Committee
shall determine to be appropriate from time to time; provided, however, that no
option shall be exercisable in whole or in part for a period of twelve (12)
months from the date on which the option is granted. Options shall be
exercisable in full or in such cumulative installments as shall be determined by
the Committee on the grant of the option. If an option shall be exercisable in
installments, the Committee may, in its discretion, provide for other events in
which all installments shall become immediately exercisable if any installment
be presently exercisable.
(vi) Incentive Stock Options. The Committee, with respect to each grant
-----------------------
of an option to an optionee, shall determine whether such option shall be an
incentive stock option, and, upon determining that an option shall be an
incentive stock option, shall designate it as such in the written instrument
evidencing such option. If the written instrument evidencing an option does not
contain a designation that it is an incentive stock option, it shall contain a
designation that it is a non-qualified option.
The Committee may not grant a participant incentive stock options in the
aggregate that are
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first exercisable during any one calendar year with respect to company stock the
aggregate market value of which exceeds $100,000, taking into account all stock
option plans of the Corporation and any parent or subsidiary entities.
(d) The Committee may grant a right to an optionee of any option granted
under the Plan with respect to some or all of the company stocked covered by
such option. A right may be granted either at the time of grant of the option
or at any time thereafter during its term. Each right shall be exercisable only
if and to the extent that the related option is then exercisable; provided, no
right may be exercised until a date at least six (6) months subsequent to the
date of grant of the right. Upon the exercise of a right, the related option
will cease to be exercisable to the extent of the company stock with respect to
which such right is exercised, but shall be considered to have been exercised to
that extent for purposes of determining the number of shares available for the
grant of further awards and/or options pursuant to the Plan. Upon the exercise
or termination of an option, the right with respect to such option shall
terminate to the extent of the shares of company stock with respect to which the
option was exercised or terminated.
(e) For purposes of this Section 10, the word "increment" means with
respect to the exercise of any right associated with an option an amount equal
to the product computed by multiplying (i) the excess of (A) the market value on
the date such right is exercised over (B) the market value on the date the
related option was granted by (ii) the number of shares of company stock with
respect to which such right is being exercised.
(f) Subject to the approval of the Committee, an optionee upon the exercise
of a right may elect to receive either: (i) a number of shares of company stock
equal to the quotient computed by dividing the increment by the market value on
the date of exercise of the right, provided, however, that cash will be paid in
lieu of any fractional share and that the total number of shares of company
stock will not exceed the total number of shares subject to the related option,
or (ii) an amount in cash equal to the increment, or (iii) a combination of cash
in the amount specified by the optionee, and the number of shares of company
stock calculated as provided in clause (i) of this Paragraph (f), after reducing
the increment that was utilized by such cash amount, plus cash in lieu of any
fractional share.
(g) Notwithstanding the provisions of Paragraph (f) of this Section 10, the
Committee may require that a cash payment election may be made only in the
period beginning on the third business day following the date of release for
publication of the quarterly and annual summary statements of earnings of the
Corporation and ending on the twelfth business day following such date. Such
restriction will be imposed on an optionee if it is required under the Exchange
Act.
(h) In the event that the employment of an optionee to whom an incentive
stock option has been granted under the Plan shall be terminated (except as set
forth below) such option may be exercised, to the extent that the option was
exercisable on the date of termination of employment, only until the earlier of
three (3) months after such termination or the original expiration date of the
option; provided, however, that any option held by an optionee whose employment
shall be terminated either (i) for cause or (ii) voluntarily by the optionee and
without the consent of the
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participating affiliate by which the optionee was employed (which consent shall
be assumed in the case of retirement at normal retirement age but not in the
case of early retirement) shall, to the extent not theretofore exercised,
forthwith terminate. If an optionee to whom an incentive stock option has been
granted under the Plan shall become disabled while employed and such disability
results in the termination of employment, such option may be exercised, to the
extent that the option was exercisable on the date of termination of employment,
by either the disabled optionee or such optionee's legal representative, as the
case may be, and the right to exercise the option shall terminate upon the
earlier of the expiration of twelve (12) months from the date of such
termination of employment or the original expiration date of the option. If an
optionee has been granted an option exercisable in installments, then,
notwithstanding the terms specifying the installments in which the option shall
be exercisable, upon the death or disability of the optionee at any time
subsequent to the expiration of the first year of the term of the option, the
option shall be exercisable within the time period set forth above as to all
shares of company stock remaining subject to the option. For the purposes of
this Section 10, the term "option" shall include any right related to the option
and the term "disabled" shall have the meaning contained within Section 22 (e)
(3) of the Code.
(i) In the event that the employment of an optionee to whom an option other
than an incentive stock option has been granted under the Plan shall be
terminated (except as set forth below), such option may be exercised, to the
extent that the option was exercisable on the date of termination of employment,
only until the earlier of such date after termination as provided by the
Committee on the grant of the option or the original expiration date of the
option; provided, however, that any option held by an optionee whose employment
shall be terminated either (i) for cause or (ii) voluntarily by the optionee and
without the consent of the participating affiliate by which the optionee was
employed (which consent shall be assumed in the case of retirement at normal
retirement age but not in the case of early retirement) shall, to the extent not
theretofore exercised, forthwith terminate. If an optionee to whom an option
other than an incentive stock option has been granted under the Plan shall
become disabled while employed or within six (6) months after the termination of
such employment (other than termination for cause or voluntarily by the optionee
and without the consent of the participating affiliate by which the optionee was
employed), such option may be exercised, to the extent that the option was
exercisable on the date of termination of employment, by either the disabled
optionee or such optionee's legal representative, as the case may be, and the
right to exercise the option shall terminate upon the earlier of such date
following termination of employment as provided by the Committee on the grant of
the option or the original expiration date of the option. If an optionee to
whom an option other than an incentive stock option has been granted under the
Plan shall die while employed or within six (6) months after the termination of
such employment (other than termination for cause or voluntarily by the optionee
and without the consent of the participating affiliate by which the optionee was
employed), such option may be exercised, to the extent that the option was
exercisable on the date of termination of employment, by either the executor,
administrator or personal representative of the optionee's estate or a
transferee of the option under Section 7(a) or a beneficiary designated under
Section 11(b), as the case may be, and the right to exercise the option shall
terminate upon the earlier of such date following termination of employment as
provided by the Committee on the grant of the option or the original expiration
date of the option. If an optionee has been granted an option exercisable in
installments, then, notwithstanding the terms specifying the installments in
which the option shall be exercisable, upon the disability or death of the
10
<PAGE>
optionee at any time subsequent to the expiration of the first year of the term
of the option, the option shall be exercisable within the time periods set forth
above as to all shares of company stock remaining subject to the option.
(j) An optionee or a transferee of an option pursuant to Section 7(a) shall
have no rights as a shareholder with respect to any company stock the subject of
either an unexercised or exercised option or right until the optionee or
transferee shall have become the holder of record of such stock, and no
adjustments shall be made for dividends in cash or other property or other
distributions or rights in respect of such stock for which the record date is
prior to the date on which the optionee or transferee shall have in fact become
the holder of record of the company stock acquired pursuant to the option or
right.
SECTION 11 - GENERAL
(a) If, in connection with the payment of any award hereunder in shares of
company stock or the exercise of any option or right hereunder, it is necessary
or desirable, to comply with any law or regulation of any governmental authority
relating to the issuance or sale of securities, that the participant receiving
such shares shall agree that the participant will take the shares for investment
and not with any present intention to resell the same and that the participant
will dispose of such shares only in compliance with such laws and regulations,
the participant shall, upon the request of the Committee, execute and deliver to
the Committee an agreement to such effect satisfactory to the Committee.
(b) If a participant dies prior to the receipt in full of any award under
the Plan to which the participant is entitled and/or prior to the exercise in
full of any option or right granted to the participant, the award or grant shall
be distributed to the participant's designated beneficiary or, in the absence of
a beneficiary designation, to the participant's estate. The designation of a
beneficiary shall be made in writing on a form prescribed by and filed with the
Secretary of the Committee.
(c) Neither the establishment of the Plan nor any provisions of the Plan or
modification thereof shall be held or construed as giving any participant in the
Plan the right to be retained in the service of any participating affiliate and
each participating affiliate expressly reserves its right to discharge any such
participant whenever the interests of such participating affiliate may so
require.
(d) A forfeiture of shares of company stock (including performance shares)
pursuant to Sections 8(e), (f) or (g) or 9(d) or (e) of the Plan shall effect a
complete forfeiture of voting rights, dividend rights and all other rights
relating to the award or grant as of the date of forfeiture.
(e) Each distribution of company stock under this Plan shall be made
subject to such federal, state and local tax withholding requirements as apply
on the distribution date. For this purpose, the Committee may provide for the
withholding of shares of company stock or allow a participant to tender back to
the Corporation shares of company stock received in such distribution.
(f) Notwithstanding any other provisions in the Plan, in the event of a
Change in Control (as
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hereinafter defined) each participant shall be fully vested in the number of
shares of company stock (including performance shares) or share units awarded to
such participant for all award periods and/or performance periods that, upon
such event, have not yet ended, and all options and rights then outstanding
shall become immediately exercisable. Distribution of all shares of company
stock, and all cash with respect to which rights have become vested, or due
because of the exercise of options or rights, shall be made as soon as
practicable within sixty (60) days after the date of the Change in Control, as
if, in the case of awards under Section 8 and Section 9, the applicable award
period or periods and/or performance period or periods had ended on such date.
In addition, the Corporation shall reimburse a participant for legal fees and
expenses incurred by such participant in successfully seeking to obtain or
enforce any right to distribution under this Section 11(f) and in the event that
it shall be determined that such participant is entitled to a cash distribution
hereunder, such participant shall also be entitled to interest thereon payable
to such participant in an amount equivalent to the prime rate of interest of NBD
Bank, N.A., from time to time during the period from the date such distribution
should have been made to the date it is made.
For purposes of this Plan, a Change in Control shall occur if (i) any
"person" or "group" within the meaning of Section 13(d) and 14(d)(2) of the
Exchange Act becomes the "beneficial owner" as defined in Rule 13d-3 under the
Exchange Act of more than thirty percent (30%) of the then outstanding voting
securities of the Corporation otherwise than through a transaction or
transactions arranged by or consummated with the prior approval of the
Corporation's Board of Directors; or (ii) during any period of twenty-four (24)
consecutive months (not including any period prior to the adoption of this Plan)
Present Directors and/or New Directors cease for any reason to constitute a
majority of the Board. For purposes of subsection (ii) of the preceding
sentence, "Present Directors" shall mean individuals who at the beginning of
such consecutive twenty-four (24) month period were members of the Corporation's
Board and "New Directors" shall mean any director of the Corporation whose
election by the Corporation's Board or whose nomination for election by the
Corporation's shareholders was approved by a vote of at least two-thirds the
Corporation's Directors then still in office who were Present Directors or New
Directors. Notwithstanding any other provisions of the Plan, the provisions of
this Section 11(f) may not be amended after the date a Change in Control occurs
without the written consent of a majority in number of participants.
SECTION 12 - AMENDMENT, SUSPENSION AND TERMINATION
The Board of Directors of the Corporation reserves the right at any time to
amend, suspend, or terminate the Plan; provided, however, no such amendment,
suspension or termination shall adversely affect any award or grant then in
effect unless the prior approval of the participant so affected is obtained. No
amendment of the Plan shall, without approval of the shareholders of the
Corporation, (a) increase the aggregate number of shares of company stock
(including performance shares) that are reserved for award and/or grant under
the Plan (except as provided in Section 6), (b) change the group of eligible
employees under the Plan, (c) change the manner of determining the option price
or the amount payable upon exercise of a right, or (d) increase the maximum
duration of an option.
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SECTION 13 - GOVERNING LAW
The Plan and all determinations made and action taken pursuant thereto
shall be governed by the laws of the State of Michigan and construed in
accordance therewith.
13
<PAGE>
NBD BANCORP, INC.
PERFORMANCE INCENTIVE PLAN
Appendix A
----------
The following provisions have been disclosed to and approved by the
shareholders of the Corporation at the annual meeting held on May 16, 1994:
The performance-based long-term incentive criteria for the chief executive
officer and the next four highest paid executive officers (the "class of
employees" covered) provide for annual grants of performance shares, starting in
1994, that will be earned out 0-100% at the end of a four-year performance
period based on NBD's average return on equity ("ROE") in comparison to average
ROE during the period at peer banking institutions selected by the Committee
(the "performance measure").
TARGET AND MAXIMUM AWARDS. Each participating officer is assigned a target
award at the start of each performance period stated as a percent of salary.
Under the criteria, the Committee is able to grant a maximum target award of
100% of the salary stated in the Corporation's proxy statement for the first
year of the performance period. The target award is multiplied by the
participant's salary and divided by the fair market value of a share of the
Corporation's Common Stock at the start of each performance period to determine
a target number of performance shares. If average ROE during the performance
period is at or above the goal, the target number of performance shares will be
earned. The target number of shares is also the maximum number of shares (the
"maximum award"). If ROE performance is below the goal, individual awards will
be less than the target, down to an ROE threshold below which all performance
shares will be forfeited.
DEFINITIONS. For purposes of determining awards, "Return on Equity" is
calculated by dividing "Net Income" by "Stockholders' Equity" for the year.
"Net Income" is defined as consolidated net income as reported in the
Corporation's audited financial statements for the year, before any
extraordinary, unusual or non-recurring items of gain or loss that are
identified and quantified separately in the audited financial statements, net
of tax effect, and after any preferred dividends. The Compensation Committee
retains the right in its discretion to reduce Net Income for purposes of the
performance-based long-term incentive criteria if it believes that such Net
Income produces a level of payout above the level warranted by management
performance. It may not, however, increase Net Income or individual awards
above the level produced by the calculations. "Stockholders' Equity" is the
Corporation's common stockholders' equity on its consolidated balance sheet at
the end of the preceding year.
TERM OF CRITERIA. The term of the performance-based long-term incentive
criteria is five years, 1994 through 1998, unless sooner terminated or amended
by the Board. Any amendment that would materially change the "class of
employees" covered, the "performance measure," or the "maximum award" payable is
subject to stockholder approval.
<PAGE>
NBD BANCORP, INC.
PERFORMANCE INCENTIVE PLAN
Appendix A
----------
The following provisions have been disclosed to and approved by the
shareholders of the Corporation at the annual meeting held on May 15, 1995:
The performance-based long-term incentive criteria for the chief executive
officer and the next four highest paid executive officers (the "class of
employees" covered) provide for annual grants of performance shares, starting in
1995, that will be earned out 0-100% at the end of a four-year performance
period based on NBD's average return on equity ("ROE") in comparison to average
ROE during the period at peer banking institutions selected by the Committee
(the "performance measure").
TARGET AND MAXIMUM AWARDS. Each participating officer is assigned a target
award at the start of each performance period stated as a percent of salary.
Under the criteria, the Committee is able to grant a maximum target award of
100% of the salary stated in the Corporation's proxy statement for the first
year of the performance period, not to exceed $1.5 million. The target award is
multiplied by the participant's salary and divided by the fair market value of a
share of the Corporation's Common Stock at the start of each performance period
to determine a target number of performance shares. If average ROE during the
performance period is at or above the goal, the target number of performance
shares will be earned. The target number of shares is also the maximum number
of shares (the "maximum award"). If ROE performance is below the goal,
individual awards will be less than the target, down to an ROE threshold below
which all performance shares will be forfeited.
DEFINITIONS. For purposes of determining awards, "Return on Equity" is
calculated by dividing "Net Income" by "Stockholders' Equity" for the year.
"Net Income" is defined as consolidated net income as reported in the
Corporation's audited financial statements for the year, before any
extraordinary, unusual or non-recurring items of gain or loss that are
identified and quantified separately in the audited financial statements, net of
tax effect, and after any preferred dividends. The Compensation Committee
retains the right in its discretion to reduce Net Income for purposes of the
performance-based long-term incentive criteria if it believes that such Net
Income produces a level of payout above the level warranted by management
performance. It may not, however, increase Net Income or individual awards
above the level produced by the calculations. "Stockholders' Equity" is the
Corporation's average total stockholders' equity on its consolidated balance
sheet.
TERM OF CRITERIA. The term of the performance-based long-term incentive
criteria is five years, 1995 through 1999, unless sooner terminated or amended
by the Board. Any amendment that would materially change the "class of
employees" covered, the "performance measure," or the "maximum award" payable is
subject to stockholder approval.
<PAGE>
EXHIBIT 10(S)
BANC ONE CORPORATION
INVESTMENT OPTION PLAN
Preamble
--------
BANC ONE CORPORATION (the "Company") hereby establishes the BANC ONE
CORPORATION Investment Option Plan (the "Plan"), effective as of the date
specified herein.
The purpose of the Plan is to provide a vehicle for the payment of
compensation, otherwise payable to participating Employees, with options. The
Plan is intended to be a nonqualified option plan within the meaning of Section
83 of the Internal Revenue Code, as amended, and is not intended to be covered
by the provisions of the Employee Retirement Income Security Act of 1974, as
amended.
ARTICLE I
Definitions
-----------
As used in this Plan, the following capitalized words and phrases have the
meanings indicated, unless the context requires a different meaning:
1.1 "BENEFICIARY" means the person or persons who, pursuant to the Plan,
are entitled to exercise Options after a Participant's death.
1.2 "BOARD OF DIRECTORS" OR "BOARD" means the Board of Directors of the
Company.
1.3 "CODE" means the Internal Revenue Code of 1986, any amendments thereto,
and any regulations on rulings issued thereunder.
1.4 "COMMITTEE" means the Personnel and Compensation Committee of the
Board, which is comprised of two or more non-Employee Directors, and which shall
have the authority of said Board with respect to this Plan.
1.5 "COMPANY" means BANC ONE CORPORATION, or any successor thereto.
1.6 "DESIGNATED PROPERTY" means shares of regulated investment companies or
any other property, except for cash, cash equivalents, or securities of the
Company or its affiliates, designated by the Committee as subject to purchase
through the exercise of an Option.
1.7 "EFFECTIVE DATE" means August 1, 1998.
1.8 "EMPLOYEE" means any individual who is employed by the Employer.
<PAGE>
1.9 "EMPLOYER" means BANC ONE CORPORATION, including all of its Related
Companies and any successor corporation or other entity resulting from a merger
or consolidation into or with the Company or a transfer or sale of substantially
all of the assets of the Employer.
1.10 "EXERCISE DATE" means, with respect to any Option, the date determined
under Section 3.2.
1.11 "EXERCISE 'PRICE" means the price that a Participant must pay in order
to exercise an Option.
1.12 "FAIR MARKET VALUE" means the closing price of the Designated Property
reflected in The Wall Street Journal, or other recognized market source, as
determined by the Committee, on the applicable date of reference hereunder, or
if there is no sale on such date, then the closing price on the last previous
day on which a sale is reported.
1.13 "GRANT DATE" means, with respect to any Option, the date on which an
Option first becomes effective, which date will not be earlier than the date on
which the Committee takes action to award the Option.
1.14 "OPTION" means the right of a Participant, granted by the Company in
accordance with the terms of this Plan, to purchase Designated Property from the
Company at the Exercise Price established under Section 2.3.
1.15 "OPTION AGREEMENT" means an agreement, the form of which has been
approved by the Committee, acknowledging the issuance of the Option(s) and
setting forth any terms that are not specified in this Plan.
1.16 "PARTICIPANT" means any individual who has received an award of
Options in accordance with Section 2.2 that has not either expired or been
exercised.
1.17 "PLAN" means the BANC ONE CORPORATION Investment Option Plan, as set
forth herein and as from time to time amended.
1.18 "Related Company" means a subsidiary or any entity, which, on the
Grant Date of an Option, is a member of a common controlled croup with BANC ONE
CORPORATION pursuant to Code Section 1563 (a)(1).
1.19 "SEVERANCE OF EMPLOYMENT" means a Participant whose resignation has
been requested by an executive or officer of the Employer under threat of
discharge due to reorganization, change of control, or merger of the Company as
designated by the Company.
1.20 "SHARE" means shares of any publicly traded mutual fund underlying an
Option.
1.21 "SPREAD" means the difference between the Exercise Price and the Fair
Market Value of the Designated Property underlying an Option.
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1.22 "TERMINATION FOR CAUSE" means a Participant who resigns or
involuntarily terminates due to employee misconduct as determined by the Company
pursuant to established employment guidelines.
1.23 "TERMINATION OF EMPLOYMENT" means a Participant separation from the
service of the Employer for any reason other than death, Disability or
Retirement. For purposes of this Section: 1) "Disability" shall mean
eligibility for benefits under BANC ONE CORPORATION's Long Term Disability Plan
or any other long term disability plans sponsored by the Company; 2)
"Retirement" shall mean termination of employment with eligibility for immediate
retirement benefits under the BANC ONE CORPORATION Cash Balance Pension Plan or
any other qualified defined benefit plan sponsored by the Company.
1.24 "VOLUNTARY TERMINATION OF EMPLOYMENT" means a Participant who resigns
from employment either by written resignation with notice or by simply
abandoning employment at some point with or without notice.
1.25 RULES OF CONSTRUCTION
1.25.1 GOVERNING LAW. The construction and operation of this Plan are
governed by the laws of the state of Ohio.
1.25.2 HEADINGS. The headings of Articles, Sections and Subsections are for
reference only and are not to be utilized in construing the Plan.
1.25.3 GENDER. Unless clearly inappropriate, all pronouns of whatever
gender refer indifferently to persons or objects of any gender.
1.25.4 SINGULAR AND PLURAL. Unless clearly inappropriate, singular terms
refer also to the plural number and vice versa.
1.25.5 SEVERABILITY. If any provision of this Plan is held to be illegal or
invalid for any reason, the remaining provisions are to remain in full force and
effect and to be construed and enforced in accordance with the purposes of the
Plan as if the illegal or invalid provision did not exist.
ARTICLE II
Award of Options
----------------
2.1 Eligibility for awards. Awards of Options may be made to any Employee
selected by the Committee. In making this selection, and in determining the form
and amount of Options, the Committee will consider any factors it deems
relevant.
2.2 AWARDING OF OPTIONS. Recipients of Options are determined from time to
time by the Committee. The Committee may condition the award of any Option on
the surrender by the
3
<PAGE>
Participant of right to receive salary, bonus or other cash compensation
otherwise payable in the future by the Employer to the Participant. The
Committee may also award other options at its discretion. Awards become
effective on the Grant Date. Awards may be made at any time on or after the
Effective Date and prior to the termination of the Plan.
2.3 SELECTION OF DESIGNATED PROPERTY; EXERCISE PRICE; OTHER TERMS. When an
Option is awarded, the Committee will specify the Designated Property that may
be purchased by exercise of the Option, the Grant Date, and will fix any terms
of the Option not specified in the Plan. On the day the Option is awarded, the
Designated Property that may be purchased by exercising the Option must be
readily tradable on an established market or consist wholly of interests readily
tradable on an established market. Unless otherwise specified in a particular
Option Agreement, the Exercise Price will equal the greater of twenty-five
percent (25%) of the Fair Market Value of the Designated Property on the Grant
Date or on the Exercise Date.
2.4 ACQUISITION OF DESIGNATED PROPERTY. If the Company acquires: Designated
Property purchasable upon the exercise of an Option, such Designated Property
must:
(a) not be subject to any security interest, whether perfected or not, or
to any option or contract under which any other person may acquire any
interest in it; and
(b) be readily tradable on an established market or consist wholly of
interests in property that is readily tradable on an established
market.
2.5 EFFECT OF DIVIDENDS AND DISTRIBUTIONS WITH RESPECT TO DESIGNATED
PROPERTY UNDER Option. All dividends and distributions with respect to
Designated Property will be treated as if reinvested in additional property of
the same kind (or as nearly the same kind as feasible, if the property of the
same kind is not available), and will immediately be subject to the Option
related to the Designated Property. However, the Exercise Price of an Option to
purchase Designated Property will be adjusted to include the greater of twenty-
five percent (25%) of the fair market value of the reinvestment on the date of
the reinvestment or the date of exercise of the Option. The reinvestment of
dividends and distributions does not extend or modify the term or other
conditions of the Option, other than adjusting the Exercise Price and amount of
Designated Property.
2.6 SUBSTITUTION OF OTHER PROPERTY FOR DESIGNATED PROPERTY. At any time
after the grant of an Option, the Committee may, in its discretion, substitute
other property of equal value for Designated Property subject to that Option.
After substitution, such Option shall not be exercisable for six months or the
period specified in the Option Agreement, whichever is less.
ARTICLE III
Exercise of Options
-------------------
3.1 PERIOD FOR EXERCISE OF OPTIONS. Except as otherwise provided in the
Plan, Options may be exercised by a Participant at any time during the period
beginning six months after the Grant Date and ending on the earliest of:
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<PAGE>
(a) nine (9) months after the Grant Date, or if later, sixty (60) days
following the end of the calendar year in which Termination of
Employment occurs as a result of the Participant's Voluntary
Termination of Employment or Termination for Cause,
(b) one (1) year after the Participant's Termination of Employment as a
result of the Participant's death,
(c) three (3) years after Severance of Employment pursuant to Company
programs not designated under (d) below,
(d) ten (10) years after the Participant's Termination of Employment, if
such Participant terminates due to retirement, disability, designated
Severance of Employment, or other situations designated by the
Company, or
(e) twenty (20) years after the Grant Date.
If the Company has a Change of Control, as defined in the Amended and Restated
BANC ONE CORPORATION Compensation Deferral Plan, all Awards of Options hereunder
may be exercised by the Participant as of the first business day following the
change of control.
If the Participant is or may be an employee whose remuneration from the Company
is subject to Code Section 162(m), as determined by the Committee, the Committee
may condition, limit and/or delay the exercise of such Participant's Options in
such manner as the Committee may in good faith determine to be necessary, or
desirable, in order to prevent disallowance of the Company's deductions by
reason of Code Section 162(m) with respect to the exercise of such Options.
An Option may not be exercised during the a Participant's lifetime except by the
Participant or, in the event of the Participant's legal incapacity, by his
guardian or legal representative acting in a fiduciary capacity on behalf of the
Participant under state law and court supervision. If a Participant dies before
all of the Options have been exercised, any Options that remain outstanding may
be exercised by the Beneficiary, subject to all of the terms, conditions, and
restrictions applicable to the Options had death not occurred.
Any Option that has not been exercised by the close of business on the last day
provided for under the Plan or in the Option Agreement for exercise thereof (or
under any extension thereof) will expire automatically and will not thereafter
be exercisable.
3.2 PROCEDURE FOR EXERCISING AN OPTION. A Participant may exercise an
Option by giving written notice to the Committee. Such written notice of
exercise must be in such a form as the Committee may require, must be properly
completed, and must be mailed or delivered to the Committee, or to such other
person(s) designated pursuant to Section 5.1. Options may be exercised, in any
combinations or amounts subject to the restrictions set for in the Plan, except
that the Committee may from time to time require a minimum number of Options to
be exercised
5
<PAGE>
at one time, but such minimum number will not be designed to impose any
substantial restriction on a Participant's ability to exercise Options. Except
as otherwise provided in the Plan or in any Option Agreement, the "Exercise
Date" of an Option will be the first Business Day on which the Committee is in
actual receipt of the written notice of exercise. Upon exercise of an Option,
the Participant must pay the Exercise Price of the Option to the Company. The
consideration to be paid in satisfaction of the Exercise Price will be cash in
the form, of currency, check, or other cash equivalent, in each case acceptable
to the Company. The Exercise Price must be paid in full before the delivery of
the Designated Property will be made in accordance with Section 3.4.
3.3 TAX WITHHOLDING. Whenever Designated Property is to be delivered upon
exercise of an Option under the Plan, the Company will require as a condition of
such delivery (a) a cash payment by the Participant of an amount sufficient to
satisfy all federal, state, local, foreign or other tax withholding requirements
related thereto, (b) the withholding of such amount from any Designated Property
to be delivered to the Participant, (c) the withholding of such amount from
compensation otherwise due to the Participant, or (d) any combination of the
foregoing, at the election of the Participant with the consent of the Company.
As soon as practicable following receipt by the Company of a properly completed
notice of exercise of an Option from a Participant, the Company will notify the
Participant of the withholding amount determined by the Company.
3.4 DELIVERY OF DESIGNATED PROPERTY. Following the Exercise Date and
receipt by the Company of both the Exercise Price and tax withholding or
authorization to withhold, the Company will use its reasonable best efforts to
deliver the Designated Property to the Participant, or cause such delivery of
the Designated Property to the Participant to occur within ten business days.
The Company will not, however, be required to issue any fractional shares of
Designated Property, and the Committee may provide for the elimination of
fractions or for the settlement thereof in cash. In the event that the listing,
registration or qualification of the Option or the Designated Property on any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary as a condition of, or
in connection with, the exercise of the Option, then the Option will not be
exercised in whole or in part until such listing, registration, qualification,
consent or approval has been effected or obtained.
3.5 VESTING OF OPTIONS. Participants shall at all times be 100% vested in
Options granted by the Committee under this Plan unless otherwise provided in
the Option Agreement.
3.6 INALIENABILITY OF OPTIONS. No Option granted under this Plan may be
transferred, assigned or alienated, except as provided herein, and no Option
shall be subject to execution, attachment or similar process, and any attempt to
transfer, assign, alienate, execute upon attach, or subject to process any
Option will be void.
3.7 BENEFICIARY. The Committee may permit a Participant to designate a
Beneficiary on a form therefor prescribed by the Committee on which the
Participant may designate a Beneficiary (and change a previous designation) by
filing the prescribed form with the Committee. If so prescribed by the
Committee, such form may allow the designation of multiple Beneficiaries and/or
successor Beneficiary or successor Beneficiaries. The consent of the
Participant's current
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<PAGE>
Beneficiary is not required for a change of Beneficiary, and no Beneficiary has
any rights under this Plan except as are provided by its terms. The rights of a
Beneficiary who predeceases the Participant immediately terminate. Unless a
Beneficiary has been designated in accordance with this Section 3.7 and such
Beneficiary survives the Participant, the Beneficiary of any Participant is the
estate.
ARTICLE IV
Amendment or Termination of the Plan
------------------------------------
4.1 COMPANY'S RIGHT TO AMEND OR TERMINATE PLAN. The Board may, in its sole
discretion, at any time and from time to time, amend, in whole or in part, any
of the provisions of this Plan or may terminate it as a whole or with respect to
any Participant or group of Participants. Any such amendment is binding upon all
Participants and Beneficiaries, the Committee, the Company, the Employer, and
all other affected parties. Any action of the Board amending or terminating
the Plan becomes effective as of the date specified therein. Any action of the
Board amending or terminating the Plan will not affect adversely any Option
awarded prior to such action of the Board, except for amendments that would be
permissible amendments if made by the Committee to an Option Agreement under
Section 4.2(a), Section 4.2(b), or Section 4.2(d). The Board will provide
written notice of any such amendment or termination of the Plan to the
Committee, the Company, the Employer, and any other affected parties, including
Participants and Beneficiaries as soon as practicable following the adoption of
such amendment or termination.
4.2 AMENDMENT OF OPTIONS. An Option Agreement may be amended by the
Committee at any time if the Committee determines that an amendment is necessary
or advisable as a result of:
(a) any addition to or change in the Code, a federal or state securities
law or any other law or regulation, which occurs after the Grant Date
and by its terms applies to the Option,
(b) any substitutions of Designated Property pursuant to Section 2.6,
(c) any Plan amendment or termination pursuant to Section 4. 1, provided
that the amendment does not materially affect the terms, conditions
and restrictions applicable to the Option, or
(d) any circumstances not specified in Paragraphs (a), (b), (c), with the
consent of the Participant.
Any such amendment by the Committee is binding upon the affected Participant,
any Beneficiary of the Participant, and all other parties in interest. The
Committee will provide written notice to the affected Participant as soon as
practicable after the Committee action amending the Option Agreement.
7
<PAGE>
ARTICLE V
Administration
--------------
5.1 Plan Administration. This Plan shall be administered by the Committee.
The Committee shall periodically make determinations with respect to
participation of Employees in this Plan and, except as otherwise required by law
or this Plan, the Option Agreement terms including vesting schedules, price,
restriction or option period, dividend rights, post-retirement and termination
rights, payment alternatives such as cash or mutual fund units, or other means
of payment consistent with the purpose of this Plan, and such other terms and
conditions as the Committee deems appropriate. Except as otherwise required by
this Plan, the Committee shall have authority to make determinations pursuant to
any Plan provision or Option Agreement which shall be final and binding on all
persons. The Committee may designate persons other than its members to carry out
its responsibilities under such conditions or limitations as it may set, other
that its authority with regard to Options granted to Reporting Persons.
5.2 POWERS OF THE COMMITTEE. For purposes of the Plan, the Committee will
have, in addition to any other powers conferred by the Plan, by law or in
Section 5.1, the following powers:
(a) to substitute Designated Property as provided in Section 2.6;
(b) to maintain all records necessary for the administration of the Plan;
(c) to prescribe, amend, and rescind rules for the administration of the
Plan to the extent that they are not inconsistent with the terms
thereof,
(d) to appoint such individuals and subcommittees as it deems desirable
for the conduct of its affairs and the administration of the Plan;
(e) to employ counsel, accountants and other consultants to aid in
exercising its powers and carrying out its duties under the Plan; and
(f) to perform any other acts necessary and proper for the conduct of its
affairs and the administration of the Plan, except those reserved by
the Board.
5.3 DETERMINATIONS BY THE COMMITTEE. The Committee will interpret and
construe the Plan and the Option Agreements, and its interpretations
determinations will be conclusive and binding on all Participants,
Beneficiaries, and any other persons claiming an interest under the Plan or any
Option Agreement.
5.4 INDEMNIFICATION. The Company will indemnify and hold harmless each
member of the Committee and any persons acting on behalf -of the Committee
against any and all expenses and liabilities arising out of such member's action
or failure to act in such capacity, excepting only expenses and liabilities
arising out of such member's own willful misconduct or gross negligence.
8
<PAGE>
(a) Expenses and liabilities against which a member of the Committee or
any persons acting on behalf of the Committee is indemnified hereunder
will include, without limitation, the amount of any settlement or
judgment, costs, counsel fees and related charges reasonably incurred
in connection with a claim asserted or a proceeding brought against
them or the settlement thereof.
(b) This right of indemnification will be in addition to any other rights
to which any member of the Committee or any persons acting on behalf
of the Committee may be entitled.
(c) The Company may, at its own expense, settle any claim asserted or
proceeding brought against any member of the Committee or any persons
acting on behalf of the Committee when such settlement appears to be
in the best interests of the Company, with such member's consent which
will not be unreasonably withheld.
ARTICLE VI
Miscellaneous Provisions
------------------------
6.1 NO RIGHTS TO DESIGNATED PROPERTY. Neither the Participant, a
Beneficiary nor any assignee will be, or will have any of the rights and
privileges of a shareholder or owner with respect to any Designated Property
purchasable or issuable upon the exercise of an Option, prior to the date of
exercise of such Option.
6.2 PRIORITY TO DESIGNATED PROPERTY. Designated Property shall be the
property of the Company and subject to the claims of the Company's creditors in
the event of the Company's bankruptcy or insolvency. No Participant will have
any priority claim to, security interest in, or any other right to Designated
Property superior to the rights of a general creditor of the Company.
6.3 NO RIGHT TO CONTINUED EMPLOYMENT. Nothing contained in the Plan will
be deemed to give any person the right to be retained in the employ of the
Company or any Related Company, or to Interfere with the right of the Company to
discharge any person at any time without regard to the effect that such
discharge will have upon such person's rights or potential rights, if any, under
the Plan. The provisions of the Plan are in addition to, and not a limitation
on, any rights that a Participant may have against the Company by reason of any
employment or other agreement with the Company.
6.4 RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Participant under the Plan or any Option will not be taken into account in
determining any benefits under any profit-sharing, retirement, or other benefit
or compensation plan or arrangement maintained by the Company or the Employer,
and will not affect the amount of any life insurance coverage available under
any life insurance plan or arrangement covering employees of the Employer,
except to the extent provided under such plan or arrangement.
9
<PAGE>
6.5 NOTICES. Unless otherwise specified in an Option Agreement, any notice
to be provided under the Plan to the Committee will be mailed (by
certified mail, postage prepaid) or delivered to the Committee in care
of the Company at its executive offices, and any notice to the
Participant will be mailed (by certified mail, postage prepaid) or
delivered to the Participant at the current address shown on the
payroll records of the Company. No notice will be binding on the
Committee until received by the Committee, and no notice will be
binding on the Participant until received by the Participant.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its
duly authorized officer and its corporate seal to be hereunto affixed by
authority of its Board of Directors this 21/st/ of July, 1998.
BANC ONE CORPORATION
Witnessed By: /s/ Phyllis J. Kohli By: /s/ Steven A. Bennett
----------------------- ------------------------
Steven A. Bennett
Senior Vice President and
Secretary
10
[Corporate Seal]
<PAGE>
Summary of the
BANC ONE CORPORATION INVESTMENT OPTION PLAN
At BANC ONE CORPORATION ("BANC ONE"), our success depends on the efforts of our
employees. We work hard to ensure our compensation and benefit programs reflect
our appreciation for your efforts. That's why we're excited to tell you about a
new program the BANC ONE CORPORATION Investment Option Plan.
The Investment Option Plan gives you the opportunity to replace current income,
or, on a one-time basis, exchange existing Compensation Deferral and/or 401(k)
Restoration /1/ Plan account(s), with an option written on a One Group mutual
fund ("Investment Option") that you can exercise in the future. In this way, you
can defer the tax on the income that you replace with the Investment Option.
The Investment Option Plan provides an opportunity to save on a long-term, tax-
favored basis and offers you financial planning flexibility. As an eligible
employee, you decide whether, and the extent to which you'll participate in the
Plan - including:
. The amount of your compensation you want to replace with Investment Options;
and
. When to exercise your Investment Options and recognize taxable income.
THE INVESTMENT OPTION PLAN AT A GLANCE
Designed to work in conjunction with our regular compensation programs, the
Investment Option Plan offers you the choice of replacing a part of your
compensation with Investment Options written on One Group mutual funds offered
under the Plan. If you decide to participate in the Plan, you can select the
mutual funds on which the Investment Options apply.
Here's how the Plan works:
. By August 30,1998, you may elect to exchange all or a portion of your
Compensation Deferral and/or 401 (k) Restoration Plan account(s) for
Investment Options. The exchange will be effective November 1, 1998.
- --------------------------------------------------------------------------------
This handout summarizes the BANC ONE CORPORATION Investment Option Plan.
Exclusively the provisions of that Plan and the Investment Option agreements
issued thereunder determine the rights and benefits of participants and their
beneficiaries. Confidential
- --------------------------------------------------------------------------------
_____________
/1/ Limited to Employee Accounts. Company Match Fund may not be exchanged
unless you are fully vested and are at least age 55 on the exchange date.
_______________
<PAGE>
. In addition, commencing with the November, 1998 open enrollment (new
employees may make elections within 30 days of their date of hire):
. You have the opportunity to select the amount or percent (1 % to 100%)
of your 1999 bonus (payable in February, 2000) which you want to
exchange for Investment Options. Amounts not applied toward Investment
Options, or deferred to the Compensation Deferral Plan, will be paid in
cash.
. You will have the opportunity to receive Investment Options by reducing
your base salary in excess of $6,666.66 per pay period.
If you elect to take all or part of your compensation in the form of
Investment Options, BANC ONE will purchase mutual fund Investment Options with
the amount you elected. BANC ONE also will sell the shares to you at the
exercise price.
You may exercise your Investment Options at any time during the period beginning
six months after the Grant Date and ending on the EARLIEST of:
(a) nine (9) months after the Grant Date, or if later, sixty (60) days
following the end of the calendar year in which termination of
employment occurs as a result of voluntary termination of employment
or termination for cause,
(b) one (1) year after termination of employment as a result of death,
(c) three (3) years after severance of employment (without cause) pursuant
to BANC ONE programs not designated under (d) below,
(d) ten (10) years after termination of employment if such termination is
due to retirement, disability, designated Severance of Employment
programs, or under other situations as designated by BANC ONE, or
(e) twenty (20) years after the Grant Date.
POTENTIAL APPRECIATION
The Investment Option Plan is designed to provide you with appreciation
opportunities similar to our Compensation Deferral Plan, with greater
accessibility and payment flexibility. As a Plan participant, your Investment
Options represent the right to mutual funds.
EXERCISING YOUR INVESTMENT OPTIONS
When you are ready to exercise your Investment Options, you simply pay the
Investment Option Exercise Price in effect at that time, as shown in the
following example. The minimum amount you may exercise is $5,000 (or if less,
the total value of the Investment Option property).
2
<PAGE>
Example
The following example assumes that Employee A elects to replace $30,000 of
compensation with Investment Options. Under the Plan, Employee A will receive an
Investment Option to buy $40,000 of a mutual fund.
The Investment Option Exercise Price will be determined based on the greater
value of the Investment Option on the grant date or the exercise date. In this
example, the exercise price on the exercise date is the greater of 25% of the
fair market value of the shares on the grant date ($40, 000 x .25 = $10, 000) or
25% of the fair market value of the shares on the exercise date, for example
($80,000 x .25 = $20,000), which equals $20,000.
Assuming that the value of the underlying mutual fund appreciates 100% before
the Investment Option is exercised, Employee A has an Investment Option to
purchase a fund worth $80,000 on the exercise date, for an exercise price of
$20,000. The $60,000 represents the net gain in the mutual fund subject to the
Investment Option. This amount will be treated as taxable income for the year in
which the Investment Options are exercised.
EMPLOYEE A'S INVESTMENT OPTION GRANT -- SUMMARY CHART
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
DATE OF GRANT DATE OF
EXERCISE
- -------------------------------------------------------------------
<S> <C> <C>
Value of Mutual Fund $40,000 $80,000
- -------------------------------------------------------------------
Exercise price $10,000 $20,000
- -------------------------------------------------------------------
Invest. Option Value/ Gain $30,000 $60,000
- -------------------------------------------------------------------
</TABLE>
TAX CONSEQUENCES
It is easiest to explain the tax consequences of the Investment Option Plan by
examining two separate events:
<TABLE>
<CAPTION>
EVENT TAX CONSEQUENCE
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Investment Option grant date Because you are replacing compensation for an Investment Option under
(when you receive Investment the Plan, you do not have taxable income at the Investment Option grant
Options through the Plan date. No tax is due on the value of your Investment Option.
- ----------------------------------------------------------------------------------------------------------
INVESTMENT OPTION EXERCISE DATE You realize taxable income in the year you exercise the investment
Option. Your taxable compensation equals the total value of the mutual
fund less the exercise price you pay.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
BANC ONE
INVESTMENT OPTION PLAN -- EXAMPLES
- -------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT OPTION GRANT EXAMPLES
- ------------------------------------------- Scenarios: Fund Value
STAYS RISES FALLS
- -------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
$7,500 of salary replaced with an A B C
Investment Option on XYZ Fund $20 sh. Price $40 sh. price $16 sh. Price
<S> <C> <C> <C>
Fair Market Value $10,000 $10,000 $20,000 $ 8,000
(500 sh. @ $20 sh.)
Exercise Price 2,500 2,500 5,000 2,500
------ ------- ------- -------
Salary Replaced $7,500
------
Income Recognized upon exercise $7,500 $ 7,500 $15,000
------- ------- -------
- -------------------------------------------------------------------------------------------------
</TABLE>
ASSUMPTION -- Employee exchanges $7,500 of current compensation for an
Investment Option to purchase 500 shares of XYZ Fund at $20/share (total of
$10,000).
SCENARIO A. Assume that XYZ Fund neither increases nor decreases in value after
two years. If the Investment Option is exercised, the exercise price is $2,500.
The XYZ Fund is worth $10,000. The employee receives the net amount of $7,500
(before withholding). The employee set aside $7,500 in the Investment Option and
received the same amount of compensation income two years later.
SCENARIO B. Assume that XYZ Fund doubles in value after two years. The exercise
price started at $2,500. The XYZ Fund is worth $20,000 and the exercise price
is $5,000 after two years. The employee receives the net amount of $15,000
(before tax withholding). The employee invested $7,500 in the Investment Option
and doubled the value when the fund doubled in value.
SCENARIO C. Assume that XYZ Fund falls 20% in value after two years. The
exercise price started at $2,500 and will not decrease if the value of the fund
decreases. After two years, the XYZ Fund is worth only $8,000. After paying the
exercise price, the employee receives the net amount of $5,500 (before tax
withholding). The employee is taxed on the net amount (the "spread") of $5,500.
Example
To review the tax effect, let's go back to the previous example.
(a) Investment Option grant date: Employee A received an Investment Option
to buy $40,000 of a mutual fund for $10,000 in exchange for reducing
compensation by $30,000. No income (or FICA) taxes are due.
(b) Investment Option exercise date: When Employee A exercises $80,000 of
Investment Options, paying an exercise price of $20,000, $60,000 of
taxable income is realized.
4
<PAGE>
This example illustrates the Plan's flexibility. As a participant, you can
replace your compensation and postpone taxes until you exercise your Investment
Options at any time after the "blackout period" (six months following the grant
date) and before the end of the Investment Option term.
PLAN ADMINISTRATION AND COSTS
Participants will receive quarterly statements summarizing the value of their
Investment Options.
BANC ONE will maintain certain records, including copies of your Investment
Option agreements. An outside vendor may provide record-keeping services.
BANC ONE will pay the cost of the trustee and record-keeping fees. Investment
management fees will be paid from the invested property and will not include
record-keeping fees. No mutual fund load fees will be charged to Participants.
5
<PAGE>
----------------------------------------
BANC ONE CORPORATION
INVESTMENT OPTION PLAN
Questions and Answers
----------------------------------------
What is the BANC ONE CORPORATION Investment Option Plan?
- --------------------------------------------------------
The BANC ONE CORPORATION Investment Option Plan ("Plan") is an arrangement
between you and BANC ONE CORPORATION that provides a flexible, tax-advantaged
form of compensation. In general, you may elect to replace part of your
compensation with Investment Options. You do not pay taxes on the replaced
compensation until you "exercise" your Investment Options.
How are Investment Options granted?
- -----------------------------------
Under the Plan, you may elect to (1) replace up to 100% of your bonus with
Investment Options, and (2) up to 100% of your base salary in excess of
$6,666.66 per pay period. BANC ONE CORPORATION may also choose to award
Investment Options instead of cash under a designated award program. In
addition, participants under the BANC ONE Compensation Deferral and/or the 401
(k) Restoration Plan are allowed to make a one-time election (effective November
1, 1998) to exchange deferred compensation balances for Investment Options.
What is an Investment Option?
- -----------------------------
An Investment Option is a contract between you and BANC ONE CORPORATION that
gives you the right to buy units of a mutual fund at a specified price within a
stated time period. When you replace compensation with Investment Options, you
sign a contract, called an "Investment Option Agreement" that "grants" you
Investment Options on the "grant date". The Investment Options remain in effect
until you "exercise" them and receive, your compensation, or until the
Investment Option expiration date, if earlier.
Why does the Plan use Investment Options?
We use Investment Options because they offer flexibility and tax advantages. You
can elect to replace part of your compensation with Investment Options to buy
mutual funds. Investment Options are not taxed until you decide to exercise
them.
For example: Joe decides to replace $12,000 of his eligible compensation
for an Investment Option to buy $16,000 of a mutual fund for an initial
exercise price of $4,000. To exercise the Investment Option, he would pay
$4,000 and receive units of the mutual fund worth $16,000. Joe does not pay
income tax on the value of his Investment Option, which grows on a tax-
deferred basis, until he decides to exercise the Investment Option.
<PAGE>
Do I actually purchase the mutual fund units?
No. An Investment Option gives you the right to buy X units of a mutual fund
for Y dollars. To own the mutual fund shares you must exercise the Investment
Option. This means that you agree to pay the exercise price, with cash or in a
"cashless exercise." After paying the exercise price and applicable taxes, you
will either own the units of the mutual fund or, if you prefer, receive cash
equal to the value of those units. You make these elections when you exercise
the Investment Option.
How does the Plan determine the exercise price?
- -----------------------------------------------
The Plan sets the exercise price by using a formula. The exercise price is 25%
of the fair market value of the units on the date of grant or date of exercise,
whichever is greater. At the time of grant, the Investment Options will have a
value equal to the compensation you have chosen to exchange for the Investment
Option.
Example: You elect to replace $12,000 of your pay with Investment Options to
acquire units of funds in Mutual Fund A. At the time of your election, a unit
of Mutual Fund A had a value of $40 per unit You are granted Investment Options
to acquire 400 units of Fund A (worth $16,000) for an initial Investment Option
exercise price of $4,000. At the time of grant, the net value of your Investment
Options is $12,000, the amount of pay you agreed to exchange for Investment
Options ($16,000 less the $4,000 exercise price). While this $12,000 would have
been taxable as compensation before using the Plan, your compensation received
as Investment Options is not taxable until exercised.
Am I fully vested in the Investment Options?
- --------------------------------------------
Yes. At all times, you are 100% vested in Investment Options that replace your
compensation.
Do I have to hold my Investment Options until / retire or for a certain period
- ------------------------------------------------------------------------------
of time?
- --------
No. Investment Options give you a great deal of flexibility. You decide when to
"exercise" your Investment Options. You can use these Investment Options to
provide retirement income or to meet interim cash requirements. Investment
Options are exercisable six (6) months after the date of grant This initial six
month period is called the "blackout period".
What tax rules apply to the Investment Options -granted under the Plan?
- -----------------------------------------------------------------------
The tax consequences are as follows:
. When the Investment Options are granted.
----------------------------------------
There is no taxable income when BANC ONE grants you the Investment Options.
2
<PAGE>
. When you hold the Investment Options.
-------------------------------------
Since there is no income, there is no tax due while you hold the Investment
Options. Your investment in the mutual fund Investment Options grows on a tax-
deferred basis until you exercise the Investment Options.
. When you exercise the Investment Options.
-----------------------------------------
When you decide to exercise an Investment Option, you will have taxable income.
Your taxable income will equal the value of the Investment Options less the
exercise price. For example, if at the time you exercise your Investment
Options, the underlying mutual fund is worth $100,000 and the Investment Option
exercise price is $25,000. The difference between the $100,000 value and the
$25,000 exercise price, or $75,000, is taxable as ordinary income. At the time
of exercise, you will receive units of the mutual fund on which the Investment
Option was written. You also may ask the designated plan broker to sell the
units immediately and give you cash.
. When you sell the mutual fund units.
------------------------------------
If, after the exercise, you elect to receive units in the mutual funds instead
of cash and you hold the units for 18 months (subject to Legislative change) or
more, you will realize long-term capital gain or loss when you sell the mutual
fund units. The gain or loss would equal the difference between the value of the
units when sold less the value of the fund units at the time you exercised the
Investment Options.
Is my money at risk?
- --------------------
Yes. The value of your Investment Options relates directly to the performance of
the mutual funds you select. Accordingly, you should assess the advantages and
disadvantages of the underlying mutual funds just as you would any other
investment.
Does my exercise price decline if the underlying mutual fund units decrease in
- ------------------------------------------------------------------------------
value?
- ------
No. The exercise price of your Investment Options is the greater of 25% of the
value of the units on the grant date or the exercise date. If the value of your
portfolio on which you have Investment Options declines, the exercise price will
not decline. As such, you have all the investment risk associated with the
investment The value of your Investment Option will increase or decrease as the
value of the underlying property changes.
We encourage you to consult your own investment advisor on the merits of the
Plan.
Is the property underlying Investment Options secured in a trust belonging to
- -----------------------------------------------------------------------------
the participants?
- -----------------
No. The Investment Options granted to you under the Plan is a contract between
you and BANC ONE CORPORATION. With an Investment Option, your employer has
agreed to sell you property (the portfolio you have selected) at a certain price
(the exercise price). Your money is not exempt from your employers creditors,
as it would be in the case of a 401(k) plan or other qualified retirement plan.
Until you exercise your Investment Options, these investments remain the
property of BANC ONE CORPORATION and are subject to its creditors.
3
<PAGE>
What would happen if BANC ONE CORPORATION becomes insolvent?
- -------------------------------------------------------------
The Investment Option property is subject to the claims of BANC ONE
CORPORATION's creditors in the event of insolvency. Your Investment Option
represents a liability for which you would become a general creditor in the
event of insolvency. That means that, you would have no preferential treatment
in receiving the Investment Optioned property if BANC ONE CORPORATION should
become insolvent. However, if you exercised the Investment Options before the
bankruptcy, you would have control over the property, and the bankruptcy trustee
would have to establish that the property should be returned to BANC ONE
CORPORATION to be included as part of its general assets.
How will I be able to monitor my investment?
- --------------------------------------------
You will receive quarterly statements showing the amount and performance of the
funds on which you hold Investment Options. The statements will track the mutual
funds performance just as statements would for other investments. You also will
receive a statement that summarizes your Investment Options and their current
exercise price.
If I become dissatisfied with a mutual fund's investment performance, what can I
- --------------------------------------------------------------------------------
do?
- ---
Before exercising an Investment Option, you may want to consult with your
financial and tax advisors. If you become dissatisfied with a mutual fund's
performance, you can do two things. First, you may exercise your Investment
Option at any time during the exercise period. After exercising the Investment
Option, you may sell the investment and pay the tax associated with the
Investment Option exercise. At that point you may re-invest the proceeds in a
more favorable investment vehicle outside of the Plan. In addition, if you plan
your exercise in advance, during the open enrollment prior to the planned
exercise date, you also could reduce your future compensation in exchange for a
new Investment Option in the same amount A new election to replace future
compensation with a new Investment Option can potentially offset the taxable
income you will recognize during that year from the exercise of an Investment
Option.
When can I make my election to exchange my BANC ONE Compensation Deferred and
- -----------------------------------------------------------------------------
401(k) Restoration Plan account(s)?
- -----------------------------------
Within 30 days of the plan's August 1, 1998, effective date, employees may, file
an election to exchange all or a portion of their Compensation Deferral and
401(k) Restoration Plan account(s) for Investment Options. The effective date
of this exchange will be November 1, 1998.
When can I make my election to reduce compensation and receive Investment
- -------------------------------------------------------------------------
Options?
- --------
To replace a portion of your salary and bonus with Investment Options, your
election must be made before the time in which you render services that earn the
compensation replaced by the Investment Options. That means your election must
be made on or before the December 31 before the payment of the additional
compensation. New employees may make elections within 30 days of their date of
hire.
What do I need to do when I am ready to exercise an Investment Option?
- ----------------------------------------------------------------------
When the necessary arrangements have been completed for plan administration,
participants will receive a set of procedures to follow to exercise an
Investment Option.
4
<PAGE>
Can an Investment Option be rolled into an IRA or to a 401(k) plan?
- -------------------------------------------------------------------
No. The Investment Option is nonqualified and cannot be rolled into a qualified
plan such as an IRA or 401(k) plan.
Will my qualified retirement plan deductions be affected by electing receive
- ----------------------------------------------------------------------------
Investment Options?
- -------------------
Your 401(k) contributions are based upon a percentage of your taxable
compensation. Electing to replace part of your compensation with Investment
Options may reduce the amount of your qualified 401(k) and pension contributions
because it reduces the amount of your taxable compensation. If, after replacing
compensation with Investment Options, your pension eligible compensation is
above $160,000 (for 1998), will be no effect on your qualified 401 (k) and
pension contributions.
Are Investment Option gains taxed at the 20% capital gains rate or as ordinary
- ------------------------------------------------------------------------------
income?
- -------
When you exercise an Investment Option, the "spread," the difference between the
fund's value and its exercise price, is taxable as ordinary compensation income.
One of the advantages of Investment Options is that you control when you
exercise the Investment Option and when you are taxed on the spread. An
Investment Option also allows you to defer taxation until the end of the
Investment Option term.
Can I transfer my Investment Option from one fund to another?
- -------------------------------------------------------------
No. You may not substitute other property for the property covered by the
Investment Option. BANC ONE, of course, reserves the right to substitute other
property if, for example, the funds originally offered under the Plan are no
longer used.
If I exercise an Investment Option when I am retired and no longer employed,
- ----------------------------------------------------------------------------
will it reduce my Social Security benefits? How will it be reported?
- --------------------------------------------------------------------
Exercising your Investment Options does not reduce your Social Security
benefits. The Investment Options relate to services performed while you were an
employee. Although the spread on the exercise of an Investment Option is
reported to you on a Form W-2, the form also will indicate that this
compensation relates to prior services. Therefore, it will not reduce your
Social Security benefits under the earnings test. Of course, you must report
taxable income on your tax return and this may affect how much of your Social
Security benefits are taxable.
On what funds will Investment Options be written?
- -------------------------------------------------
The following One Group mutual funds will be available for writing Investment
Options under the Plan:
1. The One Group Income Bond Fund
2. The One Group Equity Index Fund
3. The One Group Large Company Growth Fund
5
<PAGE>
4. The One Group Large Company Value Fund
5. The One Group Growth Opportunities Fund
6. The One Group International Equity Index Fund
7. The One Group Investor Growth Fund
8. The One Group Growth & Income Fund
9. The One Group Investor Conservative Growth Fund
6
<PAGE>
What are the key differences between the Investment Option Plan and the
- -----------------------------------------------------------------------
Compensation Deferral and 401(k) Restoration Plans?
- ---------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Compensation Deferral (CDP) and
Investment Option Plan
-------------------------------------------- 401(k) Restoration Plans (R401(k))
(IOP) ------------------------------------------
--------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Vehicle Investment Options on One Group Cash deferral invested in One Group Mutual
- ------------------ Mutual Funds (same funds as offered under Funds and Banc One Stock Fund.
CDP, less One Group Prime Market Fund and
Banc One Stock Fund).
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Changes Not available Daily
- ------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Cash only
Distribution Mode Cash or Mutual Fund Units
- -----------------
Can exercise after six (6) months following CDP: Hardships: (IRS definition) or
date of grant; until twenty (20) years from Voluntary with ten percent (10%) penalty.
Inservice grant date. R401(k): N/A
Post Employment: Later of nine (9) months after grant date, CDP & R401(k): Lump sum in 1st quarter of
or in 1st quarter of year following year of year following year of termination.
Termination termination.
One (1) year after death.* CDP & R401(k): As soon as administratively
feasible.
Death
Ten (10) years.* CDP & R401(k): Lump sum in 1st quarter of
year following year of termination.
Designated Severance Plans
Three (3) years.* CDP & R401(k): Lump sum in 1st quarter of
year following year of termination.
Other Severance (not for cause)
Ten (10) years.* CDP: Lump sum or annual installment payments
Retirement or Disability over 5 or 10 years.
R401(k): Lump sum in 1st quarter of year
following year of termination.
- -----------------------------------------------------------------------------------------------------------------------------------
Leverage
- --------
Up Stock Market Same Same
Down Stock Market Worse** Better
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Investment Option must be exercised by the earlier of 20 years from the
date of grant or the time period indicated after termination for the reason
indicated.
** Investment Option exercise price will equal the greater of twenty-five
(25%) of the fair market value of the One Group mutual funds, on the Grant Date
or the Exercise Date.
7
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If I elect to exchange a part of my Compensation Deferral Plan and/or 401(k)
- ----------------------------------------------------------------------------
Restoration Plan accounts for Investment Options, in what order will the funds
- ------------------------------------------------------------------------------
be withdrawn from said accounts?
- --------------------------------
The funds will be withdrawn, as applicable, in the order shown below.
1. The One Group Prime Money Market Fund
2. The One Group Income Bond Fund
3. The One Group Investor Conservative Growth Fund
4. The One Group Investor Growth & Income Fund
S. The One Group Equity Index Fund
6. The One Group Large Company Value Fund
7. The One Group Large Company Growth Fund
8. The One Group Growth Opportunities Fund
9. The One Group Investor Growth Fund
10. The One Group International Equity Index Fund
11. The Banc One Stock Fund
May I exchange all of my 401(k) Restoration Plan accounts for Investment
- ------------------------------------------------------------------------
Options?
- --------
You may exchange all of your Employee Accounts; however, you may not exchange
the Company Match fund unless you are fully vested and at least 55 years of age
on the date of exchange (November 1, 1998)
8
<PAGE>
EXHIBIT 10 (T)
BANC ONE CORPORATION
AMENDED 1994 KEY EXECUTIVE MANAGEMENT
INCENTIVE COMPENSATION PLAN
SECTION 1. ESTABLISHMENT, PURPOSE AND EFFECTIVE DATE OF PLAN
1.1 Establishment. BANC ONE CORPORATION (the "Corporation") hereby
establishes the "Amended 1994 Key Executive Management Incentive Compensation
Plan" (the Plan) for the Chairman and the President of the CORPORATION.
1.2 Purpose. The purpose of the Plan is to promote the interest of the
CORPORATION and its shareholders by strengthening its ability to attract and
retain executive key management talent and to motivate superior levels of
performance.
1.3 Effective Date. The Plan is amended effective as of January 1, 1995,
by action of the Personnel and Compensation Committee of the CORPORATION (the
"Committee") on January 23, 1995, subject to the approval of the amendment by
the shareholders of the CORPORATION prior to the payment of any awards for the
year 1995. The Plan was originally established on December 23, 1993 by the
COMMITTEE and approved by shareholders on April 19, 1994.
SECTION 2. PLAN ADMINISTRATION
2.1 Plan Administration. The Plan is administered by the Personnel and
Compensation Committee of the Board of Directors of the CORPORATION. Its
findings and determinations regarding this Plan are official and final.
SECTION 3. DEFINITIONS
3.1 Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "Award" means the cash amount payable upon the achievement of
performance goals as established by the Committee as authorized by the
Plan.
(b) "Committee" means the committee appointed by the Board of Directors of
the CORPORATION to administer the Plan. The Committee shall consist of
two (2) or more outside directors as defined by Section 162(m) of the
Internal Revenue Code of 1986, a amended from time to time.
(c) "CORPORATION" means BANC ONE CORPORATION, a bank holding company under
the Bank Holding Company Act of 1956, headquarters in Columbus, Ohio.
<PAGE>
(d) "Disability" means disability as determined by the Committee in good
faith upon receipt of and in reliance on sufficient competent medical
advice from one or more individuals, selected by the Committee, who
are qualified to give professional medical advice.
(e) "Plan Year" means the one year period beginning January 1 and ending
on December 31 of each calendar year.
3.2 Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender when used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 Eligibility and Participation. Participation in the Plan is limited
to the employees holding the positions of Chairman and President of the
CORPORATION. Participation may be revoked at any time by the Committee. An
employee whose participation is revoked will be notified, in writing, of such
revocation as soon as practicable following such action. An individual who
becomes eligible to participate in the Plan during the Plan Year may be approved
by the Committee for a partial year of participation. In such case, the
participant's award shall be prorated based on the amount of full months of
participation.
SECTION 5. AWARD DETERMINATION
5.1 Target Award Level. Target Award levels are expressed in terms of a
percentage of Base Pay. Base Pay is the salary earned while participating in
the Plan in a designated Plan Year. The Target Award levels for the Chairman
and President, respectively, will be established by the Committee from year to
year pursuant to the provisions of this Plan within the time period required by
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder ("Section 162(m)").
5.2 Maximum Award Level. The maximum amount payable under the Plan is
defined as a percentage of the Target Award as established by the Committee for
a designated Plan Year within the time period required by Section 162(m);
provided, however, that the maximum payment for any one Plan Year hereunder to
any participant under the Plan is $3,000.00.
5.3 Corporate Performance Measure. The Corporate Performance Thresholds
for a Plan Year shall be established by the Committee within the time period
required by Section 162(m) and shall be based upon the achievement of designated
performance objectives or goals. The performance measures to be used to
establish such objectives or goals shall be (i) earnings growth for the
CORPORATION for the Plan Year as compared with the prior year and (ii) Return on
Assets of the CORPORATION for the Plan Year as compared with the previous year.
The established performance thresholds as established by this Committee based on
such goals or objectives must be met by the CORPORATION prior to any incentive
awards being paid. A
2
<PAGE>
performance matrix specifying the actual award payments for the Plan Year as a
percentage of Target Award Level will be established by the Committee based upon
the goals established for the Plan Year. The matrix will determine the awards
payment.
5.4 Payment of Awards. At the end of each Plan Year, awards will be
computed for each participant. Award amounts may vary above or below the Target
Award level based on the determination of Corporate performance results.
Payment of Awards will be made in cash, subject to applicable tax withholding,
as soon as practicable after the achievement of performance measures and other
material terms of the Plan is certified, and individual awards are approved, by
the Committee, provided, however that the Committee may in its sole discretion
reduce individual awards determined by the performance matrix.
5.5 Modification, Amendment, and Termination of the Plan. The Plan may be
modified, amended, or terminated at any time by the Board of Directors of the
CORPORATION and, if and as applicable, the shareholders. The existence of the
Plan does not obligate or bind the CORPORATION to pay an award to any
participant (or beneficiary) nor does any participant (or beneficiary) attain
any vested, non-forfeitable right to an award until the award has been finalized
and approved for payment by the Committee.
SECTION 6. TERMINATION OF EMPLOYMENT
6.1 Termination of Employment. In the event a participant's employment is
terminated due to death or Disability, the participant's award will be reduced
to reflect the partial year of participation. This reduction will be determined
by multiplying the award by a fraction, the numerator of which is the
Participant's total months of participation in the current Plan Year through the
date of termination rounded up to whole months, and the denominator of which is
Twelve (12). The participant's award will be paid as soon as practicable
following the end of the Plan Year and after the attainment of the Performance
Measures is certified by the Committee. In the event a participant's employment
is terminated for reasons other than death or disability, all rights to an award
for the Plan Year will be forfeited.
6.2 Beneficiary Designation. Each Participant under the Plan may, from
time to time, name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
in case of his death before he receives any or all of such benefit. Each
designation will revoke all prior designations by the same Participant, shall be
in a form prescribed by the Committee, and will be effective only when filed by
the Participant in writing with the Committee during his lifetime. In the
absence of any such designation, or if for any reason such designation is
ineffective, in whole or in part, benefits remaining unpaid at the Participant's
death shall be paid to his estate.
SECTION 7. GENERAL PROVISIONS
7.1 Tax Withholding. Any and all payments made under the Plan shall be
subject to applicable federal, state, or local taxes required by the law to be
withheld.
3
<PAGE>
7.2 Benefit Plans Treatment of Award as Compensation. Amounts paid under
this Plan will not be considered compensation for purposes of other BANC ONE
Qualified Benefit Plans unless specifically provided for in such plans. The
treatment of these amounts under any non-qualified benefit plans will be
determined according to the provisions of such plans.
7.3 Deferral of Award. If a participant has been designated as eligible
to participate in the BANC ONE CORPORATION Incentive Compensation Deferral Plan,
an award or portion thereof granted under the Plan may be deferred pursuant to
the terms of that plan, provided a timely deferral election is made by the
participant.
7.4 Nontransferability. Except as specifically provided herein or as may
otherwise be required by law, no undistributed bonus amount payable to the
participant may be sold, transferred, or assign or encumbered, in whole or in
part, by a participant, and any attempt to so alienate or subject any such
amount shall be void.
4
<PAGE>
EXHIBIT 10(U)
BANC ONE CORPORATION
AMENDED AND RESTATED DIVIDEND EQUIVALENT UNIT PLAN
PURPOSE
BANC ONE CORPORATION ("the Corporation") hereby establishes the "Dividend
Equivalent Unit Plan" ("the Plan") for the Chairman and the President of the
Corporation. The purpose of the Plan is to promote the interest of the
Corporation and its shareholders by strengthening its ability to retain
executive key management talent who will not be granted restricted stock due to
the loss of the tax deduction of such stock under Section 162(m) of the Internal
Revenue Code of 1986 as amended from time to time. The Plan shall constitute an
unfunded "top-hat" arrangement under Title I of the Employee Retirement Income
Security Act of 1974, as amended.
Effective Date
The Plan was originally effective as of April 18, 1994. It was restated
effective as of April 17, 1995 and further amended on August 15, 1996. This
amended and restated version of the Plan is effective as of August 1, 1998,
unless specifically indicated in provisions throughout the Plan. The Plan shall
be in effect only for the Dividend Equivalent Units granted by the Committee at
its meetings on April 18, 1994 and April 17, 1995. No other Dividend Equivalent
Units shall be granted under this Plan.
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meaning stated herein,
unless the context clearly indicates otherwise.
Section 1.1 - Committee
The Committee appointed by the Board of Directors of the Corporation to
administer the Plan. This Committee shall consist of two (2) or more outside
directors as defined by Section 16 of the Securities Exchanged Act of 1934, as
amended.
Section 1.2 - Company
BANC ONE CORPORATION, a bank holding company under the Bank Holding Company Act
of 1956, or any successor thereto.
Section 1.3 - Disability
The inability of the Participant to perform the requirements of his position
with the Company by reason of a medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, as supported by
medical evidence acceptable to the Committee. With respect to any period which
the Participant qualifies for Social Security Disability benefits based on his
physical or mental impairment, he shall automatically be deemed to meet the
requirements of this Section 1.3.
<PAGE>
Section 1.4 - Dividend Equivalent Unit
The right to receive payments equal to the dividends paid to a holder of a share
of common stock of the Corporation over a five (5) year period from the date of
grant of such Dividend Equivalent Units.
Section 1.5 - Dividend Equivalent Payment
The amount of dividend payable on one share of common stock of the Corporation
on each date on which regular dividend payments are made to common shareholders
of the Corporation.
Section 1.5 - Participant
Any Chairman or President of the Corporation who has been selected for
participation in the Plan by the Committee.
Section 1.6 - Related Company
A subsidiary or any entity which is a member of a common controlled group with
BANC ONE CORPORATION pursuant to Section 1563(a)(1) of the Internal Revenue
Code.
Section 1.7 - Retirement
Early or Normal Retirement as defined under the BANC ONE CORPORATION Cash
Balance Pension Plan, or any successor plan thereto.
ARTICLE II
PARTICIPATION
Section 2.1 - Eligibility
Participation in the Plan is limited to the employees holding the position of
Chairman or President of the Corporation. Participation may be revoked at any
time by the Committee. An employee whose participation is revoked shall be
notified, in writing, of such revocation as soon as practicable following such
action.
Section 2.2 - Dividend Equivalent Unit Award Determination
The number of Dividend Equivalent Units granted to a Participant will be those
determined by the Committee at its meetings on April 18, 1994 and April 17,
1995.
Section 2.3 - Accrual of Dividend Equivalent Payments
Dividend Equivalent Payments will be credited to a non-qualified deferred
compensation account, established by the Company in the name of the Participant,
to which Dividend Equivalent Payments made in accordance with this Plan are
credited. The Dividend Equivalent Payment date will be the date dividends are
paid to shareholders of the Corporation. The Dividend Equivalent Payment amount
will be reduced for any taxes due at the time of crediting the account.
2
<PAGE>
Section 2.4 - Participant Directed Accounts
The Participant will direct the Corporation to invest the cash balance from the
accumulation of Dividend Equivalent payments into one or more of the alternative
investment portfolios available under the BANC ONE CORPORAON Compensation
Deferral Plan, or any successor plan thereto, with the exception that from and
after August 15, 1996, no funds will be invested in the BANC ONE Stock Fund, or
any successor fund thereto. In the absence of an investment election made by the
Participant, all new deferrals and previously deferred funds will be invested in
a money market account.
Section 2.5 - Funding
The Plan shall be entirely unfunded and no provision shall at any time be made
with respect to segregating any assets of the Company or a Related Company for
payment of any benefit hereunder. No Participant, Participant's spouse or any
other person shall have any interest in any particular assets of the Company or
any Related Company by reason of the right to receive a benefit under the Plan,
and any such Participant, Participant's spouse, or other person shall have only
the rights of a general unsecured creditor of the Company with respect to any
rights under the Plan. Nothing contained in the Plan shall constitute a guaranty
by the Company or other entity or person that the assets of the Company will be
sufficient to pay any benefit hereunder.
Section 2.6 - Statement of Accounts
At least once annually, the Company shall furnish each Participant with a
written statement of his account setting forth the net income or loss of the
account; any administrative expenses charged to the account; all payments and
distributions made from the account; and such further information as the Company
deems appropriate.
ARTICLE III
DISTRIBUTIONS
Section 3. 1 - Timing of Distributions
In the event a Participant's employment is terminated for any reason, the
Participant will cease to be eligible for Plan participation and the accumulated
account balance will be distributed in a lump sum payment to the Participant as
soon as administratively feasible on or after January 1st coincident with or
next following the later of: (i) the Participant's termination of employment
from the Company or (ii) the date the Participant is no longer a statutory
director, an emeritus director, an advisory board member, or an honorary
director of the Company or a Related Company.
In the event a Participant's employment is terminated for reasons of Death or
Disability, the accumulated balance will be distributed in a lump sum payment to
his designated beneficiary as soon as administratively feasible following the
date of Death or termination of employment due to Disability.
Section 3.2 - Cash Payments: Determination of Amount
All distributions to Participants shall be made in the form of cash, with
exception of those portions of the Participant's account which are invested in
common stock of the Company and which can or must be distributed in kind as
provided in Schedule C. The amount to be distributed shall be determined based
on the fair market value of the balance eligible for distribution credited to
the Participant's account as of the
3
<PAGE>
close of business on last day of the calendar month immediately preceding
distribution or such later valuation date immediately preceding the date of
distribution if the accounts are valued more frequently than monthly (i.e.,
daily).
Section 3.5 - Vesting
Each Participant is immediately one hundred percent (100%) vested in all amounts
credited to his account and any earnings thereon.
Section 3.6 - Acceleration of Benefits for Unforeseeable Emergencies
The Company, with the approval of the Committee, may accelerate the payment of
any amounts eligible for distribution held in any Participant's account in the
case of unforeseeable emergencies. An "unforeseeable emergency" is a severe
financial hardship to the Participant or Beneficiary resulting from a sudden and
unexpected illness or accident of the Participant or dependent of the
Participant, loss of Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant. The circumstances which will constitute a
"unforeseeable emergency" will depend upon the facts of each case, but in any
case, payment will not be made to the extent that such hardship is or may be
relieved: (a) Through reimbursement or compensation by insurance or otherwise;
(b) By liquidation of the Participant's assets, to the extent the liquidation of
such assets would not itself cause severe financial hardships; or (c) By
cessation of deferrals under the Plan. "Unforeseeable emergency" will not
include the need to send the Participant's child to college or the desire to
purchase a home. Any early distributions made under this Section 3.6 will only
be permitted to the extent reasonably needed to satisfy the emergency needs.
No distribution or payment shall be allowed hereunder unless, in the judgment of
the Company, the Committee or its appointees, such distribution or payment will
not constitute a Discretionary Transaction under Securities and Exchange
Commission Rule 16b-3 which will subject the Participant to potential liability
under Section 16(b) of the Exchange Act or jeopardize or make less likely the
ability to properly account for a transaction in which the Company is
participating and which the Company wishes to account for as a "pooling of
interests".
Section 3.7 - Withholding and Deductions
All benefit payments made under the Plan to any Participant or Beneficiary shall
be subject to allocable withholding and to such other deductions as shall at the
time of such payment be required under any income tax or other law, whether of
the United States or any other jurisdiction, and delivery to the Company of all
necessary documents. To the extent that the Company is required to withhold any
current taxes at the time of deferral, the deferral amount shall be reduced by
the required taxes. Determinations by the Company as to withholding shall be
binding on the Participant and applicable Beneficiary(ies).
Section 3.8 - Benefit Plans Treatment of Dividend Equivalent Payments as
Compensation.
Amounts paid under this Plan will not be considered compensation for purposes of
other Company qualified benefit plans unless specifically provided for in such
plans. The treatment of these amounts under any Company non-qualified benefit
plans will be determined according to the provisions of such plans.
4
<PAGE>
Section 3.9 - Beneficiary Designation
Each Participant under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his death before he receives any
or all of such benefit. Each designation will revoke all prior designations by
the same Participant, shall be in a form prescribed by the Committee, and will
be effective only when filed by the Participant in writing with, and
acknowledged by, the Committee during his lifetime. in the absence of any such
designation, or if for any reason such designation is ineffective, in whole or
in part, benefits remaining unpaid at the Participant's death shall be paid to
the Participant's estate.
