CHEMICAL BANKING CORP, 10-K, 1994-03-25

CHEMICAL BANKING CORP
10-K, 1994-03-25
STATE COMMERCIAL BANKS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED COMMISSION FILE
DECEMBER 31, 1993 NUMBER 1-5805
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CHEMICAL BANKING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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DELAWARE 13-2624428
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

270 PARK AVENUE, NEW YORK, N.Y. 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 270-6000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
-------------------
WHICH REGISTERED
-----------------------------
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COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NEW YORK STOCK EXCHANGE, INC.
ADJUSTABLE RATE CUMULATIVE PREFERRED STOCK, SERIES C (STATED VALUE--$12) . . . . NEW YORK STOCK EXCHANGE, INC.
10.96% CUMULATIVE PREFERRED STOCK (STATED VALUE--$25) . . . . . . . . . . . . . . NEW YORK STOCK EXCHANGE, INC.
8.38% CUMULATIVE PREFERRED STOCK (STATED VALUE--$25) . . . . . . . . . . . . . . NEW YORK STOCK EXCHANGE, INC.
7.92% CUMULATIVE PREFERRED STOCK (STATED VALUE--$100) EVIDENCED BY
DEPOSITARY SHARES REPRESENTING ONE QUARTER SHARE OF PREFERRED STOCK . . . . . . NEW YORK STOCK EXCHANGE, INC.
7.58% CUMULATIVE PREFERRED STOCK (STATED VALUE--$100) EVIDENCED BY
DEPOSITARY SHARES REPRESENTING ONE QUARTER SHARE OF PREFERRED STOCK . . . . . . NEW YORK STOCK EXCHANGE, INC.
7 1/2% CUMULATIVE PREFERRED STOCK (STATED VALUE--$100) EVIDENCED BY
DEPOSITARY SHARES REPRESENTING ONE QUARTER SHARE OF PREFERRED STOCK . . . . . . NEW YORK STOCK EXCHANGE, INC.
RIGHTS TO PURCHASE UNITS OF JUNIOR PARTICIPATING PREFERRED STOCK . . . . . . . . NEW YORK STOCK EXCHANGE, INC.
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING ON FEBRUARY 28, 1994: 253,255,253
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES ..X.. NO ....

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]

THE AGGREGATE MARKET VALUE OF CHEMICAL BANKING CORPORATION COMMON STOCK
HELD BY NON-AFFILIATES OF CHEMICAL BANKING CORPORATION ON FEBRUARY 28, 1994 WAS
$9,372,000,000.

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DOCUMENT INCORPORATED BY REFERENCE PART OF FORM 10-K INTO
IN THIS FORM 10-K WHICH INCORPORATED
------------------------------------ ------------------------
Part III
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PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 17, 1994
PART III (OTHER THAN INFORMATION INCLUDED IN THE PROXY STATEMENT PURSUANT TO
RULE 402 (I), (K) AND (L) OF REGULATION S-K)

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FORM 10-K INDEX

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PART I PAGE
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Item 1 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1
Organizational Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3
Government Monetary Policies and Economic Controls . . . . . . . . . . . . . . . . A3
Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . A3
Foreign Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A8
Statistical Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A9
Distribution of Assets, Liabilities and Stockholders'
Equity; Interest Rates and Interest Differential . . . . . . . . . . . . . . . . A10
Securities Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A17
Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A19
Maturities and Sensitivity to Changes in Interest Rates . . . . . . . . . . . . . A19
Risk Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A20
Allowance for Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A21
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A23
Item 2 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A24
Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A24
Item 4 Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . A24
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . A25

PART II
- - - -------

Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A26
Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A26
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . A26
Item 8 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . A26
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A26

PART III
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Item 10 Directors and Executive Officers of the Corporation . . . . . . . . . . . . . . . . . . A27
Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A27
Item 12 Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A27
Item 13 Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . A27

PART IV
- - - -------

Item 14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A28
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PART I

ITEM 1. BUSINESS

OVERVIEW

Chemical Banking Corporation (the "Corporation") is a bank holding company
organized under the laws of Delaware in 1968 and registered under the Bank
Holding Company Act of 1956, as amended (the "BHCA"). On December 31, 1991,
Manufacturers Hanover Corporation ("MHC") merged with and into the Corporation
(the "Merger"). The Merger was accounted for as a pooling of interests and,
accordingly, the Corporation's financial statements include the consolidated
results of MHC. In addition, on June 19, 1992, Manufacturers Hanover Trust
Company ("MHT"), a New York banking corporation, was merged with and into
Chemical Bank ("Chemical Bank"), a New York banking corporation. Certain
amounts in the 1992 and 1991 financial statements have been reclassified to
conform with the presentation of the 1993 financial statements.

The Corporation conducts domestic and international financial services
businesses through various bank and non-bank subsidiaries. The principal bank
subsidiaries of the Corporation are Chemical Bank and Texas Commerce Bank
National Association, a subsidiary of Texas Commerce Bancshares, Inc. ("Texas
Commerce"), a bank holding company subsidiary of the Corporation headquartered
in Texas. The bank and non-bank subsidiaries of the Corporation operate
nationally through offices located primarily in New York, Texas and New Jersey
as well as through overseas branches and an international network of
representative offices, subsidiaries and affiliated banks.

The financial services provided by the Corporation's domestic subsidiaries
include personal and commercial checking accounts, savings and time deposit
accounts, United States corporate tax depository facilities, personal and
business loans, consumer financing, leasing, real estate financing, investment
banking, mortgage banking, individual credit cards, money transfer, cash
management, safe deposit facilities, payroll management, correspondent banking,
personal trust and estate administration, full investment services, discount
brokerage, United States Government and Federal agency securities dealership,
and corporate debt and equity securities dealership and underwriting.

Internationally, services also include correspondent banking arrangements,
merchant banking, underwriting and trading of eurosecurities, and foreign
exchange activities.

The Corporation's bank subsidiaries also provide products to ensure that a
customer will have a specific currency-exchange or interest rate at some future
date. These products include interest-rate and currency swaps, interest rate
options, future rate agreements, forward interest-rate contracts, foreign
exchange contracts and financial futures.

The Corporation retains a 40% interest in the CIT Group Holdings, Inc. ("CIT").
CIT, directly or through its subsidiaries, engages in diversified financial
services activities, primarily in the United States. These activities include
asset-based finance and leasing, sales finance and factoring. For additional
information pertaining to CIT, see the section entitled "Noninterest Revenue"
in Section B, page 30.

ORGANIZATIONAL REVIEW

The Corporation's activities are internally organized, for management reporting
purposes, into various business sectors. Developments that have occurred
during 1993 with respect to these business sectors are disclosed below .

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THE GLOBAL BANK
The Global Bank provides banking, financial advisory, trading and investment
services to corporations and public sector clients worldwide through a network
of offices in 35 countries, including major operations in all key international
financial centers. For a discussion of the Global Bank's business activities,
see the section entitled "Lines of Business Results" in Section B at page 32.
Additionally, during 1993, the Corporation received approval from the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") for
authority for its securities subsidiary, Chemical Securities Inc. ("CSI"), to
underwrite and deal in corporate debt and equity securities.

THE REGIONAL BANK
The Regional Bank is a leading provider of services to consumers in the
tri-state metropolitan region of New York, New Jersey and Connecticut. For a
discussion of the Regional Bank's business activities, see the section entitled
"Lines of Business Results" in Section B at page 33. Additionally, during
1993, the Corporation continued to build The Hanover Funds, the Corporation's
proprietary mutual funds family, by increasing the number of funds available
for investment from six to ten, continued the merging of the branch systems of
Chemical Bank and MHT, introduced unified products throughout the Regional Bank
branch network and initiated steps to sell insurance products nationwide
through a joint venture with MDS/Bankmark. In 1994, the Corporation sold
certain of Chemical Bank's branches located in Albany, Buffalo, Rochester,
Syracuse and certain other upstate locations to Fleet Bank of New York, and
plans to close approximately 50 branches located in the N.Y. metropolitan area.

TEXAS COMMERCE
Texas Commerce is a major financial institution in Texas with over 115
locations statewide and serving as the primary Texas bank for more than half of
all companies located in Texas with annual revenues of $250 million or more.
For a discussion of Texas Commerce's business activities, see the section
entitled "Lines of Business Results" in Section B at page 33. In February
1993, Texas Commerce acquired certain assets of four former banks of the First
City Bancorporation of Texas and in September 1993 Texas Commerce acquired
Ameritrust Texas Corporation. As a result of these acquisitions, at December
31, 1993, Texas Commerce ranked, in terms of total deposits, first in the
Houston and third in the Dallas/Fort Worth banking markets and had more than
doubled its trust assets under management to $14 billion, the largest trust
operations in the southwest United States.

REAL ESTATE AND CORPORATE
For a discussion on the Corporation's real estate and corporate business
sectors, see the section entitled "Lines of Business Results" in Section B at
page 34.

ACQUISITIONS, DIVESTITURES AND STRATEGIC POSITIONING
The acquisitions and divestitures undertaken by the Corporation during 1993 are
consistent with the Corporation's desire to focus on businesses and markets
where it has or can acquire a leadership position. The Corporation intends to
continue to examine opportunities for expansion or acquisition, particularly in
businesses in which economies of scale are important (such as credit cards,
mortgage servicing, mutual funds and certain areas of operating services) or in
which significant expense savings can be obtained from
consolidation of operations (such as in-market consolidations of banking
operations). Likewise, businesses that fall outside the Corporation's
strategic focus (either in terms of product offering or geographic market), may
be candidates for divestiture or closure. The Corporation also intends to
continue its productivity efforts to focus on containing costs throughout the
organization and increasing efficiency over the long term. As part of this
program, the Corporation may open new branches and close existing branches from
time to time in order to keep its distribution system attuned to changing
economics of branch banking and changing customer preferences for delivery of
banking services.

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COMPETITION

The Corporation and its subsidiaries and affiliates operate in a highly
competitive environment. The Corporation's bank subsidiaries compete with
other domestic and foreign banks, thrift institutions, credit unions, and money
market and other mutual funds for deposits and other sources of funds. In
addition, the Corporation and its bank and non-bank subsidiaries face increased
competition with respect to the diverse financial services and products they
offer. Competitors also include leasing companies, finance companies,
brokerage firms, investment banking companies, merchant banks, and a variety of
other financial services and advisory companies. Many of these competitors are
not subject to the same regulatory restrictions as are domestic bank holding
companies and banks, such as the Corporation and its bank subsidiaries.

The Corporation expects that competitive conditions will continue to intensify
as a result of technological advances. Technological advances have, for
example, made it possible for non-depository institutions to offer customers
automatic transfer systems and other automated payment systems services that
have been traditional banking products.

GOVERNMENT MONETARY POLICIES AND ECONOMIC CONTROLS

The earnings and business of the Corporation are affected by general economic
conditions, both domestic and international. In addition, fiscal or other
policies that are adopted by various regulatory authorities of the United
States, by foreign governments, and by international agencies can have
important consequences on the financial performance of the Corporation. The
Corporation is particularly affected by the policies of the Federal Reserve
Board, which regulates the national supply of bank credit. Among the
instruments of monetary policy available to the Federal Reserve Board are
engaging in open-market operations in United States Government securities;
changing the discount rates of borrowings of depository institutions; imposing
or changing reserve requirements against depository institutions deposits and
certain assets of foreign branches; and imposing or changing reserve
requirements against certain borrowings by banks and their affiliates
(including parent corporations such as the Corporation). These methods are
used in varying combinations to influence the overall growth of bank loans,
investments, and deposits, and the interest rates charged on loans or paid for
deposits.

The Corporation has economic, credit, legal, and other specialists who monitor
economic conditions, and domestic and foreign government policies and actions.
However, since it is difficult to predict changes in macroeconomic conditions
and in governmental policies and actions relating thereto, it is difficult to
foresee the effects of any such changes on the business and earnings of the
Corporation and its subsidiaries.

SUPERVISION AND REGULATION

The Corporation is subject to regulation as a registered bank holding company
under the BHCA. As such, the Corporation is required to file with the Federal
Reserve Board an annual report and other information required quarterly
pursuant to the BHCA. The Corporation is also subject to the examination
powers of the Federal Reserve Board.

Under the BHCA, the Corporation may not engage in any business other than
managing and controlling banks or furnishing certain specified services to
subsidiaries, and may not acquire voting control of non-banking corporations,
except those corporations engaged in businesses or furnishing services which
the Federal Reserve Board deems to be so closely related to banking as "to be a
proper incident thereto". Further, the Corporation is prohibited, with certain
exceptions, from acquiring direct or indirect ownership or control of more than
5% of the voting shares of any non-banking corporation, and may not acquire
direct or indirect ownership or control of more than 5% of the voting shares of
any domestic bank without the prior approval of the Federal Reserve Board.
Under existing laws, the Federal Reserve Board generally is prohibited from
approving any application by a bank holding company to acquire voting shares of
any bank in another state unless such interstate acquisitions are authorized by
the laws of such state or unless, under certain circumstances, such bank is a
failing bank.

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Federal law imposes limitations on the payment of dividends by the subsidiaries
of the Corporation that are state member banks of the Federal Reserve System (a
"state member bank") or national banks. Non-bank subsidiaries of the
Corporation are not subject to such limitations. The amount of dividends that
may be paid by a state member bank, such as Chemical Bank, or by a national
bank, such as Texas Commerce Bank National Association, is limited to the
lesser of the amounts calculated under a "recent earnings" test and an
"undivided profits" test. Under the recent earnings test, a dividend may not
be paid if the total of all dividends declared by a bank in any calendar year
is in excess of the current year's "net profits" combined with the "retained
net profits" of the two preceding years unless the bank obtains the approval of
its appropriate Federal banking regulator (which, in the case of a member bank,
is the Federal Reserve Board and, in the case of a national bank, is the Office
of the Comptroller of the Currency (the "Comptroller of the Currency")). Under
the undivided profits test, a dividend may not be paid in excess of a bank's
"undivided profits then on hand", after deducting losses and "bad debts" in
excess of the allowance for loan and lease losses.

Under regulations adopted by the Federal Reserve Board and the Comptroller of
the Currency, the terms "net profits" and "undivided profits then on hand" are
defined as the amounts reported by a bank on its Reports of Condition and
Income; the term "retained net profits" is defined as net income (as defined)
less any common or preferred dividends declared for the reporting period; and
the term "bad debts" is defined to include matured obligations due a bank on
which the interest is past due and unpaid for six months, unless the debts are
well secured and in the process of collection. Generally, a debt is considered
"matured" when all or a part of the principal is due and payable as a result of
demand, arrival of the stated maturity date, of acceleration by contract or by
operation of law. The New York Banking Department also adopted regulations in
December 1990 that require net profits of New York State-chartered banks, like
Chemical Bank, to be calculated in a manner similar to the method set forth in
the Federal Reserve Board's regulations.

At December 31, 1993, in accordance with the foregoing restrictions, the
Corporation's bank subsidiaries could, without the approval of their relevant
banking regulators, pay dividends of approximately $1,715 million to their
respective bank holding companies, plus an additional amount equal to their net
profits from January 1, 1994 through the date of any such dividend payment.

In addition to the dividend restrictions described above, the Federal Reserve
Board, the Comptroller of the Currency and the FDIC have authority under the
Financial Institutions Supervisory Act to prohibit or to limit the payment of
dividends by the banking organizations they supervise, including the
Corporation and its subsidiaries that are banks or bank holding companies, if,
in the banking regulator's opinion, payment of a dividend would constitute an
unsafe or unsound practice in light of the financial condition of the banking
organization.

For a further discussion of the dividend restrictions imposed on the
Corporation's subsidiaries that are state member or national banks, see Note
17, "Restrictions on Cash and Intercompany Funds Transfers", in Section B on
page 71.

The Corporation is also subject to the risk-based capital and leverage
guidelines of the Federal Reserve Board, which require that the Corporation's
capital-to-assets ratios meet certain minimum standards. For a discussion of
the Federal Reserve Board's guidelines and the Corporation's ratios, see the
sections entitled "Capital", "Risk-Based Capital Ratios", and "Leverage Ratios"
in Section B, pages 42 through 44. The FDIC, the Federal Reserve Board and the
Comptroller of the Currency also have issued proposed rules which are intended
to revise the risk-based capital rules to take into account interest-rate risk.
For a further discussion of the proposed rulemaking and the Corporation's
assessment of the impact the proposal would have on the capital ratios of the
Corporation, see the section entitled "Interest Rate Sensitivity" in Section B
at pages 47 through 49.

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FDICIA
On December 19, 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") was enacted. Among other things, FDICIA requires the FDIC
to establish a risk-based assessment system for FDIC deposit insurance and
revises certain provisions of the Federal Deposit Insurance Act as well as
certain other Federal banking statutes. In general, FDICIA provides for
expanded regulation of depository institutions and their affiliates, including
parent holding companies, by such institutions' appropriate Federal banking
regulators, and requires the appropriate Federal banking regulator to take
"prompt corrective action" with respect to a depository institution if such
institution does not meet certain capital adequacy standards.

Prompt Corrective Action. Pursuant to FDICIA, the Federal Reserve Board, the
FDIC and the Office of the Comptroller of the Currency adopted regulations,
effective December 19, 1992, setting forth a five-tier scheme for measuring the
capital adequacy of the depository institutions they supervise. Under the
regulations (commonly referred to as the "prompt corrective action" rules), an
institution would be placed in one of the following capital categories: (i)
well capitalized (an institution that has a total risk- based capital ratio of
at least 10%, a Tier 1 risk-based capital ratio of at least 6% and a Tier 1
leverage ratio of at least 5%); (ii) adequately capitalized (an institution
that has a total risk-based capital ratio of at least 8%, a Tier 1 risk-based
capital ratio of at least 4% and a Tier 1 leverage ratio of at least 4%); (iii)
undercapitalized (an institution that has a total risk-based capital ratio of
under 8% or a Tier 1 risk-based capital ratio under 4% or a Tier 1 leverage
ratio under 4%); (iv) significantly undercapitalized (an institution that has a
total risk-based capital ratio of under 6% or a Tier 1 risk-based capital ratio
under 3% or a Tier 1 leverage ratio under 3%); and (v) critically
undercapitalized (an institution that has a ratio of tangible equity to total
assets of 2% or less).

Supervisory actions by the appropriate Federal banking regulator will depend
upon an institution's classification within the five categories. All
institutions are generally prohibited from declaring any dividends, making any
other capital distribution, or paying a management fee to any controlling
person, if such payment would cause the institution to become undercapitalized.
Additional supervisory actions are mandated for an institution falling into one
of the three "undercapitalized" categories, with the severity of supervisory
action increasing at greater levels of capital deficiency. For example,
critically undercapitalized institutions are, among other things, restricted
from making any principal or interest payments on subordinated debt without
prior approval of their appropriate Federal banking regulator. The regulations
apply only to banks and not to bank holding companies, such as the Corporation;
however, the Federal Reserve Board is authorized to take appropriate action at
the holding company level based on the undercapitalized status of such holding
company's subsidiary banking institution. In certain instances relating to an
undercapitalized banking institution, the bank holding company would be
required to guarantee the performance of the undercapitalized subsidiary and
may be liable for civil money damages for failure to fulfill its commitments on
such guarantee.

At December 31, 1993, Chemical Bank and Texas Commerce National Association
were each "well capitalized".

Brokered Deposits. The FDIC issued a rule, effective June 16, 1992, regarding
the ability of depository institutions to accept brokered deposits. Under the
rule, the term "brokered deposits" is defined to include deposits that are
solicited by a bank's affiliates on its behalf. A significant portion of
Chemical Bank's wholesale deposits are solicited on its behalf by a
broker-dealer affiliate of Chemical Bank and are considered brokered deposits.
Under the rule, (i) an "undercapitalized institution is prohibited from
accepting, renewing or rolling over brokered deposits, (ii) an "adequately
capitalized" institution must obtain a waiver from the FDIC before accepting,
renewing or rolling over brokered deposits and is not permitted to pay interest
on brokered deposits accepted in such institution's normal market area at rates
that "significantly exceed" rates paid on deposits of similar maturity in such
area, and (iii) a "well capitalized" institution may accept, renew or roll over
brokered deposits without restriction. The definitions of "well capitalized",
"adequately capitalized", and "undercapitalized" are the same as those utilized
in the "prompt corrective action" rules described above. As noted above, at
December 31, 1993, each of Chemical Bank and Texas Commerce Bank National
Association was "well capitalized".

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FDIC Insurance Assessments. The FDIC has adopted final rules implementing, for
assessment periods commencing January 1, 1994, risk- based insurance premiums.
Under the assessment system, each depository institution is assigned to one of
nine risk classifications based upon certain capital and supervisory measures
and, depending upon its classification, will be assessed premiums ranging from
23 basis points to 31 basis points. In adopting the "permanent" risk-based
assessment system, the FDIC indicated that, if future conditions so warrant, it
may reconsider certain aspects of the rate schedules and of the risk
classification categories. The Corporation believes that the implementation of
the "permanent" risk-based FDIC assessment system will not have a material
effect on the Corporation's FDIC expenses during 1994.

Other FDICIA Rules. Other rules that have been adopted pursuant to FDICIA
include: (i) real estate lending standards for banks, which would provide
guidelines concerning loan-to-value ratios for various types of real estate
loans; (ii) rules relating to consumer lending, including regulations governing
advertising and disclosures required for consumer deposit accounts; (iii) rules
requiring depository institutions to develop and implement internal procedures
to evaluate and control credit and settlement exposure to their correspondent
banks; (iv) rules implementing the FDICIA provision prohibiting, with certain
exceptions, FDIC- insured state banks from making equity investments of the
types and amount, or from engaging as principal in activities, not permissible
for national banks; and (v) rules mandating enhanced financial reporting and
audit requirements. Rules proposed, but not yet adopted, include those
addressing (i) various "safety and soundness" issues, including operations and
managerial standards, standards for asset quality, earnings and stock
valuations, and compensation standards for the officers, directors, employees
and principal stockholders of the depository institution, (ii) the degree to
which the risk-based capital rules should be revised to take into account
interest-rate risk, as previously mentioned and (iii) notice provisions in the
case of branch closings.

The Corporation expects the rules and regulations adopted and proposed to be
adopted pursuant to FDICIA will result in increased compliance costs for the
Corporation and its bank subsidiaries but does not expect such rules and
regulations to have a material impact on the operations of the Corporation or
its bank subsidiaries.

POWERS OF THE FDIC UPON INSOLVENCY OF AN INSURED DEPOSITORY INSTITUTION
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") imposes liability on an FDIC-insured depository institution (such as
the Corporation's bank subsidiaries), for costs incurred by the FDIC in
connection with the insolvency of other FDIC-insured institutions under common
control with such institution (commonly referred to as "cross-guarantees" of
insured depository institutions). An FDIC cross-guarantee claim against a
depository institution is superior in right of payment to claims of the holding
company and its affiliates against such depository institution.

In the event an insured depository institution becomes insolvent, or upon the
occurrence of certain other events specified in the Federal Deposit Insurance
Act, whenever the FDIC is appointed the conservator or receiver of such insured
depository institution, the FDIC has the power: (i) to transfer any of such
bank's assets and liabilities to a new obligor (including, but not limited to,
another financial institution acquiring all or a portion of the bank's
business, assets or liabilities), without the approval of such bank's
creditors; (ii) to enforce the terms of such bank's contracts pursuant to their
terms, or (iii) to repudiate or disaffirm any contract or lease to which such
depository institution is a party, the performance of which is determined by
the FDIC to be burdensome and the disaffirmance or repudiation of which is
determined by the FDIC to promote the orderly administration of such depository
institution's assets. Such provisions of the Federal Deposit Insurance Act
would be applicable to obligations and liabilities of those of the
Corporation's subsidiaries that are insured depository institutions, such as
Chemical Bank and Texas Commerce Bank National Association, including without
limitation, obligations under senior or subordinated debt issued by such banks
to investors (hereinafter referred to as "public noteholders") in the public
markets.

A6
<PAGE> 9
In its resolution of the problems of an insured depository institution in
default or in danger of default, the FDIC is not permitted to take any action
that would have the effect of increasing the losses to a deposit insurance fund
by protecting depositors for more than the insured portion of their deposits or
by protecting creditors of the insured depository institution (including public
noteholders), other than depositors. On October 25, 1993, the FDIC issued
proposed rules to implement these provisions. In addition, the FDIC is
authorized to settle all uninsured and unsecured claims in the insolvency of an
insured institution by making a final settlement payment after the declaration
of insolvency based upon a percentage determined by the FDIC reflecting an
average of the FDIC's receivership recovery experience, regardless of the
assets of the insolvent institution actually available for distribution to
creditors. Such a payment would constitute full payment and disposition of the
FDIC's obligations to claimants.

The Omnibus Budget Reconciliation Act of 1993 included a "depositor preference"
provision, which provided that, in the event of a liquidation of an insured
depository institution, claims of depositors and their subrogees, including the
FDIC in respect of the payment of insured deposits, would be entitled to a
preference over all other unsecured claimants against the depository
institution, including some creditors (such as certain public noteholders),
other than depositors.

As a result of the provisions described above, whether or not the FDIC ever
sought to repudiate any obligations held by public noteholders of any
subsidiary of the Corporation that is an insured depository institution, such
as Chemical Bank or Texas Commerce Bank National Association, the public
noteholders would be treated differently from, and could receive, if anything,
substantially less than, holders of deposit obligations of such depository
institution.

OTHER SUPERVISION AND REGULATION
Under Federal Reserve Board policy, the Corporation is expected to act as a
source of financial strength to each bank subsidiary and to commit resources to
support such bank subsidiary in circumstances where it might not do so absent
such policy. Any loans by a bank holding company to any of its subsidiary
banks are subordinate in right of payment to deposits and to certain other
indebtedness of the subsidiary banks. 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 at a certain
level will be assumed by the bankruptcy trustee and entitled to a priority of
payment.