Section 3.10 - Rights to Benefits
Nothing contained in this Plan is intended to give or shall give any spouse,
former spouse or Beneficiary of a Participant or any other person any right to
benefits under this Plan by virtue of Sections 401(a)(11) and 417 of the
Internal Revenue Code (relating to qualified pre-retirement survivor annuities)
and qualified joint and survivor annuities) or Sections 401(a)(13)(B) and 414(p)
of the Internal Revenue Code (relating to qualified domestic relations orders)
as amended.
ARTICLE IV
ADMINISTRATION
Section 4.1 - Administrative Powers and Duties
The Company shall be responsible for the general operation and administration of
the Plan and for carrying out the provisions thereof. The Committee may, in its
discretion, appoint an employee or employees or an administrative committee in
writing to administer the provisions of this Plan. The decision of the Committee
with respect to any questions arising as to the administration or interpretation
of this Plan, including the discontinuance of any or all of the provisions
thereof, shall be final, conclusive, and binding. If the Plan is administered by
a committee, such committee may act by a majority of its members by vote at a
meeting or in writing without a meeting signed by all the members of the
committee.
Section 4.2 - Expenses
Any cost or expense of administering the Plan shall be paid by the Company
and/or participating Related Companies. Notwithstanding the above, the Company
may charge each Participant's account with the amount of reasonable
administrative expenses it determines, in its sole discretion, for the cost of
administering this Plan. Any such charges shall reduce the earnings credited to
the Participant's account and shall be applied in a uniform and
nondiscriminatory manner.
Section 4.3 - Records
The Company shall keep such records of such information, as shall be proper,
necessary or desirable to effectuate the purposes of the Plan, including without
in any manner limiting the generality of the foregoing, records and information
with respect to deferral elections, Participant accounts, dates of employment
and termination and determinations made hereunder. To the extent that the
Company shall prescribe forms for use by the Participants and their
beneficiaries in communicating with the Company and shall establish periods
during which communications may be received, the Company shall be protected in
disregarding any notice or communication for which a form shall so have
5
<PAGE>
been prescribed and which shall not be made in such form and any notice or
communication for the receipt of which a period shall so have been established
and which shall not be received during such period. The Company and the
Committee shall respectively also be protected in acting upon any notice or
other communication purporting to be signed by any person and reasonably
believed to be genuine and accurate, including the Participant's current mailing
address.
Section 4.4 - Determinations
All determinations hereunder made by the Company or Committee shall be made in
the sole and absolute discretion of the Company or Committee, as the case may
be.
Section 4.5 - Claims Procedure
If required by the Company, any person entitled to benefits hereunder must file
a claim with the Company upon forms furnished by the Company. Notwithstanding
any other provision of this Plan, payment of benefits need not be made until
receipt of the claim and the expiration of the time periods specified in this
Section 4.5 for rendering a decision on the claim. In the event a claim is
denied, benefits need not be made or commence until a final decision is reached
by the Committee subject to the provisions of Section 4.6.
The Company shall notify the claimant of its decision within ninety (90) days
after receipt of the claim. However, if special circumstances require, the
Company may defer action on a claim for benefits for an additional period not to
exceed ninety (90) days, and in that case it shall notify the claimant of the
special circumstances involved and the time by which it expects to render a
decision.
If the Company determines that any benefits claimed should be denied, it shall
give notice to the claimant setting forth the specific reason or reasons for the
denial and provide a specific reference to the Plan provisions on which the
denial is based. The Company shall also describe any additional information
necessary for the claimant to perfect the claim and explain why the information
is necessary. Such claimant shall be entitled to full and fair review by the
Committee of the denial.
Section 4.6 - Appeal and Review Procedure
If a claim has been denied by the Company, the claimant shall have sixty (60)
days after receipt of the denial in which to file a notice of appeal with the
Company. A final determination by the Committee shall be rendered within sixty
(60) days after receipt of the claimant's notice of appeal. Under special
circumstances such determination may be delayed for an additional period not to
exceed sixty (60) days, in which case the claimant shall be notified of the
delay prior to the close of the initial sixty (60) day period. The Committee's
final decision shall set forth the reasons and the references to the Plan
provisions on which it is based.
Section 4.7 - Facility of Payment
Whenever a person entitled under the Plan to receive any payment of a benefit,
or installment thereof, is under a legal disability or incapacity or is in any
way unable to manage his financial affairs, the Company may, in its discretion,
direct payments on behalf of such person to be made to the incapacitated
person's legal representative, custodian, relative, or other such individual(s)
as is (are) known by the Company to be assisting such person. Such decision by
the Company shall be made after consultation with those persons, if any, which
may include legal counsel and/or medical personnel, which the Company in his
sole discretion determines are necessary in order to make such decision. Any
payment of a benefit or installment thereof in
6
<PAGE>
accordance with the provisions of this Section 4.7 shall be a complete discharge
of any liability relating to the making of or entitlement to such payment under
the provisions of the Plan.
Section 4.8 - Action by the Company
Any action by the Company under this Plan may be by resolution of its Board, or
alternatively, by the Committee, or by any person or persons, duly authorized by
resolution of said Board to take such action.
Section 4.9 - Exemption from Liability/Indemnification
The members of the Committee and the persons acting on behalf of the Company,
shall be free from all liability, joint or several, for their acts, omissions,
and conduct, and for the acts, omissions and conduct of their duly appointed
agents, in the administration of the Plan, except for those acts or omissions
and conduct resulting from willful misconduct or lack of good faith.
The Company shall indemnify each member of the Committee, the persons acting on
behalf of the Company and any other employee, officer or director of the Company
against any claims, loss, damage, expense and liability, by insurance or
otherwise, reasonably incurred by the individual in connection with any action
or failure to act by reason of membership on the Committee or performance of an
authorized duty or responsibility for or on behalf of the Company pursuant to
the Plan unless the same is judicially determined to be the result of the
individual's gross negligence or willful misconduct. Such indemnification by the
Company shall be made only to the extent such expense or liability is not
payable to or on behalf of such person under any liability insurance coverage.
The foregoing right to indemnification shall be in addition to any other rights
to which any such person may be entitled as a matter of law.
Section 4. 10 - Non-Assignability
No right or benefit under the Plan shall be subject to anticipation, alienation,
sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, assign, sell, pledge, encumber or charge the same shall be void.
The Plan shall not in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person entitled to benefits
hereunder.
ARTICLE V
AMENDMENT OR TERMINATION
Section 5.1 - Amendment or Termination
The Company, through action of its Board of Directors, may amend or terminate
this Plan at any time. In the event of a termination, the Company in its sole
discretion may accelerate payment of Plan benefits to those Participants
participating in the Plan on the date of such termination, to the extent such
benefits would be otherwise payable as defined in Section 3.1 determined on the
basis that each Participant's presumed termination date was the date the Plan
was terminated.
Section 5.2 - Transfer Between Related Companies
In the event that a Participant's employment is transferred from the Company or
a Related Company to another Related Company or from a Related Company to the
Company, the transfer shall not adversely
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affect the administration of amounts then credited to the Plan account(s) of
such Participant on or as of the date of transfer.
Section 5.3 - Change of Control
The Plan shall not be automatically terminated upon a Change of Control if;
following the Change of Control, the Company, its successor or purchaser is
obligated to pay, or continue to pay, Plan benefits to those Participants
participating in the Plan on the date of such Change of Control, to the extent
such benefits would be otherwise payable as defined in Section 3. l.
ARTICLE VI
GENERAL PROVISIONS
Section 6. 1 - Offset to Benefits
Notwithstanding any provisions of the Plan to the contrary, the Company may, at
the time of distribution in its sole and absolute discretion, enforce the right
to offset against any amounts to be paid to a Participant under the Plan against
any debt of the Participant which has been reduced to judgment in favor of the
Company.
Section 6.2 - Construction
In the construction of the Plan, the masculine shall include the feminine and
the singular the plural where such meanings would be appropriate.
Section 6.3 - Controlling Law
The laws of the State of Ohio shall be controlling in all matters relating to
the Plan and shall be controlling state law in all matters relating to the Plan
and shall apply to the extent that it is not preempted by the laws of the United
States of America.
Section 6.4 - Effect of Invalid Provisions
If any provision of this Plan is held invalid or unenforceable for any reason,
such invalidity or unenforceability shall not effect any provisions hereof, and
the remaining provisions of this Plan shall be construed and enforced as if such
provisions had not been included.
Section 6.5 - ERISA Status
This Plan shall constitute a plan which is unfunded and which maintained
primarily for the purpose of providing deferred compensation benefits for a
select group of management or highly compensated employees within the meaning of
Sections 202, 301, and 401 of ERISA and the ERISA reporting and disclosure
regulations.
8
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IN WITNESS WHEREOF, BANC ONE CORPORATION has caused this Plan to be adopted and
effective as first set forth above.
Date: November 2, 1998 BANC ONE CORPORATION
------------------------
Attest: /s/ Phyllis J. Kohli By: /s/ Steven A. Bennett
------------------------ -----------------------------------
Steven A. Bennett
Senior Vice President and Secretary
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EXHIBIT 10(V)
January 1998
1998 BANC ONE Performance Improvement Plan
Participant Overview
BANC ONE Corporate Vision
We will settle for nothing less than to be a national leader in providing
financial services to the people and businesses of America. We are committed to
the relentless pursuit of ideas that enable those we serve to prosper and
achieve their goals.
Delighting Customers ...
Creating Value ...
Rewarding Outcomes ...
BANC ONE's Performance Improvement Plan (PIP) is a key component of our total
reward program for selected management employees and key contributors of the
Corporation, its Lines of Business, and its related companies.
The purpose of the Plan is to enable the successful achievement of our Corporate
Vision and required business commitments by providing a management system to:
[_] communicate business objectives,
[_] focus and align efforts,
[_] promote collaboration and our high-performance imperative,
[_] strengthen the sense of ownership in business outcomes, and
[_] share the rewards for performance results.
The Plan is constructed for flexibility, in order to ensure an appropriate and
tailored design aligned with the specific business requirements of each National
Line-of-Business or function.
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- --------------------------------------------------------------------------------
BANC ONE PIP
[DIAGRAM OF BANC ONE PIP APPEARS HERE]
Other National National Corporate Other
Line of -- Retail -- Commercial -- Finance -- National
Business PIP PIP PIP Functions
- --------------------------------------------------------------------------------
Participation in the PIP includes those employees who, by the nature and scope
of their positions, are materially responsible for the growth and -success of
BANC ONE's businesses.
Participation is approved by the Chief Executive Officer of each national BANC
ONE line-of-business or national staff division.
Full Performance Achievement Award
Full Performance Achievement Awards are intended to reward participants for
successfully achieving our stakeholder's demanding expectations, and represent
the incentive dollars a participant could earn if their high-performance
business objectives are achieved.
The Full Performance Achievement Award is calculated as the aggregate base
salary earned during the year times the Full Performance Award Percentage. A
Full Performance Award Percentage, commensurate with each participant's role and
accountabilities, is determined at the beginning of each plan year. Full
Performance Achievement Awards are prorated to reflect changes in both base
salary and Full Performance Award percentages that occur during the year by
taking the time weighted average of (base salary * Full Performance Award
Percentage) for the portion of the year each combination of such was in effect.
Full Performance Achievement Awards are expected to be paid only when aggregate
performance significantly exceeds the median performance for BANC ONE's peer
companies.
Performance Measures
The Full Performance Earnings Measure for BANC ONE CORPORATION is established by
the Personnel and Compensation Committee of BANC ONE's Board of Directors (P&C
Committee). BANC ONE's Chairman and CEO, and President jointly establish Full
Performance Measures for each participating national Line-of-Business or Staff
Function. Line-of-business CEOs and Staff Division Heads in turn establish
performance objectives for the sub-businesses, regions and functions reporting
to them. Participant's Performance Measures generally reflect a combination of
appropriate specific earnings, team and individual goals, as well as a component
for more subjective, discretionary factors.
a) Overall Corporate Earnings Threshold
As a prerequisite to any awards being paid under the Plan, BANC ONE
CORPORATION must achieve an overall earnings threshold of at least
$1.925 billion for 1998. Unless this overall threshold is met, no
awards are paid to anyone in the PIP for any plan component.
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b) BANC ONE EPS
Given the nature and scope of an individual's role, some participants
may have BANC ONE EPS, the corporate performance measure established
by the P&C Committee, as a component within their PIP Scorecard. For
1998 100% of the Full Performance Award for the BANC ONE EPS component
will be paid for EPS achievement of $3.55 per share. Where applicable,
your Scorecard provides the relationship between actual EPS
performance and the percentage of the Full Performance Achievement
Award which may be paid for this component. If the performance
threshold for BANC ONE EPS is not achieved, awards can still be paid
for other earnings and individual components of the Plan subject only
to the Overall Corporate Threshold in Section "a" above.
c) Full Performance Earnings Goals
Each National Line-of-Business will have a Full Performance Earnings
measure. Associated with this measure will be a minimum performance
threshold. If a business-specific earnings threshold is not met, no
participant earns an award for that award component. However, awards
can be earned for all other award components established for that
participant.
Full Performance Earnings Goals also impact the funding of the bonus
pool for the Individual Goals / Discretionary components at the
National Line-of-Business or Region level. See item "f" below.
An appropriate relationship linking performance to reward is used for
each Full Performance Earnings Goal, along with a defined performance
measure percentage weight, to determine the component scoring
opportunity for each individual participant. Please reference your PIP
Performance Measures graph, to be distributed, and your Performance
Scorecard for details on earnings and other performance measures.
d) National Function Team Goals
Each national function will have a team goal (e.g. Team HR
Achievement) in place of a Full Performance Earnings Measure. This
component should capture performance toward achieving the major goals
and objectives of the function. The performance score for each team
goal impacts the funding of the bonus pool for the Individual Goals /
Discretionary component at the National Function level. See Item "f"
below.
e) Individual Goals / Discretionary
The Individual Goals component recognizes performance achievement in
such quantifiable performance measures as NIE, new business
generation, credit quality, market penetration, and key project
completion. Generally, specific strategic goals are separately listed
and described for each participant in the Individual Goals section of
the PIP Performance Scorecard.
The Discretionary component recognizes performance achievement and
contributions that are less quantifiable, such as innovation,
collaboration, leadership, or performance in a newly created Line-of-
Business which lacks complete financial information. The Discretionary
component can also be used to recognize contributions to. projects
that were unanticipated at the beginning of the plan year.
f) Funding Pool for Team and Individual Goals Components
A funding pool is established for the Team and Individual
Goals/Discretionary components at the appropriate national Line-of-
Business, Region, or national Staff Function level. For the purpose of
calculating funding pools and allocating awards, all participants are
assigned to the funding pool which most closely represents their
primary area of responsibility. Funding pool assignments normally will
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correspond with the national Line-of-Business, Region, or national
Function that has the largest weight of the earnings goal components.
The Full Performance level for each funding pool is calculated as the
aggregation of all components of the Full Performance Award subject to
the funding pool for each participant assigned to that pool. The
actual funding pool generated will be determined contingent upon the
degree to which the applicable national Line-of-Business, Region or
national Staff Function has achieved its primary Full Performance
Goal, as follows:
[_] less than the performance threshold, then the funding pool
is set at 50% of the full performance level;
[_] greater than the performance threshold, then the funding
pool is set equal to the percent of the Full Performance
Award for that financial component up to a maximum of 115%
of the Full Performance Award.
g) Earnings Adjustments
All Full Performance Earnings Goals and performance scores other than
BANC ONE EPS may be modified at any time by the Chairman or President
of BANC ONE CORPORATION. Adjustments to the BANC ONE EPS component
require the approval of the P&C Committee. These modifications are
generally used to adjust earnings measures for significant
unanticipated or nonrecurring gains or losses in income which do not
directly result from the efforts of management.
Award Calculation
The award percentage is determined by aggregating the weighted performance
scores for all plan performance components. Award dollars are then calculated by
multiplying the total actual performance achievement percent by the Full
Performance Achievement Award opportunity for each participant.
Below is an example of the year-end calculation process for a typical
performance achievement matrix. The circled scores represent year-end
performance achievement levels. As the example shows, the calculated PIP award
is $19,800.
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- --------------------------------------------------------------------------------
BANC ONE CORPORATION
1998 Performance Improvement Plan
Performance/Rewards Scorecard
- --------------------------------------------------------------------------------
III. Performance Measures / Results*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Incentive as a Percent of Full Performance Award
------------------------------------------------ Performance Award
Weight 60% 80% 100% 120% 140% Score Earned
------ --- --- ---- ---- ---- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings and Business Commitments
- ---------------------------------
BANK ONE EPS 20% $3.356 $3.451 $3.545 $3.640 $3.735 100% 20.0%
Line-of-Business** 20% N/A $412.9 $471.9 $530.9 $589.9 80% 16.0%
Team and Individual Goals***
- ----------------------------
Business Unit 20% N/A $46.6 %53.3 $59.9 $66.6 120% 24.0%
Specific Individual 20% 100% 20.0%
Discretionary 20% 95% 19.0%
-----
Weighted %: 99.0%
Full Performance Award: $20,000
Calculated Award: $19,800
Final Award $19,000
</TABLE>
* The Personnel and Compensation Committee of the Board of Directors may
adjust the score for any performance measure, including BANC ONE EPS, for
extraordinary items and other events as they deem appropriate.
** The performance score for this component drives Team and Individual Goals
Pooling funding.
*** Total awards from this segment allocated from the Team and Individual Goals
Funding Pool.
- --------------------------------------------------------------------------------
Windfall Provision
It is the intent of this plan is to generally recognize outstanding
contributions with uncapped incentive rewards. However, there may be instances
when the award calculated by the predetermined plan formula produces an award
that is out-of-balance with a participant's contribution to BANC ONE's success
or the awards of other similar participants. Therefore, the Chairman and
President explicitly reserve the right to reduce the amount of any award in
excess of 175% of the Full Performance Achievement Award regardless of the
predetermined formula calculation.
Final Award Determination
The Chairman and President approve final awards, based on the calculated award,
considering recommendations of senior management and other considerations.
Awards for the direct reports of the Chairman and President are approved by the
P&C Committee of BANC ONE CORPORATION.
Payment of Awards
At the end of each Plan Year, awards are computed for each participant. Payment
of awards are made as a payroll deposit, subject to applicable withholding, as
soon as practicable after year-end results are reviewed and individual awards
are approved. It is anticipated that awards for 1998 will be paid during the 1st
quarter of 1999. Participants must be employed by BANC ONE at the date of
payment to be eligible to receive any award.
Partial Year Participants
Employees added to the plan during the plan year are normally approved for a
Full Performance Award prorated to reflect the portion of the plan year during
which they will be a participant. The actual award paid will be determined based
on the prorated Full Performance Award. Participants removed from the plan
during the year are no longer entitled to any award, prorated or otherwise.
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Termination of Employment
In the event a participant's employment is terminated during the Plan Year due
to death or total and permanent disability (as determined by the Corporate
Compensation Committee), the participant's award is prorated to reflect the
partial year of participation. This proration is determined by multiplying the
award by a fraction, the numerator of which is the months of participation
through the date of termination rounded up to whole months and the denominator
of which is twelve (12). The participant's award is paid as soon as practicable
following the end of the Plan Year, to the Participant or pursuant to the
Beneficiary Designation. In the event of a participant's termination due to
normal retirement on December 31, the employee will receive his full earned
award. In the event a participant's employment is terminated for reasons other
than death, disability, or normal retirement on December 31, all rights to an
award for the Plan Year will be generally forfeited.
General Provisions
[_] The Plan may be modified, amended, or terminated at any time by the
Board of Directors. The existence of this Plan does not obligate or
bind BANC ONE CORPORATION or its related companies to pay an award to
any participant (or beneficiary ) nor does any participant (or
beneficiary) attain any vested, nonforfeitable right to an award until
the award has been finalized and approved for payment by the Board of
Directors.
[_] Any and all payments made under the Plan shall be subject to
applicable federal, state, FICA, or local taxes required by the law to
be withheld.
[_] If a participant has been designated to participate in the BANC ONE
Compensation Deferral Plan, an award or portion thereof granted under
the Plan may be deferred pursuant to the terms of that plan provided a
timely deferral election is made by the participant.
[_] Except as specifically provided herein, or as may otherwise be
required by law, no undistributed bonus amount payable to the
participant on the Plan may be sold, transferred, assigned, or
encumbered in whole or in part, by a participant, and any attempt to
do so alienate or subject any such amount shall be null and void.
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EXHIBIT 10(W)
Amended and Restated
BANC ONE CORPORATION
COMPENSATION DEFERRAL PLAN
PURPOSE
-------
The purpose of the BANC ONE CORPORATION Compensation Deferral Plan (the "Plan")
is to provide a means by which eligible Participants of the BANC ONE CORPORATION
Performance Improvement Plan or any specialized incentive compensation plan
designated by the Board of Directors or Plan Administrator may defer incentive
or base salary compensation.
Effective Date
This Plan was originally effective as of January 1, 1982. It was restated
effective October 1, 1994 and October 1, 1996 and October 1, 1997. This amended
and restated version of the Plan is effective May 1, 1998 unless otherwise
specifically indicated in provisions throughout the Plan.
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meaning stated herein,
unless the context clearly indicates otherwise.
Section 1.1 - Appeals Committee
A committee consisting of three (3) or more officers of the Company who shall be
appointed by the Chief Executive Officer of the Company to hear appeals of
denied employee, Participant, or Beneficiary benefit claims under the Plan,
provided that with respect to denied claims of an executive officer who has been
identified by the Company as an Insider, such Appeals Committee shall be the
Personnel and Compensation Committee of the Board.
Section 1.2 - Automatic Deferral Award
An award, specified as a deferred award, made from time to time under the Plan
by the Company and set forth in Schedule C, as annexed hereto and made a part
hereof, which will be payable to the Participant in future years upon the
satisfaction of conditions and requirements with respect thereto. The terms and
conditions of each such award shall be annexed hereto and made a part of
Schedule C.
Section 1.3 - Base Salary
The employee's annual base salary or wage rate with the Company or a Related
Company in effect any given point in time, prior to the application of any
salary deferrals to qualified or non-qualified
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plans sponsored by the Company or a Related Company.
Section 1.4 - Beneficiary
A person or persons designated by a Participant in accordance with provisions of
Section 3.8, to receive any death benefit which may be payable under this Plan
upon the death of said Participant.
Section 1.5 - Board
The Board of Directors of the Company.
Section 1.6 - Change of Control
(a) The acquisition by any individual, entity or group (within the meaning of
Section l3(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding Shares or (ii) the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or a Related Company or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of Subsection (c) of this Section 1.6; or
(b) Individuals who, as of October 1, 1997, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in which case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding Shares and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their
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ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
Section 1.7 - Committee
The Personnel and Compensation Committee of the Board which is comprised of two
or more non-employee Directors and which shall have the authority of said Board
with respect to this Plan.
Section 1.8 Company
BANC ONE CORPORATION.
Section 1.9 - Exchange Act
The Securities Exchange Act of 1934, as amended.
Section 1.10 - Incentive Compensation
The monetary award given to an employee under an Incentive Plan.
Section 1.11 - Incentive Plan
The BANC ONE CORPORATION Performance Improvement Plan(s) or any specialized
incentive compensation plan designated by the Board of Directors and as set
forth on Schedule A attached hereto and made a part hereof.
Section 1.12 - Insider
Any person who is required to file reports of his beneficial ownership of Shares
with the Securities Exchange Commission pursuant to Section 16(a) of the
Exchange Act.
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Section 1.13 - Participant
(a) Any person who satisfies the eligibility and participation requirements of
this Plan and who elects or has previously elected to defer compensation under
this Plan, or
(b) An officer who receives or has received an Automatic Deferral Award, or
(c) A participant under any Prior Plan from and after the effective date of
merger of said Prior Plan with and into the Plan.
Section 1.14 - Plan Administrator
BANC ONE CORPORATION.
Section 1.15 - Plan Year
The twelve (12) month period commencing on January 1 and ending the following
December 31.
Section 1.16 - Prior Plan
Any base salary or incentive compensation deferral plan of the Company, a
Related Company, or a predecessor or successor thereof, which has been merged
with and into this Plan as set forth from time to time on the attached Schedule
D which is made a part hereof.
Section 1.17- Related Company
A subsidiary or any entity which is a member of a common controlled group with
BANC ONE CORPORATION pursuant to Internal Revenue Code Section 1563(a)(1).
Section 1.18 - Shares
Common shares of BANC ONE CORPORATION, or any successor thereto.
ARTICLE II
PARTICIPATION
Section 2.1 - Eligibility
Any officer of the Company (a) who is designated by the Plan Administrator as a
participant in one or more Incentive Plans and (b) who is awarded compensation
under one or more Incentive Plans, or (c) who receives an Automatic Deferral
Award. In addition, such officer must also satisfy the following requirements
for purposes of deferring Incentive Compensation and/or Base Salary
Compensation, respectively: (a) for Incentive Compensation, Base Salary as of
December 31 of the preceding calendar year which equals or exceeds One Hundred
Twenty Five Thousand
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Dollars ($125,000), as indexed from time to time by the Company and/or (b) for
Base Salary Deferrals, Base Salary as of December 31 of the preceding calendar
year which equals or exceeds One Hundred Fifty Thousand Dollars ($150,000) or
such other limit as is in effect and adjusted from time to time pursuant to
Internal Revenue Code Section 401(a)(17); provided, however, that with respect
to any newly employed officer who was hired after December 31, such Base Salary
requirements applicable to the year of hire shall apply to the Base Salary in
effect and as of such officer's date of hire. The Plan Administrator shall
notify officers as to their eligibility to participate in either or both of the
deferral provisions under this Plan.
Section 2.2 - Conditions of Participation
An individual shall not become a Participant hereunder until he or she furnishes
within a reasonable time limit established by the Plan Administrator such
completed and executed elections, Beneficiary designations, consents and other
documents and information prescribed by the Plan Administrator. Each person upon
becoming a Participant shall be deemed conclusively, for all purposes, to have
assented to the terms and provisions of this Plan and shall be bound thereby.
Section 2.3 - Election To Defer and Automatic Deferral Awards
(a) Deferral of Annual Incentive Compensation. With respect to elections made
for calendar years prior to 1999 under Incentive Plans which make compensation
awards annually or less frequently than annually, a Participant may elect, on or
before December 31 of any calendar year, to authorize the Company to deduct and
withhold payment of any portion of his Incentive Compensation which he will earn
during the calendar year for which such election applies and for all succeeding
calendar years. Commencing for calendar years after 1998, such election must be
made on or before the date such award amount is determined, as provided by the
Plan Administrator, but not later than August 1st of the calendar year preceding
the year in which the award is made. Any such election shall remain in effect
until the earlier of the following events: (i) the Participant terminates his
election pursuant to Subsection 2.3(g) of this Plan, or (ii) the Participant
ceases to be an employee of the Company or a Related Company.
(b) Deferral of Incentive Compensation Awarded More Frequently than Annually.
With respect to Incentive Plans which award compensation more frequently than
annually, a Participant may elect on or before December 31 of any calendar year,
to authorize the Company to deduct and withhold payment of any portion of his
Incentive Compensation which he will earn during the calendar year for which
such election applies and for all succeeding calendar years; provided such
deferral may be limited by the Company to apply only to specified (which may be
less than all) payments of Incentive Compensation earned by the Participant
during the year as set forth on the attached Schedule B which is made a part
hereof. Commencing for calendar years after 1998, such election must be made on
or before the date such award amount is determined, as provided by the Plan
Administrator, but not later than August 1st of the calendar year preceding the
year in which the award is made. Any such election shall remain in effect until
the earlier of the following events: (i) the Participant terminates his election
pursuant to Subsection 2.3(g) of this Plan, or (ii) the Participant ceases to be
an employee of the Company or a Related Company.
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(c) Deferral of Base Salary Compensation. A Participant eligible to defer Base
Salary, may elect on or before December 31 of any calendar year, to authorize
the Company to deduct and withhold any portion of his Base Salary which he will
earn during the calendar year for which the election applies and for all
succeeding calendar years. The maximum amount which may be deferred under this
provision equals the amount by which the Participant's rate of Base Salary pay
(when annualized) exceeds $150,000 (or such other amount as in effect from time
to time pursuant to Internal Revenue Code Section 401(a)(17)). This subparagraph
(c) is effective December 31, 1996. Any such election shall remain in effect
until the earlier of the following events: (1) the Participant terminates his
election pursuant to Subsection 2.3(g) of this Plan, or (ii) the Participant
ceases to be an employee of the Company or a Related Company.
(d) Deferrals Pursuant to Company Stock Incentive Plan(s). To the extent that
the Committee has approved deferral of restricted stock or proceeds from stock
option exercises, an employee who has elected such deferral pursuant to the
terms and conditions established for such deferrals under long term stock
incentive plan(s) designated by the Company, will become a Participant upon the
effective date of the deferral and such deferral will automatically be held
pursuant to the terms of this Plan.
(e) Newly Eligible Officers. If an officer of the Company first becomes eligible
to participate in the Plan during a given calendar year, such officer may elect
to participate in the Plan and to defer his Incentive Compensation and Base
Salary compensation which he will receive or will earn, but has not yet
received, during the remainder of such calendar year and for all succeeding
calendar years, if he makes such election within thirty (30) days of becoming
eligible to participate in the Plan. Such election shall be made in accordance
with Subsections 2.2(a), (b) and (c) as applicable.
(f) Minimum Amounts. The minimum amount of such Compensation which may be
deferred under subparagraphs (a) and (b) is Five Thousand Dollars ($5,000).
(g) Timeliness of Election. Any such elections shall be made in such format
(including but not limited to approved forms or electronic data response) and in
the manner provided by the Plan Administrator. If a Participant who is eligible
to participate in this Plan fails to file (or fails to timely file) the forms(s)
or take any action required by the Plan Administrator to participate in this
Plan for a given Plan year, such person shall not be permitted to participate in
this Plan until the next open enrollment period applicable for the next calendar
year.
(h) Termination of Election. A Participant may terminate the election to defer
payment of Base Salary or Incentive Compensation under the Plan by written
notice delivered to the Plan Administrator. Such election shall become effective
as of the end of the calendar year in which said notice is given with respect to
compensation payable for subsequent calendar years. Amounts credited to the
Participant's account prior to the effective date of deferral cessation shall
not be affected thereby and shall be distributed pursuant to Section 3.1 of the
Plan.
(i) Automatic Deferral Awards. If a Participant is awarded an Automatic Deferral
Award, no election of or approval by the Participant shall be required with
respect thereto and such award will automatically be held pursuant to the terms
of this Plan and such award.
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Section 2.4 - Participant Directed Accounts
Incentive Compensation and Base Salary deferred at the election of a Participant
and Automatic Deferrals shall be held in the general funds of the Company and
shall be credited to an account established by the Company in the Participant's
name to which deferrals made in accordance with this Plan are credited. Except
with respect to any award for which Participant election is not applicable, each
Participant who chooses to participate in this Plan shall elect, on the form(s)
and in the manner prescribed by the Plan Administrator, to direct the investment
of his account in any of the alternative investment funds established by the
Board from time to time. With the exception of Automatic Deferral Awards which
specify the investment method, in the absence of an investment election made by
the Participant, all new deferrals and previously deferred funds for which the
selected investment fund has been eliminated by the Committee will be invested a
money market account. Participants may change their investment decisions in the
manner permitted by the Plan Administrator which shall be no less frequently
than quarterly. The Plan Administrator may, in its discretion, disregard the
investment directions of participants at any time and from time to time. Any
Participant, including an Insider, shall be permitted to elect to invest all or
any portion of the deferral amount to which such election applies in BANC ONE
CORPORATION capital stock as one of the investment options under the Plan.
However, no prior deferral amounts, or any part thereof, may be transferred by
an Insider into or out of capital stock of the Company without the express
approval of the Plan Administrator or the person(s) designated to administer the
Plan pursuant to Section 4.1 hereof. Such approval will be allowed when, in the
judgment of the Plan Administrator or such appointed person(s), such a transfer
of previously allocated funds will not (i) as a result of Discretionary
Transactions elected by the Insider (as that term is used in Rule 16b-3 of the
Securities and Exchange Commission) under the Plan and all other employee
benefit plans of the Company and Related Companies, subject such person to
potential liability under Section 16(b) of the Securities and Exchange Act of
1934; or (ii) subject such person or the Company to potential liability under
other Securities and Exchange Commission rules; or (iii) jeopardize or make less
likely the ability to properly account for a transaction in which the Company is
participating and which the Company wishes to account for as a pooling of
interests as a "pooling of interests".
Section 2.5 - Funding
The Plan shall be entirely unfunded and no provision shall at any time be made
with respect to segregating any assets of the Company or a Related Company for
payment of any benefit hereunder. No Participant, Participant's spouse or any
other person shall have any interest in any particular assets of the Company or
any Related Company by reason of the right to receive a benefit under the Plan,
and any such Participant, Participant1s spouse, or other person shall have only
the rights of a general unsecured creditor of the Company with respect to any
rights under the Plan. Nothing contained in the Plan shall constitute a guaranty
by the Company or other entity or person that the assets of the Company will be
sufficient to pay any benefit hereunder.
Section 2.6 - Statement of Accounts
At least once annually, the Plan Administrator shall furnish each Participant
with a written statement of his account setting forth the net income or loss of
the account; any administrative
7
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expenses charged to the account; all payments and distributions made from the
account; and such further information as the Plan Administrator deems
appropriate.
Section 2.7 - Exchange of Accounts for Options
Subject to Committee approval, a Participant may be provided the opportunity to
surrender any or all of his accounts under the Plan in exchange for options
under the BANC ONE CORPORATION Investment Option Plan. The Participant's
account(s) shall be valued for such purpose as of the day before the effective
date of the exchange. The opportunity to make such surrender and exchange shall
be made pursuant to the terms and conditions set forth by the Plan Administrator
and as approved by the Committee.
ARTICLE III
DISTRIBUTIONS
Section 3.1 - Timing of Distributions
Amounts credited to a Participant under the Plan and which are eligible for
distribution shall be distributed as soon as administratively feasible as
follows:
(a) On or after January 1st on or following the later of (i) the Participant's
retirement or termination of employment from the Company and (ii) the date the
Participant is no longer a statutory director, an emeritus director, an advisory
board member, or an honorary director of the Company or a Related Company;
(b) Upon the death of the Participant, in accordance with Section 3.4; or
(c) After an acceleration of benefits under Section 3.6;
(d) Upon receipt by the Plan Administrator of the Participant's written request
to receive all of his account; or
(e) After termination of this Plan in accordance with Section 5.1;
provided, however, that no distribution or payment shall be allowed hereunder
unless, in the judgment of the Plan Administrator or its appointees, such
distribution or payment will not constitute a Discretionary Transaction under
Securities and Exchange Commission Rule 16b-3 which will subject the Participant
to potential liability under Section 16(b) of the Exchange Act or jeopardize or
make less likely the ability to properly account for a transaction in which the
Company is participating and which the Company wishes to account for as a
"pooling of interests"; and
provided, further, that (i) any distribution made pursuant to Section 3.1(d)
shall be in a single
8
<PAGE>
lump sum which amount shall be 10% less than the total amount attributed to such
Participant's account, which 10% shall be withheld by and forfeited to the
Company, and (ii) the Participant making such request shall not be eligible to
defer Fees payable after the date of such election until on or after January 1
of the second calendar year following the year in which such Participant made
such election for distribution.
Section 3.2 - Form of Distributions
(a) Amounts credited to a Participant under the Plan which are eligible for
distribution shall be distributed in a lump sum payment or in annual
installments over a five- or ten-year period as the Participant has elected on
the form(s) and in the manner provided by the Plan Administrator. Any such
payment election shall continue in effect until the Participant elects a
different form of payment. All such elections must be made at least six (6)
months prior to the date of distribution. All distributions shall be made in
cash, except to the extent that amounts credited to the Plan pursuant to
Sections 2.3(e) and (i) are required to be distributed as shares of Company
common stock. The Participant's election regarding form of payment only applies
to those Participants who terminate employment due to retirement or disability.
If a Participant terminates employment for any other reason or if a Participant
fails to make such an election with respect to the amounts credited to his
account, such amount shall be paid in a lump sum.
(b) The first installment (or the lump sum payment if the Participant so elects)
shall be paid on the commencement date described above and subsequent
installments shall be paid as soon as administratively feasible after the first
business day of each succeeding calendar year until the entire amount credited
to the Participant's deferred account shall have been paid. During such time as
amounts credited to a Participant under the Plan continue to be held for the
Participant or the Participant's Beneficiary, such amounts shall continue to
share in appreciation and/or depreciation in accordance with the Participant's
investment elections and shall be charged administrative expenses as provided in
Section 4.2.
(c) Any Automatic Deferral Award or other special or incentive compensation held
under the Plan which, pursuant to the terms of such award, is subject to vesting
or the satisfaction of other conditions or requirements as specified in Schedule
C, shall not be eligible for distribution to the Participant pursuant to the
terms of this Article III until such vesting or other conditions have been
satisfied. Until such vesting or other conditions or requirements have been
satisfied pursuant to the terms of the applicable award, such award or the
proceeds thereof, in whatever form or fund invested, shall be subject to
forfeiture to the Company.
(d) The form and frequency of distribution being made from a Prior Plan at the
effective date of Plan merger will continue in effect provided that such
distribution is, in the sole discretion of the Plan Administrator, deemed to be
reasonably administratively feasible under the Plan and further provided that
the payment amount is determined in a manner approved by the Plan Administrator
pursuant to Section 3.3 of this Plan.
Section 3.3 - Cash Payments: Determination of Amount
All distributions to Participants shall be made in the form of cash, with
exception of those portions
9
<PAGE>
of the Participant's account which are invested in common stock of the Company
and which can or must be distributed in kind as provided in Schedule C. Subject
to Section 3.2, the amount to be distributed shall be determined based on the
fair market value of the balance eligible for distribution credited to the
Participant's account as of the close of business on last day of the calendar
month immediately preceding distribution or such later valuation date
immediately preceding the date of distribution if the accounts are valued more
frequently than monthly (i.e., daily), or in such other manner as is approved by
the Plan Administrator for Prior Plan payments.
Section 3.4 - payments in the Event of a Participant's Death
In the event a Participant dies before payments from the Participant's account
have commenced or after such payments have commenced but before the entire
amount credited to the Participant's account has been paid, all amounts credited
to the Participant's account which are eligible for distribution at the time of
the Participant's death, together with accumulated earnings thereon net of
charges for administrative expenses, shall be paid to the Beneficiary or
Beneficiaries described in Section 3.8, below, in a lump sum payment as soon as
administratively feasible after the Plan Administrator is notified of the
Participant's death unless the Participant has indicated on any beneficiary
designation forms an alternate manner of payment which is permitted by the Plan
Administrator.
Section 3.5 - Vesting
Each Participant is immediately one hundred percent (100%) vested in all amounts
credited to his account and any earnings thereon, except for those portions
which remain subject to the satisfaction of vesting or other requirements.
Section 3.6 - Acceleration of Benefits for Unforeseeable Emergencies
The Plan Administrator, with the approval of the Chief Executive Officer of the
Company, may accelerate the payment of any vested amounts eligible for
distribution held in any Participant's account in the case of unforeseeable
emergencies. An "unforeseeable emergency" is a severe financial hardship to the
Participant or Beneficiary resulting from a sudden and unexpected illness or
accident of the Participant or dependent of the Participant, loss of
Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. The circumstances which will constitute a "unforeseeable
emergency" will depend upon the facts of each case, but in any case, payment
will not be made to the extent that such hardship is or may be relieved: (a)
Through reimbursement or compensation by insurance or otherwise; (b)By
liquidation of the Participant's assets, to the extent the liquidation of such
assets would not itself cause severe financial hardships; or (c) By cessation of
deferrals under the Plan. "Unforeseeable emergency" will not include the need to
send the Participant's child to college or the desire to purchase a home. Any
early distributions made under this Section 3.6 will only be permitted to the
extent reasonably needed to satisfy the emergency needs.
No distribution or payment shall be allowed hereunder unless, in the judgment of
the Plan Administrator or its appointees, such distribution or payment will not
constitute a Discretionary
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<PAGE>
Transaction under Securities and Exchange Commission Rule 16b-3 which will
subject the Participant to potential liability under Section 16(b) of the
Exchange Act or jeopardize or make less likely the ability to properly account
for a transaction in which the Company is participating and which the Company
wishes to account for as a "pooling of interests".
Section 3.7 - Withholding and Deductions
All benefit payments made under the Plan to any Participant or Beneficiary shall
be subject to allocable withholding and to such other deductions as shall at the
time of such payment be required under any income tax or other law, whether of
the United States or any other jurisdiction, and delivery to the Plan
Administrator of all necessary documents. To the extent that the Company is
required to withhold any current taxes at the time of deferral of Incentive
Compensation, the deferral amount shall be reduced by the required taxes.
Determinations by the Plan Administrator as to withholding shall be binding on
the Participant and applicable Beneficiary(ies).
Section 3.8 - Beneficiary Designation
Each Participant who has a deferred account hereunder may from time to time
designate a Beneficiary(ies) to receive the amounts credited to the
Participant's account and eligible for distribution in the event of the
Participant's death prior to the time such account is distributed to the
Participant. Such designation shall be made pursuant to the procedures
established by the Plan Administrator and in a form satisfactory to the Plan
Administrator. Each proper designation of Beneficiary will revoke all previous
Beneficiary designations. The revocation of a Beneficiary designation, no matter
how effected, shall not require the consent of or notice to any designated
Beneficiary.
If any Participant fails to designate a Beneficiary in the manner provided
above, or if any Participant is not survived by such Beneficiary(ies), that part
of the Participant's account eligible for distribution shall be paid as follows:
(a) If the Participant is married, to the Participant's spouse;
(b) If the Participant is unmarried, to the Participant's estate.
Section 3.9 - Rights to Benefits
Nothing contained in this Plan is intended to give or shall give any spouse,
former spouse or Beneficiary of a Participant or any other person any right to
benefits under this Plan by virtue of Internal Revenue Code Sections 401(a)(11)
and 417 (relating to qualified pre-retirement survivor annuities) and qualified
joint and survivor annuities) or Internal Revenue Code Sections 401(a)(13)(B)
and 414(p) (relating to qualified domestic relations orders) as amended.
11
<PAGE>
ARTICLE IV
ADMINISTRATION
Section 4.1 - Administrative Powers and Duties
The Plan Administrator shall be responsible for the general operation and
administration of the Plan and for carrying out the provisions thereof. The
Chief Executive Officer of the Company may, in his discretion, appoint an
employee or employees or an administrative committee in writing to administer
the provisions of this Plan. The decision of the Plan Administrator with respect
to any questions arising as to the administration or interpretation of this
Plan, including the discontinuance of any or all of the provisions thereof,
shall be final, conclusive, and binding. If the Plan is administered by a
committee, such committee may act by a majority of its members by vote at a
meeting or in writing without a meeting signed by all the members of the
committee.
Section 4.2 - Expenses
Any cost or expense of administering the Plan shall be paid by the Company
and/or participating Related Companies. Notwithstanding the above, the Plan
Administrator may charge each Participant's account with the amount of
reasonable administrative expenses it determines, in its sole discretion, for
the cost of administering this Plan. Any such charges shall reduce the earnings
credited to the Participant's account and shall be applied in a uniform and
nondiscriminatory manner.
Section 4.3 - Records
The Plan Administrator shall keep such records of such information, as shall be
proper, necessary or desirable to effectuate the purposes of the Plan, including
without in any manner limiting the generality of the foregoing, records and
information with respect to deferral elections, Participant accounts, dates of
employment and termination and determinations made hereunder. To the extent that
the Plan Administrator shall prescribe forms for use by the Participants and
their Beneficiaries in communicating with the Plan Administrator and shall
establish periods during which communications may be received, the Plan
Administrator shall be protected in disregarding any notice or communication for
which a form shall so have been prescribed and which shall not be made in such
form and any notice or communication for the receipt of which a period shall so
have been established and which shall not be received during such period. The
Company, the Plan Administrator and the Appeals Committee shall respectively
also be protected in acting upon any notice or other communication purporting to
be signed by any person and reasonably believed to be genuine and accurate,
including the Participant's current mailing address.
Section 4.4 - Determinations
All determinations hereunder made by the Plan Administrator or the Appeals
Committee shall be made in the sole and absolute discretion of the Plan
Administrator or Appeals Committee, as the case may be.
12
<PAGE>
Section 4.5 - Claims Procedure
The Plan Administrator shall have discretion regarding benefit determinations.
If required by the Plan Administrator, any person entitled to benefits hereunder
must file a claim with the Plan Administrator upon forms furnished by the Plan
Administrator. Notwithstanding any other provision of this Plan, payment of
benefits need not be made until receipt of the claim and the expiration of the
time periods specified in this Section 4.5 for rendering a decision on the
claim. In the event a claim is denied, benefits need not be made or commence
until a final decision is reached by the Appeals Committee subject to the
provisions of Section 4.6.
The Plan Administrator shall notify the claimant of its decision within ninety
(90) days after receipt of the claim. However, if special circumstances require,
the Plan Administrator may defer action on a claim for benefits for an
additional period not to exceed ninety (90) days, and in that case it shall
notify the claimant of the special circumstances involved and the time by which
it expects to render a decision.
If the Plan Administrator determines that any benefits claimed should be denied,
it shall give notice to the claimant setting forth the specific reason or
reasons for the denial and provide a specific reference to the Plan provisions
on which the denial is based. The Plan Administrator shall also describe any
additional information necessary for the claimant to perfect the claim and
explain why the information is necessary. Such claimant shall be entitled to
full and fair review by the Appeals Committee of the denial.
Section 4.6 - Appeal and Review Procedure
If a claim has been denied by the Plan Administrator, the claimant shall have
sixty (60) days after receipt of the denial in which to file a notice of appeal
with the Plan Administrator. A final determination by the Plan Administrator
shall be rendered within sixty (60) days after receipt of the claimant's notice
of appeal. Under special circumstances such determination may be delayed for an
additional period not to exceed sixty (60) days, in which case the claimant
shall be notified of the delay prior to the close of the initial sixty (60) day
period. The Appeals Committee's final decision shall set forth the reasons and
the references to the Plan provisions on which it is based.
Section 4.7 - Facility of Payment
Whenever a person entitled under the Plan to receive any payment of a benefit,
or installment thereof, is under a legal disability or incapacity or is in any
way unable to manage his financial affairs, the Plan Administrator may, in its
discretion, direct payments on behalf of such person to be made to the
incapacitated person's legal representative, custodian, relative, or other such
individual(s) as is (are) known by the Plan Administrator to be assisting such
person. Such decision by the Plan Administrator shall be made after consultation
with those persons, if any, which may include legal counsel and/or medical
personnel, which the Plan Administrator in his sole discretion determines are
necessary in order to make such decision. Any payment of a benefit or
installment thereof in accordance with the provisions of this Section 4.7 shall
be a complete discharge of any liability relating to the making of or
entitlement to such payment under the provisions of the Plan.
13
<PAGE>
Section 4.8 - Action by the Company
Any action by the Company under this Plan may be by resolution of its Board, or
alternatively, by the Committee, or by any person or persons, duly authorized by
resolution of said Board to take such action.
Section 4.9 - Exemption from Liability/Indemnification
The members of the Appeals Committee and the persons acting on behalf of the
Plan Administrator, shall be free from all liability, joint or several, for
their acts, omissions, and conduct, and for the acts, omissions and conduct of
their duly appointed agents, in the administration of the Plan, except for those
acts or omissions and conduct resulting from willful misconduct or lack of good
faith.
The Company shall indemnify each member of the Appeals Committee, the persons
acting on behalf of the Plan Administrator and any other employee, officer or
director of the Company against any claims, loss, damage, expense and liability,
by insurance or otherwise, reasonably incurred by the individual in connection
with any action or failure to act by reason of membership on the Appeals
Committee or performance of an authorized duty or responsibility for or on
behalf of the Company pursuant to the Plan unless the same is judicially
determined to be the result of the individual's gross negligence or willful
misconduct. Such indemnification by the Company shall be made only to the extent
such expense or liability is not payable to or on behalf of such person under
any liability insurance coverage. The foregoing right to indemnification shall
be in addition to any other rights to which any such person may be entitled as a
matter of law.
Section 4.10 - Non-Assignability
No right or benefit under the Plan shall be subject to anticipation, alienation,
sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, assign, sell, pledge, encumber or charge the same shall be void.
The Plan shall not in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person entitled to benefits
hereunder.
ARTICLE V
AMENDMENT OR TERMINATION
Section 5.1 - Amendment or Termination
The Company, through action of the Board, or alternatively, the Committee, may
amend or terminate this Plan at any time. In the event of a termination, the
Company in its sole discretion may accelerate payment of Plan benefits to those
Participants participating in the Plan on the date of such termination, to the
extent such benefits would be otherwise payable as defined in Section
14
<PAGE>
3.1 determined on the basis that each Participant's presumed termination date
was the date the Plan was terminated.
Section 5.2 - Transfer Between Related Companies
In the event that a Participant's employment is transferred from the Company or
a Related Company to another Related Company or from a Related Company to the
Company, the transfer shall not adversely affect the administration of amounts
then credited to the Plan account(s) of such Participant on or as of the date of
transfer.
Section 5.3 - Change of Control
The Plan shall not be automatically terminated upon a Change of Control if;
following the Change of Control, the Company, its successor or purchaser is
obligated to pay, or continue to pay, Plan benefits to those Participants
participating in the Plan on the date of such Change of Control, to the extent
such benefits would be otherwise payable as defined in Section 3.1.
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 - Offset to Benefits
Notwithstanding any provisions of the Plan to the contrary, the Company may, at
the time of distribution in its sole and absolute discretion, enforce the right
to offset against any amounts to be paid to a Participant under the Plan against
any debt of the Participant which has been reduced to judgment in favor of the
Company.
Section 6.2 - Construction
In the construction of the Plan, the masculine shall include the feminine and
the singular the plural where such meanings would be appropriate.
Section 6.3 - Controlling Law
The laws of the State of Ohio shall be controlling in all matters relating to
the Plan and shall be controlling state law in all matters relating to the Plan
and shall apply to the extent that it is not preempted by the laws of the United
States of America.
Section 6.4 - Effect of Invalid Provisions
If any provision of this Plan is held invalid or unenforceable for any reason,
such invalidity or unenforceability shall not effect any provisions hereof, and
the remaining provisions of this Plan shall be construed and enforced as if such
provisions had not been included.
15
<PAGE>
Section 6.5 - ERISA Status
This Plan shall constitute a plan which is unfunded and which maintained
primarily for the purpose of providing deferred compensation benefits for a
select group of management or highly compensated employees within the meaning of
Sections 202, 301, and 401 of ERISA and the ERISA reporting and disclosure
regulations.
IN WITNESS WHEREOF, BANC ONE CORPORATION has caused this Plan to be adopted and
effective as first set forth above.
Date: November 2, 1998 BANC ONE CORPORATION
----------------
Attest: /s/ Phyllis J. Kohli By:/s/ Steven A. Bennett
-------------------- ---------------------
Steven A. Bennett
Senior Vice President and Secretary
16
<PAGE>
SCHEDULE A
BANC ONE CORPORATION COMPENSATION
DEFERRAL PLAN
1. BANC ONE CORPORATION Performance Improvement Plans (PIP) (formerly known as
the BANC ONE CORPORATION Key Management Incentive Compensation Plan).
2. Banc One Capital Corporation Annual Incentive Plan
3. BANC ONE CORPORATION EVA Plan(s)
4. Banc One Investment Management Group Institutional Asset Management Incentive
Plan
5. Banc One Investment Management Group Institutional Sales Executive Incentive
Plan
6. Revised and Restated BANC ONE CORPORATION 1995 Stock Incentive Plan
17
<PAGE>
SCHEDULE B
BANC ONE CORPORATION COMPENSATION
DEFERRAL PLAN
1. Banc One Capital Corporation Quarterly Incentive Plan (4th quarter payment
only)
2. Banc One Capital Corporation Semi-Annual Incentive Plan (second portion of
semiannual payment only)
18
<PAGE>
SCHEDULE C
BANC ONE CORPORATION COMPENSATION
DEFERRAL PLAN
Special Provisions Relating To Automatic Deferral Awards
Section 1 - Special Recognition Awards Granted October 22, 1997
On October 22, 1997, BANC ONE CORPORATION ("BANC ONE") granted "Special
Recognition Awards" ("Awards") to 11 executive officers to recognize the role
and contribution of BANC ONE's line-of-business CEOs and to reward extraordinary
contributions made to BANC ONE's restructuring efforts. The amount of each Award
was determined in accordance with criteria approved by BANC ONE's Board of
Directors. The Awards, based upon initial cash amounts, were made in the form
of BANC ONE stock units and are held in the recipient's account in the BANC ONE
CORPORATION Compensation Deferral Plan (the "Plan"). The value of the stock
units will reflect both changes in the price of BANC ONE common stock and
accrued dividends thereon. All Awards shall vest on the earlier of October 22,
2000 or the death or disability of the participant (assuming, in each case, that
the participant is employed by BANC ONE on such date), except in the case of an
Award granted to one participant which was fully vested as of the date it was
granted. Upon vesting, a participant may exchange his BANC ONE stock units into
any of the other investment options available to such participant under the
Plan. A participant will be entitled to a distribution of the cash value of his
vested Award under the terms and conditions set forth in the Plan.
Section 2 - Special Recognition Awards Granted April 21, 1998
On April 21, 1998, BANC ONE CORPORATION ("BANC ONE") granted "Special
Recognition Awards" ("Awards") to 2 executive officers to reward extraordinary
contributions made to BANC ONE's restructuring efforts and to provide
competitive compensation while maximizing shareholder return by minimizing
corporate tax expense under Internal Revenue Code Section 162(m). The amount of
each Award was determined in accordance with criteria approved by BANC ONE's
Board of Directors. The Awards, based upon initial cash amounts, are held in the
recipient's account in the BANC ONE CORPORATION Compensation Deferral Plan (the
"Plan") and invested in accordance with the participant's elections made
pursuant to the Plan, with the exception that the Awards may not be invested in
the BANC ONE Stock Fund. The Awards shall vest on the earlier of April 21, 2001
or upon termination of employment due to the death or total and permanent
disability of the participant (assuming, in each case, that the participant is
employed by BANC ONE on such date). A participant will be entitled to a
distribution of the cash value of his vested Award under the terms and
conditions set forth in the Plan.
19
<PAGE>
SCHEDULE D
BANC ONE CORPORATION COMPENSATION DEFERRAL PLAN
Special Provisions Relating To Prior Plan Mergers
Merger Date Plan Name/Sponsor Special Provisions
- ----------- ----------------- ------------------
March 13, 1998 Metropolitan Bancorp Deferred Incentive Participants
Incentive Compensation Plan terminating
employment prior
to the merger
date may elect
installment
payments under the
Plan.
March 13, 1998 Metropolitan Bancorp, Inc. Excess None
Savings Plan
March 13, 1998 Metropolitan Bancorp, Inc. Special None
Deferral Agreement
March 13, 1998 Liberty National Bancorp, Inc. and None
Amended Restated Management Compensation
Plan.
20
<PAGE>
EXHIBIT 10(X)
Version used for participants with a policy date of 11-1-98
BANC ONE
EXECUTIVE LIFE INSURANCE PLAN
SPLIT DOLLAR INSURANCE AGREEMENT
THIS SPLIT DOLLAR INSURANCE AGREEMENT ("this Agreement"), made this 1st day of
November, 1998 by and between BANC ONE CORPORATION and [NAME] (the
"Participant").
W I T N E S S E T H:
WHEREAS, BANC ONE CORPORATION has adopted the BANC ONE Executive Life
Insurance Plan ("Plan") for the benefit of certain employees in order to assist
those employees in providing a death benefit for their beneficiaries;
WHEREAS, the Company and the Participant desire to enter into this Split
Dollar Insurance. Agreement to set forth the terms and conditions under which
the Participant will acquire and the parties will maintain life insurance
protection on the life of [NAME] (the "Employee") pursuant to the Plan;
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, and intending to be legally bound hereby, the Company and the
Participant agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings:
-----------
(a) "Cause" means the termination of the Employee's employment with the
Company or a Related Company for any one or more of the following reasons: (l)
embezzlement or theft from the Company or a Related Company, or other acts of
dishonesty or disloyalty injurious to the Company or a Related Company; (2) use
by the Employee of alcohol, drugs, narcotics, or other controlled substances to
such an extent that the Employee's ability to perform his duties as an employee
of the Company or a Related Company is materially impaired; (3) disclosing
without authorization proprietary or confidential information of the Company or
a Related Company; (4) committing any act of gross negligence or gross
malfeasance; (5) conviction of a crime amounting to a felony under the laws of
the United States of America or any of the several states; or (6) removal from
office by order of the Comptroller of the Currency, Federal Reserve Board, or
other appropriate agency. The determination of whether there has been a
termination for cause shall be made by the Company.
(b) "Company" means BANC ONE CORPORATION, an Ohio corporation, which has
its principal place of business in Columbus, Ohio, and any organization that is
a successor thereto.
(c) "Disability" means a condition which renders an Employee Disabled as
defined in the BANC ONE CORPORATION Long-Term Disability Plan, as amended from
time to time.
(d) "Early Retirement" means an Employee's retirement prior to attaining
age 65 and upon or after attaining age 55 with at least 10 years of Service (as
defined by the BANC ONE CORPORATION Retirement Plan) with the Company or a
Related Company.
<PAGE>
(e) "Insurer" means the insurance company described in Schedule A to this
Agreement.
(f) "Policy" means the life insurance policy or policies insuring the life
of the Employee as described in Schedule A of this Agreement. If more than one
policy is described in Schedule A, except as otherwise specifically promised in
this agreement, all such policies will be collectively treated as one policy for
purposes of this Agreement; provided, however, the Company may require a
separate Collateral Assignment for each policy pursuant to Section 4 of this
Agreement.
(g) "Related Company" means any employer that is a corporation included
with BANC ONE CORPORATION in a "controlled group of corporations," as defined in
Code section 414(b), or an unincorporated business included with BANC ONE
CORPORATION in a group of trades or businesses under "common control," as
defined by regulations prescribed by the Secretary of the Treasury under Code
section 414(c).
(h) "Term Cost" means, as of the initial date of the Policy and upon each
anniversary thereafter, an amount equal to the annual cost of current life
insurance protection payable to the Participant's beneficiary under the Policy
measured by the lesser of (1) the P.S. 58 rates as published by the Internal
Revenue Service or (2) the Insurer's term rates effective on July 1, 1998.
2. APPLICATION FOR INSURANCE; OWNERSHIP OF THE POLICY. The Participant
--------------------------------------------------
shall apply to the Insurer for issuance of a life insurance policy or policies
insuring the Employee's life and in such amount as determined by the Company.
When the Policy is issued, the policy number(s) and initial face amount(s) shall
be recorded on Schedule A. The Participant shall be the sole owner of the
Policy and, subject to this Agreement and the Collateral Assignment, may
exercise all ownership rights which the Policy grants to the policy owner.
Except as otherwise provided in Section 3(c) of this Agreement, policy dividends
shall be applied to purchase paid-up additional insurance protection. The
Company's obligations under this Agreement are expressly conditioned on issuance
of the Policy upon such underwriting classification and premium amount as are
acceptable to the Company in the exercise of its sole and absolute discretion.
3. PREMIUM PAYMENTS.
----------------
(a) Except as otherwise provided in this Agreement, the Company and the
Participant shall each pay a portion of each premium due on the Policy. Each
premium on the Policy shall be paid by the Company as it becomes due. Following
each premium payment by the Company, the Participant shall reimburse the Company
in an amount equal to the Term Cost.
(b) Notwithstanding the foregoing, during the term of this Agreement the
Company shall pay the portion of the annual premium described in Subsection (a)
of this Section 3 for the number of years stated in Item 3 of Schedule A,
commencing with the premium for the initial policy year.
(c) If the Company is not obligated to pay a portion of the premium on the
Policy for any policy year during the term of this Agreement, the Participant
shall pay such premium. The Participant may pay such premium either in cash or
by the application of policy dividends and/or surrenders of values. Provided,
however, the Participant agrees not to pay such premium by the application of
policy dividends or surrender of values if the Company's Policy Interest (as
described in Subsection 5(a) below) is reduced thereby.
2
<PAGE>
4. COLLATERAL ASSIGNMENT. To secure the Participant's reimbursement to
---------------------
the Company of the amount of premiums the Company pays on the Policy pursuant to
this Agreement, the Participant shall, upon issuance of the Policy, assign the
Policy to the Company as collateral by way of an agreement (the "Collateral
Assignment"), being in such form as the Company requires and granting to the
Company the limited rights in and to the Policy specified therein. All rights
in and to the Policy not granted to the Company by the Collateral Assignment or
this Agreement, including but not limited to the right to designate and change
the beneficiary of that portion of the Policy proceeds to which the Participant
is entitled, shall be retained by the Participant. The Collateral Assignment is
intended only to grant to the Company a security interest in the Policy and this
security interest shall not be interpreted in any way to include any incidents
of ownership, except as provided in this Agreement and the Collateral
Assignment. The Collateral Assignment shall not be canceled, altered or amended
except as provided in this Agreement.
5. POLICY INTERESTS.
----------------
(a) Company's Policy Interest. The Policy interests described in this
-------------------------
Subsection 5(a) shall be referred to as the "Company's Policy Interest."
(1) In the event of the surrender or cancellation of the Policy
during the term of this Agreement, the Company's Policy Interest is limited to
its right to recover a portion of the cash value equal to the lesser of (i) the
cumulative amount of premiums on the Policy paid by the Company reduced by
premiums reimbursed to it by the Participant or (ii) the entire Policy cash
value.
(2) Upon termination of the Plan prior to the third Policy
anniversary, the Company shall have the sole right at its election pursuant to
the terms of the Policy to change the Policy to a term policy and receive a
refund of premiums paid less the cost of the change.
(3) Upon the Employee's death during the term of this Agreement, the
Company's Policy Interest is the greater of (i) the entire death benefit payable
under the Policy reduced by the death benefit payable to the Participant's
beneficiary as provided in Subsection 5(b)(2) or (ii) an amount equal to the
cumulative amount of premiums on the Policy paid by the Company reduced by
premiums reimbursed to it by the Participant.
(b) Participant's Policy Interest. The Policy interests described in this
-----------------------------
Subsection 5(b) shall be referred to as the "Participant's Policy Interest."
(1) In the event of the surrender or cancellation of the Policy
during the term of this Agreement, the Participant's Policy Interest shall be
the entire Policy cash value minus the Company's Policy Interest described in
Subsection 5(a)(l) above.
(2) Upon the Employee's death during the term of this Agreement, the
Participant's Policy Interest payable to the Participant's beneficiary is the
lesser of (i) the Participant's Death Benefit specified in Schedule A payable in
the policy year of the Employee's death or (ii) the entire death benefit payable
under the Policy reduced by the excess of the cumulative amount of premiums on
the Policy paid by the Company over premiums reimbursed to it by the
Participant.
(c) Any payments made under the Policy to the Company in connection with
the rights granted to the Company pursuant to this Agreement shall first be made
from the Policy's cash value attributable to the paid-up additional life
insurance purchased by dividends payable under the Policy. The Participant
shall have no interest in the paid-up additional life insurance protection
except to the extent the death
3
<PAGE>
benefit or cash value thereof exceeds the Company's Policy Interest. Neither the
Company nor the Participant shall have the right to obtain policy loans without
in each case obtaining the express written consent of the other party.
(d) If the Employee dies during the first two years after the Policy
issued under the Plan is in force, and any material misrepresentation was made
in the policy application that would have resulted in a different classification
or rating or in insurance not being accepted, and if a claim for benefits under
the Policy is denied, then no payments will be made hereunder to the Participant
or his beneficiary and the Agreement shall terminate.
6. TERMINATION OF AGREEMENT.
------------------------
(a) This Agreement shall terminate without notice no later than sixty (60)
days after the occurrence of any of the following:
(l) The expiration of the number of Policy years stated in item 4,
Schedule A as measured from the initial date of the Policy;
(2) Failure of the Participant either to pay his share of a premium
or to reimburse the Company for the Participant's share of a premium pursuant to
Section 3;
(3) Termination of the Employee's employment with the Company or a
Related Company or any successor thereto for any reason other than (A) Early
Retirement, (B) upon or following the Employee's attainment of age 65, or (C)
Disability; provided, however, that in its sole and absolute discretion the
Company may elect to continue this Agreement.
(4) Termination of the Plan by the Company.
Notwithstanding any other provision in this Subsection 6(a), this Agreement
shall terminate upon the Employee's termination of employment for Cause.
(b) (l) Except as provided in Paragraph 6(b)(2), upon occurrence of any
of the events described in Paragraphs 6(a)(l) through (4) above or upon
termination for Cause, the Participant shall have the right to pay to the
Company within sixty (60) days following the date of such occurrence an amount
equal to the Company's Policy Interest. Upon receipt of such amount by the
Company this Agreement shall terminate and the Company shall promptly execute
and deliver to the Participant an appropriate instrument releasing any and all
rights of the Company under the Collateral Assignment so that all rights under
the Policy thereafter inure to the Participant. If the Participant fails to
timely repay the Company's Policy Interest within 60 days, then the Company
shall refund to the Participant all payments made by the Participant to the
Company or the Insurer for the unexpired portion of the premium payment period
in which the termination of the Agreement occurred, and thereafter the
Participant shall within 5 days execute any and all instruments required to vest
sole ownership of the Policy in the company. The Participant shall thereafter
have no further interest in the Policy and will be deemed to have satisfied all
obligations for the repayment of any and all of the Company's Policy Interest.
(2) Upon termination of the Plan by the Company prior to the third
Policy anniversary and the Company's exercise of its right pursuant to
Subsection 5(a)(2) to change the Policy to a term policy and receive a refund of
premiums paid less the cost of the change, the Participant shall promptly
execute any and all instruments required to vest sole ownership of the Policy in
the Company and shall thereafter
4
<PAGE>
have no further interest in the Policy and will be deemed to have satisfied all
obligations for the repayment of any and all of the Company's Policy interest.
7. ASSIGNMENT.
----------
(a) The Participant may at any time transfer or assign his interest in the
Policy and his rights and obligations under this Agreement to a third party or
parties. Upon any such transfer, all of the Participant's interest in the
Policy and rights and obligations under this Agreement and the Collateral
Assignment shall be vested in the transferee or transferees, who shall be
substituted for the Participant as a party or parties hereto, and the
Participant shall have no further interest in the Policy or rights under this
Agreement.
(b) The Company may assign its rights, interest and obligations under this
Agreement; provided, however, any such assignment shall be subject to the terms
of this Agreement; and provided further, however, the Company shall remain
liable to discharge its obligations under this Agreement.
8. ERISA. The following provisions are part of this Agreement and are
-----
intended to meet the requirements of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). This Plan is a "welfare plan" under ERISA. This
Agreement (including the Schedules) constitutes a summary plan description under
ERISA.
(a) Plan Name: BANC ONE Executive Life Insurance Plan
---------
(b) Plan Number: 511
-----------
(c) Plan Year: January l - December 31
---------
(d) Employer: BANC ONE CORPORATION, Attention Corporate Personnel, 100
--------
East Broad Street, Columbus, Ohio 43271, telephone (614) 248-6346, Federal Tax
ID #31-0738296.
(e) Plan Administrator: BANC ONE CORPORATION, 100 East Broad Street,
------------------
Columbus, Ohio 43271-0161, telephone (614) 248-6346.
(f) Agent for Service of Legal Process: BANC ONE CORPORATION, Attention
----------------------------------
Steven A. Bennett, 100 East Broad Street, Columbus, Ohio 43271-0158 (Service of
process may also be made on the Plan Administrator).
(g) Eligibility Requirements: You are eligible to participate in the Plan
------------------------
if you are an employee of BANC ONE CORPORATION or a Related Company and are
designated as eligible to participate by the Chief Executive Officer of the
Company or such other person(s) as he may designate from time to time.
(h) Claims: For claims procedure purposes, the "Claims Manager" shall be
------
the Plan Administrator and such other persons as may be designated from time to
time in writing by the Chief Executive Officer of BANC ONE CORPORATION.
(1) If for any reason a claim for benefits under this Agreement is
denied, in whole or in part, the Claims Manager shall deliver to the claimant a
written explanation setting forth the specific reasons for the denial, pertinent
references to the section of the Agreement, the Policy, the Collateral
Assignment, or the Plan on which the denial is based, such other data or
information as may be pertinent
5
<PAGE>
for the claimant to perfect his claim and information on the procedures to be
followed by the claimant in obtaining a review of the claim, all written in a
manner calculated to be understood by the claimant. For this purpose:
(i) The claimant's claim shall be deemed filed when presented
orally or in writing to the Claims Manager.
(ii) The Claims Manager's explanation shall be in writing
delivered to the claimant within ninety (90) days of the date the claim is filed
(plus an additional 90 days if required for processing provided notice of the
additional 90-day extension of time, indicating the specific circumstances
requiring the extension and the day by which a decision shall be rendered, is
given to the claimant within the first 90-day period). If a claimant does not
receive a decision within such 90-day or 180-day period, as the case may be, the
claim shall be deemed to have been denied in full.
(2) The claimant shall have sixty (60) days following receipt of the
denial of the claim to file with the Claims Manager a written request for review
of the denial. For such review, the claimant or the claimant's representative
may submit pertinent documents and written issues and comments.
(3) The Appeals Committee (a committee consisting of three (3) or
more officers of the Company or a Related Company who shall be appointed by the
Chief Executive Officer of the Company to hear appeals of denied claims;
provided that with respect to denied claims of an executive officer of the
Company, such Appeals Committee shall be the Personnel and Compensation
Committee of the Board of Directors of the Company) shall decide the issue on
review and furnish the claimant with a copy of the decision within sixty (60)
days of receipt of the claimant's request for review of the claim unless special
circumstances require an extension of time, in which case such decision shall be
rendered not later than 120 days after receipt of the request. If an extension
of time for review is required, written notice of the extension shall be
furnished to the claimant prior to the commencement of the extension. The
decision on review shall be in writing and shall include specific reasons for
the decision written in a manner calculated to be understood by the claimant, as
well as specific references to the pertinent provisions of the Agreement, the
Policy, the Collateral Assignment, or the Plan on which the decision is based.
If a copy of the decision is not so furnished to the claimant within such sixty
(60) days or 120 days, as the case may be, the claim shall be deemed denied on
review. To the extent permitted by applicable law, the decision of the Claims
Manager and the Appeals Committee shall be final and binding upon all parties.
(i) ERISA Rights: The Employee is entitled to certain rights and
------------
protections under ERISA. ERISA provides that all participants shall be entitled
to:
Examine, without charge, at the plan administrator's office and
at other specified locations, all plan documents, including insurance contracts,
and copies of all documents filed by the plan with the U.S. Department of Labor,
such as detailed annual reports and plan descriptions.
Obtain copies of all plan documents and other plan information
upon written request to the plan administrator. The administrator may make a
reasonable charge for the copies.
In addition to creating rights for plan participants, ERISA
imposes duties upon the people who are responsible for the operation of the
employee benefit plan. The people who operate your plan, called "fiduciaries" of
the plan, have a duty to do so prudently and in the interest of you and other
plan participants and beneficiaries. No one, including your employer or any
other person, may fire you or
6
<PAGE>
otherwise discriminate against you in any way to prevent you from obtaining a
benefit or exercising your rights under ERISA.
Under ERISA, there are steps you can take to enforce the above
rights. For instance, if you request materials from the plan and do not receive
them within 30 days, you may file suit in a federal court. In such a case, the
court may require the plan administrator to provide the materials and pay you up
to $100 a day until you receive the materials, unless the materials were not
sent because of reasons beyond the control of the administrator. If you have a
claim for benefits which is denied or ignored, in whole or in part, you may file
suit in a state or federal court.
If it should happen that plan fiduciaries misuse the plan's
money, or if you are discriminated against for asserting your rights, you may
seek assistance from the U.S. Department of Labor, or you may file suit in a
federal court. The court will decide who should pay court costs and legal fees.
If you are successful, the court may order the person you have sued to pay those
costs and fees. If you lose, the court may order you to pay these costs and
fees, for example, if it finds your claim is frivolous.
If you have any questions about your plan, you should contact the
plan administrator. If you have any questions about this statement or about your
rights under ERISA, you should contact the nearest Area Office of the U.S.
Labor-Management Services Administration, Department of Labor.
9. ENTIRE AGREEMENT; AMENDMENT. The Plan is made a part hereof and is
---------------------------
incorporated herein by reference. The Plan, this Agreement and the Collateral
Assignment and any written amendments thereto contain all the terms and
provisions of the parties' rights and obligations relating to the subject hereof
and shall constitute the entire agreement of the parties, any other alleged
terms or provisions being of no effect. Neither this Agreement nor the
Collateral Assignment may be amended or modified except by a written instrument
signed by all parties hereto.
10. LIABILITY OF COMPANY. The benefits provided by the Insurer shall be
--------------------
governed by the terms of the Policy. All such benefits are provided solely by
the insurer and are subject to the Insurer's ability to pay benefits. The
Company does not guarantee the Insurer's payments under the Policy.
11. BINDING EFFECT. This Agreement is binding upon and inures to the
--------------
benefit of the Company and any successor or transferee, the Participant (and the
Participant's heirs, executors, administrators and transferees), and any Policy
beneficiary.
12. MERGER OR CONSOLIDATION. In the event of a merger or a consolidation
-----------------------
by BANC ONE CORPORATION with another corporation, or the acquisition of
substantially all of the assets or outstanding stock of BANC ONE CORPORATION by
another corporation, then and in such event the obligations and responsibilities
of BANC ONE CORPORATION under this Agreement shall be assumed by any such
successor or acquiring corporation, and all of the rights, privileges and
benefits of the Participant under this Agreement shall continue.
13. NO EMPLOYMENT AGREEMENT. This Agreement is not an employment
-----------------------
agreement and nothing in this Agreement changes or in any way affects the
Company's or a Related Company's rights to terminate the Employee's employment.
7
<PAGE>
14. NO GUARANTEE OF ANY PARTICULAR TAX RESULTS. Neither the Company nor
------------------------------------------
any of its agents, consultants or advisors guarantee any particular income tax
treatment of this Agreement, the Collateral Assignment, the Plan, and the
Policy. The Participant acknowledges that while the Agreement is in effect the
Employee is subject to income taxation each year on the excess, if any, of the
value of the economic benefit attributable to the life insurance protection
provided to the Participant under this Agreement over the Participant's premium
payment for such year. The Participant also acknowledges that although the
Policy is designed not to be or become a Modified Endowment Contract ("MEC") as
defined in Section 7702A of the Internal Revenue Code of 1986, it may
nevertheless be or become a MEC. Under a MEC, cash withdrawals and Policy loans
are taxed to the extent there are earnings in the Policy, and may be subject to
an additional tax. The Participant represents that the Participant has
consulted with such attorneys and other advisors as the Participant deems
necessary and has not relied and does not rely upon the Company's advice or
statements in entering into this Agreement.
15. PARTICIPANT'S INTEREST IS EXEMPT FROM CREDITORS (TO THE EXTENT
--------------------------------------------------------------
PERMITTED BY LAW). Subject to the terms and conditions of the Collateral
- -----------------
Assignment and to the extent enforceable under applicable law, neither the
Participant's interest in the Policy and this Agreement nor any part thereof is
subject in any manner to (a) any claims of any creditor of the Participant or
the Company, (b) the debts, contracts, liabilities or torts of the Participant
or the Company, or (c) voluntary or involuntary transfer to, on behalf of, or on
account of any creditor of the Participant or the Company. If any person or
entity attempts to take any action contrary to this Section and if this Section
is enforceable under applicable law, such action will have no effect, and the
Company and the Participant will disregard the action, will not in any manner be
bound by it, and will not incur any liability on account of it or the disregard
of it.
16. MISCELLANEOUS. Where appropriate in this Agreement, words used in the
-------------
singular shall include the plural. This Agreement and all rights hereunder are
governed by ER1SA and, to the extent that state law is applicable, the laws of
the State of Ohio shall govern this Agreement.
IN WITNESS WHEREOF, the parties have executed this Plan under seal as of
the day and year first above written.
BANC ONE CORPORATION
By:____________________________
_______________________________ (Title)
PARTICIPANT
_______________________________
[Name]
8
<PAGE>
EXHIBIT 10(Y)
Amended and Restated
BANC ONE CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
PURPOSE
-------
The purpose of the BANC ONE CORPORATION Directors Deferred Compensation Plan
(the "Plan") is to provide a means by which a member of the Board of Directors
of either BANC ONE CORPORATION or a Related Company may defer the payment of all
(but not less than all) of the Fees payable to the Director for services
rendered by the Director.
Effective Date
This Plan was originally effective as of January 1, 1984 and was restated and
amended effective January 1, 1994 and October 1, 1997. This amended and
restated version of the Plan is effective May 1, 1998 unless otherwise
specifically herein indicated.
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meaning stated herein,
unless the context clearly indicates otherwise.
Section 1.1 Appeals Committee
A committee consisting of three (3) or more officers of the Company who shall be
appointed by the Chief Executive Officer of the Company to hear appeals of
denied Director or Beneficiary benefit claims under the Plan, provided that with
respect to denied claims of a Director who has been identified by the Company as
an Insider, such Appeals Committee shall be the Personnel and Compensation
Committee of the Board.
Section 1.2 - Assignee
Any person, trust, organization, charity, association or other entity designated
by a Participant, who is or was a Statutory Director, in accordance with the
provisions of Section 3. 10 of this Plan to receive (i) distributions in lieu of
that Participant and/or (ii) any death benefit which may be payable under this
Plan upon the death of said Participant.
Section 1.3 - Beneficiary
A person or persons designated by a Participant in accordance with provisions of
Section 3.8, to receive any death benefit which may be payable under this Plan
upon the death of said Participant.
1
<PAGE>
Section 1.4 - Board
The Board of Directors of the Company.
Section 1.5 - Change of Control
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership (within the meaning of Rule l3d-3 promulgated under the Exchange Act)
of 20% or more of either (i) the then outstanding Shares or (ii) the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or a Related Company or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of Subsection (c) of this Section 1.5; or
(b) Individuals who, as of October 1, 1997, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in which case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding Shares and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from
2
<PAGE>
such Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
Section 1.6 - Committee
The Personnel and Compensation Committee of the Board which is comprised of two
or more non-employee Directors and which shall have the authority of said Board
with respect to this Plan.
Section 1.7 - Company
BANC ONE CORPORATION.
Section 1.8 - Director
A statutory director, an emeritus director, an advisory board member, or an
honorary director of the Company or a participating Related Company who is not
an officer or employee of the Company or a Related Company and who receives Fees
for services rendered.
Section 1.9 - Exchange Act
The Securities Exchange Act of 1934, as amended.
Section 1.10 - Fees
Amounts payable by the Company or a Related Company to a Director for services
rendered by the Director to the Company or Related Company, including retainer,
meeting, and committee fees.
Section 1.11 - Insider
Any person who is required to file reports of his beneficial ownership of Shares
with the Securities Exchange Commission pursuant to Section 16(a) of the
Exchange Act.
Section 1.12 - Participant
(a) Any Director who satisfies the eligibility and participation requirements
of this Plan and who elects or has previously elected to defer Fees under this
Plan, or
3
<PAGE>
(b) A participant under any Prior Plan from and after the effective date of
merger of said Prior Plan with and into the Plan.
Section 1.13 - Plan Administrator
BANC ONE CORPORATION.
Section 1.14 - Prior Plan
Any director deferred fee plan of the Company, a Related Company, or a
predecessor or successor thereof, which has been merged with and into this Plan
as set forth from time to time on the attached Schedule A which is made a part
hereof.
Section 1.15 - Related Company
A subsidiary or any entity which is a member of a common controlled group with
BANC ONE CORPORATION pursuant to Internal Revenue Code Section 1563(a)(1).
Section 1.16 - Share(s)
Common shares of the Company, or any successor thereto.
Section 1.17 - Statutory Director
A person who is serving or who at any time has served as a statutory director of
the Company.
ARTICLE II
PARTICIPATION
Section 2.1 - Eligibility
Any Director who receives Fees is eligible to become a participant in this Plan.
Any participant in a Prior Plan shall become a Participant in the Plan as of the
effective date of merger of said Prior Plan into the Plan.
Section 2.2 - Conditions of Participation
A Director shall not become a Participant hereunder until he or she furnishes
within a reasonable time limit established by the Plan Administrator such
completed and executed elections, Beneficiary designations, consents and other
documents and information prescribed by the Plan Administrator. Each Director
upon becoming a Participant shall be deemed conclusively, for all purposes, to
have assented to the terms and provisions of this Plan and shall be bound
thereby.
4
<PAGE>
Section 2.3 - Election To Defer
(a) Current Directors. A Director may elect, on or before December 31 of any
year, to defer payment of all (but not less than all) of the Fees earned during
the calendar year following such election and all succeeding calendar years.
Any such elections shall remain in effect until the earlier of the following
events: (i) the Director terminates his election pursuant to Subsection 2.3(d)
of this Plan, or (ii) the participant ceases to be a Director.
(b) Newly Eligible Directors. Any person who becomes a Director during any
calendar year, and who was not a Director on the preceding December 31, may
elect, before such Director attends a meeting, to defer payment of all (but not
less than all) of the Fees earned by the Director for the remainder of such
calendar year and all succeeding calendar years, pursuant to Section 2.3(a) of
this Plan.
(c) Timeliness of Election. Any such elections shall be made in such format
(including but not limited to approved forms or electronic data response) and in
the manner provided by the Plan Administrator. If a Director who is eligible to
participate in this Plan fails to file (or fails to timely file) the form(s) or
take any action required by the Plan Administrator to participate in the Plan,
such Director will not be permitted to participate in the Plan until the next
open enrollment period applicable for the following calendar year.
(d) Termination of Election. A Director may terminate the election to defer
payment of Fees under the Plan by written notice delivered to the Plan
Administrator. Such election shall become effective as of the end of the
calendar year in which said notice is given with respect to Fees payable as a
Director for subsequent calendar years; provided, however, that if such election
is made in conjunction with a request for distribution pursuant to Section 3. 1
(d), such election shall become effective immediately. Amounts credited to the
Participant's account prior to the effective date of deferral cessation shall
not be affected thereby and shall be distributed pursuant to Section 3.1 of the
Plan.
Section 2.4 - Participant Accounts
Fees deferred at the election of a Participant shall be held in the general
funds of the Company and shall be credited to an account established by the
Company in the Participant's name to which deferrals made in accordance with
this Plan are credited. The Fees deposited in the Participant's deferred
account shall be invested under the Interest Program or the Stock Program, or
both, as elected by the Participant. All deferred fees not specifically
designated by a Participant to be credited to the Interest Program shall be
credited to the Stock Program. Effective with the first day of any next
succeeding quarter, any Participant may prospectively change his or her election
to participate in the Interest Program and/or the Stock Program by delivering a
new election form to the Plan Administrator. Such designation shall affect the
deferral of future Fees and shall have no affect on former Fees which shall
remain in the Interest Program or the Stock Program as previously designated
unless an election is made pursuant to Section 2.7 of this Plan.
5
<PAGE>
Section 2.5 - Interest Program
(a) If the Participant elects to participate in the Interest Program, the
Participant's deferred account shall be invested in units of The One Group Prime
Money Market Fund, or any successor thereto, and cash or cash equivalent
securities as determined by the Plan Administrator or its agent from time to
time.
(b) Interest which is paid on the units in the Interest Program shall be
automatically reinvested in additional units of the Interest Program within a
reasonable time following the crediting of said interest.
Section 2.6 - Stock Program
(a) If the Participant elects to participate in the Stock Program, the
Participant's deferred account shall be invested in Shares of the Company and
cash or cash equivalent securities as determined by the Plan Administrator or
its agent from time to time.
(b) The cash dividends which are paid on the Shares in the Stock Program s '
hall be automatically
reinvested in additional Shares of the Company within a reasonable time
following payment of such dividends.
Section 2.7 - Transfers of Prior Deferrals
During the annual election period, any Participant who is not an Insider may
elect to transfer prior deferral amounts from one investment program to the
other, such transfer to be effective December 31st of the year in which the
election is made. The election to transfer prior deferral amounts must be
received by the Plan Administrator by the last business day prior to December
31st, in order to be effective on said date. Any such transfer will be valued
as of the last business day prior to January 1st. No prior deferral amounts may
be transferred into or out of the Stock Program by an Insider without the
express approval of the Plan Administrator or the person(s) designated to
approve such Insider transactions. Such approval will be allowed when, in the
judgment of the Plan Administrator or such appointed person(s), such transfer of
previously allocated funds will not (i) as a result of Discretionary
Transactions elected by the Insider (as that term is used in Rule 16b-3 of the
Securities and Exchange Commission) under the Plan and all other employee
benefit plans of the Company and Related Companies, subject such person to
potential liability under Section 16(b) of the Exchange Act; or (ii) jeopardize
or make less likely the ability to properly account for a transaction in which
the Company is participating and which the Company wishes to account for as a
pooling of interests as a "pooling of interests".
Section 2.8 - Funding
The Plan shall be entirely unfunded and no provision shall at any time be made
with respect to segregating any assets of the Company or a Related Company for
payment of any benefit hereunder. No Participant, Participant's spouse or any
other person shall have any interest in any
6
<PAGE>
particular assets of the Company or any Related Company by reason of the right
to receive a benefit under the Plan, and any such Participant, Participant's
spouse, or other person shall have only the rights of a general unsecured
creditor of the Company with respect to any rights under the Plan. Nothing
contained in the Plan shall constitute a guaranty by the Company or other entity
or person that the assets of the Company will be sufficient to pay any benefit
hereunder.
Section 2.9 - Statement of Accounts
At least once annually, the Plan Administrator shall furnish each Participant
with a written statement of his account setting forth the net income or loss of
the account; any administrative expenses charged to the account; all payments
and distributions made from the account; and such further information as the
Plan Administrator deems appropriate.
ARTICLE III
DISTRIBUTIONS
Section 3.1 - Timing of Distributions
Amounts credited to a Participant under the Plan shall be distributed as soon as
administratively feasible as follows:
(a) On or after January 1st on or following the date the Plan Administrator is
notified that the Participant is neither a Director nor an employee of the
Company or a Related Company;
(b) Upon the death of the Participant, in accordance with Section 3.4;
(c) After an acceleration of benefits under Section 3.6;
(d) Upon the receipt by the Plan Administrator of the Participant's written
request to receive all of his account; or
(e) After termination of this Plan in accordance with Section 5.1;
provided, however, that no distribution or payment shall be allowed hereunder
unless, in the judgment of the Plan Administrator or its appointees, such
distribution or payment will not constitute a Discretionary Transaction under
Securities and Exchange Commission Rule 16b-3 which will subject the Participant
to potential liability under Section 16(b) of the Exchange Act or jeopardize or
make less likely the ability to properly account for a transaction in which the
Company is participating and which the Company wishes to account for as a
"pooling of interests"; and
provided, further, that (i) any distribution made pursuant to Section 3. 1 (d)
shall be in a single lump sum which amount shall be 10% less than the total
amount attributed to such Participant's account, which 10% shall be withheld by
and forfeited to the Company, and (ii) the Participant
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<PAGE>
making such request shall not be eligible to defer Fees payable after the date
of such election until on or after January 1 of the second calendar year
following the year in which such Participant made such election for
distribution.
Section 3.2 - Form of Distribution
(a) Amounts credited to a Participant under the Plan shall be distributed in a
lump sum payment or in annual installments over a five or ten-year period as the
Participant has elected on the form(s) and in the manner provided by the Plan
Administrator. Any such election shall continue until the Participant elects a
different form of payment. All such elections must be made at least six months
prior to the date of distribution. If a Participant fails to make such an
election, the amounts credited to a Participant under the Plan shall be paid in
annual installments of cash over a five-year period. All distributions under
this Plan shall be calculated on the basis of the value of the Participant's
account balance as of the last business day of the calendar quarter preceding
the commencement date described above, or in the case of an installment payment,
the account balance as of the last business day of the calendar quarter
preceding the installment payment. The first installment (or the lump sum
payment if the Participant so elects) shall be paid on the commencement date
described above and subsequent installments shall be paid within sixty days
after the first business day of each succeeding calendar year until the entire
amount credited to the Participant's deferred account shall have been paid.
During such time as amounts credited to a Participant under the Plan continue to
be held for the Participant or the Participant's Beneficiary, such amounts shall
continue to share in appreciation and/or depreciation in accordance with the
Participant's investment elections and may be charged administrative expenses as
provided in Section 4.2.
(b) The form and frequency of distribution being made from a Prior Plan at the
effective date of Plan merger will continue in effect provided that such
distribution is administratively feasible under the Plan and further provided
that the payment amount is determined in a manner approved by the Plan
Administrator pursuant to Section 3.3 of this Plan.
Section 3.3 - Cash Payments; Determination of Amount
All distributions shall be made in the form of cash. Subject to Section 3.2,
the amount to be distributed shall be determined based on the fair market value
of the balance credited to the Participant's account as of the close of business
on the last day of the calendar month immediately preceding distribution or such
later valuation date immediately preceding the date of distribution if the
accounts are valued more frequently than monthly (i.e., daily), or in such other
manner as is approved by the Plan Administrator for Prior Plan payments.
Section 3.4 - Payments in the Event of a Participant's Death
In the event a Participant dies before payments from the Participant's account
have commenced or after such payments have commenced but before the entire
amount credited to the Participant's account has been paid, all amounts credited
to the Participant's account at the time of the Participant's death, together
with accumulated earnings thereon net of charges for administrative
8
<PAGE>
expenses, shall be paid either to (i) the Beneficiary or Beneficiaries described
in Section 3.8 or (ii) the Assignee as described in Section 3.10, in a lump sum
payment as soon as administratively feasible after the Plan Administrator is
notified of the Participant's death unless the Participant has indicated on any
Beneficiary or Assignee designation forms an alternate manner of payment which
is permitted by the Plan Administrator.
Section 3.5 - Vesting
Each Participant is immediately one hundred percent (100%) vested in all amounts
credited to his or her account and any earnings thereon.
Section 3.6 - Acceleration of Benefits for Unforseen Emergencies
The Plan Administrator, with the approval of the Chief Executive Officer of the
Company, may accelerate the payment of any amounts held in any Participant's
account in the case of unforeseeable emergencies. An "unforeseeable emergency"
is a severe financial hardship to the Participant or Beneficiary resulting from
a sudden and unexpected illness or accident of the Participant or dependent of
the Participant, loss of Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances which will
constitute an "unforeseeable emergency" will depend upon the facts of each case,
but in any case, payment will not be made to the extent that such hardship is or
may be relieved: (i) through reimbursement or compensation by insurance or
otherwise; (ii) by liquidation of the Participant's assets, to the extent the
liquidation of such assets would not itself cause severe financial hardships; or
(iii) by cessation of deferrals under the Plan. "Unforeseeable emergency" will
not include the need to send the Participant's child to college or the desire to
purchase a home. Any early distributions made under this Section 3.6 will only
be permitted to the extent reasonably needed to satisfy the emergency needs.
No distribution or payment shall be allowed hereunder unless, in the judgment of
the Plan Administrator or its appointees, such distribution or payment will not
constitute a Discretionary Transaction under Securities ans Exchange Commission
Rule 16b-3 which will subject the Participant to potential liability under
Section 16(b) of the Exchange Act or jeopardize or make less likely the ability
to properly account for a transaction in which the Company is participating and
which the Company wishes to account for as a "pooling of interests."
Section 3.7 - Withholding and Deductions
All benefit payments made under the Plan to any Participant or Beneficiary shall
be subject to such withholding and other deductions as shall at the time of such
payment be required under any income tax or other law, whether of the United
States or any other jurisdiction, and delivery to the Plan Administrator of all
necessary documents. To the extent that the Company is required to withhold any
current taxes at the time of deferral of Director's Fees, the deferral amount
shall be reduced by the required taxes. Determination by the Plan Administrator
as to withholding shall be binding on the Participant and applicable Assignee or
Beneficiary(ies).
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<PAGE>
Section 3.8 - Beneficiary Designation
Each Participant who has a deferred account hereunder and who has not assigned
benefits hereunder may from time to time designate a Beneficiary(ies) to receive
the amounts credited to the Participant's account in the event of the
Participant's death prior to the time the account is distributed to the
Participant. Such designation shall be made pursuant to the procedures
established by the Plan Administrator and in a form satisfactory to the Plan
Administrator. Each proper designation of a Beneficiary shall revoke all
previous Beneficiary designations. The revocation of a Beneficiary designation,
no matter how effected, shall not require the consent of or notice to any
designated Beneficiary.
If any Participant fails to designate a Beneficiary in the manner provided
above, or if any Participant is not survived by such Beneficiary(ies), the
Participant's account shall be paid, pursuant to Section 3.4, to the
Participant's estate.
If any Participant who designates an Assignee also designates a Beneficiary or
Beneficiaries in the manner provided above, such designation of an Assignee
shall be null and void and shall have no effect until such time as the
designation of Beneficiary or Beneficiaries is revoked and such revocation is
accepted and acknowledged in writing by the Plan Administrator. A determination
to accept or reject such revocation shall be at the sole discretion of the Plan
Administrator and the Plan Administrator shall not be obligated to accept such
revocation of Beneficiary(ies).
Section 3.9 - Rights to Benefits
Nothing contained in this Plan is intended to give or shall give any spouse,
former spouse or Beneficiary of a Participant or any other person any right to
benefits under this Plan by virtue of Internal Revenue Code Sections 401(a)(11)
and 417 (relating to qualified pre-retirement survivor annuities and qualified
joint and survivor annuities) or Internal Revenue Code Sections 401(a)(13)(B)
and 414(p) (relating to qualified domestic relations orders) as amended.
Section 3.10 - Assignment of Benefits
Each Participant who is or was a Statutory Director who has a deferred account
hereunder may designate an Assignee as the party entitled to receive (i)
distributions in lieu of that Participant and/or (ii) any death benefit which
may be payable under this Plan upon the death of said Participant. Such
designation of Assignee shall be made pursuant to the procedures established by
the Plan Administrator and in a form satisfactory to the Plan Administrator.
Each proper designation of an Assignee shall revoke all previous Assignee
designations. The revocation of an Assignee, no matter how effected, shall not
require the consent of or notice to any previously designated Assignee.
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<PAGE>
ARTICLE IV
ADMINISTRATION
Section 4.1 - Administrative Powers and Duties
The Plan Administrator shall be responsible for the general operation and
administration .of the Plan and for carrying out the provisions thereof. The
Chief Executive Officer of the Company may, in his discretion, appoint an
employee or employees or an administrative committee in writing to administer
the provisions of this Plan. The decision of the Plan Administrator with respect
to any questions arising as to the administration or interpretation of this
Plan, including the discontinuance of any or all of the provisions thereof,
shall be final, conclusive, and binding. If the Plan is administered by a
committee, such committee may act by a majority of its members by a vote at a
meeting, or in writing, without a meeting, signed by all the members of the
committee.
Section 4.2 Expenses
Any cost or expense of administering the Plan shall be paid by the Company
and/or participating Related Companies. Notwithstanding the above, the Plan
Administrator may charge each Participant's account with the amount of
reasonable administrative expenses it determines, in its sole discretion, for
the cost of administering the Plan. Any such charges shall reduce the earnings
credited to the Participant's account and shall be applied in a uniform and non-
discriminatory manner.
Section 4.3 - Records
The Plan Administrator shall keep such records of such information, as shall be
proper, necessary or desirable to effectuate the purposes of the Plan, including
without in any manner limiting the generality of the foregoing, records and
information with respect to deferral elections, Participant accounts, dates of
employment and termination and determinations made hereunder. To the extent that
the Plan Administrator shall prescribe forms for use by the Participants and
their Beneficiaries or Assignee in communicating with the Plan Administrator and
shall establish periods during which communications may be received, the Plan
Administrator shall be protected in disregarding any notice or communication for
which a form shall so have been prescribed and which shall not be made in such
form and any notice or communication for the receipt of which a period shall so
have been established and which shall not be received during such period. The
Company, the Plan Administrator and the Appeals Committee shall respectively
also be protected in acting upon any notice or other communication purporting to
be signed by any person and reasonably believed to be genuine and accurate,
including the Participant's current mailing address.
Section 4.4 - Determinations
All determinations hereunder made by the Plan Administrator or the Appeals
Committee shall be made in the sole and absolute discretion of the Plan
Administrator or Appeals Committee, as the case may be.
11
<PAGE>
Section 4.5 - Claims Procedures
The Plan Administrator shall have discretion regarding benefit determinations.
If required by the Plan Administrator, any person entitled to benefits hereunder
must file a claim with the Plan Administrator upon forms furnished by the Plan
Administrator. Notwithstanding any other provision of this Plan, payment of
benefits need not be made until receipt of the claim and the expiration of the
time periods specified in this Section 4.5 for rendering a decision on the
claim. In the event a claim is denied, benefits need not be made or commence
until a final decision is reached by the Appeals Committee subject to the
provisions of Section 4.6.
The Plan Administrator shall notify the claimant of its decision within ninety
(90) days after receipt of the claim. However, if special circumstances require,
the Plan Administrator may defer action on a claim for benefits for an
additional period not to exceed ninety (90) days, and in that case it shall
notify the claimant of the special circumstances involved and the time by which
it expects to render a decision.
If the Plan Administrator determines that any benefits claimed should be denied,
it shall give notice to the claimant setting forth the specific reason or
reasons for the denial and provide a specific reference to the Plan provisions
on which the denial is based. The Plan Administrator shall also describe any
additional information necessary for the claimant to perfect the claim and
explain why the information is necessary. Such claimant shall be entitled to
full and fair review by the Appeals Committee of the denial.
Section 4.6 - Appeal and Review Procedure
If a claim has been denied by the Plan Administrator, the claimant shall have
sixty (60) days after receipt of the denial in which to file a notice of appeal
with the Plan Administrator. A final determination by the Appeals Committee
shall be rendered within sixty (60) days after the receipt of the claimant's
notice of appeal. Under special circumstances such determination may be delayed
for an additional period not to exceed sixty (60) days, in which case the
claimant shall be notified of the delay prior to the close of the initial sixty
(60) day period. The Appeals Committee's final decision shall set forth the
reasons and the references to the Plan provisions on which it is based.
Section 4.7 - Facility of Payment
Whenever a person entitled under the Plan to receive any payment of a benefit,
or installment thereof, is under a legal disability or incapacity or is in any
way unable to manage his financial affairs, the Plan Administrator may, in its
discretion, direct payments on behalf of such person to be made to the
incapacitated person's legal representative, custodian, relative, or other such
individual(s) as is (are) known by the Plan Administrator to be assisting such
person. Such decision by the Plan Administrator shall be made after consultation
with those persons, if any, which may include legal counsel and/or medical
personnel, which the Plan Administrator in its sole discretion determines are
necessary in order to make such decision. Any payment of a benefit or
installment thereof in accordance with the provision of this Section 4.7 shall
be a complete
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<PAGE>
discharge of any liability relating to the making of or entitlement to such
payment under the provisions of the Plan.
Section 4.8 - Action by the Company
Any action by the Company under this Plan may be by resolution of its Board, or
alternatively, by the Committee, or by any person or persons, duly authorized by
resolution of said Board to take such action.
Section 4.9 Exemption from Liability/Indemnification
The members of the Appeals Committee and the persons acting on behalf of the
Plan Administrator, shall be free from all liability, joint or several, for
their acts, omissions, and conduct, for the acts, omissions and conduct of their
duly appointed agents, in the administration of the Plan, except for those acts
or omissions and conduct resulting from willful misconduct or lack of good
faith.
The Company shall indemnify each member of the Appeals Committee, the persons
acting on behalf of the Plan Administrator and any other employee, officer or
director of the Company or Related Company against any claims, loss, damage,
expense and liability, by insurance or otherwise, reasonably incurred by the
individual in connection with any action or failure to act by reason of
membership on the Appeals Committee or performance of an authorized duty or
responsibility for or on behalf of the Company pursuant to the Plan unless the
same is judicially determined to be the result of the individual's gross
negligence or willful misconduct. Such indemnification by the Company shall be
made only to the extent such expense or liability is not payable to or on behalf
of such person under any liability insurance coverage. The foregoing right to
indemnification shall be in addition to any other rights to which such person
may be entitled as a matter of law.
Section 4. 10 - Nonassignability
Except as set forth at Section 3. 10 with respect to Participants who are
Statutory Directors, no right or benefit under the Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and
any attempt to anticipate, alienate, assign, sell, pledge, encumber or charge
the same shall be void.
The Plan shall not in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person entitled to benefits
hereunder.
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ARTICLE V
AMENDMENT OR TERMINATION
Section 5.1 - Amendment or Termination
The Company, through action of the Board, or alternatively, the Committee, may
amend or terminate this Plan at any time. In the event of a termination, the
Company in its sole discretion may accelerate payment of Plan benefits to those
Participants participating in the Plan on the date of such termination, to the
extent such benefits would otherwise be payable as defined in Section 3.1
determined on the basis that each Participant's presumed termination date was
the date the Plan was terminated.
Section 5.2 - Change of Control
The Plan shall not be automatically terminated upon a Change of Control if,
following the Change of Control, the Company, its successor or purchaser is
obligated to pay, or continue to pay, Plan benefits to those Participants
participating in the Plan on the date of such Change of Control, to the extent
such benefits would be otherwise payable as defined in Section 3. 1.
ARTICLE VI
GENERAL PROVISIONS
Section 6.1 - Offset to Benefits
Notwithstanding any provisions of the Plan to the contrary, the Company may, at
the time of distribution in its sole and absolute discretion, enforce the right
to offset against any amounts to be paid to a Participant under the Plan against
any debt of the Participant which has been reduced to judgment in favor of the
Company.
Section 6.2 - Construction
In the construction of the Plan, the masculine shall include the feminine and
the singular the plural where such meanings would be appropriate.
Section 6.3 - Controlling Law
The laws of the State of Ohio shall be controlling in all matters relating to
the Plan and shall apply to the extent that it is not preempted by the laws of
the United States of America.
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Section 6.4 - Effect of Invalid Provisions
If any provision of this Plan is held invalid or unenforceable for any reason,
such invalidity or unenforceability shall not effect any provision hereof, and
the remaining provisions of this Plan shall be construed and enforced as if such
provisions had not been included.
IN WITNESS WHEREOF, the Company has caused this Plan to be adopted and effective
as first set forth above.
Date: November 2, 1998 BANC ONE CORPORATION
-----------------------------
Attest: /s/ Phyllis J. Kohli By: /s/ Steven A. Bennett
--------------------------- -----------------------------------
Steven A. Bennett
Senior Vice President and Secretary
Revised and Amended Effective October 1, 1997
Revised and Amended Effective May 1, 1998
15
<PAGE>
SCHEDULE A
BANC ONE CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
Special Provisions Relating To Prior Plan Mergers
<TABLE>
<CAPTION>
Merger Date Plan Name/Sponsor Special Provisions
- ----------- ----------------- -------------------
<S> <C> <C>
November 1, 1997 Deferred Compensation Plan - Board Of Directors None
The Metropolitan Bank of Lima, Ohio
December 2, 1997 Euclid National Bank Directors Deferred None
Compensation Plan
</TABLE>
16
<PAGE>
EXHIBIT 10(AA)
Revised and Restated
BANC ONE CORPORATION
1995 STOCK INCENTIVE PLAN
1. Purpose
The purpose of the BANC ONE CORPORATION 1995 Stock Incentive Plan is to provide
incentives and rewards for Employees and Eligible Directors of the Corporation
and its Subsidiaries (i) to support the execution of the Corporation's business
and human resource strategies and the achievement of its goals and (ii) to
associate the interests of Employees and Eligible Directors with those of the
Corporation's shareholders.
2. Definitions
"Award" includes, without limitation, stock options (including incentive stock
options under Section 422 of the Code and Director Stock Options), stock
appreciation rights, restricted and performance shares, restricted and
performance share units, Performance Stock Awards, dividend or equivalent
rights, or other awards that are valued in whole or in part by reference to, or
are otherwise based on, the Common Stock ("Other Common Stock-based Awards"),
all on a stand alone, combination or tandem basis, as described in or granted
under this Plan.
"Award Agreement" means a written agreement entered into between the Corporation
and a Participant setting forth the terms and conditions of an Award made to
such Participant under this Plan, in the form prescribed by the Committee.
"Board" means the Board of Directors of the Corporation.
"Change of Control" shall have the meaning specified In Section 12(b).
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Committee" means the Committee appointed by the Board, each member of which
shall be a "non-employee director" within the meaning of Rule 16b-3 under the
Exchange Act and shall be an "outside director" within the meaning of Section
162(m) of the Code. The Committee shall be composed of no fewer than the minimum
number of disinterested persons as may be required by Rule 16b-3.
"Common Stock" means the common stock of the Corporation, without par value.
"Corporation" means BANC ONE CORPORATION, a bank holding company under the Bank
Holding Company Act of 1956 headquartered in Columbus, Ohio.
"Director Stock Option" means the right, granted to an Eligible Director, to
purchase Common Stock at a stated price for a specified period of time. Each
Director Stock Option shall be a nonqualified stock option whose grant is not
intended to comply with the requirements of Section 422 of the Code or any
successor Section as it may be amended from time to time.
"Eligible Director" means any statutory director of the Corporation who is not
an employee of the Corporation or any Subsidiary.
"Employee" means an employee of the Corporation or a Subsidiary.
"Employee Award" means an Award (other than a Director Stock Option) to an
Employee under this Plan.
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the closing price of the Common Stock as reported on
the New York Stock Exchange Composite Transactions Tape on the relevant
valuation date or, if there were no Common Stock transactions on the valuation
date, on the next preceding date on which there were Common Stock transactions;
provided, however, that the Committee may specify some other definition of Fair
Market Value with respect to any particular Employee Award.
"Negative Discretion" means other factors to be applied by the Committee in
reducing the number of restricted shares to be issued pursuant to a Performance
Stock Award if the Performance Goals have been met or exceeded if, in the
Committee's sole judgment, such application is appropriate in order to act in
the best interest of the Corporation and its shareholders. The Negative
Discretion factors include, but are not limited to, the achievement of
measurable individual performance objectives established by the Committee and
communicated to the Employee in advance of the Performance Period, and
competitive pay practices.
"Participant" means an Employee or an Eligible Director who has been granted an
Award under this Plan.
"Performance Goals" means, with respect to any Performance Period, performance
goals based on any of the following criteria and established by the Committee
prior to the beginning of such Performance Period or performance goals based on
any of the following criteria and established by the Committee after the
beginning of such Performance Period that meet the requirements to be considered
pre-established performance goals under Section 162(m) -of the Code: earnings or
earnings growth; return on equity, assets or investment; revenues; expenses;
stock price; market share; charge-offs; or reductions in non-performing assets.
Such Performance Goals may be particular to an Employee or the division,
department, branch, line of business, Subsidiary or other Unit in which the
Employee works, or may be based on the performance of the Corporation generally.
"Performance Period" means the period of time designated by the Committee
applicable to a Performance Stock Award during which the Performance Goals shall
be measured.
"Performance Stock Award" shall have the meaning specified in Section 6(g).
"Plan" means this BANC ONE CORPORATION 1995 Stock Incentive Plan.
"Plan Year" means a twelve-month period beginning with January 1 of each year.
"Reporting Person" means an officer or director of the Corporation subject to
the reporting requirements of Section 16 of the Exchange Act.
"Subsidiary" means any corporation or other entity, whether domestic or foreign,
in which the Corporation has or obtains, directly or indirectly, a proprietary
interest of more than 50% by reason of stock ownership or otherwise.
3. Eligibility
(a) Any Employee selected by the Committee is eligible to receive an
Employee Award.
(b) Eligible Directors are entitled to participate in this Plan solely with
respect to the grant of Director Stock Options and may not receive any other
Awards under this Plan. The selection of Eligible Directors is not subject to
the discretion of the Committee. Persons serving on the Committee who are
Eligible Directors may receive grants of Director Stock Options.
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<PAGE>
4. Plan Administration
(a) This Plan shall be administered by the Committee. The Committee shall
periodically make determinations with respect to the participation of Employees
in this Plan and, except as otherwise required by law or this Plan, the grant
terms of Awards including vesting schedules, price, performance standards
(including Performance Goals), length of relevant performance, restriction or
option period, dividend rights, post-retirement and termination rights, payment
alternatives such as cash, stock, contingent awards or other means of payment
consistent with the purposes of this Plan, and such other terms and conditions
as the Committee deems appropriate. Except as otherwise required by this Plan,
the Committee shall have authority to interpret and construe the provisions of
this Plan and the Award Agreements and make determinations pursuant to any Plan
provision or Award Agreement which shall be final and binding on all persons.
(b) The Committee may designate persons other than its members to carry out
its responsibilities under such conditions or limitations as it may set, other
than its authority with regard to Awards granted to Reporting Persons.
5. Stock Subject To The Provisions Of This Plan
(a) The stock subject to the provisions of this Plan shall either be shares
of authorized but unissued Common Stock, shares of Common Stock held as treasury
stock or previously issued shares of Common Stock reacquired by the Corporation,
including shares purchased on the open market. Subject to adjustment in
accordance with the provisions of Section 11, and subject to Section 5(d), (i)
the total number of shares of Common Stock available for grants of Awards
(including, without limitation, Awards of restricted and performance shares) in
any Plan Year shall not exceed one percent of the outstanding Common Stock as
reported in the Corporation's Annual Report on Form 10-K for the fiscal year
ending immediately prior to such Plan Year and (ii) the total number of shares
of Common Stock available for grants of restricted and performance shares
(including restricted shares to be issued pursuant to Performance Stock Awards)
in any Plan Year shall not exceed one fourth of one percent of the outstanding
Common Stock as reported in the Corporation's Annual Report on form 10-K for the
fiscal year ending immediately prior to such Plan Year.
(b) Subject to adjustment in accordance with Section 11, and subject to
Section 5(a), (i) the total number of shares of Common Stock available for
grants of Awards in any Plan Year to any Participant shall not exceed one half
of one percent of the outstanding Common Stock as reported in the Corporation's
Annual Report on Form 10-K for the fiscal year ending immediately prior to such
Plan Year and (ii) the total number of shares of Common Stock available for
grants of restricted shares to be issued pursuant to Performance Stock Awards in
any Plan Year to any Employee shall not exceed one eighth of one percent of the
outstanding Common Stock as reported in the Corporation's Annual Report on form
10-K for the fiscal year ending immediately prior to such Plan Year.
(c) For purposes of calculating the total number of shares of Common Stock
available for grants of Awards, (i) the grant of a performance or restricted
share unit Award shall be deemed to be equal to the maximum number of shares of
Common Stock which may be issued under the Award and (ii) where the value of an
Award is variable on the date it is granted, the value shall be deemed to be the
maximum limitation of the Award. Awards payable solely in cash will not reduce
the number of shares of Common Stock available for Awards granted under this
Plan.
(d) There shall be carried forward and be available for Awards under this
Plan in each succeeding Plan Year, in addition to shares of Common Stock
available for grant under paragraph (a) of this Section 5, all of the following:
(i) any unused portion of the limit set forth in paragraph (a) of this Section 5
for the two immediately preceding Plan Years; (ii) shares of Common Stock
represented by Awards which have been canceled, forfeited, surrendered,
terminated or expire unexercised during that Plan Year or the two immediately
preceding Plan Years; (iii) the excess amount of variable Awards which become
fixed at less than their maximum limitations; (iv) authorized shares of Common
Stock as to which stock options, stock appreciation rights, restricted stock
awards, performance shares or performance awards were not granted under the BANC
ONE CORPORATION 1989 Stock Incentive Plan; and (v) shares of Common Stock under
the BANC ONE CORPORATION 1989 Stock Incentive Plan subject to stock options,
stock appreciation rights, restricted stock
3
<PAGE>
awards, performance shares or performance awards which have been canceled,
forfeited, surrendered, terminated or expire unexercised during that Plan Year
or the two immediately preceding Plan Years.
6. Employee Awards Under This Plan
As the Committee may determine, the following types of Employee Awards may be
granted under this Plan to Employees on a stand alone, combination or tandem
basis:
(a) Stock Option. A right to buy a specified number of shares of Common
Stock at a fixed exercise price during a specified time, all as the Committee
may determine; provided that the exercise price of any option shall not be less
than 100% of the Fair Market Value of the Common Stock on the date of grant of
the Award.
(b) Incentive Stock Option. An award in the form of a stock option which
shall comply with the requirements of Section 422 of the Code or any successor
Section as it may be amended from time to time.
(c) Stock Appreciation Right. A right to receive the excess of the Fair
Market Value of a share of Common Stock on the date the stock appreciation right
is exercised over the Fair Market Value of a share of Common Stock on the date
the stock appreciation right was granted.
(d) Restricted and Performance Shares. A transfer of shares of Common Stock
to a Participant, subject to such restrictions on transfer or other incidents of
ownership, or subject to specified performance standards, for such periods of
time as the Committee may determine.
(e) Restricted and Performance Share Unit. A fixed or variable share or
dollar denominated unit subject to conditions of vesting, performance and time
of payment as the Committee may determine, which may be paid in shares of Common
Stock, cash or a combination of both.
(f) Dividend or Equivalent Right. A right to receive dividends or their
equivalent in value in shares of Common Stock, cash or in a combination of both
with respect to any new or previously existing Employee Award.
(g) Performance Stock Awards. A right, granted to an Employee, to receive
restricted shares (as defined in Section 6(d) hereof) that are not to be issued
to the Employee until after the end of the related Performance Period, subject
to satisfaction of the Performance Goals for such Performance Period.
(h) Other Common Stock-Based Awards. Other Common Stock-based Awards which
are related to or serve a similar function to those Employee Awards set forth in
this Section 6.
In addition to granting Employee Awards for purposes of incentive compensation,
Employee Awards may also be made in tandem with or in lieu of current or
deferred Employee compensation.
7. Performance Stock Awards
(a) Administration. Performance Stock Awards may be granted to Employees
either alone or in addition to other Employee Awards granted under this Plan.
The Committee shall determine the Employees to whom Performance Stock Awards
shall be awarded for any Performance Period, the duration of the applicable
Performance Period, the number of restricted shares to be awarded at the end of
a Performance Period to Employees if the Performance Goals are met or exceeded
and the terms and conditions of the Performance Stock Award in addition to those
contained in this Section 7.
(b) Payment of Award. After the end of a Performance Period, the financial
performance of the Corporation during such Performance Period shall be measured
against the Performance Goals. If the Performance Goals are not met, no
restricted shares shall be issued pursuant to the Performance Stock Award. If
the Performance Goals are met or
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<PAGE>
exceeded, the Committee shall certify that fact in writing in the Committee
minutes or elsewhere and certify the number of restricted shares to be issued
under each Performance Stock Award in accordance with the related Award
Agreement. The Committee may, in its sole discretion, apply Negative Discretion
to reduce the number of restricted shares to be issued under a Performance Stock
Award.
(c) Requirement of Employment. To be entitled to receive a Performance
Stock Award, an Employee must remain in the employment of the Corporation
through the end of the Performance Period, except that the Committee may provide
for partial or complete exceptions to this requirement as it deems equitable in
its sole discretion.
8. Director Stock Options
Subject to the provisions of Section 5, Director Stock Options shall be granted
to Eligible Directors as provided in this Section 8 and the Committee shall have
no discretion with respect to any matters set forth in this Section 8.
(a) Vesting. Each Director Stock Option shall become exercisable on and
after the first anniversary of the date of the grant.
(b) Number of Shares. Director Stock Options shall be granted as follows:
(i) Each person who is first elected or appointed to serve as a
director of the Corporation after the effective date of this Plan and who
is an Eligible Director shall, upon such person's initial appointment or
election as an Eligible Director, automatically be granted Director Stock
Options for that number of shares of Common Stock having a Fair Market
Value of $100,000 on the date the Director Stock Options are grinted; and
(ii) Commencing immediately after the adjournment of the Corporation's
annual meeting of shareholders (an "Annual Meeting") in 1995 and
immediately after the adjournment of the Annual Meeting each year
thereafter, each Eligible Director who was an Eligible Director immediately
preceding such Annual Meeting and who has been elected as a director at
such Annual Meeting shall automatically be granted Director Stock Options
for that number of shares of Common Stock having a Fair Market Value of
$60,000 on the date the Director Stock Options are granted if, but only if,
the return on common equity of the Corporation as set forth in the
Corporation's annual report to shareholders for the immediately preceding
fiscal year is equal to or greater than 10%.
(c) Option Price. Each Director Stock Option shall have an option price
("Option Price") that is equal to the Fair Market Value of the Common Stock on
the date the Director Stock Option is granted.
(d) Duration of Opdons. No Director Stock Option may be exercisable later
than twenty years and one day from the date of its grant
(e) Payment. The Option Price upon exercise of any Director Stock Option
shall be payable to the Corporation in full either (i) in U.S. dollars by
personal check, bank draft or money order payable to the order of the
Corporation, by money transfers or direct account debits, (ii) through the
delivery or deemed delivery based on attestation of ownership of shares of
Common Stock with a Fair Market Value at the time of exercise equal to the total
Option Price or (iii) by a combination of the methods described in items (i) and
(ii) above.
(f) Termination of Director Stock Options. If an Eligible Director ceases
to be an Eligible Director for any reason, the rights under any then outstanding
Director Stock Option granted pursuant to this Plan which are exercisable as of
the date such person ceases to be an Eligible Director shall terminate upon the
date determined as provided in Section 8(d), above, or three years after such
cessation date, whichever first occurs. Any then outstanding Director Stock
Option granted to such Eligible Director which is not exercisable as of the date
such person ceases to be an Eligible Director shall terminate on and as of such
date.
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9. Other Terms and Conditions
(a) Assignability. Except to the extent if any, as may be permitted by the
Code and rules promulgated under Section 16 of the Exchange Act, (i) no Award
shall be assignable or transferable except by will, by the laws of descent and
distribution, pursuant to a qualified domestic relations order as defined by the
Code and as determined or established by the Committee, and (ii) during the
lifetime of a Participant, an Award shall be exercisable only by such
Participant, such Participants guardian, legal representative or assignee
pursuant to a qualified domestic relations order or as determined or established
by the Committee. An Award shall not otherwise be assignable.
(b) Award Agreement. Each Award under this Plan shall be evidenced by an
Award Agreement
(c) Rights As A Shareholder. Except as otherwise provided herein or in any
Award Agreement a Participant shall have no rights as a shareholder with respect
to shares of Common Stock covered by an Award until the date the Participant or
his nominee (which, for purposes of this Plan, shall include any third party
agent selected by the Committee to hold such shares on behalf of a Participant),
guardian or legal representative is the holder of record of such shares.
(d) No Obligation to Exercise. The grant of an Award shall impose no
obligation upon the Participant to exercise the Award.
(e) Payments by Participants. The Committee may determine that Employee
Awards for which a payment is due from a Participant may be payable: (i) in U.S.
dollars by personal check, bank draft or money order payable to the order of the
Corporation, by money transfers or direct account debits; (ii) through the
delivery or deemed delivery based on attestation to the ownership of shares of
Common Stock with a Fair Market Value equal to the total payment due from the
Participant; (iii) by a combination of the methods described in (i) and (ii)
above; or (iv) by such other methods as the Committee may deem appropriate.
(f) Tax Withholding. The Corporation shall have the right to withhold from
any payments made under this Plan, or to collect as a condition of payment, any
taxes required by law to be withheld. At any time when a Participant is required
to pay to the Corporation an amount required to be withheld under applicable
income tax laws in connection with a distribution of shares of Common Stock
pursuant to this Plan, the Participant may satisfy this obligation in whole or
in part by electing to have the Corporation withhold from such distribution
shares of Common Stock having a value equal to the amount required to be
withheld. The value of the shares of Common Stock to be withheld shall be based
on the Fair Market Value of the Common Stock on the date that the amount of tax
to be withheld shall be determined (the "Tax Date"). Any such election is
subject to the following restrictions: (i) the election must be made on or prior
to the Tax Date and (ii) the election must be subject to the disapproval of the
Committee.
(g) Restrictions On Sale and Exercise. With respect to Reporting Persons,
and if required to comply with rules promulgated under Section 16 of the
Exchange Act, (i) no Award providing for exercise, a vesting period, a
restriction period or the attainment of performance standards shall
permit.unrestricted ownership of shares of Common Stock by the Participant for
at least six months from the date of grant, and (ii) shares of Common Stock
acquired pursuant to this Plan (other than shares of Common Stock acquired as a
result of the granting of a "derivative security") may not be sold or otherwise
disposed of for at least six months after acquisition.
(h) Requirements of Law. The granting of Awards and the issuance of shares
of Common Stock upon the exercise of Awards shall be subject to all applicable
requirements imposed by federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any stock
exchanges upon which the Common Stock may be listed. As a condition precedent to
the issuer of shares of Common Stock pursuant to the grant or exercise of an
Award, the Corporation may require the Participant to take any reasonable action
to meet such requirements.
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10. Amendments
(a) Except as otherwise provided in this Plan, the Board may at any time
terminate and, from time to time, may amend or modify this Plan. Any such action
of the Board may be taken without the approval of the Corporation's
shareholders, but only to the extent that such shareholder approval is not
required by applicable law or regulation, including specifically Rule 16b-3
under the Exchange Act.
(b) No amendment modification or termination of this Plan shall in any
manner adversely affect any Awards theretofore granted to a Participant under
this Plan without the consent of such Participant.
11. Recapitalization
The aggregate number of shares of Common Stock as to which Awards may be granted
to Participants, the number of shares thereof covered by each outstanding Award,
and the price per share thereof in each such Award, shall all be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, stock dividend, combination or exchange of
shares, exchange for other securities, reclassification, reorganization,
redesignation, merger, consolidation, recapitalization or other such change. Any
such adjustment may provide for the elimination of fractional shares.
12. No Right to Employment
No person shall have any claim or right to be granted an Award, and the grant of
an Award shall not be construed as giving a Participant the right to be retained
in the employ of the Corporation or a Subsidiary. Nothing in this Plan shall
interfere with or limit in any way the right of the Corporation or any
Subsidiary to terminate any Participants employment at any time, nor confer upon
any Participant any right to continue in the employ of the Corporation or any
Subsidiary.
13. Change of Control
(a) Subject to the provisions of Section 13(c) below, notwithstanding
anything contained in this Plan, the provisions of Section 13(a)(iii) below or
any Award Agreement to the contrary, in the event of a Change of Control, as
defined below, the following (x) may, in the sole discretion of the Committee,
occur with respect to any and all Employee Awards outstanding as of such Change
of Control and (y) shall occur with respect to any and all Director Stock
Options outstanding as of such Change of Control:
(i) automatic maximization of performance standards, lapse of all
restrictions and acceleration of any time periods relating to the exercise,
realization or vesting of such Awards so that such Awards may be
immediately exercised, realized or vested in full on or before the relevant
date fixed in the Award Agreement;
(ii) performance shares or performance units shall be paid entirely in
cash;
(iii) upon exercise of a stock option or an incentive stock option
(collectively, an "Option") during the 60-day period from and after the
date of a Change of Control, the Participant exercising the Option may in
lieu of the receipt of Common Stock upon the exercise of the Option, elect
by written notice to the Corporation to receive an amount in cash equal to
the excess of the aggregate Value (as defined below) of the shares of
Common Stock covered by the Option or portion thereof surrendered
determined on the date the Option is exercised, over the aggregate exercise
price of the Option (such excess is referred to herein as the "Aggregate
Spread"); provided, however, and notwithstanding any other provision of
this Plan, if the end of such 60-day period from and after the date of a
Change of Control is within six months of the date of grant of an Option
held by a Participant who is a Reporting Person, such Option shall be
canceled in exchange for a cash payment to the Participant equal to the
Aggregate Spread on the day which is six months and one day after the date
of grant of such Option. As used in this Section 113(a)(iii) the term
"Value" means the higher of (i) the highest Fair Market Value during the
60-day
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period from and after the date of a Change of Control and (ii) if the
Change of Control is the result of a transaction or series of transactions
described in paragraphs (i) or (iii) of the definition of Change of
Control, the highest price per share of the Common Stock paid in such
transaction or series of transactions (which in the case of paragraph (i)
shall be the highest price per share of the Common Stock as reflected in a
Schedule 13D filed by the person having made the acquisition);
(iv) if a Participants employment terminates for any reason other than
retirement or death following a Change of Control, any Options held by such
Participant may be exercised by such Participant until the earlier of three
months after the termination of employment or the expiration date of such
Options; and
(v) all Awards become non-cancelable.
(b) A "Change of Control" of the Corporation shall be deemed to have
occurred upon the happening of any of the following events:
(i) the acquisition, other than from the Corporation, by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership of 20% or more of
either the then outstanding shares of Common Stock of the Corporation or
the combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors;
provided, however, that any acquisition by the Corporation or any of its
Subsidiaries, or any employee benefit plan (or related trust) of the
Corporation or its Subsidiaries, or any corporation with respect to which,
following such acquisition, more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Common Stock and voting securities of the Corporation immediately
prior to such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the then outstanding
shares of Common Stock of the Corporation, or the combined voting power of
the then outstanding voting securities of the Corporation entitled to vote
generally in the election of directors, as the case may be, shall not
constitute a Change of Control;
(ii) individuals who, as of January 1, 1995, constitute the Board as
of the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to such date whose election, or nomination
for election by the Corporation's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the
Corporation (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(iii) approval by the shareholders of the Corporation of a
reorganization, merger or consolidation of the Corporation, in each case,
with respect to which the individuals and entities who were the respective
beneficial owners of the Common Stock and voting securities of the
Corporation immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of Common Stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such reorganization, merger or consolidation, or
a complete liquidation or dissolution of the Corporation or of the sale or
other disposition of all or substantially all of the assets of the
Corporation.
(c) If any right granted pursuant to Section 13(a) would make a Change of
Control transaction ineligible for pooling of interests accounting that but for
Section 13(a) would otherwise be eligible for such accounting treatment, the
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Committee shall have the ability to substitute the cash payable pursuant to
Section 13(a) with Common Stock with a Fair Market Value equal to the cash that
would otherwise be payable thereunder.
14. Governing Law
To the extent that federal laws do not otherwise control, this Plan shall be
construed in accordance with and governed by the law of the State of Ohio.
15. Indemnification
Each person who is or shall have been a member of the Committee or of the Board
shall be indemnified and held harmless by the Corporation against and from any
loss, cost, liability or expense that may be imposed upon or reasonably incurred
by him in connection with or resulting from any claim, action, suit or
proceeding to which he may be a party or in which he may be involved by reason
of any action taken or failure to act under this Plan and against and from any
and all amounts paid by him in settlement thereof, with the Corporation's
approval, or paid by him in satisfaction of any judgment in any such action,
suit or proceeding against him, provided he shall give the Corporation an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Corporation's Articles of
Incorporation or Code of Regulations, as a matter of law, or otherwise, or any
power that the Corporation may have to indemnify them or hold them harmless.
16. Deferral of Award Shares
The Committee may from time to time establish procedures pursuant to which a
Participant may elect to defer receipt of all or a portion of the Shares subject
to such Award and/or to receive cash at such later time or times in lieu of such
deferred Shares, all on such terms and conditions as the Committee shall
determine. If any such deferrals are permitted, then notwithstanding Section 9
above, a Participant who elects such deferral shall not have any rights as a
stockholder with respect to such deferred Shares unless and until Shares are
actually delivered to the Participant with respect thereto, except to the extent
otherwise determined by the Committee.
17. Savings Clause
This Plan is intended to comply in all aspects with applicable law and
regulation, including, with respect to those Employees who are Reporting
Persons, Rule 16b-3 under the Exchange Act. In case any one or more of the
provisions of this Plan shall be held invalid, illegal or unenforceable in any
respect under applicable law and regulation (including Rule 16b-3), the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby and the invalid, illegal or
unenforceable provision shall be deemed null and void; however, to the extent
permissible by laws, any provision which could be deemed null and void shall
first be construed, interpreted or revised retroactively to permit this Plan to
be construed in compliance with all applicable laws (including Rule 16b-3) so as
to foster the intent of this Plan. Notwithstanding anything in this Plan to the
contrary, the Committee, in its sole and absolute discretion, may bifurcate this
Plan so as to restrict, limit or condition the use of any provision of this Plan
to Participants who are Reporting Persons without so restricting, limiting or
conditioning this Plan with respect to other Participants.
18. Effective Date and Term
The effective date of this Plan is April 17, 1995 subject to its approval by the
Corporation's shareholders at their next annual meeting or at any adjournment
thereof, within twelve months following the date of its adoption by the Board.
This Plan shall remain in effect until terminated by the Board.
9
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IN WITNESS WHEREOF, BANC ONE CORPORATION has caused this Plan to be adopted and
effective as first set forth above.
Date: November 2, 1998 BANC ONE CORPORATION
------------------------
Attest: /s/ Phyllis J. Kohli By: /s/ Steven A. Bennett
---------------------- -----------------------
Steven A. Bennett
Senior Vice President and Secretary
Amended:
Oct. 1996 - (S)2 - Definition of Committee
(S)9(f) -Tax Withholding
Jan. 1997 - (S)9(a) - Assignability
Jan. 1998 - (S)10 -Amendments -former (S)1 0(b) deleted
(S)13(a) - Change of Control
(S) 13(c) - Change of Control added
July 1998 - (S)16 - Deferrals added - former (S)16 - (S)17 renumbered
Revised 5/30/97
Revised 6/2/97 (tab spacing change only)
Revised 2/27/98
Revised 3/10/98 (correct two typos)
10
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EXHIBIT 10(DD)
FIRST USA
DEFERRED COMPENSATION PLAN
W I T N E S S E T H :
WHEREAS, FIRST USA, INC. and other adopting entities desire to adopt
the FIRST USA DEFERRED COMPENSATION PLAN (the "PLAN") for the benefit of certain
----------
eligible individuals; and
NOW THEREFORE, the Plan is hereby adopted as follows, effective as of
June 1, 1996:
I.
DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. Where the following words and phrases appear in
the Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates to the contrary.
(1) ACCOUNT: An individual account for each Member to which is credited
the Deferrals made on his behalf pursuant to Section 3.1 and which is credited
or debited for such account's allocation of net income (or net loss) equivalents
as provided in Section 3.2.
(2) AFFILIATE: Each corporation or unincorporated entity, directly or
indirectly, through one or more intermediaries, controlling, controlled by, or
under common control with First USA, Inc. For this purpose, control shall be
determined by a more than 50% ownership standard.
(3) BOARD: The Board of Directors of First USA, Inc.
(4) CODE: The Internal Revenue Code of 1986, as amended.
(5) COMPANY: First USA, Inc. and any other adopting entity which adopts
the Plan pursuant to the provisions of Article XI.
(6) DEFERRALS: Deferrals made by the Company on a Member's behalf pursuant
to Section 3.1.
(7) DIRECTOR: Any member of the Board of Directors of First USA, Inc.,
First USA Paymentech, Inc. and/or their Affiliates.
(8) DISABILITY: The total and permanent disability of a Member, as
determined in the sole discretion of the Plan Administrator, based on a written
medical opinion (unless waived by
<PAGE>
the Plan Administrator as unnecessary), that such Member is permanently
incapable of performing his job for physical or mental reasons.
(9) EFFECTIVE DATE: June 1, 1996.
(10) ELIGIBLE INDIVIDUAL: Any individual (i) who is employed by the Company
as an officer or with an equivalent title and who earned cash compensation of at
least $125,000 during the fiscal year of the Company immediately preceding the
Plan Year selected as a Member, or (ii) who is a Director. For all purposes
herein, the "service" of an individual as a Director shall be deemed to be
equivalent to "employment" with the Company.
(11) ENTRY DATE: The first day of each Plan Year and, with respect to an
Eligible Individual who becomes a Member on other than the first day of a Plan
Year, the date such Eligible Individual becomes a Member in such Plan Year.
(12) FUNDS: The investment funds designated from time to time for the
deemed investment of Accounts pursuant to Article IV.
(13) INSIDER: An officer or director of First USA, Inc. or First USA
Paymentech, Inc. subject to Section 16(b) of the Securities Exchange Act of1934.
(14) MEMBER: Each Eligible Individual who has met the eligibility
requirements for participation in the Plan and who has become a Member pursuant
to Article II.
(15) PARENT BOARD: The Board of Directors of First USA, Inc.
(16) PARENT COMMITTEE: A committee of the Parent Board that is composed
solely of two or more directors, none of whom (i) is an officer of First USA,
Inc. or a parent or subsidiary (including First USA Paymentech, Inc.) thereof or
is otherwise employed by First USA, Inc. or a parent or subsidiary (including
First USA Paymentech, Inc.) thereof; (ii) receives compensation, either directly
or indirectly, from First USA, Inc. or a parent or subsidiary (including First
Paymentech, Inc.) thereof for services rendered as a consultant or in any
capacity other than as a director, except for an amount that does not exceed the
dollar amount for which disclosure would be required pursuant to Item 404(a) of
Regulation S-K; (iii) possesses an interest in any other transaction for which
disclosure would be required pursuant to Item 404(a) of Regulation S-K; or
(iv)is engaged in a business relationship for which disclosure would be required
pursuant to item 404(b) of Regulation S-K.
(17) PAY: The total of all amounts paid by the Company to or for the
benefit of a Member for services rendered or labor performed, which are required
to be reported on such Member's federal income tax withholding statement(s)
(Form W-2, 1099, or their subsequent equivalents), excluding taxable income
resulting from the exercise of nonqualified stock options, the imputed value of
group term life insurance, relocation reimbursements and from non-cash executive
perquisites, deductions for supplemental life and medical coverages or other
similar payroll deductions, plus any amounts such Member could have received in
cash in lieu of Deferrals pursuant to Section 3.1.
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(18) PAYMENTECH BOARD: The Board of Directors of First USA Paymentech, Inc.
(19) PAYMENTECH COMMITTEE: A committee of the Paymentech Board that is
composed solely of two or more directors, none of whom (i) is an officer of
First USA Paymentech, Inc. or a parent (including First USA, Inc.) or subsidiary
thereof or is otherwise employed by First USA Paymentech, Inc. or a
parent(including First USA, Inc.) or subsidiary thereof; (ii) receives
compensation, either directly or indirectly, from First USA Paymentech, Inc. or
a parent(including First USA, Inc.) or subsidiary thereof for services rendered
as a consultant or in any capacity other than as a director, except for an
amount that does not exceed the dollar amount for which disclosure would be
required pursuant to Item 404(a) of Regulation S-K; (iii) possesses an interest
in any other transaction for which disclosure would be required pursuant to Item
404(a) of Regulation S-K; or (iv) is engaged in a business relationship for
which disclosure would be required pursuant to item 404(b) of Regulation S-K.
(20) PLAN: The First USA Deferred Compensation Plan, as amended from time
to time.
(21) PLAN ADMINISTRATOR: The Plan administrator appointed by the Board
pursuant to Section 8.1.
(22) PLAN YEAR: The short period commencing on the Effective Date and
ending on June 30, 1996, and thereafter the twelve-consecutive month period
commencing July 1 of each year.
(23) RETIREMENT: As to a Member who is not a Director, termination of
employment with the Company and its Affiliates after attainment of age sixty or
attainment of age fifty-five with five years of aggregate employment from and
after the Effective Date. As to a Member who is a Director, termination of
employment with the Company following the date which is at least five years
after the first day of the Plan Year in which he commenced participation in the
Plan.
(24) STOCK FUNDS: The First USA, Inc. Common Stock Fund and the First USA
Paymentech, Inc. Common Stock Fund.
(25) TRUST: The trust, if any, established under the Trust Agreement.
(26) TRUST AGREEMENT: The agreement, if any, entered into between the
Company and the Trustee pursuant to Article X.
(27) TRUST FUND: The funds and properties, if any, held pursuant to the
provisions of the Trust Agreement, together with all income, profits and
increments thereto.
(28) TRUSTEE: The trustee appointed by the Board who is qualified and
acting under the Trust Agreement at any time.
(29) UNFORESEEABLE FINANCIAL EMERGENCY: An unexpected need of a Member for
cash that (i) arises from an illness, casualty loss, sudden financial reversal,
or such other unforeseeable occurrence that is caused by an event beyond the
control of such Member, (ii)
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<PAGE>
would result in severe financial hardship to such Member if his Deferral
election was not cancelled pursuant to Section 3.1(h)and/or if a withdrawal or
benefit payment pursuant to Article VI or Section 7.6was not permitted, and
(iii) is not reasonably satisfiable from other resources of such Member. Cash
needs arising from foreseeable events, such as the purchase of a house or
education expenses for children, shall not be considered to be the result of an
Unforeseeable Financial Emergency.
(30) VALUATION DATES: Each Entry Date and any other interim Valuation Date
designated by the Plan Administrator on a nondiscriminatory basis.
Notwithstanding the foregoing, an interim Valuation Date shall be designated as
the date next preceding the date a withdrawal or payment of a Member's benefits
to be made or to commence pursuant to Article VI or Article VII.
1.2 NUMBER AND GENDER. Wherever appropriate herein, words used in the
singular shall be considered to include the plural and words used in the plural
shall be considered to include the singular. The masculine gender, where
appearing in the Plan, shall be deemed to include the feminine gender.
1.3 HEADINGS. The headings of Articles and Sections herein are included
solely for convenience, and if there is any conflict between such headings and
the text of the Plan, the text shall control.
II.
PARTICIPATION
2.1 ELIGIBILITY. Any Eligible Individual shall be eligible to become a
Member of the Plan for any Plan Year by electing to make Deferrals pursuant to
Section 3.1. Notwithstanding the foregoing, for the Plan Years commencing with
the Effective Date and with July 1, 1996, Eligible Individuals shall only be
eligible to become Members of the Plan if so designated for eligibility by the
Plan Administrator and effective as of the date so designated.
2.2 PARTICIPATION.
(a) Prior to each Entry Date, the Plan Administrator shall notify
those Eligible Individuals who are determined by the Plan Administrator to be
eligible to initially become Members pursuant to Section 2.1 as of such Entry
Date. Any such Eligible Individual may become a Member for the Plan Year
beginning on such Entry Date by effecting, prior to such Entry Date and within
the time period prescribed by the Plan Administrator, the Deferral election
prescribed by the Plan Administrator. Notwithstanding any provision herein to
the contrary, an Eligible Individual who first becomes an Eligible Individual on
other than the first day of a Plan Year may become a Member on the first day of
the calendar month coinciding with or next following the date he first becomes
an Eligible Individual for the remainder of such Plan Year with respect to
Deferrals pursuant to Section 3.1 by effecting, prior to or within 30 days after
the date he first becomes an Eligible Individual and within the time period
prescribed by the Plan Administrator, the Deferral election prescribed by the
Plan Administrator.
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(b) Notwithstanding any provision herein to the contrary, if an
Eligible Individual who is an officer or who has an equivalent title becomes a
Member of the Plan and ceases to earn cash compensation of at least $125,000
during the fiscal year of the Company immediately preceding any Plan Year, such
Eligible Individual shall not be entitled to make Deferrals hereunder for such
Plan Year. Any such Eligible Individual may again become entitled to make
Deferrals hereunder for any subsequent Plan Year which is immediately preceded
by a fiscal year of the Company in which such Eligible Individual earns cash
compensation of at least $125,000.
(c) Notwithstanding any provision herein to the contrary, an
Eligible Individual who has become a Member of the Plan shall cease to be
entitled to make Deferrals hereunder effective as of any date designated by the
Plan Administrator. Any such Plan Administrator action shall be communicated to
the affected individual prior to the effective date of such action. Any such
Eligible Individual may again become entitled to make Deferrals hereunder for
any subsequent Plan Year selected by the Plan Administrator in its sole
discretion.
III.
ACCOUNT CREDITS AND ALLOCATIONS
3.1 DEFERRALS.
(a) A Member may:
(1) Elect to defer from his Pay a fixed amount or an integral
percentage of from 1% to 100% of his base annual salary (or of his fees in the
case of a Director) for a Plan Year; and/or
(2) Elect to defer from his Pay a fixed amount or an integral
percentage of from 1% to 100% of his annual incentive bonus (or of his retainers
in the case of a Director) for a Plan Year.
Notwithstanding the foregoing, no Member may elect to defer less than $5,000 of
his Pay for any Plan Year (with such amounts prorated for any Plan Year of less
than twelve months with respect to any Member). Further, with respect to an
Eligible Individual who first becomes a Member on other than the first day of a
Plan Year, any such Deferrals pursuant to Section 3.1(a)(1) shall apply only for
the portion of such Plan Year commencing with the date he first becomes a Member
and ending on the last day of such Plan Year.
(b) Pay for a Plan Year not so deferred by such election pursuant
to this Section shall be received by such Member in cash. A Member's election to
defer an amount of his Pay pursuant to this Section shall be made by effecting,
in the form prescribed by the Plan Administrator, a Deferral election pursuant
to which the Member authorizes the Company to reduce his Pay in the elected
amount and the Company, in consideration thereof, agrees to credit
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an equal amount to such Member's Account maintained under the Plan. The
reduction in a Member's Pay pursuant to Section 3.1(a)(1) shall be effected by
equal Pay reductions each pay period during the applicable portion of the Plan
Year as determined by the Plan Administrator following the effective date of
such election. The reduction in a Member's Pay pursuant to Section 3.1(a)(2)
shall be effected by a Pay reduction at the time such annual bonus (or retainer)
is paid. Such Pay reductions shall be within the Plan Year to which the Deferral
election relates, except that Pay reductions attributable to elections pursuant
to Section 3.1(a)(2) may be made within the next following Plan Year if the
bonus(or retainer) to which the Deferral election relates is paid in such next
following Plan Year. Deferrals made by a Member shall be credited to such
Member's Account as of the date deferred.
(c) Notwithstanding the foregoing, a Deferral election of a
Member pursuant to Section 3.1(a)(1) for a Plan Year shall be automatically
suspended during such Member's unpaid leave of absence and upon termination of
such Member's employment with the Company and its Affiliates. A Deferral
election of a Member pursuant to Section 3.1(a) may, with the consent of the
Plan Administrator, be suspended for the remainder of the Plan Year in which
such Member has an unpaid leave of absence. Any such Member may again become
entitled to make Deferrals hereunder for any subsequent Plan Year following
return to full-time employment. A Deferral election of a Member pursuant to
Section 3.1(a) shall be suspended for the remainder of the Plan Year in which
such Member is on short-term Disability for ninety consecutive days. Any such
Member may again become entitled to make Deferrals hereunder for any subsequent
Plan Year following recovery from Disability.
(d) A Deferral election pursuant to Section 3.1(a) shall become
effective as of the Entry Date which is on or after the date the election is
effected by the Member. A Deferral election shall remain in force and effect for
the entire (or partial, if applicable) Plan Year to which such election relates.
(e) A Deferral election shall indicate the applicable time and
form of payment, as provided in Sections 7.2 and 7.3, for the Pay deferred
thereunder for such Plan Year and the net income (or net loss) equivalents
allocated with respect thereto. A Member may make different time and form of
payment elections with respect to base annual salary (or fee) Deferrals and
annual incentive bonus (or retainer) Deferrals for any Plan Year. Each Member's
Account shall be divided into subaccounts to reflect such Member's various
elections respecting time and form of payment.
(f) A Member who has made a Deferral election pursuant to
Section3.1(a) may change his election, as of the Entry Date of any subsequent
Plan Year, by effecting a new Deferral election prior to such Entry Date and
within the time period prescribed by the Plan Administrator.
(g) A Member who has made a Deferral election pursuant to
Section3.1(a) may cancel his election, as of the Entry Date of any subsequent
Plan Year, by effecting the same in the form prescribed by the Plan
Administrator prior to such Entry Date and within the time period prescribed by
the Plan Administrator. A Member who so cancels his Deferral election may again
make anew such Deferral election for a subsequent Plan Year, if he satisfies the
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eligibility requirements set forth in Section 2.1, by effecting a new such
Deferral election prior to the Entry Date of such Plan Year and within the time
period prescribed by the Plan Administrator.
(h) In the event that the Plan Administrator, upon written
petition of a Member, determines in its sole discretion that such Member has
suffered an Unforeseeable Financial Emergency, the Deferral election of such
Member then in effect, if any, shall be terminated as soon as administratively
practicable after such determination. A Member whose Deferral election has been
so terminated may again make a new Deferral election for a subsequent Plan Year
that begins at least twelve months after the effective date of such termination,
if he satisfies the eligibility requirements set forth in Section 2.1, by
effecting a new Deferral election for such Plan Year and within the time period
prescribed by the Plan Administrator.
3.2 ALLOCATION OF NET INCOME OR NET LOSS EQUIVALENTS.
(a) As of each Valuation Date, the Plan Administrator shall
determine the net income (or net loss) equivalents of each Fund for the period
elapsed since the next preceding Valuation Date. The net income (or net loss)
equivalent of each Fund since the next preceding Valuation Date shall be
ascertained by the Plan Administrator based upon changes in net asset value in
such manner as it deems appropriate, which may include expenses of operating the
Fund.
(b) For purposes of allocations of net income (or net loss)
equivalents, each Member's Accounts shall be divided into subaccounts to reflect
such Member's deemed investment in a particular Fund or Funds pursuant to
Article IV. As of each Valuation Date, the net income (or net loss) equivalent
of each Fund, separately and respectively, shall be allocated among the
corresponding subaccounts of the Members who were deemed to have had such
corresponding subaccounts invested in such Funds since the next preceding
Valuation Date.
(c) So long as there is any balance in any Account, such Account
shall continue to receive allocations pursuant to this Section.
IV.
DEEMED INVESTMENT OF FUNDS
Each Member shall designate, in accordance with the procedures established
from time to time by the Plan Administrator, the manner in which the amounts
allocated to his Account shall be deemed to be invested from among the Funds
made available from time to time for such purpose by the Plan Administrator.
Such Funds shall include the Stock Funds; provided, however, with respect to
Insiders, the Stock Funds shall not be available until August 15, 1996. Such
Member may designate one of such Funds for the deemed investment of all the
amounts allocated to his Account or he may split the deemed investment of the
amounts allocated to his Account between such Funds in 5% increments. If a
Member fails to make a proper designation, then his Account shall be deemed to
be invested in the Fund or Funds designated by the Plan Administrator from time
to time in a uniform and nondiscriminatory manner. Any such initial
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designation by an Insider affecting a Stock Fund shall be approved in advance of
the effective date of such initial designation by (i) either the Parent Board or
the Parent Committee, with respect to designations affecting the First USA, Inc.
Common Stock Fund, or (ii) either the Paymentech Board or the Paymentech
Committee, with respect to designations affecting the First USA Paymentech, Inc.
Common Stock Fund.
A Member may change his deemed investment designation for future amounts
to be allocated to his Account. Any such change shall be made as of the first
day of any calendar quarter in accordance with the procedures established by the
Plan Administrator, and the frequency of such changes may be limited by the Plan
Administrator. Any such change in designation by an Insider affecting a Stock
Fund shall be approved in advance of the effective date of such change of
designation by (i) either the Parent Board or the Parent Committee, with respect
to designations affecting the First USA, Inc. Common Stock Fund, or (ii) either
the Paymentech Board or the Paymentech Committee, with respect to designations
affecting the First USA Paymentech, Inc. Common Stock Fund.
A Member may elect to convert his deemed investment designation with
respect to the amounts already allocated to his Account. Any such conversion
shall be made as of the first day of any calendar quarter in accordance with the
procedures established by the Plan Administrator, and the frequency of such
conversions may be limited by the Plan Administrator. No election of a
conversion designation by an Insider which has the effect of increasing the
total amount allocated to a Stock Fund may be made on a date which is less than
six months following (i) the date of any prior election of a conversion
designation by such Insider which had the effect of decreasing the total amount
allocated to such Stock Fund or (ii) the date of any election by such Insider
with respect to any other plan of First USA, Inc. or any subsidiary
thereof(including First USA Paymentech, Inc.) which had the effect (directly or
indirectly) of making a disposition on behalf of such Insider of the same class
of equity security as that which is the subject of such Stock Fund. No election
of a conversion designation by an Insider which has the effect of decreasing the
total amount allocated to a Stock Fund may be made on a date which is less than
six months following (i) the date of any prior election of a conversion
designation by such Insider which had the effect of increasing the total amount
allocated to such Stock Fund or (ii) the date of any election by such Insider
with respect to any other plan of First USA, Inc. or any subsidiary thereof
(including First USA Paymentech, Inc.) which had the effect (directly or
indirectly) of making an acquisition on behalf of the Insider of the same class
of equity security as that which is the subject of such Stock Fund.
The restrictions contained herein regarding investment designations,
changes, and/or conversions by Insiders respecting Stock Funds are intended to
comply with, and enable Insiders to rely upon, the exemption provided by
Rule16b-3 under the Securities Exchange Act of 1934. Any future amendment to
Rule16b-3 or any successor rule promulgated by the Securities and Exchange
Commission affecting the investment by Insiders in the Stock Funds shall be
incorporated by reference herein and be deemed to be an amendment to the Plan in
order that Insiders shall continue to be entitled to rely upon the exemption
provided by such rule without any interruption. Notwithstanding the foregoing,
the Plan Administrator may alter the designation, change and/or conversion
restrictions applicable to an Insider, as set forth in this Article IV, as a
result of changes in Rule 16b-3 under the Securities Exchange Act of 1934.
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V.
VESTING
A Member shall be 100% vested in his Account at all times.
VI.
WITHDRAWALS
6.1 IN GENERAL. Except as provided in this Article VI and in Article VII,
Members shall not be permitted to make withdrawals from the Plan. Members shall
not, at any time, be permitted to borrow from the Plan.
6.2 UNFORESEEABLE FINANCIAL EMERGENCY. In the event that the Plan
Administrator, upon written petition of a Member, determines in its sole
discretion that such Member has suffered an Unforeseeable Financial Emergency,
such Member shall be entitled to a benefit, determined as of any Valuation Date,
in an amount not to exceed the lesser of (1) the amount determined by the Plan
Administrator as necessary to meet such Member's needs created by the
Unforeseeable Financial Emergency or (2) the then value of such Member's
Account. Such withdrawal benefit shall be paid in a single lump sum, cash
payment as soon as administratively practicable after the Plan Administrator has
made its determinations with respect to the availability and amount of such
benefit. If a Member's Account contains more than one distribution subaccount,
such withdrawal benefit shall be considered to have been distributed, first,
from the subaccount with respect to which the earliest distribution would be
made, then, from the subaccount with respect to which the next earliest
distribution would be made, and continuing in such manner until all of such
subaccounts necessary to satisfy the withdrawal benefit have been exhausted.
Moreover, within the applicable Account or subaccount, such withdrawal benefit
shall be considered to have been distributed from Deferrals(including net income
(or net loss) and additional interest equivalents attributable thereto) on a
first-in, first-out basis.
6.3 ELECTIVE WITHDRAWAL.
(a) A Member may elect at any time, by effecting the election
procedure prescribed by the Plan Administrator, to withdraw as a benefit all,
but not less than all, of his Account as of any Valuation Date, subject to a
withdrawal penalty of 10% of such Account as of such Valuation Date. Upon any
such withdrawal, the withdrawal penalty shall be forfeited to the Company. Upon
any such withdrawal, such Member's participation in the Plan shall terminate and
no further Deferrals shall be made under the Plan on behalf of such Member.