The bank subsidiaries of the Corporation are subject to certain restrictions
imposed by Federal law on extensions of credit to, and certain other
transactions with, the Corporation and certain other affiliates and on
investments in stock or securities thereof. Such restrictions prevent the
Corporation and other affiliates from borrowing from a bank subsidiary unless
the loans are secured in specified amounts. Without the prior approval of the
Federal Reserve Board, secured loans, other transactions and investments by any
bank subsidiary are generally limited in amount as to the Corporation and as to
each of the other affiliates to 10% of the bank's capital and surplus and as to
the Corporation and all such other affiliates to an aggregate of 20% of the
bank's capital and surplus. Federal law also requires that transactions
between a bank subsidiary and the Corporation or certain non-bank affiliates,
including extensions of credit, sales of securities or assets and the provision
of services, be conducted on terms at least as favorable to the bank subsidiary
as those that apply or that would apply to comparable transactions with
unaffiliated parties.

The Corporation's bank and non-bank subsidiaries are subject to direct
supervision and regulation by various other Federal and state authorities.
Chemical Bank, as a New York State-chartered bank and member bank of the
Federal Reserve System, is subject to supervision and regulation of the New
York State Banking Department as well as by the Federal Reserve Board and the
FDIC. The Corporation's national bank subsidiaries, such as Texas Commerce
Bank National Association, Chemical Bank New Jersey, N.A. and Chemical Bank,
N.A., are subject to substantially similar supervision and regulations by the
Comptroller of the Currency. Supervision and regulation by each of the
foregoing regulatory agencies generally include comprehensive annual reviews of
all major aspects of the relevant bank's business and condition, as well as the
imposition of periodic reporting requirements and limitations on

A7
<PAGE> 10
investments and other powers. The activities of the Corporation's
broker-dealers are subject to the regulations of the Securities and Exchange
Commission and the National Association of Securities Dealers, and, in the case
of CSI, are subject to the supervision and regulation of the Federal Reserve
Board (which has imposed conditions governing CSI's activities, including
limitations on the gross revenues that may be derived from certain of CSI's
activities). Additionally, various securities activities conducted by the bank
subsidiaries of the Corporation, such as dealing in municipal securities,
acting as transfer agent, the making available of mutual funds and providing
other types of investment management services, are subject to the regulations
of the Securities and Exchange Commission, the Municipal Securities Rulemaking
Board and, with respect to certain activities of its mutual funds, the Federal
Reserve Board. The types of activities in which the foreign branches of
Chemical Bank and the international subsidiaries of the Corporation may engage
are subject to various restrictions imposed by the Federal Reserve Board. Such
foreign branches and international subsidiaries are also subject to the laws
and banking authorities of the countries in which they operate.

Federal and state legislation affecting the banking industry has played, and
will continue to play, a significant role in shaping the nature of the
financial services industry. For example, there are bills currently pending in
Congress that would permit, to varying degrees, the interstate expansion and
branching of bank holding companies and banks, respectively. In addition,
there are cases pending before Federal and state courts that seek to expand or
restrict interpretations of existing laws and their accompanying regulations
affecting bank holding companies and their subsidiaries. It is not possible to
predict the extent to which the Corporation and its subsidiaries may be
affected by any of these initiatives.

FOREIGN OPERATIONS

For geographic distributions of total assets, total revenue, total expense,
income before income tax expense and net income, see Note 21, "International
Operations", of the Notes to Consolidated Financial Statements in Section B,
page 77. For a discussion of foreign loans, see the sections entitled
"Cross-Border Outstandings" and "Outstandings to Countries Engaged in Debt
Rescheduling" in Section B, pages 41 and 42.

A8
<PAGE> 11
STATISTICAL INFORMATION

In addition to the statistical information that is presented in the following
pages in this Section A of the Form 10-K, the following statistical information
is included in Section B of the Form 10-K:

<TABLE>
<CAPTION>
DESCRIPTION OF STATISTICAL INFORMATION SECTION B LOCATION

- - - --------------------------------------------------- -----------------------------------------------
<S> <C> <C>
1. DISTRIBUTION OF ASSETS, LIABILITIES AND Pages 80 and 81 (Average Balances, Interest and
STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST Rates)
DIFFERENTIAL

2. SECURITIES PORTFOLIO Pages 60 and 61 (Note 4)

3. RISK ELEMENTS:

Lending and Related Activities Pages 34 through 42 (includes an analysis of the
Corporation's Credit Portfolio, Credit Risk
Management, Nonperforming Assets, Allowance for
Losses, Net Charge-Offs, Commercial Real Estate,
Commercial and Industrial, Financial Institutions,
and Foreign Governments and Official Institutions,
and Consumer Portfolios, Cross-Border Outstandings
and Outstandings to Countries Engaged in Debt
Rescheduling) and pages 62 through 64 (Notes 5, 6
and 7)

Nonaccrual Policy Pages 57 and 58 (Note 1)

Impact of Nonperforming Loans on Interest Income Page 64 (Note 7)

Cross-Border Outstandings Exceeding 1% of Total Pages 41 through 42 (Cross-Border Outstandings and
Assets and Outstandings to Liquidity Impaired Outstandings to Countries Engaged in Debt
Countries Rescheduling)

4. SUMMARY OF LOAN LOSS EXPERIENCE Pages 36 through 42 (Allowance for Losses, Net
Charge-Offs and Commercial Real Estate, Commercial
and Industrial, Financial Institutions, and
Foreign Governments and Official Institutions,
Consumer, Cross-Border Outstandings and
Outstandings to Countries Engaged in Debt
Rescheduling), pages 57 and 58 (Note 1) and page
63 (Note 6)

5. PERFORMANCE RATIOS, CAPITAL RATIOS AND ALLOWANCE Page 25 (Financial Review)
COVERAGE RATIOS
6. SHORT-TERM AND OTHER BORROWINGS Page 64 (Note 8)
</TABLE>

A9
<PAGE> 12

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL

For a five-year summary of the consolidated average balances, interest rates
and interest differentials on a taxable-equivalent basis for the years 1993
through 1989, see Section B, pages 80 and 81. Income computed on a
taxable-equivalent basis is income as reported in the Consolidated Statement of
Income adjusted to make income and earning yields on assets exempt from income
taxes (primarily Federal taxes) comparable to other taxable income. The
incremental tax rate used for calculating the taxable equivalent adjustment was
approximately 43% in each of the years 1993 through 1989.

Within the five-year summary, the principal amounts of nonaccrual and
renegotiated loans have been included in the average loan balances used to
determine the average interest rate earned on loans. Interest accrued but not
collected at the date a loan is placed on nonaccrual status is reversed against
interest income. Subsequent cash receipts are applied either to the
outstanding principal balance or recorded as interest income, depending on
management's assessment of the ultimate collectibility of principal and
interest. Interest income is accrued on renegotiated loans at the renegotiated
rates. Certain renegotiated loan agreements call for additional interest to be
paid on a deferred or a contingent basis. Such interest is taken into income
only as collected.

A summary of interest rates and interest differentials segregated between
domestic and foreign operations for the years 1993, 1992 and 1991 is presented
on pages A11 and A12 herein. Regarding the basis of segregation between the
domestic and foreign components, see Note 21 of the Notes to Consolidated
Financial Statements in Section B, page 77.

The tables on pages A13 through A16 herein present an analysis of the effect on
net interest income of volume and rate changes for the periods 1993 over 1992
and 1992 over 1991. In this analysis, the change due to the volume/rate
variance has been allocated to volume.

A10
<PAGE> 13
CHEMICAL BANKING CORPORATION AND SUBSIDIARIES

INTEREST RATES AND INTEREST DIFFERENTIAL ANALYSIS OF NET INTEREST INCOME -
DOMESTIC AND FOREIGN

<TABLE>
<CAPTION>
1993
-------------------------------------
(DOLLARS IN MILLIONS; INTEREST AND AVERAGE AVERAGE AVERAGE
RATES ON A TAXABLE-EQUIVALENT BASIS) BALANCE INTEREST RATE
------- -------- -------
DOMESTIC
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Deposits With Banks . . . . . . . . . . . . . . . . . . . . $ 232 $ 10 4.65%
Federal Funds Sold and Securities Purchased
Under Resale Agreements . . . . . . . . . . . . . . . . . 9,946 314 3.16
Securities and Trading Account Assets . . . . . . . . . . . 25,977 1,741 6.70
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,701 4,197 7.28
--------- ---------
TOTAL INTEREST-EARNING ASSETS . . . . . . . . . . . . . $ 93,856 $ 6,262 6.67
========= =========
INTEREST-BEARING LIABILITIES:
Deposits:
Domestic Retail Time Deposits . . . . . . . . . . . . . . $ 46,598 $ 1,237 2.65
Domestic Negotiable Certificates of
Deposit and Other Time Deposits . . . . . . . . . . . . 6,242 191 3.05
--------- ---------
Total Deposits . . . . . . . . . . . . . . . . . . . . 52,840 1,428 2.70
--------- ---------
Short-Term Borrowings:
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements . . . . . . . . . . . . 14,413 397 2.76
Other Borrowed Funds . . . . . . . . . . . . . . . . . . . 7,881 412 5.24
--------- ---------
Total Short-Term Borrowings . . . . . . . . . . . . . . 22,294 809 3.63
--------- ---------
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . 7,763 494 6.37
Intra-Company Funding-Net . . . . . . . . . . . . . . . . . (4,835) (187) --
--------- ---------
TOTAL INTEREST-BEARING LIABILITIES . . . . . . . . . . 78,062 2,544 3.26
NONINTEREST-BEARING LIABILITIES . . . . . . . . . . . . . . . . 15,794 -- --
--------- ---------
TOTAL INVESTABLE FUNDS . . . . . . . . . . . . . . . . $ 93,856 $ 2,544 2.71
--------- ---------
DOMESTIC NET INTEREST INCOME AND NET YIELD . . . . . . . . . . $ 3,718 3.96%
=========
</TABLE>

<TABLE>
<S> <C> <C> <C>
FOREIGN
INTEREST-EARNING ASSETS:
Deposits With Banks . . . . . . . . . . . . . . . . . . . . $ 3,970 $ 258 6.49%
Federal Funds Sold and Securities Purchased
Under Resale Agreements . . . . . . . . . . . . . . . . . 354 25 6.93
Securities and Trading Account Assets . . . . . . . . . . . 5,716 439 7.67
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,038 1,440 6.85
--------- ---------
TOTAL INTEREST-EARNING ASSETS . . . . . . . . . . . . . $ 31,078 $ 2,162 6.95
--------- ---------
INTEREST-BEARING LIABILITIES:
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,066 $ 813 3.86
--------- ---------
Short-Term Borrowings:
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements . . . . . . . . . . . . 1,048 75 7.15
Other Borrowed Funds . . . . . . . . . . . . . . . . . . . 1,220 108 8.82
--------- ---------
Total Short-Term Borrowings . . . . . . . . . . . . . . 2,268 183 8.05
--------- ---------
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . 290 40 13.77
Intra-Company Funding-Net . . . . . . . . . . . . . . . . . 4,835 187 3.86
--------- ---------
TOTAL INTEREST-BEARING LIABILITIES . . . . . . . . . . 28,459 1,223 4.29
NONINTEREST-BEARING LIABILITIES . . . . . . . . . . . . . . . . 2,619 -- --
--------- ---------
TOTAL INVESTABLE FUNDS . . . . . . . . . . . . . . . . $ 31,078 $ 1,223 3.93
--------- ---------
FOREIGN NET INTEREST INCOME AND NET YIELD . . . . . . . . . . . $ 939 3.02%
=========
PERCENTAGE OF TOTAL ASSETS AND LIABILITIES
ATTRIBUTABLE TO FOREIGN OPERATIONS:
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.5%
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 25.2%
</TABLE>

A11
<PAGE> 14

<TABLE>
<CAPTION>
1992 1991
- - - ------------------------------------------------ ----------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
$ 22 $ 1 6.11% $ 290 $ 21 7.41%

8,368 308 3.69 10,340 586 5.67
24,308 1,806 7.43 24,147 2,073 8.59
58,963 4,580 7.77 60,460 5,604 9.27
---------- --------- --------- ---------
$ 91,661 $ 6,695 7.30 $ 95,237 $ 8,284 8.71
---------- --------- --------- ---------

$ 44,538 $ 1,438 3.23 $ 43,193 $ 2,373 5.49

7,506 296 3.94 8,458 494 5.84
---------- --------- --------- ---------
52,044 1,734 3.33 51,651 2,867 5.55
---------- --------- --------- ---------

15,011 552 3.70 18,890 1,129 6.01
7,387 390 5.31 9,278 624 6.73
---------- --------- --------- ---------
22,398 942 4.21 28,168 1,753 6.22
---------- --------- --------- ---------
5,829 393 6.75 5,564 424 7.64
(3,326) (49) -- (2,247) (134) --
---------- --------- --------- ---------
76,945 3,020 3.93 83,136 4,910 5.91
14,716 -- -- 12,101 -- --
---------- --------- --------- ---------
$ 91,661 $ 3,020 3.29 $ 95,237 $ 4,910 5.17
---------- --------- --------- ---------
$ 3,675 4.01% $ 3,374 3.54%
========= =========

$ 2,583 $ 273 10.56% $ 2,498 $ 342 13.68%

224 41 18.45 115 12 10.52
3,571 371 10.38 2,954 306 10.32
23,210 1,799 7.75 24,060 2,352 9.77
---------- --------- --------- ---------
$ 29,588 $ 2,484 8.39 $ 29,627 $ 3,012 10.16
---------- --------- --------- ---------

$ 21,717 $ 1,134 5.22 $ 22,754 $ 1,801 7.92
---------- --------- --------- ---------

647 71 11.05 464 42 9.07
1,179 215 18.20 1,317 251 19.05
---------- --------- --------- ---------
1,826 286 15.67 1,781 293 16.44
---------- --------- --------- ---------
391 61 15.54 316 31 9.75
3,326 49 1.49 2,247 134 5.98
---------- --------- --------- ---------
27,260 1,530 5.61 27,098 2,259 8.33
2,328 -- -- 2,529 -- --
---------- --------- --------- ---------
$ 29,588 $ 1,530 5.17 $ 29,627 $ 2,259 7.62
---------- --------- --------- ---------
$ 954 3.22% $ 753 2.54%
========= ---------

22.5% 21.6%
22.8% 20.9%
</TABLE>

A12
<PAGE> 15
CHEMICAL BANKING CORPORATION AND SUBSIDIARIES

CHANGE IN NET INTEREST INCOME
VOLUME AND RATE ANALYSIS
_______________________________________
<TABLE>
<CAPTION>
CONSOLIDATED
---------------------------------------
INCREASE (DECREASE)
(DOLLARS IN MILLIONS; INTEREST AND AVERAGE DUE TO CHANGE IN NET
RATES ON A TAXABLE-EQUIVALENT BASIS) VOLUME RATE CHANGE
------ ---- ------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS
Deposits With Banks . . . . . . . . . . . . . . . . . . . . . $ 99 $ (105) $ (6)
Federal Funds Sold and Securities Purchased
Under Resale Agreements . . . . . . . . . . . . . . . . . . 60 (70) (10)
Securities and Trading Account Assets . . . . . . . . . . . . 277 (274) 3
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . (244) (498) (742)
------- --------- --------
CHANGE IN INTEREST INCOME . . . . . . . . . . . . . . . . . . 192 (947) (755)
------- --------- --------

INTEREST-BEARING LIABILITIES
Deposits:
Domestic Retail Time Deposits . . . . . . . . . . . . . . . 57 (258) (201)
Domestic Negotiable Certificates of Deposit
and Other Time Deposits . . . . . . . . . . . . . . . . . (38) (67) (105)
Deposits in Foreign Offices . . . . . . . . . . . . . . . . (26) (295) (321)
------- --------- --------
Total Deposits . . . . . . . . . . . . . . . . . . . . . (7) (620) (627)
------- --------- --------
Short-Term Borrowings:
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements . . . . . . . . . . . . 15 (166) (151)
Other Borrowed Funds . . . . . . . . . . . . . . . . . . . 31 (116) (85)
------- --------- --------
Total Short-Term Borrowings . . . . . . . . . . . . . . . 46 (282) (236)
------- --------- --------
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . 109 (29) 80
Intra-Company Funding . . . . . . . . . . . . . . . . . . . . -- -- --
------- --------- --------
CHANGE IN INTEREST EXPENSE . . . . . . . . . . . . . . . . . 148 (931) (783)
------- --------- --------
CHANGE IN NET INTEREST INCOME . . . . . . . . . . . . . . . . $ 44 $ (16) $ 28
======= ========= ========
</TABLE>

A13
<PAGE> 16

1993 OVER 1992
<TABLE>
<CAPTION>

- - - --------------------------------------------------------------------------------------------------------------
DOMESTIC FOREIGN
- - - --------------------------------------------------- --------------------------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE IN NET DUE TO CHANGE IN NET
VOLUME RATE CHANGE VOLUME RATE CHANGE
- - - ------ ---- ------ ------ ---- ------
<S> <C> <C> <C> <C> <C>
$ 9 $ -- $ 9 $ 90 $ (105) $ (15)

50 (44) 6 10 (26) (16)
112 (177) (65) 165 (97) 68
(94) (289) (383) (150) (209) (359)
- - - ------- ------- ------- ------- ------- -------
77 (510) (433) 115 (437) (322)
- - - ------- ------- ------- ------- ------- -------

57 (258) (201) -- -- --

(38) (67) (105) -- -- --
-- -- -- (26) (295) (321)
- - - ------- ------- ------- ------- ------- -------
19 (325) (306) (26) (295) (321)
- - - ------- ------- ------- ------- ------- -------

(14) (141) (155) 29 (25) 4
27 (5) 22 4 (111) (107)
- - - ------- ------- ------- ------- ------- -------
13 (146) (133) 33 (136) (103)
- - - ------- ------- ------- ------- ------- -------
123 (22) 101 (14) (7) (21)
(59) (79) (138) 59 79 138
- - - ------- ------- ------- ------- ------- -------
96 (572) (476) 52 (359) (307)
- - - ------- ------- ------- ------- ------- -------
$ (19) $ 62 $ 43 $ 63 $ (78) $ (15)
======= ======= ======= ======= ======= =======

</TABLE>

A14
<PAGE> 17
CHEMICAL BANKING CORPORATION AND SUBSIDIARIES

CHANGE IN NET INTEREST INCOME
VOLUME AND RATE ANALYSIS
<TABLE>
<CAPTION>
_______________________________________
CONSOLIDATED
_______________________________________
INCREASE (DECREASE)
(DOLLARS IN MILLIONS; INTEREST AND AVERAGE DUE TO
RATES ON A TAXABLE-EQUIVALENT BASIS) CHANGE IN NET
VOLUME RATE CHANGE
__________ _____ _______

INTEREST-EARNING ASSETS
Deposits With Banks . . . . . . . . . . . . . . . . . . . . . $ (7) $ (82) $ (89)
Federal Funds Sold and Securities Purchased
Under Resale Agreements . . . . . . . . . . . . . . . . . . (53) (196) (249)
Securities and Trading Account Assets . . . . . . . . . . . . 76 (278) (202)
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . (184) (1,393) (1,577)
------- -------- --------
CHANGE IN INTEREST INCOME . . . . . . . . . . . . . . . . . . (168) (1,949) (2,117)
------- -------- --------

INTEREST-BEARING LIABILITIES
Deposits:
Domestic Retail Time Deposits . . . . . . . . . . . . . . . 41 (976) (935)
Domestic Negotiable Certificates of Deposit
and Other Time Deposits . . . . . . . . . . . . . . . . . (37) (161) (198)
Deposits in Foreign Offices . . . . . . . . . . . . . . . . (53) (614) (667)
------- -------- --------
Total Deposits . . . . . . . . . . . . . . . . . . . . . (49) (1,751) (1,800)
------- -------- --------
Short-Term Borrowings:
Federal Funds Purchased and Securities
Sold Under Repurchase Agreements . . . . . . . . . . . . (121) (427) (548)
Other Borrowed Funds . . . . . . . . . . . . . . . . . . . (127) (143) (270)
------- -------- --------
Total Short-Term Borrowings . . . . . . . . . . . . . . . (248) (570) (818)
------- -------- --------
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . 31 (32) (1)
Intra-Company Funding . . . . . . . . . . . . . . . . . . . . -- -- --
------- -------- --------
CHANGE IN INTEREST EXPENSE . . . . . . . . . . . . . . . . . (266) (2,353) (2,619)
------- -------- --------
CHANGE IN NET INTEREST INCOME . . . . . . . . . . . . . . . . $ 98 $ 404 $ 502
======= ======== ========
</TABLE>

A15
<PAGE> 18
1992 OVER 1991

- - - ---------------------------------------------------------------------------------------------------------------
DOMESTIC FOREIGN
- - - --------------------------------------------------- ---------------------------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE IN NET DUE TO CHANGE IN NET
VOLUME RATE CHANGE VOLUME RATE CHANGE
- - - ------ ---- ------ ------ ---- ------
<S> <C> <C> <C> <C> <C>
$ (16) $ (4) $ (20) $ 9 $ (78) $ (69)

(73) (205) (278) 20 9 29
13 (280) (267) 63 2 65
(117) (907) (1,024) (67) (486) (553)
- - - --------- --------- --------- ------- -------- -------
(193) (1,396) (1,589) 25 (553) (528)
- - - --------- --------- --------- ------- -------- -------

41 (976) (935) -- -- --

(37) (161) (198) -- -- --
-- -- -- (53) (614) (667)
- - - --------- --------- --------- ------- -------- -------
4 (1,137) (1,133) (53) (614) (667)
- - - -------- --------- --------- ------- -------- -------

(141) (436) (577) 20 9 29
(102) (132) (234) (25) (11) (36)
- - - --------- --------- --------- ------- -------- -------
(243) (568) (811) (5) (2) (7)
- - - --------- --------- --------- ------- -------- -------
19 (50) (31) 12 18 30
(16) 101 85 16 (101) (85)
- - - -------- --------- --------- ------- -------- -------
(236) (1,654) (1,890) (30) (699) (729)
- - - --------- --------- --------- ------- -------- -------
$ 43 $ 258 $ 301 $ 55 $ 146 $ 201
========= ========= ========= ======= ======== =======

</TABLE>

A16
<PAGE> 19
SECURITIES PORTFOLIO

On December 31, 1993, the Corporation adopted Statement of Financial Accounting
Standard No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). SFAS 115 addresses the accounting for investments in
equity securities that have readily determinable fair values and all
investments in debt securities. Prior to the adoption of SFAS 115,
available-for-sale securities were carried at the lower of aggregate amortized
cost or market value. For a further discussion of the Corporation's securities
portfolio see Note 4 of the Notes to Consolidated Financial Statements in
Section B, pages 60 through 61.

Of the securities held in the Corporation's securities portfolio, the U.S.
Government is the only issuer whose securities exceeded 10% of the
Corporation's total stockholders' equity at December 31, 1993. The year-end
balances of the Corporation's held-to- maturity securities for 1993, 1992 and
1991 were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1993 1992 1991
--------- ---------- ----------
(IN MILLIONS)

<S> <C> <C> <C>
U.S. Treasury and Federal
Agencies . . . . . . . . . . . . . . . . . . $ 9,142 $ 12,108 $ 14,081
Obligations of States and
Political Subdivisions . . . . . . . . . . . 13 4 24
Other (a) . . . . . . . . . . . . . . . . . . . 953 2,924 5,658
--------- --------- ---------
Total . . . . . . . . . . . . . . . . $ 10,108 $ 15,036 $ 19,763
========= ========= =========
</TABLE>

The year-end balances of the Corporation's available-for-sale securities for
1993 and 1992 were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1993 1992
--------- ---------

(IN MILLIONS)

<S> <C> <C>
U.S. Treasury and Federal
Agencies . . . . . . . . . . . . . . . . . . $ 11,897 $ 6,568
Other (a) . . . . . . . . . . . . . . . . . . . 3,943 1,822
--------- ---------
Total . . . . . . . . . . . . . . . . $ 15,840 $ 8,390
- - - ------------------------ ========= =========

</TABLE>

(a) Includes investments in debt securities issued by foreign governments,
corporate debt securities, collateralized mortgage obligations of private
issuers, and other debt and equity securities.

A17
<PAGE> 20

The following table presents, by maturity range and type of security, the
amortized cost at December 31, 1993, and the average yield of the
held-to-maturity securities portfolio.

<TABLE>
<CAPTION>
MATURITIES AND AVERAGE AMORTIZED COST AVERAGE
YIELDS OF THE PORTFOLIO DECEMBER 31, 1993 YIELD (a)
- - - ----------------------- ----------------- ---------
<S> <C> <C>
(IN MILLIONS, EXCEPT YIELDS)
U.S. Treasury and Federal Agencies:
Due in One Year or Less . . . . . . . . . . . . . . . . . . $ 90 3.09%
Due After One Year through Five Years . . . . . . . . . . . 423 6.11
Due After Five Years through Ten Years . . . . . . . . . . . 785 6.63
Due After Ten Years (b) . . . . . . . . . . . . . . . . . . 7,844 7.13
------- ------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 9,142 7.00%
======= ======

Obligations of State and Political
Subdivisions:
Due in One Year or Less . . . . . . . . . . . . . . . . . . $ 7 4.14%
Due After One Year through Five Years . . . . . . . . . . . 1 9.31
Due After Five Years through Ten Years . . . . . . . . . . . 2 9.79
Due After Ten Years . . . . . . . . . . . . . . . . . . . . 3 10.66
------- ------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 13 6.97%
======= ======

Other:
Due in One Year or Less . . . . . . . . . . . . . . . . . . $ -- --
Due After One Year through Five Years . . . . . . . . . . . 623 4.91
Due After Five Years through Ten Years . . . . . . . . . . . 88 4.13
Due After Ten Years (b) . . . . . . . . . . . . . . . . . . 242 7.82
------- ------
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 953 5.58%
- - - ------------------------- ======= ======
</TABLE>

The following table presents, by maturity range and type of security, the fair
value and amortized cost at December 31, 1993 and the average yield of the
available-for-sale securities portfolio.

<TABLE>
<CAPTION>
MATURITIES AND AVERAGE FAIR VALUE AMORTIZED COST
YIELDS OF THE PORTFOLIO DECEMBER 31, DECEMBER 31, AVERAGE
- - - -----------------------
(IN MILLIONS, EXCEPT YIELDS) 1993 1993 YIELD (a)
----------------- ------------------ ---------
<S> <C> <C> <C>
U.S. Treasury and Federal Agencies:
Due in One Year or Less . . . . . . . . . . . . . $ 136 $ 134 5.02%
Due After One Year through Five Years . . . . . . 705 676 7.02
Due After Five Years through Ten Years . . . . . . 1,123 1,119 6.18
Due After Ten Years (b) . . . . . . . . . . . . . 9,933 9,606 7.32
--------- --------- ------
Total . . . . . . . . . . . . . . . . . . . $ 11,897 $ 11,535 7.17%
========= ========= ======
Other:
Due in One Year or Less . . . . . . . . . . . . . $ 639 $ 633 4.60%
Due After One Year through Five Years . . . . . . 1,238 1,222 7.93
Due After Five Years through Ten Years . . . . . . 823 798 7.86
Due After Ten Years (b) . . . . . . . . . . . . . 1,243 1,256 4.56
--------- --------- ------
Total . . . . . . . . . . . . . . . . . . . $ 3,943 $ 3,909 6.29%
- - - -------------------- ========= ========= ======

(a) Yields are derived by dividing interest income, adjusted for amortization of premiums and accretion
of discounts, by total amortized cost. Taxable-equivalent yields are used, where applicable.

(b) Substantially all of the Corporation's mortgage-backed securities are due in ten years or more
based on contractual maturity. The weighted-average maturity of mortgage-backed securities,
which reflects anticipated future prepayments based on a consensus of dealers in the market,
is approximately 5 years.

A18
</TABLE>

<PAGE> 21

LOAN PORTFOLIO

The table below sets forth the amount of loans outstanding by type for the
dates indicated:
<TABLE>
<CAPTION>

DECEMBER 31,
----------------------------------------------------------------
1993 1992 1991 1990 1989
-------- ---------- ---------- ----------- ----------
(IN MILLIONS)

<S> <C> <C> <C> <C> <C>
Domestic Loans:
Commercial and Financial . . . . . . . $ 23,848 $ 29,277 $ 32,904 $ 33,790 $ 34,050
Consumer . . . . . . . . . . . . . . . 25,798 23,599 20,436 18,700 16,069
Commercial Real Estate . . . . . . . . 7,338 8,103 8,737 9,407 9,460
--------- ---------- --------- ---------- ----------
Total Domestic Loans . . . . . 56,984 60,979 62,077 61,897 59,579
--------- ---------- --------- ---------- ---------

Foreign Loans:
Commercial, Industrial and Consumer. . 7,353 8,115 8,742 11,847 11,806
Foreign Governments and
Official Institutions . . . . . 7,558 8,266 8,740 9,651 9,892
Financial Institutions . . . . . . . . 3,963 5,145 5,278 3,057 3,368
--------- ---------- --------- ---------- ---------
Total Foreign Loans . . . . . . 18,874 21,526 22,760 24,555 25,066
--------- ---------- --------- ---------- ---------

Total Loans . . . . . . . . . . . . . . . 75,858 82,505 84,837 86,452 84,645
Unearned Discount . . . . . . . . . . . . (477) (495) (600) (767) (1,132)
--------- ---------- --------- ---------- ---------
Loans, Net of Unearned
Income . . . . . . . . . . . . . . . $ 75,381 $ 82,010 $ 84,237 $ 85,685 $ 83,513
------------------------- ========= =========== ============ =========== ===========
</TABLE>

MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES

The following table shows the maturity distribution based upon the terms of the
loan agreements, and sensitivity to changes in interest rates of the loan
portfolio, excluding consumer loans, at December 31, 1993:

<TABLE>
<CAPTION>
WITHIN 1-5 AFTER 5
DECEMBER 31, 1993 (IN MILLIONS) 1 YEAR(b) YEARS YEARS TOTAL
- - - ------------------------------- ------ ----- ----- -----
<S> <C> <C> <C> <C>
Domestic:
Commercial and Financial . . . . . . . . . $ 12,748 $ 8,174 $ 2,926 $ 23,848
Commercial Real Estate . . . . . . . . . . 2,895 3,626 817 7,338
Foreign, including LDC (a) . . . . . . . . . . 9,051 3,851 5,855 18,757
---------- -------- -------- ----------
Total . . . . . . . . . . . . . . . . . . $ 24,694 $ 15,651 $ 9,598 $ 49,943
========== ======== ======== ==========

Loans at Fixed Interest Rates . . . . . . . . . $ 2,229 $ 1,555
Loans at Variable Interest Rates . . . . . . . 13,422 8,043
-------- --------
Total . . . . . . . . . . . . . . . . . . $ 15,651 $ 9,598
- - - ------------------------- ======== ========
</TABLE>

(a) LDC denotes loans to countries engaged in debt rescheduling.
(b) Includes demand loans, overdrafts and loans having no stated schedule of
repayments and no stated maturity.

A19
<PAGE> 22
RISK ELEMENTS

The following table shows the principal amounts of nonaccrual and renegotiated
loans at the dates indicated:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Nonaccruing Loans:
Domestic . . . . . . . . . . . . . . . . $ 1,698 $ 2,974 $ 3,099 $ 2,984 $ 2,023
Foreign, excluding LDC . . . . . . . . . 234 493 272 333 164
LDC . . . . . . . . . . . . . . . . . . . 618 1,344 1,243 2,471 3,575
-------- -------- -------- -------- --------
Total Nonaccrual Loans . . . . . . . . 2,550 4,811 4,614 5,788 5,762
-------- -------- -------- -------- --------

Renegotiated Loans:
Domestic . . . . . . . . . . . . . . . . -- -- 7 21 11
Foreign, excluding LDC . . . . . . . . . 37 1 2 3 6
LDC . . . . . . . . . . . . . . . . . 4 4 5 13 13
-------- -------- -------- -------- ---------
Total Renegotiated Loans . . . . . . . 41 5 14 37 30
--------- -------- -------- -------- ---------
Total . . . . . . . . . . . . . . $ 2,591 $ 4,816 $ 4,628 $ 5,825 $ 5,792
======== ======== ======== ======== ========
</TABLE>

See Note 7 on page 64 of Section B for interest income calculated on the
carrying value of nonaccrual and renegotiated loans that would have been
recorded if these loans had been current in accordance with their original
terms (interest at original rates), and the amount of interest income on these
loans that was included in income for the periods indicated.

_______________________________________________________________________________

The following table presents loans past due 90 days or more for which interest
is being accrued at the dates indicated:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
(IN MILLIONS) 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Domestic (a) . . . . . . . . . . . . . . . . . $ 323 $ 393 $ 393 $ 342 $ 260
Foreign . . . . . . . . . . . . . . . . . . . . -- -- 30 25 8
------ ------ ------ ----- ------
Total . . . . . . . . . . . . . . . . . . $ 323 $ 393 $ 423 $ 367 $ 268
====== ====== ====== ===== ======
</TABLE>

(a) Includes consumer loans, exclusive of residential mortgage loans, as to
which interest or principal is past due 90 days or more which are
generally not classified as nonperforming but, rather, are charged-off on
a formula basis upon reaching certain specified stages of delinquency.

A20
<PAGE> 23
ALLOWANCE FOR LOSSES

The table below sets forth the Allowance for Losses for the dates indicated:

CHARGE-OFFS
Domestic:
Commercial and Financial . . . . . . (496) (511) (528) (325) (338)
Consumer . . . . . . . . . . . . . . (467)(a) (449) (456) (248) (225)
Commercial Real Estate . . . . . . . (259) (302) (265) (287) (242)
Foreign . . . . . . . . . . . . . . . . . (250) (339) (1,126)(d) (884) (822)
--------- --------- -------- -------- ---------
Total Charge-Offs . . . . . . . . . (1,472) (1,601) (2,375) (1,744) (1,627)

RECOVERIES
Domestic:
Commercial and Financial . . . . . . 74 61 70 67 104
Consumer . . . . . . . . . . . . . . 48 49 46 51 51
Commercial Real Estate . . . . . . . 15 12 12 10 9
Foreign . . . . . . . . . . . . . . . . . 206(b) 25 44 47 32
--------- -------- -------- -------- --------
Total Recoveries . . . . . . . . . . 343 147 172 175 196

NET CHARGE-OFFS . . . . . . . . . . . . . (1,129) (1,454) (2,203) (1,569) (1,431)
Losses on LDC Sales and Swaps . . . . . (152) (155) (102)(d) (688)(e) (89)
Other . . . . . . . . . . . . . . . . . . 17(c) (6) 6 12 (92)
--------- -------- -------- -------- --------
Balance at End of Year . . . . . . . . . $ 3,020 $ 3,025 $ 3,275 $ 4,229 $ 5,313
========= ======== ======== ======== ========
</TABLE>

_________________________

(a) Includes $55 million related to the decision to accelerate the
disposition of certain nonperforming residential mortgage loans.
(b) Includes $175 million of recoveries on the disposition of LDC debt.
(c) Includes $19 million increase in allowance related to the acquisition by
Texas Commerce of certain assets of four former banks of First City
Bancorporation of Texas, Inc.
(d) Includes a $902 million charge to adjust Brazilian medium- and long-term
outstandings to an estimated net recoverable value.
(e) Includes a $349 million charge related to the Mexican debt restructuring
agreement. This amount represents the difference between the carrying
value of the debt exchanged and the face value of the bonds received.
(f) Includes special additions of $1.7 billion for loans to countries
engaged in debt rescheduling and $210 million to Texas Commerce's
allowance for losses.

A21
<PAGE> 24

ALLOWANCE FOR LOSSES-FOREIGN

The following table shows, for the years 1993-1989, the changes in the
portion of the allowance for losses allocated to loans related to foreign
operations, including activity related to countries engaged in debt
rescheduling:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN MILLIONS) 1993 1992 1991 1990 1989
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance at Beginning
of Year . . . . . . . . . . . . . . $ 887 $ 1,337 $ 2,464 $ 4,028 $ 3,092
Provision for Losses . . . . . . . . . . 174 225 52 20 1,778 (c)
Charge-offs . . . . . . . . . . . . . . . (250) (339) (1,126)(a) (884) (822)
Recoveries . . . . . . . . . . . . . . . 206 25 44 47 32
Transfer from (to)
Non-LDC Allowance . . . . . . . . . (200) (200) -- (65) 57
Losses on LDC Sales and Swaps . . . . . . (152) (155) (102)(a) (688)(b) (89)
Other . . . . . . . . . . . . . . . . . . -- (6) 5 6 (20)
------- -------- -------- -------- --------
Balance at End
of Year . . . . . . . . . . . . . . $ 665 $ 887 $ 1,337 $ 2,464 $ 4,028
- - - ------------------------- ======= ======== ======== ======== ========
</TABLE>

(a) Includes a $902 million charge to adjust Brazilian medium- and
long-term outstandings to an estimated net recoverable value.

(b) Includes a $349 million charge related to the Mexican debt
restructuring agreement. This amount represents the difference
between the carrying value of the debt exchanged and the face value of
the bonds received.

The consolidated year-end allowance for losses is available to absorb
potential credit losses from the entire loan portfolio, as well as from other
balance sheet and off-balance sheet credit related transactions.

LOAN LOSS ANALYSIS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN MILLIONS) 1993 1992 1991 1990 1989
------ ------ ------ ------ ------

BALANCES

<S> <C> <C> <C> <C> <C>
Loans-Averages . . . . . . . . . . . . . $ 78,739 $ 82,173 $ 84,520 $ 84,727 $ 91,712
Loans-Year End . . . . . . . . . . . . . 75,381 82,010 84,237 85,685 83,513
Net Charge-Offs . . . . . . . . . . . . . 1,129 1,454 2,203 1,569 1,431
Allowance for Losses . . . . . . . . . . 3,020 3,025 3,275 4,229 5,313
Nonperforming Loans . . . . . . . . . . . 2,591 4,816 4,628 5,825 5,792

RATIOS

Net Charge-Offs to:
Loans-Average . . . . . . . . . . . 1.43% 1.77% 2.61% 1.85% 1.56%
Allowance for Losses . . . . . . . 37.38 48.07 67.27 37.10 26.93
Allowance for Losses to:
Loans-Year End . . . . . . . . . . 4.01 3.69 3.89 4.94 6.36
Nonperforming Loans . . . . . . . . 116.56 62.81 70.76 72.60 91.73

</TABLE>

A22
<PAGE> 25
DEPOSITS

The following data provide a summary of the Corporation's average deposits and
average interest rates for the years 1993-1991:

<TABLE>
<CAPTION>
AVERAGE BALANCES AVERAGE INTEREST RATES
------------------------------------- --------------------------
1993 1992 1991 1993 1992 1991
-------- ------- ------- ---- ---- ----
(IN MILLIONS, EXCEPT INTEREST RATES)
<S> <C> <C> <C> <C> <C> <C>
Domestic:
Noninterest-Bearing Demand . . . . . $ 21,750 $ 18,989 $ 16,698 --% --% --%
Interest-Bearing Demand . . . . . . 6,456 5,547 4,900 1.60 2.17 4.22
Savings . . . . . . . . . . . . . . 27,553 26,641 25,253 2.22 2.67 5.20
Time Deposits . . . . . . . . . . . 18,831 19,856 21,498 3.79 4.54 6.27
--------- --------- ---------
74,590 71,033 68,349 1.91 2.44 4.19
--------- --------- ---------

Foreign:
Noninterest-Bearing Demand . . . . . 157 345 251 -- -- --
Interest-Bearing Demand . . . . . . 7,969 6,111 5,800 4.87 5.72 7.55
Savings . . . . . . . . . . . . . . 43 82 53 2.48 1.72 3.55
Time Deposits . . . . . . . . . . . 12,897 15,179 16,650 3.28 5.16 8.18
--------- --------- ---------
21,066 21,717 22,754 3.86 5.22 7.92
--------- --------- ---------

Total . . . . . . . . . . . . . . . $ 95,656 $ 92,750 $ 91,103 2.34% 3.09% 5.12%
========= ========= =========
</TABLE>

Substantially all of the foreign deposits are in denominations of $100,000 or
more.

The following table presents deposits in denominations of $100,000 or more by
maturity range and type for the dates indicated:

<TABLE>
<CAPTION>
DOMESTIC TIME OTHER DEPOSITS
CERTIFICATES DOMESTIC TIME IN FOREIGN
DEPOSITS (IN MILLIONS) OF DEPOSITS DEPOSITS OFFICES
($100,000 OR MORE) ($100,000 OR MORE) ($100,000 OR MORE)
------------------ ------------------ -----------------
By remaining maturity
at December 31, 1993 1992 1993 1992 1993 1992
-------- ------- -------- -------- --------- ----------

<S> <C> <C> <C> <C> <C> <C>
Three Months or Less $ 3,370 $ 3,394 $ 3,752 $ 1,846 $ 21,145 $ 18,702
Over Three Months but
within Six Months 503 537 40 40 1,208 664
Over Six Months but
within Twelve Months 311 304 20 71 368 440
Over Twelve Months 1,047 938 104 1,592 173 201
-------- -------- -------- -------- --------- ----------
$ 5,231 $ 5,173 $ 3,916 $ 3,549 $ 22,894 $ 20,007
======== ======== ======== ======== ========= ==========
</TABLE>

At December 31, 1993, time and savings deposits in domestic offices totaled
$51,940 million, of which $5,231 million were time certificates of deposit in
denominations of $100,000 or more, $3,916 million were other time deposits in
denominations of $100,000 or more and $34,290 million were money market deposit
accounts and other savings accounts. Deposits of $100,000 or more in foreign
offices totaled $22,894 million, substantially all of which were
interest-bearing.

At December 31, 1992, time and savings deposits in domestic offices totaled
$51,353 million, of which $5,173 million were time certificates of deposit in
denominations of $100,000 or more, $3,549 million were other time deposits in
denominations of $100,000 or more and $33,330 million were money market deposit
accounts and other savings accounts. Deposits of $100,000 or more in foreign
offices totaled $20,007 million, substantially all of which were
interest-bearing.

A23
<PAGE> 26
ITEM 2. PROPERTIES

The headquarters of the Corporation is located in New York City at 270 Park
Avenue, which is a 50-story bank and office building owned by the Corporation.
This location contains approximately 1.3 million square feet of commercial
office and retail space. The Corporation also owns and occupies a 22-story
bank and office building at 4 New York Plaza with 900,000 square feet of
commercial office and retail space. The Corporation also occupies, under
leasehold agreements, office space at 55 Water Street, 277 Park Avenue, 95 Wall
Street and various other locations in New York City.

The Corporation, as lessee, also occupies offices in the United Kingdom. The
most significant office space leased in the United Kingdom is the 168,000
square feet at 125 London Wall, which lease expires in December 2017.

In addition, the Corporation and its subsidiaries own and occupy administrative
and operational facilities in Hicksville, New York; Moorestown, New Jersey;
Houston, Texas; McAllen, Texas; Austin, Texas; Arlington, Texas and El Paso,
Texas.

The Corporation and its subsidiaries occupy branch offices and other locations
throughout the United States and in foreign countries under various types of
ownership and leasehold agreements which, when considered in the aggregate, are
not material to its operations.

ITEM 3. LEGAL PROCEEDINGS

On January 4, 1991, Best Products Co., Inc., a catalog showroom retailer, and
several of its wholly-owned subsidiaries (collectively "Best") filed under
Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the
United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court"). On or about December 29, 1992, Best commenced adversary
proceedings in the Bankruptcy Court against Chemical Bank arising out of a
leveraged buyout of Best.

Chemical Bank acted as agent bank for a syndicate of financial institutions
(the "Bank Group") that provided permanent financing of approximately $622
million (of which Chemical Bank held, as of January 4, 1991, approximately $185
million of outstanding principal and accrued and unpaid interest) to Best in
connection with its leveraged buyout. Best's complaint alleges that the
principal and interest payments made to the Bank Group and the fees and
expenses paid to the Bank Group in return for the financing (of which Chemical
Bank's share of all such payments is approximately $232 million) constituted
fraudulent conveyances in violation of New York and Virginia law.

In January 1994, Best filed and disseminated a plan of reorganization which,
among other things, contemplates that all of the claims asserted by Best
against Chemical Bank and the Bank Group would be dismissed pursuant to a
compromise and settlement that is part of the plan. On February 4, 1994, the
Resolution Trust Corporation (the "RTC"), acting as receiver for certain other
creditors of Best, filed an adversary proceeding against the Bank Group seeking
a declaration that the Bank Group cannot enforce the subordination provisions
of the Intercreditor Agreement to which such other creditors, Best, and
Chemical Bank, as agent for the Bank Group, are parties because the Bank
Group's claims against Best constitute fraudulent conveyances. The RTC seeks a
further declaration that if, by reasons of the subordination provisions of the
Intercreditor Agreement, the Bank Group receives distributions from Best
pursuant to a confirmed plan of reorganization, the RTC's rights to recover
such distributions from the Bank Group shall survive the confirmation of such
plan of reorganization.

The Bankruptcy Court has approved the disclosure statement for the plan of
reorganization and a creditor vote on the plan has taken place. A hearing on
the compromise and settlement of Best's claims against Chemical Bank and the
Bank Group commenced on March 16, 1994 and has not been concluded. Although
there can be no assurance that the Bankruptcy Court will approve the compromise
and settlement or confirm the proposed plan of reorganization, management
believes that the above-described proceedings will be resolved without having
any material adverse impact on the financial condition of Chemical Bank or the
Corporation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

A24
<PAGE> 27
EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
POSITIONS AND OFFICES HELD
NAME AGE WITH THE CORPORATION AND WITH CHEMICAL BANK
---- --- -------------------------------------------
<S> <C> <C>
JOHN F. MCGILLICUDDY 63 Chairman of the Board and Chief Executive Officer of the
Corporation and Chemical Bank through December 31, 1993,
when he retired. Prior to the Merger, had served as
Chairman of the Board and Chief Executive Officer of MHC
since April 1979. A Director of the Corporation, and of
Chemical Bank since the Merger.

WALTER V. SHIPLEY 58 Effective January 1, 1994, Chairman and Chief Executive
Officer of the Corporation and the Bank. From the Merger
until December 31, 1993, President of the Corporation and
Chemical Bank. Prior to the Merger, was Chairman and Chief
Executive Officer of Chemical Banking Corporation and
Chemical Bank since 1983. Director of the Corporation and
Chemical Bank since 1982.

EDWARD D. MILLER 53 Effective January 1, 1994, President of the Corporation and
the Bank. From the Merger until December 31, 1993, Vice
Chairman of the Corporation and of Chemical Bank. A
Director of the Corporation and Chemical Bank since the
Merger. Prior to the Merger, Mr. Miller had served as a
Vice Chairman and a Director of MHC since December 1988.

WILLIAM B. HARRISON JR. 50 Vice Chairman of the Corporation and Chemical Bank. A
Director of the Corporation since the Merger and of the
Bank since August 1990. Prior to the Merger, Mr. Harrison
had been an Executive Officer of the Corporation since
1988.

PETER J. TOBIN 50 Executive Vice President and Chief Financial Officer of the
Corporation and Chemical Bank. Prior to the Merger, Mr.
Tobin had served in the same capacity for MHC since
December 1985.
</TABLE>

Unless otherwise noted, all of the Corporation's above-named executive officers
have continuously held senior level positions with the Corporation and Chemical
Bank during the five fiscal years ended December 31, 1993. There are no family
relationships among the foregoing executive officers.

A25
<PAGE> 28
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The outstanding shares of the Corporation's Common Stock are listed on the New
York Stock Exchange and the International Stock Exchange of the United Kingdom
and the Republic of Ireland. For the quarterly high and low prices of the
Common Stock on the New York Exchange and the quarterly dividends declared data
for the Corporation's common stock in the last two years, see the section
entitled "Quarterly Financial Information" in Section B, page 79.

At February 28, 1994, there were approximately 55,637 holders of record of the
Corporation's Common Stock.

ITEM 6. SELECTED FINANCIAL DATA

For five-year selected financial data, see "Financial Review" in Section B,
page 25.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Management's discussion and analysis of financial condition and results of
operations, entitled "Management's Discussion and Analysis", appears in Section
B, pages 26 through 51.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements appear, together with the Notes thereto
and the report of Price Waterhouse dated January 18, 1994 thereon, in Section
B, pages 52 through 79.

Supplementary financial data for each full quarter within the two years ended
December 31, 1993 are included in Section B, page 79 in the table entitled
"Quarterly Financial Information". Also included in Section B, pages 80
through 82, are the "Average Consolidated Balance Sheet, Interest and Rates"
and the "Consolidated Balance Sheet" for Chemical Bank and Subsidiaries.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

A26
<PAGE> 29
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to Instruction G (3) to Form 10-K, the information to be provided by
Items 10, 11, 12 and 13 of Form 10-K (other than information pursuant to Rule
402 (i), (k) and (l) of Regulation S-K) are incorporated by reference to the
Corporation's definitive proxy statement for the annual meeting of
stockholders, to be held May 17, 1994, which proxy statement will be filed with
Securities and Exchange Commission pursuant to Regulation 14A within 120 days
of the close of the Corporation's 1993 fiscal year.

A27
<PAGE> 30
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) EXHIBITS

1. Financial Statements

The consolidated financial statements, the Notes thereto and the report thereon
listed in Item 8 are set forth in Section B, commencing on page 52 thereof.

2. Financial Statement Schedules
None.

3. EXHIBITS

<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of Chemical Banking Corporation.

3.2 By-laws of Chemical Banking Corporation, as amended.

4.1 (a) Form of Rights Agreement, dated as of April 13, 1989 between Chemical Banking Corporation and
Harris Trust Company of New York, as amended (incorporated by reference to Exhibit 4 to the
Current Report on Form 8-K of Chemical Banking Corporation dated April 13, 1989).

4.1 (b) Letter of Appointment dated December 23, 1991 of Chemical Banking Corporation appointing Chemical
Bank, as successor Rights Agent under the Rights Agreement (incorporated by reference to Exhibit
4.13(b) of the Annual Report on Form 10-K dated December 31, 1991 of Chemical Banking
Corporation).

4.2 Form of Indenture dated as of December 1, 1989 between Chemical Banking Corporation and The Chase
Manhattan Bank (National Association), which Indenture includes the form of Debt Securities
(incorporated by reference to Exhibit 4.9 to the Registration Statement on Form S-3 (File No. 33-
32409) of Chemical Banking Corporation).

4.3 Form of Indenture dated as of April 1, 1987, between Chemical New York Corporation and Morgan
Guaranty Trust Company of New York, as Trustee, as amended and restated as of December 15, 1992,
which Indenture includes the form of Subordinated Debt Securities (incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K dated December 22, 1992 of Chemical Banking
Corporation).

4.4 (a) Form of Indenture dated as of June 1, 1982, between Manufacturers Hanover Corporation and Morgan Guaranty
Trust Company of New York, as Trustee, which Indenture includes the form of Debt Securities (incorporated by
reference to Exhibit 4(a) to Manufacturers Hanover Corporation's Registration Statement on Form S-3
(File No. 2-82433)).

</TABLE>

A28
<PAGE> 31
<TABLE>
<S> <C>
4.4 (b) Form of First Supplemental Indenture dated as of January 15, 1986 to the Indenture dated as of
June 1, 1982 between Manufacturers Hanover Corporation and Morgan Guaranty Trust Company of New
York, as Trustee, relating to the Senior Debt Securities (incorporated by reference to Exhibit 1
to Manufacturers Hanover Corporation's Current Report on Form 8-K, dated as of January 29, 1986).

4.4 (c) Form of Second Supplemental Indenture dated as of March 13, 1991 to the Indenture dated as of
June 1, 1982 between Manufacturers Hanover Corporation and Morgan Guaranty Trust Company of New
York, as Trustee, relating to the Senior Debt Securities (incorporated by reference to Exhibit 4
to Manufacturers Hanover Corporation's Current Report on Form 8-K, dated March 19, 1991).