(b) No election of a withdrawal of an amount allocated to a Stock
Fund may be made by an Insider on a date which is less than six months following
(i) the date of any prior election to convert such Insider's deemed investment
designation which had the effect of
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increasing the total amount allocated to such Stock Fund or (ii) the date of any
election by such Insider with respect to any other plan of First USA, Inc. or
any subsidiary thereof (including First USA Paymentech, Inc.) which had the
effect (directly or indirectly) of making an acquisition on behalf of such
Insider of the same class of equity security as that which is the subject of
such Stock Fund.
VII.
DISTRIBUTIONS
7.1 AMOUNT OF BENEFIT. A Member or, in the event of the death of
the Member, the Member's designated beneficiary, shall be entitled to a benefit
equal in value to the Member's Account as of the Valuation Date next preceding
the date the payment of such benefit is to be made or to commence pursuant to
Section 7.2 (plus any annual bonus (or retainer) Deferral not previously
allocated to such Account).
7.2. TIME OF PAYMENT. Payment of a Member's benefit under Section
7.1 shall be made or commence, with respect to such Member's Account, or with
respect to such Member's subaccounts established pursuant to Section 3.1(e)
separately and respectively, as soon as administratively practicable as of the
date irrevocably elected by such Member pursuant to Section 3.1(e). A Member
may, pursuant to Section 3.1(e), elect distribution with respect to his
Deferrals for any Plan Year to be made as of an Entry Date which is at least
five years following the beginning of such Plan Year or to be made or commenced
after the first day of the month following his Retirement. Notwithstanding the
foregoing, payment of a Member's benefit under Section 7.1 shall be made or
commence as soon as administratively practicable after the first day of the
month following the date the Member terminates his employment with the Company
and its Affiliates for any reason, including Retirement, Disability or death.
For this purpose, a Member on Disability for a period of two years shall be
deemed to have terminated his employment with the Company and its Affiliates as
of the end of such two-year period.
7.3 ALTERNATIVE FORMS OF BENEFIT PAYMENTS. A Member's benefit
under Section 7.1 payable prior to termination of employment with the Company
and its Affiliates shall be paid, with respect to such Member's Account, or with
respect to such Member's subaccounts established pursuant to Section 3.1(e)
separately and respectively, in one lump sum payment. A Member's benefit under
Section 7.1 payable after termination of employment with the Company and its
Affiliates prior to a Member's Retirement shall be paid in one lump sum payment.
A Member's benefit under Section 7.1 payable after a Member's Retirement
(inclusive of termination due to Disability) shall be paid in one of the
following forms irrevocably elected by such Member pursuant to Section 3.1(e):
(1) One lump sum payment; or
(2) Monthly installment payments for a term certain of
either 5 or 10 years payable to the Member or, in the event of such Member's
death prior to the end of such term certain, to his designated beneficiary as
provided in Section 7.4; provided, that to the extent such
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Member designates a non-spouse beneficiary, such beneficiary's share of the
remaining installments shall be paid in one lump sum.
With respect to any portion of a Member's Retirement benefit for which no form
of payment election is in effect, such amount shall be paid in the 10-year
monthly installment payment form; provided, however, that the Plan Administrator
may, in its sole discretion, elect to make such benefit payment in any other
available form. If a Member dies prior to the date the payment of his lump sum
benefit is made, then such lump sum benefit shall be made to the Member's
designated beneficiary as provided in Section 7.4. Plan provisions to the
contrary notwithstanding, if payments are to be made in monthly installments,
"installment valuation dates" shall be established as of each payment date. As
of each such "installment valuation date," net income (or net loss) equivalents
shall be allocated to the Member's Account. The installment payment to be made
on behalf of a Member as of each such "installment valuation date" shall be
determined by multiplying the balance of such Member's Account as of such
"installment valuation date" (after allocation of net income (or net loss)
equivalents) by a fraction, the numerator of which is one and the denominator of
which is the number of months remaining in the installment period.
7.4 DESIGNATION OF BENEFICIARIES.
(a) Each Member shall have the right to designate the beneficiary or
beneficiaries to receive payment of his benefit in the event of his death. Each
such designation shall be made by executing the beneficiary designation form
prescribed by the Plan Administrator and filing same with the Plan
Administrator. Any such designation may be changed at any time by execution of
a new designation in accordance with this Section.
(b) If no such designation is on file with the Plan Administrator at
the time of the death of the Member or such designation is not effective for any
reason as determined by the Plan Administrator, then the designated beneficiary
or beneficiaries to receive such benefit shall be as follows:
(1) If a Member leaves a surviving spouse, his benefit shall be paid
to such surviving spouse;
(2) If a Member leaves no surviving spouse, his benefit shall be paid
to such Member's executor or administrator, or to his heirs at law if there is
no administration of such Member's estate.
7.5 CHANGE IN PAY-OUT OF CERTAIN BENEFITS.
(a) Notwithstanding any provision in Section 7.3 to the contrary, if a
Member's Retirement benefit payments are to be paid in installments and the
aggregate amount to be paid with respect to such Member in any particular Plan
Year is less than $12,000, then the Plan Administrator shall cause the
installment payments for such Plan Year with respect to such Member to be paid
in one lump sum payment.
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(b) Notwithstanding any provision in Section 7.3 to the contrary, if a
Member's Retirement benefit payments respecting any one subaccount established
pursuant to Section 3.1(e) are to be paid in installments and the aggregate
amount remaining to be paid with respect to such subaccount is less than
$50,000, then the Plan Administrator shall cause the remaining benefit payments
with respect to such subaccount to be paid in one lump sum payment.
(c) Notwithstanding any provision in Section 7.3 to the contrary, the
form of payment of a Member's Retirement Benefits with respect to a part or all
of his Account may, in the sole discretion of the Plan Administrator, be changed
from the form(s) elected by such Member pursuant to Sections 3.1(e) and 7.3 to
one or more other forms provided in Section 7.3. In making its determination as
to the form(s) of payment, the Plan Administrator may consider the age, family
status, health, financial status, or such other facts as it deems relevant
respecting the Member. The Member may, but shall not be required to, express
his preference to the Plan Administrator as to such form(s) of payment, but the
Plan Administrator shall be under no obligation to follow such preference.
7.6 ACCELERATED PAY-OUT DUE TO EMERGENCY. Notwithstanding any provision in
Sections 7.2 and 7.3 to the contrary, in the event that the Plan Administrator,
upon written petition of a Member, determines in its sole discretion that such
Member has suffered an Unforeseeable Financial Emergency, such Member shall be
entitled to an accelerated pay out of his benefit pursuant to Section 6.2. Any
remaining amounts in such Member's Account following payment of such emergency
benefit shall be payable at the time(s) and in the form(s) otherwise provided in
Sections 7.2 and 7.3.
7.7 DEFERRED PAY-OUT DUE TO LOSS OF TAX DEDUCTION. If the Company determines
in good faith that there is a reasonable likelihood that any benefits paid to a
Member pursuant to this Article VII would not be deductible by the Company under
applicable income tax provisions then in effect, then to the extent deemed
necessary by the Company to ensure that the entire amount of any such
distribution to a Member is deductible, the Company may defer payment of all or
any portion of such benefits. Any amount deferred pursuant to this Section 7.7
shall continue to receive net income (or net loss) equivalents pursuant to the
Plan until distribution. The amounts so deferred shall be distributed to the
Member (or his beneficiary in the event of the Member's death) at the earliest
possible date, as determined by the Company in good faith, as of which such
deductibility will be ensured.
7.8 PAYMENT OF BENEFITS. To the extent the Trust Fund has sufficient assets,
the Trustee shall pay benefits to Members or their beneficiaries, except to the
extent the Company pays the benefits directly and provides adequate evidence of
such payment to the Trustee. To the extent the Trustee does not or cannot pay
benefits out of the Trust Fund, the benefits shall be paid by the Company. Any
benefit payments made to a Member or for his benefit pursuant to any provision
of the Plan shall be debited to such Member's Account. All benefit payments
shall be made in cash to the fullest extent practicable.
7.9 UNCLAIMED BENEFITS. In the case of a benefit payable on behalf of a
Member, if, after exercising reasonable diligence, the Plan Administrator is
unable to locate the Member or beneficiary to whom such benefit is payable, upon
the Plan Administrator's determination
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thereof, such benefit shall be forfeited to the Company. Notwithstanding the
foregoing, if subsequent to any such forfeiture the Member or beneficiary to
whom such benefit is payable makes a valid claim for such benefit, such
forfeited benefit shall be restored to the Plan by the Company.
7.10 SET-OFF UPON DISCHARGE FOR CAUSE. Plan provisions to the contrary
notwithstanding, if a Member's employment with the Company and its Affiliates is
terminated by the Company or its Affiliates because he has engaged in misconduct
to the material detriment of the Company and its Affiliates or because he has
been convicted of a felony involving the Company or its Affiliates, the amount
of his benefit, determined pursuant to Section 7.1, shall be reduced by any
amounts due the Company and its Affiliates by such Member as a result of such
misconduct or felony, with such amounts due to be determined in the sole
discretion of the Plan Administrator. Notwithstanding the foregoing, the right
of set-off as provided in this Section 7.10 shall not affect any other rights or
set-off available to the Company or its Affiliates under common-law or under any
other agreement.
VIII.
ADMINISTRATION OF THE PLAN
8.1 APPOINTMENT OF PLAN ADMINISTRATOR. The general administration of the
Plan shall be vested in the Plan Administrator (which may be an individual or a
committee of two or more persons) which shall be appointed by the Board.
8.2 RESIGNATION AND REMOVAL. At any time during his term of office, the
individuals comprising the Plan Administrator may resign by giving written
notice to the Board, such resignation to become effective upon the appointment
of a substitute or, if earlier, the lapse of thirty days after such notice is
given as herein provided. At any time during its term of office, and for any
reason, the individuals comprising the Plan Administrator may be removed by the
Board.
8.3 RECORDS AND PROCEDURES. The Plan Administrator shall keep appropriate
records of its proceedings and the administration of the Plan and shall make
available for examination during business hours to any Member or beneficiary
such records as pertain to that individual's interest in the Plan. The Plan
Administrator shall provide an annual statement to each Member or beneficiary of
his interest in the Plan. The Plan Administrator shall designate the person or
persons who shall be authorized to sign for the Plan Administrator and, upon
such designation, the signature of such person or persons shall bind the Plan
Administrator.
8.4 SELF-INTEREST OF PLAN ADMINISTRATOR. No individual comprising the Plan
Administrator shall have any right to vote or decide upon any matter relating
solely to himself under the Plan or to vote in any case in which his individual
right to claim any benefit under the Plan is particularly involved. In any case
in which an individual comprising the Plan Administrator is so disqualified to
act, the remaining individuals comprising the Plan Administrator or, if none,
the Board shall decide the matter in which he is disqualified.
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8.5 COMPENSATION AND BONDING. The Plan Administrator shall not receive
compensation with respect to its services as Plan Administrator. To the extent
required by applicable law, or required by the Company, the Plan Administrator
shall furnish bond or security for the performance of its duties hereunder.
8.6 PLAN ADMINISTRATOR POWERS AND DUTIES. The Plan Administrator shall
supervise the administration and enforcement of the Plan according to the terms
and provisions hereof and shall have all powers necessary to accomplish these
purposes, including, but not by way of limitation, the right, power, authority
and duty:
(a) to make rules, regulations and bylaws for the administration of
the Plan which are not inconsistent with the terms and provisions hereof,
provided such rules, regulations and bylaws are evidenced in writing and copies
thereof are delivered to the Trustee and to the Company;
(b) to construe all terms, provisions, conditions and limitations of
the Plan;
(c) to correct any defect or supply any omission or reconcile any
inconsistency that may appear in the Plan, in such manner and to such extent as
it shall deem expedient to carry the Plan into effect for the greatest benefit
of all interested parties;
(d) to employ and compensate such accountants, attorneys, investment
advisors and other agents and employees as the Plan Administrator may deem
necessary or advisable in the proper and efficient administration of the Plan;
(e) to determine all questions relating to eligibility;
(f) to determine the amount, manner and time of payment of any
benefits and to prescribe procedures to be followed by Members and their
beneficiaries in obtaining benefits;
(g) to make a determination as to the right of any person to a benefit
under the Plan; and (h) to receive and review reports from the Trustee as to the
financial condition of the Trust Fund, including its receipts and disbursements.
8.7 COMPANY TO SUPPLY INFORMATION. The Company shall supply full and timely
information to the Plan Administrator relating to the Pay of all Members, their
ages, their Retirement, Disability, death or other termination of employment and
such other pertinent facts as the Plan Administrator may require. The Company
shall advise the Trustee of such of the foregoing facts as are deemed necessary
for the Trustee to carry out the Trustee's duties under the Plan. When making a
determination in connection with the Plan, the Plan Administrator shall be
entitled to rely upon the aforesaid information furnished by the Company.
8.8 CLAIMS REVIEW. In any case in which a claim for Plan benefits of a Member
or beneficiary is denied or modified, the Plan Administrator shall furnish
written notice to the
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claimant within ninety days (or within 180 days if additional information
requested by the Plan Administrator necessitates an extension of the ninety-day
period), which notice shall:
(a) State the specific reason or reasons for the denial or
modification;
(b) Provide specific reference to pertinent Plan provisions on which
the denial or modification is based;
(c) Provide a description of any additional material or information
necessary for the Member, his beneficiary, or representative to perfect the
claim and an explanation of why such material or information is necessary; and
(d) Explain the Plan's claim review procedure as contained herein.
In the event a claim for Plan benefits is denied or modified, if the Member, his
beneficiary, or a representative of such Member or beneficiary desires to have
such denial or modification reviewed, he must, within sixty days following
receipt of the notice of such denial or modification, submit a written request
for review by the Plan Administrator of its initial decision. In connection with
such request, the Member, his beneficiary, or the representative of such Member
or beneficiary may review any pertinent documents upon which such denial or
modification was based and may submit issues and comments in writing. Within
sixty days following such request for review the Plan Administrator shall, after
providing a full and fair review, render its final decision in writing to the
Member, his beneficiary or the representative of such Member or beneficiary
stating specific reasons for such decision and making specific references to
pertinent Plan provisions upon which the decision is based. If special
circumstances require an extension of such sixty-day period, the Plan
Administrator's decision shall be rendered as soon as possible, but not later
than 120 days after receipt of the request for review. If an extension of time
for review is required, written notice of the extension shall be furnished to
the Member, beneficiary, or the representative of such Member or beneficiary
prior to the commencement of the extension period.
8.9 INDEMNITY. To the extent permitted by applicable law, the Company shall
indemnify and save harmless the Board and any individual acting as Plan
Administrator against any and all expenses, liabilities and claims (including
legal fees incurred to defend against such liabilities and claims) arising out
of their discharge in good faith of responsibilities under or incident to the
Plan. Expenses and liabilities arising out of willful misconduct shall not be
covered under this indemnity. This indemnity shall not preclude such further
indemnities as may be available under insurance purchased by the Company or
provided by the Company under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, as such indemnities are permitted under
applicable law.
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IX.
ADMINISTRATION OF FUNDS
PAYMENT OF EXPENSES. All expenses incident to the administration of the Plan
and Trust, including but not limited to, legal, accounting, Trustee fees, and
expenses of the Plan Administrator, shall be paid by the Company and, if not
paid by the Company, shall be paid by the Trustee from the Trust Fund, if any.
9.2 TRUST FUND PROPERTY. All income, profits, recoveries, contributions,
forfeitures and any and all moneys, securities and properties of any kind at
anytime received or held by the Trustee, if any, shall be held as a commingled
Trust Fund pursuant to the terms of the Trust Agreement. The Plan Administrator
shall maintain an Account in the name of each Member, but the maintenance of an
Account designated as the Account of a Member shall not mean that such Member
shall have a greater or lesser interest than that due him by operation of the
Plan and shall not be considered as segregating any funds or property from any
other funds or property contained in the commingled fund. No Member shall have
any title to any specific asset in the Trust Fund, if any.
X.
NATURE OF THE PLAN
The Company intends and desires by the adoption of the Plan to recognize
the value to the Company of the past and present services of individuals covered
by the Plan and to encourage and assure their continued service with the Company
by making more adequate provision for their future retirement security. The
Plan is intended to constitute an unfunded, unsecured plan of deferred
compensation for a select group of management or highly compensated employees of
the Company and for Directors. Plan benefits herein provided are a contractual
obligation of the Company which may be paid out of the Company's general assets
or out of the Trust Fund. Subject to the terms hereof and of the Trust
Agreement, the Company may transfer money or other property to the Trustee, and
the Trustee shall pay Plan benefits to Members and their beneficiaries out of
the Trust Fund in accordance with the terms of the Trust Agreement.
The Board, in its sole discretion, may establish the Trust and direct the
Company to enter into the Trust Agreement. In such event, the Company shall
remain the owner of all assets in the Trust Fund and the assets shall be subject
to the claims of Company creditors if the Company ever becomes insolvent. For
purposes hereof, the Company shall be considered "insolvent" if (a) the Company
is unable to pay its debts as they become due, or (b) the Company is subject to
a pending proceeding as a debtor under the United States Bankruptcy Code (or any
successor federal statute). The chief executive officer of the Company and its
board of directors shall have the duty to inform the Trustee in writing if the
Company becomes insolvent. Such notice given under the preceding sentence by any
party shall satisfy all of the parties' duty to give notice. When so informed,
the Trustee shall suspend payments to the Members and hold the
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assets for the benefit of the Company's general creditors. If the Trustee
receives a written allegation that the Company is insolvent, the Trustee shall
suspend payments to the Members and hold the Trust Fund for the benefit of the
Company's general creditors, and shall determine within the period specified in
the Trust Agreement whether the Company is insolvent. If the Trustee determines
that the Company is not insolvent, the Trustee shall resume payments to the
Members. No Member or beneficiary shall have any preferred claim to, or any
beneficial ownership interest in, any assets of the Trust Fund.
XI.
ADOPTING ENTITIES
It is contemplated that other corporations, associations, partnerships or
proprietorships may adopt this Plan and thereby become the Company. Any such
entity, whether or not presently existing, may become a party hereto by
appropriate action of its officers without the need for approval of its board of
directors or noncorporate counterpart or of the Board; provided, however, that
such entity must be an Affiliate. The provisions of the Plan shall apply
separately and equally to each Company and its employees in the same manner as
is expressly provided for First USA, Inc. and its employees, except that the
power to appoint or otherwise affect the Plan Administrator or the Trustee and
the power to amend or terminate the Plan or amend the Trust Agreement shall be
exercised by the Board alone. Transfer of employment among Companies and
Affiliates shall not be considered a termination of employment hereunder. Any
Company may, by appropriate action of its officers without the need for approval
of its board of directors or noncorporate counterpart or the Board, terminate
its participation in the Plan. Moreover, the Board may, in their discretion,
terminate a Company's Plan participation at any time.
XII.
MISCELLANEOUS
12.1 NOT CONTRACT OF EMPLOYMENT. The adoption and maintenance of the Plan
shall not be deemed to be a contract between the Company and any person or to be
consideration for the employment of any person. Nothing herein contained shall
be deemed to give any person the right to remain under contract with the Company
or to be retained in the employ of the Company or to restrict the right of the
Company to discharge any person at any time nor shall the Plan be deemed to give
the Company the right to require any person to remain under contract with the
Company or remain in the employ of the Company or to restrict any person's right
to terminate his services at any time.
12.2 ALIENATION OF INTEREST FORBIDDEN. The interest of a Member or his
beneficiary or beneficiaries hereunder may not be sold, transferred, assigned,
or encumbered in any manner, either voluntarily or involuntarily, and any
attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be null and void; neither shall the benefits hereunder be
liable for or subject to the debts, contracts, liabilities, engagements or torts
17
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of any person to whom such benefits or funds are payable, nor shall they be an
asset in bankruptcy or subject to garnishment, attachment or other legal or
equitable proceedings.
12.3 WITHHOLDING. All Deferrals and payments provided for hereunder shall
be subject to applicable withholding and other deductions as shall be required
of the Company under any applicable local, state or federal law.
12.4 GUARANTY. Plan provisions to the contrary notwithstanding, in the
event any Affiliate that adopts the Plan pursuant to Article XI (other than
First USA Paymentech, Inc. or any of its subsidiaries) fails to make payment of
the benefits due under the Plan on behalf of its Members, whether directly or
through the Trust, First USA, Inc. shall be liable for and shall make payment of
such benefits due as a guarantor of such entity's obligations hereunder.
Moreover, in the event any subsidiary of First USA Paymentech, Inc. that adopts
the Plan pursuant to Article XI fails to make payment of the benefits due under
the Plan on behalf of its Members, whether directly or through the Trust, First
USA Paymentech, Inc. shall be liable for and shall make payment of such benefits
due as a guarantor of such entity's obligations hereunder. The guaranty
obligations provided herein shall be satisfied directly and not through the
Trust.
12.5 AMENDMENT AND TERMINATION. The Board may from time to time, in their
discretion, amend, in whole or in part, any or all of the provisions of the
Plan; provided, however, that no amendment may be made that would impair the
rights of a Member with respect to amounts already allocated to his Account.
The Board may terminate the Plan at any time. In the event that the Plan is
terminated, the balance in a Member's Account shall be paid to such Member or
his designated beneficiary in the manner specified by the Plan Administrator,
which may include one lump sum payment in full satisfaction of all of such
Member's or beneficiary's benefits hereunder.
12.6 SEVERABILITY. If any provision of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions hereof; instead, each provision shall be fully severable
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.
12.7 GOVERNING LAWS. ALL PROVISIONS OF THE PLAN SHALL BE CONSTRUED
INACCORDANCE WITH THE LAWS OF TEXAS EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL
LAW.
EXECUTED this 27th day of June, 1996.
FIRST USA, INC.
By: /s/ Philip E. Taken
-------------------
Senior Vice President
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FIRST USA
DEFERRED COMPENSATION PLAN TRUST AGREEMENT
THIS AGREEMENT AND DECLARATION OF TRUST, made this 27th day of June 1996,
by and between FIRST USA, INC. and WACHOVIA BANK OF NORTH CAROLINA, N.A.
(hereinafter referred to as the "Trustee").
WHEREAS, FIRST USA, INC. has established the FIRST USA DEFERRED
COMPENSATION PLAN (hereinafter referred to as the "Plan") for the benefit of
certain individuals who are eligible for benefits under the terms of the Plan
(such individuals being referred to herein as the "Members"), which Plan
provides for the payment of certain deferred compensation benefits (the
"Benefits") to the Members and the beneficiaries of the respective Members who
may become entitled to any payments under the terms of the Plan in the event of
the Member's death ("Beneficiaries"); and
WHEREAS, other adopting entities may adopt the Plan (such other adopting
entities, if any, along with FIRST USA, INC. hereinafter referred to as the
"Company," jointly and severally); and
WHEREAS, the Plan contemplates that the Company will pay the entire cost
of the Benefits from its general assets; and
WHEREAS, FIRST USA, INC. desires to establish the FIRST USA DEFERRED
COMPENSATION PLAN TRUST AGREEMENT (the "Trust") to aid the Company in meeting
the obligations under the Plan; and
WHEREAS, the Trust is intended to be a "grantor trust" with the corpus
and income of the Trust treated as assets and income of the Company for federal
income tax purposes; and
WHEREAS, the Company intends that the assets of the Trust shall at all
times be subject to the claims of general creditors of the Company as provided
in Article X; and
WHEREAS, the Company intends that the existence of the Trust shall not
alter the characterization of the Plan as "unfunded" for purposes of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and shall
not be construed to provide income to any Member prior to actual payment of
Benefits under the Plan; and
WHEREAS, under the Trust, the Trustee covenants that it will hold all
property which it may receive hereunder, IN TRUST, for the uses and purposes and
upon the terms and conditions hereinafter stated;
1
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NOW, THEREFORE, the parties hereto adopt this Trust Agreement effective June
l, 1996, and agree, as follows:
ARTICLE I
GENERAL TRUST PROVISIONS
------------------------
1.1 Establishment of Trust. First USA, Inc. hereby adopts the Trust
----------------------
Agreement, establishing the Trust with the Trustee, consisting of such sums of
money and other property acceptable to the Trustee as from time to time shall be
paid or delivered to the Trustee by the Company. All such money and other
property, all investments and reinvestments made therewith or proceeds thereof
and all earnings and profits thereon, less all payments and charges as
authorized herein, shall constitute the "Trust Fund." The Trust Fund shall at
all times be subject to the claims of general creditors of the Company as
provided in Article X. No Member or Beneficiary shall have any preferred claim
to, or any beneficial ownership interest in, any assets of the Trust Fund prior
to the time such assets are paid to such Member or Beneficiary as Benefits.
1.2 Separate Sub-Trusts. Contrary provisions of the Trust
-------------------
notwithstanding, except as provided in Article XI, the provisions of the Trust
shall apply separately and equally to First USA, Inc. and to each adopting
entity that has entered into this Trust Agreement pursuant to Article XI. Each
Company shall bear the cost of providing Benefits for its own Members and their
Beneficiaries, and the portion of the Trust Fund attributable to the
contributions of each Company shall be available only to provide benefits to
such Company's Members and their Beneficiaries or to satisfy claims of such
Company's Bankruptcy Creditors in the event such Company becomes Insolvent (as
such terms are defined in Section 10.1).
1.3 Trust Irrevocable. The Trust shall be irrevocable and shall be held
-----------------
for the exclusive purpose of providing benefits under the Plan to Members and
their Beneficiaries and defraying expenses of the Trust in accordance with the
provisions of this Trust Agreement. Except as provided in Sections 3.6(c) and
3.6(d) and Articles IX and X hereof, no part of the income or corpus of the
Trust Fund shall be recoverable by or for the Company.
1.4 Non-Alienation. No right or interest to receive benefits from the
--------------
Trust may be assigned, sold, anticipated, alienated or otherwise transferred by
any Member or Beneficiary.
1.5 Acceptance by Trustee. The Trustee accepts the Trust established
---------------------
under this Trust Agreement on the terms and subject to the provisions set forth
herein, and it agrees to discharge and perform fully and faithfully all of the
duties and obligations imposed upon it under this Trust Agreement.
2
<PAGE>
ARTICLE II
GENERAL DUTIES OF THE PARTIES
-----------------------------
2.1 General Duties of the Company and the Trustee.
---------------------------------------------
(a) The Company has provided or will provide the Trustee with a copy
of the Plan and shall provide the Trustee with a copy of any amendment to the
Plan promptly upon its adoption. The Plan, as of the date of execution of this
Trust Agreement, is hereby incorporated by reference into and shall form a part
of this Trust Agreement as fully as if set forth herein verbatim. Any amendment
to the Plan shall also be incorporated by reference into and form a part of this
Trust Agreement, effective as of the effective date of such amendment. Schedule
A to this Trust Agreement sets forth the name and mailing address of each Member
entitled to receive Benefits, the Beneficiaries, if any, designated by each
Member, and each Member's aggregate balance ("Account Balance") in the accounts
maintained under the Plan on his or her behalf. Such Schedule (as amended from
time to time as provided herein) is hereinafter referred to as the "Benefit
Schedule." The Company shall be responsible for notifying the Trustee of any
changes in the information set forth on the Benefit Schedule, including, but not
limited to, the addition of new Members and a change in the mailing address of a
Member.
(b) Subject to the provisions of Section 2.1(c), the Trustee shall be
charged with keeping the Benefit Schedule accurate and current, including but
not limited to, preparing by September 30 of each year a completely updated
Benefit Schedule as of June 30 of the immediately preceding year with such
assistance from the Company and independent third parties as may be necessary in
order to permit distributions from the Trust Fund to be made in accordance with
the provisions of Section 3.6. The Company shall keep accurate books and records
with respect to the eligibility of individuals to participate in the Plan and
the Benefits payable under the Plan, and shall provide such information to the
Trustee and any independent third party referred to in the immediately preceding
sentence and shall also provide access to such books and records at such time or
times as the Trustee shall reasonably request.
(c) If, at any time, the Company fails or refuses to give the Trustee
Member data or access to such books and records in accordance with Section
2.1(b), the Trustee shall deliver a written request to the Company to provide
access to books and records of the Company and to provide such data as required
in accordance with Section 2.1(b) for the Trustee to keep the Benefit Schedule
accurate and current. If the Company fails or refuses to comply with the
Trustee's written request pursuant to the preceding sentence prior to the
expiration of thirty days from the date of delivery thereof by the Trustee, the
Trustee shall, after ten days written notice to the Company, immediately pay to
each Member an amount equal to such Member's Account Balance as set forth on the
most recent Benefit Schedule, reduced by any taxes to be withheld pursuant to
Section 3.6. Such payment shall be made in accordance with the provisions of
Section 3.6. For this purpose, the Company shall be deemed to have complied with
the Trustee's written request if, in the Trustee's judgment, it shall have
substantially complied at the end of the thirty-day period and is endeavoring in
good faith to complete compliance without delay.
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<PAGE>
(d) The Trustee shall notify each Member and Beneficiary of a then
deceased Member in writing of any changes in the Benefit Schedule with respect
to such Member or Beneficiary and shall notify all Members and such
Beneficiaries of any failure of the Company to provide information required in
this Section 2. 1.
(e) It is intended that Benefits payable to Members shall be determined
under the provisions of the Plan and shall be calculated under the provisions of
the Plan as of the date of payment. Payment of Benefits shall be based upon the
amounts set forth on the Benefit Schedule only under the circumstances set forth
in Section 2.1(c). If the actual Benefits payable to a Member under the
provisions of the Plan exceeds the amount set forth on the Benefit Schedule
which is paid pursuant to Section 2.1(c), the Company shall be liable for
payment of the remaining portion of such Benefits.
(f) Trust provisions to the contrary notwithstanding, the Company shall
have the right at any time, and from time to time, in its sole discretion, to
substitute assets of equal fair market value for any asset held by the Trust.
This right is exercisable by the Company in a nonfiduciary capacity without the
approval or consent of any person in a fiduciary capacity.
2.2 Additional General Duties of Trustee. The Trustee shall manage,
------------------------------------
invest and reinvest the Trust Fund as the Trustee may determine in the exercise
of its fiduciary duties hereunder, consistent with the provisions of Article
III. The Trustee shall collect the income on the Trust Fund, and make
distributions therefrom, all as hereinafter provided.
ARTICLE III
INVESTMENT, ADMINISTRATION AND DISBURSEMENT OF TRUST FUND
---------------------------------------------------------
3.1 Investment of Trust Fund. The following provisions shall apply with
------------------------
respect to investment of the Trust Fund:
(a) At any time prior to the occurrence of a Change in Control (as
such term is defined in Section 12.3), the Trustee shall invest and
reinvest the assets of the Trust Fund in accordance with the written
directions received from time to time by the Trustee from the administrator
established pursuant to the Plan (the "Plan Administrator"). Specifically,
but not by way of limitation, the Plan Administrator may, in its
discretion, direct the Trustee to follow the deemed investment directions
of each Member or Beneficiary of a deceased Member, whether written or
telephonic, with respect to a portion of the Trust Fund assets equal in
value to the Account Balance maintained under the Plan on behalf of such
individual, within parameters established by, and as agent for, the Plan
Administrator;
(b) To the extent that the Trustee is directed by the Plan
Administrator, the Trustee may invest in securities (including stock or
rights to acquire stock) or obligations issued by the Company;
4
<PAGE>
(c) To the extent that the Trustee is directed by the Plan
Administrator, the Trustee may establish one or more separate investment
accounts within the Trust Fund, each separate account being hereinafter
referred to as an Investment Fund. Except as otherwise provided, the
Trustee shall transfer to each such Investment Fund such portion of the
assets of the Trust Fund as the Plan Administrator directs. The Trustee
shall be under no duty to question, and shall not incur any liability on
account of following, any direction of the Plan Administrator. The Trustee
shall be under no duty to review the investment guidelines, objectives, and
restrictions established, or the specific investment directions given by
the Plan Administrator for any Investment Fund, or to make suggestions to
the Plan Administrator in connection therewith. To the extent that
directions from the Plan Administrator to the Trustee represent deemed
investment elections of the Members, the Trustee shall have no
responsibility for such investment elections and shall incur no liability
on account of investing the assets of the Trust Fund in accordance with
such directions. All interest, dividends, and other income received with
respect to, and any proceeds received from the sale or other disposition of
securities or other property held in, an Investment Fund shall be credited
to and reinvested in such Investment Fund. All expenses of the Trust Fund
which are allocable to a particular Investment Fund shall be so allocated
and charged. The Plan Administrator may direct the Trustee to eliminate an
Investment Fund or Funds, and the Trustee shall thereupon dispose of the
assets of such Investment Fund and reinvest the proceeds thereof in
accordance with the directions of the Company; and
(d) From and after the occurrence of a Change in Control, or if the
Plan Administrator fails to provide the Trustee with such written
directions, the Trustee shall have, with respect to the Trust Fund, power
in its discretion to invest and reinvest such assets in (i) common and
preferred stocks, bonds, notes and debentures (including convertible stocks
and securities but not including any stock, debt instruments, or other
securities of the Company, the Trustee or their affiliates) which are
readily marketable and listed on a United States national securities
exchange or the NASDAQ national market, (ii) interest-bearing deposit
accounts or certificates of deposit maturing within one year after
acquisition thereof, entered into or issued by a United States national or
state bank or trust company having capital, surplus and undivided profits,
at the holding company level, of at least $75 million, (iii) direct
obligations of, and obligations fully guaranteed by, the United States of
America or any agency of the United States of America which is backed by
the full faith and credit of the United States of America (so long as such
obligations shall mature within one year after acquisition thereof), (iv)
any common, collective or commingled fund, including a fund maintained by
the Trustee, established and maintained primarily for the purpose of
investing and reinvesting in assets of the type described in (i), (ii) and
(iii) above, and (v) insurance contracts issued by one or more insurance
companies. Further, notwithstanding the provisions of the preceding
sentence, after the occurrence of a Change in Control or in the event the
Plan Administrator fails to provide the Trustee with written directions
pursuant to the first sentence of this Section, the Trustee shall have the
power in its discretion to retain, maintain, continue, sell, or take any
other actions relative to any assets then held in the
5
<PAGE>
Trust Fund (including, without limitation, to take actions in accordance
with deemed investment directions obtained directly from a Member or
Beneficiary of a deceased Member with respect to a portion of the Trust
Fund assets equal in value to the Account Balance maintained under the Plan
on behalf of such individual).
3.2 Valuation of Trust Fund. As soon as practicable after June 30 of each
-----------------------
year and as of such other dates as may be specified by the Company or the Plan
Administrator, the Trustee shall report to the Company and the Plan
Administrator the assets held in the Trust Fund as of such day and shall
determine and include in such report the fair market value as of such day of
each such asset. In determining such fair market values, the Trustee shall use
such market quotations and other information as are available to it and may in
its discretion be appropriate. The report of any such valuation shall not
constitute a representation by the Trustee that the amounts reported as fair
market values would actually be realized upon the liquidation of the Trust Fund.
The Trustee shall not be accountable to the Company or to any other person on
the basis of any such valuation, but its accountability shall be in accordance
with the provisions of Article IV hereof.
3.3 Additional Investment of Trustee. Subject to the provisions of
--------------------------------
Sections 3.1, 3.6 and 9.2 hereof, the Trustee shall have, with respect to the
Trust Fund, the power in its discretion:
(a) To retain any property at any time received by it;
(b) To sell, exchange, convey, transfer or dispose of, and to
grant options for the purchase or exchange with respect to, any property
at any time held by it; and
(c) To register and carry any securities or any other property
in the name of the Trustee, or in the name of the nominee of the Trustee
(or to hold any such property unregistered) without increasing or
decreasing the fiduciary liability of the Trustee, and to exercise any
option, right or privilege to convert any convertible securities,
including shares or fractional shares of the Trustee so long as the
conversion privilege is offered pro rata to all shareholders.
3.4 Administrative Powers of Trustee. The Trustee shall have the power in
--------------------------------
its discretion:
(a) To exercise all voting rights with respect to the shares of
stock held in the Trust Fund and to grant proxies, discretionary or
otherwise; provided, however, voting rights with respect to stock issued
by the Company or its affiliates shall be exercised by the Company prior
to the occurrence of a Change in Control;
(b) To cause any shares of stock to be registered and held in
the name of one or more of its nominees, or one or more nominees of any
system for the central handling of securities, without increase or
decrease of liability;
6
<PAGE>
(c) To collect and receive any and all money and other property
due to the Trust Fund and to give full discharge therefor;
(d) Subject to the provisions of Section 3.6 hereof: to settle,
compromise or submit to arbitration any claims, debts or damages due or
owing to or from the Trustee; to commence or defend suits or legal
proceedings to protect any interest of the Trust; and to represent the
Trust in all suits or legal proceedings in any court or before any other
body or tribunal;
(e) To organize under the laws of any state a corporation or
limited liability company for the purpose of acquiring and holding title
to any property which it is authorized to acquire under this Trust
Agreement and to exercise with respect thereto any or all of the powers
set forth in this Trust Agreement;
(f) To determine how all receipts and disbursements shall be
credited, charged or apportioned as between income and principal;
(g) To determine the amount and time of Benefit payments in
accordance with Section 3.6; and
(h) Generally to do all acts, whether or not expressly
authorized, which the Trustee may deem necessary or desirable for the
protection of the Trust Fund.
3.5 Dealings with Trustee. Persons dealing with the Trustee shall be
---------------------
under no obligation to see to the proper application of any money paid or
property delivered to the Trustee or to inquire into the Trustee's authority as
to any transaction.
3.6 Distributions from Trust Fund.
------------------------------
(a) Except as set forth in Section 3.6(c), Section 3.6(d), Section 9.2 and
Article X hereof, distributions from the Trust Fund shall be made by the Trustee
to the Members and Beneficiaries at the times and in the amounts set forth in
the Plan and, to the maximum extent permitted by applicable law, the Trustee
shall be fully protected in so doing. Any amounts so paid shall be reduced by
the amount of any federal, state, or local income or other taxes that may be
required by law to be withheld or paid by the Trustee and the Trustee shall pay
such amounts to the appropriate governmental authorities; provided, however,
that the Company, the Plan Administrator, the Members, and the Beneficiaries
shall provide the Trustee with all of the information necessary for the Trustee
to determine the amount of such taxes required to be withheld or paid by the
Trustee and the Trustee shall be fully protected in relying upon such
information. Notwithstanding any provision of this Trust Agreement to the
contrary, the Company shall be obligated to pay the Benefits. To the extent
that the Trust Fund is not sufficient to pay any Benefit when due, the Company
shall pay such Benefit directly. In the event Benefits are due to more than one
Member or Beneficiary on the same date and the Trust Fund is not sufficient to
pay all such Benefits, the Trust Fund shall be applied pro rata among such
Members and Beneficiaries on the basis of the Benefits due to be paid such
individuals on
7
<PAGE>
such date. Nothing in this Trust Agreement shall relieve the Company of its
liabilities to pay Benefits except to the extent such liabilities are met by
application of Trust Fund assets.
(b) Prior to the occurrence of a Change in Control, the Plan Administrator
shall direct the Trustee in writing as to the time and amount of Benefits to be
distributed to the Members and Beneficiaries. From and after the occurrence of
a Change in Control, a Member or Beneficiary who believes that he or she is
entitled to Benefits may apply in writing directly to the Trustee for payment of
such Benefits. Such application shall advise the Trustee of the circumstances
which entitle such Member or Beneficiary to payment of such Benefits. The
Trustee shall, in such case, reach its own independent determination as to the
Member's or Beneficiary's entitlement to Benefits, even though the Trustee may
be informed from another source (including the Company or the Plan
Administrator) that payments are not due under the Plan. If the Trustee so
desires, it may, in its sole discretion, make such additional inquiries and/or
take such additional measures as it deems necessary in order to enable it to
determine whether Benefits are due and payable, including, but not limited to,
interviewing appropriate persons, requesting affidavits, soliciting oral or
written testimony under oath, or holding a hearing or other proceeding. After
the occurrence of a Change in Control, the Trustee shall determine whether
Benefits are payable as promptly as possible.
(c) At any time and from time to time, the Plan Administrator may direct
the Trustee in writing to distribute to the Company cash held by the Trustee as
part of the Trust Fund in an amount equal to the Benefits accrued under the Plan
that have been forfeited under the terms of the Plan. As soon as practicable
after receipt of such a direction and, if such direction is received by the
Trustee after the occurrence of a Change in Control, the Trustee's independent
determination that such benefits have, in fact, been forfeited in accordance
with the terms of the Plan, the Trustee shall distribute such amount to the
Company.
(d) At any time and from time to time prior to the occurrence of a Change
in Control, the Company may apply in writing to the Trustee for a distribution
by the Trustee to the Company of assets held by the Trustee as part of the Trust
Fund ("Trust Assets") in an amount (the "Refund Amount") equal to or less than
the difference, if any, between (i) the Net Fair Market Value of the Trust
Assets (as such term is hereinafter defined) as of the last day of the month
coincident with or immediately preceding the date of such application, and (ii)
the aggregate Account Balances for all Members and Beneficiaries as of such
date. Such application shall advise the Trustee of the manner in which the
Refund Amount was calculated. Upon the receipt of such an application from the
Company, the Trustee shall reach its own independent determination as to the
Company's entitlement to the Refund Amount, even though the Trustee may be
informed from another source (including a Member) that the Company is not
entitled to the Refund Amount. If the Trustee so desires, it may, in its sole
discretion, make such additional inquiries and/or take such additional measures
as it deems necessary in order to enable it to determine whether the Company is
entitled to the Refund Amount, including, but not limited to, interviewing
appropriate persons, requesting affidavits, soliciting oral or written testimony
under oath, or engaging such independent third parties as the Trustee may deem
necessary to assist in making such determination. The Trustee shall determine
whether the Company is entitled to all or any portion of the Refund Amount as
promptly as possible. If the Trustee determines that the
8
<PAGE>
Company is entitled to all or any portion of the Refund Amount, then the Trustee
shall distribute such amount to the Company in cash or in kind as determined by
the Trustee in its sole discretion. As used herein, the term "Net Fair Market
Value of the Trust Assets" shall mean the fair market value of the Trust Assets,
as determined by the Trustee in its sole discretion, reduced by all liabilities
of the Trust, whether or not such liabilities are secured by any or all of the
Trust Assets, other than liabilities to Members or Beneficiaries under the Plan.
In determining such fair market value, the Trustee shall use such market
quotations and other information as are available to it and may in its
discretion be appropriate; provided, however, that the fair market value of any
life insurance contract which constitutes a portion of the Trust Assets shall be
its net cash surrender value. The determination of the Net Fair Market Value of
the Trust Assets by the Trustee shall not constitute a representation by the
Trustee that the amounts reported as fair market values would actually be
realized upon the liquidation of the Trust Assets. The Trustee shall not be
accountable to the Company or to any other person, including the Members or
Beneficiaries, on the basis of any such valuation except as otherwise provided
in this Trust Agreement.
(e) The Trustee may engage its own counsel or other experts to assist it
in making its determination under Section 3.6(a), (b), (c) or (d) hereof. The
cost of such counsel or other expert assistance, and any other costs reasonably
incurred by the Trustee in making such determination, shall be borne by the
Company. If the Company fails to pay any such costs when due, the Trustee may
use the assets of the Trust Fund to pay them as provided in Section 5.2.
(f) The Trustee shall not itself commence any legal action, whether in the
nature of an interpleader action, request for declaratory judgment or otherwise,
requesting a court to make a determination under Section 3.6(a), (b), (c) or (d)
hereof in the Trustee's stead without first using its best efforts to make such
determination.
(g) Notwithstanding any other provision of this Trust Agreement, if any
amounts held in the Trust are found in a "determination" (within the meaning of
Section 1313(a) of the Internal Revenue Code of 1986) to have been includible in
gross income of a Member or Beneficiary prior to payment of such amounts from
the Trust, the Trustee shall, as soon as practicable, pay such amounts to such
Member or Beneficiary, as applicable, (but not in excess of such Member's or
Beneficiary's Account Balance at the time of such payment). For purposes of
this Section 3.6, the Trustee shall be entitled to rely on an affidavit by a
Member or Beneficiary, as applicable, and a copy of the determination to the
effect that a determination described in the preceding sentence has occurred.
9
<PAGE>
ARTICLE IV
SETTLEMENT OF ACCOUNTS
----------------------
The Trustee shall keep full accounts of all of its receipts and
disbursements. Its books and records with respect to the Trust Fund shall be
open to inspection by the Company, any Member or any Beneficiary of a deceased
Member or their representatives at all times during business hours of the
Trustee. Within sixty days after June 30 of each year, or any termination of the
duties of the Trustee, the Trustee shall prepare, sign and mail to the Company
and the Plan Administrator an account of its acts and transactions as Trustee
hereunder. If, within sixty days after the mailing of the account or any amended
account, the Company and the Plan Administrator have not filed with the Trustee
notice of any objection to any act or transaction of the Trustee, the account or
amended account shall become an account stated. If any objection has been filed,
and if the objecting party is satisfied that it should be withdrawn or if the
account is adjusted to the objecting party's satisfaction, the objecting party
shall in writing filed with the Trustee signify its approval of the account and
it shall become an account stated. When an account becomes an account stated,
such account shall be finally settled, and the Trustee shall be completely
discharged and released, as if such account had been settled and allowed by a
judgment or decree of a court of competent jurisdiction in an action or
proceeding in which the Trustee, the Company and the Plan Administrator were
parties. The Trustee, the Company or the Plan Administrator shall have the right
to apply at any time to a court of competent jurisdiction for judicial
settlement of any account of the Trustee not previously settled as hereinabove
provided. In any such action or proceeding it shall be necessary to join as
parties the Trustee, the Company and the Plan Administrator and any judgment or
decree entered therein shall be conclusive upon all such parties.
ARTICLE V
TAXES, EXPENSES AND COMPENSATION OF TRUSTEE
-------------------------------------------
5.1 Taxes. The Company agrees that all income, deductions and credits of
-----
the Trust Fund belong to it as owner for income tax purposes and will be
included on the Company's income tax returns. The Company shall from time to
time pay taxes (references in this Trust Agreement to the payment of taxes shall
include interest and applicable penalties) of any and all kinds whatsoever which
at any time are lawfully levied or assessed upon or become payable in respect of
the Trust Fund, the income or any property forming a part thereof, or any
security transaction pertaining thereto. To the extent that any taxes levied or
assessed upon the Trust Fund are not paid by the Company or contested by the
Company pursuant to the last sentence of this Section 5.1, the Trustee shall pay
such taxes out of the Trust Fund and the Company shall upon demand by the
Trustee deposit into the Trust Fund an amount equal to the amount paid from the
Trust Fund to satisfy such tax liability. If requested by the Company, the
Trustee shall, at Company expense, contest the validity of such taxes in any
manner deemed appropriate by the Company or its counsel, but only if it has
received an indemnity bond or other security
10
<PAGE>
satisfactory to it to pay any expenses of such contest. Alternatively, the
Company may itself contest the validity of any such taxes, but any such contest
shall not affect the Company's obligation to reimburse the Trust Fund for taxes
paid from the Trust Fund.
5.2 Expenses and Compensation. The Trustee shall be paid compensation by
-------------------------
the Company as the Company and the Trustee may from time to time agree. The
Trustee shall be reimbursed by the Company for its reasonable expenses of
management and administration of the Trust, including reasonable compensation of
counsel and any agent engaged by the Trustee to assist it in such management and
administration. In the event that the Company shall fail or refuse to make such
reimbursement upon demand, the Trustee may satisfy such obligations out of the
assets of the Trust Fund; in that event, the Company shall immediately upon
demand by the Trustee deposit into the Trust Fund a sum equal to the amount paid
by the Trust Fund for such fees and expenses.
ARTICLE VI
FOR PROTECTION OF TRUSTEE
-------------------------
6.1 Communication with the Company, the Plan Administrator and the Members
----------------------------------------------------------------------
(a) The Company shall certify to the Trustee the name or names of any
person or persons authorized to act for the Company and for the Plan
Administrator. Such certification shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary of the Company. Until the
Company notifies the Trustee, in a similarly signed notice, that any such person
is no longer authorized to act for the Company or for the Plan Administrator, as
applicable, the Trustee may continue to rely upon the authority of such person.
(b) The Trustee may rely upon any certificate, notice or direction of the
Company or the Plan Administrator which the Trustee reasonably believes to have
been signed by a duly authorized officer or agent of the Company or the Plan
Administrator, as applicable.
(c) Communications to the Trustee shall be sent in writing to its
principal address, Attention: Legal Department, or to such other address as the
Trustee may specify. No communication shall be binding upon the Trust Fund or
the Trustee until it is received by the Trustee and unless it is in writing and
signed by an authorized person.
(d) Communications to the Company shall be sent in writing to the Company
at 1601 Elm Street, 47th Floor, Dallas, Texas 75201, Attention: General Counsel,
or to such other address as the Company may specify in writing to the Trustee.
Communications to the Plan Administrator shall be sent in writing to the
Company's address, Attention: Deferred Compensation Plan Administrator.
Communications to a Member or Beneficiary shall be sent in writing to the
address of such person as stated on the Benefit Schedule, or to such other
address as such person may specify in writing to the Trustee. No communication
shall be binding upon
11
<PAGE>
the Company, the Plan Administrator. or a Member or Beneficiary until it is
received by such person.
6.2 Advice of Counsel. The Trustee may consult with any legal counsel with
-----------------
respect to the construction of this Trust Agreement, its duties hereunder or any
act which it proposes to take or omit, and shall not be liable for any action
taken or omitted in good faith pursuant to such advice. Expenses of such
counsel shall be deemed to be expenses of management and administration of the
Trust within the meaning of Section 5.2 hereof.
6.3 Fiduciary Responsibility.
------------------------
(a) The Trustee shall discharge its duties under this Trust Agreement in
effectuating the Plan in a manner consistent with the objectives of this Trust
Agreement and the Plan. The Trustee shall not be liable for any loss sustained
by the Trust Fund by reason of the purchase, retention, sale or exchange of any
investment in good faith and in accordance with the provisions of this Trust
Agreement. The Trustee shall have no responsibility or liability for any failure
of the Company to make contributions to the Trust Fund or for any insufficiency
of assets in the Trust Fund to pay Benefits when due. The Trustee shall not be
liable hereunder for any act taken or omitted to be taken in good faith, except
for its own negligence or misconduct.
(b) The Trustee's duties and obligations shall be limited to those
expressly imposed upon it by this Trust Agreement.
(c) The Company at any time may employ as agent (to perform any act,
keep any records or accounts, or make any computations required of the Company
or the Plan Administrator by this Trust Agreement or the Plan) the individual,
corporation or association serving as Trustee hereunder. Nothing done by said
individual, corporation or association as such agent shall affect its
responsibilities or liability as Trustee hereunder.
ARTICLE VII
INDEMNITY OF TRUSTEE
--------------------
The Company hereby indemnifies and holds the Trustee harmless from and
against any and all losses, damages, costs, expenses or liabilities (herein,
"Liabilities"), including reasonable attorneys' fees and other costs of
litigation, to which the Trustee may become subject pursuant to, arising out of,
occasioned by, incurred in connection with or in any way associated with this
Trust Agreement, except for any act or omission constituting negligence or
misconduct of the Trustee. If one or more Liabilities shall arise, or if the
Company falls to indemnify the Trustee as provided herein, or both, then the
Trustee may engage counsel of the Trustee's choice, but at the Company's
expense, either to conduct the defense against such Liabilities or to conduct
such actions as may be necessary to obtain the indemnity provided for herein, or
to take both such actions. The Trustee shall notify the Company within fifteen
days after the Trustee has so
12
<PAGE>
engaged counsel of the name and address of such counsel. If the Trustee shall be
entitled to indemnification by the Company pursuant to this Article VII and the
Company shall not provide such indemnification upon demand, the Trustee may
apply assets of the Trust Fund in full satisfaction of the obligations for
indemnity by the Company, and any legal proceeding by the Trustee against the
Company for such indemnification shall be on behalf of the Trust.
ARTICLE VIII
RESIGNATION AND REMOVAL OF TRUSTEE
----------------------------------
8.1 Resignation of Trustee. The Trustee may resign upon sixty days' prior
----------------------
written notice to the Board of Directors of First USA, Inc. (the "Board"), the
Plan Administrator, each Member and each Beneficiary of a deceased Member,
except that any such resignation shall not be effective until the Board have
appointed in writing a successor trustee, which must be a bank, trust company,
or an individual, and such successor has accepted the appointment in writing;
provided, however, that if such appointment is to become effective at any time
after the occurrence of a Change in Control, then the consent of a majority of
the Members to the appointment of such successor trustee must be obtained. For
all purposes of this Trust Agreement where the consent of a majority of the
Members is required, the determination of majority consent shall be based upon
receiving the consent of any combination of Members whose sum of Account
Balances as of the time of determination is greater than fifty percent of the
sum of Account Balances for all Members at such time, rather than upon receiving
the consent of a majority of the number of Members. For purposes of this
determination, Beneficiaries of deceased Members shall be considered Members.
The Board shall make a good faith effort, following receipt of notice of
resignation from the Trustee, to find and appoint a successor Trustee who will
adhere to the obligations imposed on such successor under the terms of this
Trust Agreement, and in particular, but without limitation, the obligation to
exercise judgment independent of the Company in the circumstances described in
Section 3.6 hereof. The appointment of a successor trustee shall also be
conditioned upon obtaining from such successor a written statement that the
successor has read the Trust Agreement and understands its obligations
thereunder. If the consent of a majority of the Members is required for the
appointment of a successor Trustee, then the Trustee shall be responsible for
securing such Member consents in a timely fashion and, unless ordered by a court
of competent jurisdiction, shall not reveal to the Board, the Plan Administrator
or any other person any information concerning such consents, except whether the
required majority has been achieved. Any notice sent to Members by the Trustee
canvassing the Members as to their consent to a successor trustee, shall include
the name and address of the proposed successor trustee. Any consent of a Member
required under this Section 8.1 shall be deemed given if no written objection is
received by the Trustee from such Member within fourteen days after request for
such consent is sent postpaid by United States registered or certified mail with
return receipt requested to such Member.
13
<PAGE>
8.2 Removal of Trustee. The Board may remove the Trustee upon sixty days'
------------------
prior written notice to the Trustee, the Plan Administrator, each Member and
each Beneficiary of a deceased Member, except that any such removal shall not be
effective until the close of such notice period and (a) delivery by the Board to
the Trustee of an instrument in writing appointing a successor trustee meeting
the requirements of Section 8.1, and (b) an acceptance of such appointment in
writing executed by such successor. Notwithstanding the provisions of the
preceding sentence, if such appointment of a successor trustee is to become
effective at any time after the occurrence of a Change in Control, then the
removal of the Trustee and the appointment of a successor trustee shall not be
effective until the Trustee has received the consent of a majority of the
Members (as determined in accordance with the provisions of Section 8.1 hereof)
to such removal and such appointment. Upon the receipt by the Trustee of a
written notice of removal, the Trustee shall be responsible for securing the
Member consents (if such consents are required pursuant to the preceding
provisions of this Section 8.2) in a timely fashion and, unless ordered by a
court of competent jurisdiction, shall not reveal to the Board, the Plan
Administrator or any other person any information concerning such consents,
except whether the required majority has been achieved. Any notice sent to
Members by the Trustee canvassing the Members as to their consent to removal of
the Trustee and the appointment of a proposed successor trustee, shall include
the name and address of the proposed successor trustee. Any consent of a Member
required under this Section 8.2 shall be deemed given if no written objection is
received by the Trustee from such Member within fourteen days after request for
such consent is sent postpaid by United States registered or certified mail with
return receipt requested to such Member.
8.3 Successor Trustee. All of the provisions set forth herein with
-----------------
respect to the Trustee shall relate to each successor with the same force and
effect as if such successor had been originally named as the Trustee hereunder.
8.4 Transfer of Trust Fund to Successor. Upon the resignation or removal
-----------------------------------
of the Trustee and appointment of a successor, the Trustee shall transfer and
deliver the Trust Fund to such successor. Following the effective date of the
appointment of the successor, the Trustee's responsibility hereunder shall be
limited to managing the assets in its possession and transferring such assets to
the successor, and settling its final account. Neither the Trustee nor the
successor shall be liable for the acts of the other.
14
<PAGE>
ARTICLE IX
DURATION AND TERMINATION OF TRUST AND AMENDMENT
-----------------------------------------------
9.1 Duration and Termination. The Trust is hereby declared to be
------------------------
irrevocable and shall continue until (a) all payments required by Section 3.6
have been made or (b) until the Trust Fund contains no assets and retains no
claims to recover assets from the Company or any other person or entity,
whichever shall first occur. Notwithstanding the preceding provisions of this
Section 9.1, unless earlier terminated, the Trust shall terminate twenty-one
(21) years after the death of the last to die of all of the Members and their
issue living on the date of execution of this Trust Agreement; provided,
however, that if at that time the Trust may be continued in force without
violating the rule against perpetuities or any other law of the State of Texas,
then the Trust shall remain in effect until otherwise terminated as provided
hereunder.
9.2 Distribution upon Termination. If this Trust terminates under the
-----------------------------
provisions of Section 9.1, the Trustee shall liquidate the Trust Fund and, after
its final account has been settled as provided in Article IV, shall distribute
to the Company the net balance of any assets of the Trust remaining after all
expenses have been paid and all Benefits, whether or not due and payable under
the terms of the Plan on the date of such termination, have been paid to the
Members and Beneficiaries. Upon making such distribution, the Trustee shall be
relieved from all further liability. The powers of the Trustee hereunder shall
continue so long as any assets of the Trust Fund remain in its hands.
9.3 Amendment. The Board may from time to time amend, in whole or in
---------
part, any or all of the provisions of this Trust Agreement; provided, however,
that (a) no amendment will be made to this Trust Agreement or the Plan which
will cause this Trust Agreement, the Plan or the assets of the Trust Fund to be
governed by or subject to Part 2, 3 or 4 of Title I of ERISA, (b) no such
amendment shall adversely affect any Benefits to the date of such amendment in
respect of any Member or Beneficiary or the amount of assets of the Trust Fund
available to pay such Benefits, (c) no such amendment shall purport to alter the
irrevocable character of the Trust established under this Trust Agreement, (d)
no such amendment shall increase the duties or responsibilities of the Trustee
unless the Trustee consents thereto in writing, and (e) after the occurrence of
a Change in Control, no amendment will be made to this Trust Agreement without
the consent of a majority of the Members (as determined pursuant to the
provisions of Section 8.1 hereof). Upon receipt of a request from the Board for
an amendment which requires the consent of a majority of the Members, the
Trustee shall be responsible for securing Member consents in a timely fashion,
and unless ordered by a court of competent jurisdiction, shall not reveal to the
Board, the Plan Administrator or any other person any information concerning
such consents, except whether the required majority has been achieved. Any
consent of a Member required under this Section 9.3 shall be deemed given if no
written objection is received by the Trustee from such Member within fourteen
days after request for such consent is sent postpaid by United States registered
or certified mail with return receipt requested to such Member. This Trust
Agreement may be amended, to the extent permitted in this Section 9.3, by an
instrument in writing executed on behalf of First USA, Inc. by its authorized
representatives, consents to
15
<PAGE>
which instrument have been obtained from the required majority of Members if
such consents are required.
ARTICLE X
CLAIMS OF COMPANY'S CREDITORS
-----------------------------
10.1 Insolvency of Company. As used in this Article X, the Company shall
---------------------
be deemed to be "Insolvent" if (a) the Company is unable to pay its debts as
they come due, or (b) the Company is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code (or any successor federal statute). In
the event that the Company shall be deemed Insolvent, the assets of the Trust
Fund shall be held for the benefit of the general creditors of the Company
(hereinafter referred to as "Bankruptcy Creditors").
10.2 Trustee's Responsibilities if Company may be Insolvent.
------------------------------------------------------
(a) If at any time the Company or a person claming to be a creditor of the
Company alleges in writing to the Trustee that the Company has become Insolvent,
the Trustee shall within thirty days independently determine whether the Company
is Insolvent and, pending such determination, the Trustee shall discontinue any
payment of Benefits under the Plan and this Trust Agreement and shall hold the
Trust Fund for the benefit of Bankruptcy Creditors. As a condition of being a
Member of the Plan and this Trust Agreement. each Member hereby waives his
priority credit position, if any, under applicable state law. The Trustee shall
resume payments of Benefits under the Plan and this Trust Agreement in
accordance with Section 3.6 hereof only after the Trustee has determined that
the Company is not Insolvent (or is no longer Insolvent, if the Trustee
initially determined the Company to be Insolvent) or upon receipt of an order of
a court of competent jurisdiction requiring such payments. The Company, by its
chief executive officer and its Board of Directors, shall further be obligated
to give the Trustee prompt notice in writing in the event that the Company
becomes Insolvent, with the same consequences as provided in the preceding two
sentences. In determining whether the Company is Insolvent, the Trustee may
rely conclusively upon, and shall be protected in relying upon, court records
showing that the Company is Insolvent, or a current report or statement from a
nationally recognized credit reporting agency showing that the Company is
Insolvent. For purposes of this Trust Agreement, knowledge and information
concerning the Company which is not in the possession of the Trustee, or its
employees, shall not be imputed to the Trustee. The Trustee shall have no duty
or obligation to ascertain whether the Company is Insolvent unless and until it
receives a writing that the Company is Insolvent as described in the first or
third sentence of this Section 10.2(a).
(b) If the Trustee determines that the Company is Insolvent, the Trustee
shall hold the assets of the Trust Fund for the benefit of the Bankruptcy
Creditors, and shall disburse the assets of the Trust Fund to satisfy such
claims as a court of competent jurisdiction shall direct.
16
<PAGE>
(c) If the Trustee discontinues payment of Benefits pursuant to Section
10.2(a) and subsequently resumes such payments, the first payment to a Member or
Beneficiary following such discontinuance shall include an aggregate amount
equal to the difference between the payments that would have been made to such
Member or Beneficiary, as applicable, under this Trust Agreement but for this
Section 10.2 and the aggregate payments actually made to such Member or
Beneficiary, as applicable, by the Company pursuant to the Plan during any such
period of discontinuance. In the event that upon resumption of payments pursuant
to the preceding sentence, the assets of the Trust Fund are insufficient to pay
Benefits in full, Benefit payments to the affected Members and Beneficiaries
shall be prorated so as to equitably apportion the assets of the Trust Fund
among all affected Members and Beneficiaries in proportion to their Benefits.
10.3 Trust Recovery of Payments to Creditors. In the event that at any
---------------------------------------
time an amount is paid from the Trust Fund to Bankruptcy Creditors of the
Company, the Trustee shall demand that the Company deposit into the Trust Fund a
sum equal to the amount paid by the Trust Fund to such Bankruptcy Creditors and,
if such payment is not made within ninety days of such demand, the Trustee shall
take such action as it deems prudent or advisable to recover payment.
ARTICLE XI
ADOPTING ENTITIES
-----------------
It is contemplated that other corporations, associations, partnerships or
proprietorships that have adopted the Plan may adopt this Trust Agreement and
thereby become the Company. Any such entity, whether or not presently existing,
may become a party hereto by appropriate action of its officers without the need
for approval of its board of directors or noncorporate counterpart or of the
Board. The provisions of the Trust Agreement shall apply separately and equally
to each Company and its Members and their Beneficiaries in the same manner as is
expressly provided for First USA, Inc. and its Members and their Beneficiaries,
except that (a) the power to appoint or otherwise affect the Trustee and the
power to amend the Trust Agreement shall be exercised by the Board alone, and
(b) the determination of whether a Change in Control has occurred shall be based
solely on First USA, Inc.
ARTICLE XII
Miscellaneous
-------------
12.1 Laws of the State of Texas to Govern. This Trust Agreement and the
------------------------------------
Trust hereby created shall be construed and regulated by the laws of the State
of Texas.
17
<PAGE>
12.2 Titles and Heading not to Control. The titles to Articles and headings
---------------------------------
of Sections in this Trust Agreement are placed herein for convenience of
reference only and, in case of any conflict, the text of this Trust Agreement,
rather than such titles or headings, shall control.
12.3 Change in Control. As used in this Trust Agreement, the term "Change
-----------------
in Control" shall mean the occurrence of one or more of the following events:
(a) First USA, Inc. shall not be the surviving entity in any merger,
consolidation or other reorganization to which it is a party (or survives only
as a subsidiary of an entity other than a previously wholly-owned subsidiary of
First USA, Inc.); (b) First USA, Inc. sells, leases or exchanges all or
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of First USA, Inc.); (c) First USA, Inc. is dissolved
and liquidated or adopts a plan of dissolution and liquidation; (d) any person
or entity, including a "group" as contemplated by Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, acquires or gains ownership or
control (including, without limitation, power to vote) of more than 50% of the
outstanding shares of First USA, Inc.'s voting stock (based upon voting power);
or (e) as a result of or in connection with a contested election of directors,
the persons who were directors of First USA, Inc. before such election shall
cease to constitute a majority of the Board. First USA, Inc., by its chief
executive officer and its Board of Directors, shall be obligated to give the
Trustee prompt notice in writing of the occurrence of a Change in Control. In
the event the Trustee receives such a notice or if at any time a Member or a
Beneficiary of a deceased Member alleges in writing to the Trustee that a Change
in Control has occurred, the Trustee shall within thirty days independently
determine whether a Change in Control has occurred and, pending such
determination, the Trustee shall assume that a Change in Control has occurred
for all purposes of this Trust Agreement and the Plan. The Trustee shall have no
duty or obligation to ascertain whether a Change in Control has occurred unless
it receives a written notice as described in either of the preceding two
sentences. In determining whether a Change in Control has occurred, the Trustee
may, in its sole discretion, make such additional inquiries and/or take such
additional measures as it deems necessary, including, but not limited to,
interviewing appropriate persons, requesting affidavits, soliciting oral or
written testimony under oath, or engaging such independent third parties as the
Trustee may deem necessary to assist in making such determination.
Notwithstanding the foregoing, if at any time First USA, Inc. notifies the
Trustee in writing that the Trustee should interpret this Trust Agreement and
the Plan as if a Change in Control had occurred, then for all purposes of this
Trust Agreement and the Plan, the Trustee shall so interpret this Trust
Agreement and the Plan. Once the notice described in the preceding sentence is
received by the Trustee, it may not be rescinded by First USA, Inc.
12.4 Successors and Assigns. This Trust Agreement may not be assigned by
----------------------
either party without the prior written consent of the other, and any purported
assignment without such prior written consent shall be null and void. This
Trust Agreement shall be binding upon the successors and permitted assigns of
each party hereto.
12.5 Controlling Document. Should an inconsistency or conflict exist
--------------------
between the specific terms of this Trust Agreement and those of the Plan, then
the relevant terms of this Trust Agreement shall govern and control.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be executed as of the day and year first above written.
FIRST USA, INC.
By: /s/ PHILIP E. TAKEN
Philip E. Taken
Senior Vice President
WACHOVIA BANK OF NORTH
CAROLINA, N.A., Trustee
By: /s/ JOE O. LONG
Joe O. Long
Senior Vice President
19
<PAGE>
SCHEDULE A
BENEFITS SCHEDULE
[TO BE ADDED]
20
<PAGE>
EXHIBIT 10(EE)
First USA Savings Restoration Plan
(As Amended and Restated Effective March 22, 1996)
1
<PAGE>
PREAMBLE
The First USA Savings Restoration Plan (hereinafter referred to as the "Plan")
as amended and restated herein shall become effective as of March 22, 1996. The
Plan was originally established effective January 1, 1992 to provide a program
of deferred compensation and matching contributions for a select group of
management or highly compensated employees. Participating employees have the
opportunity to participate in the Plan under which they can elect to have a
portion of their salary deferred directly into the Plan on their behalf by the
Company. Participant salary deferrals are matched by their Employer up to a
specified limit.
This Plan is unfunded and is intended to meet the requirements of a "top hat"
nonqualified deferred compensation arrangement under the Employee Retirement
Income Security Act of 1974 ("ERISA") and the Internal Revenue Code.
2
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TABLE OF CONTENTS
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<S> <C> <C>
ARTICLE I DEFINITIONS 1
1.1 Account 1
1.2 Beneficiary 1
1.3 Board of Directors 1
1.4 Code 1
1.5 Committee 1
1.6 Company 1
1.7 Compensation 1
1.8 Deferral Election 2
1.9 Deferred Salary Account 2
1.10 Deferred Salary Contribution 2
1.11 Effective Date 2
1.12 Employee 2
1.13 Employer or Participating Employer 2
1.14 Employer Matching Contributions 2
1.15 Employer Matching Contribution Account 2
1.16 Fund 3
1.17 Financial Hardship 3
1.18 Qualified Plan 3
1.19 Normal Retirement Age (Date) 3
1.20 Plan Year 3
1.21 Year of Service 3
1.22 Valuation Date 3
ARTICLE 2 PARTICIPATION 4
2.1 Participation Requirements 4
2.2 Plan Entry Date 4
2.3 Loss of Participant Status 4
2.4 Special Provisions Applicable to Employees of First USA
Paymentech, Inc. 4
2.5 Transfer to First USA Paymentech, Inc. After the Effective Date 5
2.6 Transfer from First USA Paymentech, Inc. 5
ARTICLE 3 DEFERRED SALARY CONTRIBUTIONS 7
3.1 Deferred Salary Election 7
3.2 Amount of Deferred Salary Contribution 7
ARTICLE 4 EMPLOYER CONTRIBUTIONS 8
4.1 Employer Matching Contributions 8
</TABLE>
3
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE 5 PARTICIPANTS' ACCOUNTS 9
5.1 Separate Accounts 9
5.2 Crediting Earnings to Participant Accounts 9
5.3 Statements 9
ARTICLE 6 DEATH BENEFITS AND BENEFICIARY DESIGNATION 10
6.1 Distribution Upon Death 10
6.2 Designation of Beneficiary 10
ARTICLE 7 VESTING AND TERMINATION OF EMPLOYMENT 11
7.1 Vesting in Deferred Salary Contributions 11
7.2 Vesting in Employer Matching Contribution Account 11
7.3 Forfeitures 12
7.4 Distribution of Vested Benefits 12
ARTICLE 8 DISTRIBUTION OF BENEFITS 13
8.1 Normal Form of Benefit 13
ARTICLE 9 WITHDRAWALS WHILE EMPLOYED; LOANS 14
9.1 Hardship Withdrawals 14
9.2 Loans 14
ARTICLE 10 THE FUND 15
10.1 Commingled Fund 15
10.2 Fund as a Company Asset 15
ARTICLE 11 ADMINISTRATION OF THE PLAN 16
11.1 Administration of the Plan 16
11.2 Committee Procedures 16
11.3 Powers of the Committee 16
11.4 Selection of Professional Counselors 17
11.5 Reliance on Professional Counselors 18
11.6 Plan Claim Procedure 18
11.7 Source of Payment of Expenses 19
11.8 Compensation of the Committee 19
ARTICLE 12 GENERAL PROVISIONS 21
12.1 Amendment and Termination 21
12.2 Nonalienation of Benefits 21
12.3 No Contract of Employment 21
12.4 Withholding Taxes 21
</TABLE>
4
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TABLE OF CONTENTS
(continued)
<TABLE>
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<S> <C> <C>
12.5 Notices 21
12.6 Severability of Provisions 21
12.7 Headings and Captions 22
12.8 Applicable Law 22
</TABLE>
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ARTICLE 1
DEFINITIONS
The following words and phrases used herein shall have the following meanings;
and the masculine, feminine, and neuter gender shall be deemed to include the
others, unless a different meaning is plainly required by the context:
1.1 Account
To the extent applicable to a Participant, the total of his Deferred Salary
Account and Employer Matching Contribution Account, including respective
contributions and the investment earnings credited on such amounts.
1.2 Beneficiary
The person, persons, or entity designated in writing by a Participant or
otherwise determined in accordance with the Plan, entitled to receive any
death benefit which may be, or may become, payable under the Plan.
1.3 Board of Directors
The Board of Directors of the Company, as constituted from time to time.
1.4 Code
The Internal Revenue Code of 1986, as amended from time to time.
1.5 Committee
The Administrative Committee composed of persons appointed under Article 11
responsible for the administration of the Plan.
1.6 Company
Means First USA Financial, Inc., a Delaware corporation, and any successor
thereto.
1.7 Compensation
Shall mean the total compensation received from the Employer for personal
services rendered by an eligible Participant to the Employer during the
Plan Year as reported on the Participant's federal income tax withholding
statement (Form W-2), including base salary, bonuses, commissions,
incentive pay, overtime, but excluding directors' fees, expense allowances,
and other special payments and any benefits paid under the Qualified Plan
or this Plan. In determining Compensation hereunder, any election by
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a Participant to reduce his Compensation pursuant to Section 125 or 401(k)
of the Code shall be disregarded. Compensation for any Plan Year shall
include any amounts in excess of the limitation of Section 401(a)(17) of
the Code (the $150,000 indexed limit).
1.7 Deferral Election
The means by which a Participant authorizes and elects to have deferred by
his Employer and credited to his Deferred Salary Account.
1.8 Deferred Salary Account
The Account into which Deferred Salary Contributions made on behalf of a
Participant and earnings on those contributions shall be credited.
1.10 Deferred Salary Contribution
The amount withheld from the Compensation of a Participant and credited to
his Deferred Salary Account pursuant to a Deferral Election.
1.11 Effective Date
Means March 22, 1996, the Effective Date of this amended and restated Plan.
The plan was originally effective January 1, 1992.
1.12 Employee
Any Employee who is receiving compensation for personal services rendered
in the employment of an Employer.
1.13 Employer or Participating Employer
Means (i) the Company and (ii) any subsidiary or other affiliated
organization which, with the approval of the Board of Directors and subject
to such considerations as the Board of Directors may impose, adopts this
plan. As of the Effective Date, First USA Paymentech, Inc. is a
Participating Employer under the Plan and shall continue as a Participating
Employer until June 30, 1996.
1.14 Employer Matching Contributions
The amounts contributed on behalf of a Participant pursuant to Article 4.
1.15 Employer Matching Contribution Account
The account into which Employer Matching Contributions are made on behalf
of a Participant and investment earnings credited to such account.
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1.16 Fund
Means the Fund established for this Plan in which are deposited Deferred
Salary Contributions, Employer Matching Contributions and earnings thereon,
and from which benefits under the Plan are paid as described in Article 10
hereof. The Fund is established for the convenience of the Employer and is
an asset of each Employer. The obligation of an Employer to any Participant
for benefits payable under the Plan exists independently of the Fund.
1.17 Financial Hardship
Means an unanticipated emergency that is caused by an event beyond the
control of the Participant that would result in a severe financial hardship
to the Participant if an early withdrawal is not permitted. The Committee
shall have sole discretion in determining whether or not a Financial
Hardship exists; provided that any early withdrawal approved by the
Committee must be limited to the amount necessary to meet such
unanticipated emergency.
1.18 Qualified Plan
Means the First USA Retirement Savings Plan, as it may be amended from time
to time.
1.19 Normal Retirement Age (Date)
A Participant's Normal Retirement Age shall be the later of (i) the 65th
anniversary of birth or (ii) the Participant's completion of five (5) Years
of Service. A Participant's Normal Retirement Date shall be the first day
of the month coincident with or next following the attainment of Normal
Retirement Age.
1.20 Plan Year
The period beginning January 1 and ending on the next December 31.
1.21 Year of Service
The term Year of Service and the related term Period of Service shall have
the same meaning as in the Qualified Plan.
1.22 Valuation Date
The last business day of each March, June, September, and December.
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ARTICLE 2
PARTICIPATION
2.1 Participation Requirements
The eligibility requirements for becoming a Participant in the Plan are as
follows:
(A) The attainment of age twenty-one (21);
(B) The Employee is a highly compensated employee within the meaning of
Section 414(q) of the Code of an Employer;
(C) The Employee is specifically approved for participation by the Chief
Executive Officer of the Company; and
(D) The Employee is a highly compensated or management employee of an
Employer within the meaning of ERISA Sections 201(a), 301(a)(3), and
401(a)(1).
A Participant shall be entitled to make Deferred Salary Contributions and
to receive Employer Matching Contributions under the Plan only during the
period for which he continues to satisfy the requirements described in this
Section 2. 1.
2.2 Plan Entry Date
Each Employee who has satisfied the requirements specified in Section 2.1
prior to or on January 1, 1992 shall become a Participant in the Plan as of
such date provided he elects to make Deferred Salary Contributions under
the Plan.
Each other Participant who satisfies the requirements as provided in
Section 2.1 after January 1, 1992 shall become a Participant on the first
day of the payroll period following the date on which he satisfied such
requirements and has elected to make Deferred Salary Contributions to the
Plan.
2.3 Loss of Participant Status
An Employee who becomes a Participant shall continue to be a Participant in
the Plan, whether or not he continues to make Deferred Salary
Contributions, until there are no longer any benefits remaining payable to
him.
2.4 Special Provisions Applicable to Employees of First USA Paymentech, Inc.
As of June 30, 1996, First USA Paymentech, Inc. shall cease to be a
Participating Employer in the Plan. With respect to each Plan Participant
who is in the employ of First USA Paymentech, Inc. as of June 30, 1996:
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(1) such Participant shall not be considered to have terminated employment
or retired for purposes of being eligible for a distribution under the
Plan;
(2) benefits and benefit liabilities attributable to such Participant's
Account shall be transferred to the First USA Paymentech Savings
Restoration Plan; provided that the First USA Paymentech Savings
Restoration Plan accepts such transfer at such time; and
(3) such Participant's Account under the Plan shall be cancelled when the
transfer described in (2) above is made.
2.5 Transfer to First USA Paymentech, Inc. After the Effective Date
If, after July 1, 1996, a Participant transfers employment to First USA
Paymentech, Inc. or one of its subsidiaries or affiliates which is a member
of the same controlled group as First USA Paymentech, Inc., as determined
under Code Sections 414(b), (c), (in) or (o):
(1) such Participant shall not be considered to have terminated employment
or retired for purposes of being eligible for a distribution under the
Plan;
(2) benefits and benefit liabilities attributable to such Participant's
Account shall be transferred to the First USA Paymentech Savings
Restoration Plan; provided that the First USA Paymentech Savings
Restoration Plan accepts such transfer at such time; and
(3) such Participant's Account under the Plan shall be cancelled when the
transfer described in (2) above is made.
2.6 Transfer from First USA Paymentech, Inc.
If, on or after July 1, 1996, an Employee transfers employment to an
Employer from First USA Paymentech, Inc. or one of its subsidiaries or
affiliates which is a member of the same controlled group as First USA
Paymentech, Inc., as determined under Code Sections 414(b), (c), (m) or
(o):
(1) the Plan shall accept a transfer of benefits and benefit liabilities
attributable to such Employee's Account under the First USA Paymentech
Savings Restoration Plan, if any;
(2) upon such transfer of benefits and benefit liabilities, the Employee
shall have an Account under this Plan equal to the Account transferred
from the First USA Paymentech Savings Restoration Plan.
An Employee who transfers employment from First USA Paymentech, Inc. or one
of its subsidiaries or affiliates as aforesaid shall be credited with the
Years of Service and Period of Service that was credited to such Employee
under the terms of the First USA
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Paymentech Savings Restoration Plan as of the date of transfer to covered
employment under this Plan; provided, however, that service shall not be
credited in accordance with the foregoing if such Employee was a
participant in the First USA Paymentech Savings Restoration Plan and no
transfer of benefits and benefit liabilities is made from such plan on
behalf of such Employee in accordance with the foregoing.
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ARTICLE 3
DEFERRED SALARY CONTRIBUTIONS
3.1 Deferred Salary Election
Each Participant may elect to make Deferred Salary Contributions to the
Fund for credit to his Participant Account for any Plan Year beginning on
or after the Effective Date by filing his election, on a form approved by
the Committee, at least fifteen (15) days preceding the first day of the
Plan Year in which the election is to be effective; provided, that in the
first year in which a Participant becomes eligible to participate in the
Plan, the Participant may file his election at least fifteen (15) days
preceding the Participant's initial Entry Date. A Participant may continue,
modify, revoke, or resume his election to make Deferred Salary
Contributions with respect to subsequent Plan Years by filing his written
notice with the Committee, on a form supplied by the Committee at least
fifteen (15) days preceding the first day of the Plan Year in which the
continuation, modification, revocation, or resumption is to be effective.
Notwithstanding any provision of the Plan, no election to make a Deferred
Salary Contribution may be made by a Participant with respect to
Compensation that has already been paid by the Employer to the Participant
or that has already been earned by the Participant.
3.2 Amount of Deferred Salary Contribution
The amount of the Participant's Deferred Salary Contribution for any Plan
Year shall equal the percentage of the Participant's Compensation elected
by such Participant in accordance with Section 3.1.
A Participant may elect to contribute a level percentage of Compensation
for any Plan Year following the procedures in Section 3.1. The maximum
contribution that may be made by any Participant for a Plan Year is equal
to the maximum amount allowed under Section 402(g) of the Code as applied
to the Qualified Plan.
Each pay period, the Employer shall reduce each Participant's Compensation
by the amount of his Deferred Salary Contribution. As soon as practical
following the end of each calendar quarter, the Employer shall credit such
contribution to the Participant's Deferred Salary Account.
The amount of Deferred Salary Contributions for any Plan Year under this
Plan is not conditioned upon or subject to any adjustment for deferred
salary contributions made to the Qualified Plan for such Plan Year.
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ARTICLE 4
EMPLOYER CONTRIBUTIONS
4.1 Employer Matching Contributions
The Employer shall credit an Employer Matching Contribution to the
Participant's Employer Matching Contribution Account for each Participant
who makes a Deferred Salary Contribution with respect to any Plan Year.
Employer Matching Contributions shall be credited as of the Valuation Date
to the Employer Matching Contribution Account of each Participant who made
Deferred Salary Contributions during the period since the preceding
Valuation Date and who is actively employed on the Valuation Date. The
amount of the Employer Matching Contribution shall be equal to fifty
percent (50%) of the Deferred Salary Contributions made by the Participant
excluding any Deferred Salary Contributions in excess of three percent (3%)
of the Participant's Compensation for such period. Deferred Salary
Contributions for such Participants in excess of three percent (3%) of
Compensation shall not be eligible for an Employer Matching Contribution.
The maximum Employer Matching Contribution for any Participant shall be
fifty percent (50%) of the maximum salary deferral amount allowed under
Section 402(g) of the Code as applied to the Qualified Plan.
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ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.1 Separate Accounts
The Committee shall maintain or cause to be maintained a Separate Account
for each Participant which shall consist of his Deferred Salary Account and
his Employer Matching Contribution Account. Each such account shall be
considered a sub-account of the Participant's Account.
5.2 Crediting Earnings to Participant Accounts
The Account of each Participant who has not received his entire
distribution under the Plan shall be credited at the end of each calendar
quarter with investment earnings (or losses) at the same rate credited for
such purposes in the Qualified Plan with respect to the Participant's
Qualified Plan Account. At the discretion of the Committee, additional
interest credits may be granted to the accounts of Participants. If
additional interest is credited, each Participant shall be notified in
writing of the amount or percentage interest rate credited for the period.
Interest shall be credited on the sum of (a) the Participant's beginning
balance less any distributions during the period, plus (b) one-half of the
Deferred Salary Contributions made during the calendar quarter. Each
Participant (or Beneficiary) assumes the risk in connection with any
decrease in value of his Account as a result of investment losses, and
there shall be no liability to the Participant (or Beneficiary) under the
Plan in excess of the value of his vested Account.
5.3 Statements
At least once annually, the Committee shall cause to be furnished to each
Participant a statement showing the value of his Deferred Salary Account
and Employer Matching Contribution Account as of the most recent Valuation
Date and the additions or deductions from the Accounts since the date of
the last statement.
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ARTICLE 6
DEATH BENEFITS AND BENEFICIARY DESIGNATION
6.1 Distribution Upon Death
If a Participant dies, while an Employee or after becoming totally and
permanently disabled while an Employee, all amounts standing to the
deceased Participant's credit in his Participant's Account, if any, shall
be one hundred percent (100%) vested and non-forfeitable. In such case, a
Participant's Account shall be valued as of the Valuation Date coincident
with or next following his death and the value of such Account determined
on such Valuation Date shall be paid in a lump sum in cash as soon as
administratively feasible to his designated Beneficiary.
6.2 Designation of Beneficiary
Each Participant shall designate one or more persons as Beneficiary to
receive his Account upon his death. If more than one Beneficiary is named,
the Participant may specify the sequence and/or proportion in which payment
shall be made to each Beneficiary. The designation shall be made on a form
prescribed by the Committee and shall become effective when filed with the
Committee. No Beneficiary designation shall be effective unless it is filed
with and received by the Committee. A Participant may from time to time
change his Beneficiary by filing a new Beneficiary designation form with
the Committee. Prior to the death of the Participant, no designated
Beneficiary shall acquire any interest in any amounts held in the
Participant's Account.
If there is no designated Beneficiary when a death benefit becomes payable,
the benefits shall be paid to the estate of the deceased Participant. If
the primary Beneficiary predeceases the Participant, the balance of such
payments shall be paid to the contingent Beneficiary. If there is no
contingent Beneficiary, the balance of such payments shall be paid to the
estate of the deceased Participant. A Participating Employer is ineligible
to be named as a Beneficiary.
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ARTICLE 7
VESTING AND TERMINATION OF EMPLOYMENT
7.1 Vesting in Deferred Salary Contributions
A Participant shall at all times have a one hundred percent (100%) vested
and non-forfeitable interest in his Deferred Salary Account.
7.2 Vesting in Employer Matching Contribution Account
A Participant whose employment under the Plan is terminated prior to his
Normal Retirement Age (and for any reason other than death or death
following total and permanent disability) shall have a vested and non-
forfeitable right in his Employer Matching Contribution Account in
accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Percentage Vested
---------------- -----------------
<S> <C>
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
</TABLE>
A Participant whose employment under the Plan is terminated on or after
attaining his Normal Retirement Age shall have a one hundred percent (100%)
vested and non-forfeitable right to his Employer Matching Contribution
Account.
If a Participant who is less than one hundred percent (100%) vested in his
Employer Matching Contribution Account receives a distribution from such
account and is subsequently rehired, his vested interest in such account
shall be determined based on the formula adopted for such purposes in the
Qualified Plan.
7.3 Forfeitures
If a Participant's employment under the Plan is terminated, any portion of
his Account in which the Participant does not have a non-forfeitable
interest shall be provisionally forfeited as of his date of termination. If
the Participant becomes an Employee again prior to incurring five (5)
consecutive One-Year Breaks in Service, the provisionally forfeited amount
shall be reinstated to his Account unadjusted for gains and losses which
occurred during said One-Year Breaks in Service. If the Participant is not
rehired before incurring five (5) consecutive One-Year Breaks in Service,
the amount of his provisional forfeiture shall be forfeited permanently.
Forfeitures shall be used, in the sole discretion of the Committee, to pay
administrative expenses of this Plan or to reduce future Employer Matching
Contributions to this Plan.
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7.4 Distribution of Vested Benefits
Benefits payable in the case of a Participant whose employment under the Plan is
terminated shall be paid in accordance with Article 6 in the case of death, or
Article 8, in the case of a Participant who retires or otherwise terminates
employment with a vested benefit.
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ARTICLE 8
DISTRIBUTION OF BENEFITS
8.1 Normal Form of Benefit
All distributions of amounts in a Participant's Account shall be made in
the form of a single lump-sum payment in cash equal to the vested balance
credited to the Participant's Account as of the Valuation Date next
following or coinciding with his date of termination, whether by retirement
or otherwise. A Participant's vested Account shall be distributed as soon
as administratively feasible following the Valuation Date coincident with
or next following the occurrence of the Participant's date of termination,
whether by retirement or otherwise.
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ARTICLE 9
WITHDRAWALS WHILE EMPLOYED; LOANS
9.1 Hardship Withdrawals
At its sole discretion, the Committee may approve the distribution to a
Participant of all or a portion of his vested Account based on the
Committee's determination of Financial Hardship. Any such distribution must
first be paid from his Deferred Salary Account and then, if necessary, from
his vested Employer Matching Contribution Account. Such Accounts shall then
be reduced by their respective portions of the withdrawal.
9.2 Loans
Loans from a Participant's Accounts are not allowed.
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ARTICLE 10
THE FUND
10.1 Commingled Fund
Contributions under the Plan and earnings and losses thereon may be
invested in one commingled Fund for the benefit of all Participants.
However, in order that the interest of each Participant may be accurately
determined and computed, separate Accounts shall be maintained for each
Participant and investment earnings (or losses) shall be credited to such
Accounts in accordance with Section 5.2. The Accounts represent the
Participants' individual interests in the Plan and the total of all
Accounts need not equal the amount of the Fund.
10.2 Fund as a Company Asset
The Fund shall remain an asset of the Company and shall be subject to the
claims of its general unsecured creditors. Each Participant shall have no
greater right or status than as an unsecured creditor of the Company with
respect to any amounts accumulated for such Participant under the Plan.
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ARTICLE 11
ADMINISTRATION OF THE PLAN
11.1 Administration of the Plan
Except as to those functions reserved within the Plan to the Company or the
Board of Directors, there shall be an administrative committee appointed by
the Board of Directors to control and manage the operation and
administration of the Plan. The Board of Directors shall have the authority
to allocate or delegate among themselves, to the Committee, or to any other
person, any fiduciary responsibility with respect to the Plan. The
Committee shall consist of not fewer than three (3) members and not more
than seven (7) members to serve at its pleasure and without compensation.
Any Committee member who is employed under the Plan shall be deemed to have
resigned from the Committee at the time of his termination of employment,
unless expressly provided to the contrary in writing at such time.
11.2 Committee Procedures
The Committee may act at a meeting or in writing without a meeting. The
Committee shall elect one of its members as a chairman and appoint a
secretary, who is not required to be a Committee member. Any written
memorandum signed by the secretary or any member of the Committee or one or
more individuals who have been authorized to perform specific acts on
behalf of the Committee shall have the same force and effect as a formal
resolution adopted in open meeting. Minutes of all meetings of the
Committee and a record of any action taken by the Committee shall be kept
in written form, such record to be kept by the secretary appointed by the
Committee. The Committee may adopt such bylaws and regulations as it deems
desirable for the conduct of its affairs. All decisions of the Committee
shall be made by the vote of the majority including actions in writing
taken without a meeting. A dissenting Committee member who, within a
reasonable time after he has knowledge of any action or failure to act by
the majority, registers his dissent in writing delivered to the other
Committee members and the Company shall not be responsible for any such
action or failure to act. A member of the Committee may not vote or decide
upon any matter relating solely to himself or vote in any case in which his
individual right or claim to any benefit under the Plan is involved. If in
any case in which an individual Committee member is so disqualified to act,
the remaining members cannot agree, the Board will appoint a temporary
substitute member to exercise all of the powers of a qualified member
concerning the matter with respect to which the disqualified member is not
qualified to act.
11.3 Powers of the Committee
The Committee, subject to the limitations herein contained and to. such
other restrictions as the Board of Directors may make, shall have the power
and the duty to take all actions and to make all decisions necessary or
proper to carry out the provisions of the Plan. The determination of the
Committee as to any question involving the general administration and
16
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interpretation of the Plan shall be final, conclusive, and binding. Any
discretionary actions to be taken under the Plan by the Committee with
respect to the classification of Employees, Participants, Beneficiaries,
contributions, or benefits shall be uniform in their nature and applicable
to all persons similarly situated. Without limiting the generality of the
foregoing, the Committee shall have the following powers and duties:
(A) To require any person to furnish such information as it may request for
the purpose of the proper administration of the Plan as a condition of
receiving any benefits under the Plan;
(B) To make and enforce such rules and regulations and prescribe the use of
such forms as it shall deem necessary for the efficient administration
of the Plan;
(C) To interpret the Plan, and to resolve ambiguities, inconsistencies and
omissions, which findings shall be binding, final, and conclusive;
(D) To decide questions concerning the Plan and eligibility of any Employee
to participate in the Plan in accordance with Article 2 of the Plan.
(E) To determine the amount of benefits which shall be payable to any
person in accordance with the provisions of the Plan. The Committee
may require claims for benefits to be filed in writing, on such forms
and containing such information as the Committee may deem necessary.
Adequate notice shall be provided in writing to an Employee,
Participant, or Beneficiary thereof whose claim for benefits under the
Plan has been wholly or partially denied. The Plan claim review
procedure is more particularly described in Section 11.6 of the Plan.
Notice of denial of a claim shall afford reasonable opportunity to the
Participant or his Beneficiary whose claim for benefits has been denied
for a full and fair review of the decision denying the claim;
(F) To allocate any such powers and duties to or among individual members
of any administrative committee;
(G) To designate persons other than the Committee members to carry out any
duty or power which would otherwise be a fiduciary responsibility of
the Committee under the terms of the Plan; and
(H) To make such administrative or technical amendments to the Plan as may
be necessary or appropriate to carry out the intent of the Board of
Directors.
11.4 Selection of Professional Counselors
(A) The Committee may employ legal counsel, a qualified public accountant,
a qualified actuary, a consultant, and such clerical, medical, and
other accounting services as it may require in carrying out the
provisions of the Plan.
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(B) The Committee may appoint an investment manager or managers and
delegate investment responsibilities to manage any assets of the Fund,
including the power to acquire and dispose of fund assets and to
perform such other services as the Committee shall deem necessary or
desirable in connection with the management of Plan assets. Such
investment manager or managers shall (i) be registered as an investment
advisor under the Investment Advisors Act of 1940; (ii) be a bank, as
defined in the Investment Advisors Act of 1940; or (iii) be an
insurance company qualified to manage, acquire, or dispose of qualified
plan assets under the laws of more than one State; and shall
acknowledge in writing to the Committee that he is (or they are) a
fiduciary with respect to the Plan. Anything in this Article or
elsewhere in the Plan to the contrary notwithstanding, the Committee
shall be relieved of the authority and discretion to manage and solely
control the assets of the Plan to the extent that authority to acquire,
dispose of, or otherwise manage the assets of the Plan is delegated to
one or more investment managers in accordance with this Section.
11.5 Reliance on Professional Counselors
To the extent permitted by law, the Committee and any person to whom it
may delegate any duty or power in connection with administering the
Plan, the Employer, and the officers and directors thereof, shall be
entitled to rely conclusively upon, and shall be fully protected in any
action taken or suffered by them in good faith in reliance upon, any
legal counsel, accountant, other specialist, or other person selected
by the Committee, or in reliance upon any tables, valuations,
certificates, opinions, or reports which shall be furnished by any of
them or by any investment manager appointed pursuant to the preceding
section.
11.6 Plan Claim Procedure
(A) Any claim for a Plan benefit hereunder shall be filed by a Participant
or Beneficiary (claimant) of this Plan on the form prescribed for such
purpose with the Committee, or in lieu thereof, by written
communication which is made by the claimant or the claimant's
authorized representative which is reasonably calculated to bring the
claim to the attention of the Committee.
(B) If a claim for a Plan benefit is wholly or partially denied, notice of
the decision shall be furnished to the claimant by the Committee within
ninety (90) days after receipt of the claim by the Committee.
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(C) Any claimant who is denied a claim for a Plan benefit shall be furnished
written notice setting forth:
(1) the specific reason or reasons for the denial;
(2) specific reference to the pertinent Plan provisions upon which the
denial is based;
(3) a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(4) an explanation of the Plan's claim review procedure.
(D) In order that a claimant may appeal denial of a claim, a claimant or his
duly authorized representative:
(1) may request a review by written application to the Committee not later
than sixty (60) days after receipt by the claimant of written
notification of denial of a claim;
(2) may review pertinent documents; and
(3) may submit issues and comments in writing.
(E) A decision on review of a denied claim shall be made not later than sixty
(60) days after the Plan's receipt of a request for review, unless special
circumstances require an extension of time for processing, in which case a
decision shall be rendered within a reasonable period of time, but not
later than one hundred twenty (120) days after receipt of a request for
review.
The decision on review shall be in writing and shall include the specific
reason(s) for the decision and the specific reference(s) to the pertinent
Plan provisions on which the decision is based.
11.7 Source of Payment of Expenses
All expenses prior to the termination of the Plan that shall arise in
connection with the administration of the Plan, including but not limited
to administrative expenses and proper charges and disbursements of the
Committee and compensation and other expenses and charges of any legal
counsel, accountant, specialist or other person who shall be employed by
the Committee in connection with the administration thereof, shall be paid
by the Employer.
11.8 Compensation of the Committee
The Committee shall serve without compensation for services as such (other
than any compensation a member of the Committee may receive as an employee
of the employer),
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but all reasonable expenses incurred in the performance of their duties
shall be paid by the Employer.
20
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ARTICLE 12
GENERAL PROVISIONS
12.1 Amendment and Termination
The Company reserves the right to amend this Plan at any time and from time
to time in any fashion, and to terminate it at will. No amendment to or
discontinuance or termination of the Plan shall, without the written
consent of the Participant, adversely affect any rights of such Participant
with respect to amounts previously credited to such Participant's Account.
12.2 Nonalienation of Benefits
All payments to persons entitled to benefits hereunder shall be made to
such persons and shall not be grantable, transferable, or otherwise
assignable in anticipation of payment thereof, in whole or in part, by the
voluntary or involuntary acts of any such persons, or by operation of law,
and shall not be liable or taken for any obligation of such person.
12.3 No Contract of Employment
Nothing contained herein shall be construed as conferring upon any person
the right to be employed or continue in the employ of the Company.
12.4 Withholding Taxes
The Employers shall have the right to withhold taxes from any payments made
pursuant to the Plan, or to make such other provisions as they deem
necessary or appropriate to satisfy its obligations to withhold federal,
state, local, or foreign income or other taxes incurred by reason of
payments pursuant to the Plan. In lieu thereof, the Employers shall have
the right, to the extent permitted by law, to withhold the amount of such
taxes from any other sums due or to become due to the Participant upon such
terms and conditions as the Committee may prescribe.
12.5 Notices
Each Participant shall be responsible for furnishing the Committee with the
current and proper address for the mailing of notices and delivery of
agreements and payments. Any notice required or permitted to be given shall
be deemed given if directed to the person to whom addressed at such address
and mailed by regular United States mail, first-class and prepaid. If any
item mailed to such address is returned as undeliverable to the addressee,
mailing will be suspended until the Participant furnishes the proper
address.
12.6 Severability of Provisions
If any provision of this Plan shall be held invalid or unenforceable, such
invalidity or
21
<PAGE>
unenforceability shall not affect any other provisions hereof, and this
Plan shall be construed and enforced as if such provisions had not been
included.
12.7 Headings and Captions
The headings and captions herein are provided for reference and convenience
only, shall not be considered part of the Plan, and shall not be employed
in the construction of the Plan.
12.8 Applicable Law
This Plan shall be construed under the laws of the State of Delaware.
22
<PAGE>
IN WITNESS WHEREOF, the foregoing Plan is executed this 5th day of August,
1996, but effective as of March 22, 1996.
FIRST USA FINANCIAL, INC.
By: /s/
--------------------------
Attest: /s/ Philip E. Taken
--------------------------
Secretary
23
<PAGE>
EXHIBIT 10(FF)
FIRST USA. INC.
1994
RESTRICTED STOCK PLAN
---------------------
1 Purpose. The First USA. Inc. 1994 Restricted Stock Plan (the "Plan") is
intended to provide an incentive to officers and key employees of First USA,
Inc., a Delaware corporation and its subsidiaries (collectively, the "Company"),
important to the success of the Company as determined by a committee consisting
of two or more members of the Board of Directors of the Company, as appointed
pursuant to Section 3 hereof, to remain in the employ of the Company, to
reinforce corporate, organizational and business-development goals, to promote
the achievement of long-range financial and other business objectives, and to
increase their efforts for the success of the Company by offering them an
opportunity to increase their proprietary interest in the Company, through the
grant of restricted stock (the "Restricted Stock"). Consistent with these
objectives, the Plan authorizes the granting of Restricted Stock.
2. Definitions
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee of the Board as described in
Section 3 hereof.
(d) "Company" shall mean, collectively, First USA, Inc. and its
subsidiaries.
(e) "Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "Executive Officer" shall mean an officer of the Company who is an
"executive officer" within the meaning of Rule 3b-7 promulgated under the
Exchange Act.
(h) "Grantee" shall mean the individual who has been awarded
Restricted Stock under the plan.
(i) "Operating Earnings Per Share" shall mean net earnings of the
Company for each fiscal year in a Performance Period determined in
accordance with generally accepted accounting principles and reported in
the Company's audited financial statements for such fiscal year.
(j) "Performance Goal" shall mean the criteria and objectives.
determined by the Committee, which must be met during the applicable
Performance Period as a condition of the Grantee's receipt of payment with
respect to an Award. Performance Goals may include any or ail of the
following: (i) attainment of an amount of cumulative Consolidated Net
Earnings during a Performance Period; (ii) attainment of a percentage of
Return on Equity for a Performance Period; (iii) attainment of amounts of
Operating Earnings Per Share of the Company; (iv) increases in the market
price of Stock or levels of total return to shareholders during the
Performance Period; (v) attainment of a percentage increase in earnings per
share of Stock during the Performance Period; (vi) attainment of goals
established based on
1
<PAGE>
the financial performance of individual subsidiaries or business segments
of the Company relating to increases in total revenues, operating expenses
or pre-tax operating earnings. With respect to Grantees who are not
Executive Officers, Performance Goals shall also include such personal
performance goals as the Committee shall, from time to time, establish.
(k) "Performance Period" shall mean a period of five consecutive years
or such other period (which in no case may be less than one year) as may be
determined by the Committee.
(l) "Plan" shall mean the First USA, Inc. 1994 Restricted Stock Plan.
(m) "Restricted Stock" shall mean restricted stock granted pursuant to
the terms of the Plan.
(n) "Restricted Stock Agreement" shall mean the written agreement
between the Company and the Grantee evidencing a grant of Restricted Stock
under the Plan.
(o) "Return on Equity" shall mean, for each fiscal year, the quotient
obtained by dividing (i) Consolidated Net Earnings for a fiscal year by
(ii) the average of common shareholders' equity of the Company as of the
beginning and the end of such fiscal year.
(p) "Rule 16b-3", shall mean Rule 16b-3 under the Exchange Act.
(q) "Stock" shall mean shares of Common Stock, par value S.01 per
share, of the Company.
3. Administration of the Plan.
(a) Members of the Committee. The Plan shall be administered by the
Committee appointed by the Board. The Committee shall consist of two or
more persons each of whom is an "outside director" within the meaning of
Section 162(m) of the Code and a "disinterested person" as defined in
subsection (c)(2)(i) of Rule 16b-3. Members of the Committee shall serve at
the pleasure of the Board.
(b) Authority of the, Committee. The Committee shall adopt such rules
as it may deem appropriate in order to carry out the purpose of the Plan.
All questions of interpretation, administration, and application of the
Plan shall be determined by a majority of the members of the Committee then
in office, except that the Committee may authorize any one or more of its
members, or any officer of the Company, to execute and deliver documents on
behalf of the Committee. The determination of such majority shall be final
and binding in all matters relating to the Plan. No member of the Committee
shall be liable for any act done or omitted to be done by such member or by
any other member of the Committee in connection with the Plan, except for
such members own willful misconduct or as expressly provided by statute.
4. Eligibility. Restricted Stock may be granted to selected officers and
key employees of the Company. In determining the persons to whom Restricted
Stock shall be granted, the Committee shall take into account such factors as
the Committee shall deem relevant in connection with accomplishing the purposes
of the Plan.
5. Stock Reserved for the Plan. The shares subject to the Plan shall
consist of 500,000 shares of Common Stock, subject to adjustment pursuant to
Section 6(f) hereof, which may be either authorized but unissued shares or
previously issued shares reacquired and held by the Company. If any outstanding
Restricted
2
<PAGE>
Stock under the Plan for any reason expires or is canceled or otherwise
terminated without having vested in full, the shares of Common Stock allocable
to the unvested portion of such Restricted Stock shall (unless the Plan shall
have been terminated) become available for subsequent grants of Restricted Stock
under the Plan; provided that, in the case of forfeiture, cancellation, exchange
or surrender of shares of Restricted Stock with respect to which dividends have
been paid or accrued, the number of shares with respect to such Restricted Stock
shall not be available for grants hereunder unless, in the case of shares with
respect to which dividends were accrued but unpaid. such dividends are also
forfeited. canceled, exchanged or surrendered.
6. Terms and Conditions of Restricted Stock. Each Restricted Stock granted
pursuant to the Plan shall be evidenced by a Restricted Stock Agreement and
shall comply with and be subject to the following terms and conditions:
(a) Issuance and Restrictions. The Committee shall determine the number
of shares of Restricted Stock, granted pursuant to the Restricted Stock
Agreement. Restricted Stock shall be subject to such restrictions on
transferability and other restrictions, if any, as the Committee may impose
at the date of grant or thereafter, which restrictions may lapse separately
or in combination at such times under such circumstances in such
installments, or otherwise as the Committee may determine. Such conditions
may lapse in whole or in part based upon achievement of such Performance
Goals for the Performance Period as have been set by the Committee.
(b) Restrictions. Prior to vesting, shares of Restricted Stock may not
be sold, assigned, transferred, pledged. hypothecated or otherwise disposed
of, except by will or the laws of descent and distribution, or, if then
permitted under Rule 16b-3, pursuant to a qualified domestic relations
order as defined in Title 1 of the Employee Retirement Income Security Act
of 1974, as amended. Certificates for shares of Stock issued pursuant to
awards of Restricted Stock shall bear an appropriate legend referring to
such restrictions, and any attempt to dispose of any such shares of Stock
in contravention of such restrictions shall be null and void and without
effect. Prior to vesting, such certificates shall be held in escrow by an
escrow agent appointed by the Committee.
(c) Forfeiture. Subject to such exceptions as may be determined by the
Committee, if the Grantee's continuous employment with the Company shall
terminate for any reason (other than by reason of death or disability)
prior to vesting of the Restricted Stock, or to the extent any Performance
Goals for the Performance Period are not met, any shares remaining subject
to restrictions shall thereupon be forfeited by the Grantee and transferred
to, and reacquired by, the Company at no cost to the Company: provided
that, with respect to Grantees who are not Executive Officers. (i) the
Committee may provide, by rule or regulation or in any Restricted Stock
Agreement, or may determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Stock will be waived in whole
or in part in the event of terminations resulting from specified causes,
and (ii) the Committee may in other cases waive in whole or in part the
forfeiture of Restricted Stock. Nothing in the Plan or in any Restricted
Stock Agreement shall confer upon an individual any right to continue in
the employ of the Company or interfere in any way with the right of the
Company to terminate such employment.
(d) Withholding. The Company may defer making payment or delivery of
any benefits under the Plan until satisfactory arrangements have been made
for the payment of any tax attributable to any amounts payable with respect
to Restricted Stock granted under the Plan. The Company is authorized to
take any action as the Committee may deem advisable to enable the Company
and Grantee to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any award under the
3
<PAGE>
Plan. This authority shall include authority to withhold or receive stock
or other property and to make cash payments in respect thereof in
satisfaction of the Grantee's tax obligations.
(e) Death or Disability of Grantee. If a Grantee shall die while
employed by the Company or if the Grantee's employment shall terminate by
reason of disability, all Restricted Stock theretofore granted to such
Grantee shall vest as of the date of death or disability of the Grantee.
(f) Effect of Certain Changes.
(i) If there is any change in the number or class of shares of
Stock through the declaration of stock or cash dividends, or
recapitalization resulting in stock splits, or combinations or
exchanges of such shares, the number or class of shares of Stock
available for Restricted Stock and the number or class of such
outstanding Restricted Stock may be proportionately adjusted by the
Committee in its sole discretion to reflect any such change in the
number or class of issued shares of Stock; provided, however, that any
fractional shares resulting from any such adjustment shall be
eliminated. In the event of any other extraordinary corporate
transaction, including but not limited to distributions of cash or
other property to the Company's shareholders, the Committee may
equitably adjust outstanding Restricted Stock as it deems appropriate
in its sole discretion.
(ii) If while unvested Restricted Stock remains outstanding under
the Plan--
(A) the "beneficial ownership" (as defined in Rule 13d-3)
under the Exchange Act of securities representing more than 25% of
the combined voting power of the Company is acquired by any
"person" as defined in sections 13(d) and 14(d) of the Exchange Act
(other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, any
corporation owned, directly or indirectly, by the shareholders of
the Company in substantially the same proportions as their
ownership of stock of the Company or any person who is the
beneficial owner of 25% of the combined voting power of the Company
as of the effective date of the Plan), or
(B) the stockholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into another
corporation or to sell or otherwise dispose of all or substantially
all of its assets or adopt a plan of liquidation, or
(C) during any period of two consecutive years, individuals
who at the beginning of such period were members of the Board cease
for any reason to constitute at least a majority thereof (unless
the election, or the nomination for election by the Company's
stockholder of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors
at the beginning of such period).
then from and after the date of any such stockholder approval or adoption,
or the date on which public announcement of the acquisition of such
percentage shall have been made or the date on which the change in the
composition of the Board set forth above shall have occurred, whichever is
applicable, all Restricted Stock shall vest in full.
4
<PAGE>
(iii) In the event of a change in the Stock of the Company as
presently constituted which is limited to a change of all of its
authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from any
such change shall be deemed to be the Stock within the meaning of the
Plan.
(iv) To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding
and conclusive.
(v) Except as expressly provided in the Plan, the Grantee shall
have no rights by reason of any subdivision or consolidation of shares
of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or
by reason of any dissolution, liquidation, merger, or consolidation or
spin-off of assets or stock of another corporation; and any issue by
the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall not affect, and no adjustment
by reason thereof shall be made with respect to the Restricted Stock.
The grant of Restricted Stock pursuant to the Plan shall not affect in
any way the right or power of the company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structures or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all or part of its business or assets.
(g) Rights as a Stockholder. Except to the extent restricted under
the Restricted Stock Agreement, a Grantee shall have all of the rights
of a stockholder including without limitation, the right to vote
Restricted Stock and the right to receive dividends thereon.
(h) Other Provisions. The Restricted Stock Agreements authorized
under the Plan shall contain such other provisions not inconsistent
with this Plan including, without limitation, the imposition of
restrictions upon the transferability of Restricted Stock and
conditions on vesting of Restricted Stock as the Committee shall deem
advisable and such other provisions as the Committee, in its
discretion, deems advisable including without limitation noncompetition
and confidentiality provisions.
(i) Special Provisions Regarding Certain Awards. Notwithstanding
anything to the contrary contained in this Section 6 the vesting of
Restricted Stock granted pursuant to the Plan to an Executive Officer
shall be based on the attainment of the Performance Goals during the
Performance Period. In no event shall the number of Restricted Stock
granted for a Performance Period be made to a Covered Employee as of
the end of such Performance Period exceed 50,000 shares of Stock.
Unless otherwise determined by the Committee, in the case of Grantees
who are Covered Employees as of the end of the Performance Period,
unless otherwise determined by the Committee, shares of Restricted
Stock shall be released from restrictions only after achievement of the
applicable Performance Goals has been certified by the Committee.
7. Term of Plan Restricted Stock may be granted pursuant to the Plan from
time to time within a period of ten (10) years from the date the Plan is adopted
by the Board, or the date the Plan is approved by the stockholders of the
Company, whichever is earlier.
8. Amendment and Termination of the Plan. The Board or the Committee may
at any time and from time to time alter, amend, suspend, or terminate the Plan
in whole or in part; provided that, no amendment which
5
<PAGE>
requires stockholder approval under applicable law or in order for the Plan to
continue to comply with Rule 16b-3 or Code Section 162(m) shall be effective
unless the same shall be approved by the requisite vote of the stockholders of
the Company. Notwithstanding the foregoing, no amendment shall affect adversely
any of the rights or obligations of any Grantee, without such Grantee's consent,
with respect to any Restricted Stock theretofore granted under the Plan.
9. Effective Date. The Plan shall become effective as of July 20, 1994,
subject to the receipt of approval of the Plan by the stockholders of the
Company entitled to vote thereon. Any grants of Restricted Stock make prior to
stockholder approval described herein shall be subject to receipt of such
approval. In the absence of such approval, such grants of Restricted Stock shall
be null and void.
10. Headings. The headings of sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Plan.
11. Governing Law. This Plan and all rights hereunder shall be construed
in accordance with the and governed by the laws of the State of Delaware.
12. Interpretation. The Plan is designed and intended to comply with Rule
16b-3 and to the extent applicable with Section 162(m) of the Code and all
provisions hereof shall be construed in a manner to so comply.
6
<PAGE>
EXHIBIT 10(GG)
Management Security Plan
of
First USA Financial, Inc.
and
Subsidiary and Affiliated Companies
Effective July 1, 1990
WHEREAS, First USA Financial, Inc., a corporation organized and existing
under the laws of the State of Delaware, desires to adopt, for the benefit of a
select group of management and highly-compensated employees, the Management
Security Plan of First USA Financial, Inc. and Subsidiary and Affiliated
Companies (the "Plan").
NOW, THEREFORE, effective as of July 1, 1990, the Plan is hereby adopted
upon the following terms and conditions.
PURPOSE
The purpose of the Management Security Plan of First USA Financial, Inc.
and Subsidiary and Affiliated Companies is to provide retirement income benefits
to a specified, select group of management and highly-compensated employees who
contribute materially to the continued growth, development and future business
success of First USA Financial, Inc. and its subsidiaries and affiliates that
adopt the Plan. It is the intention of First USA Financial, Inc. that the Plan
and the individual Plan Agreements entered into hereunder be administered as an
unfunded benefit plan established and maintained for a select group of
management or highly compensated employees.
ARTICLE 1
Definitions
For purposes of the Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following meanings:
1.1 "Actuarial Equivalent" shall mean equality of value determined using
an interest rate of 8% per annum and the 1984 Unisex Projected Mortality Table.
The lump sum value of a Member's Accrued Benefit is the present value of
anticipated payments starting at Normal Retirement Age, discounted for interest
and mortality.
1.2 "Accrued Benefit" shall mean monthly retirement income commencing on
the first day of the month coinciding with or next following the Member's Normal
Retirement Age in the amount specified in Section 5.2 and payable as follows:
100% of the benefit payable for 12 months; and
50% of the benefit payable for the next 108 months.
1.3 "Beneficiary" shall mean the person or persons or the estate of a
Member entitled to receive any benefits under the Plan.
<PAGE>
1.4 "Board" shall mean the Board of Directors of First USA Financial,
Inc., a Delaware corporation, as from time to time constituted.
1.5 "Committee" shall mean the First USA Financial Employee Benefits
Committee appointed to manage and administer the Plan in accordance with the
provisions of Article 14 hereof.
1.6 "Corporation" shall mean First USA Financial, Inc. "Company" shall
mean the Corporation and each of its subsidiaries or affiliated or associated
companies which shall duly adopt the Plan with the approval of the Corporation
as provided in Article 16 hereof.
1.7 "Covered Salary" shall mean that portion of a Member's base monthly
salary for the most recently completed calendar year, excluding bonuses or other
special payments.
1.8 "Employee" shall mean any person who is in the regular full-time
employment of the Company as determined by the personnel rules and practices of
the Company. The term does not include persons who are retained by the Company
as consultants only.
1.9 "Fiscal Year" shall mean the twelve month period from July 1 through
June 30.
1.10 "Member" shall mean an Employee who is selected by the Board and who
elects to participate in the Plan and agrees to the terms thereof.
1.11 "Normal Retirement Age" shall mean, with respect to each Member, age
sixty-five (65).
1.12 "Plan" shall mean the Management Security Plan of First USA
Financial, Inc. and Subsidiary and Affiliated Companies, as set forth herein.
1.13 "Plan Agreement" shall mean the form of agreement to be executed by
an Employee electing to become a Member.
1.14 "Retirement" shall mean severance from employment with the Company
either as an early retiree (on or after age 55) or as a normal retiree (on
attainment of 65) or as a late retiree (after attainment of age 65).
1.15 "Years of Service" shall mean a Member's total period of employment
with the Company, aggregating all separate periods of continuous service, and
including employment with Lomas Banker Corp and MCorp, or either or both of
their respective subsidiaries.
ARTICLE 2
Eligibility and Membership
2.1 To be eligible for membership in the Plan, an Employee shall be
designated by the Board, which, in its sole discretion, shall determine
eligibility and admittance standards in accordance with the purposes of the
Plan.
2.2 To become a Member of the Plan, an Employee, having been designated by
the Board,
2
<PAGE>
shall complete and return to the Committee a fully executed Plan
Agreement, in the form attached as Exhibit I hereto, electing to participate in
the Plan and agreeing to the terms thereof.
ARTICLE 3
Beneficiary
3.1 A Member shall designate his Beneficiary to receive benefits under the
Plan by completing the appropriate space in the Plan Agreement. If more than one
Beneficiary is named, the shares and, or precedence of each Beneficiary shall be
indicated. A Member shall have the right to change the Beneficiary by submitting
to the Committee notice thereof in writing provided, however, no change of
Beneficiary shall be effective until acknowledged in writing by the Company. If
the Company has any doubt as to the proper Beneficiary to receive payment
hereunder, the Company shall have the right to withhold such payment until the
matter is finally adjudicated. Any payment made by the Company, in good faith
and in accordance with the Plan, shall fully discharge the Company from all
future obligations with respect to such payment. If a Member fails to designate
a Beneficiary or if all Beneficiaries designated by the Member predecease the
Member, the Company shall pay any benefits due under the Plan to the duly
appointed personal representative of the deceased Member's estate.
ARTICLE 4
Death Benefit
4.1 In the event a Member dies before age sixty-five (65) and the Plan is
in effect at that time, the Company will pay or cause to be paid a Death Benefit
commencing on the first day of the month following the date of death of the
Member as follows:
(i) 100% of the Member's Covered Salary for the first 12 months;
(ii) 50% of the Member's Covered Salary for the next 108 months;
(iii) after 120 months, 50% of the Member's Covered Salary shall be
paid monthly for the remaining period, if any, ending with the
first day of the month coincident with or immediately preceding
the date the Member would have attained age 65.
All such payments shall be paid to the Member's named Beneficiary, or if
there is no surviving Beneficiary, to the Member's estate (as provided in
Section 3.1). In lieu of the monthly payments described in this Section 4.1,
the Beneficiary may elect, subject to the approval of the Committee, to receive
the actuarial1y commuted amount of such payments in a lump sum.
4.2 The Company will pay or cause to be paid such death benefit only if
(a) at the time of such Member's death prior to age sixty-five (65), (i) he was
an Employee of the Company and had not retired prior to age sixty-five (65) or
(ii) his required payments were being waived on account of disability; (b) his
Plan Agreement had been kept in force until such time of death; and (c) such
death was due to causes other than suicide within two (2) years after the date
of his Plan Agreement.
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<PAGE>
ARTICLE 5
Retirement Benefits
5.1 Normal Retirement Benefits. If a Member has remained an Employee of
the Company until age sixty-five (65) and shall then retire, and if the Plan and
his Plan Agreement have been kept in force, the Company will pay or cause to be
paid to such Member, as a retirement benefit, the following monthly amounts: (a)
for each of the first twelve (12) months commencing on the first day of the
month following such Member's attaining age sixty-five (65), an amount equal to
one hundred percent (100%) of his Covered Salary, and (b) for each of the next
one hundred eight (108) months, an amount equal to fifty percent (50%) of his
Covered Salary. In the event the Member has less than 10 Years of Service, his
normal retirement benefit shall be reduced proportionately.
5.2 Accrued Benefit. A Member's Accrued Benefit is equal to (l) his
projected retirement benefit at age sixty-five (65) based on his current Covered
Salary, and (2) his projected Years of Service at age 65, multiplied by (3) the
ratio of his actual Years of Service to the projected Years of Service at age
65. The Accrued Benefit is payable at age 65 in the form described in Section
5.1. Notwithstanding any provision of the Plan to the contrary, a Member and
his Beneficiary (upon the death of the Member) may receive payment of the
Member's Accrued Benefit (or remaining Accrued Benefit) on an Actuarial
Equivalent basis, subject to the approval of the Committee.
5.3 Early Retirement Benefits. A Member who has attained age fifty-five
(55), may, with the Company's consent, elect retirement prior to age sixty-five
(65) and be entitled to a retirement benefit at reduced monthly amounts
commencing on the first day of the month following such Member's retirement or
at such later time as the Member may request and the Committee, in its
discretion, shall approve or deny such election. Such early retirement benefit
shall be in the amount of the Member's Accrued Benefit, as specified in Section
5.2, reduced by one-fifteenth (1/15) for each year by which the starting date of
benefit payments precedes the date on which such Member attains age sixty-five
(65). The percentages of the Accrued Benefit payable as an early retirement
benefit are set forth in the following table:
<TABLE>
<CAPTION>
Percent of
Age of Age 65 Age of Percent of
Commencement Benefits Commencement Age 65
of Early Retirement Payable of Early Benefits
Payments Payments Retirement Payable
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
64 93.3% 59 60.0%
63 86.7 58 53.3
62 80.0 57 46.7
61 73.3 56 40.0
60 66.7 55 33.3
</TABLE>
5.4 Late Retirement Benefits. In the event a Member shall retire after
age sixty-five (65), such Member (a) shall, upon his attainment of age sixty-
five (65), have been given the right to elect payment of his retirement benefit
either (i) commencing on the first day of the month following his attaining age
sixty-five (65) in the amount and form described in Section 5.1 based on the
Member's Covered Salary and Years of Service at age sixty-five (65), or (ii)
commencing on the date of his actual retirement in the amount and form described
in Section 5.l, based on the Member's Covered Salary and Years of Service at
actual retirement.
4
<PAGE>
5.5 If a Member dies after becoming entitled to a retirement benefit
(whether retirement is before or after age sixty-five (65) but before such
payment or all such payments are made, any retirement benefit payments then
remaining unpaid to such Member shall be paid to such Member's Beneficiary
commencing on the first day of the month following the date of death of the
Member.
5.6 If a Member dies after attaining age sixty-five (65), but before he
retires, all retirement benefit payments due to be paid to such Member after
retirement shall be paid to such Member's Beneficiary commencing on the first
day of the month following the date of death of the Member.
5.7 If a Member dies after becoming entitled to a retirement benefit under
the circumstances set forth in Sections 5.5 and 5.6, above, then no death
benefit as provided for in Article 4 shall be payable to his Beneficiary, but
such Beneficiary shall receive the deceased Member's retirement benefit payments
as set forth in said Sections.
ARTICLE 6
Disability
6.1 If a Member becomes totally disabled before age sixty-five (65) and if
such total disability continues for more than six (6) months, such Member shall
continue to receive credit for Years of Service during the period of disability
or to age 65, if earlier. His Covered Salary during the period of disability
shall be equal to his Covered Salary on the date immediately preceding the date
his disability commenced.
6.2 The Company will be obligated to continue service credit only if (i)
such disability is due to causes other than illegal or criminal acts of a
Member, acts contrary to the interests of the Company, and intentionally self-
caused acts and (ii) the Member was an Employee of the Company at the time he
became totally disabled (or was then on authorized leave of absence).
6.3 In the event a Member who is totally disabled dies prior to attaining
age sixty-five (65), the death benefit provided in Article 4 will be paid. If a
Member who is totally disabled is continuously disabled until he retires, the
retirement income benefit provided in Article 5 will be paid.
6.4 The determination of what constitutes total disability and the removal
thereof for purposes of this Article, shall be made by the Committee, in its
sole discretion, and such determination shall be conclusive. The Committee
shall have the right to request reasonable proof of disability from the Member.
If such proof is not provided, no period of service will be credited for the
period of disability.
ARTICLE 7
Leave of Absence
If a Member is authorized by the Company for any reason, including
military, medical reasons or other reasons, to take a leave of absence from
employment, such Member's Plan Agreement shall remain in effect during such
authorized leave of absence and such Member shall continue to accrue Years of
Service during the authorized leave of absence.
5
<PAGE>
ARTICLE 8
Source of Benefits
8.1 Amounts payable to a Member shall be paid exclusively from the general
assets of the Company. No person entitled to any payment hereunder shall have
any claim, right, security or other interest, implied or otherwise, in any asset
of the Company. The Company's liability for the payment of benefits hereunder
shall be evidenced only by the Plan and each Plan Agreement entered into between
the Company and a Member.
8.2 The Company may, but shall not be obligated to, invest in any specific
asset trust, fund or insurance policy.
8.3 The Company may require that a Member provide evidence of the state of
his health if required for insurance or for proof of disability. If the Member
does not meet the standard of health required by insurance, or his proof of
disability is not sufficient, or if a Member does not cooperate in the
completion of such requirements, the death benefit, as described in Section 4.1
shall not be provided. Rather, the benefit payable in the event of death prior
to retirement shall be a lump sum amount equal to the actuarial equivalent of
the Member's Accrued Benefit.
8.4 The Company shall have no obligation of any nature whatsoever to a
Member under the Plan and Plan Agreement, except as otherwise provided in the
Plan, if the Member's death is determined to be from a bodily or mental cause or
causes, the information about which was withheld or knowingly concealed, or
falsely provided by the Member, when requested by the Company to furnish
evidence of the state of his health.
ARTICLE 9
Termination of Employment
The Plan and Plan Agreement, either singly or collectively, do not in any
way obligate the Company to continue the employment of a Member with the
Company, nor does either limit the right of the Company to terminate a Member's
employment with the Company at any time and for any reason. Termination of a
Member's employment with the Company for any reason, whether by action of the
Company or Member, shall immediately terminate his participation in the Plan and
his Plan Agreement and all further obligations of either party thereunder,
except as may be provided in Article 11 below. In no event shall the Plan or
the Plan Agreement, either singly or collectively, by their terms or
implications, constitute an employment contract of any nature whatsoever between
the Company and a Member.
ARTICLE 10
Termination of Participation
A Member shall be fully vested in his Accrued Benefit at all times. If the
Member's employment with the Company is terminated (other than by death) before
he is eligible for a retirement benefit as described in Sections 5.1, 5.3, or
5.4, the Member shall receive a lump sum payment equal to the Actuarial
Equivalent of his Accrued Benefit.
If such Member is subsequently reemployed by the Company and reinstated as
a Member in the
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Plan, any additional distributions from the Plan shall be reduced by the
Actuarial Equivalent of all prior distributions from the Plan unless the Member
has reimbursed the Company for the amount of the current Actuarial Equivalent,
as of the date of his reemployment, of the Accrued Benefit for which he had
previously received a lump sum distribution.
ARTICLE 11
Termination, Amendment, Modification or Supplement of Plan
11.1 The Corporation reserves the right to terminate, amend, modify or
supplement the Plan, wholly or partially, and from time to time, at any time.
The Corporation likewise reserves the right to terminate, amend, modify or
supplement any Plan Agreement, wholly or partially, and from time to time, at
any time. Such right to terminate, amend, modify or supplement the Plan or Plan
Agreement shall be exercised for the Corporation by the Committee, provided,
however, that:
(a) no action to terminate the Plan shall be taken until after not less
than thirty (30) days' prior written notice shall have been given to each Member
to be affected thereby and
(b) the Committee shall take no action to terminate the Plan or a Plan
Agreement with respect to a Member or his Beneficiary after the payment of any
benefits pursuant to Article 4 or Article 5 of the Plan has commenced and has
not been paid in full.
11.2 Upon the termination of the Plan or any Plan Agreement, respectively,
by either the Committee or a Member in accordance with the provisions for such
termination, neither the Plan nor the Plan Agreement shall be of any further
force and effect and no party shall have any further obligation under either the
Plan or any Plan Agreement so terminated.
ARTICLE 12
Other Benefits and Agreements
The benefits provided for a Member and Member's Beneficiary under the Plan
are in addition to any other benefits available to such Member under any other
plan or program of the Company for its employees, and, except as may otherwise
be expressly provided, the Plan shall supplement and shall not supersede, modify
or amend any other plan or program of the Company or a Member.
ARTICLE 13
Restrictions on Alienation of Benefits
No right or benefit under the Plan or a Plan Agreement shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge
the same shall be void. No right or benefit hereunder shall in any manner be
liable for or subject to the debts, contracts, liabilities, or torts of the
person entitled to such benefit, if any Member or Beneficiary under the Plan
should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge any right to a benefit hereunder, then such right or benefit,
in the discretion of the Committee, shall -cease and determine, and, in such
event, the Committee may hold or apply the same or any part thereof for the
benefit of such Member or Beneficiary, his or her spouse, children, or other
dependents, or any of them, in such manner and in such portion as the Committee
may
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deem proper.
ARTICLE 14
Administration
14.1 The general administration of the Plan and any Plan Agreements
executed hereunder, as well as construction and interpretation thereof, shall be
vested in the First USA Financial Employee Benefits Committee, the number and
members of which shall be designated and appointed from time to time by, and
shall serve at the pleasure of, the Board. Any such member of the Committee may
resign by notice in writing filed with the secretary of the Committee.
Vacancies shall be filled promptly by the Board. Each person appointed to serve
as a member of the Committee shall signify his acceptance by filing a written
acceptance with the secretary of the Committee.
14.2 The Board may designate one of the members of the Committee as
Chairman and may appoint a secretary who need not be a member of the Committee.
The secretary shall keep minutes of the Committee's proceedings and all data,
records and documents relating to the Committee's administration of the Plan and
any Plan Agreements executed hereunder. The Committee may appoint from its
number such subcommittees with such powers as the Committee shall determine and
may authorize one or more of its members or any agent to execute or deliver any
instrument or make any payment on behalf of the Committee.
14.3 All resolutions or other actions taken by the Committee shall be by
the vote of a majority of those present at a meeting at which a majority of the
members are present, or in writing by all the members at the time in office if
they act without a meeting.
14.4 Subject to the provisions of the Plan, the Committee shall from time
to time establish rules, forms, and procedures for the administration of the
Plan, including Plan Agreements. Except as herein otherwise expressly provided,
the Committee shall have the exclusive right to interpret the Plan and any Plan
Agreements, and to decide any and all matters arising thereunder or in
connection with the administration of the Plan and any Plan Agreements. The
Committee shall have the exclusive right to determine disability with respect to
a Member, such determination to be made on the basis of such medical or other
evidence, or both, that the Committee, in its sole and absolute discretion, may
require. Such decisions, actions and records of the Committee shall be
conclusive and binding upon the Company and all persons having or claiming to
have any right or interest in or under the Plan.
14.5 The members of the Committee and the officers and directors of the
Company or a Subsidiary or Affiliated Company shall be entitled to rely on all
certificates and reports made by any duly appointed accountants, and on all
opinions given by legal counsel. Such legal counsel may be counsel for the
Company.
14.6 No member of the Committee shall be liable for any act or omission of
any other member of the Committee, or for any act or omission on his part,
excepting only his own willful misconduct. The Company shall indemnify and hold
harmless each member of the Committee against any and all expenses and
liabilities arising out of his membership on the Committee, excepting only
expenses and liabilities arising out of his own willful misconduct. Expenses
against which a member of the Committee shall be indemnified hereunder shall
include, without limitation, the amount of any settlement or judgment, costs,
counsel fees, and related charges reasonably incurred in connection with a claim
asserted, or a proceeding brought, or settlement thereof.
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14.7 In addition to the powers hereinabove specified, the Committee shall
have the power to compute and certify, under the Plan and any Plan Agreement,
the amount and kind of benefits from time to time payable to Members and their
Beneficiaries, and to authorize all disbursements for such purposes.
14.8 To enable the Committee to perform its functions, the Company and the
Subsidiaries and Affiliated Companies shall supply full and timely information
to the Committee on all matters relating to the compensation of all Members,
their retirement, death or other cause for termination of employment, and such
other pertinent facts as the Committee may require.
14.9 The Committee shall have the power, in its sole and absolute
discretion, to change the manner and time of payment of benefits to be made to a
Member or his Beneficiary from that set forth in the Member's Plan Agreement if
requested to do so by such Member or Beneficiary.
ARTICLE 15
Miscellaneous
15.1 Any notice which shall be or may be given under the Plan or a Plan
Agreement shall be in writing and shall be mailed by United States mail, postage
prepaid. If notice is to be given to the Company, such notice shall be
addressed to the Company at its principal business address in Dallas, Texas,
marked for the attention of the Secretary, First USA Financial Employee Benefits
Committee, Management Security Plan or, if notice to a Member, addressed to the
address shown on such Member's Plan Agreement.
15.2 Any party may, from time to time, change the address to which notices
shall be mailed by giving written notice of such new address.
15.3 The Plan shall be binding upon the Company and its successors and
assigns, and upon a Member, his Beneficiary, assigns, heirs, executors and
administrators.
15.4 The Plan and Plan Agreement shall be governed and construed under the
laws of the State of Texas as in effect at the time of their adoption and
execution, respectively.
15.5 Masculine pronouns wherever used shall include feminine pronouns and
the singular shall include the plural.
ARTICLE 16
Adoption of Plan by Subsidiary, Affiliated or Associated Companies
Any corporation which is a subsidiary, affiliated or associated company of
the Corporation may, with the approval of the Corporation, adopt the Plan and
thereby come within the definition of Company in Article 1 hereof.
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ARTICLE 17
Effect of Control
17.1 Upon a change of control of the Company, the Company shall transfer
to a trust an amount in cash equal in value to the Member's Accrued Benefit. The
amount to be transferred shall be determined as of the date of the change of
control. In addition, each year following a change of control, the Company shall
transfer an amount in cash equal in value to the annual increase in value of the
Member's Accrued Benefit. All transfers required to be made under this Article
17 shall be known collectively as the "Required Transfers".
17.2 The trust shall be held by or on behalf of the Company for the
benefit of the Member. All assets held in the trust shall be subject to the
terms and conditions of the Plan.
17.3 All Required Transfers shall be made by the Company within ninety
days following (i) the date of the change of control, in the case of the
Member's Accrued Benefit, and (ii) the end of each calendar year following a
change of control, in the case of annual increases in value of the Member's
Accrued Benefit following a change of control. If the Company fails to make a
Required Transfer, the amount of the unpaid Required Transfer shall become
immediately due and payable and shall constitute a claim of the Member against
the Company.
17.4 A "change of control" for purposes of this Article 17 shall occur
upon (i) any event resulting in the failure of First USA, Inc. to own, directly
or indirectly, all of the outstanding shares of capital stock of the Company or
(ii) the acquisition (except with respect to the ownership of the common stock
of First USA, Inc. as of the date hereof) by any person or entity or two or more
persons or entities acting in concert of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of thirty-five percent or more of the
outstanding shares of voting stock of First USA, Inc.
17.5 The Member may waive any provisions of this Article 17 by written
notice delivered to the Company.
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EXHIBIT 10(HH)
FIRST USA SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF MARCH 22, 1996)
<PAGE>
PREAMBLE
The First USA Supplemental Executive Retirement Plan (hereinafter referred to
as the "Plan") as amended and restated herein shall be effective March 22,
1996. The Plan was originally effective on August 9, 1989. The purpose of
the Plan is to permit certain Employees of the Employer to receive
supplemental retirement income from the Employer when benefits cannot be paid
from the First USA Pension Plan due to the limitations of Sections 401(a)(17)
and 415 of the Code.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS 1
1.1 "Annuity Starting Date". 1
1.2 "Basic Plan" 1
1.3 "Basic Plan Retirement Income" 1
1.4 "Board of Directors" 1
1.5 "Cash Balance Account" 1
1.6 "Code" 1
1.7 "Committee" 1
1,8 "Company" 1
1.9 "Compensation" 1
1.10 "Effective Date" 1
1.11 "Employee" 1
1.12 "Employer" or "Participating Employer" 1
1.13 "Participant" 1
1.14 "Plan" 1
1.15 "Plan Year" 1
1.16 "Supplemental Cash Balance Account" 2
1.17 "Supplemental Retirement Income" 2
1.18 "Total and Permanent Disability" or "Disability" 2
ARTICLE 2 PARTICIPATION AND VESTING 3
2.1 Participation 3
2.2 Vesting 3
2.3 Cessation of Participation 3
2.4 Forfeiture for Cause 3
2.5 Transfer to First USA Paymentech, Inc. 3
2.6 Transfer from First USA Paymentech, Inc. 4
ARTICLE 3 RETIREMENT DATE 5
3.1 Retirement Date 5
3.2 Normal Retirement Date 5
3.3 Early Retirement Date 5
3.4 Postponed Retirement Date 5
ARTICLE 4 SUPPLEMENTAL RETIREMENT INCOME 6
4.1 Supplemental Normal Retirement Income 6
4.2 Supplemental Early Retirement Income 6
4.3 Supplemental Postponed Retirement Income 6
4.4 Supplemental Vested Retirement Income 7
<PAGE>
4.5 Effect of Vested Status under the Basic Plan 7
ARTICLE 5 MODES OF BENEFIT PAYMENT 8
5.1 Mode of Payment 8
5.2 Date of Payment 8
ARTICLE 6 DEATH BENEFITS 9
6.1 In-Service Death Benefit 9
6.2 Supplemental Cash Balance Account 9
ARTICLE 7 DISABILITY BENEFITS 11
7.1 Disability Benefit 11
7.2 Determination 11
7.3 Termination 12
7.4 Recovery 12
7.5 Age 65 12
ARTICLE 8 LIABILITY OF THE COMPANY 13
8.1 Funding of Plan 13
8.2 Participant as Creditor of Plan 13
ARTICLE 9 ADMINISTRATION OF THE PLAN 14
9.1 Administration by Committee 14
9.2 Powers of the Committee 14
9.3 Reliance on Professionals 15
9.4 Payment of Expenses 15
ARTICLE 10 AMENDMENT OR TERMINATION OF THE PLAN 16
10.1 Power to Amend, Terminate 16
ARTICLE 11 GENERAL PROVISIONS 17
11.1 Plan Not Contract of Employment 17
11.2 Nonalienation of Benefits 17
11.3 Incapacity 17
11.4 Sole Source of Benefits 18
11.5 Address of Payee Unknown 18
11.6 Governing Law 18
<PAGE>
ARTICLE 1
DEFINITIONS
1.1 "Annuity Starting Date" means the date a benefit is paid under the Plan.
1.2 "Basic Plan" means the First USA Pension Plan, as amended.
1.3 "Basic Plan Retirement Income" means the benefit paid to a Participant
under the Basic Plan and includes retirement income payable upon Normal
Retirement, Early Retirement or Postponed Retirement.
1.4 "Board of Directors" means the Board of Directors of the Company, or any
person or committee duly authorized to act for and represent the Board.
1.5 "Cash Balance Account" is as defined in the Basic Plan.
1.6 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.7 "Committee" means the Committee composed of persons appointed under the
provisions of Article XIII of the Basic Plan.
1.8 "Company" means First USA Financial, Inc., a Delaware Corporation.
1.9 "Compensation" is as defined in the Basic Plan without applying the
limitation of Section 401(a)(17) of the Code.
1.10 "Effective Date" of this amended and restated Plan means March 22, 1996.
The original effective date of the Plan was August 9, 1989.
1.11 "Employee" means a person who is an employee of an Employer.
1.12 "Employer" or "Participating Employer" means the Company or other
corporation affiliated with the Company which, with the consent of the
Company has adopted this plan.
1.13 "Participant" means an Employee who is eligible to participate in this
Plan pursuant to the provisions of Article 2 of the Plan.
1.14 "Plan" means the First USA Supplemental Executive Retirement Plan, as
herein set forth, and as it may hereafter be amended from time to time.
1.15 "Plan Year" means the period beginning July 1 and ending on the next June
30. However, there will be an initial short Plan Year beginning August 9,
1989 and ending June 30, 1990.
<PAGE>
1.16 "Supplemental Cash Balance Account" is defined in Section 6.2 hereof.
1.17 "Supplemental Retirement Income" means the retirement benefits provided to
Participants and their joint or contingent annuitants and beneficiaries in
accordance with the applicable provisions of this Plan and shall include
Supplemental Normal Retirement Income, Supplemental Early Retirement
Income and Supplemental Postponed Retirement Income, and Supplemental
Deferred Vested Retirement Income as defined in Article 4.
1.18 "Total and Permanent Disability" or "Disability" means totally and
permanently disabled as defined in Section 7.2 hereof is defined in the
Basic Plan.
References to males shall be construed to include females, the singular shall be
construed to include the plural, and vice versa, wherever appropriate.
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ARTICLE 2
PARTICIPATION AND VESTING
2.1 PARTICIPATION
An Employee shall be eligible to participate in this Plan if such Employee
meets the eligibility requirements in Section 3.01 of the Basic Plan and if
such Employee's benefits under the Basic Plan are reduced by reason of the
application of the limitations imposed by Section 401(a)(17) of the Code or
Section 415 of the Code.
2.2 VESTING
Once an Employee becomes a Participant in the Plan he shall have a
nonforfeitable right to his accrued Retirement Income except as provided in
Section 2.4.
2.3 CESSATION OF PARTICIPATION
The Company may from time to time remove an Employee from participation in
his Plan; provided, however, that except as otherwise provided in Section
2.4, such removal will not reduce the amount of Retirement Income accrued
by the Employee under this Plan, as determined as of the date of such
Employee's removal. An Employee so removed shall remain a Participant
until his benefits are distributed in accordance with the provisions of
this Plan, but shall accrue no further benefits under this Plan after his
date of removal.
2.4 FORFEITURE FOR CAUSE
The accrued Retirement Income of a Participant may be forfeited if the
Participant is discharged for willful, deliberate, or gross misconduct as
determined by the Board of Directors in its sole discretion.
2.5 TRANSFER TO FIRST USA PAYMENTECH, INC.
If, on or after the Effective Date, a Participant transfers employment to
First USA Paymentech, Inc. or one of its subsidiaries or affiliates which
is a member of the same controlled group as First USA Paymentech, Inc., as
determined under Code Sections 414(b), (c), (m) or (o):
(1) such Participant shall not be considered to have terminated
employment or retired for purposes of being eligible for a distribution
under the Plan;
(2) benefits and benefit liabilities attributable to such Participant's
accrued benefit under this Plan shall be transferred to the First USA
Paymentech Supplemental Executive Retirement Plan; provided that such Plan
accepts such transfer at such time; and
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(3) such Participant's accrued benefit under this Plan shall be cancelled
when the transfer described in (2) above is made.
For this purpose, a Participant's accrued benefit under the Plan shall be
determined as if he had terminated employment or retired (if eligible for
retirement) on the date of such Participant's transfer of employment.
2.6 TRANSFER FROM FIRST USA PAYMENTECH, INC.
If, after the Effective Date, an Employee transfers employment to an
Employer from First USA Paymentech, Inc. or one of its subsidiaries or
affiliates which is a member of the same controlled group as First USA
Paymentech, Inc., as determined under Code Sections 414(b), (c), (m) or
(o):
(1) the Plan shall accept a transfer of benefits and benefit liabilities
attributable to such Employee's accrued benefit under the first USA
Paymentech Supplemental Executive Retirement Plan, if any; and
(2) upon such transfer of benefits and benefit and liabilities, the
Employee shall have an accrued benefit under this Plan at least equal
to the accrued benefit transferred from the First USA Paymentech
Supplemental Executive Retirement Plan.
An Employee who transfers employment from First USA Paymentech, Inc. or one of
its subsidiaries or affiliates as described in this Section 2.6 shall be
credited with the service for eligibility, vesting and benefit accrual purposes
that was credited to such Employee under the terms of the First USA Paymentech
Supplemental Executive Retirement Plan as of the date of transfer to covered
employment under this Plan; provided, however, that service shall not be
credited in accordance with the foregoing if such Employee was a participant in
the First USA Paymentech Supplemental Executive Retirement Plan and no transfer
of benefits and benefit liabilities is made from the First USA Paymentech
Supplemental Executive Retirement Plan on behalf of such Employee in accordance
with the foregoing.
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<PAGE>
ARTICLE 3
RETIREMENT DATE
3.1 RETIREMENT DATE
A Participant's Retirement Date shall be his date of actual Retirement
which may be his Normal, Early, or Postponed Retirement Date, whichever is
applicable to him pursuant to the following Sections of this Article 3.
3.2 NORMAL RETIREMENT DATE
A Participant's Normal Retirement Age shall be the later of (i) the
Participant's 65th anniversary of his birth or (ii) five (5) years of
participation in the Plan. Such Participant's Normal Retirement Date shall
be the first day of the month coincident with or next following the
attainment of Normal Retirement Age while in the service of the Employer,
3.3 EARLY RETIREMENT DATE
A Participant may retire on an Early Retirement Date, which may be the
first day of any month coincident with or subsequent to the 55th
anniversary of his birth and his completion of at least ten (10) Years of
Credited Service. A Year of Credited Service shall be equal to a "Year of
Credited Service" as defined under the Basic Plan.
3.4 POSTPONED RETIREMENT DATE
If a Participant continues in the employment of an Employer beyond his
Normal Retirement Date, the first day of any month coincident with or
subsequent to his termination of employment after his Normal Retirement
Date shall be known as his Postponed Retirement Date.
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<PAGE>
ARTICLE 4
SUPPLEMENTAL RETIREMENT INCOME
4.1 SUPPLEMENTAL NORMAL RETIREMENT INCOME
The Supplemental Normal Retirement Income payable to an eligible
Participant in the form of a single life annuity shall, commencing on his
Normal Retirement Date, be equal to the difference between (a) and (b) as
stated below:
(a) the monthly amount of the Basic Plan Retirement Income payable upon
Normal Retirement to which the Participant would have been entitled
under the Basic Plan, if such benefit were calculated under the Basic
Plan without giving effect to the limitations imposed by the
application of Code Sections 401(a)(17) and 415.
(b) the monthly amount of Basic Plan Retirement Income payable upon Normal
Retirement actually payable to the Participant under the Basic Plan
after the limitations imposed by the application of Code Sections
401(a)(17) and 415.
4.2 SUPPLEMENTAL EARLY RETIREMENT INCOME
The Supplemental Early Retirement Income payable to an eligible Participant
in the form of a single life annuity shall, commencing on his Early
Retirement Date or on the first day of any month thereafter up to his
Normal Retirement Date, be equal to the difference between (a) and (b) as
stated below:
(a) the monthly amount of the Basic Plan Retirement Income payable upon
Early Retirement to which the Participant would have been entitled
under the Plan, if such benefit were calculated under the Basic Plan
without giving effect to the limitations imposed by the application of
Code Sections 401(a)(17) and 415.
(b) the monthly amount of Basic Plan Retirement Income payable upon Early
Retirement actually payable to the Participant under the Basic Plan
after the limitations imposed by the application of Code Sections
401(a)(17) and 415.
4.3 SUPPLEMENTAL POSTPONED RETIREMENT INCOME
The Supplemental Postponed Retirement Income payable to an eligible
Participant in the form of a single life annuity shall, commencing on his
Postponed Retirement Date, be equal to the difference between (a) and (b)
as stated below:
(a) the monthly amount of the Basic Plan Retirement Income payable upon
Postponed Retirement to which ft Participant would have been entitled
under
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<PAGE>
the Basic Plan, if such benefit were calculated under the Basic Plan
without giving effect to the limitations imposed by the application of
Code Sections 401(a)(17) and 415.
(b) the monthly amount of Basic Plan Retirement Income payable upon
Postponed Retirement actually payable to the Participant after the
limitations imposed by the application of Code Sections 401(a)(17) and
415.
4.4 SUPPLEMENTAL VESTED RETIREMENT INCOME
The Supplemental Vested Retirement Income payable to an eligible
Participant in the form of a single life annuity shall, commencing the
first day of the month following termination of employment, or the first
day of any month thereafter, up to his Normal Retirement Date, be equal to
the difference between (a) and (b) as stated below:
(a) the monthly amount of the Basic Plan Retirement Income payable upon the
Participant's date of termination which the Participant would be
entitled to receive, assuming the Participant has a nonforfeitable
right to a benefit under the Basic Plan, if such benefit were
calculated under the Basic Plan without giving effect to the limitation
imposed by the application of Code Sections 401(a)(17) and 415.
(b) the monthly amount of Basic Plan Retirement Income payable upon the
date the Participant elects for benefits to commence, assuming the
Participant had a nonforfeitable right to a benefit under the Basic
Plan, actually payable under the Basic Plan after the limitations
imposed by the application of Code Sections 401(a)(17) and 415.
4.5 EFFECT OF VESTED STATUS UNDER THE BASIC PLAN
The calculations described in Section 4.1, 4.2, 4.3, and 4.4 shall all be
made treating the Participant as vested under the Basic Plan regardless of
the Participant's actual vesting status under the Basic Plan.
7
<PAGE>
ARTICLE 5
MODES OF BENEFIT PAYMENT
5.1 MODE OF PAYMENT
Any Retirement Income payable under this Plan to a Participant or a
beneficiary shall be paid as a single-sum amount which is the actuarial
equivalent of a single life annuity. For this purpose, actuarial
equivalence shall be determined utilizing the actuarial equivalent factors
stated in the Basic Plan for determining single-sum amounts. No
Participant's benefit shall be less than his Supplemental Cash Balance
Account as defined in Section 6.2.
5.2 DATE OF PAYMENT
Payment of Retirement Income due under the Plan, if any, shall be made as
soon as administratively possible after the Participant's retirement or
termination of employment, as the case may be.
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<PAGE>
ARTICLE 6
DEATH BENEFITS
6.1 IN-SERVICE DEATH BENEFIT
(a) Except as otherwise provided herein, in the event of a married
Participant's death prior to the Participant's Annuity Starting Date,
the Surviving Spouse shall receive a single sum amount equal to the
Participant's Supplemental Cash Balance Account.
This death benefit shall only be payable if (i) the Participant dies
while in active employment with the Employer; (ii) the Participant
dies after ceasing active employment with an Employer but prior to his
Annuity Starting Date; or (iii) while the Participant is accruing a
benefit under Article 7.
(b) In the event of the death of a single Participant prior to the
Participant's Annuity Starting Date, the Participant's Beneficiary
shall receive a single-sum amount equal to the Participant's
Supplemental Cash Balance Account.
This death benefit shall only be payable if (i) the Participant dies
while in active employment with the Employer; (ii) the Participant
dies after ceasing active employment with an Employer but prior to his
Annuity Starting Date; or (iii) while the Participant is accruing a
benefit under Article 7.
(c) Any beneficiary designation made by a single Participant or by a
married Participant with the consent of such Participant's Spouse
under the provisions of Section 6.01 and Section 13.12 of the Basic
Plan shall be controlling under this Plan. Therefore, any death
benefit payable under this Section 6.1 shall be payable to the same
person(s) or entity as the death benefit payable under Section 6.01 of
the Basic Plan.
(d) Payment of the death benefit provided hereunder shall be made as soon
as administratively possible after the death of the Participant is
established to the satisfaction of the Committee in accordance with
rules and procedures established by the Committee.
6.2.1 SUPPLEMENTAL CASH BALANCE ACCOUNT
For purposes of this Article 6 a Participant's Supplemental Cash Balance
Account is equal to the difference between (a) and (b) as stated below:
(a) The Cash Balance Account calculated under the Basic Plan without
giving effect to the limitations imposed by the application of Code
Sections 401(a)(17) and 415.
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(b) The Cash Balance Account calculated under the Basic Plan after giving
effect to the limitations imposed by the application of Code Sections
401(a)(17) and 415.
10
<PAGE>
ARTICLE 7
DISABILITY BENEFITS
7.1 DISABILITY BENEFIT
A Participant who, while in the employment of his Employer, becomes Totally
and Permanently Disabled prior to his Normal Retirement Date, shall, any
other provision of the Plan to the contrary notwithstanding, continue to be
considered a Participant and an Employee in the employment of his Employer,
and shall be entitled:
(a) to continue to accrue Supplemental Retirement Income benefits pursuant
to Article 4 until the early of his Normal Retirement Date or the
cessation of his Total and Permanent Disability. Such accruals shall be
based upon his Compensation in the calendar quarter prior to the
calendar quarter in which he became Totally and Permanently Disabled;
(b) to receive, beginning on his Normal Retirement Date, the Supplemental
Retirement Income benefit accrued by him pursuant to Article 4 (prior
to becoming Totally and Permanently Disabled) and pursuant to paragraph
(a) of this Section 7.1; provided, however, that a Participant who has
completed at least ten (10) years of Credited Service as of the date he
became Totally and Permanently Disabled shall be entitled to receive
his benefits anytime on or after the date he attains age 55, in which
event his accruals pursuant to this Section 7.1 shall cease at that
time and his Supplemental Retirement Income shall be subject to the
reduction for early commencement as provided in Section 4.2.