4.4 (d) Form of Third Supplemental Indenture dated as of December 31, 1991 among Chemical Banking
Corporation, Manufacturers Hanover Corporation and Morgan Guaranty Trust Company of New York, to
the Indenture dated as of June 1, 1982 (incorporated by reference to Exhibit 4.14(d) of the
Annual Report on Form 10-K dated December 31, 1991 of Chemical Banking Corporation).

4.5 (a) Form of Indenture dated as of June 1, 1985 between Manufacturers Hanover Corporation and IBJ
Schroder Bank and Trust Company, as Trustee, relating to 8 1/2% Subordinated Capital Notes Due
February 15, 1999 (incorporated by reference to Exhibit 4 (b) to the Current Report on Form 8-K
dated February 27, 1987 of Manufacturers Hanover Corporation).

4.5 (b) Form of First Supplemental Indenture dated as of December 31, 1991 among Chemical Banking
Corporation, Manufacturers Hanover Corporation and IBJ Schroder Bank and Trust Company to the
Indenture dated June 1, 1985 (incorporated by reference to Exhibit 4.18(b) to the Annual Report
on Form 10-K dated December 31, 1991 of Chemical Banking Corporation).

10.1 Stock Purchase Agreement, dated as of September 18, 1989, between the Dai-Ichi Kangyo Bank,
Limited as Purchaser and Manufacturers Hanover Corporation as Seller (incorporated by reference
to Manufacturers Hanover Corporation's Current Report on Form 8-K dated September 25, 1989).

10.2 Stockholder's Agreement, dated as of December 29, 1989, among The CIT Group Holdings, Inc., The
Dai-Ichi Kangyo Bank, Limited and Manufacturers Hanover Corporation (incorporated by reference to
Manufacturers Hanover Corporation's Current Report on Form 8-K dated January 16, 1990).

10.3 CIT Stock Purchase Agreement, dated as of September 18, 1989 between The Dai-Ichi Kangyo Bank,
Limited as Purchaser and Manufacturers Hanover Corporation as Seller (incorporated by reference
to Manufacturers Hanover Corporation's Current Report on Form 8-K dated September 25, 1989).

</TABLE>

A29
<PAGE> 32
<TABLE>
<S> <C>
10.4 Executive Performance Incentive Plan of Chemical Banking Corporation and Subsidiaries, as amended
(incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K of Chemical Banking
Corporation for the year ended December 31, 1988).

10.5 Deferred Compensation Plan for Employees of Chemical Banking Corporation and Participating
Companies, as amended (incorporated by reference to Exhibit 10.3 to the Annual Report of Chemical
Banking Corporation on Form 10-K for the year ended December 31, 1985).

10.6 Deferred Compensation Plan for Non-Employee Directors of Chemical Banking Corporation and
Chemical Bank, as amended and restated effective December 15, 1992 (incorporated by reference to
Exhibit 10.6 to the Annual Report of Chemical Banking Corporation on Form 10-K for the year ended
December 31, 1992).

10.7 Chemical Banking Corporation Long-Term Stock Incentive Plan, as amended and restated as of May
19, 1992 (incorporated by reference to Exhibit 10.7 to the Annual Report of Chemical Banking
Corporation on Form 10-K for the year ended December 31, 1992).

10.8 Forms of employment agreements as entered into by Chemical Banking Corporation and certain of its
executive officers (incorporated by reference to Exhibit 10.9 to the Annual Report of Chemical
Banking Corporation on Form 10-K for the year ended December 31, 1992).

10.9 Post-Retirement Compensation Plan for Non-Employee Directors, as amended and restated as of
December 15, 1992 (incorporated by reference to Exhibit 10.10 to the Annual Report of Chemical
Banking Corporation on Form 10-K for the year ended December 31, 1992).

10.10 Executive Cash Plan for Retirement of Chemical Banking Corporation and Certain Affiliates, as
amended and restated effective January 1, 1991 (incorporated by reference to Exhibit 10.11 to the
Annual Report on Form 10-K of Chemical Banking Corporation for the year ended December 31, 1992).

10.11 Permanent Life Insurance Options Plan (incorporated by reference to Exhibit 10.11 to the Annual
Report on Form 10-K of Chemical Banking Corporation for the year ended December 31, 1992).

11.1 Computation of Net Income per common share.

12.0 Computation of ratio of earnings to fixed charges.

12.1 Computation of ratio of earnings to fixed charges and preferred stock dividend requirements.

21.1 List of Subsidiaries of Chemical Banking Corporation.

22.1 Annual Report on Form 11-K of Chemical Savings Plan of Chemical Bank and Certain Affiliates (to
be filed by amendment pursuant to Rule 15d-21 under the Securities Exchange Act of 1934).

</TABLE>

A30
<PAGE> 33
<TABLE>
<S> <C>
22.2 Annual Report on Form 11-K of Chemical Savings Plan of Texas Commerce Bancshares, Inc. (to be
filed by amendment pursuant to Rule 15d-21 under the Securities Exchange Act of 1934).

23.1 Consent of Independent Accountants.
</TABLE>

The Corporation hereby agrees to furnish to the Commission, upon request,
copies of instruments defining the rights of holders for the following
outstanding nonregistered long-term debt of the Corporation and its
subsidiaries: Floating Rate Subordinated Capital Note Due 1999 of the
Corporation; Floating Rate Subordinated Note Due 1998 of the Corporation;
Subordinated Floating Rate Notes Due 2003 of the Corporation; Floating Rate
Note Due 2002 of the Corporation; Zero-Coupon Note Due 2002 of the Corporation;
Serial Zero Coupon Guaranteed Notes Due 1984-2003 of the Corporation; 7 1/4%
Subordinated Notes Due 2002 of Chemical Bank; 7% Subordinated Notes Due 2005 of
Chemical Bank; Floating Rate Subordinated Notes Due May 5, 2003 of Chemical
Bank; Floating Rate Subordinated Notes Due June 15, 2000 of Chemical Bank;
Floating Rate Subordinated Notes Due July 29, 2003 of Chemical Bank; 6.58%
Subordinated Notes Due 2005 of Chemical Bank; 6.70% Subordinated Notes Due 2008
of Chemical Bank; 6.125% Subordinated Notes Due 2008 of Chemical Bank;
Adjustable Rate Notes Due April 1, 2011 of Texas Commerce Bancshares, Inc.;
Floating Rate Subordinated Capital Notes Due 1994 of Manufacturers Hanover
Trust Company; Floating Rate Subordinated Notes Due 1997 of Manufacturers
Hanover Corporation; Floating Rate Subordinated Capital Notes Due April 1997 of
Manufacturers Hanover Trust Company; LIBOR Note, Series C, Due March 1998 of
Manufacturers Hanover Corporation; and Subordinated Note Due April 1996 of
Manufacturers Hanover Corporation. These instruments have not been filed as
exhibits hereto by reason that the total amount of each issue of such
securities does not exceed 10% of the total assets of the Corporation and its
subsidiaries on a consolidated basis.

(b) REPORTS ON FORM 8-K

o A Form 8-K dated October 21, 1993 was filed setting forth the
Corporation's financial results for the 1993 third quarter and the
announcement that Walter V. Shipley was to succeed John F.
McGillicuddy as Chairman of the Board and Chief Executive Officer of
the Corporation on January 1, 1994.

o A Form 8-K dated November 19, 1993 was filed relating to the
redemption of Chemical Banking Corporation's 10 3/4% Cumulative
Preferred Stock on December 31, 1993.

A31
<PAGE> 34

SECTION B

Pages 1 - 23 not used

A32
<PAGE> 35

CHEMICAL BANKING
CORPORATION
AND SUBSIDIARIES

FINANCIAL REPORT

<TABLE>
<CAPTION>
Page Number in
B Section
<S> <C>
Financial Review 25

Management's Discussion And Analysis:
* Overview 26
* Results Of Operations 27
* Lines Of Business Results 32
* Balance Sheet Analysis 34
* Off-Balance Sheet Analysis 45
* Accounting Developments 49
* Comparison Between 1992 And 1991 49

Management's Report On Responsibility For Financial Reporting 52
Report Of Independent Accountants 52
Consolidated Financial Statements 53
Notes To Consolidated Financial Statements 57

Supplemental Schedules:
* Quarterly Financial Information 79
* Average Consolidated Balance Sheet, Interest And Rates 80
* Chemical Bank Consolidated Balance Sheet 82

</TABLE>

B24
<PAGE> 36
CHEMICAL BANKING
CORPORATION
AND SUBSIDIARIES

FINANCIAL REVIEW(a)

<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE, RATIO AND UNIT DATA)
AS OF OR FOR THE YEAR ENDED DECEMBER 31, 1993 1992 1991 1990 1989
- - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Net Interest Income $ 4,636 $ 4,598 $ 4,080 $ 3,539 $ 3,651
Provision for Losses 1,259 1,365 1,345 1,161 2,539(d)
Noninterest Revenue 4,024 3,026 2,862 2,792 2,926
Noninterest Expense 5,293 4,930 5,307(c) 4,641 4,864
Income (Loss) Before Income Tax Expense
and Effect of Accounting Changes 2,108 1,329 290 529 (826)
Income Tax Expense 539 243 136 89 163
Net Effect of Changes in Accounting Principles 35 -- -- -- --
Net Income (Loss) $ 1,604 $ 1,086 $ 154 $ 440 $ (989)
- - - ---------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Income (Loss) Before Effect of Accounting Changes $ 5.63 $ 3.90 $ .11(c) $ 1.84 $ (8.38)
Net Effect of Changes in Accounting Principles .14 -- -- -- --
Net Income (Loss) 5.77 3.90 .11(c) 1.84 (8.38)
Book Value at December 31, 37.60 32.43 31.02 32.80 34.35
Market Value at December 31, 40.13 38.63 21.25 10.75 29.88
Cash Dividends Declared 1.37 1.20 1.05 2.29 2.72
Cash Dividends Declared Per Class B -- --(b) .29 .64 .76
- - - ---------------------------------------------------------------------------------------------------------------------------------

TOTAL AT YEAR-END
Loans $ 75,381 $ 82,010 $ 84,237 $ 85,685 $ 83,513
Allowance for Losses (3,020) (3,025) (3,275) (4,229) (5,313)
Securities 25,948 23,426 19,763 19,242 16,254
Total Assets 149,888 139,655 138,930 136,249 133,492
Deposits 98,277 94,173 92,950 89,147 92,145
Long-Term Debt 8,192 6,798 5,738 5,764 6,370
Common Stockholders' Equity 9,510 8,003 5,691 5,848 5,689
Total Stockholders' Equity 11,164 9,851 7,281 7,238 6,979
- - - ---------------------------------------------------------------------------------------------------------------------------------

SELECTED RATIOS
Return on Average:
Total Assets 1.11% .78% .11% .30% n/m
Common Stockholders' Equity 16.66 12.36 .33 5.38 n/m
Total Stockholders' Equity 15.16 11.65 2.02 5.94 n/m
At December 31:
Common Stockholders' Equity to Assets 6.34 5.73 4.10 4.29 4.26%
Total Stockholders' Equity to Assets 7.45 7.05 5.24 5.31 5.23
Tier 1 Leverage 6.77 6.60 4.74 4.48 n/a
Risk-Based Capital Ratios:
Tier 1 (4.00% Required) 8.12 7.33 5.13 5.16 5.11
Total (8.00% Required) 12.22 11.55 9.13 9.40 9.71
Allowance for Losses to Nonperforming Loans 117 63 71 73 92
Common Dividend Payout 24 32 1,280(c) 146 n/m
Overhead Ratio (Excluding one-time charges) 59 64 67 71 73
- - - ---------------------------------------------------------------------------------------------------------------------------------

OTHER DATA
Average Common Shares and Common Stock
Equivalents Outstanding 251.2 240.4 181.4 174.7 131.6
Number of Employees 41,567 39,687 43,169 45,636 49,173
- - - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) On December 31, 1991, Manufacturers Hanover Corporation ("MHC") merged with
and into Chemical Banking Corporation (the "merger"). The merger was accounted
for as a pooling of interests and, accordingly, all amounts include the
consolidated results of MHC. (b) In March 1992, the Class B Common Stock was
converted into the Corporation's Common Stock. (c) Includes the impact of a
$625 million restructuring charge incurred in connection with the merger with
MHC. (d) Reflects special provisions of $1.9 billion for the allowance for
losses, including $1.7 billion for the allowance for losses related to
countries engaged in debt rescheduling ("LDC"). n/m--As a result of the loss,
these ratios are not meaningful. n/a--Not applicable.

B25
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON BETWEEN 1993 AND 1992

OVERVIEW

Chemical Banking Corporation (the "Corporation") earned record net income of
$1,604 million for 1993, an increase of 48% from $1,086 million reported for
1992. Net income per common share for 1993 was $5.77, compared with $3.90 in
1992.
The higher net income in 1993 reflected strong revenue growth in the
Corporation's core businesses. Total noninterest revenue in 1993 increased 33%
from 1992 reflecting strong performances from capital markets, corporate
finance, personal trust and national consumer activities, as well as higher
profits from venture capital activities. Also contributing to the strong
earnings was a lower provision for losses reflecting improvement in the
Corporation's credit quality.
The Corporation's 1993 results included the impact of two significant
accounting changes. On January 1, 1993, the Corporation adopted Financial
Accounting Standards Board Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106"), which resulted in a
charge of $415 million and Financial Accounting Standards Board Statement No.
109, "Accounting for Income Taxes" ("SFAS 109"), which resulted in an income
tax benefit of $450 million. The net favorable impact of the adoption of these
two new accounting standards was $35 million. Income before the effect of these
accounting changes was $1,569 million ($5.63 per common share), an increase of
44% from 1992.
Due to the strength of its earnings, the Corporation recognized in
1993 its remaining available Federal tax benefits. Tax benefits in 1993
amounted to $331 million (excluding the aforementioned adoption of SFAS 109),
compared with $278 million in 1992. The Corporation's earnings, beginning with
the fourth quarter of 1993, were reported on a fully-taxed basis.
For all of 1993, the Corporation realized merger-related expense
savings of $525 million related to the December 31, 1991 merger of the
Corporation and MHC, compared with $280 million in 1992.
The Corporation's nonperforming assets at December 31, 1993 were $3.53
billion, down 42% from $6.09 billion at the 1992 year-end. Nonperforming assets
were 2.4% of total assets at the end of 1993, compared with 4.4% at December
31, 1992. At December 31, 1993, the non-LDC allowance for losses was 123% of
non-LDC nonperforming loans, compared with 64% at the same date a year ago.
In 1993, the Corporation increased the quarterly cash dividend on its
outstanding common stock to $0.38 per share, a 27% increase from the quarterly
dividend of $0.30 per share paid in 1992. This overall increase was achieved
through an increase in March 1993 to $0.33 per share and in December 1993 to
$0.38 per share.
At December 31, 1993, the Corporation's ratios of Tier 1 Capital to
risk-weighted assets and Total Capital to risk-weighted assets were 8.12% and
12.22%, respectively, well in excess of the minimum ratios specified by the
Board of Governors of the Federal Reserve System ("Federal Reserve Board"),
compared with 7.33% and 11.55%, respectively, at December 31, 1992.

[NET INCOME BAR GRAPH -- SEE EDGAR APPENDIX]
[RETURN ON AVERAGE COMMON STOCKHOLDERS' EQUITY BAR GRAPH -- SEE EDGAR APPENDIX]

B26
<PAGE> 38
RESULTS OF OPERATIONS

NET INTEREST INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Total Interest Income $8,403 $9,148
Total Interest Expense 3,767 4,550
- - - -----------------------------------------------------------
Net Interest Income 4,636 4,598
Taxable-Equivalent Adjustment(a) 21 31
- - - -----------------------------------------------------------
Net Interest Income-Taxable
Equivalent Basis $4,657 $4,629
- - - -----------------------------------------------------------
</TABLE>

(a) Reflects a pro forma adjustment to the net interest income amount included
in the Statement of Income to permit comparisons of yields on tax-exempt and
taxable assets.

The Corporation's net interest income was $4,636 million in 1993, up
from $4,598 million in 1992. The improvement in net interest income for 1993
was due to the favorable impact from the reduction in nonperforming loans,
higher average interest earning assets and lower funding costs (primarily as a
result of the upgrades to the Corporation's credit ratings). These improvements
were partially offset by a decrease in the Corporation's loan portfolio as a
result of continued sluggish loan demand, loan paydowns from businesses
refinancing their borrowings in the debt and equity markets, as well as
management's strategic decision to reduce the credit risk profile of the
Corporation. As a consequence, there was a remixing of the composition of the
Corporation's average interest-earning assets to liquid assets, which support
the Corporation's trading businesses. Also contributing to the reduction in net
interest income was the expiration of positions taken prior to and in the early
part of 1992 to take advantage of declining U.S. interest rates.
The negative impact on net interest income from nonperforming loans in
1993 was $111 million, down from $293 million in 1992. The improvement is
principally due to the significant reduction in the level of the Corporation's
nonperforming loans as well as the lower interest rate environment in 1993.
Average interest-earning assets rose 3.0% in 1993 to $124.9 billion,
compared with $121.2 billion in 1992. The growth occurred in Federal funds and
resale agreements, trading account assets, consumer loans and securities,
partially offset by a decline in commercial lending. Although the asset remix
resulted in a lower contribution to net interest income, the increase in liquid
trading account assets resulting from the remix contributed to the significant
increase in trading revenue, which is recorded in noninterest revenue.
The Corporation's average total loans in 1993 were $78.7 billion, a
decrease of $3.5 billion from a year ago. As a percentage of total
interest-earning assets, the loan portfolio decreased to 63.0% in 1993 from
67.8% a year ago. The decline was due to the aforementioned reduction in
commercial lending, partially offset by the continued growth in consumer loans,
principally credit card and installment loans.

[NET INTEREST INCOME BAR GRAPH -- SEE EDGAR APPENDIX]

The securities portfolio averaged $23.7 billion in 1993, compared with
$21.7 billion in 1992. The Corporation's liquid interest-earning assets
averaged $22.5 billion in 1993, an increase of $5.1 billion from a year ago. As
a result of the aforementioned remix of interest-earning assets, the percentage
of the combined portfolio of securities and liquid assets to total
interest-earning assets increased to 37.0% in 1993 from 32.2% in 1992.
The $3.7 billion growth in interest-earning assets was funded by a
$2.3 billion increase in interest-bearing liabilities and a $1.4 billion
increase in interest-free funds. For 1993, average interest-bearing liabilities
were $106.5 billion, compared with $104.2 billion for the same period in 1992.
The Corporation's average core deposit base increased 7% in 1993 to $60.8
billion and funded 48.7% of average interest-earning assets, compared with
47.1% during 1992. As a result of this increase in core deposits, coupled with
the issuance of long-term debt and internally generated capital during 1993,
the Corporation was able to utilize lower-cost funds to support
interest-earning assets in 1993.
The interest rate spread, which is the difference between the average
rate on interest-earning assets and the average rate on interest-bearing
liabilities, was 3.20% for both 1993 and 1992. During 1993, the spread was
favorably affected by the smaller negative impact from nonperforming loans and
lower funding costs, offset by the aforementioned shift in the Corporation's
balance sheet asset mix.
The net yield on interest-earning assets, which is the average rate
for interest-earning assets less the average rate paid for all sources of
funds, including the impact of interest-free funds, was 3.73% in 1993, compared
with 3.82% in 1992. The decline in the net yield was impacted by the same
factors that affected the interest rate spread, as well as by a lower
contribution from interest-free sources of funds. The contribution from
interest-free funds to the net yield in 1993 was 53 basis

B27
<PAGE> 39
points, compared with 62 basis points in 1992. The decline resulted from the
lower interest rate environment in 1993, despite an increase of $1.4 billion in
interest-free funds that financed interest-earning assets.
Management anticipates that the net yield on interest-earning assets
will be slightly lower in 1994 than 1993. Net interest income in 1994 is
expected to approximate the 1993 level as an anticipated higher level of
interest-earning assets is expected to offset the anticipated decline in net
yield.

<TABLE>
<CAPTION>
INTEREST RATE SPREAD AND NET YIELD ON 1993 1992
AVERAGE INTEREST-EARNING ASSETS AVERAGE AVERAGE
YEAR ENDED DECEMBER 31, (TAXABLE EQUIVALENT RATES; IN MILLIONS) BALANCE RATE BALANCE RATE
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans(a) $ 78,739 7.16% $82,173 7.76%
Securities 23,654 7.32 21,674 8.11
Liquid Interest-Earning Assets 22,541 4.68 17,402 6.00
- - - ------------------------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets $ 124,934 6.74% 121,249 7.57%
- - - ------------------------------------------------------------------------------------------------------------------------
Interest-Bearing Liabilities $ 106,521 3.54% 104,205 4.37%
Interest Rate Spread 3.20 3.20
Interest-Free Funds 18,413 -- 17,044 --
- - - ------------------------------------------------------------------------------------------------------------------------
Total Sources of Funds $ 124,934 3.01% 121,249 3.75%
- - - -----------------------------------------------------------------------------------------------------------------------
Net Yield on Interest-Earning Assets 3.73% 3.82%
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Nonperforming loans are included in the average loan balances.

DOMESTIC NET INTEREST INCOME

Domestic net interest income was $3,697 million in 1993, an increase of $53
million from the prior year. The increase in 1993 was attributable to a higher
level of interest-earning assets and the significant reduction in nonperforming
loans, partially offset by the aforementioned remixing of the Corporation's
interest-earning assets.

FOREIGN NET INTEREST INCOME

Net interest income from foreign operations was $939 million for 1993, compared
with $954 million in 1992. In 1993, the Corporation recorded interest
collections on Argentine loans of $48 million (including a one-time cash
payment of $29 million related to interest arrearages), compared with $19
million in 1992. Interest income on Brazilian loans was $75 million in 1993,
relatively unchanged from $76 million in 1992.

[COMPOSITION OF INTEREST - EARNING ASSETS PIE CHART -- SEE EDGAR APPENDIX]

PROVISION FOR LOSSES

The provision for losses in 1993 was $1,259 million, a decrease of 8% from
$1,365 million in 1992. In both years, the provision equaled the amount of the
respective year's non-LDC net charge-offs (which was lower in 1993 than in
1992, despite a $55 million provision related to the decision to accelerate the
disposition of certain nonperforming residential mortgage loans).
As a result of the significant improvement in the Corporation's
nonperforming assets during 1993 and the favorable credit environment
anticipated for 1994, the Corporation expects a significant reduction in the
provision for losses in 1994.

<TABLE>
<CAPTION>
NONINTEREST REVENUE
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992
- - - ---------------------------------------------------------------------------------
<S> <C> <C>
Trust and Investment Management Fees $ 406 $ 361
Corporate Finance and Syndication Fees 338 265
Service Charges on Deposit Accounts 288 264
Fees for Other Banking Services 1,067 1,040
Trading Account and Foreign Exchange Revenue 1,073 853
Securities Gains 142 53
Other Revenue 710 190
- - - ---------------------------------------------------------------------------------
Total Noninterest Revenue $4,024 $3,026
- - - ---------------------------------------------------------------------------------
</TABLE>

Noninterest revenue totaled $4,024 million in 1993, an increase of 33%
from last year. The growth in noninterest revenue was primarily the result of
record combined trading revenue, increases in various fee-based revenue, higher
venture capital gains and other revenue, principally gains from the sale of
refinancing country securities.

B28
<PAGE> 40

Trust and investment management fees are primarily derived from
corporate and personal trust activities. Services provided include custody,
securities processing, and private banking to customers on a global basis. The
increase of $45 million for 1993 was principally due to growth in the
Corporation's personal trust and asset management businesses. Personal trust
fees increased $31 million in 1993 to $196 million, principally due to a rise
in the market value of investments under management and to new customer
relationships developed as a result of two acquisitions by Texas Commerce
Bancshares Inc. ("Texas Commerce") in 1993: the acquisition of certain assets
of the former First City Bancorporation of Texas, Inc. ("First City Banks") in
February 1993 and the acquisition of Ameritrust Texas Corporation
("Ameritrust") in September 1993.
Corporate finance and syndication fees include revenue from managing
and syndicating loan arrangements; providing financial advisory services in
connection with leveraged buyouts, recapitalizations and mergers and
acquisitions; and arranging private placements. Corporate finance and
syndication fees in 1993 reached $338 million, a 28% increase from the prior
year, principally resulting from the continued strong growth in global loan
originations and distribution activities. During 1993, the Corporation acted as
agent or co-agent for approximately $185 billion of syndicated credit
facilities, a reflection of the Corporation's large client base and strong
emphasis on distribution. During 1993, the Federal Reserve Board approved the
Corporation's applications to underwrite and deal in all debt and equity
securities. Fees from underwriting debt offerings also contributed to the
increase.
Service charges on deposit accounts totaled $288 million in 1993, an
increase of 9% over last year. The increase from 1992 was primarily due to the
higher level of fees related to retail accounts as well as a larger deposit
base (principally resulting from the acquisition of the First City Banks).

[NONINTEREST REVENUE BAR GRAPH -- SEE EDGAR APPENDIX]

Fees for other banking services for 1993 were $1,067 million, an
increase of $27 million from a year ago, which is indicative of the continued
growth in the Corporation's core revenue businesses. The fee level for 1993 was
primarily affected by changes in the following areas:

* Retail credit card fees increased $28 million from last year due to
increased transaction volume, reflecting a growing consumer cardholder
base and the return to the balance sheet of previously securitized
loans. In the fourth quarter of 1993, the Corporation initiated a
program for a co-branded MasterCard with Shell Oil Company. Revenue
from the Shell program was insignificant in 1993; however, it is
expected to contribute to growth in retail card fees for 1994.

* Mortgage servicing fees increased $6 million in 1993, reflecting the
purchase of mortgage servicing rights as well as a higher level of
mortgage originations resulting from the low interest-rate environment
in 1993. The Corporation originated $14.7 billion of mortgage loans in
1993 versus $12.5 billion in 1992.

* Loan commitment fees were $90 million in 1993, an increase of $9
million from 1992.

* Loan servicing fees were $23 million in 1993, a decrease of $20
million from a year ago, primarily reflecting the reduction in the
level of securitized credit card loans serviced in 1993 versus 1992.

Combined revenues from trading account and foreign exchange activities
in 1993 were $1,073 million, an increase of 26% from $853 million a year ago.
The increase was in part due to continued efforts by the Corporation to
diversify and expand its trading activities through an emphasis on
market-making and sales businesses. The Corporation's sources of trading
revenue are through sales, arbitrage, market-making and positioning. In 1993,
the Corporation, taking advantage of its higher credit ratings and its
increasing global presence, broadened its global trading activities and
increased the range of products it offers and the currency markets in which it
operates. The resulting growth in transaction volume, coupled with a broader
range of instruments, market volatility and wider spreads (especially in the
European markets) contributed to the increased revenues.
The following table sets forth the components of trading account and
foreign exchange revenues for 1993 and 1992.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Trading Account and Foreign
Exchange Revenue:
Interest Rate Contracts(a) $ 453 $333
Foreign Exchange Revenue(b) 302 363
Debt Instruments and Other(c) 318 157
- - - -----------------------------------------------------------
Total Trading Account and Foreign
Exchange Revenue $1,073 $853
- - - -----------------------------------------------------------
</TABLE>

(a) Includes interest rate swaps, currency swaps, foreign exchange forward
contracts, interest rate futures, and forward rate agreements.
(b) Includes foreign exchange spot and option contracts.
(c) Includes U.S. and foreign government agency and corporate debt securities;
emerging markets debt instruments, debt-related derivatives, equity securities,
equity derivatives, and commodity derivatives.

B29
<PAGE> 41
Trading revenues are affected by many factors including volatility of
currencies and interest rates, the volume of transactions executed by the
Corporation's customers, its success in proprietary positioning, its credit
standings and steps taken by central banks and governments to affect financial
markets. Although the Corporation believes that its improved credit standing
has recently been contributing to the improvement in its trading revenue, other
factors, such as market volatility, governmental actions, or success in
proprietary positioning, might not be as favorable in future periods as they
were in 1993. For a further discussion of the Corporation's risk-management
products and related revenues, see the Off-Balance Sheet section of the
Management's Discussion and Analysis and Note Eighteen of the Notes to
Consolidated Financial Statements.
Securities gains were $142 million in 1993, compared with $53 million
in 1992. For further discussion of the Corporation's securities, see the
Securities section.
The Corporation's other noninterest revenue is primarily comprised of
income from venture capital activities, equity income from affiliates
(including the Corporation's 40% interest in The CIT Group Holdings, Inc.
("CIT")), and gains on the sale of corporate assets. The most significant items
within other revenue for 1993 and 1992 are listed in the following table.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992
- - - ---------------------------------------------------------------------------------
<S> <C> <C>
Net Gains on Refinancing Country Securities(a) $ 306 $ --
Income from Venture Capital Activities 301 100
Equity Income from CIT(b) 65 57
Other 38 33
- - - ---------------------------------------------------------------------------------
Total Other Revenue $ 710 $ 190
- - - ---------------------------------------------------------------------------------
</TABLE>

(a) Principally reflects a $179 million gain from the sale of Argentine
floating rate bonds and $152 million gain from the sale of interest due and
unpaid bonds received from Brazil.
(b) The Corporation's 40% net investment in CIT at December 31, 1993 and 1992,
totaled $849 million and $816 million, respectively.

Income from venture capital activities, net of valuation losses, was
$301 million in 1993, an increase of $201 million from 1992. At December 31,
1993, the Corporation had equity and equity-related investments with a carrying
value of $1.3 billion. On average, these investments are held for four to seven
years. Income is recognized when an investment is sold or the investment is
marked to market at a discount to the public value upon completion of an
initial public offering. The Corporation believes that venture capital will
continue to make substantial contributions to the Corporation's earnings,
although the timing of the recognition of gains from such activities is
unpredictable and it is expected that revenues from such activities will vary
significantly from period to period.

NONINTEREST EXPENSE

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Salaries $2,070 $1,977
Employee Benefits 396 372
Occupancy Expense 587 566
Equipment Expense 337 316
Foreclosed Property Expense 287 283
Restructuring Charge 158 --
Other Expense 1,458 1,416
- - - -----------------------------------------------------------
Total Noninterest Expense $5,293 $4,930
- - - -----------------------------------------------------------
</TABLE>

Noninterest expense in 1993 was $5,293 million, compared with $4,930
million in 1992. Included in noninterest expense were expenses related to two
acquisitions by Texas Commerce during 1993 and higher expenses associated with
investments in certain key businesses, such as expansion of the Corporation's
securities business and the introduction of the co-branded MasterCard program
with Shell Oil Company. In the fourth quarter of 1993, the Corporation incurred
$53 million in operating expenses in connection with its introduction of the
Shell MasterCard from Chemical Bank.
Noninterest expense for 1993 reflected $525 million in expense savings
related to the December 31, 1991 merger of the Corporation and MHC, up from
$280 million of expense savings for 1992. The Corporation expects to continue
to realize expense savings (estimated at approximately $710 million in 1994 and
approximately $750 million in 1995 and each year thereafter) and one-time
merger related benefits in connection with its implementation of the merger.
During 1993, the Corporation incurred a charge of $115 million, principally
related to changes since the date of the merger in the Corporation's facilities
plans and revised estimates of occupancy-related costs associated with
headquarters and branch consolidations. The Corporation does not anticipate any
further merger-related restructuring charges.
During 1993, the ratio of noninterest operating expense (excluding
one-time charges) to total operating revenue improved to 59.1% from 63.7% in
1992.
Salaries and employee benefits expenses in 1993 were $2,466 million,
compared with $2,349 million recorded in 1992. The increase from last year was
primarily the result of significantly higher incentive compensation costs due
to increased revenues (primarily from the Corporation's capital markets and
corporate finance activities), higher expenses related to services provided by
temporary employment agencies to assist with merger integration efforts, and
the additional staff costs from the 1993 acquisitions by Texas Commerce.
Additionally, as a result of the adoption of SFAS 106, expenses for 1993
related to other postretirement benefits ("OPEB") were approximately $20
million higher than in 1992.

B30
<PAGE> 42

Total staff at December 31, 1993 amounted to 41,567 compared with
39,687 at December 31, 1992. The increase in staff count from December 31, 1992
is attributable to the acquisition of the First City Banks and Ameritrust. At
December 31, 1993, merger-related staff reductions totaled 6,221 from July 15,
1991 (the date the merger with MHC was first announced) exceeding the goal of
6,200 established at that time. In 1994, the Corporation expects pension and
OPEB expense to be approximately $30 million higher than the 1993 level
primarily due to a decrease in the discount rate utilized in determining the
benefit obligation to 7.5%. For a further discussion, see Note Thirteen of the
Notes to Consolidated Financial Statements.
Occupancy expense in 1993 was $587 million, an increase of $21 million
from 1992. The increase in 1993 principally resulted from $13 million in
occupancy-related expenses associated with the facilities acquired in
connection with the First City Banks and Ameritrust transactions. The remaining
increase in occupancy expense largely reflected the consolidation and
relocation of certain facilities in London.
Equipment expense in 1993 was $337 million compared with $316 million
in 1992. The increase in 1993 was primarily the result of technology
enhancements to support the Corporation's investment in certain businesses,
such as Geoserve, retail banking and capital markets.
Foreclosed property expense was $287 million in 1993, compared with
$283 million in 1992. Included in the 1993 results was $20 million related to
the accelerated disposition of nonperforming assets originally extended several
years ago under a reduced-documentation residential mortgage program that was
discontinued in 1990. Management expects that foreclosed property expense in
1994 will be significantly lower than the 1993 level.
In 1993, the Corporation incurred the aforementioned $115 million
charge related to the final assessment of costs associated with the merger with
MHC and $43 million in connection with the acquisition of assets and assumption
of liabilities of the First City Banks from the Federal Deposit Insurance
Corporation (the "FDIC"). For a further discussion, see Note Two of the Notes
to Consolidated Financial Statements.
Other expense comprises items such as professional services,
insurance, marketing, communications expense and FDIC assessments. Other
expense in 1993 was $1,458 million compared with $1,416 million in 1992. The
1992 amount included a $41 million charge incurred in combining the
Corporation's employee benefit plans and a $30 million charge for the
Corporation's Canary Wharf lease arrangement. The increase in other expense
from last year principally reflected higher marketing costs, operating expenses
associated with the First City Banks and Ameritrust acquisitions, and higher
FDIC costs due to a higher deposit base as a result of such acquisitions.
Marketing expense for 1993 was $187 million, an increase of $76
million from 1992. The higher level of marketing expense reflected the
Corporation's marketing program for the co-branded MasterCard with Shell Oil
Company, an increase in credit card solicitation costs (exclusive of Shell),
and increased promotional advertising related to the Corporation's retail
banking business.
Included in other expense for 1993 was approximately $76 million
related to the amortization of goodwill and other intangible assets and other
ongoing expenses associated with the First City Banks and Ameritrust
acquisitions. As a result of these acquisitions, total amortization of goodwill
and intangibles increased to $106 million in 1993 from $80 million in 1992.
The Corporation expects that noninterest operating expense in 1994
will be somewhat higher than that in 1993 (after taking into consideration the
effects of merger-related cost savings anticipated to be realized during the
year), reflecting costs associated with the continued investment by the
Corporation to grow key business activities. Nevertheless, one of management's
objectives for 1994 and thereafter will be to continue to improve the ratio of
noninterest operating expenses to total operating revenue.

[OVERHEAD RATIO BAR GRAPH -- SEE EDGAR APPENDIX]

INCOME TAXES

The Corporation recorded income tax expense of $539 million in 1993, compared
with $243 million in 1992. Included in the 1993 and 1992 income tax expense
were approximately $331 million and $278 million, respectively, of Federal
income tax benefits.
The Corporation adopted SFAS 109 as of January 1, 1993, and, after
taking into account the additional tax benefits associated with the adoption of
SFAS 106, the Corporation recognized a favorable cumulative effect on income
tax expense of $450 million (or $1.81 per common share). This favorable impact
was recorded within the caption "Net Effect of Changes in Account-

B31
<PAGE> 43
ing Principles" on the Consolidated Statement of Income. Prior years' financial
statements have not been restated to apply the provisions of SFAS 109.
Due to the strength of its earnings, the Corporation recognized in the
third quarter of 1993 its remaining available Federal income tax benefits in
accordance with SFAS 109. As a result, the Corporation's earnings beginning in
the fourth quarter of 1993 were reported on a fully-taxed basis.
On August 10, 1993, President Clinton signed the Omnibus Budget
Reconciliation Act ("OBRA") of 1993, which increased the corporate Federal tax
rate from 34% to 35% retroactive to January 1, 1993. The impact of the higher
Federal tax rate increased the Corporation's tax provision; however, this was
more than offset by an increase in the value of the Corporation's deferred tax
assets. As a result, the Corporation's tax expense in 1993 decreased by
approximately $8 million due to the enactment of OBRA.
The Corporation's effective tax rate was 25.6% in 1993, compared with
18.3% in 1992. Excluding the $331 million of benefits recognized under SFAS 109
for 1993, the Corporation's effective tax rate for 1993 would have been 41.3%.
Excluding the $278 million of benefits recognized in 1992, the Corporation's
effective tax rate for 1992 would have been 39.2%.

LINES OF BUSINESS RESULTS

Profitability of the Corporation is tracked with an internal information system
that produces line-of-business performance within the Global Bank, Regional
Bank, Real Estate and Corporate sectors. A set of management accounting
policies has been developed and implemented to ensure that the reported results
of the groups reflect the economics of their businesses. Line-of-business
results are subject to restatement as appropriate whenever there are
refinements in management reporting policies or changes to the management
organization. Thus, certain amounts reported in 1992 have been restated to
conform with the presentation of the current-year's results. Line-of-business
results are subject to further restatements as may be necessary to reflect
future changes in internal management reporting.
Guidelines exist for assigning expenses that are not directly incurred
by businesses, such as overhead and taxes, as well as for allocating
stockholders' equity and the provision for losses, utilizing a risk-based
methodology. Noninterest expenses of the Corporation are fully allocated to the
business units except for special corporate one-time charges. Management has
developed a risk-adjusted capital methodology that quantifies different types
of risk -- credit, operating and market -- within various businesses and
assigns capital accordingly. Credit risk is computed using a risk-grading
system that is consistently applied throughout the Corporation. The
Corporation's businesses are evaluated on a fully-taxed basis. The tax benefits
currently reflected in the Corporation's income tax expense (which results in a
lower effective tax rate) are generally included in the Corporate sector.
Texas Commerce's results are tracked and reported on a legal entity
basis, including the return-on-common equity calculation.

GLOBAL BANK

The Global Bank is organized into three principal management entities: Banking
& Corporate Finance (domestic wholesale banking, corporate finance and venture
capital activities); Asia, Europe & Capital Markets (international wholesale
banking and corporate finance, and the Corporation's trading and treasury
functions); and Developing Markets (businesses include cross-border investment
banking, local merchant banking and trade finance). The Global Bank seeks to
optimize its risk profile by emphasizing underwriting, distribution, and
risk-management skills.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT RATIOS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Total Revenue $3,531 $ 2,899
Credit Provision 300 362
Noninterest Expense 1,270 1,220
Net Income 1,181 806
Average Assets 81,860 78,061
Return on Common Equity 31.9% 20.2%
Return on Assets 1.44% 1.03%
- - - -----------------------------------------------------------
</TABLE>

The Global Bank produced excellent results in 1993, as evidenced by
net income of $1.181 billion and a 31.9% return on equity, a substantial
increase from the 1992 results of $806 million and 20.2%, respectively. The
1993 performance was characterized by strong noninterest revenue growth.
Overall trading revenues exceeded $1.050 billion in 1993, up approximately 26%
from $834 million in 1992. Earnings from derivatives, foreign exchange and
securities trading were particularly strong throughout the entire global
network. Trading results in the emerging markets area were almost double the
amounts recorded in 1992.
Corporate finance and syndication fees were also strong in 1993, a
reflection of the Corporation's leadership position in global loan origination
and distribution, as the Global Bank continued to be the industry leader in
loan syndications during 1993. In 1993, revenues from venture capital
activities were $301 million, a substantial increase from $100 million in 1992.
The Developing Markets Group also benefited from $301 million of noninterest
revenue related to restructured country debt, principally the sale of Argentine
and Brazilian debt securities.

B32
<PAGE> 44

REGIONAL BANK

The Regional Bank includes Retail Banking (comprised of New York Markets,
Retail Card Services and National Consumer Business), Regional Relationship
Banking (comprised of Middle Market, Private Banking and Chemical Bank New
Jersey, N.A.) and Geoserve. The Corporation's Technology and Operations group
is also managed within this organizational structure. The Retail Bank provides
a broad array of products and services including consumer lending, residential
financing, deposit services and credit card financing. The Corporation
maintains a leading market share position in serving the financial needs of
Middle Market commercial enterprises in the New York metropolitan area. Private
Banking serves its high-net worth clientele with banking and investment
services. The Geoserve unit offers cash management, funds transfer, trade,
corporate trust and securities processing to the global market and is a market
leader in many of its businesses.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT RATIOS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Total Revenue $ 4,141 $ 3,895
Credit Provision 472 569
Noninterest Expense 2,832 2,753
Net Income 504 351
Average Assets 40,427 38,461
Return on Common Equity 23.9% 15.2%
Return on Assets 1.25% 0.91%
- - - -----------------------------------------------------------
</TABLE>

The Regional Bank's net income of $504 million and return on equity of
23.9% in 1993 improved significantly from the 1992 results of $351 million and
15.2%, respectively. In 1993, New York Markets' net income increased modestly
from 1992, reflecting a higher level of fees and wider deposit spreads. The
National Consumer Business results reflected strong net interest income growth
in 1993 as loan volume substantially increased. Mortgage servicing volume
exceeded $36.4 billion, an increase of $6.0 billion over the prior year, and
contributed to higher servicing fee revenues. Retail Card Services also
benefited from higher net interest income due to increased volume. This
performance was accompanied by an improvement in overall credit quality, as
charge-offs in the Retail Card portfolio in 1993 declined from 1992 levels.
During the fourth quarter of 1993, a program for a co-branded MasterCard with
Shell Oil Company was announced. The new Shell MasterCard offers cardholders
rebates towards the purchase of Shell gasoline. The start-up costs associated
with this program accounted for over two-thirds of the overall increase in
noninterest expense for the Regional Bank compared with 1992. Regional
Relationship Banking had a significant increase in earnings, primarily due to
reduced credit costs in Middle Market and Chemical Bank New Jersey, N.A.
Private Banking produced higher earnings as a result of increased net interest
income (represented by solid loan growth) and fees. Geoserve also reported an
increase in its earnings in 1993 over the prior year, primarily due to
significant growth in revenue from several new business initiatives.

TEXAS COMMERCE BANCSHARES

Texas Commerce is a premier corporate banking institution in the State of Texas
and a leader in providing financial products and services to individuals
throughout Texas. The 1993 results included the acquisitions of the First City
Banks and Ameritrust. As a result of these acquisitions, Texas Commerce had the
largest trust operations in the southwest United States. As of December 31,
1993, Texas Commerce had $22 billion in total assets.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT RATIOS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Total Revenue $ 1,084 $ 895
Credit Provision -- 25
Noninterest Expense 815 686
Net Income 190 180
Average Assets 21,126 17,250
Return on Common Equity 11.1% 15.1%
Return on Assets 0.90% 1.04%
- - - -----------------------------------------------------------
</TABLE>

Texas Commerce's net income of $190 million in 1993 improved from last
year's results of $180 million. The improved 1993 results also included $79
million of income tax expense compared with only $4 million for last year due
to the use of net operating loss carryforwards in 1992. On a pre-tax basis, the
$269 million of operating earnings posted by Texas Commerce was up 46% over
last year and represented the most profitable year in its history. Although
commercial loan demand remained weak, Texas Commerce benefited from its strong
customer base to post substantial increases in revenue from fee-based services
and growth in deposit volumes. Solid expense management also contributed to the
strong earnings.
The aforementioned results for the year ended December 31, 1993
exclude the restructuring charge ($43 million pre-tax; $30 million after-tax)
related to the acquisition of the First City Banks and a positive $9 million
after-tax net effect from the implementation of SFAS 106 and SFAS 109.
Nonperforming assets declined to $219 million at December 31, 1993,
down 49% from the end of 1992 and 84% below the peak of $1,303 million in
mid-1988. Based on the continuing improvements in asset quality and Texas
Commerce's already adequate allowance for losses, no overall credit provision
was recorded in 1993.

B33
<PAGE> 45

REAL ESTATE

Real Estate includes the management of the Corporation's commercial real estate
portfolio, exclusive of those in Texas Commerce and Chemical Bank New Jersey,
N.A. The net loss of $222 million in 1993 resulted from credit costs remaining
at high levels, although credit quality continued to improve. Total
nonperforming assets at December 31, 1993 were $1,304 million, down 33% from
$1,944 million at December 31, 1992. Noninterest expense of $213 million for
1993 included $119 million of foreclosed property expense.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT RATIOS) 1993 1992
- - - ---------------------------------------------------------
<S> <C> <C>
Total Revenue $ 172 $ 137
Credit Provision 329 324
Noninterest Expense 213 220
Net Loss (222) (245)
Average Assets 6,982 7,679
Return on Common Equity n/m n/m
Return on Assets n/m n/m
- - - ---------------------------------------------------------
</TABLE>

n/m--Not meaningful due to net loss.

CORPORATE

Corporate had a net loss of $49 million in 1993, compared with a net loss of $6
million in 1992. Included in the $49 million loss were the following one-time
items: a noninterest expense charge of $67 million ($115 million pre-tax) as a
result of a reassessment of costs associated with the merger with MHC; an
after-tax loss of $53 million ($75 million pre-tax) due to the writedown
associated with the accelerated disposition of nonperforming residential
mortgages; and a $30 million after-tax restructuring charge ($43 million
pre-tax) related to the acquisition of the First City Banks. In addition,
Corporate included the recognition of any Federal tax benefits and a net $35
million gain from the adoption of SFAS 106 and SFAS 109. Included in the $6
million net loss in 1992 were one-time charges of $41 million for costs
incurred to combine the Corporation's employee benefit plans, and $30 million
for London occupancy-related expenses in connection with the Corporation's
Canary Wharf lease arrangements.
Corporate also includes the management results attributed to the
parent company, the Corporation's investment in CIT, and some effects remaining
at the corporate level after the implementation of management accounting
policies. The following examples represent management accounting policies which
had a corporate impact: the performance of individual businesses are evaluated
on a fully-taxed basis, whereas the Corporation's overall tax rate in 1993 was
lower due to the utilization of Federal tax benefits; the difference between
risk-adjusted credit loss provisions in the business units and the overall
financial provision for losses taken by the Corporation; and the difference
between risk-adjusted capital in the groups and the Corporation's financial
capital.

BALANCE SHEET ANALYSIS

SECURITIES

As of December 31, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). As a result of the adoption of SFAS 115, debt
and equity securities that were previously measured at amortized cost or at the
lower of aggregate amortized cost or market are measured at fair value. See
Note Four of the Notes to Consolidated Financial Statements for further
discussion of SFAS 115.
The prepayment of mortgage-backed securities and collateralized
mortgage obligations ("CMO") is actively monitored through the Corporation's
portfolio management function. The Corporation typically invests in CMO's with
stable cash flows and relatively short duration, thereby limiting the impact of
interest rate fluctuations on the portfolio. Management regularly does
simulation testing regarding the impact that interest and market rate changes
would have on its CMO portfolio. Mortgage-backed securities and CMO's which
management believes have high prepayment risk are included in the
available-for-sale portfolio.

CREDIT PORTFOLIO

Loans outstanding, the most significant component of earning assets, totaled
$75.4 billion at December 31, 1993, compared with $82.0 billion at December 31,
1992. The decline of $6.6 billion primarily reflected weak loan demand (except
large syndicated loans discussed below), loan paydowns from businesses that are
refinancing their borrowings in the debt and equity markets, as well as
management's strategic decision to reduce the credit risk profile of the
Corporation. Partially offsetting these declines was growth in credit card
receivables and installment loans.
The Corporation is a leading participant in loan originations and
sales. This activity is comprised of the sale of loans and lending commitments
to investors, generally without recourse. These sales include syndication,
assignment and participation, and include both short- and medium-term
transactions. This loan distribution capability allows the Corporation to
compete aggressively and profitably in wholesale lending markets by enabling it
to reduce larger individual credit exposures and thereby to price more flexibly
than if all loans were held as permanent investments. The Corporation also
benefits from increased liquidity.

B34
<PAGE> 46

The Corporation's loan balances at December 31, 1993 and 1992 were as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, (IN MILLIONS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Non-LDC Loans:
Commercial Real Estate(a) $ 7,939 $ 8,551
Commercial and Industrial 24,963 30,064
Financial Institutions 8,364 10,513
Foreign Governments and Official
Institutions 5,314 5,230
- - - -----------------------------------------------------------
Total Commercial Loans 46,580 54,358
Consumer(b) 25,803 23,756
- - - -----------------------------------------------------------
Total Non-LDC Loans 72,383 78,114
LDC Loans 2,998 3,896
- - - -----------------------------------------------------------
Total Loans $ 75,381 $82,010
- - - -----------------------------------------------------------
</TABLE>

(a) Represents loans secured primarily by real property, other than loans
secured by mortgages on 1-4 family residential properties.
(b) Consists of 1-4 family residential mortgages, credit cards, installment
loans (direct and indirect types of consumer finance) and student loans.

CREDIT RISK MANAGEMENT

A significant aspect of banking is understanding, measuring and managing credit
risk. Credit risk represents the possibility that a loss may occur if a
borrower or counterparty fails to honor fully the terms of a contract. Under
the direction of the Chief Credit Officer, risk policies are formulated,
approved and communicated throughout the Corporation. The Credit Risk
Management Committee, chaired by the Chief Credit Officer, is responsible for
maintaining a sound credit process, addressing risk issues and reviewing the
portfolio.
The Corporation's credit risk management is an integrated process
operating concurrently at the transaction and portfolio levels. For credit
origination, business units formulate strategies, target markets and determine
acceptable levels of risk. Credit officers work with client managers, portfolio
management and, when appropriate, the syndications group during the
underwriting process.
The consumer and commercial segments of the portfolio have different
risk characteristics and different techniques are utilized to measure and
manage their credit risks. The consumer portfolio is evaluated on a product as
well as geographic basis. Within the commercial segment, each credit facility
is risk graded. Facilities are subject to hold targets based on risk, and are
often syndicated in order to lower potential concentration risks. Credits not
syndicated remain on the balance sheet and are carefully monitored and
analyzed. The loan review process includes industry specialists and country
risk managers who provide independent expert insight into the portfolio.
Industries and countries are also graded in a process which is incorporated
into credit risk decisions through the facility risk grading system and by
direct consultation with originating officers. The Corporation's global
exposure system is utilized to monitor exposure by industry, obligor, business
unit, product, geographic region and risk grade. This data is integral to the
process of formulating strategic portfolio direction.
Risk management conducts independent evaluations of business unit
portfolios and risk processes, reviewing compliance with risk policies,
especially facility risk grading and problem credit recognition. Remedial
actions for problem credits are the responsibility of the special loan group.
Significant progress was made in 1993 on the Corporation's credit risk
profile. Credit quality indicators are favorable and improving, and the outlook
for 1994 is for these positive trends to continue.

NONPERFORMING ASSETS

The following table sets forth the nonperforming assets of the Corporation at
December 31, 1993 and 1992.