7.2 DETERMINATION
A Participant SHALL.1 be deemed to be Totally and Permanently Disabled, and
entitled to receive Disability benefits from the Plan, only if, on the
basis of a medical examination by a qualified physician or clinic
acceptable to the Committee, the Committee finds that the Participant has
a condition which totally and presumably permanently prevents him from
engaging in any substantial or gainful employment with a Participating
Employer. Notwithstanding any other provision of this Section 7.2, no
Participant shall be deemed to be Totally and Permanently Disabled if the
Committee determines that his incapacity results from chronic alcoholism,
self-addiction to narcotics, an injury suffered while engaged in a
felonious or criminal act or enterprise, or service in the armed forces of
the United States which entitles the Participant to a veteran's disability
pension. The determination of the Committee shall be final and binding upon
all persons and for all purposes.
11
<PAGE>
7.3 TERMINATION
No provision of this Article shall prevent a Participant from electing to
receive his benefit under any other provisions of this Plan should he
determine not to return as an Employee of the Employer; however, the value
of all payments, if any, previously made to him as Disability payments
shall be deducted-from the value of the benefits to which he would be
otherwise entitled by virtue of such other provisions.
7.4 RECOVERY
Upon receipt of evidence that a Participant is no longer Totally and
Permanently Disabled prior to his attaining age sixty-five (65), the
Participant shall receive no additional accruals under Section 7.1. Should
the Participant return to work and/or later become entitled to any benefits
under the Plan, the value of all Disability benefits, if any, previously
received by him shall be deducted from the value of the benefits to which
he would otherwise be entitled. In order to continue to be eligible to
receive accruals under Section 7.1, a Participant must submit such evidence
as the Committee shall require that he continues to be Totally and
Permanently Disabled. In order to determine whether the Participant
continues to be Totally and Permanently Disabled, the Committee may require
a Participant submit to a physical exam at its expense, but not more
frequently than annually.
7.5 AGE 65
Upon attainment of age sixty-five (65), a Participant who had previously
retired by reason of Disability shall be conclusively presumed to be
Totally and Permanently Disabled and shall receive his monthly benefits
payable under Section 7.1.
12
<PAGE>
ARTICLE 8
LIABILITY OF THE COMPANY
8.1 FUNDING OF PLAN
The benefits of this Plan shall be paid by the Employer and not be funded
prior to the time paid to the Participant, beneficiary or joint or
contingent annuitant designated by the Participant, unless and except as
expressly provided otherwise by the Company.
8.2 PARTICIPANT AS CREDITOR OF PLAN
A Participant who is vested in a benefit under this Plan shall be an
unsecured creditor of the Employer as to the payment of any benefit under
this Plan.
13
<PAGE>
ARTICLE 9
ADMINISTRATION OF THE PLAN
9.1 ADMINISTRATION BY COMMITTEE
Except for the functions reserved to the Company or the Board of Directors
of the Company, the administration of the Plan shall be the responsibility
of the Committee.
9.2 POWERS OF THE COMMITTEE
The Committee shall have the power and the duty to take all actions and to
make all decisions necessary or proper to carry out the Plan. The
determination of the Committee as to any question involving the general
administration and interpretation of the Plan shall be final, conclusive
and binding. Any discretionary actions to be taken under the Plan by the
Committee shall be uniform in their nature and applicable to all persons
similarly situated. Any Committee member who is employed under the Plan
shall be deemed to have resigned from the Committee at the time of his
termination of employment unless expressly provided to the contrary in
writing at such time. Without limiting the generality of the foregoing, the
Committee shall have the following powers and duties:
(a) To furnish to all Participants, upon request, copies of the Plan; and
to require any person to furnish such information as it may request
for the purpose of the proper administration of the Plan as a
condition to receiving any benefits under the Plan;
(b) To make and enforce such rules and regulations and prescribe the use
of such forms as it shall deem necessary for the efficient
administration of the Plan;
(c) To interpret the Plan, and to resolve ambiguities, inconsistencies and
omissions, which findings shall be binding, final and conclusive;
(d) To decide on questions concerning the Plain in accordance with the
provision of the Plan;
(e) To determine the amount of benefits which shall be payable to any
person in accordance with the provisions of the Plan; and to provide a
full and fair review to any Participant whose claim for benefits has
been denied in whole or in part;
(f) To allocate any such powers and duties to or among individual members
of the Committee; and
14
<PAGE>
(g) To designate persons other than Committee members to carry out any
duty or power which would otherwise be a responsibility of the
Committee, under the terms of the Plan.
9.3 RELIANCE ON PROFESSIONALS
To the extent permitted, by law, the Committee and any person to whom it
may delegate any duty or power in connection with administering the Plan,
the Employer, and officers and directors thereof, shall be entitled to rely
conclusively upon, and shall be fully protected in any action taken or
suffered by them in good faith in the reliance upon, and actuary, counsel,
accountant, other specialist, or other person selected by the Committee,
or in reliance upon any tables, valuations, certificates, opinions or
reports which shall be furnished by any of them. Further, to the extent
permitted by law, no member of the Committee, nor the Employer, nor the
officers or directors thereof, shall be liable for any neglect, omission or
wrongdoing of any other members of the Committee, agent, officer or
employee of an Employer. Any person claiming under the Plan shall look
solely to the Employer for redress.
9.4. PAYMENT OF EXPENSES
All expenses incurred prior to the termination of the Plan that shall arise
in connection with the administration of the Plan, including, but not
limited to administrative expenses, proper charges and disbursements,
compensations and other expenses and charges of any actuary, counsel,
accountant, specialist, or other person who shall be employed by the
Committee in connection with the administration thereof, shall be paid by
the Company.
15
<PAGE>
ARTICLE 10
AMENDMENT OR TERMINATION OF THE PLAN
10.1 POWER TO AMEND, TERMINATE
The Board of Directors shall have the power to suspend or terminate this
Plan in whole or in part at any time, and from time to time to extend,
modify, amend, revise, or terminate this Plan in such respects as the Board
of Directors by resolution may deem advisable; provided that no such
extension, modification, amendment, revision, or termination shall deprive
a Participant or any beneficiary designated by a Participant of the vested
portion of any benefit under this Plan.
16
<PAGE>
ARTICLE 11
GENERAL PROVISIONS
11.1 PLAN NOT CONTRACT OF EMPLOYMENT
This Plan shall not be deemed to constitute a contract between the Employer
and any Employee or other person whether or riot in the employ of the
Employer, nor shall anything herein contained be deemed to give any
Employee or other person whether or not in the employ of the Employer any
right to be retained in the employ of the Employer, or to interfere with
the right of the Employer to discharge any Employee at any time and to
treat him without any regard to the effect which such treatment might have
upon him as a Participant of the Plan.
11.2 NONALIENATION OF BENEFITS
Except as may otherwise be required by law, no distribution or payment
under the Plan to any Participant, beneficiary, or joint or contingent
annuitant, shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, whether
voluntary or involuntary, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void; nor
shall any such distribution or payment be in any way liable for or subject
to the debts, contracts, liabilities, engagements or torts of any person
entitled to such distribution or payment. If any Participant, beneficiary,
or joint or contingent annuitant is adjudicated bankrupt or purports to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge
any such distribution or payment, voluntarily or involuntarily, the
Committee, in its discretion, may cancel such distribution or payment or
may hold or cause to be held or applied such distribution or payment or any
part thereof to or for the benefit of such Participant, beneficiary, or
joint or contingent annuitant in such manner as the Committee shall direct.
11.3 INCAPACITY
If the Employer determines that any person entitled to payments under the
Plan is an infant or incompetent by reason of physical or mental
disability, it may cause all payments thereafter becoming due to such
person to be made to any other person for his benefit, without
responsibility to follow application of amounts so paid. Payments made
pursuant to this provision shall completely discharge the Plan, the
Employer and the Committee.
17
<PAGE>
11.4 SOLE SOURCE OF BENEFITS
The Employer shall be the sole source of benefits under this Plan, and each
Employee, Participant, joint or contingent annuitant, beneficiary, or any
other person who shall claim the right to any payment or benefit under this
Plan shall be entitled to look only to the Employer for payment of
benefits.
11.5 ADDRESS OF PAYEE UNKNOWN
If the Employer is unable to make payment to any Participant or other
person to whom a payment is due under the Plan because it cannot ascertain
the identity or whereabouts of such Participant or other person after
reasonable efforts have been made to identify or locate such person
(including a notice of the payment so due mailed to the last known address
of such Participant or other person shown on the records of the Employer),
such payment and all subsequent payments otherwise due to such Participant
or other person shall be forfeited twenty-four (24) months after the date
such payment first became due; provided, however, that such payment and any
subsequent payments shall be reinstated retroactively, no later than sixty
(60) days after the date on which the Participant or person is identified
or located.
11.6 GOVERNING LAW
The provisions of the Plan shall be construed, administered and governed
under applicable Federal laws and the laws of the State of Delaware.
18
<PAGE>
IN TESTIMONY WHEREOF, First USA Financial, Inc. has caused this
instrument to be executed in its name and on its behalf this 5th day of August
1996, but effective as of March 22, 1996.
Witness: First USA Financial, Inc.
/s/ By: /s/
- ------------------------- --------------------------
_________________________ Title: Chairman of the Board
------------------------
19
<PAGE>
EXHIBIT 10(II)
SECOND AMENDMENT TO THE
FIRST USA, INC.
EMPLOYEE STOCK PURCHASE PLAN
WHEREAS, First USA, Inc. a Delaware corporation (the "Company"), has
heretofore maintained the First USA, Inc. Employee Stock Purchase Plan (the
"Plan") for the benefit of certain of its employees; and
WHEREAS, the Company considers it advisable to amend the Plan to
increase the number of shares of Common Stock of the Company, $.01 par value,
subject to the Plan and increase the percentage of total compensation employees
may contribute under the Plan; and
WHEREAS, the Board of Directors of the Company, pursuant to Section 17
of the Plan, authorized this amendment on July 17, 1996, subject to shareholder
approval;
NOW THEREFORE, effective July 17, 1996 (the "Effective Date"), subject
to shareholder approval, the Company hereby amends the Plan as follows:
(1) The first sentence of Section 4(b) is hereby deleted and replaced with
the following:
Each eligible Employee may elect to participate in the Plan with
respect to an offer, only by filing a subscription agreement with the
Company by the fifteenth day of the month prior to the Offering
Period, indicating the amount of such Employee's Compensation (not to
exceed 20% of such Compensation) which such Employee elects to use to
purchase shares of Common Stock and authorizing payroll deductions (as
set forth in paragraph 5 hereof) throughout the Offering Period.
(2) The first sentence of Section 10(a) is hereby deleted and replaced
with the following:
The maximum number of shares of Common Stock which shall be reserved
for sale under the Plan shall be 700,000, subject to adjustment upon
changes in capitalization of the Company as provided in paragraph 16.
<PAGE>
IN WITNESS HEREOF, the Company has adopted this amendment as of the
Effective Date.
FIRST USA, INC.
By: /s/ Philip Taken
------------------
Title: Senior Vice President and General Counsel
-----------------------------------------
<PAGE>
FIRST AMENDMENT TO THE
FIRST USA, INC.
EMPLOYEE STOCK PURCHASE PLAN
WHEREAS, First USA, Inc. a Delaware corporation (the "Company"), has
heretofore maintained the First USA, Inc. Employee Stock Purchase Plan (the
"Plan") for the benefit of certain of its employees; and
WHEREAS, the Company considers it advisable to amend the Plan to
increase the number of shares of Common Stock of the Company, $.01 par, subject
to the Plan and to allow newly-hired employees to participate in the Plan rather
than requiring one year of employment; and
WHEREAS, stockholders of the Company approved this amendment at the
Annual Stockholders Meeting on November 2, 1994 and the Board of Directors of
the Company, pursuant to Section 17 of the Plan, authorized this amendment on
July 20, 1994;
NOW THEREFORE, effective November 2, 1994, (the "Effective Date"), the
Company hereby amends the Plan as follows:
(1) Section 3(a) is hereby deleted and replaced with the following:
Subject to the requirements of paragraph 4(b) hereof, any person who
is an Employee as of the commencement of an Offering Period shall be
eligible to participate in the Plan for such Offering Period, provided
that he or she continues to be an Employee through the last payroll
deduction date in such Offering Period.
(2) The first sentence of Section 10(a) is hereby deleted and replaced
with the following:
The maximum number of shares of Common Stock which shall be reserved
for sale under the Plan shall be 200,000, subject to adjustment upon
changes in capitalization of the Company as provided in paragraph 16.
<PAGE>
IN WITNESS HEREOF, the Company has adopted this amendment as of the
Effective Date.
FIRST USA, INC.
By: /s/ Philip Taken
------------------
Title: Senior Vice President & Asst. Secretary
-----------------------------------------
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN OF
FIRST USA, INC.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company that the Plan qualify as an "Employee Stock Purchase Plan" within
the meaning of Section 423 of the Internal Revenue Code of 1986, as amended, and
the provisions of the Plan shall be construed in a manner consistent with the
requirements of such Section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock, $.01 par value, of the
Company.
(d) "Company" shall mean First USA, Inc., a Delaware corporation.
(e) "Committee" shall have the meaning set forth in paragraph 11
hereof.
(f) "Compensation" shall mean the total compensation received from the
Company for personal services rendered by an Employee in respect of a particular
Offering Period, including an Employee's portion of the salary deferral
contributions pursuant to Section 401(k) of the Code, bonus, commissions,
incentive pay (other than long-term incentive payments), overtime pay and any
amount excludable pursuant to Section 125 of the Code, but excluding any long-
term incentive payments, imputed income, severance pay, expenses or other
special emolument or any credit or benefit under any employee plan maintained by
the Company.
(g) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company (including, but not limited to, a military
or sick leave), provided that such leave is for a period of, not more than 90
days or if reemployment upon the expiration of such leave is guaranteed by
contract or statute.
(h) "Designated Subsidiaries" shall mean the subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(i) "Employee" shall mean any person, including an officer, who is
regularly employed by the Company or one of its Designated Subsidiaries.
(j) "Exercise Date" shall mean the last business day of each Offering
Period under the Plan.
<PAGE>
(k) Fair Market Value" per share as of a particular date shall mean
(i) the closing sales price per share of Common Stock on the national
securities exchange on which the Common Stock is principally traded, for the
last preceding date on which there was a sale of Common Stock on such exchange,
or (ii) if the shares of Common Stock are then traded in an over-the-counter
market, the average of the closing bid and asked prices for the shares of
Common Stock in such over-the-counter market for the last preceding date on
which there was a sale of such Common Stock in such market, or (iii) if the
shares of Common Stock are not then listed on a national securities exchange or
traded in an over-the-counter market, such value (as defined in Section 3
hereof) as the Committee, in its sole discretion, shall determine.
(1) "Initial Valuation Date" shall mean December 1, March 1, June 1
and September 1 of each Plan Year, or with respect to the first Offering Period,
such date as the Committee shall determine.
(m) "Insider" shall mean an Employee participating in the Plan who is
subject to the reporting provisions of Section 16(a) of the Exchange Act.
(n) "Offering Period" shall mean each calendar quarter during the
effectiveness of the Plan, commencing on each January 1, April 1, July 1 and
October 1 following an Initial Valuation Date, provided that the Committee shall
have the power to change the duration of Offering Periods.
(o) "Plan" shall mean this Employee Stock Purchase Plan as amended
from time to time.
(p) "Plan Year" shall mean the calendar year.
(q) "Reserves" shall have the meaning set forth in paragraph 16
hereof.
(r) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) Subject to the requirements of paragraph 4(b) hereof, any person
who is an Employee as of the commencement of an Offering Period shall be
eligible to participate in the Plan for such Offering Period, provided that (i)
at the commencement of an offering Period he or she has maintained Continuous
Status as an Employee for at least one year, and (ii) he or she continues to be
so employed on the last payroll deduction date in such Offering Period.
b) Notwithstanding any provisions of the Plan to the contrary, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any Subsidiary of the Company, or (ii) which permits his or her
right to purchase
<PAGE>
stock under all employee stock purchase plans (described in Section 423 of the
Code) of the Company and its Subsidiaries to accrue at a rate which exceeds
twenty-five thousand dollars ($25,000) of Fair Market Value of such stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding at any time.
4. Grant of Option; Participation.
(a) On each Initial Valuation Date the Company shall commence an offer
by granting each eligible Employee an option to purchase such number of shares
of Common Stock as may be purchased with the amount elected by such Employee
under paragraph 4(b), subject to the limitations set forth in paragraph 10
hereof.
(b) Each eligible Employee may elect to participate in the Plan with
respect to an offer, only by filing a subscription agreement with the Company by
the fifteenth day of the month prior to the Offering Period, indicating the
amount of such Employee's Compensation (not to exceed 10% of such Compensation)
which such Employee elects to use to purchase shares of Common Stock and
authorizing payroll deductions (as set forth in paragraph 5 hereof) throughout
the Offering Period. Such subscription agreement shall also set forth such
Employees election (i) to receive certificates in his or her name representing
the number of whole shares purchased hereunder as promptly as practicable
following exercise of his option or to have such certificates held by a nominee
for such participant and (ii) to have distributed to him or her dividends on
shares of Common Stock purchased hereunder in cash or reinvested in shares of
Common Stock. Such subscription agreement shall remain in effect for subsequent
offering Periods unless modified or terminated by the participant by the
fifteenth day of the month prior to any such subsequent Offering Period.
(c) The option price per share of the Common Stock subject to an
offering shall be the lesser of: (i) 85% of the Fair Market Value of a share of
Common Stock on the Initial Valuation Date immediately preceding the applicable
Offering Period; or (ii) 85% of the Fair Market Value of a share of Common Stock
on the Exercise Date.
5. Payroll Deductions.
(a) During an Offering Period, the Company shall withhold from the
Compensation of each Employee participating in the offer, the amount elected by
such Employee under paragraph 4(b) (the "Aggregate Purchase Price").
(b) The Aggregate Purchase Price shall be, withheld in approximately
equal installments from each paycheck during the Offering Period.
(c) All payroll deductions made by a participant shall be credited to
his or her account under the Plan. A participant may not make any additional
payments into such account.
6. Exercise of Option. Unless a participant withdraws from the Plan as
provided in paragraph 8, his or her election to purchase shares will be
exercised automatically on the Exercise Date, and the maximum number of whole
and/or fractional shares (up to four decimal places) subject to such option will
be purchased for him or her at the applicable option price with the accumulated
payroll deductions in his account. The shares purchased upon exercise of an
<PAGE>
option hereunder shall be deemed to be transferred to the participant on the
Exercise Date. During his or her lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
7. Delivery. Certificates representing shares purchased upon exercise
of a participant's option shall be held for the account of such participant, or
delivered as promptly as practicable to such participant following such
exercise, in accordance with participant's subscription agreement as provided in
Section 4(b) hereof. No shares shall be delivered until full payment therefore
has been made.
8. Withdrawal; Termination of Employment; Insiders.
(a) A participant may withdraw all, but not less than all, the payroll
deductions credited to his or her account under the Plan at any time prior to
the Exercise Date of an offering Period by giving written notice to the Company.
All of the payroll deductions credited to such participant's account will be
paid to him or her promptly after receipt of his or her notice of withdrawal and
his or her option for the current period will be automatically terminated. No
further payroll deductions for the purchase of shares will be made for such
participant during such Offering Period.
(b) Upon termination of a participant's Continuous Status as an
Employee prior to the Exercise Date of the Offering Period on account of
retirement, disability or death, the payroll deductions credited to his or her
account will be used to purchase shares on the next succeeding Exercise Date
unless the participant (or his or her estate, as the case may be) elects to
withdraw such deductions in cash prior to such Exercise Date. Upon termination
of a participant's Continuous Status as an Employee for any other reason, such
deductions shall be refunded to such participant in cash. Thereafter, so long as
such participant's Continuous Status as an Employee shall continue to be
terminated, such participant's participation in the Plan shall cease.
(c) To the extent required by Rule 16b-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any successor thereof, an
Insider who at any time shall cease to participate in the Plan shall not again
participate in the Plan for a period of at least six months from the date of
such cessation of participation, and an Insider shall not dispose of any shares
of Common Stock purchased hereunder for a period of at least six months from the
date such shares were purchased.
9. Interest. No interest shall accrue on or be payable with respect to
the payroll deductions of a participant in the Plan.
10. Stock.
(a) The maximum number of shares of Common Stock which shall be
reserved for sale under the Plan shall be 50,000, subject to adjustment upon
changes in capitalization of the Company as provided in paragraph 16. If the
total number of shares which would otherwise be subject to options granted
pursuant to paragraph 4(a) hereof on an Initial Valuation Date exceeds the
number of shares then available under the Plan (after deduction of all shares
for which options have been exercised or are then outstanding), the Committee
shall make a pro rata allocation of
<PAGE>
the shares remaining available for option grant in as uniform a manner as shall
be practicable and as it shall determine to be equitable. In such event, the
Committee shall give written notice to each Employee of such reduction of the
number of option shares affected thereby and shall similarly reduce the rate of
payroll deductions, if necessary. The Plan shall terminate if all shares of
Common Stock reserved for sale hereunder shall have been purchased. Shares of
Common Stock available for purchase pursuant to this Plan may be purchased on
the open market or directly from the Company. The Company shall pay all
brokerage commissions or fees incurred in connection with the purchase of shares
of Common Stock hereunder.
(b) The participant will not have rights as a shareholder with respect
to shares covered by his, or her option until such shares shall have been
purchased for his or her account in accordance with the provisions of the Plan.
(c) Shares of Common Stock to be delivered to a participant under the
Plan will be registered in the name of the participant.
11. Administration. The Plan shall be administered by a committee (the
"Committee") established by the Board, the composition of which shall at all
time satisfy the provisions of Rule 16b-3 of the Exchange Act, or any successor
thereof. The Committee shall have full power and authority, subject to the
provisions of the Plan, to promulgate such rules and regulations as it deems
necessary for the proper administration of the Plan, to interpret the provisions
and supervise the administration of the Plan, and to take all action in
connection therewith or in relation to the Plan as it deems necessary or
advisable. Decisions of the Committee shall be made by a majority of its members
and shall be final Any decision reduced to writing and signed by all of the
members of the Committee shall be fully effective as if it had been made at a
meeting duly held. The Company will pay all expenses incurred in the
administration of the Plan.
12. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, remaining in such participant's account under
the Plan in the event of the participant's death subsequent to the end of an
offering Period but prior to delivery to him or her of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Exercise Date of an offering Period.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or mote dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
13. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the. exercise of an option
or to receive shares under the Plan may be
<PAGE>
assigned, transferred, pledged or otherwise disposed of in any way (other than
by will, the laws of descent and distribution or as provided in paragraph 14
hereof) by the participant. Any such attempt at assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may treat
such act as an election to withdraw funds in accordance with paragraph 8.
14. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
15. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees as soon as practicable following each Exercise Date, which statements
will set forth the amounts of payroll deductions, the per share purchase price,
the number of shares purchased and the remaining cash balance, if any.
16. Effect of Certain Changes. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each option under the Plan which has not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but have not yet been placed under option (collectively, the "Reserves"), as
well as the price per share of Common Stock covered by each option under the
Plan which has not yet been exercised, shall be proportionately adjusted, for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock or similar capital adjustment, or any
other increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Committee, whose determination in that respect shall be-final,
binding and conclusive. Except as expressly provided herein, no issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each option under the Plan shall be assumed or an equivalent option
shall be substituted by such successor corporation or a parent or subsidiary of
such successor corporation, unless the Committee determines, in the exercise of
its sole discretion and in lieu of such assumption or substitution, that the
participant shall have the right to exercise the option as to all of the
optioned shares, including shares as to which the option would not other wise be
exercisable. If the Committee makes an option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Committee shall notify the participant that the option shall be fully
exercisable for a period of thirty (30) days from the date of such notice, and
the option will terminate upon the expiration of such period.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock
<PAGE>
covered by each outstanding option, in the event that the Company effects one or
more reorganizations, recapitalizations, rights offerings or other increases or
reductions of shares of its outstanding Common Stock, and in the event of the
Company being consolidated with or merged into any other corporation.
17. Amendment or Termination. The Board may at any time terminate,
suspend or amend the Plan and any provision thereof. Except as provided in
paragraph 16, no such termination can affect options previously granted, nor may
an amendment make any change in any option theretofore granted which adversely
affects the rights of any participant, nor may an amendment be made without
prior approval of the shareholders of the Company (obtained in the manner
described in paragraph 19) if such amendment would:
(a) Materially increase the number of -shares that may be issued under
the Plan;
(b) Change the designation or the class of employees eligible for
participation in the Plan; or
(c) Materially increase the benefits which may accrue to participants
under the Plan; provided, however, that prior approval of the shareholder of the
company shall be required only to the extent a failure to obtain such approval
for such an amendment would cause the Plan to lose the exemptions provided under
Rule 16b-3 of the Exchange Act, or to the extent required by any other law,
regulation or stock exchange rule.
18. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
19. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted.
20. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
<PAGE>
21. Effective Date. The Plan shall be effective as of the date
determined by Company subject to the approval of the Plan by the shareholders of
the Company.
<PAGE>
EXHIBIT 10(JJ)
FIRST USA, INC.
1991
STOCK OPTION PLAN
1. Purpose. The First USA, Inc. 1991 Stock option Plan (the "Plan") is
intended to provide an incentive to officers and key employees of First USA,
Inc., a De lava re corporation (the "Company"), and its direct and indirect
subsidiaries, important to the success of the Company as determined by a
committee consisting of two or more members of the Board of Directors of the
Company (the "Board"), as appointed pursuant to Section 2 hereof, to remain in
the employ of the Company and to increase their efforts for the success of the
Company by offering them an opportunity to increase their proprietary interest
in the Company, through the grant of stock options (the "Options") to purchase
shares of Common Stock of the Company, par value $0.01 per share (the "Common
Stock"). Consistent with these objectives, the Plan authorizes the granting of
Nonqualified Stock Options, as defined herein, to acquire shares of Common Stock
pursuant to the terms and conditions hereinafter set forth. The term "options"
refers to nonqualified stock options. The options are not intended to qualify as
"Incentive Stock Options" within the meaning of Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Administration of the Plan.
(a) Members of the Committee. The Plan shall be administered by a
committee (the "Committee") appointed by the Board which shall consist of at
least two members of the Board, each of whom shall be "disinterested persons" as
defined in subsection (c)(2)(i) of Rule 16b3 ("Rule 16b3") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Members of the Committee
shall serve at the pleasure of the Board of Directors of the Company.
(b) Authority of the Committee. The Committee shall adopt such rules
as it may deem appropriate in order to carry out the purpose of the Plan. All
questions of interpretation, administration, and application of the Plan shall
be determined by a majority of the members of the Committee then in office,
except that the Committee may authorize any one or more of its members, or any
officer of the Company, to execute and deliver documents on behalf of the
Committee. The determination of such majority shall be final and binding in all
matters relating to the Plan. No member of the Committee shall be liable for any
act done or omitted to be done by such member or by any other member of the
Committee in connection with the Plan, except for such member's own willful
misconduct or as expressly provided by statute.
3. Stock Reserved for the Plan. The shares subject to the Plan shall
consist of 1,250,000 shares of Common Stock, subject to adjustment pursuant to
section 4(h) hereof, which may be either authorized but unissued shares or
previously issued shares reacquired and held by the Company. If any outstanding
Option under the Plan for any reason expires or is cancelled or otherwise
terminated without having been exercised in full, the shares of Common Stock
allocable to the unexercised portion of such option shall (unless the Plan shall
have been terminated) become available for subsequent grants of Options under
the Plan.
4. Terms and Conditions of Options. Each Option granted pursuant to the
Plan shall be evidenced by a written agreement (the "Option Agreement") between
the Company and the person to whom such Option is awarded (the "Optionee"),
which Option Agreement shall comply with and be subject to the following terms
and conditions:
(a) Number of Shares. Each Option Agreement shall state the number of
shares of Common Stock to which the Option relates.
(b) Option Price. Each Option Agreement shall state the option Price,
which shall be not less than one hundred percent (100%) of the fair market value
of the shares of Common Stock on the date of grant of the Option. The term "fair
market value" of a share of Common Stock shall mean (i) if the shares of Common
Stock are then traded on an
<PAGE>
over-the-counter market, the average of the closing bid and asked prices for the
shares of Common Stock in such over-the-counter market for the last preceding
date on which there was a sale of such Common Stock in such market, (ii) if the
shares of Common Stock are then listed on a national securities exchange, the
closing sales price per share for the last preceding date on which there was a
sale of such Common Stock on such exchange, or (iii) if the shares of Common
Stock are not then traded in an over the counter market or listed on a national
securities exchange, such value as the Committee in its discretion may
determine. The Option Price shall be subject to adjustment as provided in
Section 4(h) hereof.
(c) Payment of Option Price; Withholding.
(i) Shares of Common Stock shall be issued to the Optionee upon
payment in full either in cash or by an exchange of shares of Common
Stock of the Company previously owned by the Optionee, or a
combination of both, in an amount or having a combined value equal to
the aggregate purchase price for the shares subject to the option or
portion thereof being exercised. The value of the previously owned
shares of Common Stock exchanged in full or partial payment for the
shares purchased upon the exercise of an Option shall be equal to the
aggregate fair market value of such shares on the date of the exercise
of such Option. The Optionee shall be entitled to elect to pay all or
a portion of the aggregate purchase price by having shares of Common
Stock having a fair market value on the date of exercise equal to the
aggregate purchase price withheld by the Company or sold by a broker-
dealer under circumstances meeting the requirements of 12 C.F.R.
(S)220.
(ii) The Company may defer making payment or delivery of any
benefits under the Plan until satisfactory arrangements have been made
for the payment of any tax attributable to any amounts payable on
shares deliverable under the Plan. The Optionee shall be entitled to
elect to pay all or a portion of all taxes arising in connection with
the exercise of an option by electing to (1) have the Company withhold
shares of Common Stock, or (2) deliver other shares of Common Stock
previously owned by the Optionee having a fair market value equal to
the amount to be withheld; provided, however, that the amount to be
withheld shall not exceed the Optionee's estimated total Federal,
State and local tax obligations associated with the transaction. The
fair market value of fractional shares remaining after payment of the
withholding taxes shall be paid to the Optionee in cash. No such
election shall be permitted in respect of an exercise of an option
that occurs within six months of its grant.
(d) Term and Exercise of Options. Options shall be exercisable over
the exercise period as and at the times And upon the conditions that the
Committee may determine, as reflected in the Option Agreement; provided,
however, that, under circumstances other than those set forth in Section
4(h)(iii) hereof, the Committee shall have the authority to accelerate the
exerciseability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate; and further
provided, however, that such exercise period shall not exceed ten (10) years
from the date of grant of such Option. The exercise period shall be subject to
earlier termination as provided in Sections 4(e) and 4(f) hereof. An Option may
be exercised, as to any or all full shares of Common Stock as to which the
Option has become exercisable, by giving written notice of such exercise to the
Committee or to such individual(s) as the Committee may from time to time
designate.
(e) Termination. Except as provided in this Section 4(e) and in
Section 4(f) hereof, an option may not be exercised unless the Optionee is then
in the employ of the Company or its direct or indirect subsidiaries, and unless
the Optionee has remained continuously so employed since the date of grant of
the option. in the event that the employment of an Optionee shall terminate
(other than by reason of death, disability or retirement), all options of such
Optionee that are exercisable at the time of such termination may, unless
earlier terminated in accordance with their terms, be exercised within three (3)
months after such termination; provided, however, that if the employment of an
Optionee shall terminate for cause, all Options theretofore granted to such
Optionee shall, to the, extent not theretofore exercised, terminate forthwith.
Nothing in the Plan or in any option granted pursuant hereto shall confer upon
an individual any right to continue in the employ of the Company or its direct
or indirect subsidiaries or affiliates or interfere in any way with the right of
the Company or its direct or indirect subsidiaries or affiliates to terminate
such employment.
2
<PAGE>
(f) Death, Disability or Retirement of Optionee. If an Optionee shall
die while employed by the Company or its direct or indirect subsidiaries or
affiliates, or within three (3) months after the termination of such Optionee's
employment, other than for cause, or if the Optionee's employment shall
terminate by reason of disability or retirement, all Options theretofore granted
to such Optionee (to the extent otherwise exercisable at the time of death or
termination of employment) may, unless earlier terminated in accordance with
their terms, be exercised by the Optionee or by the Optionee's estate or by a
person who acquired the right to exercise such option by bequest or inheritance
or otherwise by reason of the death or disability of the Optionee, at any time
within six months (or such longer period as may be determined by the Committee
in its sole discretion) after the date of death, disability or retirement of the
Optionee.
(g) Nontransferability of Options. Options granted under the Plan
shall not be transferable otherwise than by will or by the laws of descent and
distribution, and Options may be exercised, during the lifetime of the Optionee,
only by the Optionee or by his guardian or legal representative.
(h) Effect of Certain Changes. (i) If there is any change in the
number or class of shares of Common Stock through the declaration of
stock or cash dividends, or recapitalization resulting in stock
splits, or combinations or exchanges of such shares, the number or
class of shares of Common Stock available for Options, the number or
class of such shares covered by outstanding Options, and the price per
share of such options may be proportionately adjusted by the Committee
in its sole discretion to reflect any such change in the number or
class of issued shares of Common Stock; provided, however, that any
fractional shares resulting from any such adjustment shall be
eliminated. in the event of any other extraordinary corporate
transaction, including but not limited to distributions of cash or
other property to the Company's shareholders,, the Committee may
equitably adjust outstanding options as it deems appropriate in its
sole discretion.
(ii) In the event of the proposed dissolution or liquidation of
the Company, in the event of any corporate separation or division,
including, but not limited to, split-up, split-off or spin-off , or in
the event of a merger or consolidation of the Company with another
corporation, the Committee may provide that the holder of each Option
then exercisable shall have the right to exercise such Option (at its
then Option Price) solely for the kind and amount of shares of stock
and other securities, property, cash or any combination thereof
receivable upon such dissolution, liquidation, or corporate separation
or division, or merger or consolidation by a holder of the number of
shares of Common Stock for which such Option might have been exercised
immediately prior to such dissolution, liquidation, or corporate
separation or division, or merger or consolidation.
(iii) If while unexercised options remain outstanding under the
Plan
(A) the "beneficial ownership" (as defined in Rule 13d-3 under
the Exchange Act of securities representing more than 25% of the
combined voting power of the Company is acquired by any "person" as
defined in sections 13(d) and 14(d) of the Exchange Act (other than
the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, any corporation owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the
Company or any person who is the beneficial owner of 25% of the
combined voting power of the Company as of the effective date of the
Plan), or
(B) the stockholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into another
corporation or to tell or otherwise dispose of all or substantially
all of its assets, or adopt a plan of liquidation, or
(C) during any period of two consecutive years, individuals who
at the beginning of such period were members of the Board cease for
any reason to constitute at least a majority thereof (unless the
3
<PAGE>
election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of such period),
then from and after the date of the first purchase of Common Stock pursuant to
such Offer, or the date of any such stockholder approval or adoption, or the
date on which public announcement of the acquisition of such percentage shall
have been made, or the date on which the change in the composition of the Board
set forth above shall have occurred, whichever is applicable (the applicable
date being referred to hereinafter as the "Acceleration Date"), all Options
shall be exercisable in full, whether or not otherwise exercisable. Following
the Acceleration Date, the Committee shall, in the case of a merger,
consolidation or sale or disposition of assets, promptly make an appropriate
adjustment to the number and class of shares of Common Stock available for
Options, and to the amount and kind of shares or other securities or property
receivable upon exercise of any outstanding options after the effective date of
such transaction, and the price thereof.
(iv) Paragraphs (ii) and (iii) of this Section 4(h) shall not
apply to a merger or consolidation in which the Company is the
surviving corporation and shares of Common Stock are not converted
into or exchanged for stock, securities of any other corporation, cash
or any other thing of value. Notwithstanding the preceding sentence,
in case of any consolidation or merger of another corporation into the
Company in which the Company is the surviving corporation and in which
there is a reclassification or change (including a change to the right
to receive cash or other property) of the shares of Common Stock
(other than a change in par value, or from par value to no par value,
or as a result of a subdivision or combination, but including any
change in such shares into two or more classes or series of shares) ,
the Committee may provide that the holder of each Option then
exercisable shall have the right to exercise such Option solely for
the kind and amount of shares of stock and other securities (including
those of any new direct or indirect parent of the Company), property,
cash or any combination thereof receivable upon such reclassification,
change, consolidation or merger by the holder of the number of shares
of Common Stock for which such option might have been exercised.
(v) In the event of a change in the Common Stock of the Company
as presently constituted, which is limited to a change of all of its
authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from
any such change shall be deemed to be the Common Stock within the
meaning of the Plan.
(vi) To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the
Committee, whose determination .in that respect shall be final,
binding and conclusive.
(vii) Except as expressly provided in this Section 4(h), the
Optionee shall have no rights by reason of any subdivision or
consolidation: of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease in the number of
shares of stock of any class or by reason of any dissolution,
liquidation, merger, or consolidation or spin-off of assets or stock
of another corporation; and any issue by the Company of shares of
stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock
subject to the option. The grant of an Option pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structures or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer All or part of its business
or assets.
(i) Rights as a Stockholder. An Optionee or a transferee of an Option
shall have no rights as a stockholder with respect to any shares covered by the
option until the date of the issuance of a stock certificate to him or her for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property)
4
<PAGE>
or distribution of other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 4(h) hereof.
(j) Other Provisions. The Option Agreements authorized under the Plan
shall contain such other provisions not inconsistent with this Plan, including,
without limitation, the imposition of restrictions upon the exercise of an
option as the Committee shall deem advisable.
5. Limited Stock Appreciation Rights.
(a) The Committee shall have authority to grant a Limited Right to the
Optionee of any option under the Plan (referred to herein as the "Related LSAR
Option") with respect to all or some of the shares of Common Stock covered by
such Related LSAR Option. Each Limited Right granted pursuant to the Plan shall
be evidenced by a written limited rights agreement between the Company and the
Grantee, in such form as the Committee shall from time to time approve (the
"Limited Rights Agreement"). A Limited Right granted in tandem with an option
may be granted either at the time of grant of the Related LSAR option or any
time thereafter during its term. A Limited Right may be exercised only during
the ninety-day period beginning on an "Acceleration Date" (as defined in Section
4(h)(iii)). Each Limited Right shall be exercisable only if, and to the extent
that, the Related LSAR Option is exercisable. Notwithstanding the provisions of
the two immediately preceding sentences, a Limited Right (or Related LSAR
Option) granted to an Optionee who is subject to the reporting requirements of
Section 16(a) of the Exchange Act (an "Insider") must be (i) held by the Insider
for at least six (6) months from the date of grant of the Limited Right (or
related LSAR Option) before it becomes exercisable and (ii) automatically paid
out in cash to the Insider on an Acceleration Date (provided such six (6) month
holding period requirement has been met). Upon the exercise of a Limited Right
(in the case of an Insider, for purposes of this Section 5 the term "exercise"
shall mean the automatic payment provided for in the immediately preceding
sentence), the Related LSAR Option shall cease to be exercisable to the extent
of the shares of Common Stock with respect to which such Limited Right is
exercised, but shall be considered to have been exercised to that extent for
purposes of determining the number of shares of Common Stock available for the
grant of further awards pursuant to this Plan. Upon the exercise or termination
of a Related LSAR Option, the Limited Right with respect to such Related LSAR
Option shall terminate to the extent of the shares of Common Stock with respect
to which the Related LSAR Option was exercised or terminated.
(b) Upon the exercise of a Limited Right, the Optionee thereof shall
receive in cash whichever of the following amounts is applicable:
(i) in the case of the realization of Limited Rights by reason of
an acquisition of Common Stock described in Section 4(h)(iii)(A), an
amount equal to the Acquisition Spread as defined in Section 5(d)
hereof; or
(ii) in the case of the realization of Limited Rights by reason
of shareholder approval of an agreement or plan described in Section
4(h)(iii)(B), an amount equal to the Merger Spread as defined in
Section 9(f) hereof; or
(iii) in the case of the realization of Limited Rights by reason
of the change in composition of the Board described in Section
4(h)(iii)(C), an amount equal to the Spread as defined in Section 9(g)
hereof.
(c) The term "Acquisition Price per Share" as used herein shall mean,
with respect to the exercise of any Limited Right by reason of an acquisition of
Common Stock described in Section 4(h)(iii)(A), the greater of (i) the highest
price per share shown on the Statement of Schedule 13D or amendment thereto
filed by the holder of 50% or more of the voting power of the Company that gives
rise to the exercise of such Limited Right, or (ii) the highest Fair Market
Value per share of Common Stock during the sixty-day period ending on the date
the Limited Right is exercised.
(d) The term "Acquisition Spread" as used herein shall mean an amount
equal to the product computed by multiplying (i) the excess of (A) the
Acquisition Price per Share over (B) the Option Price per share of Common Stock
at
5
<PAGE>
which the Related LSAR Option is exercisable, by (ii) the number of shares of
Common Stock with respect to which such Limited Right is being exercised.
(e) The term "Merger Price per Share" as used herein shall mean, with
respect to the exercise of any Limited Right by reason of shareholder approval
of an agreement described in Section 4(h)(iii)(B), the greater of (i) the fixed
or formula price for the acquisition of shares of Common Stock specified in such
agreement, if such fixed or formula price is determinable on the date on which
such Limited Right is exercised, or (ii) the highest Fair Market Value per share
of Common Stock during the sixty-day period ending on the date on which such
Limited Right is exercised.
(f) The term "Merger Spread" as used herein shall mean an amount equal
to the product computed by multiplying (i) the excess of (A) the Merger Price
per Share over (B) the option Price per share of Common Stock at which the
Related LSAR Option is exercisable, by (ii) the number of shares of Common Stock
with respect to which such Limited Right is being exercised.
(g) The term "Spread" as used herein shall mean, with respect to the
exercise of any Limited Right by reason of a change in the composition of the
Board described in Section 4(h)(iii)(C), an amount equal to the product computed
by multiplying (i) the excess of (A) the highest Fair Market Value per share of
Common Stock during the sixty-day period ending on the date the Limited Right is
exercised over (B) the option Price per share of Common Stock at which the
Related LSAR Option is exercisable, by (ii) the number of shares of Common Stock
with respect to which the Limited Right is being exercised.
(h) Each Limited Right shall be granted on such other terms and
conditions not inconsistent with the plan as the Committee may determine.
(i) To exercise a Limited Right, the Optionee shall (i) give written
notice thereof to the Committee or its designated agent in form satisfactory to
the Committee specifying the number of shares of Common Stock with respect to
which the Limited Right is being exercised, and (ii) if requested by the
Committee, deliver the Limited Rights Agreement and, if applicable, the Related
LSA.R Option Agreement to the Committee, who shall endorse thereon a notation of
such exercise and return the Limited Rights Agreement and, if applicable, the
Related LSAR Option Agreement to the Optionee. The date of exercise of a Limited
Right that is validly exercised shall be deemed to be the date on which there
shall have been delivered the instruments referred to in the first sentence of
this paragraph (i).
(j) Notwithstanding any other provision of this Section 5, any Limited
Right granted to an Insider shall be construed so as to comply with Rule 16b-
3(e), and to the extent such Rule or any administrative interpretation
thereunder require an amendment to the provisions hereof in order to comply with
such Rule, such amendment shall be deemed to have been made as of the date such
Limited Right was granted.
6. Term of Plan. Options may be granted pursuant to the Plan from time to
time within a period of ten (10) years from the date the Plan is adopted by the
Board, or the date the Plan is approved by the stockholders of the Company,
whichever is earlier.
7. Amendment. The Board may at the time and from time to time alter, amend,
suspend, or terminate the Plan in whole or in part; provided, however, that no
amendment which requires shareholder approval in order for the exemptions
available under Rule 16b-3 to be applicable to the Plan and the Optionees, shall
be effective unless the same shall be approved by the stockholders of the
Company entitled to vote thereon on or before the effective date of the
amendment. Such approval shall be obtained in such manner as is required by the
Company's Certificate of Incorporation, its By-Laws, and the laws of the State
of Delaware as in effect at the time of such approval. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights or obligations
of any Optionee, without such Optionee's consent, under any Option theretofore
granted under the Plan.
6
<PAGE>
8. Effective Date. The Plan shall become effective as of [ ], subject to
the receipt of approval of the Plan by the stockholders of the Company entitled
to vote thereon. No payments or distributions of shares of Common Stock may be
made to any Optionee or any other person under the Plan until such time as
stockholder approval of the Plan are obtained pursuant to this Section.
9. Headings. The headings of sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Plan.
10. Governing Law. This Plan and all rights hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware.
This Plan has been adopted by the Board as of [ ] and approved by the
stockholders of the Company as of [ ].
7
<PAGE>
FIRST AMENDMENT TO THE
FIRST USA, INC.
1991 STOCK OPTTON PLAN
WHEREAS, First USA, Inc. a Delaware corporation (the "Company"), has
heretofore maintained the First USA, Inc. 1991 Stock Option Plan (the "Plan")
for the benefit of certain of its employees; and
WHEREAS, the Company considers it advisable to amend the Plan to increase
the number of shares of Common Stock of the Company, $.01 par, subject to the
Plan; and
WHEREAS, stockholders of the Company approved this amendment of the Annual
Stockholders Meeting on November 3, 1993 and the Board of Directors of the
Company, pursuant to Section 7 of the Plan, has the authority to end the Plan;
NOW THEREFORE, effective November 4, 1993, (the "Effective Date"), the
Company hereby amends the Plan by deleting Section 3 of the Plan in its entirety
and inserting therefore the following:
3. Stock Reserved for the Plan. The shares subject to the Plan
shall consist of 2,000,000 shares of Common Stock, subject to
adjustment pursuant to Section 4(h) hereof, which may be either
authorized but unissued shares or previously issued shares reacquired
and held by the Company. If any outstanding Option under the Plan for
any reason expires or is canceled or otherwise terminated without
having been exercised in full, the shares of Common Stock allocable to
the unexercised portion of such Option shall (unless the Plan shall
have been terminated) become available for subsequent grants of
Options under the Plan.
IN WITNESS WHEREOF, the Company has adopted this amendment as of the
Effective Date.
FIRST USA, INC.
By: /s/ Philip Taken
----------------------------------
Title: Senior Vice President, Assistant
Secretary and General Counsel
<PAGE>
SECOND AMENDMENT
TO THE FIRST USA, INC.
1991 STOCK OPTION PLAN
A. Section 4(g) of the First USA, Inc. 1991 Stock Option Plan is hereby
deleted in its entirety and replaced with the following:
(g) Transferability of Options. Options granted under the Plan
shall not be transferable except (i) by will or by the laws of descent
and distribution, or (ii) as specifically provided below. Any
Optionee may transfer Options to members of his or her Immediate
Family (as defined below) if (i) the Option Agreement with respect to
such Options so provides, (ii) such Option Agreement was approved by
the Compensation Committee, and (iii) the Optionee does not receive
any consideration for the transfer. "Immediate Family" refers to
children, grandchildren and spouse of the Optionee or one or more
trusts for the benefit of such family members or partnerships in which
such family members are the only partners. Any Option Agreement may
be amended to provide for the transferability feature as outlined
above, provided, that such amendment must be approved by the
Compensation Committee. Any Option not granted pursuant to an Option
Agreement expressly permitting its transfer or amended expressly to
permit its transfer is not transferable. Options may be exercised,
during the lifetime of the Optionee, only by the Optionee or by his
guardian or legal representative or his transferee as permitted under
this section (g).
B. All terms and provisions of the First USA, Inc. 1991 Stock Option
Plan, as amended, and all Option Agreements outstanding with respect thereto,
remain in fall force and effect.
Approved by the Compensation Committee of the Board of Directors of First
USA, Inc. on, and effective as of, April 20, 1994.
First USA, Inc.
By: /s/ Pamela Patsley
------------------------------
Title: Executive Vice President and
Secretary
<PAGE>
THIRD AMENDMENT TO THE
FIRST USA. INC.
1991 STOCK OPTION PLAN
WHEREAS, First USA, Inc. a Delaware corporation (the "Company"), has
heretofore maintained the First USA, Inc. 1991 Stock Option Plan (the "Plan")
for the benefit of certain of its employees; and
WHEREAS, the Company considers it advisable to amend the Plan to increase
the number of shares of Common Stock of the Company, par value $.01 per share,
subject to the Plan; and
WHEREAS, subject to the approval of the stockholders of the Company at the
Annual Stockholders Meeting on September 7, 1995, the Board of Directors of the
Company, pursuant to Section 7 of the Plan, has the authority to amend the Plan;
NOW, THEREFORE, effective as of the date this amendment is approved by the
stockholders of the Company, (the "Effective Date"), the Company hereby amends
the Plan by deleting Section 3 of the Plan in its entirety and inserting
therefore the following:
3. Stock Reserved for the Plan. The shares subject to the Plan shall
consist of 8,500,000 shares of Common Stock, subject to adjustment pursuant to
Section 4(h) hereof, which may be either authorized but unissued shares or
previously issued shares reacquired and held by the Company. The maximum number
of shares with respect to which any Options may be granted to any one Optionee
in any one fiscal year shall be 250,000.
IN WITNESS WHEREOF, the Company has adopted this amendment as of the
Effective Date.
FIRST USA, INC.
By: /s/ Philip Taken
--------------------------------
Title: Senior Vice President, General
Counsel and Assistant Secretary
<PAGE>
FOURTH AMENDMENT TO THE
FIRST USA, INC. 1991 STOCK OPTION PLAN
WHEREAS, First USA, Inc. a Delaware corporation (the "Company"), has
heretofore maintained the First USA, Inc. 1991 Stock Option Plan (the "Plan")for
the benefit of certain employees; and
WHEREAS, the Company considers it advisable to amend the Plan to clarify
the original intent of the Plan with respect to the full vesting of options upon
the death or disability of an optionee; and
WHEREAS, pursuant to Section 7 of the Plan, the Board of Directors of the
Company approved this Amendment on October 16, 1996; NOW, THEREFORE, the Company
hereby amends the Plan by deleting Paragraph(f) of Section 4 of the Plan in its
entirety and inserting therefore the following:
(f) Death, Disability or Retirement of Optionee. If an Optionee shall die
while employed by the Company, or one of its direct or indirect subsidiaries, or
if the Optionee's employment shall terminate by reason of disability, all
Options theretofore granted to such Optionee shall fully vest and be 100%
exercisable and may, unless earlier terminated in accordance with its terms, be
exercised by the Optionee or by the Optionee's estate or by a person who
acquired the right to exercise such Option by bequest or inheritance or
otherwise by reason of the death or disability of the Optionee, at any time
within six (6) months (or such longer period as may be determined by the
Committee in its sole discretion) after the date of death or disability of the
Optionee. If Optionee terminates employment with the Company or one of its
subsidiaries, by reason of Retirement (as defined below), then the Committee, in
its discretion, may determine whether or not the Option will vest in part or
whole, and any additional terms applicable to such vesting. "Retirement" shall
mean such circumstances determined as retirement in the sole discretion of the
Committee. If an Optionee shall die within three (3) months after the
termination of such Optionee's employment, other than for cause (as determined
by the Committee), all Options theretofore granted to such Optionee (to the
extent such Options were exercisable at the time of death) may, unless earlier
terminated in accordance with their terms, be exercised by the Optionee's estate
or by a person who acquired the right to exercise such Option by bequest or
inheritance or otherwise by reason of the death of the Optionee, at any time
within six (6) months (or such longer period as may be determined by
the Committee in its sole discretion) after the date of death of the Optionee.
IN WITNESS WHEREOF, the Company has adopted this amendment as of the
Effective Date.
FIRST USA, INC.
By: /s/ PHILIP E. TAKEN
Title: Senior Vice President and General
Counsel
<PAGE>
EXHIBIT 10(KK)
FIRST USA PAYMENTECH, INC.
1996
STOCK OPTION PLAN
1. Purpose. The First USA Paymentech, Inc. 1996 Stock Option Plan (the
"Plan"), effective as of the consummation of the initial public offering of
Common Stock, as more fully described in the Registration Statement on Form S-1
filed with the Securities and Exchange Commission on January 12, 1996, (the
"Underwritten Offerings") is intended to provide an incentive to officers and
key employees of First USA Paymentech, Inc., a Delaware corporation (the
"Company"), First USA, Inc., a Delaware corporation ("First USA"), and their
respective direct and indirect subsidiaries, to remain in such employ and to
increase their efforts for the success of the Company by offering them an
opportunity to increase their proprietary interest in the Company, through the
grant of stock options ("Options") to purchase shares of common stock of the
Company, par value $0.01 per share ("Common Stock"). Consistent with these
objectives, the Plan authorizes the granting of Options to acquire shares of
Common Stock pursuant to the terms and conditions hereinafter set forth.
Pursuant to Section 5 of the Plan, Options shall also be granted to members of
the Company's Board of Directors (the "Board") who are not employees of the
Company, First USA, Inc. or their respective direct and indirect subsidiaries
("Nonemployee Directors"). Options granted pursuant to the Plan may consist of
incentive stock options ("Incentive Stock Options") (within the meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the "Code")) and
Options that are not Incentive Stock Options ("Nonqualified Stock Options").
Each Option shall be designated as an Incentive Stock Option or as a
Nonqualified Stock Option. To the extent that any Option intended to be an
Incentive Stock Option does not qualify as such, it shall constitute a separate
Nonqualified Stock Option.
The Plan also provides the authority to make loans ("Loans" for the
purchase of Common Stock in connection with the Underwritten Offerings. The Plan
is intended to satisfy the requirements of Rule 16b-3 ("Rule 16b-3") promulgated
under Section 16 of the Securities Exchange Act of 1934, as from time to time
amended (the "Exchange Act"), and section 162(m) of the Code, and shall be
interpreted in a manner consistent with the requirements thereof.
2. Eligibility; Administration of the Plan.
(a) Eligibility. Options may be granted to selected officers and key
employees of the Company or First USA or their respective direct and
indirect subsidiaries. In determining the persons to whom Options shall be
granted, the Committee (as defined below) shall take into account such
factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan.
(b) Members of the Committee. The Plan shall be administered by a
committee (the "Committee") appointed by the Board. The Committee shall
consist solely of members of the Board and shall have at least two members,
each of whom shall be a "disinterested person" within the meaning of Rule
16b-3 and an "outside director" within the meaning of section 162(m) of the
Code. Members of the Committee shall serve at the discretion of the Board.
(c) Authority of the Committee. The Committee shall determine which
officers and key employees of the Company or First USA or their respective
direct and indirect subsidiaries shall receive Options and the terms and
conditions thereof. The Committee shall adopt such rules as it may deem
appropriate in order to carry out the purpose of the Plan. All questions of
interpretation, administration and application of the Plan shall be
determined by a majority of the members of the Committee then in office,
except that the Committee may authorize any one or more of its members, or
any officer of the Company, to execute and deliver documents on behalf of
the Committee. The determination of such majority shall be final and
binding in all matters relating to the Plan. No member of the Committee
shall be liable for any act done or omitted to be done by such member, or
by any other member of the Committee in connection with the Plan, except
for such member's own willful misconduct or as expressly provided by
statute.
<PAGE>
3. Stock Reserved for the Plan. The shares subject to the Plan shall
consist of 4,000,000 shares of Common Stock, subject to adjustment pursuant to
Section 4(h) hereof, which may be either authorized but unissued shares or
previously issued shares reacquired and held by the Company. If any outstanding
Option under the Plan for any reason expires or is canceled or otherwise
terminated without having been exercised in full, the shares of Common Stock
allocable to the unexercised portion of such Option shall (unless the Plan shall
have been terminated) become available for subsequent grants of Options under
the Plan.
4. Terms and Conditions of Options. Each Option granted pursuant to the
Plan shall be evidenced by a written agreement (the "Option Agreement") between
the Company and the person to whom such Option is awarded (the "Optionee"),
which Option Agreement shall comply with and be subject to the following terms
and conditions, except as otherwise determined by the Committee:
(a) Number of Shares. Each Option Agreement shall state the number of
shares of Common Stock to which the Option relates. No Optionee shall be
granted an Option or Options for more than 250,000 shares of Common Stock
during any fiscal year of the Company. In the event that the aggregate
Fair Market Value (determined as of the date the Option is granted) of the
shares of Common Stock with respect to which Incentive Stock Options
granted under this Plan and all other options plans of the Company, First
USA and their respective direct and indirect subsidiaries become
exercisable for the first time by an Optionee during any calendar year
exceeds $100,000, Options granted in excess of such limit shall constitute
Nonqualified Stock Options for all purposes. The "Fair Market Value" of a
share of Common Stock shall mean (i) if the shares of Common Stock are then
traded on an over-the-counter market, the average of the closing bid and
asked prices for the shares of Common Stock in such over-the-counter market
for the last preceding date on which there was a sale of such Common Stock
in such market, (ii) if the shares of Common Stock are then listed on a
national securities exchange, the closing sales price per share for the
last preceding date on which there was a sale of such Common Stock on such
exchange, or (iii) if the shares of Common Stock are not then traded in an
over-the-counter market for listed on a national securities exchange, such
value as the Committee in its discretion may determine.
(b) Option Price. Each Option Agreement shall state the exercise
price per share of Common Stock (the "Option Price"), which shall be not
less than one hundred percent (100%) of the Fair Market Value of the shares
of Common Stock on the date of grant of the Option; provided, however, that
if an Incentive Stock Option is granted to a person owning shares of the
Company possessing more than 10% of the total combined voting power of all
classes of shares of the Company as defined in section 422 of the Code (a
"10% Shareholder"), the Option Price shall equal 110% of the Fair Market
Value of the Common Stock at the time of grant. The Option Price shall be
subject to adjustment as provided in Section 4(h) hereof.
(c) Payment of Option Price; Withholding.
(i) Shares of Common Stock shall be issued to the Optionee upon
payment in full either in cash (including through a Loan) or by an
exchange of shares of Common Stock of the Company previously owned by
the Optionee, or a combination of cash and shares, in an amount or
having a combined value equal to the aggregate Option Price for the
shares subject to the Option or portion thereof being exercised. The
value of the previously owned shares of Common Stock exchanged in full
or partial payment for the shares purchased upon the exercise of an
Option shall be equal to the aggregate Fair Market Value of such
shares on the date of the exercise of such Option. The Optionee shall
be entitled to elect to pay all or a portion of the aggregate purchase
price by having shares of Common Stock having a Fair Market Value on
the date of exercise equal to the aggregate Option Price withheld by
the Company or sold by a broker-dealer under circumstances meeting the
requirements of 12 C.F.R. (S)220.
(ii) The Company may defer making payment or delivery of any
benefits under the Plan until satisfactory arrangements have been made
for the payment of any tax attributable to any amounts payable on
shares deliverable under the Plan. To the extent authorized by the
Committee, the Optionee shall be entitled to elect to pay all or a
portion of all taxes arising in connection with the exercise of an
Option by electing to (A) have the Company withhold shares of Common
Stock, or (B) deliver other shares of Common Stock previously owned by
the Optionee having a Fair Market Value equal to the amount to be
2
<PAGE>
withheld; provided, however, that the amount to be withheld shall not
exceed the Optionee's estimated total federal, state and local tax
obligations associated with the transaction. The Fair Market Value of
fractional shares remaining after payment of the withholding taxes
shall be paid to the Optionee in cash. Such election by an Optionee
who is subject to the reporting requirements of Section 16(a) of the
Exchange Act shall be made in accordance with the requirements of Rule
16b-3 and, to the extent necessary to comply with the requirements of
Rule 16b-3 as from time to time in effect, shall not be permitted in
respect of an exercise of an Option that occurs within six months of
its grant.
(d) Term and Exercise of Options. Options shall be exercisable over
the exercise period as and at the times and upon the conditions that the
Committee may determine, as reflected in the Option Agreement; provided,
however, that, under circumstances other than those set forth in Section
4(h)(iii) hereof, the Committee shall have the authority to accelerate the
exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate; and further
provided, however, that such exercise period shall not exceed ten (10)
years from the date of grant of such Option; and further provided, however,
that an Incentive Stock Option granted to a 10% Shareholder shall have a
term not exceeding five years from the date of grant. The exercise period
shall be subject to earlier termination as provided in Sections 4(e) and
4(f) hereof. An Option may be exercised, as to any or all full shares of
Common Stock as to which the Option has become exercisable, by giving
written notice of such exercise to the Committee or to such individual as
the Committee may from time to time designate.
(e) Termination Except as provided in this Section 4(e) and in Section
4(o hereof, an Option may not be exercised unless the Optionee is then in
the employ of the Company, First USA or one of their respective direct or
indirect subsidiaries, and unless the Optionee has remained continuously so
employed since the date of grant of the Option. In the event that the
employment of an Optionee shall terminate (other than by reason of death or
disability), all Options of such Optionee that are exercisable at the time
of such termination may, unless earlier terminated in accordance with their
terms, be exercised within three (3) months after such termination;
provided, however, that if the employment of an Optionee shall terminate
for cause (as determined by the Committee), all Options theretofore granted
to such Optionee shall, to the extent not theretofore exercised, terminate
forthwith. Nothing in the Plan or in any Option granted pursuant hereto or
in a Loan granted pursuant hereto shall confer upon an individual any right
to continue in the employ of the Company, First USA or their respective
direct or indirect subsidiaries or interfere in any way with the right of
the Company, First USA or direct or indirect subsidiaries to terminate such
employment.
(f) Death Disability or Retirement of Optionee. If an Optionee shall
die while employed by the Company, First USA or their respective direct or
indirect subsidiaries, or within three (3) months after the termination of
such Optionee's employment, other than for cause (as determined by the
Committee), or if the Optionee's employment shall terminate by reason of
disability, all Options theretofore granted to such Optionee (to the extent
otherwise exercisable at the time of death or termination of employment)
may, unless earlier terminated in accordance with their terms, be exercised
by the Optionee or by the Optionee's estate or by a person who acquired the
right to exercise such Option by bequest or inheritance or otherwise by
reason of the death or disability of the Optionee, at any time within six
(6) months (or such longer period as may be determined by the Committee in
its sole discretion) after the date of death or disability of the Optionee.
If Optionee terminates employment with the Company or First USA, or their
subsidiaries, by reason of Retirement (as defined below), then the
Committee, in its discretion, may determine whether or not the Option will
vest in part or whole, and any additional terms applicable to such vesting.
"Retirement" shall mean such circumstances determined as retirement in the
sole discretion of the Committee.
(g) Transferability of Options. Options granted under the Plan shall
not be transferable except (i) by will or by the laws of descent and
distribution, or (ii) as specifically provided in this Section 4(g). Any
Optionee may transfer Options to members of his or her Immediate Family (as
defined in this Section 4(g)) if (i) the Option Agreement with respect to
such Options so provides, (ii) such Option Agreement was approved by the
Compensation Committee, and (iii) the Optionee does not receive any
consideration for the transfer. "Immediate Family" refers to children,
grandchildren and spouse of the Optionee or one or more trusts for the
benefit of such family members or partnerships in which such family members
are the only partners. Any Option Agreement
3
<PAGE>
may be amended to provide for the transferability feature as outlined
above, provided that such amendment must be approved by the Committee. Any
Option not granted pursuant to an Option Agreement expressly permitting its
transfer or amended expressly to permit its transfer shall not be
transferable. Options may be exercised, during the lifetime of the
Optionee, only by the Optionee or by his guardian or legal representative
or his transferee as permitted under this Section 4(g).
(h) Effect of Certain Changes.
(i) If there is any change in the number or class of shares of
Common Stock through the declaration of stock or cash dividends, or a
recapitalization resulting in stock splits, or combinations or
exchanges of such shares, the number or class of shares of Common
Stock available for Options, the number or class of such shares
covered by outstanding Options, and the price per share of such
Options may be proportionately adjusted by the Committee in its sole
discretion to reflect any such change in the number or class of issued
shares of Common Stock; provided, however, that any fractional shares
resulting from any such adjustment shall be eliminated. In the event
of any other extraordinary corporate transaction, including but not
limited to distributions of cash or other property to the Company's
shareholders, the Committee may equitably adjust outstanding Options
as it deems appropriate in its sole discretion.
(ii) In the event of the proposed dissolution or liquidation of
the Company, in the event of any corporate separation or division,
including, but not limited to, split-up, split-off or spin-off, or in
the event of a merger or consolidation of the Company with another
corporation, the Committee may provide that the holder of each Option
then exercisable shall have the right to exercise such Option (at its
then aggregate Option Price) solely for the kind and amount of shares
of stock and other securities, property, cash or any combination
thereof receivable upon such dissolution, liquidation, or corporate
separation or division, or merger or consolidation by a holder of the
number of shares of Common Stock for which such Option might have been
exercised immediately prior to such dissolution, liquidation, or
corporate separation or division, or merger or consolidation.
(iii) For purposes of the Plan, the "FUSA Companies" shall be
defined to include First USA, so long as First USA owns or controls at
least 25% of the outstanding voting securities of the Company, and the
Company. If while unexercised Options remain outstanding under the
Plan
(A) any Person (as defined in this clause A) is or becomes
the beneficial owner (as defined in Rule 13d-3 of the Exchange
Act), directly or indirectly, of securities of the FUSA Companies
(not including in the securities beneficially owned by such
Person any securities acquired directly from the FUSA Companies
or any of their affiliates) representing 25% or more of the
combined voting power of either of the FUSA Companies' then
respective outstanding voting securities. For purposes of this
Plan, "Person" shall mean any person (as defined in Section
3(a)(9) of the Securities Exchange Act), as such term is modified
in Sections 13(d) and 14(d) of the Exchange Act) other than (1)
any employee plan established by a FUSA Company, (2) a FUSA
Company or any of their affiliates (as defined in Rule 12b-2
promulgated under the Exchange Act), (3) an underwriter
temporarily holding securities pursuant to an offering of such
securities, and (4) a corporation owned, directly or indirectly,
by stockholders of a FUSA Company in substantially the same
proportions as their ownership of the FUSA Company; or
(B) during any period of up to two consecutive years (not
including any period prior to the date hereof), individuals who
at the beginning of such period and any new director (other than
a director whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of directors of a FUSA Company) whose appointment or
election by the respective Board of Directors or nomination for
election by the respective FUSA Companies' stockholders was
approved by a vote of at least two-thirds (2/3) of the applicable
directors then still in office who either were directors at the
beginning of such period or whose
4
<PAGE>
appointment, election or nomination for election was previously
so approved, cease for any reason to constitute a majority
thereof; or
(C) there is consummated a merger or consolidation of a FUSA
Company with any other corporation or the stockholders of a FUSA
Company approve the issuance of voting securities of the
respective FUSA Company in connection with a merger or
consolidation of the respective FUSA Company (or any direct or
indirect subsidiary of the respective FUSA Company) pursuant to
applicable stock exchange requirements, other than (i) a merger
or consolidation with First USA Financial, Inc. or one of its
direct or indirect subsidiaries, or (ii) a merger or
consolidation which would result in the voting securities of the
respective FUSA Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the
respective FUSA Company, at least 75% of the combined voting
power of the voting securities of the respective FUSA Company or
such surviving entity or any parent thereof Outstanding
immediately after such merger or consolidation, or (iii) a merger
or consolidation effected to implement a recapitalization of the
respective FUSA Company (or similar transaction) in which no
Person is or becomes the beneficial owner, directly or
indirectly, of securities of the respective FUSA Company (not
including in the securities beneficially owned by such Person,
any securities acquired directly from the respective FUSA Company
or its subsidiaries other than in connection with the acquisition
by the respective FUSA Company or its subsidiaries of a business)
representing 25% or more of either the then outstanding shares of
common stock of the respective FUSA Company or the combined
voting power of the respective FUSA Company's then outstanding
securities; or
(D) the stockholders of a FUSA Company approve a plan of
complete liquidation or dissolution of the respective FUSA
Company or there is consummated an agreement for the sale or
disposition by the respective FUSA Company of all or
substantially all of the respective FUSA Company's assets, other
than a sale or disposition by the respective FUSA Company of all
or substantially all of the respective FUSA Company's assets to
an entity, at least 75% of the combined voting power of which are
owned by Persons in substantially the same proportions as their
ownership of the respective FUSA Company immediately prior to
such sale;
then from and after the date on which public announcement of the
acquisition of such percentage shall have been made or the date on
which the change in the composition of the Board of Directors set
forth above shall have occurred or the date of such consummation or
approval, whichever is applicable (the applicable date being referred
to hereinafter as the "Acceleration Date"), all then outstanding
Options shall be exercisable in full, whether or not otherwise
exercisable. Following the Acceleration Date, the Committee shall, in
the case of a merger, consolidation or sale or disposition of assets,
promptly make an appropriate adjustment to the number and class of
shares of Common Stock available for Options, and to the amount and
kind of shares of other securities or property receivable upon
exercise of any outstanding Options after the effective date of such
transaction, and the price thereof
(iv) In the event of a change in the Common Stock of the Company
as presently constituted, which is limited to a change of all of its
authorized shares with par value into the same number of shares with a
different par value or without par value, the shares resulting from
any such change shall be deemed to be the Common Stock within the
meaning of the Plan.
(v) To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding
and conclusive.
(vi) Except as expressly provided in this Section 4(h), the
Optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any
stock dividend
5
<PAGE>
or any other increase or decrease in the number shares of stock of any
class or by reason of any dissolution, liquidation, merger, or
consolidation or spin-off of assets or stock of another corporation;
and any issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to the
Option. The grant of an Option pursuant to the Plan shall not affect
in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structures or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all or part of its business or assets.
(i) Rights as a Stockholder. An Optionee or a transferee of an Option
shall have no rights as a stockholder with respect to any shares covered by
the Option until the date of the issuance of a stock certificate to him or
her for such shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property) or the
distribution of other rights for which the record date is prior to the date
of such stock certificate is issued, except as provided in Section 4(h)
hereof.
(j) Other Provisions. The Option Agreements authorized under the Plan
shall contain such other provisions not inconsistent with this Plan
including, without limitation, the imposition of restrictions upon the
exercise of an Option, as the Committee shall deem advisable.
5. Nonemployee Director Options. Notwithstanding any of the other
provisions of the Plan to the contrary, the provisions of this Section 5 shall
apply only to grants of Options to Nonemployee Directors. Except as set forth
in this Section 5, the other provisions of the plan shall apply to grants of
Options to Nonemployee Directors to the extent not inconsistent with this
Section 5. For purposes of interpreting Section 4(e) hereof, a Nonemployee
Director's service as a member of the Board shall be deemed to be employment
with the Company.
(a) General. Nonemployee Directors shall receive Options in
accordance with this Section 5 and may not be granted or other awards under
this Plan. The Option Price per share of Common Stock purchasable under
Options granted to Nonemployee Directors shall be the Fair Market Value of
a share on the date of grant. No Option Agreement with any Nonemployee
Director may alter the provisions of this Section 5.
(b) Automatic Grants. An Option to purchase 5,000 shares of Common
Stock shall be granted automatically, without action by the Committee, (i)
on the date following the Underwritten Offerings at an exercise price equal
to the Initial Public Offering price less the underwriting discount per
share, to each then Nonemployee Director and (ii) on the date following the
date on which a new Nonemployee Director shall be elected or appointed, to
such new Nonemployee Director. On the date following each annual meeting
of stockholders commencing with the first annual meeting after the
Underwritten Offerings, each Nonemployee Director (other than a Nonemployee
Director who is first elected at such annual meeting) shall be granted
automatically, without action by the Committee, an Option to purchase 2,500
shares of Common Stock.
(c) Exercisability. Each Option shall be fully exercisable on the
date the Option is granted.
(d) Duration. Each Option granted to a Nonemployee Director shall
expire on the first to occur of (i) the tenth anniversary of the date of
grant of the Option, and (ii) ninety days following the Nonemployee
Director's termination of service as a member of the Board other than for
cause. The Committee may not provide for an extended exercise period
beyond the periods set forth in this Section 5.
6. Loan Provisions. Subject to the provisions of the Plan and all
applicable federal and state laws, rules and regulations, the Committee shall
have the authority to approve the making of Loans pursuant hereto to Optionees
(on such terms and conditions as the Committee shall determine), in order to
enable such Optionees to purchase shares in connection with the Underwritten
Offerings. Loans shall be evidenced by a promissory note or other agreement,
signed by the borrower, which shall contain provisions for repayment and such
other terms and conditions as the Committee shall determine.
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<PAGE>
7. Term of Plan. Options may be granted pursuant to the Plan from time to
time within a period of ten (10) years from the date the Plan is adopted by the
Board, or the date the Plan is approved by the stockholders of the Company,
whichever is earlier.
8 Amendment. The Board may at the time and from time to time alter,
amend, suspend, or terminate the Plan in whole or in part; provided, however,
that no amendment which requires shareholder approval under applicable law or in
order for the exemptions available under Rule 16b-3 to be applicable to the Plan
and the Optionees or to preserve under section 162(m) of the Code the
deductibility by the Company of compensation related hereto, shall be effective
unless the same shall be approved by the stockholders of the Company entitled to
vote thereon on or before the effective date of the amendment. Such approval
shall be obtained in such manner as is required by the Company's Certificate of
Incorporation, its By-Laws, and the laws of the State of Delaware as in effect
at the time of such approval. Notwithstanding the foregoing, no amendment
shall affect adversely any of the rights or obligations of any Optionee, without
such Optionee's consent, under any Option theretofore granted under the Plan.
9. Effective Date. The Plan shall become effective as of the consummation
of the Underwritten Offerings, subject to the receipt of approval of the Plan by
the sole stockholder of the Company entitled to vote thereon.
10. Headings. The headings of sections and subsections herein are
included solely for convenience of reference and shall not affect the meaning of
any of the provisions of the Plan.
11. Governing Law. This Plan and all rights hereunder shall be construed
in accordance with and governed by the laws of the State of Delaware.
12. Interpretation. The Plan is designed and intended to comply with Rule
16b-3 and, to the extent applicable, with section 162(m) of the Code, and all
provisions hereof shall be construed in a manner to so comply.
This Plan has been adopted by the Board as of February 7, 1996 and approved
by the sole stockholder of the Company as of February 7, 1996.
7
<PAGE>
FIRST AMENDMENT TO THE
FIRST USA PAYMENTECH, INC.
1996 STOCK OPTION PLAN
----------------------
WHEREAS, First USA Paymentech, Inc. a Delaware corporation (the "Company"),
has heretofore maintained the First USA Paymentech, Inc. 1996 Stock Option Plan
(the "Plan") for the benefit of certain employees; and
WHEREAS, the Company considers it advisable to amend the Plan to clarify
the original intent of the Plan with respect to the full vesting of options upon
the death or disability of an Optionee; and
WHEREAS, pursuant to Section 8 of the Plan, the Board of Directors of the
Company approved this Amendment on October 15, 1996;
NOW, THEREFORE, the Company hereby amends the Plan by deleting Paragraph
(f) of Section 4 of the Plan in its entirety and inserting therefore the
following:
(f) Death, Disability or Retirement of Optionee. If an Optionee shall
die while employed by the Company, First USA or one of their respective
direct or indirect subsidiaries, or if the Optionee's employment shall
terminate by reason of disability, all Options theretofore granted to such
Optionee shall fully vest and be 100% exercisable and may, unless earlier
terminated in accordance with their terms, be exercised by the Optionee or
by the Optionee's estate or by a person who acquired the right to exercise
such Option by bequest or inheritance or otherwise by reason of the death
or disability of the Optionee, at any time within six (6) months (or such
longer period as may be determined by the Committee in its sole discretion)
after the date of death or disability of the Optionee. If Optionee
terminates employment with the Company or First USA, or one of their
subsidiaries, by reason of Retirement (as defined below), then the
Committee, in its discretion, may determine whether or not the Option will
vest in part or whole, and any additional terms applicable to such vesting.