<TABLE>
<CAPTION>
DECEMBER 31, (IN MILLIONS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Non-LDC:
Commercial Real Estate $ 707 $1,251
Commercial and Industrial 1,068 1,871
Financial Institutions 69 102
Foreign Governments and Official
Institutions -- 3
- - - -----------------------------------------------------------
Total Commercial Loans 1,844 3,227
Consumer 125 241
- - - -----------------------------------------------------------
Total Non-LDC Nonperforming Loans 1,969 3,468
- - - -----------------------------------------------------------
LDC:
Brazil 403 713
Argentina 7 316
Other LDC Countries 212 319
- - - -----------------------------------------------------------
Total LDC Nonperforming Loans 622 1,348
- - - -----------------------------------------------------------
Total Nonperforming Loans 2,591 4,816
Assets Acquired as Loan Satisfactions 934 1,276
- - - -----------------------------------------------------------
Total Nonperforming Assets $3,525 $6,092
- - - -----------------------------------------------------------
</TABLE>

The Corporation's total nonperforming assets at December 31, 1993 were
$3,525 million, down 42% from $6,092 million at December 31, 1992. The decline
from the prior year-end resulted from a $1,499 million decrease in non-LDC
nonperforming loans, a $726 million decrease in LDC nonperforming loans and a
$342 million decrease in assets acquired as loan satisfactions. The
Corporation's nonperforming assets do not include certain assets acquired in
connection with the First City Banks acquisition. See Note Seven of the Notes
to Consolidated Financial Statements. Management expects a further significant
reduction in the level of nonperforming assets during 1994.

B35
<PAGE> 47

The following table presents the reconciliation of non-LDC
nonperforming assets for 1993 and 1992.

RECONCILIATION OF NON-LDC NONPERFORMING ASSETS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992
- - - ---------------------------------------------------------------------------------
<S> <C> <C>
Balance at Beginning of Year $ 4,744 $4,907
Additions:
Loans Placed on Nonperforming Status 1,496 2,790
Deductions:
Payments 1,197 900
Sales 411 343
Charge-offs(a) 946 918
Write-downs 249 212
Return to Accrual Status 447 580
Transfer to Held-for-Sale (Other Assets) 87 --
- - - ---------------------------------------------------------------------------------
Balance at End of Year $ 2,903 $4,744
- - - ---------------------------------------------------------------------------------
</TABLE>

(a) Excludes charge-offs on a formula basis..

Nonperforming LDC loans at December 31, 1993 were $622 million, a
decrease of $726 million from the 1992 year-end. The decrease in nonperforming
LDC loans principally reflected charge-offs, sales and swaps and the removal of
restructured Argentine debt from nonaccrual status. For a further discussion
with respect to Argentina, see the Outstandings to Countries Engaged in Debt
Rescheduling section.

[NONPERFORMING ASSETS BAR GRAPH -- SEE EDGAR APPENDIX]

As of December 31, 1993, the Corporation had consumer loans of $299
million (which primarily consisted of credit card and installment loans), and
commercial loans of $24 million that were not characterized as nonperforming
loans, although such loans were past due 90 days or more as to principal or
interest. The comparable amounts at December 31, 1992 included consumer loans
of $303 million and commercial loans of $90 million. Consumer loans, exclusive
of residential mortgage loans, as to which interest or principal is past due 90
days or more are generally not classified as nonperforming but, rather, are
charged off on a formula basis upon reaching certain specified stages of
delinquency. A commercial loan on which interest or principal is past due 90
days or more is not classified as nonperforming if the loan is considered
well-secured (i.e., the collateral value is considered sufficient to cover the
principal and accrued interest on the loan) and is in the process of
collection. At each of December 31, 1993 and 1992, the past-due consumer and
commercial loans of the Corporation that were not characterized as
nonperforming were substantially all domestic.

ALLOWANCE FOR LOSSES

The allowance for losses is available to absorb potential credit losses from
the entire loan portfolio, as well as from other balance sheet and off-balance
sheet credit-related transactions. The appropriate level of the allowance is
based on analyses of the loan portfolio as well as other credit-related balance
sheet and off-balance sheet financial instruments and reflects an amount which,
in management's judgment, is adequate to provide for potential losses. The
analyses include consideration of such factors as the risk rating of individual
credits, the size and diversity of the portfolio, particularly in terms of
industry and geography, economic and political conditions, prior loss
experience and results of the Corporation's periodic credit reviews of its
portfolio. If deemed appropriate, as a result of such analyses, the allowance
for losses is increased or decreased by a charge or credit, respectively, to
income.
The accompanying table reflects the activity in the allowance for
losses for the years ended December 31, 1993 and 1992.

ALLOWANCE FOR LOSSES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992
- - - ------------------------------------------------------------------------------------
<S> <C> <C>
Non-LDC Allowance:
Balance at Beginning of Year $ 2,206 $2,012
Provision for Losses 1,259(a) 1,365
Net Charge-Offs (1,259)(a) (1,365)
Allowance Related to Purchased Assets 19(b) --
Reallocation from LDC Allowance 200 200
Other (2) (6)
- - - ------------------------------------------------------------------------------------
Balance at End of Year 2,423 2,206
- - - ------------------------------------------------------------------------------------
LDC Allowance:
Balance at Beginning of Year 819 1,263
Provision for Losses -- --
Net (Charge-Offs) Recoveries 130 (89)
Losses on Sales and Swaps (152) (155)
Reallocation to Non-LDC Allowance (200) (200)
- - - ------------------------------------------------------------------------------------
Balance at End of Year 597 819
- - - ------------------------------------------------------------------------------------
Total Allowance for Losses $ 3,020 $3,025
- - - ------------------------------------------------------------------------------------
</TABLE>

(a) Includes $55 million related to the decision to accelerate the disposition
of certain nonperforming residential mortgages.
(b) Related to First City Banks acquisition.

B36
<PAGE> 48

The Corporation's allowance for losses has been allocated between the
non-LDC and LDC portfolio segments. The Corporation's non-LDC allowance at the
1993 year-end was $2.4 billion, or 3.35% of non-LDC loans outstanding, compared
with $2.2 billion, or 2.83% of non-LDC loans outstanding, at December 31, 1992.
The LDC allowance totaled $.6 billion at December 31, 1993, compared
with $.8 billion at the end of 1992. The changes in the non-LDC and the LDC
allowances during 1993 resulted primarily from the reallocation of $200 million
from the LDC allowance to the non-LDC allowance. The reallocation reflected the
Corporation's ongoing analysis and evaluation of its LDC loan portfolio,
including the finalization of the Argentine financing program and progress in
debt negotiations with Brazil. In addition, during 1993, the Corporation
allocated a specific portion of the LDC allowance for Brazilian outstandings as
a result of the Corporation's evaluation of its refinancing country portfolio
and in consideration of recent recommendations of the Interagency Country
Exposure Review Committee ("ICERC"). At December 31, 1993, the balance
allocated to Brazil was $82 million. For further discussion of this allocation,
see Note Six of the Consolidated Notes to the Financial Statements.
The Corporation will continue to assess developments relating to the
various LDC debt renegotiations. Continued progress in this area will allow the
Corporation to evaluate its options with respect to the allowance currently
allocated to the LDC portfolio.
The following table reflects the Corporation's allowance coverage
ratios at December 31, 1993 and 1992.

ALLOWANCE COVERAGE RATIOS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993 1992
- - - ----------------------------------------------------------
<S> <C> <C>
Allowance for Losses to:
Loans at Year-End 4.01% 3.69%
Average Loans 3.84 3.68
Nonperforming Loans 116.56 62.81
Non-LDC Allowance for Losses to:
Non-LDC Loans at Year-End 3.35 2.83
Non-LDC Nonperforming Loans 123.06 63.61
LDC Allowance for Losses to:
Medium- and Long-Term Outstandings 26.55 23.67
Total Outstandings 14.59 18.69
LDC Nonperforming Loans 95.98 60.76
LDC Allowance Adjusted for Prior
Charge-Offs with Claims Retained
to Medium- and Long-Term
Outstandings and Claims Retained 54.14 56.47
Total Net Charge-Offs to:
Loans at Year-End 1.50 1.77
Average Loans 1.43 1.77
Non-LDC Net Charge-Offs to
Non-LDC Loans at Year-End 1.74 1.75
- - - ----------------------------------------------------------
</TABLE>

The Corporation deems its allowance for losses at December 31, 1993 to
be adequate. Although the Corporation considers that it has sufficient reserves
to absorb losses that may currently exist in the portfolio, but are not yet
identifiable, the precise loss content from the loan portfolio, as well as from
other balance sheet and off-balance sheet credit-related instruments, is
subject to continuing review based on quality indicators, concentrations,
changes in business conditions, and other external factors such as competition,
legal and regulatory requirements. The Corporation will continue to reassess
the adequacy of the allowance for losses.

NET CHARGE-OFFS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992
- - - ---------------------------------------------------------
<S> <C> <C>
Non-LDC Net Charge-Offs:
Commercial Real Estate $ 284 $ 354
Commercial and Industrial 516 571
Financial Institutions 40 39
Foreign Governments and Official
Institutions -- --
- - - ---------------------------------------------------------
Total Commercial Net Charge-Offs 840 964
Consumer 419 401
- - - ---------------------------------------------------------
Total Non-LDC Net Charge-Offs 1,259 1,365
LDC Net Charge-Offs (Recoveries) (130) 89(a)
- - - ---------------------------------------------------------
Total Net Charge-Offs 1,129 1,454
Losses on LDC Sales and Swaps 152 155
- - - ---------------------------------------------------------
Total Net Charge-Offs and Losses $1,281 1,609
- - - ---------------------------------------------------------
</TABLE>

(a) Includes charge-offs of $51 million related to loans to the former
republics of Yugoslavia (collectively "Yugoslavia").

For a discussion of net charge-offs, see the various credit portfolio
sections. Management expects total non-LDC net charge-offs in 1994 to decrease
significantly from the 1993 amount.

COMMERCIAL REAL ESTATE PORTFOLIO

Commercial real estate loans represent loans secured primarily by real
property, other than loans secured by one-to-four family residential
properties, which are included in the consumer loan portfolio. Commercial real
estate loans outstanding for the Corporation totaled $7.9 billion at December
31, 1993, compared with $8.6 billion a year ago. The decrease during 1993 is
attributable to repayments, transfers to real estate owned and charge-offs,
partially offset by the addition of approximately $500 million of commercial
real estate loans acquired as part of the First City Banks acquisition.
The table below indicates the composition of the commercial real
estate loan portfolio.

<TABLE>
<CAPTION>
DECEMBER 31, (IN MILLIONS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Commercial Mortgages $6,478 $6,826
Construction 1,461 1,725
- - - -----------------------------------------------------------
Total Commercial Real Estate Loans $7,939 $8,551
- - - -----------------------------------------------------------
</TABLE>

B37
<PAGE> 49

Commercial mortgages provide financing for the acquisition or
refinancing of commercial properties, and typically have terms ranging from
three to seven years. Construction loans are generally originated to finance
the construction of real estate projects. When a loan financing the completed
construction has cash flows sufficient to support a commercial mortgage, the
loan is transferred from construction status to commercial mortgage status.
The following table shows the Corporation's commercial real estate
loan portfolio, nonperforming loans and foreclosed commercial real estate, by
property type and geographic location.

<TABLE>
<CAPTION>
COMMERCIAL REAL ESTATE BY PROPERTY TYPE 1993 1992
AND GEOGRAPHIC REGION(a) NEW YORK/ OTHER TOTAL
DECEMBER 31, (IN MILLIONS) NEW JERSEY TEXAS DOMESTIC DOMESTIC FOREIGN TOTAL TOTAL
- - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office:
Loans $ 817 $ 422 $ 350 $ 1,589 $179 $ 1,768 $2,118
Nonperforming Loans 69 3 108 180 18 198 325
Real Estate Owned 52 46 42 140 68 208 148
Retail:
Loans 617 263 490 1,370 89 1,459 1,737
Nonperforming Loans 42 10 -- 52 -- 52 164
Real Estate Owned 11 3 51 65 -- 65 135
Residential:(b)
Loans 757 183 221 1,161 54 1,215 1,375
Nonperforming Loans 106 15 9 130 -- 130 123
Real Estate Owned 122 1 -- 123 -- 123 215
Hotel:
Loans 205 80 289 574 45 619 807
Nonperforming Loans 23 -- 49 72 -- 72 272
Real Estate Owned 200 -- 11 211 -- 211 159
Land:
Loans 179 173 35 387 17 404 535
Nonperforming Loans 76 6 8 90 -- 90 167
Real Estate Owned 85 81 46 212 -- 212 312
Other:
Loans 1,214 689 354 2,257 217 2,474 1,979
Nonperforming Loans 102 27 29 158 7 165 200
Real Estate Owned 21 6 20 47 -- 47 147
Total:
Loans $ 3,789 $1,810 $ 1,739 $ 7,338 $601 $ 7,939 $8,551
Nonperforming Loans 418 61 203 682 25 707 1,251
Real Estate Owned 491 137 170 798 68 866 1,116
- - - -------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Nonperforming loans are included in loan balances. Real Estate Owned
denotes foreclosed commercial real estate, which is included in assets acquired
as loan satisfactions.
(b) Represents residential property construction, land development and
multi-family permanent mortgages, excluding 1-4 family residential mortgages.

The largest concentration of commercial real estate loans is in the
New York/New Jersey and Texas markets, representing 48% and 23%, respectively,
of the commercial real estate portfolio. No other state represented more than
3% of the commercial real estate loan portfolio. The New York/New Jersey
economy stabilized during 1993, resulting in moderate improvements in
commercial space leasing activity. However, in most real estate property
sectors of that region, demand is not yet sufficient to result in higher
prices. Improvements in the Texas economy have resulted in significant growth
in employment (employment rates in Dallas and Austin are currently above the
national average) and in improvements in the real estate market. In California,
where the Corporation has less than 3% of its commercial real estate loans, the
economy is still weak. At December 31, 1993, the portfolio included $601
million of secured international real estate loans which are primarily located
in the United Kingdom and Hong Kong.
The Corporation's management has a process to monitor all real estate
credits to assist it in early identification of problem loans. Line credit
officers work in conjunction with appraisers to review individual loans,
conduct regular market analyses and evaluate portfolio segments. In addition,
real estate problem assets are managed in special units staffed for
restructuring, workout and collection and real estate management and
disposition. The Corporation reassesses the market value of real estate owned
for possible impairment on a continual basis.
Nonperforming commercial real estate assets totaled $1.6 billion at
December 31, 1993, a 34% decrease from a year ago. The decrease reflects
nonaccrual loans returning to accrual status, charge-offs and the continuing
sale of foreclosed property. Nonperforming commercial real estate loans were
$707 million, down 43% from $1,251 million at December 31, 1992. Real estate
owned totaled $866 million at December 31, 1993, down 22% from $1,116 million
at December 31, 1992.

B38
<PAGE> 50
Improvement in nonperforming commercial real estate asset levels
during 1993 is the result of increased liquidity in the commercial real estate
markets, lower interest rates and successful focused workout activities.
Commercial real estate loans entering nonperforming status declined
significantly in 1993 when compared with 1992. Reductions to nonperforming
assets in the form of payments, return to accrual status and sales of real
estate owned were greater than the additions to nonperforming assets in each
quarter of 1993. Commercial real estate net charge-offs in the 1993 totaled
$284 million, compared with $354 million in 1992. Writedowns of commercial real
estate owned totaled $199 million in 1993, compared with $212 million in 1992.
Approximately $298 million in commercial real estate owned was sold in 1993.
Generally, these assets were sold at or above carrying value. Commercial real
estate net charge-offs, writedowns and nonperforming assets for 1994 are
expected to be below 1993 levels.

COMMERCIAL AND INDUSTRIAL PORTFOLIO

The commercial and industrial portfolio totaled $25.0 billion at December 31,
1993, representing 33% of the total loan portfolio. The portfolio is
diversified geographically and by industry. Approximately 75% of the commercial
and industrial loans are domestic. The commercial and industrial portfolio is
comprised of 39 industry groups which are graded and actively monitored by the
Corporation's industry specialists. Approximately 70% of the industries each
represent less than 1% of total loans. The largest industry concentration is
oil and gas at approximately 2.9% of total loans. Real estate related, of
approximately $1.6 billion, is the second largest concentration representing
2.2% of total loans.
Included in commercial and industrial are loans related to highly
leveraged transactions ("HLT"). The Corporation originates and syndicates loans
in HLTs, which include acquisitions, leveraged buyouts and recapitalizations.
HLT loans at December 31, 1993 totaled approximately $1.9 billion, compared
with $3.3 billion at December 31, 1992. The Corporation was also committed at
December 31, 1993 to lend an additional amount of approximately $.9 billion.
The substantial reduction in the HLT loan portfolio from year-end 1992 can be
largely attributed to repayments, charge-offs and reclassifications to non-HLT
status. At December 31, 1993, the Corporation had $269 million in nonperforming
HLT loans compared with $586 million at year-end 1992. Net charge-offs related
to HLTs during 1993 totaled approximately $81 million, versus $185 million for
1992.

FINANCIAL INSTITUTIONS, AND FOREIGN GOVERNMENTS
AND OFFICIAL INSTITUTIONS PORTFOLIOS

Financial institutions include commercial banks and companies whose businesses
primarily involve lending, financing, investing, underwriting or insuring.
Loans to financial institutions were 11% of total loans at December 31, 1993.
Fifty-seven percent of these loans were to domestic financial institutions.
Loans to financial institutions are predominantly to commercial banks and
broker-dealers, which together comprise over half the financial institution
total.
At year-end 1993, 7% of the Corporation's total loans were to foreign
governments, government agencies, government-owned commercial enterprises, and
official institutions, exclusive of LDC loans. Approximately 65% of foreign
government and official institution loans were to central and other
government-owned banks and government institutions.

CONSUMER PORTFOLIO

The consumer loan portfolio consists of one-to-four family residential
mortgages, credit cards, installment loans and student loans. The consumer
loan portfolio totaled $25.8 billion at December 31, 1993, representing 34% of
total loans, an increase from $23.8 billion, or 29% of total loans, at December
31, 1992. During 1993, the Corporation's consumer loan portfolio grew by 9%,
primarily due to increases in credit card receivables and installment loans.
The following table represents the composition of the Corporation's
consumer loan portfolio at December 31, 1993 and December 31, 1992.

<TABLE>
<CAPTION>
DECEMBER 31, (IN MILLIONS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Residential Mortgages $ 12,346 $12,029
Credit Cards 7,176 6,166
Installment Loans 4,178 3,604
Student Loans 2,103 1,957
- - - -----------------------------------------------------------
Total Consumer Loans $ 25,803 $23,756
- - - -----------------------------------------------------------
</TABLE>

Underlying improvements in the economy in 1993 generally strengthened
the financial position of the consumer. A healthier economy and easing
employment concerns stimulated revolving line and closed-end loan debt levels.
Additionally, attractive mortgage rates stimulated home sales to first-time
buyers. Credit card receivables at December 31, 1993, increased $1.0 billion
from a year ago, of which $443 million related to the co-branded Shell
MasterCard program which was introduced in the fourth quarter of 1993.

B39
<PAGE> 51
Total nonperforming consumer loans at December 31, 1993 were $125
million and were comprised of $101 million of loans secured by residential real
estate and $24 million of installment loans. At December 31, 1992, total
nonperforming consumer loans were $241 million and were comprised of $210
million of loans secured by residential real estate and $31 million of
installment loans. Residential real estate owned at December 31, 1993 totaled
$20 million, compared with $57 million at the 1992 year-end. The reductions in
nonperforming consumer loans and residential real estate owned at December 31,
1993 reflected the decision to accelerate the disposition of $162 million of
nonperforming residential mortgages.
Net charge-offs in the consumer portfolio totaled $419 million in 1993
compared with $401 million in 1992. The 1993 net charge-offs consisted of $322
million in credit card receivables, $28 million in installment loans and $69
million in residential mortgages (which included the $55 million charge
associated with the aforementioned accelerated disposition). The composition of
the 1992 net charge-offs were $348 million in credit card receivables, $35
million in installment loans and $18 million in residential mortgages. There
were essentially no credit losses in 1993 and 1992 in the student loan
portfolio due to the existence of Federal and State government guarantees.
Excluding the charge of $55 million for the accelerated disposition program,
the decline in consumer loan charge-offs is due to the effect of further
refinement of the Corporation's risk management techniques, including enhanced
account monitoring standards and greater efficiencies in the collection and
recovery processes.
Consumer loan balances are expected to increase in 1994, particularly
in the residential mortgage and the credit card portfolios. In 1994, the
Corporation's strategy will continue to emphasize risk management and consumer
loan portfolio credit quality. Management expects consumer loan charge-offs in
1994 will approximate the 1993 level due to the anticipated higher level of
credit card receivables outstanding as a result of the Shell MasterCard
program.

Mortgage Banking Activities: With respect to the Corporation's mortgage banking
activities, the Corporation both originates and services residential mortgage
loans. After origination, the Corporation may sell loans to investors,
primarily in the secondary market, while retaining the rights to service such
loans. In accordance with current accounting standards, the value of such
servicing rights related to originating mortgage loans is not recorded as an
asset in the financial statements. The Corporation originated $14.7 billion of
mortgages in 1993 versus $12.5 billion in 1992.
In addition to originating mortgage servicing rights, the Corporation
also purchases mortgage servicing rights. The Corporation may purchase bulk
rights to service a loan portfolio or the Corporation may purchase loans
directly and then sell such loans while retaining the servicing rights. The
Corporation's servicing portfolio amounted to $36.4 billion at December 31,
1993 compared with $30.4 billion at December 31, 1992. Purchased mortgage
servicing rights (included in other assets) amounted to $249 million at
December 31, 1993 compared with $204 million at December 31, 1992. The mortgage
loans to which the Corporation's servicing rights relate are, to a substantial
degree, of recent vintage (i.e., originated within the past two years when
interest rates have been relatively low). Additionally, the Corporation
utilizes accelerated amortization and continually evaluates prepayment exposure
of the portfolio, thereby adjusting the balance and remaining life of the
servicing rights as a result of prepayments. Accordingly, the current interest
rate environment has not had a material adverse effect on the carrying value of
the Corporation's purchased mortgage servicing rights. During 1993, the
Corporation wrote down $14 million with respect to its purchased mortgage
servicing rights.

CROSS-BORDER OUTSTANDINGS

The extension of credits denominated in a currency other than that of the
country in which a borrower is located, such as dollar-denominated loans made
overseas, are called "cross-border" credits. In addition to the credit risk
associated with any borrower, these particular credits are also subject to
"country risk" -- economic and political risk factors specific to the country
of the borrower which may make the borrower unable or unwilling to pay
principal and interest according to contractual terms. Other risks associated
with these credits include the possibility of insufficient foreign exchange and
restrictions on its availability. To minimize country risk, the Corporation
monitors its foreign credits in each country with specific consideration given
to maturity, currency, industry and geographic concentration of the credits. In
addition, the Corporation establishes limits governing lending to the various
categories of the foreign portfolio.
The following table lists all countries in which the Corporation's
cross-border outstandings exceeded 1% of consolidated assets as of any of the
dates specified. The Corporation does not have significant local currency
outstandings to the individual countries listed in the following table that are
not hedged or are not funded by local currency borrowings.

B40
<PAGE> 52

<TABLE>
<CAPTION>
CROSS-BORDER OUTSTANDINGS(a) TOTAL
AT DECEMBER 31, (IN MILLIONS) CROSS-BORDER
COUNTRY PUBLIC BANKS OTHER OUTSTANDINGS(b)
- - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Japan 1993 $ 27 $ 3,955 $ 257 $ 4,239(c)
1992 1 264 148 413(c)
1991 18 1,853 150 2,021
- - - ------------------------------------------------------------------------------------------------------------------------
United Kingdom 1993 106 1,035 1,086 2,227
1992 87 358 1,271 1,716
1991 209 334 1,276 1,819
- - - ------------------------------------------------------------------------------------------------------------------------
Germany 1993 2,021 314 356 2,691(d)
1992 62 171 145 378
1991 23 143 313 479
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Outstandings (including loans and accrued interest, interest-bearing
deposits with banks, securities, acceptances and other monetary assets, except
equity investments) represent those of both the public and private sectors and
are presented on a risk basis, i.e., net of written guarantees and tangible
liquid collateral when held outside the foreign country. At December 31, 1993,
outstandings to Italy amounted to $1,281 million which was in excess of .75% of
total assets. At December 31, 1993, 1992 and 1991, outstandings to Brazil
amounted to $1,328 million, $1,224 million and $1,148 million, respectively,
which were in excess of .75% of total assets in each of such year. At December
31, 1992, outstandings to Korea amounted to $1,074 million, which were in
excess of .75% of total assets. At December 31, 1991, outstandings to Venezuela
amounted to $1,162 million, which was in excess of .75% of total assets for
such year.
(b) Outstandings exclude equity received in debt-for-equity conversions, which
is recorded initially at fair market value and generally accounted for under
the cost method. Commitments (outstanding letters of credit, standby letters of
credit, guarantees and unused legal commitments) are excluded. At December 31,
1993, off-balance sheet commitments, after adjusting for transfers of risk,
amounted to $1,133 million for Japan, $1,247 million for the United Kingdom,
and $357 million for Germany.
(c) The average outstandings to Japan during 1993 and 1992 (based on
quarter-end amounts) was approximately $3.6 billion and $1.2 billion,
respectively.
(d) The average outstandings to Germany during 1993 (based on quarter-end
amounts) was approximately $1.2 billion.

OUTSTANDINGS TO COUNTRIES ENGAGED IN DEBT RESCHEDULING

The following table sets forth the Corporation's outstandings to countries
engaged in debt rescheduling at the dates indicated.

<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992

MEDIUM-AND TRADE AND MEDIUM-AND TRADE AND
(IN MILLIONS) LONG-TERM SHORT-TERM(a) TOTAL LONG-TERM SHORT-TERM(a) TOTAL
- - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Brazil $ 499 $ 829 $ 1,328 $ 793 $431 1,224
Venezuela(b) 651 160 811 876 47 923
Argentina(c) 203 544 747 509 231 740
Others(d) 895 309 1,204 1,285 213 1,498
- - - -------------------------------------------------------------------------------------------------------------------------
Total $2,248 $ 1,842 $ 4,090 $3,463 $922 4,385
- - - -------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Trade and short-term outstandings include accrued interest,
interest-bearing deposits with banks and trade-related credits.
(b) Amounts outstanding to Venezuela exclude interest rate reduction bonds with
a book value of $365 million and $483 million at December 31, 1993 and 1992,
respectively. The principal amount of these bonds is secured by zero-coupon
U.S. Treasury securities. As of December 31, 1993, the market values of these
bonds and the underlying collateral were $292 million and $65 million,
respectively.
(c) Amounts outstanding to Argentina exclude principal reduction bonds and
interest rate reduction bonds with an aggregate book value of $17 million at
December 31, 1993. The principal amount of these bonds is secured by
zero-coupon U.S. Treasury securities. As of December 31, 1993, the market
values of these bonds and the underlying collateral were $17 million and $4
million, respectively.
(d) Amounts outstanding to Uruguay exclude interest rate reduction bonds with a
book value of $129 million at each of December 31, 1993 and 1992. The principal
amount of these bonds is secured by zero-coupon U.S. Treasury securities. As of
December 31, 1993, the market values of these bonds and the underlying
collateral were $108 million and $20 million, respectively.

LDC outstandings are subject to unique economic, political and social
risks. In 1993 and prior years, borrowers in LDC countries have restructured
and refinanced their obligations. The Corporation expects to continue a program
of close cooperation with members of the international financial community and
the representatives of LDC countries.
The Corporation's medium- and long-term LDC outstandings decreased to
$2,248 million at December 31, 1993, from $3,463 million at December 31, 1992,
a reduction of $1,215 million, or 35%. The reduction from December 31, 1992 is
primarily attributable to loan sales, charge-offs, and the removal of the
Argentine debt that was restructured in 1993.
Following is a summary of significant recent developments with respect
to the Corporation's outstandings to Brazil and Argentina.

Brazil: Nonperforming loans to Brazilian borrowers totaled $403 million at
December 31, 1993, down from $713 million at December 31, 1992, reflecting a
reduction in medium- and long-term outstandings.
Substantial progress was made during 1993 on the
agreement-in-principal reached in July 1992 between the Government of Brazil
and the Bank Advisory Committee ("BAC") on the debt and debt service reduction
package covering $45 billion of medium- and long-term debt (the "Financing
Package").

B41
<PAGE> 53
During 1993, the Corporation agreed to exchange its eligible "Old" debt
(multi-year Deposit Facility Agreement and other pre-1988 restructured debt)
for 65% Capitalization Bonds and 35% Discount Bonds. The agreement also
provides for the exchange of the Corporation's eligible "New Money" debt
(credit extensions originating from the 1988 restructuring) for New Money
Bonds, Debt Conversion Bonds and Cruzeiro Dollar Bonds. The Financing Package
was signed by 95% of the debt holders on December 15, 1993. The exchange is
expected to take place by April 15, 1994.
Brazil has paid 50% of contractual interest due throughout 1993 and is
expected to continue these 50% payments until the exchange date. The remaining
unpaid interest due is expected to be received by the Corporation on the
exchange date in the form of 12-year, uncollateralized Eligible Interest
("EI's") Bonds in the principal amount of approximately $150 million.
The Corporation's total Brazilian outstandings currently affected by
the Financing Package amount to $1,112 million (which includes loan amounts
previously charged off). Debt tendered under the Capitalization Bonds option
will be exchanged at face value for 20-year uncollateralized bonds initially
bearing interest at 4% and gradually increasing to 8% in year seven and
thereafter. The principal balance of the bonds will be increased semi-annually
during the first six years for the difference between the interest due based on
the stated rate and the rate of 8%. Equal semi-annual principal payments will
commence after a ten-year grace period. Debt tendered under the Discount Bond
option will be exchanged at a 35% discount for 30-year bonds bearing interest
at LIBOR plus 13/16% with a bullet payment at maturity. The principal payment
on the Discount Bonds is expected to be collateralized by zero-coupon U.S.
Treasury obligations having a redemption value at maturity equal to the face
value of the Bonds. Interest payments on these bonds are expected to be
collateralized by permitted investments on a 12- month rolling basis and will
become fully collateralized during a two-year phase-in period. The New Money
Bonds, Debt Conversion Bonds and Cruzeiro Dollar Bonds are uncollateralized 15-
or 17-year instruments bearing interest at LIBOR plus 13/16% with equal
semi-annual principal payments commencing after a seven- or ten-year grace
period. The Corporation does not expect to incur any additional charge-offs as
a result of the Financing Package.
The Corporation has sold substantially all of its Interest Due and
Unpaid ("IDU") Bonds which were received in November 1992 under the agreement
reached by the BAC and Brazil for the settlement of past-due interest owed to
bank creditors on medium- and long-term outstandings for 1989 and 1990. During
1993, the Corporation recognized a gain of $152 million (in other revenue) from
the sale of its IDU Bonds.

Argentina: Argentine nonperforming loans were $7 million at December 31, 1993
compared with $316 million at December 31, 1992. The decrease in medium- and
the long-term outstandings and in nonperforming loans is primarily attributable
to the exchange of eligible debt for 30-year collateralized Par and Discount
Bonds issued by the Republic of Argentina and the sale of local Argentine
government instruments.
The rescheduling agreement reached between the Republic of Argentina
and the Bank Advisory Committee on the settlement of the country's medium- and
long-term debt of approximately $23 billion and associated interest in arrears
was completed during 1993. On April 7, 1993, the creditor banks exchanged
their eligible debt into collateralized 30 year Par and Discount Bonds under
the terms of the Argentine rescheduling agreement. The Corporation's total
Argentine outstandings affected by the rescheduling agreement were $870 million
(which includes loan amounts previously charged off). Par Bonds in the amount
of $613 million and Discount Bonds in the amount of $167 million were issued to
the Corporation. The Corporation did not take any additional charge-offs in
connection with the debt exchange. In connection with the agreement, the
Corporation received $337 million of Floating Rate Bonds ("FRB's") and $32
million in cash, of which $29 million was recorded in net interest income in
1993.
The Corporation has sold substantially all of the aforementioned Par
Bonds, Discount Bonds and FRB's received as a result of the refinancing
agreement. The Corporation recognized a $179 million gain (in other revenue)
during 1993 from the sale of its FRB's.

CAPITAL

Total stockholders' equity at December 31, 1993 was $11.16 billion, an increase
from $9.85 billion at year-end 1992. The $1.31 billion increase in
stockholders' equity from December 31, 1992 included $1.11 billion in retained
earnings generated during 1993. The Corporation raised $200 million in new
common equity primarily through the sale in March 1993 of

[TOTAL STOCKHOLDERS' EQUITY BAR GRAPH -- SEE EDGAR APPENDIX]

B42
<PAGE> 54
3.8 million shares of the Corporation's common stock. Two series of fixed-rate
preferred stock totaling $400 million issued during 1993 were more than offset
by the redemption of three series of adjustable-rate preferred stock totaling
$594 million. Such redemptions were part of the Corporation's plan to improve
its capital position by achieving lower financing costs and reducing
interest-rate risk. The Corporation will continue to evaluate the opportunity
for future redemptions of preferred stock given current market conditions. The
Corporation's ratio of common stockholders' equity to total assets was 6.34% at
December 31, 1993, an increase from 5.73% at year end 1992. The ratio of total
stockholders' equity to total assets at December 31, 1993 was 7.45%, an
increase from 7.05% from the same date a year ago.
Total capitalization (total stockholders' equity under risk-based
capital guidelines, and subordinated and senior debt that qualifies as Tier 2
Capital as discussed below under "Risk-Based Capital Ratios") increased by $810
million during 1993.

LONG-TERM DEBT

During 1993, the Corporation issued $3.5 billion of long-term debt (including
$1.6 billion of subordinated debt that qualifies as Tier 2 Capital, of which
$1.1 billion was issued through its Chemical Bank subsidiary). These issuances
were offset by maturities of $402 million of long-term debt (including $330
million of medium-term notes) and the redemption of $1.9 billion of long-term
debt. As a result of these actions, the Corporation improved its liquidity and
extended the maturities of its debt portfolio. See the Liquidity Management
section for further discussion of the Corporation's long-term debt redemptions.

COMMON STOCK DIVIDENDS

In the first quarter of 1993, the Board of Directors of the Corporation
increased the quarterly dividend on the Corporation's common stock from $0.30
per share to $0.33 per share. In the fourth quarter of 1993, the Corporation
declared an increase in the quarterly dividend to be paid on its common stock
in January 1994 from $0.33 per share to $0.38 per share. Future dividend
policies will be determined by the Board of Directors in light of the earnings
and financial condition of the Corporation and its subsidiaries and other
factors, including applicable governmental regulations and policies.

RISK-BASED CAPITAL RATIOS

Under the Federal Reserve Board risk-based capital guidelines, banking
organizations are required to maintain certain ratios of "Qualifying Capital"
to "risk-weighted assets". "Qualifying Capital" is classified into two tiers,
referred to as Tier 1 Capital and Tier 2 Capital. Tier 1 Capital consists of
common equity, qualifying perpetual preferred equity and minority interests in
the equity accounts of unconsolidated subsidiaries, less goodwill and other
non-qualifying intangible assets. Tier 2 Capital consists of perpetual
preferred equity not qualifying for Tier 1, qualifying allowance for credit
losses, mandatory convertible debt and subordinated debt and other qualifying
securities. The amount of Tier 2 Capital may not exceed the amount of Tier 1
Capital. In calculating "risk-weighted assets", certain risk percentages, as
specified by the Federal Reserve Board, are applied to particular categories of
both on- and off-balance sheet assets. Under the guidelines, the Corporation's
Tier 1 Capital ratio and Total Capital ratio to risk-weighted assets at
December 31, 1993 were 8.12% and 12.22%, respectively, well in excess of the
minimum ratios specified by the Federal Reserve Board. Also on that date,
Chemical Bank's ratios of Tier 1 Capital and Total Capital to risk-weighted
assets, were 7.90% and 12.54%, respectively. Chemical Bank was "well
capitalized" as defined by the Federal Reserve Board. To be "well capitalized,"
a banking organization must have a Tier 1 Capital ratio of at least 6%, Total
Capital ratio of at least 10% and Tier 1 leverage ratio (as defined in the
following section) of at least 5%.
These ratios, as well as the leverage ratio discussed below, do not
reflect any adjustment in stockholders' equity due to the adoption of SFAS No.
115. The Federal Reserve Board has proposed to permit banking corporations to
include in Tier 1 Capital the net amount of any unrealized gains or losses from
securities available-for-sale. If the Corporation were to treat the amount at
December 31, 1993 of its net unrealized gains attributable to
available-for-sale securities as regulatory capital, the Tier 1 Capital, Total
Capital and Tier 1 leverage ratios would be 8.30%, 12.39% and 6.92%,
respectively, at December 31, 1993. The total capitalization would have
increased by an additional $215 million for a total increase of $1,025 million
during 1993.

[RISK-BASED CAPITAL RATIOS BAR GRAPH -- SEE EDGAR APPENDIX]

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<PAGE> 55
LEVERAGE RATIOS

The Tier 1 leverage ratio is defined as Tier 1 Capital divided by average total
assets (net of allowance for losses, goodwill and other non-qualifying
intangible assets). The minimum leverage ratio is 3% for banking organizations
that do not anticipate significant growth and that have well-diversified risk
(including no undue interest rate risk), excellent asset quality, high
liquidity and good earnings. Higher capital ratios could be required if
warranted by the particular circumstances, or risk profile, of a given banking
organization. The Federal Reserve Board has not advised the Corporation of any
specific minimum Tier 1 leverage ratio applicable to it. The Corporation's Tier
1 leverage ratio was 6.77% at December 31, 1993, compared with 6.60% at
December 31, 1992. At December 31, 1993, Chemical Bank's Tier 1 leverage ratio
was 6.97%.
The table which follows sets forth the Corporation's Tier 1 Capital,
Tier 2 Capital and risk-weighted assets, and the Corporation's risk-based
capital and Tier 1 leverage ratios for the dates indicated.

CAPITAL RATIOS

<TABLE>
<CAPTION>
DECEMBER 31, (IN MILLIONS, EXCEPT RATIOS) 1993 1992
- - - ---------------------------------------------------------------------------------
<S> <C> <C>
Tier 1 Capital:
Common Stockholders' Equity $ 9,295 $ 8,003
Nonredeemable Preferred Stock 1,654 1,848
Minority Interest 66 74
Less: Goodwill 941 682
Less: Non-Qualifying Intangible Assets 211 --
- - - ---------------------------------------------------------------------------------
Tier 1 Capital $ 9,863 $ 9,243
- - - ---------------------------------------------------------------------------------
Tier 2 Capital:
Long-Term Debt Qualifying as Tier 2 3,437 3,725
Qualifying Allowance for Credit Losses 1,536 1,595
- - - ---------------------------------------------------------------------------------
Tier 2 Capital $ 4,973 $ 5,320
- - - ---------------------------------------------------------------------------------
Total Qualifying Capital $ 14,836 $ 14,563
- - - ---------------------------------------------------------------------------------
Risk-Weighted Assets $ 121,446 $ 126,124
Tier 1 Capital Ratio 8.12% 7.33%
Total Capital Ratio 12.22% 11.55%
Tier 1 Leverage Ratio 6.77% 6.60%
- - - ---------------------------------------------------------------------------------
</TABLE>

Excluding the Corporation's securities subsidiary, Chemical Securities Inc.,
the December 31, 1993 ratios of Tier 1 Capital to risk-weighted assets and
Total Capital to risk-weighted assets were 7.93% and 11.86%, respectively,
compared with 7.20% and 11.29%, respectively, at December 31, 1992.

LIQUIDITY MANAGEMENT

The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all financial commitments and to capitalize on
opportunities for business expansion. Liquidity management addresses the
Corporation's ability to meet deposit withdrawals either on demand or at
contractual maturity, to repay borrowings as they mature, and to make new loans
and investments as opportunities arise. Liquidity is managed on a daily basis
at both the parent company and the subsidiary levels, enabling senior
management to monitor effectively changes in liquidity and to react accordingly
to fluctuations in market conditions. Contingency plans exist and could be
implemented on a timely basis to minimize the risk associated with dramatic
changes in market conditions.
The primary source of liquidity for the bank subsidiaries of the
Corporation derives from their ability to generate core deposits, which
includes all deposits except zero-rate deposits, foreign deposits and
certificates of deposit of $100,000 or more. The Corporation considers funds
from such retail sources to comprise its subsidiary banks' "core" deposit base
because of the historical stability of such sources of funds. The average core
deposits at the Corporation's bank subsidiaries for 1993 were $61 billion, an
increase from $57 billion for 1992. These deposits fund a proportion of the
Corporation's asset base, thereby reducing the Corporation's reliance on other,
more volatile, sources of funds. For 1993, the Corporation's percentage of
average core deposits to average interest-earning assets was 49%, compared with
47% during 1992. Average core deposits as a percentage of average loans was 77%
for 1993, compared with 70% in 1992.
The Corporation holds marketable securities and other short-term
investments which can be readily converted to cash. In addition, active asset
securitization programs and loan syndication networks are maintained in order
to facilitate the timely liquidation of certain assets if and when deemed
desirable.
The Corporation is also an active participant in the capital markets.
In addition to issuing commercial paper and medium-term notes, the Corporation
raises funds through the issuance of long-term debt, common stock and preferred
stock. During 1993, the Corporation issued $200 million of common stock, $400
million of preferred stock, $1.6 billion of subordinated debt ($1.1 billion of
which was issued by Chemical Bank) and $1.9 billion of senior debt (including
$1.1 billion through its medium-term note program) in various public offerings.
During 1993 and 1992, several nationally-recognized statistical rating
organizations announced upgrades in the ratings of the Corporation's senior
debt, subordinated debt, commercial paper and preferred stock. These rating
increases enhanced and should continue to enhance the Corporation's access to
global capital and money markets, a primary source of liquidity for an
international money-center institution. The ability to access this
geographically diverse assortment of distribution channels and to issue a wide
variety of capital and money market instruments at various maturities provides
the Corporation with a full array of alternatives for managing its liquidity
position.
During 1993, the Corporation redeemed $1.9 billion of its long-term
debt and $594 million of its preferred stock. Such redemptions were and will
continue to be undertaken by the Corporation in light of its ability (as a
result of current market conditions in general and the recent upgrades in the
Corpora-

B44
<PAGE> 56

tion's debt ratings in particular) to access the credit markets on terms more
favorable than that of the redeemed debt and preferred stock. These redemptions
were and continue to be part of the Corporation's plan to improve its capital
position by achieving lower financing costs, reducing interest rate risk and
lengthening maturities. The Corporation will continue to evaluate the
opportunity for future redemptions of debt and preferred stock given current
market conditions.
The following comments apply to the Consolidated Statement of Cash
Flows.
Cash and due from banks decreased $2.0 billion during 1993, as net
cash used by operating activities exceeded the net cash provided by investing
and financing activities. The $8.5 billion net cash used by operating
activities was principally due to cash outflows from a net increase in
trading-related assets ($10.5 billion) and purchases of available-for-sale
securities ($7.6 billion), partially offset by the maturity and sale of
available-for-sale securities ($1.6 billion and $5.4 billion, respectively).
The $.4 billion net cash provided from investing activities was largely the
result of cash inflows from the net decrease in loans ($6.7 billion) and
proceeds from the maturity of held-to-maturity securities ($5.0 billion),
partially offset by cash outflows from the purchases of held-to-maturity
securities ($6.4 billion), as well as increases in deposits with banks ($4.2
billion) and Federal funds sold and securities purchased under resale
agreements ($2.4 billion). The $6.0 billion net cash provided by financing
activities was due to increases in Federal funds purchased, securities sold
under repurchase agreements and other borrowed funds ($3.3 billion), foreign
deposits ($2.9 billion) and net proceeds from the issuance of long-term debt
($3.5 billion), partially offset by repayments and maturities of long-term debt
($2.3 billion).
The Corporation's anticipated cash requirements (on a parent
company-only basis) for 1994 include approximately $1,650 million for maturing
medium- and long-term debt, anticipated dividend payments on the Corporation's
common stock and preferred stock and for other parent company operations. The
Corporation considers the sources of liquidity available to the parent company
to be more than sufficient to meet its obligations. The sources of liquidity
available to the Corporation (on a parent company-only basis) include its
liquid assets (including deposits with its bank subsidiaries and short-term
advances to and repurchase agreements with its securities subsidiaries) as well
as dividends and the repayment of intercompany advances from its bank and
non-bank subsidiaries. In addition, as of December 31, 1993, the Corporation
had available to it $750 million in committed credit facilities from a
syndicate of domestic and international banks. The facilities included a $241
million three-year facility and a $509 million 364-day facility.

OFF-BALANCE SHEET ANALYSIS

The Corporation utilizes various off-balance sheet financial instruments in two
ways: trading and asset/liability management. Certain of these instruments,
commonly referred to as "derivatives", represent contracts with counterparties
where payments are made to or from the counterparty based upon specific
interest rates, currency levels, other market rates or on terms predetermined
by the contract. Derivatives, along with foreign exchange contracts, can
provide a cost-effective alternative to assuming and mitigating risks
associated with traditional on-balance sheet instruments. Such derivative and
foreign exchange transactions involve, to varying degrees, credit risk (i.e.,
the possibility that a loss may occur because a party to a transaction fails to
perform according to the terms of a contract) and market risk (i.e., the
possibility that a change in interest or currency rates will cause the value of
a financial instrument to decrease or become more costly to settle).
The Corporation's actual credit losses arising from such transactions
have been immaterial during 1993, 1992 and 1991. The effects of market losses
have been reflected in trading revenue, as the trading instruments are
marked-to-market on a daily basis.

TRADING ACTIVITIES: RISK MANAGEMENT PRODUCTS

The Corporation utilizes derivative and foreign exchange instruments to meet
the financing needs of its customers and to generate revenues through its
trading activities. The Corporation has four fundamental trading activities
which generate revenue. The Corporation seeks to maintain a balance between
generally stable market-making, sales and arbitrage businesses and potentially
less stable positioning.

Market-making: The Corporation trades with the intention of making a profit
based on the spread between bid and ask prices. The Corporation views the
market risk related to market-making to be relatively low and very short-term.
The stability of market-making, compared to other trading activities, is
considered by the Corporation to be medium, as both the spreads and the market
volume can fluctuate. The Corporation considers market-making to be a key
trading activity in its non-exchange traded businesses and emphasizes its use,
especially in its foreign exchange, derivative and government markets
businesses.

Sales: The Corporation accesses products for its clients at competitive prices.
The Corporation is emphasizing sales since the Corporation believes it to be a
stable business, given the Corporation's worldwide client franchise.

Arbitrage: This is the purchase or sale of derivatives in one market and the
almost simultaneous sale or purchase in another market to take advantage of
differences in interest and currency

B45
<PAGE> 57

rates. Because of the nature of trading markets, where there are numerous
instruments that relate to one another, and the Corporation's market-making
franchise, the Corporation emphasizes the use of this strategy. The Corporation
considers arbitrage to be a key fundamental of its risk management business.

Positioning: The Corporation takes certain positions in the market with the
intention of generating revenue. This strategy has the lowest stability of all
four trading activities. The Corporation's emphasis in this area is less than
in the other fundamental trading activities.

ASSET/LIABILITY MANAGEMENT

The Corporation employs a variety of off-balance sheet instruments in managing
its exposure to fluctuations in market interest rates and foreign exchange
rates. In some cases, these instruments are used to hedge specific on-balance
sheet exposures. For example, an interest rate swap contract may be entered
into in conjunction with a debt offering, shifting the effective rate paid from
fixed to variable, or vice versa, at terms more advantageous than if the debt
offering had originally been fixed-rate or variable-rate, as the case may be.
More often, these contracts are used as one of many tools in the
Corporation's overall management of its exposure, as opposed to hedging
specific transactions as described above. A swap in which the Corporation
receives a fixed interest rate and pays a floating rate may serve as a
substitute for an investment in a fixed-rate security. Such a swap transaction
will have an effect on the Corporation's consolidated interest rate sensitivity
identical to a security investment but potentially at more favorable terms
depending on market conditions. For a discussion regarding the Corporation's
interest rate positions, see the Interest Rate Sensitivity Section. For a
discussion regarding the Corporation's asset/liability management policies, see
Note One of the Notes to Consolidated Financial Statements. At December 31,
1993, the net deferred amount relating to off-balance sheet instruments used in
asset/liability management activities was immaterial.

CREDIT AND MARKET RISK MANAGEMENT

The effective management of credit and market risk is a vital ingredient of the
Corporation's trading activities and asset/liability management. The
Corporation also manages the risks associated with its trading activities
through geographic and product diversification. Because of the changing market
environment, which results in increasingly complex financial instruments, and
because of the Corporation's business strategy to maintain geographic and
product diversification, the monitoring and managing of these risks is a
continual process. The Corporation has reviewed both the Group of Thirty report
entitled "Derivatives Practices and Principles" and the recently issued Federal
Reserve Board examination guidelines for trading activities, and management
considers itself to be substantially in compliance with the recommendations and
general thrust of these documents.

Credit Risk: The Corporation controls the credit risk arising from derivative
and foreign exchange transactions through its credit approval process and the
use of risk control limits and monitoring procedures. The Corporation uses the
same credit procedures when entering into derivative and foreign exchange
transactions as it does for traditional lending products. The credit approval
process involves first evaluating each counterparty's creditworthiness, then
assessing the applicability of off-balance sheet instruments to the risks the
counterparty is attempting to manage, and determining if there are specific
transaction characteristics which alter the risk profile. Credit limits are
calculated and monitored on the basis of potential exposure which takes into
consideration current market value and estimates of potential future movements
in market values.
The notional principal of derivative and foreign exchange instruments
is the amount on which interest and other payments in a transaction are based.
For derivative transactions, the notional principal typically does not change
hands; it is simply a quantity that is used to calculate payments. While
notional principal is the most commonly used volume measure in the derivative
and foreign exchange markets, it is not a measure of credit or market risk. The
notional principal of the Corporation's derivatives and foreign exchange
products greatly exceeds the possible credit and market loss that could arise
from such transactions. As a result, the Corporation does not consider the
notional principal to be indicative of its credit or market risk exposure. The
Corporation believes the true measure of credit risk exposure is the
replacement cost (the cost to replace the contract at current market rates
should the counterparty default prior to the settlement date). This is also
referred to as the mark-to-market exposure amount.
Mark-to-market exposure is a measure, at a point in time, of the value
of a derivative or foreign exchange contract in the open market. When the
mark-to-market is positive, it indicates the counterparty owes the Corporation
and, therefore, creates a repayment risk for the Corporation. When the
mark-to-market is negative, the Corporation owes the counterparty. In this
situation the Corporation does not have repayment risk.
When the Corporation has more than one transaction outstanding with a
counterparty, the "net" mark-to-market exposure represents the netting of the
positive and negative exposures with the same counterparty. If there is a net
negative number, the Corporation's exposure to the counterparty is considered
zero. Net mark-to-market is the best measure of credit risk when there is a
master netting agreement between the Corporation and the counterparty.

B46
<PAGE> 58

The Corporation routinely enters into derivative and foreign exchange
product transactions with regulated financial institutions, which it believes
have relatively low credit risk. At December 31, 1993, over 80% of transaction
counterparties were commercial banks. The remaining 20% were comprised mainly
of other financial institutions and major corporations.
The Corporation's trading activities are geographically diverse.
Trading activities are undertaken in more than 20 countries, although a
majority of the Corporation's transactions are executed in the United States,
Japan and Western Europe, areas which the Corporation believes have the most
developed laws regarding derivatives and foreign exchange businesses. Trading
products include not only foreign exchange and derivatives but also securities,
including LDC debt.
The majority of derivative and foreign exchange transactions are
outstanding for less than one year. At December 31, 1993, 28% of outstanding
transactions were scheduled to expire within three months, 13% within three to
six months, 13% within six months to one year, 26% within one to three years
and 20% greater than three years. The short-term nature of these transactions
along with product diversification mitigates credit risk, as transactions
settle quickly.