"Retirement" shall mean such circumstances determined as retirement in the
sole discretion of the Committee. If an Optionee shall die within three
(3) months after the termination of such Optionee's employment, other than
for cause (as determined by the Committee), all Options theretofore granted
to such Optionee (to the extent such Options were exercisable at the time
of death) may, unless earlier terminated in accordance with their terms, be
exercised by the Optionee's estate or by a person who acquired the right to
exercise such Option by bequest or inheritance or otherwise by reason of
the death of the Optionee, at any time within six (6) months (or such
longer period as may be determined by the Committee in its sole discretion)
after the date of death of the Optionee.
IN WITNESS WHEREOF, the Company has adopted this amendment as of the
Effective Date.
FIRST USA PAYMENTECH, INC.
By: /s/ Philip Taken
--------------------------------
Title: Senior Vice President, General
Counsel and Assistant Secretary
<PAGE>
EXHIBIT 10(LL)
PROSPECTUS
- ----------
BANC ONE CORPORATION
---------------------------
FIRST USA, INC. MANAGEMENT
INVESTORS STOCK OPTION PLAN
148,182 SHARES
---------------------------
This prospectus (this "Prospectus") relates to 148,182 shares of common stock,
without par value ("Common Stock"), of BANC ONE CORPORATION, an Ohio corporation
(the "Company"), issuable under the First USA, Inc, Management Investors Stock
Option Plan (the "First USA Plan"), formerly the LBC Holdings, Inc. Management
Investors Stock Option Plan, upon the exercise of stock options granted
thereunder.
---------------------------
THIS PROSPECTUS COVERS SECURITIES THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT") AND IS INTENDED
TO MEET THE REQUIREMENTS OF SECTION
10(a) OF THE SECURITIES ACT.
---------------------------
This Prospectus describes but does not set forth the terms and conditions of the
plan. In the event of any conflict between such terms and conditions and the
description contained herein, the terms and conditions of the plan shall
prevail. No person has been authorized to make any representation other than as
contained herein in connection with the Plan and the offering described in this
Prospectus, and, if given or made, such representation may not be relied upon.
The date of this Prospectus is June 30, 1997.
<PAGE>
BACKGROUND
The First USA Plan was adopted by the board of directors of First USA,
Inc., a Delaware corporation ("First USA"), on August 7, 1989, approved by the
stockholders of First USA on December 21, 1989, and became effective on August
8, 1989. An amendment to the First USA Plan was presented to and approved by
First USA's stockholders on February 21, 1992. Following such stockholder
approval the amendment was adopted by such board on March 16, 1992.
Pursuant to an Agreement and Plan of Merger, dated as of January 19,
1997, and amended as of April 23, 1997 (as amended, the "Merger Agreement"),
between First USA and the Company, First USA was merged (the "Merger") with and
into the Company on June 27, 1997 (the "Effective Time"), at which time the
separate corporate existence of First USA terminated. At the Effective Time, the
First USA Plan was assumed by the Company (such assumed plan, the "Plan") and
each outstanding and unexercised option (a "First USA Option") to purchase
shares of the common stock of First USA ("First USA Common Stock") was assumed
by the Company. After the Effective Time, each First USA Option will be deemed
to constitute an option to acquire, on the same terms and conditions as were
applicable under such First USA Option immediately prior to the Effective Time,
the number of shares of Common Stock equal to the product, rounded to the
nearest whole share, of the number of shares of First USA Common Stock subject
to the First USA Option and 1.1659, at a price per share equal to the exercise
price per share of First USA Common Stock otherwise purchasable pursuant to such
First USA Option divided by 1.1659, rounded down to the nearest cent.
SUMMARY
The purpose of the Plan is to encourage stock ownership by those
officers and employees of the Company and its subsidiaries who have been granted
stock options under the First USA Plan and to encourage such employees to remain
in the service of the Company and to increase their efforts for the success of
the Company by offering them an opportunity to increase their proprietary
interest therein.
The Plan provided authority to grant nonqualified stock options which
are not intended to be incentive stock options described in section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations issued thereunder
(the "Code"). The Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 and is not a qualified plan under section
401(a) of the Code.
In November 1991, First USA accelerated the vesting of options
theretofore granted and determined that no further grants of options would be
made under the Plan.
2
<PAGE>
A summary of the material features of the Plan follows. This summary is
qualified in its entirety by reference to the full text of the Plan, a copy of
which may be obtained from the Company. Terms which are not defined in this
Prospectus have the meanings set forth in the Plan.
Additional information concerning the Plan and its administrators may
be obtained, upon written or oral request, from Manager of Corporate Benefits,
BANC ONE CORPORATION, 100 E. Broad Street, Columbus, OH 43271-0161, telephone
(614) 248-6346.
DESCRIPTION OF THE PLAN
Eligibility
Officers and key employees of First USA and its direct and indirect
subsidiaries were eligible to receive awards under the First USA Plan. Such
employees were selected by the committee which administered the First USA Plan
on a solely discretionary basis.
Shares Subject to the Plan
The Company will reserve 148,182 shares of Common Stock for issuance
under the Plan (subject to antidilution and similar adjustments). The Plan
provides that if an outstanding option expires, is cancelled or is otherwise
terminated without having been exercised in full, the remaining shares subject
thereto will cease to be reserved under the Plan.
Administration
The Plan is administered by a committee (the "Committee") appointed by
the Board of Directors of the Company (the "Board"), the composition of which
will at all times satisfy the provisions of Rule l6b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
Subject to the provisions of the Plan, the Committee may interpret the
Plan and may at any time prescribe such rules and regulations for the Plan as it
deems advisable. The Committee may authorize any one or more of its members or
any officer of the Company, to execute and deliver documents on behalf of the
Committee. All determinations of the Committee will be final and binding in all
matters relating to the Plan. No member of the Committee will be liable for any
act done or omitted to be done by such member or by any other member of the
Committee in connection with the Plan, except for such member's own willful
misconduct or as expressly provided by statute.
Committee members are selected by and serve at the pleasure of the
Board.
3
<PAGE>
Terms And Conditions Of Options
Option Grants. Each option granted pursuant to the Plan was a
nonqualified stock option, evidenced by a written option agreement ("Option
Agreement"). Each Option Agreement set forth, among other matters, (i) the
number of shares of First USA Common Stock to which the option related, (ii) the
option price, (iii) the exercise period of the option and (iv) any restrictions
on the transfer of shares acquired pursuant to the option.
The Plan provided that options granted thereunder would vest over a
four-year period commencing on August 8, 1989. The original Option Price was
$10.00 per share (the "Option Price"), which was then determined to be the fair
market value of the First USA Common Stock on the date of grant. In November
1991, First USA accelerated the vesting of options granted under the Plan, to
make each such option immediately exercisable, at the Option Price, for a period
not exceeding the original term of the option. First USA also determined at that
time to grant no further options under the Plan.
Payment for Shares. The Option Price must be paid in full at the time
of exercise and may be paid in cash or by an exchange of Common Stock previously
owned by the Optionee, or a combination of both, in an amount or having a
combined value equal to the purchase price for the shares subject to the option
or portion thereof being exercised.
The Plan also authorizes "cashless" stock option exercises (i) by
allowing the payment of the Option Price with shares of Common Stock (having a
fair market value on the date of exercise equal to such Option Price) to be
withheld by the Company from the total number of shares otherwise deliverable
upon exercise or (ii) by permitting a stock broker to extend credit to the
Company on behalf of the Optionee for the purpose of exercising an option;
provided that the broker verifies, in advance of paying the exercise price to
the Company, that (A) the Optionee has given proper notice of the exercise to
the Company, (B) the Optionee has instructed the Company to deliver the option
shares to the broker and (C) the Company will promptly honor the Optionee's
instructions to deliver the option shares to the broker.
The Company may defer making payment or delivery of any benefits under
the Plan until satisfactory arrangements have been made for the payment of any
tax attributable to any amounts payable on shares deliverable under the Plan.
The Optionee will be entitled to elect to pay all or a portion of all taxes
arising in connection with the exercise of an option by electing to (l) have the
Company withhold shares of Common Stock, or (2) deliver other shares of Common
Stock previously owned by the Optionee having a Fair Market Value equal to the
amount to be withheld, provided that the amount to be withheld may not exceed
the Optionee's estimated total Federal, State and local tax obligations
associated with the transaction. The fair market value of fractional shares
remaining after payment of the withholding taxes must be paid to the Optionee in
cash.
4
<PAGE>
Exercise Period; Termination of Employment. Options may be exercised
during the exercise period, at such times, in such amounts and subject to such
restrictions as may be determined by the Committee, as reflected in the Option
Agreement, provided that, the exercise period may not exceed ten years from the
date of the grant. The Committee may accelerate the exercisability of any
outstanding option under such circumstances as it deems appropriate.
Generally, options may not be exercised unless the Optionee is then in
the employ of the Company or its direct or indirect subsidiaries, and unless the
Optionee has remained continually in such employ since the date of grant.
If the employment of an Optionee terminates for any reason (other than
for cause or by reason of death, disability or retirement), the Optionee may,
within the three (3) month period following such termination, exercise all
unexercised and unexpired options previously granted to him to the extent he was
entitled to exercise such options at the date of termination. If an Optionee
dies while employed by the Company (or, generally, within three (3) months after
termination of employment, other than termination for cause), or terminates
employment by reason of disability or retirement, all previously granted
options, except those that have previously terminated, may be exercised, as the
case may be, by the Optionee or the person or persons to whom the Optionee's
rights pass by reason of death or disability, generally, within six (6) months
after the Optionee's death, disability or retirement (or such longer period as
may be determined by the Committee). If employment of an Optionee is terminated
for cause, the options held by such Optionee, to the extent not theretofore
exercised, will terminate on the date of such termination unless otherwise
determined by the Company.
Nothing in the Plan or in any option granted thereunder will entitle
any individual to any right to continue in the employ of the Company or its
direct or indirect subsidiaries or affiliates or to interfere in any way with
the right of the Company or its direct or indirect subsidiaries or affiliates to
terminate such employment.
Nontransferability. Options may not be transferred other than by will
or the laws of descent and distribution, and options may be exercised, during
the lifetime of an Optionee, only by the Optionee or his guardian or legal
representative.
Effect of Certain Changes. Upon the occurrence of certain corporate
events resulting in a change in the number of shares of Common Stock, including
such events as a stock or cash dividend, split-up, combination or exchange of
shares or recapitalization, the Committee may adjust, as appropriate (and
eliminating any resulting fractional shares), the number or class of Common
Stock or other securities available for options, the number of such shares
covered by outstanding options and the Option Price.
Upon the occurrence of certain other corporate events, including such
events as a liquidation of the Company, a corporate separation or division, or a
merger or consolidation (unless the Company shall be the surviving corporation
and the Common Stock shall not be converted or exchanged), the Committee may
provide that options are exercisable (at its then Option Price) for the kind of
stock or other property receivable by stockholders of the Company
5
<PAGE>
upon the occurrence of such event. See "Background," above, for a description of
the adjustment that will be made in connection with the Merger.
However, in the case of any merger or consolidation where the Company
shall be the surviving corporation and the shares of Common Stock shall be
reclassified or changed (other than a change in par value, or from par value to
no par value, but including any division of the Common Stock into two or more
classes or series of shares) the Committee may provide that the holder of each
option then exercisable shall have the right to exercise such option solely for
the kind and amount of shares of stock and other securities (including those of
any new direct or indirect parent of the Company), property, cash or any
combination thereof receivable upon such reclassification, change, consolidation
or merger by the holder of the number of shares of Common Stock for which such
option might have been exercised.
Treatment of Certain Payments. If the Company determines (in accordance
with applicable provisions of the Plan) that any payment or benefit ("Total
Payment") received or to be received by an Optionee following an Acceleration
Date or a termination of such Optionee's employment (whether pursuant to the
terms of the Plan or any other plan, arrangement or agreement with the Company
or with any person whose actions result in a change in control of the Company or
any person affiliated with the Company or such person), would be subject to any
excise tax imposed under Section 4999 of the Code (the "Excise Tax"), then such
Total Payment will be reduced to the extent necessary so that no portion of such
Total Payment is subject to the Excise Tax (after taking into account any
reduction in the Total Payment provided by Section 280G of the Code in such
other plan, arrangement or agreement; the "280G Reduction").
The Company is required to provide each Optionee with its calculations
in this regard. If the optionee objects to such calculations, the Company must
pay the Optionee the greater of (i) the net amount of the Total Payment (minus
the 280G Reduction, and minus the net amount of federal, state and local income
tax on such reduced Total Payment) or (ii) the excess of (A) the net amount of
such Total Payment (without the 280G Reduction, but minus such net taxes on such
unreduced Total Payment), over (B) the amount of Excise Tax on such Total
Payment to which the Optionee would otherwise be subject.
Rights As A Stockholder. An Optionee or a transferee of an option will
have no rights as a stockholder with respect to any shares covered by an option
until a certificate or certificates representing such shares is issued to him
for such shares. No adjustment will be made for dividends or distributions or
other rights in respect of any share for which the record date is prior to the
date on which an optionee becomes the holder of record of such share.
Amendment And Termination. The Board may at any time and from time to
time alter, amend, suspend, or terminate the Plan; provided, however, that no
such change may adversely affect any option previously granted, except with the
written consent of the Optionee.
Unless previously terminated pursuant to applicable provisions thereof,
the Plan will terminate on August 8, 1999.
6
<PAGE>
REOFFERS AND RESALES
This Prospectus does not cover sales or other dispositions of Common
Stock received under the Plan by any person who may be deemed to be an
affiliated person. Such sales or other dispositions may be made in compliance
with the registration requirements of the federal securities laws or the
requirements of Rule 144 promulgated thereunder, without being subject to the
holding period requirement of such Rule, or may be made pursuant to another
exemption from such registration. There will be no such restrictions upon sales
or other dispositions of the Common Stock by recipients who are not affiliated
persons. An affiliated person, for purposes of the federal securities laws,
generally means a senior officer, director or other person who is deemed to
control the Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences
relating to the granting and exercise or realization of nonqualified stock
options, and the sale of Common Stock acquired as a result thereof, is based on
an analysis of the Code as currently in effect, existing laws, judicial
decisions and administrative rulings and regulations, all of which are subject
to change. In addition to being subject to the federal income tax consequences
described below, an Optionee may also be subject to state and/or local income
tax consequences in the jurisdiction in which he works and/or resides. EACH
OPTIONEE MUST CONSULT HIS PERSONAL TAX ADVISOR TO DETERMINE THE TAXES APPLICABLE
TO THE ISSUANCE, EXERCISE AND SALE OF OPTIONS.
Nonqualified Shock Option ("NQSO") : An Optionee will not recognize any
taxable income upon the grant of an NQSO. The Company will not be entitled to a
tax deduction with respect to the grant of NQSOs.
Upon exercise of an NQSO, the excess of the fair market value of the
Common Stock on the exercise date over the exercise price will be taxable as
compensation income to the Optionee in the taxable year of exercise and will be
subject to applicable withholding taxes. The Optionee's tax basis for the Common
Stock received pursuant to the exercise of an NQSO will equal the sum of the
compensation income recognized and the exercise price
In general, an Optionee who pays the Option Price in full or in part
with shares of Common Stock will recognize no gain or loss for federal income
tax purposes on the shares surrendered, but otherwise will generally be taxed
according to the rules described in the next preceding paragraph with respect to
the exercise of the option. Accordingly, an Optionee should not recognize income
with respect to option shares received in exchange for an equal number of
previously held shares; however, an Optionee should recognize ordinary income
with respect to those shares received in excess of the number of shares
surrendered in an amount equal to the fair market value of such excess shares.
The amount of such income recognized should be equivalent to the amount of
income which would be recognized if the Option Price of the NQSO were paid
7
<PAGE>
for with cash. The shares received by the Optionee, equal in number to the
previously held shares exchanged therefor, should have the same tax basis as the
previously held shares. Shares received by the Optionee in excess of the number
of previously held shares should have a tax basis equal to the fair market value
of such additional shares as of the date ordinary income is recognized.
Where the Option Price is satisfied through the withholding by the
Company of shares that otherwise would be delivered to the Optionee upon
exercise of an NQSO, the withheld shares should be treated as if they had been
issued to the Optionee and immediately redeemed. In general, this deemed
issuance and redemption should not give rise to any additional tax consequences,
but may in the case of certain individuals give rise to dividend income equal to
the fair market value of the shares withheld. In addition, where the Option
Price is paid with shares of Common Stock, as long as the transactions are
properly documented by the Optionee and the Company, the deemed issuance and
redemption should not give rise to additional tax consequences.
In the event of a sale of Common Stock received upon the exercise of an
NQSO, any appreciation or depreciation after the exercise date generally will be
taxed as capital gain or loss and will be long-term capital gain or loss if the
holding period of such Common Stock was more than one year.
The Company generally will be entitled to a deduction in the amount of
an Optionee's ordinary income at the time such income is recognized by the
Optionee upon the exercise an NQSO.
No effort has been made in the foregoing discussion of federal income
tax consequences to cover all possibilities or to deal with the application of
state and local income taxes. Participants in the Plan should consult their tax
advisors with respect to the tax consequences related to their individual
participation in the Plan.
OTHER INFORMATION
The Company will provide without charge to each Optionee a copy of any
or all of the information that has been incorporated by reference in Item 3 of
Part II of the Company's registration statement on Form S-8 (File No. 333-
30421), filed with the Securities and Exchange Commission on June 30, 1997, and
such information is incorporated by reference herein. Requests for such
information should be made, orally or in writing, to Manager of Corporate
Benefits, BANC ONE CORPORATION, 100 E. Broad Street, Columbus, OH 43271-0161,
telephone (614) 248-6346. The Company's most recent annual report accompanies
this Prospectus or has previously been forwarded to Plan participants.
Shareholder communications and other reports furnished to shareholders of the
Company on a continuing basis will be furnished to Plan participants as well.
The information in this Prospectus will be updated regularly by an
appendix, a new prospectus or by including information in the most recent annual
report to stockholders or the most recent proxy statement of the Company. A Plan
participant referring to this Prospectus after
8
<PAGE>
the lapse of a significant period of time from the dale of its initial
publication should obtain and refer to all appendices. A Plan participant who
receives an appendix after receipt of this Prospectus should keep it with this
Prospectus and refer to it whenever this Prospectus is referred to.
9
<PAGE>
EXHIBIT 10(MM)
PROSPECTUS
- ----------
BANC ONE CORPORATION
FIRST USA, INC. MANAGEMENT
INVESTORS PERFORMANCE STOCK OPTION PLAN
11,159,214 SHARES
This prospectus (this "Prospectus") relates to 11,159,214 shares of common
stock, without par value ("Common Stock"), of BANC ONE CORPORATION, an Ohio
corporation (the "Company"), issuable under the First USA, Inc. Management
Investors Performance Stock Option Plan (the "First USA Plan"), formerly the LBC
Holdings, Inc. Management Investors Performance Stock Option Plan, upon the
exercise of stock options granted thereunder.
THIS PROSPECTUS COVERS SECURITIES THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT") AND IS INTENDED
TO MEET THE REQUIREMENTS OF SECTION
10(a) OF THE SECURITIES ACT.
This Prospectus describes but does not set forth the terms and conditions of the
plan. In the event of any conflict between such terms and conditions and the
description contained herein, the terms and conditions of the plan shall
prevail. No person has been authorized to make any representation other than as
contained herein in connection with the Plan and the offering described in this
Prospectus, and if given or made, such representation may not be relied upon.
The date of this Prospectus is June 30, 1997.
<PAGE>
BACKGROUND
The First USA Plan was adopted by the board of directors of First USA,
Inc., a Delaware corporation ("First USA"), on August 7, 1989, approved by the
stockholders of First USA on December 21, 1989, and became effective on August
8, 1989. An amendment to the First USA Plan was presented to and approved by
First USA's stockholders on February 21, 1992. Following such stockholder
approval the amendment was adopted by such board on March 16, 1992.
Pursuant to an Agreement and Plan of Merger, dated as of January 19, 1997,
and amended as of April 23, 1997 (as amended, the "Merger Agreement"), between
First USA and the Company, First USA was merged (the "Merger") with and into the
Company on June 27, 1997 (the "Effective Time"), at which time the separate
corporate existence of First USA terminated. At the Effective Time, the First
USA Plan was assumed by the Company (such assumed plan, the "Plan") and each
outstanding and unexercised option (a "First USA Option") to purchase shares of
the common stock of First USA ("First USA Common Stock") was assumed by the
Company. After the Effective Time, each First USA Option will be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such First USA Option immediately prior to the Effective Time,
the number of shares of Common Stock equal to the product, rounded to the
nearest whole share, of the number of shares of First USA Common Stock subject
to the First USA Option and 1.1659, at a price per share equal to the exercise
price per share of First USA Common Stock otherwise purchasable pursuant to such
First USA Option divided by 1.1659, rounded down to the nearest cent.
SUMMARY
The purpose of the Plan is to encourage stock ownership by those officers
and employees of the Company and its subsidiaries who have been granted stock
options under the First USA Plan and to encourage such employees to remain in.
the service of the Company and to increase their efforts for the success of the
Company by offering them an opportunity to increase their proprietary interest
therein.
The Plan provided authority to grant nonqualified stock options which are
not intended to be incentive stock options described in section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations issued thereunder
(the "Code"). The Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 and is not a qualified plan under section
401(a) of the Code.
In November 1991, First USA accelerated the vesting of options theretofore
granted and determined that no further grants of options would be made under the
Plan.
A summary of the material features of the Plan follows. This summary is
qualified in its entirety by reference to the full text of the Plan, a copy of
which may be obtained from the Company. Terms which are not defined in this
Prospectus have the meanings set forth in the Plan.
2
<PAGE>
Additional information concerning the Plan and its administrators may
be obtained, upon written or oral request, from manager of Corporate Benefits,
BANC ONE CORPORATION, 100 E. Broad Street, Columbus, OH 43271-0161, telephone
(614) 248-6346.
DESCRIPTION OF THE PLAN
Eligibility
Officers and key employees of First USA and its direct and indirect
subsidiaries were eligible to receive awards under the First USA Plan. Such
employees were selected by the committee which administered the First USA Plan
on a solely discretionary basis.
Shares Subject to the Plan
The Company will reserve 11,159,214 shares of Common Stock for
issuance under the Plan (subject to antidilution and similar adjustments). The
Plan provides that if an outstanding option expires, is cancelled or is
otherwise terminated without having been exercised in full, the remaining shares
subject thereto will cease to be reserved under the Plan.
Administration
The Plan is administered by a committee (the "Committee") appointed by
the Board of Directors of the Company (the "Board"), the composition of which
will at all times satisfy the provisions of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
Subject to the provisions of the Plan, the Committee may interpret the
Plan and may at any time prescribe such rules and regulations for the Plan as it
deems advisable. The Committee may authorize any one or more of its members or
any officer of the Company, to execute and deliver documents on behalf of the
Committee. All determinations of the Committee will be final and binding in all
matters relating to the Plan. No member of the Committee will be liable for any
act done or omitted to be done by such member or by any other member of the
Committee in connection with the Plan, except for such member's own willful
misconduct or as expressly provided by statute.
Committee members are selected by and serve at the pleasure of the
Board.
Terms and Conditions of Options
Option Grants. Each option granted pursuant to the Plan was a
nonqualified stock option, evidenced by a written option agreement ("Option
Agreement"). Each option Agreement set forth, among other matters, (i) the
number of shares of First USA Common Stock to which the option related, (ii) the
option price, (iii) the exercise period of the option and (iv) any restrictions
on the transfer of shares acquired pursuant to the option.
3
<PAGE>
The Plan provided that options granted thereunder would vest based on
the attainment of certain earnings targets. The original option price was $10.00
per share (the "Option Price"), which was then determined to be the fair market
value of the First USA Common Stock on the date of grant. In November 1991,
First USA accelerated the vesting of options granted under the Plan, to make
each such option immediately exercisable, at the Option Price, for a period not
exceeding the original term of the option.
First USA also determined at that time to grant no further options under the
Plan.
Payment for Shares. The Option Price must be paid in full at the time
of exercise and may be paid in cash or by an exchange of Common Stock previously
owned by the Optionee, or a combination of both, in an amount or having a
combined value equal to the purchase price for the shares subject to the option
or portion thereof being exercised.
The Plan also authorizes "cashless" stock option exercises (i) by
allowing the payment of the Option Price with shares of Common Stock (having a
fair market value on the date of exercise equal to such Option Price) to be
withheld by the Company from the total number of shares otherwise deliverable
upon exercise or (ii) by permitting a stock broker to extend credit to the
Company on behalf of the Optionee for the purpose of exercising an option;
provided that the broker verifies, in advance of paying the exercise price to
the Company, that (A) the Optionee has given proper notice of the exercise to
the Company, (B) the Optionee has instructed the Company to deliver the option
shares to the broker and (C) the Company will promptly honor the Optionee's
instructions to deliver the option shares to the broker.
The Company may defer making payment or delivery of any benefits under
the Plan until satisfactory arrangements have been made for the payment of any
tax attributable to any amounts payable on shares deliverable under the Plan.
The Optionee will be entitled to elect to pay all or a portion of all taxes
arising in connection with the exercise of an option by electing to (1) have the
Company withhold shares of Common Stock, or (2) deliver other shares of Common
Stock previously owned by the Optionee having a fair market value equal to the
amount to be withheld, provided that the amount to be withheld may not exceed
the Optionee's estimated total Federal, State and local tax obligations
associated with the transaction. The fair market value of fractional shares
remaining after payment of the withholding taxes must be paid to the Optionee in
cash.
Exercise Period; Termination of Employment Options may be exercised
during the exercise period, at such times, in such amounts and subject to such
restrictions as may be determined by the Committee, as reflected in the Option
Agreement, provided that the exercise period may not exceed ten years from the
date of the grant. The Committee may accelerate the exercisability of any
outstanding option under such circumstances as it deems appropriate.
Generally, options may not be exercised unless the Optionee is then in
the employ of the Company or its direct or indirect subsidiaries, and unless the
Optionee has remained continually in such employ since the date of grant.
4
<PAGE>
If the employment of an Optionee terminates for any reason (other than
for cause or by reason of death, disability or retirement), the Optionee may,
within the three (3) month period following such termination, exercise all
unexercised and unexpired options previously granted to him to the extent he was
entitled to exercise such options at the date of termination. If an Optionee
dies while employed by the Company (or, generally, within three (3) months after
termination of employment, other than termination for cause), or terminates
employment by reason of disability or retirement, all previously granted
options, except those that have previously terminated, may be exercised, as the
case may be, by the Optionee or the person or persons to whom the Optionee's
rights pass by reason of death or disability, generally, within six (6) months
after the Optionee's death, disability or retirement (or such longer period as
may be determined by the Committee). If employment of an Optionee is terminated
for cause, the options held by such Optionee, to the extent not theretofore
exercised, will terminate on the date of such termination unless otherwise
determined by the Company.
Nothing in the Plan or in any option granted thereunder will entitle
any individual to any right to continue in the employ of the Company or its
direct or indirect subsidiaries or affiliates or to interfere in any way with
the right of the Company or its direct or indirect subsidiaries or affiliates to
terminate such employment.
Nontransferability. Options may not be transferred other than by will
or the laws of descent and distribution, and options may be exercised, during
the lifetime of an Optionee, only by the Optionee or his guardian or legal
representative.
Effect of Certain Changes. Upon the occurrence of certain corporate
events resulting in a change in the number of shares of Common Stock, including
such events as a stock or cash dividend, split-up, combination or exchange of
shares or recapitalization, the Committee may adjust, as appropriate (and
eliminating any resulting fractional shares), the number or class of Common
Stock or other securities available for options, the number of such shares
covered by outstanding options and the Option Price.
Upon the occurrence of certain other corporate events, including such
events as a liquidation of the Company, a corporate separation or division, or a
merger or consolidation (unless the Company shall be the surviving corporation
and the Common Stock shall not be converted or exchanged), the Committee may
provide that options are exercisable (at its then Option Price) for the kind of
stock or other property receivable by stockholders of the Company upon the
occurrence of such event. See "Background," above, for a description of the
adjustment that will be made in connection with the Merger.
However, in the case of any merger or consolidation where the Company
shall be the surviving corporation and the shares of Common Stock shall be
reclassified or changed (other than a change in par value, or from par value to
no par value, but including any division of the Common Stock into two or more
classes or series of shares) the Committee may provide that the holder of each
option then exercisable shall have the right to exercise such option solely for
the kind and amount of shares of stock and other securities (including those of
any new direct or
5
<PAGE>
indirect parent of the Company), property, cash or any combination thereof
receivable upon such reclassification, change, consolidation or merger by the
holder of the number of shares of Common Stock for which such option might have
been exercised.
Treatment of Certain Payments. If the Company determines (in
accordance with applicable provisions of the Plan) that any payment or benefit
("Total Payment") received or to be received by an Optionee following an
Acceleration Date or a termination of such Optionee's employment (whether
pursuant to the terms of the Plan or any other plan, arrangement or agreement
with the Company or with any person whose actions result in a change in control
of the Company or any person affiliated with the Company or such person), would
be subject to any excise tax imposed under Section 4999 of the Code (the "Excise
Tax). then such Total Payment will be reduced to the extent necessary so that no
portion of such Total Payment is subject to the Excise Tax (after taking into
account any reduction in the Total Payment provided by Section 28OG of the Code
in such other plan, arrangement or agreement; the "280G Reduction").
The Company is required to provide each Optionee with its calculations
in this regard. If the Optionee objects to such calculations, the Company must
pay the Optionee the greater of (i) the net amount of the Total Payment (minus
the 28OG Reduction, and minus the net amount of federal, state and local income
tax on such reduced Total Payment) or (ii) the excess of (A) the net amount of
such Total Payment (without the 280G Reduction, but minus such net taxes on such
unreduced Total Payment), over (B) the amount of Excise Tax on such Total
Payment to which the Optionee would otherwise be subject.
Rights as a Stockholder. An Optionee or a transferee of an option will
have no rights as a stockholder with respect to any shares covered by an option
until a certificate or certificates representing such shares is issued to him
for such shares. No adjustment will be made for dividends or distributions or
other right's in respect of any share for which the record date is prior to the
date on which an Optionee becomes the holder of record of such share.
Amendment and Termination. The Board may at any time and from time to
time alter, amend, or terminate the Plan; provided, however, that no such change
may adversely affect any option previously granted, except with the written
consent of the Optionee.
Unless previously terminated pursuant to applicable provisions
thereof, the Plan will terminate on August 8, 1999.
REOFFERS AND RESALES
This Prospectus does not cover sales or other dispositions of Common Stock
received under the Plan by any person who may be deemed to be an affiliated
person. Such sales or other dispositions may be made in compliance with the
registration requirements of the federal securities laws or the requirements of
Rule 144 promulgated thereunder, without being subject to the holding period
requirement of such Rule, or may be made pursuant to another exemption from such
registration. There will be no such restrictions upon sales or other
dispositions of the Common Stock by recipients who are not affiliated persons.
An affiliated person, for purposes of
6
<PAGE>
the federal securities laws, generally means a senior officer, director or other
person who is deemed to control the Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences
relating to the granting and exercise or realization of nonqualified stock
options, and the sale of Common Stock acquired as a result thereof, is based on
an analysis of the Code as currently in effect, existing laws, judicial
decisions and administrative rulings and regulations, all of which are subject
to change. In addition to being subject to the federal income tax consequences
described below, an Optionee may also be subject to state and/or local income
tax consequences in the jurisdiction in which he works and/or resides. EACH
OPTIONEE MUST CONSULT HIS PERSONAL TAX ADVISOR TO DETERMINE THE TAXES APPLICABLE
TO THE ISSUANCE, EXERCISE AND SALE OF OPTIONS.
Nonqualified Stock Option ("NQSO"): An Optionee will not recognize any
taxable income upon the grant of an NQSO. The Company will not be entitled to a
tax deduction with respect to the grant of NQSOs.
Upon exercise of an NQSO, the excess of the fair market value of the
Common Stock on the exercise date over the exercise price will be taxable as
compensation income to the Optionee in the taxable year of exercise and will be
subject to applicable withholding taxes. The Optionee's tax basis for the Common
Stock received pursuant to the exercise of an NQSO will equal the sum of the
compensation income recognized and the exercise price.
In general, an Optionee who pays the Option Price in full or in part
with shares of Common Stock will recognize no gain or loss for federal income
tax purposes on the shares surrendered, but otherwise will generally be taxed
according to the rules described in the next preceding paragraph with respect to
the exercise of the option. Accordingly, an Optionee should not recognize income
with respect to option shares received in exchange for an equal number of
previously held shares; however, an Optionee should recognize ordinary income
with respect to those shares received in excess of the number of shares
surrendered in an amount equal to the fair market value of such excess shares.
The amount of such income recognized would be equivalent to the amount of income
which would be recognized if the Option Price of the NQSO were paid for with
cash. The shares received by the Optionee, equal in number to the previously
held shares exchanged therefor, should have the same tax basis as the previously
held shares. Shares received by the Optionee in excess of the number of
previously held shares should have a tax basis equal to the fair market value of
such additional shares as of the date ordinary income is recognized.
Where the Option Price is satisfied through the withholding by the
Company of shares that otherwise would be delivered to the Optionee upon
exercise of an NQSO, the withheld shares should be treated as if they had been
issued to the Optionee and immediately redeemed. In general, this deemed
issuance and redemption should not give rise to any additional tax consequences,
but may in the case of certain individuals give rise to dividend income equal to
the fair market value of the shares withheld. In addition, where the Option
Price is paid with shares
7
<PAGE>
of Common Stock, as long as the transactions are properly documented by the
Optionee and the Company, the deemed issuance and redemption should not give
rise to additional tax consequences.
In the event of a sale of Common Stock received upon the exercise of
an NQSO, any appreciation or depreciation after the exercise date generally will
be taxed as capital gain or loss and will be long-term capital gain or loss if
the holding period of such Common Stock was more than one year.
The Company generally will be entitled to a deduction in the amount of
an Optionee's ordinary income at the time such income is recognized by the
Optionee upon the exercise an NQSO.
No effort has been made in the foregoing discussion of federal income
tax consequences to cover all possibilities or to deal with the application of
state and local income taxes. Participants in the Plan should consult their tax
advisors with respect to the tax consequences related to their individual
participation in the Plan.
OTHER INFORMATION
The Company will provide without charge to each Optionee a copy of any or
all of the information that has been incorporated by reference in Item 3 of Part
11 of the Company's registration statement on Form S-8 (File No. 33330421),
filed with the Securities and Exchange Commission on June 30, 1997, and such
information is incorporated by reference herein. Requests for such information
should be made, orally or in writing, to Manager of Corporate Benefits, BANC ONE
CORPORATION, 100 E. Broad Street, Columbus, OH 43271-0161, telephone (614) 248-
6346. The Company's most recent annual report accompanies this Prospectus or has
previously been forwarded to Plan participants. Shareholder communications and
other reports furnished to shareholders of the Company on a continuing basis
will be furnished to Plan participants as well.
The information in this Prospectus will be updated regularly by an
appendix, a new prospectus or by including information in the most recent annual
report to stockholders or the most recent proxy statement of the Company. A Plan
participant referring to this Prospectus after the lapse of a significant period
of time from the date of its initial publication should obtain and refer to all
appendices. A Plan participant who receives an appendix after receipt of this
Prospectus should keep it with this Prospectus and refer to it whenever this
Prospectus is referred to.
8
<PAGE>
EXHIBIT 10(NN)
FIRST USA, INC.
ANNUAL INCENTIVE PLAN
(As Amended: October 1995)
l. PURPOSE. The annual incentive plan represents a major component of the total
cash compensation for management of the Company. It is intended to provide the
proper incentive to the executives of the Company to operate the Company in a
manner that maximizes the operation and provides the appropriate return to the
shareholders. To further these purposes, the Company may grant annual Awards to
eligible employees of the Company and its Subsidiaries according to the terms
and subject to the conditions stated in this Plan.
2. ELIGIBILITY AND PARTICIPATION. (a) Participants shall consist of active,
full-time officer (or equivalent) employees of the Company and its Subsidiaries
who meet the participation criteria established by the Committee and are
eligible to participate in the Plan under the terms and conditions thereof.
(b) If a Participant ceases to be employed by the Company and any relevant
Subsidiaries prior to the Payment Date for any Plan Year, then the Participant's
participation in the Plan shall terminate forthwith and such Participant will
not be eligible to receive an Award for such Plan Year, except as otherwise
provided in this Section.
(c) If prior to June 30th of any Plan Year (i) a Participant who has completed
during such Plan Year at least three (3) months full-time active service ceases
to be employed by the Company and any relevant Subsidiaries by reason of death,
disability or retirement or (ii) a Participant transfers to a position with the
Company or any Subsidiary in which (s)he is no longer eligible to participate in
the Plan, the Participant will receive only that portion of the Award that (s)he
would otherwise have been entitled to receive for such Plan Year determined by
multiplying the amount of such Award by a fraction, the numerator of which is
the number of days of the Participant's active service during such Plan Year
through the date of his termination or transfer and the denominator of which is
365. In the event a Participant ceases to be employed by the Company and any
relevant Subsidiaries by reason of death, the Committee or its designee may
elect to pay such pro rata Award to the Participant's estate prior to the end of
the Plan Year based on an estimate of the Company's performance for such Plan
Year.
(d) If the effective commencement date of participation in the Plan for a
Participant is after July l but prior to April l of a Plan Year, the Participant
will be entitled to receive only that portion of the Award that he would have
otherwise been entitled to receive for such Plan Year determined by multiplying
the amount of such Award by a fraction, the numerator of which is the number of
days of the Participant's active service during such Plan Year and the
denominator of which is 365. No Participant whose effective date of
participation is after April l of a Plan Year may receive an Award for such Plan
Year.
(e) Any employee who is eligible to participate in any other annual or sales
incentive plan of the Company or its Subsidiaries will not be eligible to
participate in the Plan unless the Committee determines otherwise.
<PAGE>
(f) Information concerning the amount of a Participant'1s Target Incentive and
Award, if any, under the Plan shall be made available to such Participant in
such a manner as the Committee shall determine.
3. PERFORMANCE MEASURES. The performance measures may change from time to time
but will generally be based on:
l. Earnings and earnings growth
2. Return on assets
3. Return on equity
4. Quality of earnings
5. Quality of assets
6. Balance sheet management 1
In analyzing performance, the Board will consider the economic environment,
performance comparisons against competitors, quality of earnings, the balance
between short term and long term objectives and the safety and soundness of the
company.
4. ADMINISTRATION OF THE PLAN. (a) The Plan shall be administered by the
Compensation Committee of the Board of Directors (the "Committee"), which may
delegate to the CEO or senior Human Resources Officer such administrative
functions as the Committee considers appropriate; provided, however, that the
CEO shall have primary authority under this Plan to make all decisions relating
to allocations of discretionary awards.
(b) The Committee shall have full authority and discretion to administer the
Plan, including without limitation the power to (i) adopt, suspend or modify the
Plan procedures, (ii) establish the eligibility criteria for participation in
the Plan, (iii) determine for each Plan Year the criteria for calculating Awards
and the Award Pool for such Plan Year, and (iv) recommend to the Board the Award
to made to the CEO and President.
(c) The Committee may in its sole discretion, during or after any Plan Year,
increase or decrease the amount of any Plan Target for that Plan Year to reflect
(i) extraordinary, unusual or non-recurring items or events or (ii) material
differences between any significant assumptions used by the Committee in
modifying a Plan Target and actual events or conditions experienced during the
Plan Year.
5. AWARD POOL AND INCENTIVE OPPORTUNITIES. The Award Pool Maximum is the sum
of the individual maximum awards for each plan Participant. Each Participant's
payout is based on a percentage of base compensation and the range is as
follows:
2
<PAGE>
<TABLE>
<CAPTION>
Annual Incentive Award Ranges
- ----------------------------------------------------------------------------------------------------------------
Position/Level Threshold Target Maximum/1/
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Chairman & CEO; First USA, Inc. 30% 60% 125%
- ----------------------------------------------------------------------------------------------------------------
President; First USA, Inc. 30% 60% 125%
- ----------------------------------------------------------------------------------------------------------------
- -President; First USA Bank 25% 50% 100%
- -CEO; Merchant Services
- -Vice Chairman; First USA, Inc.
- -EVP; Credit Policy & Marketing
- -Other equivalent or similarly
situated positions
- ----------------------------------------------------------------------------------------------------------------
Executive Vice President or 20% 40% 75%
Equivalent Title
- ----------------------------------------------------------------------------------------------------------------
Senior Vice President 20% 40% 50%
- ----------------------------------------------------------------------------------------------------------------
Vice President 20% 30% 40%
- ----------------------------------------------------------------------------------------------------------------
Other Officers Discretionary Discretionary 30%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Special Purpose Awards. At the discretion of the Board, awards can be
granted to executives that are above the maximums. This type of payout is
intended to allow the Board greater flexibility if circumstances warrant
special consideration due to exceptional performance.
6. AWARD DETERMINATION. The company will determine the appropriate range
of payout at the end of the fiscal year based on the company's performance as
follows:
<TABLE>
<S> <C> <C>
l. Threshold --satisfactory performance and returns
2. Target --performance superior to industry averages
3. Maximum --exceptional performance relative to competitors and
prior year
</TABLE>
7. INDIVIDUAL PERFORMANCE. Individual performance will determine the amount
of payout up to the maximum percentage determined by the Board. Awards will not
be given to individuals with poor performance.
8. PAYMENT OF AWARDS. (a) The Company shall pay each Participant any award
that such Participant is entitled to receive for a given Plan Year as soon as
administratively possible after Board approval (or the Payment Date); provided
that such Participant must be actively employed by the Company or a Subsidiary
or on an approved leave of absence on the Payment Date of such Plan Year, except
as otherwise provided herein.
(b) Awards shall be paid in cash, or can be deferred (by Participants) to future
dates with interest in accordance with Company provided investment alternatives.
9. AWARD CONFERS NO RIGHT OF EMPLOYMENT. No employee or other person, shall
have any right or claim to any Award under the Plan except in accordance with
the provisions of the Plan. The Plan shall not be construed as creating any
contract of employment or otherwise conferring upon any Employee any legal right
to continuation of employment nor as limiting or qualifying the right to the
Company and its Subsidiaries to discharge any Employee
3
<PAGE>
without regard to the effect that such discharge might have upon such Employee's
rights under the Plan.
10. AMENDMENTS. The Plan may be amended or terminated by the Board in any
respect except that no amendment may be made which would adversely affect the
rights of a Participant under an Award granted and outstanding prior to the date
such amendment is adopted.
4
<PAGE>
EXHIBIT 10(OO)
THE VALLEY NATIONAL BANK OF ARIZONA
SUPPLEMENTAL EXCESS BENEFIT
RETIREMENT PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Article One Preamble...................................................... 1
ARTICLE TWO Construction.................................................. 1
ARTICLE THREE Eligibility and Participation................................. 2
ARTICLE FOUR Benefits...................................................... 2
ARTICLE FIVE Payment of Benefits........................................... 3
ARTICLE SIX Funding....................................................... 3
ARTICLE SEVEN Administration................................................ 3
ARTICLE EIGHT Amendment and Termination of the Plan......................... 3
ARTICLE NINE Assignment.................................................... 4
ARTICLE TEN Withholding................................................... 4
ARTICLE ELEVEN Other Benefit Plans of the Bank or Affiliated Companies....... 4
ARTICLE TWELVE Miscellaneous................................................. 4
</TABLE>
<PAGE>
THE VALLEY NATIONAL BANK OF ARIZONA
SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN
ARTICLE ONE
PREAMBLE
The VALLEY NATIONAL BANK OF ARIZONA, a national banking association,
hereinafter referred to as the "Bank," previously adopted THE RETIREMENT PLAN
FOR EMPLOYEES OF THE VALLEY NATIONAL BANK OF ARIZONA, hereinafter referred to as
the "Retirement Plan" and the INVESTMENT INCENTIVE PLAN FOR EMPLOYEES OF THE
VALLEY NATIONAL BANK OF ARIZONA, hereinafter referred to as the "Investment
Incentive Plan". The Retirement Plan and the Investment Incentive Plan are
subject to the benefit and contribution limitations of Section 415 of the
Internal Revenue Code, hereinafter referred to as the "Code". By reason of the
limitations of Section 415 of the Code, as incorporated in the Retirement Plan
and Investment Incentive Plan, a Participant's benefits under such Plans may be
reduced from the benefits which would otherwise be payable under such Plans in
the absence of the benefit and contribution limitations of Section 415. The
Employee Retirement Income Security Act of 1974, hereinafter referred to as the
"Act" authorizes the Bank to establish an "excess benefit plan" for the purpose
of providing retirement benefits to certain employees in excess of the benefits
permitted under the Plans by reason of Section 415 of the Code. Pursuant to
such authorization, the Bank adopted THE VALLEY NATIONAL BANK OF ARIZONA
SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN, hereinafter referred to as the
"Plan," effective January 1, 1983, to apply to Participants in the Retirement
Plan. By this amendment and restatement in the entirety, the Bank hereby amends
the Plan to extend coverage to Participants in the Investment Incentive Plan
effective as of January 1, 1983.
ARTICLE TWO
CONSTRUCTION
Terms capitalized in the Plan shall have the meaning given in Article Two
of the Retirement Plan and Article Two of the Investment Incentive Plan,
whichever is applicable, governing definitions and construction, except where
such terms are otherwise defined in the Plan. If any provision of the Plan is
determined for any reason to be invalid or unenforceable, the remaining
provisions shall continue in full force and effect. All of the provisions of the
Plan shall be construed and enforced according to the laws of the State of
Arizona, and shall be administered according to the laws of such state, except
as otherwise required by the Act, the Code or other applicable Federal law. It
is the intention of the Bank that the Plan, as adopted by the Bank, shall
constitute an "excess benefit plan" as defined in Section 3(36) of the Act.
Benefits under the Plan shall be paid from the general assets of the Bank and/or
Affiliated Companies, and not from any trust fund or other segregated fund. The
Plan shall be construed in a manner consistent with the Bank's intention.
<PAGE>
ARTICLE THREE
ELIGIBLITY AND PARTICIPATION
The Executive Committee of the Board of Directors of the bank shall
designate for participation in the Plan Employees of the Bank and/or Affiliated
Companies who are Participants in the Retirement Plan and/or the Investment
Incentive Plan. Designation of participant's in the Plan may be made
individually or by group designation, or both, as determined by the Executive
Committee. An Employee who is eligible to participate in the Plan shall commence
participation as of the first day of the Plan Year in which the Executive
Committee designates the Employee for participation in the Plan. Such
participation shall continue until the Executive Committee informs the
participant in writing that he is no longer eligible to participate in the Plan.
ARTICLE FOUR
BENEFITS
Any participant in this Plan who is a Participant of the Retirement Plan
and who receives a benefit under the Retirement Plan (or such participant's
surviving spouse or annuitant in the event of the participant's death) shall be
entitled to a monthly benefit payable hereunder in accordance with ARTICLE FIVE
of the Plan, equal to the excess, if any, of (a) the amount of such
participant's monthly benefit, (or the surviving spouse's or annuitant's monthly
benefit if the participant has died) under the Retirement Plan determined
without regard to the limitations of Section 4.3 of the Retirement Plan and
Section 415 of the Code, over (b) the amount of such participant's monthly
benefit (or the surviving spouse's or annuitant's monthly benefit if the
participant has died) actually payable under the Retirement Plan, as determined
under the provisions of the Retirement Plan, subject to Section 4.3 of the
Retirement Plan and Section 415 of the Code.
Any participant in this Plan who is a Participant in the Investment
Incentive Plan and who has Accounts under the Investment Incentive Plan (or such
participant's surviving spouse or designated beneficiary in the event of the
participant's death), shall be entitled to a benefit payable hereunder in
accordance with ARTICLE FIVE of the Plan, equal to the excess, if any, of (a)
the total amount which would be allocated to the participant's Accounts under
the Investment Incentive Plan, without regard to the limitations of Section 415
of the Code as incorporated therein, over (b) the amount actually allocated to
the participant's Accounts under the Investment Incentive Plan as a result of
the limitations of Section 415 of the Code as incorporated therein. The
participant shall be credited with interest on the amount so determined at the
currently prevailing rate credited to the Money Market Fund of the Investment
Incentive Plan as of each Accounting Date under the Investment Incentive Plan.
Benefits payable under this Plan shall be payable to a participant (or the
participant's spouse, beneficiary or other annuitant if the participant has
died) in the same manner and subject to all the same options, conditions,
privileges and restrictions as are applicable to the benefits payable to the
participant (or his spouse, beneficiary or other annuitant) under the Retirement
2
<PAGE>
Plan and/or Investment Incentive Plan, as though such benefits were payable
under the Retirement Plan and/or the Investment Incentive Plan, without,
however, taking into account the limitations of Section 415 of the Code as set
forth in the Retirement Plan and the Investment Incentive Plan. An election of
mode of payment under the Retirement Plan and/or the Investment Incentive Plan
shall constitute an election under this Plan.
ARTICLE FIVE
PAYMENT OF BENEFITS
Benefits under the Plan shall become payable when a participant (or his
spouse, beneficiary or annuitant if the participant has died) begins to receive
payments under the Retirement Plan and/or the Investment Incentive Plan, and
shall be payable by the Bank or the Affiliated Company that employed that
participant in the same manner and at the same time as the benefits payable to
the participant (or his spouse, beneficiary or annuitant if the participant has
died) under the Retirement Plan and/or the Investment Incentive Plan, as though
such benefits were payable under the Retirement Plan and/or the Investment
Incentive Plan.
ARTICLE SIX
FUNDING
Benefits under the Plan shall be paid from the general assets of the Bank
and/or Affiliated Companies, and shall not be segregated in a trust fund or
otherwise funded in any manner prior to the time of payment. The Bank and
Affiliated Companies may, in their sole discretion, accrue and/or accumulate
reserves to fund benefits under the Plan. Such reserves, if any, shall
constitute general assets of the Bank and Affiliated Companies. No participant
shall have any vested rights hereunder nor any right hereunder to any specific
assets of the Bank and/or Affiliated Companies.
ARTICLE SEVEN
ADMINISTRATION
The Plan will be administered by the Committee which administers the
Retirement Plan. With respect to administration of the Plan, the provisions of
Article Eleven of the Retirement Plan, governing the powers of the Committee,
claim procedures and the scope of responsibility of the Committee shall be fully
applicable.
ARTICLE EIGHT
AMENDMENT AND TERMINATION OF THE PLAN
The Plan may be amended in whole or in part, prospectively or
retroactively, by action of the Bank's Board of Directors, and may be terminated
at any time by action of the Bank's Board of Directors; provided, however, that
no such amendment or termination shall reduce any
3
<PAGE>
amount payable hereunder to the extent such amount accrued prior to the date of
amendment or termination.
ARTICLE NINE
ASSIGNMENT
No participant or beneficiary of a participant shall have any right to
assign, pledge, hypothecate, anticipate or any way create a lien on any amounts
payable hereunder. No amounts payable hereunder shall be subject to assignment
or transfer or otherwise be alienable, either by voluntary or involuntary act,
or by operation of law, or subject to attachment, execution, garnishment,
sequestration or other seizure under any legal, equitable or other process, or
be liable in any way for the debts or defaults of participants and their
beneficiaries.
ARTICLE TEN
WITHHOLDING
Any taxes required to be withheld from payments to participants hereunder
shall be deducted and withheld by the Bank or the Affiliated Company making such
payments.
ARTICLE ELEVEN
OTHER BENEFIT PLANS OF THE BANK OR AFFILIATED COMPANIES
Nothing contained in the Plan shall prevent a participant (or his spouse,
beneficiary or annuitant if the participant has died), from receiving, in
addition to any payments provided for under the Plan, any payments provided for
under the Retirement Plan and/or the Investment Incentive Plan, or which would
otherwise be payable or distributable to the participant (or to his spouse,
beneficiary or annuitant if he has died) under any plan, policy or arrangement
of the Bank or an Affiliated Company. Nothing in the Plan shall be construed as
preventing the Bank or an Affiliated Company from establishing any other or
different plans providing for current or deferred compensation for employees.
ARTICLE TWELVE
MISCELLANEOUS
Nothing contained in the Plan shall be construed as a contract of
employment between the Bank or an Affiliated Company and an employee, as a right
of any employee to be continued in the employment of the Bank or an Affiliated
Company, or as a limitation of the right of the Bank or an Affiliated Company to
discharge any of its employees, with or without cause.
All of the provisions of the Plan shall be binding upon all persons who
shall be entitled to any benefit hereunder, their heirs and personal
representatives.
4
<PAGE>
IN WITNESS WHEREOF, THE VALLEY NATIONAL BANK OF ARIZONA has signed this
instrument the 27th day of November, 1985.
THE VALLEY NATIONAL BANK OF
ARIZONA
By: /s/ Leonard W. Huck
----------------------------
Its President & CAO
----------------------------
"Bank"
Attest:
By: /s/ G.E. Wright
------------------------------
Its Cashier
_______________________
5
<PAGE>
FIRST AMENDMENT TO
THE VALLEY NATIONAL BANK OF ARIZONA
SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN
Effective in 1983, THE VALLEY NATIONAL BANK OF ARIZONA, a national banking
association (hereinafter referred to as the "Bank") adopted THE VALLEY NATIONAL
BANK OF ARIZONA SUPPLEMENTAL EXCESS BENEFIT RETIREMENT PLAN (hereinafter
referred to as the "Plan") to benefit certain participants in the Retirement
Plan for Employees of The Valley National Bank of Arizona and the Investment
Incentive Plan for Employees of The Valley National Bank of Arizona (hereinafter
respectively referred to as the "Retirement Plan" and the "Investment Incentive
Plan." Effective January 1, 1987, certain provisions of the Internal Revenue
Code enacted under the Tax Reform Act of 1986 will restrict contributions on
behalf of certain executives and key employees of the Bank under the Investment
Incentive Plan. By this Amendment the Bank desires to amend the Plan for the
purpose of supplementing contributions that may no longer be made under the
Investment Incentive Plan with benefits under this Plan. By this instrument,
the Bank accomplishes such amendment.
1. This Amendment shall be effective January 1, 1987. Except as amended
by this First Amendment, the Bank hereby ratifies the Plan as most recently
restated November 27, 1985. Except as amended herein, the Plan shall remain in
full force and effect.
2. ARTICLE FOUR of the Plan is hereby deleted in its entirety, and the
following ARTICLE FOUR is inserted in lieu thereof:
ARTICLE FOUR
BENEFITS
Any participant in this Plan who is a Participant in the Retirement Plan
and who receives a benefit under the Retirement Plan (or such participant's
surviving spouse or annuitant in the event of the participant's death) shall be
entitled to a monthly benefit payable hereunder in accordance with ARTICLE FIVE
of the Plan, equal to the excess, if any, of (a) the amount of such
participant's monthly benefit (or the surviving spouse's or annuitant's monthly
benefit if the participant has died) under the Retirement Plan determined
without regard to the limitations of Section 4.3 of the Retirement Plan and
Section 415 of the Code, over (b) the amount of such participant's monthly
benefit (or the surviving spouse's or annuitant's monthly benefit if the
participant has died) actually payable under the Retirement Plan, subject to
Section 4.3 of the Retirement Plan and Section 415 of the Retirement Plan and
Section 415 of the Code.
Any participant in this Plan who is a Participant in the Investment
Incentive Plan and who has Accounts under the Investment Incentive Plan (or such
participant's surviving spouse or designated beneficiary in the event of the
participant's death) shall be entitled to a benefit payable hereunder in
accordance with ARTICLE FIVE of the Plan, equal to the excess, if any, of
6
<PAGE>
(a) the total amount which would be allocated to the participant's Accounts
under the Investment Incentive Plan, without regard to the limitations of
Section 415 of the Code as incorporated therein. The participant shall be
credited with interest on the amount so determined at the currently prevailing
rate credited to the Money Market Fund of the Investment Incentive Plan as of
each Accounting Date under the Investment Incentive Plan.
Any participant (or such participant's surviving spouse or designated
beneficiary in the event of the participant's death) in this Plan who is a
Participant in the Investment Incentive Plan and who is unable to direct (or is
subject to a refund of directed amounts) Pre-Tax Required Contributions (as
defined in the Investment Incentive Plan) under the Investment Incentive Plan in
the amount of six percent (6%) of Earnings (as defined in the Investment
Incentive Plan) by reason of the Seven Thousand Dollar ($7,000) limitation on
such contributions under Section 402(g) of the Code and the corresponding
provisions of the Investment Incentive Plan, or the "anti-discrimination"
requirements of Section 401(k)(3) of the Code and the corresponding provisions
of the Investment Incentive Plan, shall be entitled to a benefit hereunder in
accordance with ARTICLE FIVE of the Plan equal to the amount of Employer
Contributions (as defined in the Investment Incentive Plan) that would have been
credited to such participant's Employer Contributions Account (as defined in the
Investment Incentive Plan) as a matching contribution based on the Pre-Tax
Required Contributions the participant could have made in the absence of such
limitations, together with interest credited on such Employer Contributions as
though such Employer Contributions had been credited to the Money Market Fund of
the Investment Incentive Plan (and not withdrawn) and adjusted as of each
Accounting Date under the Investment Incentive Plan.
Benefits payable under this Plan shall be payable to a participant (or the
participant's spouse, beneficiary or other annuitant if the participant has
died) in the same manner and subject to all the same options, doncitions,
privileges and restrictions as are applicable to the benefits payable to the
participant (or his spouse, beneficiary or other annuitant) under the Retirement
Incentive Plan and/or the Investment Incentive Plan, without, however, taking
into account the limitations of Section 415 of the Code as set forth in the
Retirement Plan and the Investment Incentive Plan. An election of mode of
payment under the Retirement Plan and/or the Investment Incentive Plan shall
constitute an election under this Plan.
IN WITNESS WHEREOF, THE VALLEY NATIONAL BANK OF ARIZONA, has signed this
instrument this 31st day of December, 1986.
THE VALLEY NATIONAL BANK OF
ARIZONA
By: /s/
-----------------------------------
Its Chairman of the Board
ATTEST:
By: /s/ G. E. Wright
-----------------------------
Its Cashier
2
<PAGE>
RESOLUTION
WHEREAS, Section 415 of the Internal Revenue Code imposed certain
limitations on pension payments from the Retirement Plan for Employees of The
Valley National Bank of Arizona;
WHEREAS, The Board of Directors deems it to be in the best interest of the
Association to provide supplemental payments to certain executives of the
Association and its corporate affiliates, to be designated by the Executive
Committee of the Board of Directors;
NOW, THEREFORE, BE IT RESOLVED, That The Valley National Bank of Arizona
Supplemental Benefit Plan presented to this meeting be, and the same hereby is,
approved and adopted;
RESOLVED FURTHER, That the Chairman of the Board or the President of this
Association be, and he hereby is, authorized, empowered and directed, for and on
behalf of this Association, and in its corporate name, and as its corporate act
and deed, to execute the Supplemental Benefit Plan with such changes, deletions
or additions therein as he may approve, his execution thereof to conclusively
evidence his approval of such changes, deletions or additions;
RESOLVED FURTHER, That the Executive Committee of the Board of Directors of
this Association shall designate for participation in said Supplemental Benefit
Plan such officers and other employees of this Association and affiliated
corporations as said Executive Committee shall determine, in its sole and
absolute discretion.
RESOLVED FURTHER, That the acts and deeds of the officers of this
Association and the Executive Committee necessary to carry out the intent and
purpose of these resolutions be, and the same hereby are, ratified, confirmed,
approved and adopted as the acts and deeds of this Association.
I, G. E. Wright, Vice President and Cashier of The Valley National Bank of
Arizona, hereby certify that the above is a true copy of a resolution adopted by
the Board of Directors of The Valley National Bank of Arizona at a meeting held
July 20, 1983.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
said Bank this 25th day of August, 1983.
/s/ G. E. Wright
----------------------------------
Vice President and Cashier
<PAGE>
RESOLUTION
WHEREAS, Section 415 of the Internal Revenue Code of 1954 (the "Code")
imposes certain limitations on benefits payable from qualified employee pension
and profit sharing plans;
WHEREAS, The limitations of Section 415 of the Code will reduce the
benefits payable to certain executives and key employees of The Valley National
Bank of Arizona (the "Corporation") and its corporate affiliates under the
Retirement Plan for Employees of The Valley National Bank of Arizona (the
"Retirement Plan") and the Investment Incentive Plan for Employees of The Valley
National Bank of Arizona (the "Investment Incentive Plan");
WHEREAS, The Board of Directors of the Corporation deems it to be in the
best interest of the Corporation and its corporate affiliates to establish an
"excess benefit plan" as defined in Section 3(36) if the Employee Retirement
Income Security Act of 1974 under which certain executives and key employees of
the Corporation and its corporate affiliates designated by the Executive
Committee of the Board of Directors will have their benefit payments under the
Retirement Plan and its Investment Incentive Plan supplemented by payments
designed to ensure that the total benefits received by such executives and key
employees under the Retirement Plan and the Investment Incentive Plan and under
the "excess benefit plan" will equal the benefits to which the executives or key
employees would have been entitled under the Retirement Plan and the Investment
Incentive Plan in the absence of the limitations of Section 415 of the Code;
WHEREAS, As a Supplemental Excess Benefit Retirement Plan was adopted at a
meeting on July 20, 1983;
WHEREAS, The Board of Directors now desires to amend the Plan to extend its
coverage to executives and key employees whose benefits under the Investment
Incentive Plan will be reduced by the limitations of Section 415 of the Code;
NOW THEREFORE BE IT RESOLVED, That the Plan be amended to extend its
coverage to certain executives and key employees designated by the Executive
Committee of the Board of Directors of the Corporation, whose company
contribution allocations under the Investment Incentive Plan will be reduced as
a result of the limitations of Section 415 of the Code; and
RESOLVED FURTHER, That said amendment shall be effective as of January 1,
1983; and
RESOLVED FURTHER, That the President or a Vice President be and hereby is
authorized to execute such amendments or revised plan documents as in his
opinion will carry out the objectives of these resolutions; and
RESOLVED FURTHER, That the acts and deeds of the officers of the
Corporation necessary to carry out the intent and purpose of these resolutions
be, and the same hereby are, ratified, confirmed and adopted as the acts and
deeds of the Corporation.
<PAGE>
I, G. E. Wright, Senior Vice President and Cashier of The Valley National
Bank of Arizona, do hereby certify that the foregoing is a copy of a Resolution
adopted by the Board of Directors of The Valley National Bank of Arizona at a
meeting held November 20, 1985, and entered on the minutes of the Bank.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
said Bank this 19th day of December, 1985.
/s/ G. E. Wright
------------------------------------
Senior Vice President & Cashier
2
<PAGE>
EXHIBIT 10(PP)
VALLEY NATIONAL CORPORATION
401(+)(TM)
EXECUTIVE DEFERRED COMPENSATION PLAN
EFFECTIVE OCTOBER 1, 1988
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I PURPOSE.......................................... 1
ARTICLE II DEFINITIONS...................................... 1
2.1 Account.................................... 1
2.2 Average Annual Deferral Amount............. 1
2.3 Beneficiary................................ 1
2.4 Board...................................... 1
2.5 Change in Control of the Employer.......... 1
2.6 Committee.................................. 2
2.7 Compensation............................... 2
2.8 Deferral Commitment........................ 3
2.9 Deferral Period............................ 3
2.10 Determination Date......................... 3
2.11 Early Retirement Date...................... 3
2.12 Employer................................... 3
2.13 Financial Hardship......................... 3
2.14 Interest................................... 3
2.15 Normal Retirement Date..................... 3
2.16 Participant................................ 4
2.17 Participation Agreement.................... 4
2.18 Plan Benefit............................... 4
2.19 Qualified 401 (k) Plan..................... 4
2.20 Qualified Pension Plan..................... 4
2.21 Retirement................................. 4
2.22 Retirement Account......................... 4
2.23 Termination Account........................ 4
2.24 Total and Permanent Disability............. 4
2.25 Additional Terms........................... 4
ARTICLE III PARTICIPATION AND DEFERRAL COMMITMENTS........... 5
3.1 Eligibility and Participation.............. 5
3.2 Form of Deferral Minimum Deferral.......... 5
3.3 Limitation on Deferral..................... 6
3.4 Commitment Limited by Retirement........... 6
3.5 Modification of Deferral Commitment........ 6
ARTICLE IV DEFERED COMPENSATION ACCOUNTS.................... 6
4.1 Types of Accounts.......................... 6
4.2 Elective Deferred Compensation............. 7
4.3 Matching Contributions..................... 7
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.4 Determination of Accounts.................. 7
4.5 Vesting of Accounts........................ 7
4.6 Statement of Accounts...................... 7
ARTICLE V PLAN BENEFITS.................................... 8
5.1 Retirement Benefit......................... 8
5.2 Termination Benefit........................ 8
5.3 Death Benefit.............................. 8
5.4 Early Withdrawal Option.................... 8
5.5 Hardship Distributions..................... 9
5.6 Forms of Benefit Payment................... 9
5.7 Pension Make-Up Benefit.................... 9
5.8 Withholding Payroll Taxes.................. 10
5.9 Commencement of Payments................... 10
5.10 Benefits Payable to Minor or Incompetence.. 10
ARTICLE VI BENEFICIARY DESIGNATION.......................... 10
6.1 Beneficiary Designation.................... 10
6.2 Amendments................................. 11
6.3 No Beneficiary Designation................. 11
6.4 Effect of Payment.......................... 11
ARTICLE VII ADMINSTRATION.................................... 11
7.1 Committee; Duties.......................... 11
7.2 Agents..................................... 11
7.3 Binding Effect of Decisions................ 12
7.4 Indemnity of Committee..................... 12
ARTICLE VIII CLAIMS PROCEDURE................................. 12
8.1 Claim...................................... 12
8.2 Denial of Claim............................ 12
8.3 Review of Claim............................ 12
8.4 Final Decision............................. 12
ARTICLE IX AMENDMENT AND TERMINATION OF PLAN................ 13
9.1 Amendment.................................. 13
9.2 Employer's Right to Terminate.............. 13
ARTICLE X MISCELLANEOUS.................................... 14
10.1 Unfunded Plan.............................. 14
10.2 Unsecured General Creditor................. 14
10.3 Trust Fund................................. 14
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
10.4 Nonassignability........................... 14
10.5 Not a Contract of Employment............... 15
10.6 Protective Provisions...................... 15
10.7 Terms...................................... 15
10.8 Captions................................... 15
10.9 Governing Law.............................. 15
10.10 Validity................................... 15
10.11 Notice..................................... 15
10.12 Successors................................. 15
</TABLE>
iii
<PAGE>
VALLEY NATIONAL CORPORATION
401 (+)(TM)
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE I
PURPOSE
The Purpose of this 401(+)(TM) Executive Deferred Compensation Plan
(hereinafter referred to as the "Plan") is to provide current tax planning
opportunities as well as supplemental funds for retirement or death for select
officers and key management employees (and their beneficiaries) of Valley
National Corporation. It is intended that the Plan will aid in retaining and
attracting employees of exceptional ability by providing such individuals with
these benefits. This plan shall be effective as of October 1, 1988.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following words and phrases shall have the
meanings indicated, unless the context clearly indicates otherwise:
2.1 ACCOUNT. "Account" means either the Termination Account or the
Retirement Account maintained by the Employer in accordance with Article IV with
respect to any deferral of Compensation pursuant to this Plan.
2.2 AVERAGE ANNUAL DEFERRAL AMOUNT. "Average Annual Deferral Amount"
means, with respect to any Participant, and amount equal to the total dollar
amount deferred or to be deferred under all completed and uncompleted Salary and
Bonus Deferral Commitments made by a Participant, divided by the number of
Deferral Commitments entered into by the Participant.
2.3 BENEFICIARY. "Beneficiary" means the person, persons or entity
designated by the Participant, as provided in Article VI, to receive any Plan
benefits payable after a Participant's death.
2.4 BOARD. "Board" means the Board of Directors of Valley National
Corporation.
2.5 CHANGE IN CONTROL OF THE EMPLOYER. "Change in Control" shall be
deemed to have occurred at the time (1) a report on Schedule 13D is filed with
the Securities and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") disclosing that any person
(within the meaning of Section 13(d) of the
<PAGE>
Exchange Act), other than the Employer (or one of its subsidiaries) or any
employee benefit plan sponsored by the Employer (or one of its subsidiaries), is
the beneficial owner, directly or indirectly, of 20 percent or more of the
combined voting power of the then outstanding securities of the Employer; (2)
any person (within the meaning of Section 13(d) of the Exchange Act), other than
the Employer (or one of its subsidiaries) or any employee benefit plan sponsored
by the Employer (or one of its subsidiaries), shall purchase securities pursuant
to a tender offer or exchange offer to acquire any common stock) for cash,
securities or any other consideration, provided that after consummation of the
offer, the person in question is the beneficial owner (as such term is defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of 20 percent or
more of the combined voting power of the then outstanding securities of the
Employer (as determined under paragraph (d) of Rule 13d-3 under the Exchange
Act, in the case of rights to acquire common stock); (3) the stockholders of the
Employer shall approve:
(a) Any consolidation or merger of the Employer:
(i) in which the Employer is not the continuing or surviving
corporation,
(ii) pursuant to which shares of common stock of the Employer would
be converted into cash, securities or other property, or
(iii) with a corporation which prior to such consolidation or merger
owned 20 percent or more of the cumulative voting power of the then
outstanding securities of the Employer; or
(b) Any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all the assets
of the Employer; or
4) there shall have been a change in a majority of the member of the Board
of Directors of the company within a 12-month period, unless the election or
nomination for election by the company's stockholders of each new director
during such 12-month period was approved by the vote of two-thirds of the
directors then still in office who were directors at the beginning of such 12-
month period.
2.6 COMMITTEE. "Committee" means the Investment Compensation Committee of
the Board of Directors appointed by the Board to administer the Plan pursuant to
Article VII. No member of the Committee may participate in any decision
regarding his or her own benefit.
2.7 COMPENSATION. "Compensation" means the salary and bonuses paid to an
Employee-Participant during the calendar year considered to be "wages" for
purposes of federal income tax withholding, before reduction for amounts
deferred pursuant to this Plan, the Valley Flex Benefits Plan, and the
Investment Incentive Plan or any other cash or deferred compensation arrangement
pursuant to Section 410(a) of the Internal Revenue Code. Compensation does not
include expense reimbursements, or any form of non-cash compensation or
benefits.
2
<PAGE>
2.8 DEFERRAL COMMITMENT. "Deferral Commitment" means a Salary Deferral
Commitment or a Bonus Deferral Commitment made by a Participant pursuant to
Article III for which a separate Participation Agreement has been entered into
by the Participant.
2.9 DEFERRAL PERIOD. "Deferral Period" means each calendar year or any
portion thereof.
2.10 DETERMINATION DATE. "Determination Date" means the last day of each
calendar month.
DELETED 2.11 EARLY RETIRMENT DATE. "Early Retirement Date" means the date on
which the Participant actually terminates employment or Board service following
the first day of the month coinciding with or next following a Participant's
attainment of age fifty-five (55) and his completion of fifteen (15) Years of
Credited Service, but prior to his Normal Retirement Date.
2.12 EMPLOYER. "Employer" means Valley National Corporation, an Arizona
corporation, and any affiliated or subsidiary corporations designated by the
Board, or any successors to the business thereof.
2.13 FINANCIAL HARDSHIP. "Financial Hardship" means a severe financial
hardship to the Participant resulting from (a) a sudden and unexpected illness
or accident of the Participant or a dependent (as defined in Section 152 (a) of
the Internal Revenue Code) of the Participant; (b) loss of the Participant's
property due to casualty; or (c) other similar or extraordinary circumstances
arising from events beyond the control of the Participant. Notwithstanding the
foregoing, the Committee may not direct payment of any amounts credited to the
Account of a Participant to the extent that such hardship is or may be relieved
through reimbursement or compensation by insurance or otherwise, by liquidation
of the Participant's assets to the extent that such liquidation would not cause
severe financial hardship, or by the cessation of deferrals under the Plan. The
desire to send a Participant's child to college or the desire to purchase a
residence shall not be considered a Financial Hardship.
2.14 INTEREST. "Interest" means, with respect to any calendar month, either
the Termination Rate or the Retirement Rate as defined below:
(a) TERMINATION RATE means the monthly equivalent of the annual yield
of the Moody's Long Term Corporate Bond Yield Index for the preceding
calendar month as published by Moody's Investor Service, Inc. (or any
successor thereto) or, if such index is no longer published, a
substantially similar index selected by the Board.
(b) RETIREMENT RATE means the monthly equivalent of the effective
annual yield on a Termination Account plus three percentage (3%) points.
DELETED 2.15 NORMAL RETIREMENT DATE. "Normal Retirement Date" means the first
day of the month coinciding with or next following the date on which a
Participant attains age sixty-two (62).
3
<PAGE>
2.16 PARTICIPANT. "Participant" means any individual who is participating
or has participated in this Plan as provided in Article III.
2.17 PARTICIPATION AGREEMENT. "Participation Agreement" means the
agreement entered into by a Participant with the Committee prior to the
beginning of the Deferral Period. A new Participation Agreement shall be
entered into by the Participant with the Committee for each Deferral Commitment.
2.18 PLAN BENEFIT. "Plan Benefit" means the benefit payable to a
Participant as calculated in Article V.
2.19 QUALIFIED 401(k) PLAN. "Qualified 401(k) Plan" means the Investment
Incentive Plan, any successor salary reduction plan, or a salary reduction plan
maintained by an affiliate of the Employer that qualifies under Section 401(a)
of the Internal Revenue code by satisfying the requirement of Section 401(k) of
the Code.
2.20 QUALIFIED PENSION PLAN. "Qualified Pension Plan" means the Retirement
Plan for Employees of the Valley National Bank of Arizona, any successor defined
benefit plan maintained by the Employer, or a defined benefit plan maintained by
an affiliate of the Employer that qualifies under Section 401(a) of the Internal
Revenue Code.
2.21 RETIREMENT. "Retirement" means the severance of employment with the
Employer at the Participant's Normal Retirement Date or Early Retirement Date as
applicable. Participants who, after retirement, become, or continue to be
members of the Board shall not be considered to be retired, for purposes of this
plan, until the severance of service as an active Board member and as a Director
Emeritus.
2.22 RETIREMENT ACCOUNT. "Retirement Account" means the account maintained
on the books of account of the Employer and calculated pursuant to paragraph
4.5, using the Retirement Rate as stated in paragraph 2.14(b).
2.23 TERMINATION ACCOUNT. "Termination Account" means the account
maintained on the books of account of the Employer and calculated pursuant to
paragraph 4.5, using the Termination Rate as stated in paragraph 2.14(a).
2.24 TOTAL AND PERMANENT DISABILITY. "Total and Permanent Disability"
means a physical or mental condition that prevents the Participant from
satisfactorily performing the Participant's usual duties for the Employer. The
Committee shall determine the existence of Disability and may rely on advice
from a medical examiner satisfactory to the Committee in making the
determination.
2.25 ADDITIONAL TERMS. In addition to the definitions set out above, the
following terms have been described throughout this document in the sections
indicated below:
Salary Deferral Commitment 3.2(a)
Bonus Deferral Commitment 3.2(b)
4
<PAGE>
Initial Account Balance 4.2
Matching Contribution Credit 4.4
Pension Make-up Benefit 5.7
ARTICLE III
PARTICIPATION AND DEFERRAL COMMITMENTS
3.1 ELIGIBILITY AND PROTECTION.
(a) ELIGIBILITY. Eligibility to participate in the Plan is limited to
a select group of management or highly compensated employees recommended by
the Committee from time to time.
(b) PARTICIPATION. An eligible employee may elect to participate in
the Plan with respect to any Deferral Period by submitting a Participation
Agreement with the Committee by December 15 of the calendar year
immediately preceding the Deferral Period, provided that employees making
Bonus Deferral Commitments must do so prior to the Board meeting in which a
provisional or full payment of such bonus is authorized. In the event that
an individual first becomes eligible to participate during a calendar year,
a Participation Agreement must be entered into with the Committee no later
than thirty (3) days following notification of the individual by the
Committee of his eligibility to participate, and such Participation
Agreement shall be effective only with regard to Compensation earned or
payable following the submission of the Participation Agreement with the
Committee.
AMENDED 3.2 FORM OF DEFERRAL COMMITMENT. For each Deferral Period, a
Participant may make the following Deferral Commitments in separate
Participation Agreements.
(a) SALARY DEFERRAL COMMITMENT. A Participant may elect to defer any
portion of his base salary for the year following the calendar year in
which the Participation Agreement is submitted. The amount to be deferred
shall be stated as a percentage of base salary but must not be less than
two thousand dollars ($2,000) during the Deferral Period. The percentage
of salary to be deferred may be stated in one-half percent (1/2%)
increments.
(b) BONUS DEFERRAL COMMITMENT. A Participant may elect to defer all
or a portion of the bonus amounts to be paid by the Employer in the
calendar year following the calendar year in which the Participation
Agreement is submitted. The amount to be deferred shall be stated as a flat
dollar amount, as a percentage of the bonus, or as a amount in excess of a
stated dollar amount, but must not be less than two thousand dollars
($2,000), unless the Participant also elects to make a Salary Deferral
Commitment, in which case there shall be no minimum Bonus Deferral
Commitment.
5
<PAGE>
In the event a Participant enters this Plan at any time other than
January 1 of any calendar year, the minimum Deferral Commitment shall be a pro
rata portion of the minimum Deferral Commitment set forth in subparagraphs (a),
(b) and (c) above, based on the full or partial months remaining in the Deferral
Period.
3.3 LIMITATION ON DEFERRAL. Notwithstanding paragraph 3.2, the Committee
may increase the minimum deferral amount or impose a maximum deferral amount
from time to time by giving proper written notice to all Participants.
3.4 COMMITMENT LIMITED BY RETIREMENT. If a Participant intends to
terminate employment due to Retirement prior to the end of the Salary Deferral
Period the Participant may elect, with the Committee's consent, an alternative
Deferral Commitment as follows:
(a) If, at the time of entering into the Participation Agreement with
the Committee, the Participant's Retirement occurs prior to the end of the
Deferral Period, the Participant may elect to defer over a period which
ends at the date of his intended Retirement. The Minimum Deferral provided
in paragraph 3.2 above shall apply.
(b) If, subsequent to the entering into a Participation Agreement
with the Committee, the Participant decides to terminate employment due to
Retirement prior to the end of the Deferral Period, the Participant may
elect to accelerate the deferral of the remaining balance of his Deferral
Commitment. The accelerated deferrals shall be made over the period from
the first day of the calendar year following such election to the date of
the Participant's Retirement. However, the election to accelerate under
this alternative must be made prior to December 15 of the year which
precedes the calendar year(s) in which such remaining balance is to be
deferred.
3.5 MODIFICATION OF DEFERRAL COMMITMENT. A Deferral Commitment shall be
irrevocable except that notwithstanding the minimum deferral amounts under
Section 3.2, the Committee may permit a Participant to reduce the amount to be
deferred, or waive the remainder of the Deferral Commitment, upon a finding that
the Participant has suffered a Financial Hardship.
ARTICLE IV
DEFERRED COMPENSATION ACCOUNTS
4.1 TYPES OF ACCOUNTS. A Retirement Account and a Termination Account
shall be maintained for each Participant, and the Accounts shall be bookkeeping
devices utilized for the sole purpose of determining the benefits payable under
the Plan and shall not constitute a separate fund of assets. The amount of the
Elective Deferred Compensation Matching Contribution Credit and Interest thereon
shall be credited to each of these Accounts. The Employer shall be under no
obligation to maintain specific assets for the purpose of providing the benefits
under this Plan. The maintenance of the bookkeeping accounts provided in this
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section shall not alter Employer's obligation under the Plan, which is an
unfunded and unsecured promise of Employer to pay money in the future.
4.2 ELECTIVE DEFERRED COMPENSATION. The amount of Compensation that a
Participant elects to defer shall be deferred from each payment of compensation
and credited to the Participant's Account as the non-deferred portion of the
compensation becomes or would have become payable. Any withholding of taxes or
other amounts with respect to deferred Compensation which is required by state,
federal or local law shall be calculated separately for Salary and Bonus
Deferral Commitments. The amounts required to be withheld shall be first
withheld from the non-deferred portion of the salary or bonus which relates to
the Deferral Commitment and, if insufficient, shall then be drawn from the
corresponding Deferral Commitments.
AMENDED 4.3 MATCHING CONTRIBUTIONS. Employer shall credit a Matching
Contribution to the Participant's Account equal to 60% of the first 6% of
Compensation deferred by the Participant under this Plan and under the Qualified
401(k) Plan during a Deferral period, but not to exceed 3.6% of the
Participant's Compensation before such deferrals. The Matching Contribution
credited to this Plan shall be reduced by the amount, if any, Employer has
contributed as a matching contribution for the Participant to the Qualified
401(k) Plan for the Deferral Period. The Matching Contribution shall be
credited to the Account as of the same day corresponding matching contributions
to the Qualified 401(k) Plan are credited to accounts in that Plan. A
Participant shall be eligible to receive a Matching Contribution under this Plan
with respect to those amounts which, if not deferred, would have been payable
after the Participant is eligible to participate in the Qualified 401(k) Plan.
The Employer may credit additional discretionary Matching Contributions to
Participant's Accounts at such time and in such amounts as the Board shall
determine. The amounts of the Matching Contributions shall be determined as of
the end of every calendar year and shall be credited to such Participant's
Account at that time.
4.4 DETERMINATION OF ACCOUNTS. Each Participant's Retirement Account and
Termination Account as of each Determination Date shall consist of the balance
of the Participant's Account as of the immediately preceding Determination Date
(including any Initial Account Balance), plus the Participant's Elective
Deferred Compensation credited, any Matching Contribution Credit, and any
Interest earned, minus the amount of any distributions made since the
immediately preceding Determination Date. Interest earned shall be calculated
as of each Determination Date based upon the average daily balance of the
account since the preceding Determination Date and shall be credited to the
Participant's Account at that time.
4.5 VESTING OF ACCOUNTS. A Participant shall be 100% vested at all times
in the amounts deferred, any Matching Contribution Credit and the appropriate
Interest credited thereon.
4.6 STATEMENT OF ACCOUNTS. The Committee shall submit to each
Participant, within one hundred twenty (120) days after the close of each
calendar year and at
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such other time as determined by the Committee, a statement setting forth the
balance to the credit of each Account maintained for a Participant.
ARTICLE V
PLAN BENEFITS
5.1 RETIREMENT BENEFIT. The Employer shall pay a Plan Benefit equal to
the Participant's Retirement Account to each Participant who:
(a) terminates employment by reason of Retirement or Total and
Permanent Disability,
(b) terminates within two years of Change in Control for reason other
than Death.
5.2 TERMINATION BENEFIT. The Employer shall pay a Plan Benefit equal to
the Participant's Termination Account to each employee Participant who
terminates employment for reasons other than those listed in paragraphs 5.1
above and 5.3 below.
5.3 DEATH BENEFIT. Upon the death of a Participant, the Employer shall
pay to the Participant's Beneficiary an amount determined as follows.
(a) If the Participant dies after termination of employment or service
with the Employer, the amount payable shall be equal to the remaining
unpaid balance of the Participant's Account paid in the same manner being
used prior to the Participant's death.
(b) If the Participant dies prior to termination of employment with
the Employer, the amount payable shall be greater of:
(i) the sum of Participant's Retirement Account balance; or
(ii) an amount equal to the Participant's Average Annual Deferral
Amount times ten (10).
5.4 EARLY WITHDRAWAL OPTION. Participants shall be permitted to elect to
withdraw amounts from their Accounts subject to the following restrictions:
(a) TIMING OF ELECTION TO WITHDRAW. The election to man an early
withdrawal must be made at the same time the Participant enters into a
Participation Agreement for a Deferral Commitment.
(b) AMOUNT OF WITHDRAWAL. The amount which a Participant can elect to
withdraw with respect of any Deferral Commitment, shall be one hundred
percent (100%) of the amount of such Deferral Commitment without Interest.
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(c) TIMING OF EARLY WITHDRAWALS. The amount elected to be withdrawn
shall be paid in a lump sum. In no event shall the commencement of benefit
payments under this section be prior to the seventh (7/th/) anniversary of
the Deferral Commitment for which the Participant elected the early
withdrawal option.
Amounts paid to a Participant pursuant to this section shall be treated as
distributions from the Participant's account.
5.5 HARDSHIP DISTRIBUTIONS. Upon finding that a Participant has suffered
a Financial Hardship, the Committee may, in its sole discretion, make
distributions from the Participant's Account prior to the time specified for
payment of benefits under the Plan. The amount of such distribution shall be
limited to the amount reasonably necessary to meet the Participant's
requirements during the Financial Hardship.
AMENDED 5.6 FORM OF BENEFIT PAYMENT. The Plan Benefits shall be paid in
the form elected by the Participant on his Deferral Commitment. The most
recently filed election shall control the form of benefit payment with respect
to the Participant's entire Account. If, upon termination, the Participant's
most recent election as to the form of benefit was made within one year of such
termination, then the prior election shall be used to determine the form of
payment. The methods of payment from which a Participant may elect are limited
to the following:
(a) Lump sum payment.
(b) Equal monthly installments of the Account and Interest amortized
over a period of 60, 120, 180, or 240 months. Interest on the unpaid
balance shall be equal to the Retirement Rate or Termination Rate,
whichever is applicable, and shall be credited monthly. Installments shall
be redetermined each January 1, based on the appropriate crediting rate as
of the last day of the preceding September, the remaining account balance,
and the remaining number of payment periods.
(c) Any other method which is actuarially equivalent to the
Participant's Account balance and is approved by the Committee, in its sole
discretion.
5.7 PENSION MAKE-UP BENEFIT. The Employer shall provide to each
Participant a separate benefit equal to the amount by which the Participant's
benefit under the Qualified Pension Plan has been reduced as a result of
deferrals under this Plan. The amount of this benefit shall be the difference
between:
(a) The Normal Benefit which would have been available under the
Qualified Pension Plan if no deferrals had been made under this Plan; and
(b) the Normal Benefit actually available under the Qualified Pension
Plan.
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The benefit shall be paid in the time and manner as applicable to the
Participant under the Qualified Pension Plan.
5.8 WITHHOLDING; PAYROLL TAXES. The employer shall withhold from payments
made hereunder any taxes required to be withheld from payments made hereunder
any taxes required to be withheld from a Participant's wages for the federal or
any state or local government.
AMENDED 5.9 COMMENCEMENT OF PAYMENTS. Benefit payments shall commence on the
first day of the first month which begins not less than sixty (60) days after
Retirement, Termination, Total and Permanent Disability or death. All
subsequent payments shall be made as of the first day of the month.
5.10 BENEFITS PAYABLE TO MINORS OR INCOMPETENTS. Every person receiving or
claiming benefits under the Plan shall be conclusively presumed to be mentally
competent and of age until the date on which the Commitment receives a written
notice, in a form and manner acceptable to the Committee, that such person is
incompetent or a minor, for whom a guardian or other person legally vested with
the care of his person or estate has been appointed; provided, however, that if
the Committee shall find that any person to whom a benefit is payable under the
Plan is unable to care for his affairs because of incompetency, or is a minor,
any payment due (unless a prior claim therefor shall have been made by a duly
appointed legal representative) may be paid to the spouse, a child, a parent or
a brother or sister, or to any person or institution deemed by the Committee to
have incurred expenses for the person otherwise entitled to payment. To the
extent permitted by law, any such payment so made shall be a complete discharge
or liability therefor under the Plan.
In the event a guardian of the estate of any person receiving or claiming
benefits under the Plan shall be appointed by a court of competent jurisdiction,
benefit payments may be made to such guardian, provided that proper proof of
appointment and continuing qualification is furnished in a form and manner
acceptable to the Committee. To the extent permitted by law, any such payment
so made shall be a complete discharge of any liability therefor under the Plan.
ARTICLE VI
BENEFICIARY DESIGNATION
6.1 BENEFICIARY DESIGNATION. Each Participant shall have the right, at
any time, to designate any person or persons as his Beneficiary or Beneficiaries
(both principal as well as contingent) to whom benefits under this Plan shall be
paid in the event of Participant's death prior to complete distribution of the
benefits due under the Plan. Each beneficiary designation shall be in a written
form prescribed by the Committee and will be effective only when filed with the
Committee during the Participant's lifetime. To be effective, a designation of
a beneficiary other than the Participant's spouse shall require the written
consent of the spouse on the beneficiary designation form filed with the
Committee.
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6.2 AMENDMENTS. Any Beneficiary designation may be changed by a
Participant without the consent of any designated Beneficiary by the filing of a
new Beneficiary Designation with the Committee. The filing of a new Beneficiary
Designation form will cancel all Beneficiary Designations previously file.
6.3 NO BENEFICIARY DESIGNATION. If any Participant fails to designate a
Beneficiary in the manner provided above, or if the Beneficiary designated by a
decreased Participant dies before the Participant or before complete
distribution of the Participant's benefits, the Participant's Designated
Beneficiary shall be deemed to be the person in the first of the following
classes in which there is a survivor:
(a) the surviving spouse;
(b) the Participant's children, except that if any of the children
predeceases the Participant but leave issue surviving, then such issue
shall take by right of representation the share the parent would have taken
if living;
(c) the Participant's estate.
6.4 EFFECT OF PAYMENT. Payment to the deemed Beneficiary shall completely
discharge Employer's obligations under this Plan.
ARTICLE VII
ADMINISTRATION
7.1 COMMITTEE; DUTIES. This Plan shall be administered by the
Compensation Committee of the Board of Directors. The Committee may delegate
some or all of its responsibilities for the day-to-day operation of the Plan to
an Administrative Committee. Members of the Committee may be Participants under
this Plan. The Committee shall have responsibility for the general
administration of the Plan and for carrying out its intent and provisions. The
Committee shall have such powers and duties as may be necessary to discharge its
responsibilities. These powers shall include, but not be limited to:
(a) Interpretation of the Plan provisions;
(b) Determination of amounts due to any Participant, the rights of any
Participant or Beneficiary under this Plan, the right to require any
necessary information from any Participants or determine the amounts
credited to Participant's Accounts and Interest earned, and
(c) Any other activities deemed necessary or helpful.
7.2 AGENTS. The Committee may, from time to time, employ other agents and
delegate to them such administrative duties as it sees fit, and may from time to
time consult with counsel who may be counsel to the Employer.
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7.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final and conclusive and binding upon
all persons having any Interest in the Plan.
7.4 IMDEMNITY OF COMMITTEE. The Employer shall indemnify and hold harmless
the member of the Committee against any and all claims, loss damage,
expense or liability arising from any action or failure to act with
respect to this Plan, except in the case of gross negligence or
willful misconduct, to the extent the claims, loss, damage or
liability is not otherwise reimbursed by insurance.
ARTICLE VIII
CLAIMS PROCEDURE
8.1 CLAIM. Any person claiming a benefit, requesting an interpretation or
ruling under the Plan, or requesting information under the Plan shall present
the request in writing to the Committee, which shall respond in wiring as soon
as practicable.
8.2 DENIAL OF CLAIM. If the claim or request is denied, the written
notice of denial shall state:
(a) The reasons for denial, with specific reference to the Plan
provisions on which the denial is base,
(b) A description of any additional material or information required
and an explanation of why it is necessary
(c) An explanation of the Plan's claim review procedure.
8.3 REVIEW OF CLAIM. Any person whose claim or request is denied or who
has not received a response within thirty (30) days may request review by notice
given in writing to the Committee. The claim or request shall be reviewed by
the Committee who may, but shall not be required to, grant the claimant a
hearing. On review, the claimant may have representation, examine pertinent
documents, and submit issues and comments in writing.
8.4 FINAL DECISION. The decision on review shall normally be made within
sixty (60) days. If an extension of time is required for a hearing or other
special circumstances, the claimant shall be notified and the time limit shall
be one hundred twenty (120) days. The decision shall be in writing and shall
state the reasons and the relevant plan provisions. All decisions on review
shall be final and bind all parties concerned.
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ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 AMENDMENT. The Board may at any time amend the Plan in whole or in
part, provided, however, that no amendment shall be effective to decrease or
restrict the amount accrued to the date of Amendment in any Account maintained
under the Plan. Any change in the definition of "Interest" as defined herein
shall be made only upon the following terms and conditions:
(a) Any change in the Interest rate shall not become effective until
the first day of the calendar year which follows the adoption of the
amendment and providing at least thirty (30) days' written notice of the
amendment to the Participant.
9.2 EMPLOYER'S RIGHT TO TERMINATE. The Board may at any time partially or
completely terminate the Plan if, in its judgment, the tax, accounting, or other
effects of the continuance of the Plan, or potential payments thereunder would
not be in the best interests of the Employer.
(a) PARTIAL TERMINATION. The Board may partially terminate the Plan
by instructing the Committee not to accept any additional Deferral
Commitments. In the event of such a Partial Termination, the Plan shall
continue to operate and be effective with regard to Deferral Commitments
entered into prior to the effective date of such Partial Termination.
(b) COMPLETE TERMINATION. The Board may completely terminate the Plan
by instructing the Committee not to accept any additional Deferral
Commitments, and terminate all ongoing Deferral Commitments. In the event
of such a Complete Termination, the Plan shall cease to operate and the
Committee shall pay out to each Participant the appropriate Account as if
that Participant had terminated service as of the effective date of such
Complete Termination in equal monthly installments over the period listed
below based on the Account balance:
Appropriate Account Balance Payout Period
- --------------------------- ----------------
Less than $10,000 2 Years
$10,000 but less than $50,000 5 Years
More than $50,000 10 Years
Interest earned on the unpaid balance in each Participant's Account shall
be the applicable Interest rate on the Determination Date immediately preceding
the effective date of such Complete Termination.
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ARTICLE X
MISCELLANEOUS
10.1 UNFUNDED PLAN. This Plan is intended to be an unfunded plan
maintained primarily to provide deferred Compensation benefits for a select
group of management employees or highly compensated employees. This Plan is not
intended to create an investment contract, but to provide tax planning
opportunities and retirement benefits to eligible individuals who have elected
to participate in the Plan. Eligible individuals are select members of
management who, by virtue of their position with the Employer, are uniquely
informed as to the Employer's operations and have the ability to materially
affect the Employer's profitability and operations.
10.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable rights, Interest
or claims in any property or assets of Employer, nor shall they be beneficiaries
of, or have any rights, claims or interests in any life insurance policies,
annuity contracts or the proceeds therefrom owned or which may be acquired by
Employer ("Policies"). Except as provided under Section 10.3, such Policies or
other assets of Employer shall not be held under any trust for the benefit of
Participants, their Beneficiaries, heirs, successors or assigns are held in any
way as collateral security for the fulfilling of the obligations of Employer
under this Plan. Any and all of Employer's assets and Policies shall be, and
remain, the general, unpledged, unrestricted assets of Employer. Employer's
obligation under the Plan shall be that of an unfunded and unsecured promise of
Employer to pay money in the future.
10.3 TRUST FUND. The Employer shall be responsible for the payment of all
benefits provided under the Plan. At its discretion, the Employer may establish
one or more trusts, with such trustees as the Board may approve, for the purpose
of providing for the payment of such benefits. Such trust or trusts may be
irrevocable, but the assets thereof shall be subject to the claims of the
Employer's creditors. To the extent any benefits provided under the Plan are
actually paid from any such trust, the Employer shall have no further obligation
with respect thereto, but to the extent not so paid, such benefits shall remain
the obligation o, and shall be paid by, the Employer.
10.4 NONASSIGNABILITY. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate or convey in advance of actual
receipt the amounts, if any, payable hereunder, or any part thereof, which are,
and all rights to which are, expressly declared to be unassignable and non-
transferable. No part of the amounts payable shall, prior to actual payment, be
subject to seizure of sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency, except to the extent provided under
applicable law regarding community property rights.
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10.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between the Employer
and the Participant, and the Participant (or his Beneficiary) shall have no
rights against the Employer except as may otherwise be specifically provided
herein. Moreover, nothing in this Plan shall be deemed to give a Participant
the right to be retained in the service of the Employer to discipline or
discharge him at any time.
10.6 PROTECTIVE PROVISIONS. A Participant will cooperate with the
Employer by furnishing any and all information requested by the Employer, in
order to facilitate the payment of benefits hereunder, and by taking such
physical examinations as the Employer may deem necessary and taking such other
action as may be requested by the Employer. Notwithstanding the other provisions
of this Plan, no death benefits in excess of the Retirement Account balance
shall be paid if death occurs as a result of suicide.
10.7 TERMS. Whenever any words are used herein in the masculine, they
shall be construed as though they were used in the feminine in all cases where
they would so apply; and wherever any words are used herein in the singular or
in the plural, they shall be construed as though they were used in the plural or
the singular, as the case may be, in all cases where they would so apply.
10.8 CAPTIONS. The captions of the articles, sections and paragraphs of
thin Plan are for convenience only and shall not control or affect the meaning
of construction of any of its provisions.
10.9 GOVERNING LAW. The provisions of this Plan shall be construed and
interpreted according to the law of the State of Arizona.
10.10 VALIDITY. In case any provision of this Plan shall be held illegal
or invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted herein.
10.11 NOTICE. Any notice of filing required or permitted to be given to
the Committee under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to any member of the
Committee, or Secretary of the Employer. Such notice shall be deemed given as
of the date of delivery or, if delivery is made by mail, as of the date shown on
the postmark on the receipt for registration or certification.
10.12 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of the Employer and its successors and assigns. The term successors as
used herein shall include any corporate or other business entity which shall,
whether by merger, consolidation, purchase or otherwise acquire all or
substantially all of the business and assets of the Employer, and successors of
any such corporation or other business entity.
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IN WITNESS WHEREOF, and pursuant to resolution of the Board of Directors of
Valley National Corporation such corporation has caused this instrument to be
executed by its duly authorized officers effective as of October 1, 1988.
VALLEY NATIONAL CORPORATION
By: /s/ Richard J. Lehmann
-------------------------
President
By: /s/ William J. Ramsey
------------------------
Secretary
Dated: December 1, 1988
------------------
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AMENDMENT 1
VALLEY NATIONAL CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
THIS AMENDMENT to the Valley National Corporation Executive Deferred
Compensation Plan (the "Plan") is made and entered into this 20/th/ day of
December, 1989, by Valley National Corporation, an Arizona Corporation, (the
"Company");
WHEREAS, the Company has established the Plan as effective October 1, 1988; and
WHEREAS, the Company desires to make certain changes; and
WHEREAS, pursuant to Section 9.1 of the Plan, the right to amend the Plan is
reserved to the Company; and
WHEREAS, the Company has approved the amendments to the Plan as provided below;
NOW, THEREFORE, the Plan is hereby amended as follows:
FIRST: Section 2.6 shall be amended to read as follows:
2.5 COMMITTEE. "Committee" means the Compensation Committee of the Board
of Directors appointed by the Board to administer the Plan pursuant to Article
VII. No member of the committee may participate in any decision regarding his
or her own benefit.
SECOND: Section 2.11 Early Retirement Date and Section 2.15 Normal Retirement
Date shall be deleted in their entirety.
THIRD: Section 2.21 shall be amended to read as follows:
2.21 RETIREMENT: "Retirement" means the severance of employment with
the Employer at the Participant's Early, Advanced, Normal or Late Retirement
Date as applicable. Participants who, after retirement, become, or continue to
be members of the Board shall not be considered to be retired, for purposes of
this plan, until the severance of service as an active Board member and as a
Director Emeritus.
For purposes of this provision:
(a) EARLY RETIREMENT DATE. "Early Retirement Date" means the date on
which the Participant attains the status of early retirement under the personnel
procedures of the Employer.
(b) ADVANCED RETIREMENT DATE. "Advanced Retirement Date" means the date
on which the Participant actually terminates employment following the first day
of the month coinciding with or next following a Participant's attainment of age
sixty-two (62), but prior to his Normal Retirement Date.
<PAGE>
(c) NORMAL RETIREMENT DATE. "Normal Retirement Date" means the date on
which the Participant actually terminates employment following the first day of
the month coinciding with or next following a Participant's attainment of age
sixty-five (65).
(d) LATE RETIREMENT DATE. "Late Retirement Date" means the date on which
the Participant actually terminates employment following the first day of any
month following the Participant's Normal Retirement Date.
FOURTH: Section 3.2(a) shall be amended to read as follows:
(a) SALARY DEFERRAL COMMITMENT. A Participant may elect to defer any
portion of his base salary for the year following the calendar year in
which the Participation Agreement is submitted. The amount to be deferred
shall be started as a flat dollar amount or as a percentage of base salary
but must not be less than two thousand dollars ($2,000) during the Deferral
Period. The percentage of salary to be deferred may be stated in one-half
percent (1/2%) increments.
FIFTH: Section 5.6 shall be amended by adding subsection (d) to read as
follows
(d) Notwithstanding the form of payment elected by the Participant, in
the event the applicable account balance is less than ten thousand dollars
($10,000) at the time payment is to commence, the form of benefit payment
shall be a lump sum payment.
SIXTH: Section 5.9 shall be amended in its entirety to read as follows:
5.9 COMMENCEMENT OF PAYMENTS. Benefit payments shall commence no later
than sixty days following Retirement, Termination, Total and Permanent
Disability or death. All subsequent payments shall be made as of the first
day of the month.
SEVENTH: Except as provided herein, all other Plan provisions shall remain in
full force and effect.
EIGHTH: The Amendment to the Plan provided for herein shall be effective as of
the 20/th/ day of December.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of
the day and year first above written.
VALLEY NATIONAL CORPORATION
By: /s/ Richard J. Lehmann
-------------------------
Its: Chairman of the Board and Chief Executive
Officer
<PAGE>
AMENDMENT NO. 2
TO VALLEY NATIONAL CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
THIS AMENDMENT to the Valley National Corporation 401(+)(TM) Executive Deferred
Compensation Plan (the "Plan") is made and entered into this 19/th/ day of
November, 1991 by Valley National Corporation, and Arizona Corporation, (the
"Company");
WHEREAS the Company established the Plan as effective October 1, 1986.
WHEREAS the Company previously amended the Plan by execution of an amendment No.
1; and
WHEREAS the Company desires to make an additional change; and
WHEREAS pursuant to Section 9.1 of the Plan, the right to amend the Plan is
reserved to the Company; and
WHEREAS the Company has approved the amendments to the Plan as provided below;
NOW THEREFORE the Plan is hereby amended as follows:
FIRST: Section 5.1 is hereby amended in its entirety to provide as follows:
5.1 Retirement Benefit. The Employer shall pay a Plan Benefit equal
to the Participant's Retirement Account to each participant who:
(a) terminates employment by reason of Retirement or Total and
Permanent Disability,
(b) terminates employment within two years of Change in Control
for a reason other than Death.
The Employer shall also pay a Plan Benefit equal to the Participant's
Retirement Account in the event that the "regulatory capital ratio", as
such a term is defined by the Office of the Comptroller of the Currency, of
The Valley National Bank of Arizona becomes less than three Percent (3%).
SECOND: Section 5.9 is hereby amended in its entirety to provide as follows:
5.9 Commencement of Payments. Benefit payments shall commence on the
first day of the first month which begins not less than sixty (60) days
after Retirement, Termination, Total and Permanent Disability or death. In
the event that payment is due
<PAGE>
under Section 5.1 on account of the change in regulatory capital described
in Section 5.1, benefit payments shall commence on the first day of the
first month which begins not less than sixty (60) days after the later of
(a) the effective date of such event of (b) the date of determination by
the Committee of such event. All subsequent payments shall be made as of
the first day of the month.
THIRD: Except as provided herein, all other Plan Provisions shall remain in
full force and effect.
FOURTH: The Amendment to the Plan Provided for here in shall be effective as
of the 1/st/ day of January, 1992.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of
the day and year first above written.
VALLEY NATIONAL CORPORATION
BY:______________________________________
ITS:______________________________________
ATTEST:
BY:________________________________
ITS:________________________________
<PAGE>
RESOLUTION
401(+)(TM)
VALLEY NATIONAL CORPORATION
RESOLVED that the Valley National Corporation (the corporation) hereby
adopts Amendment No. 2 to the Corporation's 401 (+)(TM) Executive Deferred
Compensation Plan, a copy of which is attached hereto as Amendment No. 2 and by
this reference is incorporated herein; and be it further
RESOLVED, that the President or a Vice President and the Secretary of the
Corporation be, and the same hereby are, authorized, empowered, and directed to
execute such amendment with such changes, modifications, additions or deletions
as they may approve, their execution thereof to evidence their approval; be it
further
RESOLVED, that the acts and deeds of the officers of the Corporation
necessary to carry out the intent and purposes of these resolutions be, and the
same hereby are ratified, confirmed and adopted as the acts and deeds of this
corporation.
_______________________________________________________
PURPOSE: To amend the plan to pay a Plan Benefit equal to the Participant's
Retirement Account in the event that the "regulatory capital ratio" of The
Valley National Bank of Arizona becomes less than three percent (3%).
1
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EXHIBIT 10(QQ)
INTRODUCTION
American Fletcher Corporation ("Corporation") has created a deferred
compensation plan to provide you, as a key management employee of the
Corporation or one of its affiliates, with the opportunity to custom-design your
own retirement income and family financial security planning. The name of the
plan is the American Fletcher Corporation Deferred Compensation Plan ("Plan").
The purpose of this Summary is to explain the principal provisions of the
Plan. The actual Plan provisions are set out in a more formal Plan document, a
copy of which will be available for you. Failure to mention or describe any
provision of that document in this Summary does not change the full force and
effect of that provision as part of the Plan. In the case of any discrepancy
between this Summary and the Plan document, the Plan documents will govern.
PRINCIPAL GOALS OF THE PLAN: (1) allow you to defer current income on a
pre-tax basis, (2) provide you the opportunity to custom-design a retirement
plan in excess of and independent of Social Security and any other retirement
benefits to which you may be entitled, (3) increase the survivor benefits
payable to your family in the event of death, (4) provide many of the same
characteristics of a tax shelter but without the associated risk and (5)
demonstrate in real terms the Corporation's appreciation of your contribution to
its success.
PLAN OPERATION HIGHLIGHTS: As a selected management employee, you will be
given an opportunity to defer the receipt of income you might otherwise expect
to earn and receive in the future. In return for the irrevocable election to
defer, you (or your beneficiary) will be entitled to received from the
Corporation a series of monthly payments as follows:
<TABLE>
<CAPTION>
Pre-Retirement Retirement Benefit
Survivor Benefit (Age 65)
-------------------- -------------------------
<S> <C>
180 Monthly Payments Monthly payments for life (15 years certain)
</TABLE>
To determine the benefits that will be payable to you, if you retire at age
65, you should consult Table 1. You should be aware, however, that the
Corporation's obligation to pay the benefit listed in Table 1 is subject to the
limitations described in this document, including the Corporation's right to
amend or terminate the Plan, which right is described in the response to
Question 28.
FACTORS TO CONSIDER IN DECIDING WHETHER TO PARTICIPATE:
Details of the Plan follow in a question and answer format. Among the
points to consider in making your election to participate in the plan are:
<PAGE>
1. The extent to which the income payable under the qualified retirement
plans in which you participate, Social Security, and other sources
will be adequate for your retirement needs.
2. What other opportunities exist to accumulate financial resources for
retirement on a tax-advantage basis.
3. How much current income you can afford to defer and still have
sufficient cash for your immediate or short-term needs.
4. What the estimated needs of your dependents are for survivor income.
5. What the cost of financing survivor income benefits with after-tax
income would be if this Plan were not available.
6. The extent to which the income payable as survivor benefits under the
qualified retirement plans in which you participate and funds
available from the Group Life Plan, as well as your personal estate
assets and Social Security, will be sufficient for your survivors'
needs.
2
<PAGE>
QUESTIONS AND ANSWERS
1. HOW ARE RETIREMENT INCOME BENEFITS DETERMINED?
With the assistance of its consultant, the Corporation has developed a
system of benefits for Plan participants. Those benefits are set out in the
Tables at the end of the summary. Payment of the amounts listed in the
Tables, however, is subject to the limitations described in the following
Questions and Answers.
2. WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
Any employee who is a participant of The Performance Incentive Plan ("PIP")
3. HOW MUCH CAN BE DEFERRED?
The minimum amount that would otherwise be payable to you during any
calendar year that can be deferred is $2,000, The maximum amount that would
otherwise be payable to you during any calendar year that can be deferred
is the greater of $10,000 or 10% of your bonus and base salary (without
reduction on account of any election made by you pursuant to this Plan or
any other plan of your employer). The amount of the deferral must be an
even multiple of $1,000.
4. WHAT SOURCES OF INCOME CAN BE DEFERRED?
You may defer either a portion of your PIP bonus, your annual base salary,
or a combination of both. Before 1986, you will be given the opportunity to
defer a portion of your PIP bonus payable in 1986, your 1986 base salary,
and your PIP bonus payable in 1987. Any election to defer your PIP bonus
payable in 1987 will be effective only if the Corporation decides to permit
the deferral of amounts that would otherwise be paid in 1987. After 1985,
to the extent permitted by the Executive Committee of American Fletcher
National Bank and Trust Company ("Executive Committee"), you will be given
an opportunity before the end of each calendar year to defer a portion of
your PIP bonus paid with respect to the following year, a portion of your
base salary for the following year, or a combination of both.
5. WHEN WILL I BE ELIGIBLE FOR NORMAL RETIREMENT BENEFITS?
You will be eligible for normal retirement benefits on your normal
retirement date, which is the first day of the calendar month coincident
with or, if none is coincident with, next following your sixty-fifty (65th)
birthday.
6. HOW ARE NORMAL RETIREMENT INCOME BENEFITS PAYABLE?
Normal retirement benefits are payable monthly for life beginning on the
first day of the month following the later of the month in which you reach
age sixty-five (65) or the month in which you retire. If you die before
receiving 180 monthly payments, your beneficiary will receive the balance
of those payments, until a total of 180 monthly
3
<PAGE>
payments has been made. The annual amount of your normal retirement benefit
will be determined pursuant to Table 1.
7. WHEN WILL I BE ELIGIBLE FOR EARLY RETIREMENT BENEFITS?
You will be eligible for early retirement benefits, if you retire on an
early retirement date. An early retirement date with respect to any
deferred amount is any date on which you retire before your normal
retirement date, provided that you have attained age fifty-five (55), and
at least two full calendar years have passed since the beginning of the
calendar year in which you deferred that amount.
8. HOW IS THE LEVEL OF BENEFIT PAYMENTS DETERMINED, IF I AM ELIGIBLE FOR AN
EARLY RETIREMENT BENEFIT?
Subject to the following provisions of this paragraph, payment of your
early retirement benefit will be made in the same manner, at the same
times, and in the same amounts as if you had remained employed until your
normal retirement date. You may, however, request that the Executive
Committee cause distribution of your benefits to begin on the first day of
the month coincident with or, if none is coincident with, next following
your early retirement date. The Executive Committee may grant or deny your
request in its discretion. If the Executive Committee grants your request
for early distribution of Plan benefits, the amount of your benefits will
be reduced by five-twelfths (5/12ths) of one percent (1%) for each full or
partial month by which the date on which payment of your benefit begins
precedes your normal retirement date.
9. HOW ARE BENEFITS DETERMINED, IF MY EMPLOYMENT IS TERMINATED PRIOR TO AGE 65
BECAUSE OF DISABILITY?
For purposes of determining your benefits under the Plan, you will be
treated as if you were employed during any period prior to your normal
retirement date, if you are disabled (as defined by the American Fletcher
Group LTD Plan) during that period. Therefore, if you become disabled and
remain disabled until your normal retirement date, you will be entitled to
your normal retirement benefit on your normal retirement date.
10. HOW ARE BENEFITS DETERMINED, IF MY EMPLOYMENT IS TERMINATED PRIOR TO AN
EARLY RETIREMENT DATE OTHER THAN BY REASON OF DEATH OR DISABILITY?
If your employment is terminated prior to an early retirement date (as
defined in the response to question 7) other than by reason of death or
disability (as defined by the American Fletcher Corporation Group LTD
Plan), you will receive your deferred amounts, plus interest as determined
by the Executive Committee from time to time; provided, however, that the
interest rate used by the Executive Committee will be not less than 10% per
annum.
4
<PAGE>
11. IS IT POSSIBLE THAT MY CONDUCT SUBSEQUENT TO A DEFERRAL WILL AFFECT THE
AMOUNT OF THE BENEFIT TO WHICH I AM ENTITLED UNDER THE PLAN?
Yes. Under certain circumstances, you may lose your right to the benefits
described elsewhere in this summary. If your employment is terminated as
direct result of an act or acts of dishonesty constituting a felony under
the laws of the State of Indiana and resulting or intended to result
directly or indirectly in your gain or enrichment at the expense of the
Company, you shall not be entitled to the benefits described elsewhere in
this Summary. You shall be entitled, instead, only to a return of your
deferred amount, with such interest, if any, as determined by the Executive
Committee.
12. UNDER WHAT CIRCUMSTANCES ARE PRE-RETIREMENT SURVIVOR INCOME BENEFITS
PAYABLE?
If you die while still employed as an eligible participant or while you are
deemed to be employed because of your disability, pre-retirement survivor
income benefits will be payable to your beneficiary.
13. HOW ARE THE SURVIVOR INCOME BENEFITS DETERMINED?
If you are insurable at standard rates by an insurance company selected the
Corporation, survivor income benefits are as specified in Table 1 without
reference either to your age at the time of your death or the age of your
designated beneficiary.
14. WILL A DETERIORATION IN MY HEALTH CAUSE A REDUCTION IN SURVIVOR INCOME
BENEFITS ATTRIBUTABLE TO PRIOR DEFERRALS?
No. Survivor income benefits attributable to prior deferrals will remain
unchanged.
15. WHEN WILL SURVIVOR INCOME BENEFITS BE PAID TO DESIGNATED BENEFICIARIES, IF
I DIE WHILE STILL EMPLOYED?
Benefits are payable monthly for fifteen years beginning sixty (60) days
following the date of your death and receipt of a death certificate.
16. WHOM MAY I DESIGNATE AS MY BENEFICIARY UNDER THE PLAN?
You may designate one or more individuals or trusts, as limited by the
Staff Benefits and Retirement Committee of American Fletcher National Bank
and Trust Company ("Administrative Committee") from time to time.
5
<PAGE>
17. WILL I BE ABLE TO CHANGE THE BENEFICIARIES FOR PRIOR DEFERRALS?
Yes. You will be able to change beneficiaries from prior deferrals by
filing the appropriate form with the Administrative Committee.
18. IS THERE ANY AGE LIMITATION FOR ELECTING TO DEFER INCOME?
You may not elect to defer any amount that would otherwise be payable to
you during a calendar year, if you have attained age sixty-four (64) on or
before the first day of that calendar year.
19. WILL I BE ALLOWED TO DEFER COMPENSATION IN FUTURE YEARS?
Yes, assuming that you remain an eligible participant and the Executive
Committee determines, in its sole discretion, that further deferrals will
be available.
20. HOW WILL THE CORPORATION MEET ITS OBLIGATIONS UNDER THE PLAN?
The benefits payable under this Plan will be paid from the general assets
of the Corporation. Your right to receive payment under the Plan is merely
a contractual right to payment, and the Plan does not give you any interest
in or right to any of the funds, property, or assets of the Corporation.
The Corporation reserves the right to invest deferred amounts in any way
that it deems appropriate under the circumstances including the use of the
deferred amounts in the business of the Corporation and/or the purchase of
and payment for life insurance contracts on the lives of participants. If
the Corporation elects to purchase life insurance on any or all of the
participants, the Corporation shall be the applicant for those policies and
at all times shall be the sole owner and beneficiary under the policies. At
no time will any participant have any interest, directly or indirectly, in
any life insurance policies on his or here life issued to the Corporation.
Neither the amounts deferred nor any earnings thereon will at any time be
segregated from the general assets of the Corporation.
21. IF THE CORPORATION CHOOSES TO PURCHASE INSURANCE, WHAT FACTORS ARE
CONSIDERED BY THE INSURANCE COMPANY TO DETERMINE MY ELIGIBILITY FOR
INSURANCE AT STANDARD RATES?
The insurance company will consider your current health status, your health
history, and dangerous avocations in which you may engage, and, in some
cases, your family health history. A medical examination may be requested
by the insurance carrier for some participants. Any examination will be
paid for by the insurance company.
6
<PAGE>
22. WHEN WILL MEDICAL EXAMINATIONS BE SCHEDULED?
Examinations will be scheduled shortly after the deferral elections have
been completed and returned.
23. MUST I BE INSURABLE AT STANDARD RATES TO RECEIVE FULL RETIREMENT INCOME
BENEFITS?
No. Your insurability does not affect retirement income benefits. Your
insurability will affect survivor income benefits as provided in the
response to Question 25.
24. MAY I CHANGE MY DEFERRAL ELECTION, IF I AM NOT FOUND TO BE INSURABLE AT
STANDARD RATES?
No. Deferral elections are irrevocable after the date established by the
Executive Committee. A determination by the insurance carrier of your
insurability status should not be expected until after that date.
25. HOW ARE SURVIVOR INCOME BENEFITS DETERMINED, IF I AM NOT INSURABLE AT
STANDARD RATES?
Survivor income benefits will be equal to your normal retirement benefit
reduced by the reduction factor from Table 2 for the age at which your
death occurs; provided, however, that the benefits may not exceed the
survivor income benefits for those participants who are fully insurable at
standard rates, as specified in Table 1. Subject to the limitation set out
in the preceding sentence, the longer you live, the higher the survivor
income benefit.
For example, if a 45-year-old participant defers $10,000, his survivor
income benefit is calculated as follows:
<TABLE>
<CAPTION>
15 Year Annual
Age at Survivor Income Total Survivor
Death Benefit Income Benefit
------ --------------- --------------
<S> <C> <C>
46 $ 3,485 $ 52,275
50 4,696 70,440
55 6,548 98,220
60 10,045 150,675
</TABLE>
7
<PAGE>
26. IF I AM NOT INSURABLE AT STANDARD RATES NOW BUT BECOME INSURABLE AT
STANDARD RATES IN THE FUTURE, WILL I QUALIFY FOR UNREDUCED SURVIVOR
BENEFITS FOR PRIOR DEFERRALS AT THAT TIME?
It may be possible to receive unreduced survivor income benefits for prior
deferrals, if you become insurable at standard rates at a future date.
27. SHOULD I CANCEL OR REDUCE MY PRIVATE LIFE INSURANCE COVERAGES IN VIEW OF
THE SURVIVOR INCOME BENEFIT PAYABLE UNDER THIS PLAN?
Probably not, but this depends on your financial situation. Survivor income
benefits payable under the Plan may alleviate the need to increase your
life insurance coverage.
Survivor income benefits and personal life insurance proceeds have certain
fundamental differences. Life insurance proceeds are often paid in a lump
sum at your death, are not subject to income taxation, and may have been
structured to avoid estate taxation. Ordinary life insurance coverage may
be continued for the duration of your lifetime, while survivor income
benefits diminish and eventually terminate as you receive your retirement
income benefits.
In the event that the deferred income benefits are subject to reduction or
elimination, you may be presented with a problem, if you have reduced or
cancelled your life insurance coverage and are then determined to be
uninsurable.
28. IS THE PLAN SUBJECT TO REDUCTION OR ELIMINATION BY THE CORPORATION?
The Corporation fully intends to pay the benefits provided for under the
Plan, but it reserves the right to amend or terminate the Plan at any time.
No amendment or termination of the Plan, however, may affect those
participants or beneficiaries who are receiving income payments at the time
of the amendment or termination.
If the Corporation terminates the Plan, the amounts deferred plus interest
as determined by the Executive Committee will be paid to you in one lump
sum payment as soon as practicable following termination, provided,
however, that the interest rate used by the Executive Committee may not be
less than 10% per annum.
No amendment to the Plan may diminish your rights arising out of amounts
deferred prior to the amendment. Notwithstanding the preceding sentence,
the Corporation may reduce the interest rate used in determining normal
retirement benefits; provided, however, that the interest rate may not be
reduced below 10% per annum.
8
<PAGE>
29. DOES THE PLAN AFFECT MY PARTICIPATION IN THE QUALIFIED PLANS IN WHICH I
PARTICIPATE?
The Employees' Retirement Plan of American Fletcher National Bank and Trust
Company and Affiliates; the Employees' Retirement Plan of American Fletcher
Financial Services, Inc.; and the American Fletcher Thrift Plan will
provide (subject to approval of the Internal Revenue Service) that your
compensation, for purposes of calculating contributions of benefits under
those plans, will not be reduced, if you elect to defer a portion of your
basic salary under this Plan. If you elect to defer a portion of your basic
salary under this Plan, it is possible that contributions made on your
behalf to the Employee Stock Ownership Plan of American Fletcher
Corporation and Affiliates will be reduced. In addition, it is possible
that deferrals under this Plan will affect the aggregate amount of
contributions and benefits on your behalf under the qualified plans in
which you participate.
30. DO I OR MY BENEFICIARY HAVE THE RIGHT TO ASSIGN OR PLEDGE MY FUTURE
BENEFITS UNDER THE PLAN?
No. Neither you nor your beneficiary has the right to transfer, assign,
anticipate, or otherwise encumber in advance any of the benefits that may
become payable under the Plan.
9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE 1
BENEFITS PER $1,000 DEFERRAL
- --------------------------------------------------------------------------------
AGE* ANNUAL
AMOUNT OF
NORMAL 15 YEARS TOTAL
RETIREMENT CERTAIN SURVIVOR SURVIVOR
BENEFIT TOTAL BENEFIT BENEFIT BENEFIT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
30 10,449 156,735 3,803 57,045
31 9,251 138,765 3,642 54,630
32 8,190 122,850 3,488 52,320
33 7,252 108,780 3,341 50,115
34 6,420 96,300 3,200 48,000
35 5,685 85,275 3,065 45,975
36 5,004 75,060 2,930 43,950
37 4,405 66,075 2,802 42,030
38 3,878 58,170 2,679 40,185
39 3,414 51,210 2,561 38,415
40 3,005 45,075 2,449 36,735
41 2,746 41,190 2,242 33,630
42 2,509 37,635 2,053 30,795
43 2,292 34,380 1,879 28,185
44 2,094 31,410 1,720 25,800
45 1,913 28,695 1,575 23,625
46 1,712 25,680 1,406 21,090
47 1,532 22,980 1,255 18,825
48 1,370 20,550 1,120 16,800
49 1,226 18,390 1,000 15,000
50 1,097 16,455 893 13,395
51 984 14,760 825 12,375
52 883 13,245 762 11,430
53 792 11,880 704 10,560
54 710 10,650 651 9,765
55 637 9,555 602 9,030
56 564 8,460 538 8,070
57 499 7,485 481 7,215
58 442 6,630 430 6,450
59 391 5,865 385 5,775
60 346 5,190 344 5,160
61 321 4,815 329 4,935
62 298 4,470 315 4,725
63 277 4,155 301 4,515
- --------------------------------------------------------------------------------
</TABLE>
* Refers to age at beginning of calendar year in which deferred amounts would
have been received by executive in absence of election to defer.
10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE 2
REDUCTION FACTORS FOR SURVIVOR INCOME BENEFITS FOR
PARTICIPANTS UNINSURABLE AT STANDARD RATES
- --------------------------------------------------------------------------------
GROSS
SURVIVOR
PAYMENT AS % OF
AGE AT RETIREMENT
DEATH BENEFIT
- --------------------------------------------------------------------------------
<S> <C>
64 79.00%
63 71.33
62 64.41
61 58.15
60 52.51
59 48.20
58 44.25
57 40.62
56 37.28
55 34.23
54 32.03
53 29.97
52 28.04
51 26.24
50 24.55
49 22.79
48 21.15
47 19.63
46 18.22
45 16.91
44 15.66
43 14.50
42 13.42
41 12.43
40 11.51
39 10.65
38 9.85
37 9.11
36 8.42
35 7.79
34 7.24
33 6.73
32 6.26
31 5.82
30 5.41
- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TABLE 3
ASSUMES ONE $10,000 DEFERRAL
- --------------------------------------------------------------------------------
ANNUAL
AMOUNT OF
NORMAL 15 YEARS TOTAL
RETIREMENT CERTAIN SURVIVOR SURVIVOR
AGE* BENEFIT TOTAL BENEFIT BENEFIT BENEFIT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
30 104,485 1,567,275 38,028 570,420
31 92,508 1,387,620 36,421 546,315
32 81,904 1,228,560 34,883 523,245
33 72,516 1,087,740 22,409 501,135
34 64,204 963,060 31,998 479,970
35 56,846 852,690 30,648 459,720
36 50,041 750,615 29,303 439,545
37 44,051 660,765 28,017 420,255
38 38,779 581,685 26,789 401,835
39 34,137 512,055 25,613 384,195
40 30,052 450,780 24,491 367,365
41 27,456 411,840 22,420 336,300
42 25,085 376,275 20,525 307,875
43 22,919 343,785 18,790 281,850
44 20,940 314,100 17,202 258,030
45 19,133 286,995 15,749 236,235
46 17,119 256,770 14,058 210,870
47 15,316 229,740 12,549 188,235
48 13,704 205,560 11,202 168,030
49 12,262 183,930 9,999 149,985
50 10,972 164,580 8,927 133,905
51 9,840 147,600 8,248 123,720
52 8,826 132,390 7,622 114,330
53 7,917 118,755 7,044 105,660
54 7,101 106,515 6,509 97,635
55 6,370 96,550 6,016 90,240
56 5,637 84,555 5,379 80,240
57 4,990 74,850 4,811 72,165
58 4,417 66,255 4,302 64,530
59 3,909 58,635 3,848 57,720
60 3,461 51,915 3,442 51,630
61 3,212 48,180 3,292 49,380
62 2,983 44,745 3,150 47,250
63 2,769 41,535 3,013 45,195
- --------------------------------------------------------------------------------
</TABLE>
* Refers to age at beginning of calendar year in which deferred amounts would
have been received by executive in absence of election to defer.
12
<PAGE>
EXHIBIT 10(RR)
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and among USA, Inc., a Delaware corporation ("First USA"),
Banc One Corporation, an Ohio corporation (the "Company"), and Richard W. Vague
(the "Executive"), dated as of the 5th day of June, 1997.
The Board of Directors of First USA (the "First USA Board") and the Board
of Directors of the Company, have determined that it is in the best interests
of, respectively, First USA and its shareholders, and of the Company and its
shareholders, to assure that First USA will have the continued dedication of the
Executive pending the merger of First USA an the Company (the "Merger") pursuant
to the Agreement and Plan of Merger dated as of January 19, 1997 (the "Merger
Agreement"), and to provide the surviving corporation after the Merger with
continuity of management. Therefore, in order to accomplish these objectives,
the Company's Board and the First USA Board have caused the Company and First
USA, respectively to enter into this Agreement.
NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean the date on which the
Effective time of the Merger (as defined in the Merger Agreement) occurs.
2. Employment Period. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to accept employment with and remain in the
employ of the Company subject to the terms and conditions of this Agreement, for
the period commencing on the Effective Date and ending on the second anniversary
of the Effective Date ("the "Employment Period").
3. Terms of Employment. (a) Position and Duties. (i) (A) During the
Employment Period, the Executive shall serve as Chairman and CEO of First USA,
with such authority, duties and responsibilities as are commensurate with such
position and as ma be consistent with such position as may be assigned to the
Executive by Chairman and CEO of the Company; (B) the Executive's services shall
be performed at Wilmington, Delaware.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote substantially all of his attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable efforts to perform faithfully and efficiently such
responsibilities. The Executive shall also comply with the Company's ethics
policy during the Employment Period.
(b) Compensation. (i) Base Salary. (A) During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary") which
shall be paid at a monthly rate at least equal to or greater than twelve times
the highest monthly base salary paid
1
<PAGE>
or payable, including any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of the twelve-
month period immediately preceding the month in which the Effective Date occurs.
Increases in Annual Base Salary shall be consistent with First USA's past
practices, guided by the compensation practices of other rapidly growing
financial services companies, especially monoline credit card companies ("Past
Practices"). As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary, for each
fiscal year ending during the Employment Period the Executive shall receive, as
a percentage of annual Base Salary, an annual bonus opportunity consistent with
Past Practices. For First USA's fiscal year ending June 30, 1997, Executive
shall be entitled to an Annual bonus payable in July, 1997 pursuant to First
USA's annual incentive plans. Executive shall be paid a pro rata bonus by the
Company with respect to the remainder of calendar year 1997.
(iii) Incentive Compensation. During the Employment Period, the
Executive shall participate in all annual and long-term incentive plans,
practices, policies and programs consistent with Past Practices; provided that
the Executive shall receive the following stock-based awards: a) 300,000 stock
options; b) 45,455 shares of restricted stock in accordance with the details
outlined in Attachment A. the Executive shall be eligible for additional stock
option awards in July, 1997 and both stock options and other stock-based awards
in 1998 and each year thereafter at such times as such awards are made to other
Executives of the Company. Each stock option agreement between the Company and
the Executive shall provide that such stock options, to the extent vested upon
the Executive's termination of employment, including pursuant to any
acceleration of vesting under the terms of this Agreement, shall remain
exercisable following such termination, for a period ending no earlier than the
expiration of the Restricted Period (as defined in Section 8(b) hereof).
(iv) Savings and Retirement Plans. During the Employment Period, the
Executive shall be entitled to participate in all savings and retirement plans,
practices, policies and programs on a basis no less favorable than that
applicable to peer executives of the Company and its affiliated companies.
(v) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) on a basis no less favorable than that applicable
to peer executives of the Company and its affiliated companies.
(vi) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the Company's policies.
2
<PAGE>
(vii) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, payment of
club dues, and, if applicable, use of an automobile and payment of related
expenses, on a basis no less favorable than that applicable to peer executives
of the Company and its affiliated companies.
(viii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments as provided generally at any time thereafter
with respect to peer executives of the Company and its affiliated companies.
(ix) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the plans, policies, programs and
practices of the Company and its affiliated companies on a basis no less
favorable than that applicable to peer executives of the Company and its
affiliated companies but in any event no less than [four] weeks vacation per
annum during the Employment Period.
4. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Disability of the Executive has occurred during the
Employment Period (pursuant to the definition of Disability set forth below),
the Company may give to the Executive written notice in accordance with Section
10(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 60th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 60 days
after such receipt, the Executive shall not have returned to substantially full-
time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by an independent physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company; or
(ii) a material breach by the Executive of this Agreement which is
not remedied by the Executive promptly after receipt of notice thereof given by
the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interest of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the company shall
be conclusively
3
<PAGE>
presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interest of the Company.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for or without Good Reason. For purposed of this Agreement, "Good
Reason" shall mean, in the absence of a written consent of the Executive, any
material failure by the Company to comply with any of the provisions of this
Agreement, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company promptly and receipt
of notice thereof given by the Executive.
(d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 10(b) of this
Agreement. For purposed of this Agreement, a "Notice of Termination" means a
written notice which (I) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein within 30 days of such notice, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Cause or Disability, the Date of Termination shall be the date on which the
Company notifies the Executive of such termination and (ii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
5. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Cause, Death or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of the following amount:
(1) the Executive's Annual Base Salary through the Date of Termination to the
extent not theretofore paid; (2) any compensation previously deferred (other
than pursuant to a qualified plan) by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid (the sum of the amounts described in clauses (1) and
(2) shall be hereinafter referred to as the "Accrued Obligations") and (3) the
product of (x) the sum
4
<PAGE>
of (I) the Executive's Annual Base Salary and (II) the bonus paid to the
Executive with respect to the fiscal year prior to the fiscal year in which the
Date of Termination occurs and (y) a fraction, the numerator of which the
greater of (I) the number of months and/or partial months remaining in the
Employment Period from the Date of Termination or (II) the number of months
and/or partial months remaining in the Restricted Period (as defined in Section
8(b) hereof) from the Date of Termination (such greater number of months and/or
partial months being hereinafter referred to as the "Continuation Period"), and
the denominator of which is 12; and
(ii) during the Continuation Period, or such longer period as may be
provided by the terms of the appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or the Executive's family
at least equal to those which would have been provided in them in accordance
with the plans, programs, practices and policies described in Section 3(b)(v) of
this Agreement if the Executive's employment had not been terminated or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes re-employed with
another employer and is eligible to receive medical or other welfare benefits
under another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed for the Continuation
Period, and to have retired on the last day of such period; and
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies, including any amount which (I) is earned
by, but has not been paid to, the Executive and (ii) would have been paid or
vested in the calendar year in which the Executive's termination of employment
occurs (such other amounts and benefits shall be hereinafter referred to as the
"Other Benefits"); and
(iv) all stock-based awards shall become immediately vested.
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 5(b)
shall include death benefits as in effect on the date of the
Executive's death with respect to peer executives of the Company and
its affiliated companies and their beneficiaries.
5
<PAGE>
(c) Disability If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 5(C) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits as in effect at any time thereafter
generally, with respect to peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than Good Reason. If the Executive's employment
shall be terminated for Cause or the Executive terminates his employment without
Good Reason during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date of Termination, (y) the
amount of any compensation previously deferred by the Executive (other than
pursuant to a qualified plan), and (z) Other Benefits, in each case to the
extent not theretofore unpaid.
(6) Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 10(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies, except where there would be duplication of benefits. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
the company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy practice or
program or contract or agreement except as explicitly modified by this
Agreement.
(7) Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
provided in Section 5(a)(ii), such amount shall not be reduced whether or not
the Executive obtains other employment.
(8) Confidential Information; Non-Competition; Non-Solicitation. (a)
Confidential Information. The Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret of confidential information, knowledge or
date relating to the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its affiliated companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written
6
<PAGE>
consent of the Company or as may otherwise be required by law or legal process
or in order to enforce his rights under this Agreement or as necessary to defend
himself against a claim asserted directly or indirectly by the Company or its
affiliates, communicate or divulge any such information, knowledge or data that
is not otherwise publicly available to anyone other than the Company and those
designated by it.
(b) Non-Competition. Until the earlier of (1) the second anniversary
of the Effective Date, or if later, until one year following the Executive's
Date of Termination or (2) such earlier date as the company may specify to the
Executive, in writing, not less than 30 days prior to such date (the earlier of
clause (1) or (2), the "Restricted Period"), the Executive shall not, unless the
Executive receives the prior written consent of the Company directly or
indirectly: (i) own or become employed by or provide consulting services to, any
business engaged or planning to become engaged in the business of issuing
MasterCard, Visa or other credit card accounts; (ii) own or become employed by
or provide consulting services to, any business engaged or planning to become
engaged in the business of credit card processing, authorization or clearing
services; (iii) offer, accept, purchase, solicit or assist in the offering,
acceptance, purchase or solicitation of MasterCard, Visa or other credit card
accounts for himself or others; or (iv) solicit, offer or assist in the
solicitation or offering of (A) transaction payment processing, authorization or
clearing services, or (B) the development, design or implementation of any
computer hardware or software or system or technology relative to transaction
payment processing, authorization or clearing services.
The restrictions in the previous paragraph shall not prohibit the
Executive from directly or indirectly owning as a passive investment a less than
2 percent capital and/or profits interest in any entity, provided that the Board
has determined that such entity or interest is not a business or investment
opportunity for the Company or one of its affiliates or subsidiaries, and that
any business or entity in which said entity has a direct or indirect interest is
not a business or investment opportunity for the Company or any of its
affiliates or subsidiaries.
(c) Non-Solicitation. During the Restricted Period, the Executive
shall not, directly or indirectly solicit for employment, or directly or
indirectly employ, any individual who at the time of the Executive's termination
of employment or within six months prior thereto was employed by the Company or
its affiliates.
(d) Remedies. In the event of a breach or threatened breach of this
Section 8, the Executive agrees that the Company shall be entitled to injunctive
relief in a court of appropriate jurisdiction to remedy any such breach or
threatened breach, the Executive acknowledges that damages would be inadequate
and insufficient.
(e) Termination of Employment. Any termination of the Executive's
employment or of this Agreement shall have no effect on the continuing operation
of this Section 8.
9. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of decent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
7
<PAGE>
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(10) Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand directly to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
Richard W. Vague
[Address]
If to First USA:
---------------
First USA, Inc.
1601 Elm Street
Dallas, Texas 75201
Attn: General Counsel
Fax: (214) 849-2066
If to the Company:
-----------------
Banc One Corporation
100 East Broad Street
Columbus, Ohio 43271
Attn: General Counsel
Fax: (614) 248-6060
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
8
<PAGE>
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder shall not be deemed to be
a waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive, the Company and First USA acknowledge that prior
to the Effective Date, the terms and conditions of the Executive's employment by
First USA are governed by the terms and conditions contained in the agreement,
dated as of ____________, between First USA and the Executive and that, after
the Effective Date, this Agreement will constitute the entire agreement between
the parties and integrate all agreements between the parties with respect to the
Executive's employment by the Company, the terms and conditions of such
employment, or the termination of such employment. Any and all prior agreements,
understandings or commitments between First USA and the Executive with respect
to any such matter will, after the Effective Date, be hereby superseded and
revoked.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from their respective Boards of Directors,
the Company and First USA have caused these presents to be executed in their
respective names on their respective behalf, all as of the day and year first
above written.
By: /s/ Richard W. Vague
-------------------------------
Richard W. Vague
FIRST USA, INC.
By:
--------------------------------
BANC ONE CORPORATION
9
<PAGE>
ATTACHMENT A
1. At the Effective time of the Merger, the Executive will receive a grant of
300,000 Banc One stock options. These stock options will have an exercise
price equal to the market price of the stock on the date of grant market
and will cliff vest on December 31, 2000. Options will accelerate upon
death, disability, termination of the Company without Cause or by the
Executive for Good Reason (as such terms are defined herein). Other terms
will be provided by the Banc One Plan.
2. At the Effective time of the Merger, the Executive will receive a grant of
45,455 shares of Banc One restricted stock. These restricted stock grants
will cliff vest on December 31, 2001. Vesting will accelerate upon same
terms as options. The vesting will be reduced in amount if certain earnings
hurdles form the credit card business are not met. The applicable years are
1998 and 1999, and the hurdles and grant reductions are as follows:
a. No reduction if the aggregate 1998 and 1999 pre-tax earnings from the
card business exceed $1.570 billion.
b. a 50% reduction if the aggregate 1998 and 1999 pre-tax earnings from
the card business are below $1.570 billion, but exceed $1,400 billion.
c. A 70% reduction if the aggregate 1998 and 1999 pre-tax earnings from
the card business are below $1.400 billion.
It in intended that adjustments to earnings hurdles for the credit card business
will be made, as appropriate, for acquisitions and other relevant items as if
such business continued as an independent concern. Any amounts not vested
pursuant to the preceding provisions will vest on December 31, 2006. Other terms
as provided by Banc One stock plan.
10
<PAGE>
EXHIBIT 12
Statements re Computation of Ratios
The ratios of income to fixed charges have been computed on the basis of
the total enterprise (as defined by the Commission) by dividing income before
fixed charges and income taxes by fixed charges. Fixed charges consist of
interest expense on all long-term and short-term borrowings, excluding or
including interest on deposits as indicated. The computations of other ratios
are evident from the information presented in this Form 10-K.
<PAGE>
EXHIBIT 21
BANK ONE CORPORATION Subsidiaries
As of December 31, 1998, the Corporation had the subsidiaries listed
below, all of which were wholly-owned except for directors' qualifying shares or
as otherwise indicated. The consolidated financial statements of the Corporation
include the accounts of all such subsidiaries.
<TABLE>
<CAPTION>
Jurisdiction of
Names of Subsidiaries Organization
- --------------------- ---------------
<S> <C>
Affiliated Banks Building Co. Colorado
Affiliated Bankshares Insurance Agency, Inc. Colorado
American Fletcher Realty Corporation Indiana
American Insurance Agency, Inc. Arizona
American National Bank and Trust Company of Chicago United States
American National Corporation Delaware
American National Exchange Corporation Illinois
Midwest Audit Services, Inc. Illinois
ANB Mezzanine Corporation Delaware
Banc One ABS Corporation Ohio
Banc One Arizona Investment Corporation Arizona
Banc One Building Management Corporation Wisconsin
Banc One Capital Holdings Corporation Ohio
Banc One Capital Funding Corporation Ohio
Banc One Capital Markets, Inc. Ohio
Banc One Capital Services Corporation Ohio
Banc One Management and Consulting Corporation Ohio
Banc One Securities Corporation Ohio
BOCP Holdings Corporation Ohio
Banc One Community Development Corporation Ohio
Banc One Community Development/Wisconsin Corporation Ohio
Banc One Insurance Company Ohio
Banc One Kentucky Insurance Company Kentucky
Banc One Life Insurance Company Arizona
Banc One Management Corporation Ohio
Banc One Mortgage Corporation Delaware
Banc One Realty Columbus Corporation Ohio
Banc One Student Loan Funding Corporation Ohio
BOI Leasing Corporation Indiana
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Names of Subsidiaries Organization
- --------------------- ---------------
<S> <C>
Banc One, Arizona, National Association United States
Arizona Trust Deed Corporation Arizona
AZ IHC, Inc. Nevada
AZ REIT, Inc. Nevada
Banc One Arizona Leasing Corporation Arizona
Banc One Operations Services Corporation Arizona
BOAZ IHC, Inc. Nevada
Valley Bank Building, Inc. Arizona
Valley National Financial Services Company Arizona
Valley National Investors, Inc. Arizona
Washington Street Foods, Inc. Arizona
Bank One, Colorado, National Association United States
Banc One Boulder Leasing Services Corporation Colorado
Banc One Colorado Springs Leasing Services Corporation Colorado
Banc One Denver Leasing Services Corporation Colorado
BOCOL IHC, inc. Nevada
Bank One, Illinois, National Association United States
BOILL IHC, Inc. Nevada
First Rockford Community Development Corporation Illinois
Bank One, Indiana, National Association United States
BIL International Holdings, Inc. Indiana
BOIND IHC, Inc. Nevada
Banc One Equipment Finance, Inc. Indiana
Banc One Indianapolis Auto Lease, Inc. Indiana
Indiana LLC 1 (99%; 1% owned by the Corporation) Indiana
Bank One, Kentucky, National Association United States
Banc One Kentucky Leasing Company Kentucky
Banc One Vehicle Leasing Company Kentucky
First B.C. Realty Corporation Indiana
Liberty Payment Services, Inc. Kentucky
Liberty Properties Incorporated Kentucky
Bank One, Louisiana, National Association United States
Banc One Louisiana Leasing Corporation Louisiana
Bank One Equity Investors, Inc. Louisiana
Louisiana Credit Life Agency, Inc. Louisiana
Louisiana Credit Life Insurance Co., Inc. Arizona
Premier Investment Advisors, L.L.C.
(99.99%; 0.01% owned by Premier LLC, Inc.) Louisiana
Premier LLC, Inc. Louisiana
</TABLE>
2
<PAGE>
Jurisdiction of
Names of Subsidiaries Organization
- --------------------- ------------
Bank One, National Association United States
Banc One Acceptance Corporation Ohio
Banc One Compensation Services Corporation Ohio
Banc One Interactive Delivery Corporation Ohio
Banc One Investment Advisors Corporation Ohio
Banc One POS Services Corporation Ohio
Banc One Services Corporation Ohio
Banc One Vehicle Finance Corporation Ohio
Ohio IHC, Inc. Nevada
Bank One Oklahoma, National Association United States
Liberty Property Management Company Oklahoma
Banc One Texas Corporation Ohio
Bank One Texas, National Association United States
Banc One International Corporation United States
Banc One Leasing Corporation Ohio
Banc One Texas Leasing Corporation Texas
GP Holder, Inc. Texas
Team Life Insurance Company Texas
Texas Asset Acquisition Corp. Nevada
Texas Investment Holding Corporation Nevada
Bank One Trust Company, National Association United States
WITrust Investment Holding Company Nevada
Bank One, Utah, National Association United States
Bank One, West Virginia, National Association United States
Charleston National Plaza Company West Virginia
WV IHC, Inc. Nevada
Bank One, Wheeling-Steubenville, National Association United States
Banc One Loan Services Corporation Pennsylvania
Bank One, Wisconsin Wisconsin
Banc One Insurance Services Corporation Wisconsin
Banc One Wisconsin Bankcard Corporation Wisconsin
Banc One Wisconsin Investment Services Corporation Wisconsin
Banc One Wisconsin Leasing Corporation Wisconsin
Milwaukee Investment Holding Company Nevada
WI IHC, Inc. Nevada
3
<PAGE>
Jurisdiction of
Names of Subsidiaries Organization
- --------------------- ------------
FCC National Bank United States
FCTC General, Inc. Delaware
Finance One Corporation Ohio
Banc One Financial Services, Inc. Indiana
Banc One Consumer Discount Company, a
non-banking affiliate of BANC ONE CORPORATION Indiana
Banc One Financial Services of Minnesota, Inc. Minnesota
Banc One Financial Services of New York, Inc. New York
Banc One Financial Services of Tennessee, Inc. Tennessee
Banc One Financial Services of West Virginia, Inc. West Virginia
First Card Services, Inc. Delaware
First Chicago Financial Corporation Delaware
First Chicago Capital Corporation Delaware
First Chicago Capital Markets, Inc. Delaware
First Chicago Equity Corporation Illinois
First Chicago Hedging Services Corporation Delaware
First Chicago Investment Corporation Delaware
First Chicago Leasing Corporation Delaware
First Chicago Realty Services Corporation Delaware
First Chicago Properties, Inc. Delaware
First Chicago NBD Insurance Company Arizona
First Chicago NBD Real Estate Services, Inc. Indiana
The First National Bank of Chicago United States
FCNBD Mortgage Investments, Inc. (99.98%) Delaware
FCNBD Technology Holdings, Inc. Delaware
First Chicago Building Corporation Illinois
First Chicago Currency Advisors, Inc. Illinois
First Chicago Delaware Inc. Delaware
First Chicago Futures, Inc. Delaware
First Chicago Insurance Services, Inc. Illinois
First Chicago International United States
First Chicago International Finance Corporation United States
First Chicago Municipal Products, Inc. Delaware
First Chicago National Processing Corporation Delaware
First Chicago NBD Bank, Canada Canada
First Chicago NBD Investment Management Company Delaware
First Chicago NBD Investment Services, Inc. Delaware
First Chicago NBD Online, Inc. Delaware
First Chicago Neighborhood Development Corporation Delaware
First National Bank of Chicago Foundation Illinois
FNBC Leasing Corporation Delaware
FNBC Properties Inc. Delaware
Roney & Co. Delaware
Rosley Corporation Texas
4
<PAGE>
Jurisdiction of
Names of Subsidiaries Organization
- --------------------- ------------
First USA Financial, Inc. Delaware
First USA Bank, N.A. United States
First USA Capital Corporation Delaware
First USA Capital Markets, Inc. Michigan
First USA Thrift Services, Inc. Delaware
First USA Management Inc, Delaware
Paymentech, Inc. (55%) Delaware
FNW Capital, Inc. Illinois
Liberty Real Estate Company Oklahoma
Liberty Trust Company Oklahoma
Mid-America Credit Life Assurance Company Oklahoma
Mid-America Insurance Agency, Inc. Oklahoma
National Bank of Detroit -- Dearborn United States
NBD Bank (Detroit, Michigan) Michigan
First Chicago NBD Mortgage Company Delaware
NBD Equipment Finance, Inc. Delaware
NBD Insurance Services, Inc. Michigan
NBD Bank (Elkhart, Indiana) Indiana
NBD Bank, National Association (Indianapolis, Indiana) United States
NBD Leasing, Inc. Indiana
NBD Indiana Properties, Inc. Indiana
NBD Bank (Venice, Florida) Florida
NBD Community Development Corporation Michigan
NBD Equity Corp. Michigan
NBD Insurance Agency, Inc. Michigan
NBD Neighborhood Revitalization Corporation Indiana
NBD Service Corp. Delaware
NBD Transportation Company Michigan
Sterling Assurance Company Ohio
The names of certain other subsidiaries of the Corporation have been
omitted because such subsidiaries, considered in the aggregate, would not
constitute a significant subsidiary.
5
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To BANK ONE CORPORATION:
As independent public accountants, we hereby consent to the incorporation of
our report dated January 14, 1999, included in this Form 10-K, into the
following previously filed registration statements of the Corporation:
REGISTRATION STATEMENTS REGISTRATION STATEMENTS
ON FORM S-8: ON FORM S-3
Registration Numbers: Registration Numbers:
33-03470 33-50117 333-38397
33-14475 33-55149 333-72791
33-10822 33-55315 333-65427
33-18277 33-58923 333-65451
33-27849 333-00445 333-60313
33-34294 333-26929
33-37400 333-27631
33-20890 333-28281
33-20990 333-29395
33-40041 333-30419
33-45473 333-30421
33-46189 333-30425
33-53752 333-30429
33-55172 333-56739
33-55174 333-52503
33-54100 333-63837
33-61760
33-61758
33-60424
/s/ Arthur Andersen LLP
Chicago, Illinois,
March 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND> This schedule contains summary financial information extracted from
Form 10-K for the period ended December 31, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 19,878
<INT-BEARING-DEPOSITS> 4,642
<FED-FUNDS-SOLD> 9,862
<TRADING-ASSETS> 5,345
<INVESTMENTS-HELD-FOR-SALE> 44,852
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 155,398
<ALLOWANCE> 2,271
<TOTAL-ASSETS> 261,496
<DEPOSITS> 161,542
<SHORT-TERM> 40,101
<LIABILITIES-OTHER> 16,995
<LONG-TERM> 22,298<F1>
<COMMON> 12
0
190
<OTHER-SE> 20,358<F2>
<TOTAL-LIABILITIES-AND-EQUITY> 261,496
<INTEREST-LOAN> 14,106
<INTEREST-INVEST> 2,297
<INTEREST-OTHER> 1,121
<INTEREST-TOTAL> 17,524
<INTEREST-DEPOSIT> 4,943
<INTEREST-EXPENSE> 8,177
<INTEREST-INCOME-NET> 9,347
<LOAN-LOSSES> 1,408
<SECURITIES-GAINS> 155<F3>
<EXPENSE-OTHER> 11,545<F4>
<INCOME-PRETAX> 4,465
<INCOME-PRE-EXTRAORDINARY> 3,108
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,108
<EPS-PRIMARY> 2.65<F5>
<EPS-DILUTED> 2.61
<YIELD-ACTUAL> 4.52
<LOANS-NON> 729
<LOANS-PAST> 1,159
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,817
<CHARGE-OFFS> 1,945
<RECOVERIES> 447
<ALLOWANCE-CLOSE> 2,271
<ALLOWANCE-DOMESTIC> 0<F6>
<ALLOWANCE-FOREIGN> 0<F6>
<ALLOWANCE-UNALLOCATED> 0<F6>
<FN>
<F1> Guaranteed Preferred Beneficial Interest in the Corporation's Junior
Subordinated Debt of $996 million is included in long-term debt.
<F2> Treasury stock of $84 million is included as a reduction of other
stockholders' equity.
<F3> Investment securities gains do not include the Corporation's Equity
Securities Gains, which totaled $250 million.
<F4> Includes salaries and employee benefits of $4,477 million, outside service
fees and processing of $1,349 million, merger-related and restructuring
charges of $1,062 million, and marketing and development of $1,024 million
and other expenses of $3,633 million.
<F5> Primary earnings per share represents Basic earnings per share.
<F6> The Corporation is not required to present separate data related to foreign
activities. Allocation for potential losses not specifically identified has
been included in the commercial segment.
</FN>
</TABLE>