Market Risk: Market risk management is an effective and wide-ranging activity
at the Corporation. A critical goal is the separation of duties of those
responsible for day-to-day trading and those responsible for position valuation
and limit reporting.
The Chairman of the Market Risk Committee delegates instrument
authorities and risk limits to individual business units and exception
authority to the senior managers of divisions responsible for those units.
Procedures and policies specify authorized instruments and provide for risk
limits. Critical risk limits that are designated as primary involve independent
daily tracking and centralized reporting, while less-critical risk limits are
independently monitored and are reported centrally on a periodic basis.
Individual business units often set additional internal limits that are
monitored in the same manner. Criteria for risk limit determination include,
among other factors, relevant market analysis, prior track record, business
strategy, and management experience and depth.
The Chairman of the Market Risk Committee is supported by the Market
Risk Group. One focus of the group is independent analysis of instrument
authority and limit requests, limit utilization, measure of revenue to risk,
average risk levels, and related topics. Other focuses include measures of
value at risk, criteria for official volatility and correlation statistics, and
formulas for determination of market-related credit exposure. Additionally, the
group reviews the market risk related to new products (as one element of the
Corporation's new product process) and provides independent review of the
mathematical and simulation models utilized by the Corporation. The group
combines efforts with other functional units to assess cross-discipline risks
in business units having significant market risk.
For further discussion of the Corporation's off-balance sheet
financial instruments, see Note Eighteen of the Notes to Consolidated Financial
Statements.

INTEREST RATE SENSITIVITY

The Corporation's net interest income is affected by changes in the level of
market interest rates based upon mismatches between the repricing of its assets
and liabilities. Interest rate sensitivity arises in the ordinary course of the
Corporation's banking business as the repricing characteristics of its loans do
not necessarily match those of its deposits and other borrowings. This
sensitivity can be altered by adjusting investments and the maturities of
wholesale funding and with the use of off-balance sheet derivative instruments.
Interest rate sensitivity is managed and controlled on a consolidated
basis by the Corporation's Asset and Liability Policy Committee. A key element
of the Corporation's interest rate risk management strategy is that it allows
the assumption of limited interest rate sensitivities at a decentralized level
by authorized units with close contacts with the markets. These units operate
within authorities administered centrally which limit the size of exposures by
currency and the instruments that can be used to manage the sensitivity. The
positions are consolidated and reviewed frequently by the Asset and Liability
Policy Committee, which seeks to maximize the Corporation's net interest income
while ensuring that the risks to earnings from adverse movements in interest
rates are kept within pre-specified limits deemed acceptable by the
Corporation.

Measuring Interest Rate Sensitivity: Management uses a variety of techniques to
measure its interest rate sensitivity. One such tool is aggregate net gap
analysis, an example of which is presented below. Assets and liabilities are
placed in maturity ladders based on their contractual maturities or repricing
dates. Assets and liabilities for which no specific contractual maturity or
repricing dates exist are placed in ladders based on management's judgments
concerning their most likely repricing behaviors.
Derivatives used in interest rate sensitivity management are also
included in the maturity ladders. The aggregate notional amounts of derivatives
are netted when the repricing of the "receive-side" and "pay-side" of two swaps
occur within the same gap interval. Such net amount represents the repricing
mismatch of the Corporation's derivatives during the particular gap interval.
It is the amount of the net repricing mismatch, rather than the aggregate
notional principal of the derivatives repricing during the period, that is
included in the gap analysis, because it is the amount of the mismatch that
reflects the impact of the Corporation's derivatives in altering the repricing
profile of the Corporation. See Note Eighteen of the Notes to Consolidated
Financial Statements for the aggregate notional principal of off-balance sheet
instruments used for asset/liability management.

B47
<PAGE> 59

<TABLE>
<CAPTION>
INTEREST SENSITIVITY TABLE
OVER
YEAR ENDED DECEMBER 31, 1993 (IN MILLIONS) 1-3 MONTHS 4-6 MONTHS 7-12 MONTHS 1-5 YEARS 5 YEARS TOTAL
- - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Deposits With Banks $ 5,568 $ 455 $ 7 $ -- $ -- $ 6,030
Federal Funds Sold and Securities
Purchased Under Resale Agreements 10,556 -- -- -- -- 10,556
Trading Account Assets 11,679 -- -- -- -- 11,679
Securities 4,852 1,060 1,863 10,409 7,764 25,948
Loans, Net 48,182 7,374 4,497 8,212 4,096 72,361
Noninterest Earning Assets 14,230 279 558 3,729 4,518 23,314
- - - -------------------------------------------------------------------------------------------------------------------------
Total Assets $ 95,067 $ 9,168 $ 6,925 $ 22,350 $ 16,378 $ 149,888
- - - -------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Interest-Bearing Deposits $ 66,017 $ 3,827 $ 3,179 $ 13,221 $ 12,033 $ 98,277
Short-Term and Other Borrowings 24,688 6 7 -- 64 24,765
Long-Term Debt 4,164 647 18 701 2,662 8,192
Other Liabilities 7,089 12 16 121 252 7,490
Stockholders' Equity 638 234 468 4,891 4,933 11,164
- - - -------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 102,596 $ 4,726 $ 3,688 $ 18,934 $ 19,944 $ 149,888
- - - -------------------------------------------------------------------------------------------------------------------------
Balance Sheet (7,529) 4,442 3,237 3,416 (3,566) --
- - - -------------------------------------------------------------------------------------------------------------------------
Off-Balance Sheet Items Affecting
Interest-Rate Sensitivity(a) (4,994) (2,131) (937) 7,379 683 --
- - - -------------------------------------------------------------------------------------------------------------------------
Interest-Rate-Sensitivity Gap (12,523) 2,311 2,300 10,795 (2,883) --
- - - -------------------------------------------------------------------------------------------------------------------------
Cumulative Interest-Rate Sensitivity Gap (12,523) (10,212) (7,912) 2,883 -- --
- - - -------------------------------------------------------------------------------------------------------------------------
% of Total Assets (8)% (7)% (5)% 2% -- --
- - - -------------------------------------------------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31, 1992
Interest-Rate-Sensitivity Gap $ (11,501) $ 1,730 $ 2,516 $ 8,963 $ (1,708) --
- - - -------------------------------------------------------------------------------------------------------------------------
Cumulative Interest-Rate Sensitivity Gap (11,501) (9,771) (7,255) 1,708 -- --
- - - -------------------------------------------------------------------------------------------------------------------------
% of Total Assets (8)% (7)% (5)% 1% -- --
- - - -------------------------------------------------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31, 1991
Interest-Rate-Sensitivity Gap $ (15,702) $ 2,338 $ 2,978 $ 9,540 $ 846 --
- - - -------------------------------------------------------------------------------------------------------------------------
Cumulative Interest-Rate Sensitivity Gap (15,702) (13,364) (10,386) (846) -- --
- - - -------------------------------------------------------------------------------------------------------------------------
% of Total Assets (11)% (10)% (7)% (1)% -- --
- - - -------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Represents repricing effect of off-balance sheet positions, which include
interest rate swaps and options, financial futures, and similar agreements that
are used as part of the Corporation's overall asset and liability management
activities.

A net gap for each time period is calculated by subtracting the
liabilities repricing in that interval from the assets repricing. A negative
gap -- more liabilities repricing than assets -- will benefit net interest
income in a declining interest rate environment and will detract from net
interest income in a rising interest rate environment. Conversely, a positive
gap -- more assets repricing than liabilities -- will benefit net interest
income if rates are rising and will detract from net interest income in a
falling rate environment.
At December 31, 1993, the Corporation had $7,912 million more
liabilities than assets repricing within one year, amounting to 5.3% of total
assets. This compares with $7,255 million, or 5.2% of total assets at December
31, 1992. The consolidated gaps include exposure to U.S. dollar interest rates
as well as exposure to non-U.S. dollar rates in currency markets in which the
Corporation does business. Since U.S. interest rates and non-U.S. interest
rates do not move in tandem, the overall cumulative gaps will tend to overstate
the exposures of the Corporation to U.S. interest rates.
Simple gap analysis measures the Corporation's exposure at a
particular point in time. The exposure changes continuously as a result of the
Corporation's ongoing business and its management initiatives. Moreover, gap
analysis cannot reveal the impact of factors such as administered rates (i.e.,
the prime lending rate), pricing strategies on its consumer and business
deposits, changes in balance sheet mix or various options embedded in the
balance sheet. Accordingly, the Asset and Liability Policy Committee
supplements its gap analysis with comprehensive simulations of net interest
income under a variety of market interest rate scenarios. These simulation
models take explicit account of pricing strategies and deposit responses and
the behavior of embedded options. At December 31, 1993, based on these
simulations, net

B48
<PAGE> 60

interest income sensitivity to a gradual 150 basis point rise in market rates
over the course of 1994 was estimated at less than two percent of projected
1994 after-tax net income.
While management believes the simulation models do provide a
meaningful representation of the Corporation's interest rate sensitivity, these
simulation models do not necessarily take into account all business
developments which can have an impact on net interest income, such as changes
in credit quality or the size and composition of the balance sheet.
In 1993, the Federal Reserve Board and certain other Federal banking
regulators proposed a system for measuring interest rate risk and assessing
capital adequacy based on the sensitivity of a banking organization's "net
economic value" to changes in the level of market interest rates. The system
compares the net present value of net interest income-related cash flows under
current market conditions to the net present values under hypothetical,
instantaneous increases and declines in market rates. The proposal envisions
that banks whose net economic value sensitivity exceeds one percent of total
assets would be identified as having excessive interest rate risk and,
potentially, become subject to additional capital requirements. While final
rules have not been adopted, management believes its current interest
rate-sensitivity position falls within the range deemed acceptable by the
regulators' measurement system.

ACCOUNTING DEVELOPMENTS

ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN

In May 1993, the Financial Accounting Standards Board, ("FASB") issued
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" ("SFAS 114"). SFAS 114 requires that the carrying
value of impaired loans be measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair value of
the collateral if the loan is collateral dependent. Under the new standard, a
loan is considered impaired when, based on current information, it is probable
that the borrower will be unable to pay contractual interest or principal
payments as scheduled in the loan agreement. SFAS 114 is applicable to all
loans that are identified for evaluation, uncollateralized as well as
collateralized, with certain exceptions.
SFAS 114 applies to financial statements for fiscal years beginning
after December 15, 1994, although earlier application is encouraged. Management
is currently evaluating the financial impact of adopting this new accounting
standard.

OFFSETTING OF AMOUNTS RELATED TO CERTAIN CONTRACTS

The Corporation records unrealized gains and losses related to interest rate
and foreign exchange contracts net on the Consolidated Balance Sheet.
In March 1992, the FASB issued Interpretation No. 39, "Offsetting of
Amounts Related to Certain Contracts" (the "Interpretation"), with an effective
date of January 1, 1994, which changes the reporting of unrealized gains and
losses on interest rate and foreign exchange contracts on the balance sheet.
The Interpretation requires that gross unrealized gains be reported as assets
and gross unrealized losses be reported as liabilities. The Interpretation,
however, permits netting of such unrealized gains and losses with the same
counterparty when master netting agreements have been executed. If this
Interpretation had been in effect at December 31, 1993, giving effect to the
master netting agreements in place at that time, assets and liabilities each
would have increased by approximately $13.6 billion and the Tier 1 leverage
ratio would have been 6.19%. In 1994, to mitigate the impact of the
Interpretation, the Corporation anticipates expanding the number of master
netting agreements to which it is a party. Upon adoption of this new reporting
requirement, the Corporation's net income and risk-based capital ratios will
not be affected, although the Corporation expects its asset-based ratios (such
as the Tier 1 leverage ratio) will decrease.

MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPARISON BETWEEN 1992 AND 1991

OPERATING HIGHLIGHTS

The Corporation's net income was $1,086 million, or $3.90 per common share, for
1992, compared with $154 million, or $.11 per share, in 1991. The 1991 results
reflected a pre-tax restructuring charge of $625 million taken in connection
with the merger with MHC. Excluding the restructuring charge, earnings for
1991 were $779 million, or $3.56 per share. There were no tax benefits recorded
in connection with the restructuring charge.
The Corporation's 1992 earnings, in comparison with the prior year,
benefited from a 13% increase in net interest income, a 27% improvement in
combined trading account and foreign exchange revenue, as well as higher
revenues from fees for other banking services, service charges on deposit
accounts and trust and investment management fees. Partially offsetting these
factors were higher credit costs in 1992 compared with 1991, reflecting the
impact of the weak economy on certain areas of the Corporation's credit
portfolio.

B49
<PAGE> 61

NET INTEREST INCOME

The Corporation's net interest income was $4,598 million in 1992, an increase
of 13% from $4,080 million for 1991. The improvement in net interest income
from 1991 was attributable to wider spreads in a lower interest rate
environment, lower funding costs (primarily due to upgrades received in 1992 in
the Corporation's credit ratings) and effective asset/liability management.

PROVISION FOR LOSSES AND NET CHARGE-OFFS

The provision for losses for 1992 was $1,365 million, compared with $1,345
million for 1991.
The Corporation's non-LDC net charge-offs totaled $1,365 million in
1992 an increase from $1,191 million in 1991. The increase from the prior year
was principally due to the continued weak economy and its effects on certain
areas of the Corporation's credit portfolio. However, non-LDC net charge-offs
declined in each of the last three quarters of 1992.
LDC net charge-offs in 1992 included $51 million related to Yugoslavia
as a result of a recommendation of ICERC issued in the 1992 fourth quarter. LDC
net charge-offs and losses on sales and swaps in 1991 included $902 million
related to Brazilian loans, of which $491 million occurred in the 1991 fourth
quarter. These charge-offs reflected the Corporation's evaluation of its LDC
portfolio and the recommendations of ICERC and had the effect of adjusting the
Corporation's medium- and long-term Brazilian outstandings to an estimated net
recoverable value.

NONINTEREST REVENUE

Noninterest revenue totaled $3,026 million in 1992, an increase of $164 million
from 1991. The increase was primarily the result of higher foreign exchange
trading revenue, service charges on deposit accounts and fees for other banking
services, partially offset by lower securities gains, corporate finance and
syndication fees and other revenue.
Trust and investment management fees increased in 1992 to $361 million
from $344 million in 1991. The improvement from the prior year occurred in the
stock transfer and corporate trust businesses and also reflected higher
personal trust fees due to a rise in the market value of assets under
management.
Corporate finance and syndication fees in 1992 were $265 million, a
decrease of 12% from 1991. The decline principally resulted from the sale of a
nonstrategic business in the fourth quarter of 1991.
Service charges on deposit accounts were $264 million in 1992, an
increase from $229 million in 1991. This increase resulted from higher
per-account fees, as well as growth in the Corporation's domestic deposit
accounts.
Fees for other banking services include revolving credit fees,
commissions on letters of credit, fees in lieu of compensating balances,
mortgage servicing fees, loan commitment fees and other transactional fee
revenue. Such fees totaled $1,040 million in 1992, an increase from $959
million in 1991. The increase from the prior year reflected growth in a number
of fee components, as well as the prospective reclassification of certain
banking relationship fees from other revenue to fees for other banking
services.
Revenues from all trading activities (trading account revenue and
foreign exchange revenue) were $853 million in 1992 compared with $671 million
in 1991. In 1992, trading account revenue and foreign exchange revenue were
$377 million and $476 million, respectively, compared with $382 million and
$289 million, respectively, in 1991. The increases were primarily the result of
increased transaction volumes, market volatility, and the Corporation's higher
credit ratings, which resulted in increased opportunities in several key
businesses.
Securities gains in 1992 were $53 million compared with $110 million
in 1991. The gains recorded in both years principally resulted from certain
actions taken by the Corporation in managing its interest rate sensitivity and
enhancing its securities portfolio.
Other revenue for 1992 was $190 million compared with $247 million in
1991. The decrease from 1991 was principally due to lower revenue in connection
with the Corporation's residential mortgage warehouse operations, the
aforementioned reclassification of certain fees from other revenue to fees for
other banking services and higher gains recorded in 1991 on the disposition of
nonstrategic corporate assets.

NONINTEREST EXPENSE

Noninterest expense was $4,930 million in 1992, compared with $5,307 million in
1991. The results for 1992 included a one-time charge of $41 million related to
costs incurred in combining the Corporation's employee benefit plans and a $30
million charge for London occupancy-related expenses associated with the
Corporation's Canary Wharf lease arrangements. The 1991 results included a $625
million restructuring charge in connection with the merger with MHC and an $18
million reduction of expense related to an insurance settlement. Excluding the
impact of the aforementioned items, noninterest expense in 1992 increased by
$159 million, or 3.4%, from 1991. The 1992 full-year noninterest expense
included higher foreclosed property expense, incentive compensation costs
(principally due to improved revenues from the Corporation's trading
businesses) and FDIC premiums, which collectively increased by $208 million.
The remaining amount of noninterest expense declined from year-to-year,
reflecting the impact of merger-related expense savings.

B50
<PAGE> 62

Salaries and employee benefit expenses in 1992 were $2,349 million,
slightly lower than the $2,369 million recorded in 1991. The decline was
primarily due to lower costs attributable to the reduction in staff from
attrition and layoffs subsequent to the merger announcement on July 15, 1991.
Partially offsetting this reduction was approximately $63 million of higher
incentive compensation costs due to improved revenues primarily from the
Corporation's trading businesses.
Occupancy and equipment expenses for 1992 were $882 million, a slight
increase from $878 million in 1991.
Foreclosed property expense in 1992 was $283 million compared with
$154 million in 1991. The $129 million year-to-year increase reflected higher
operating expenses associated with an increased level of foreclosed assets and
a higher level of expenses incurred in connection with writedowns resulting
from updated market valuations.
For 1992, other expense was $1,416 million compared with $1,281
million in 1991. Other expense comprises items such as professional fees,
insurance, advertising and communications expense, and in 1992 and 1991
included the aforementioned one-time charges.

INCOME TAXES

The Corporation recorded income tax expense of $243 million in 1992, compared
with $136 million in 1991. Included in the 1992 and 1991 income tax expense was
approximately $278 million and $130 million, respectively, of Federal income
tax benefits. The Corporation's 1991 income tax expense was reduced by $55
million as a result of settlements with the Internal Revenue Service ("IRS") of
taxes from prior years.
The Corporation's effective tax rate in 1992 was lower than the
statutory rate primarily due to the recognition of approximately $278 million
of Federal income tax benefits. For 1991, the $625 million restructuring
charge, the aforementioned $130 million Federal income tax benefit and the $55
million reduction in tax expense were the most significant factors affecting
the Corporation's effective tax rate. Deferred tax benefits were reflected in
the financial statements in accordance with the recognition requirements of
Statement of Financial Accounting Standards No. 96, "Accounting for Income
Taxes".

NONPERFORMING ASSETS

The Corporation's total nonperforming assets at December 31, 1992 were $6,092
million, compared with $6,155 million at December 31, 1991. The decline from
the prior year-end resulted from a $251 million decrease in assets acquired as
loan satisfactions, partially offset by an $100 million increase in LDC
nonperforming loans and an $88 million increase in non-LDC nonperforming loans.
The non-LDC nonperforming assets decreased $163 million from the 1991
year-end primarily due to $1.3 billion of payments received on nonperforming
loans and the sale of assets acquired, $1.1 billion of charge-offs and
writedowns (excluding consumer loan charge-offs on a formula basis) and $0.6
billion of loans returning to performing status, partially offset by $2.8
billion of loans placed on nonperforming status during 1992.
LDC nonperforming loans at December 31, 1992 were $1,348 million, an
increase of $100 million from the 1991 year-end. The increase in nonperforming
LDC loans principally reflected the placement of loans to Yugoslavia on
nonperforming status during 1992, partially offset by charge-offs and sales and
swaps of LDC loans.

CASH FLOWS

The following comments apply to the Consolidated Statement of Cash Flows. Cash
and due from banks increased $1.3 billion during 1992, as net cash provided by
operating activities exceeded the net cash used by investing and financing
activities. The net cash provided by operating activities reflected changes in
operating assets/liabilities and higher earnings adjusted for non-cash charges
and credits. Financing activities used $1.1 billion of net cash, mainly due to
decreases in Federal funds purchased, securities sold under repurchase
agreements and other borrowed funds. The net cash used in investing activities
was largely the result of cash outflows for the purchases of securities and the
net increase in loans, partially offset by cash inflows from sales and
maturities of securities and the decrease in loans due to sales and
securitizations.

B51
<PAGE> 63
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING

To Our Stockholders

The management of Chemical Banking Corporation and its subsidiaries has the
responsibility for preparing the accompanying consolidated financial statements
and for their integrity and objectivity. The statements were prepared in
accordance with generally accepted accounting principles. The consolidated
financial statements include amounts that are based on management's best
estimates and judgments. Management also prepared the other information in the
annual report and is responsible for its accuracy and consistency with the
consolidated financial statements.
Management maintains a comprehensive system of internal control to assure the
proper authorization of transactions, the safeguarding of assets, and the
reliability of the financial records. The system of internal control provides
for appropriate division of responsibility and is documented by written
policies and procedures that are communicated to employees. The Corporation
maintains a strong internal auditing program that independently assesses the
effectiveness of the internal controls and recommends possible improvements
thereto. Management believes that as of December 31, 1993, the Corporation
maintains an effective system of internal control.
The Audit Committee of the Board of Directors reviews the systems of internal
control and financial reporting. The Committee meets and consults regularly
with management, the internal auditors and the independent accountants to
review the scope and results of their work.
The accounting firm of Price Waterhouse has performed an independent audit of
the Corporation's financial statements. Management has made available to Price
Waterhouse all of the Corporation's financial records and related data, as well
as the minutes of stockholders' and directors' meetings. Furthermore,
management believes that all representations made to Price Waterhouse during
its audit were valid and appropriate. The firm's report appears below.

/s/ WALTER V. SHIPLEY
- - - ---------------------
Walter V. Shipley
Chairman of the Board and Chief Executive Officer

/s/ PETER J. TOBIN
- - - ------------------
Peter J. Tobin
Executive Vice President and Chief Financial Officer

/s/ JOSEPH L. SCLAFANI
- - - ----------------------
Joseph L. Sclafani
Senior Vice President and Controller

January 18, 1994

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CHEMICAL BANKING CORPORATION

[LOGO] PRICE WATERHOUSE
1177 AVENUE OF THE AMERICAS, NEW YORK, NY 10036

In our opinion, the accompanying consolidated balance sheet of Chemical Banking
Corporation and Subsidiaries, and the related consolidated statements of
income, of changes in stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of Chemical Banking Corporation
and its subsidiaries at December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the management of Chemical
Banking Corporation; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As described in Notes Four, Thirteen and Sixteen to the consolidated
financial statements, Chemical Banking Corporation changed its methods of
accounting for certain investments in debt and marketable equity securities,
post-retirement benefits and income taxes in 1993.

/s/ PRICE WATERHOUSE
- - - ---------------------

January 18, 1994

B52
<PAGE> 64

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31, (IN MILLIONS, EXCEPT SHARE DATA) 1993 1992
- - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 6,852 $ 8,846
Deposits with Banks 6,030 1,846
Federal Funds Sold and Securities Purchased
Under Resale Agreements 10,556 7,667
Trading Account Assets 11,679 4,496
Securities:
Held-to-Maturity (Market Value: $10,288 and $15,195) 10,108 15,036
Available-for-Sale (Market Value: $15,840 and $8,674) 15,840 8,390
Loans (Net of Unearned Income: $477 and $495) 75,381 82,010
Allowance for Losses (3,020) (3,025)
Premises and Equipment 1,910 1,699
Due from Customers on Acceptances 1,077 1,392
Accrued Interest Receivable 1,106 1,086
Assets Acquired as Loan Satisfactions 934 1,276
Other Assets 11,435 8,936
- - - ----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $149,888 $139,655
- - - ----------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
Demand (Noninterest Bearing) $23,443 $ 22,813
Time and Savings 51,940 51,353
Foreign 22,894 20,007
- - - ----------------------------------------------------------------------------------------------------------------
Total Deposits 98,277 94,173
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements 12,857 15,051
Other Borrowed Funds 11,908 8,020
Acceptances Outstanding 1,099 1,443
Accounts Payable and Accrued Liabilities 2,607 1,951
Other Liabilities 3,784 2,368
Long-Term Debt 8,192 6,798
- - - ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 138,724 129,804
- - - ----------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (See Note Twenty)

STOCKHOLDERS' EQUITY
Preferred Stock 1,654 1,848
Common Stock (Issued 253,397,864 and 247,323,972 Shares) 253 247
Capital Surplus 6,553 6,376
Retained Earnings 2,501 1,392
Net Unrealized Gain on Securities Available-for-Sale (Net of Taxes) 215 --
Treasury Stock, at Cost (12) (12)
- - - ----------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS'EQUITY 11,164 9,851
- - - ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $149,888 $139,655
- - - ----------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
Statements.

B53
<PAGE> 65

CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS, EXCEPT PER SHARE DATA) 1993 1992 1991
- - - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans $5,620 $6,353 $ 7,914
Securities 1,727 1,753 1,788
Trading Account Assets 449 419 586
Federal Funds Sold and Securities Purchased Under Resale Agreements 339 349 598
Deposits With Banks 268 274 363
- - - -------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 8,403 9,148 11,249
- - - -------------------------------------------------------------------------------------------------------------------------------

INTEREST EXPENSE
Deposits 2,241 2,868 4,668
Short-Term and Other Borrowings 992 1,228 2,046
Long-Term Debt 534 454 455
- - - -------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 3,767 4,550 7,169
- - - -------------------------------------------------------------------------------------------------------------------------------
Net Interest Income 4,636 4,598 4,080
Provision for Losses 1,259 1,365 1,345
- - - -------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOSSES 3,377 3,233 2,735
- - - -------------------------------------------------------------------------------------------------------------------------------

NONINTEREST REVENUE
Trust and Investment Management Fees 406 361 344
Corporate Finance and Syndication Fees 338 265 302
Service Charges on Deposit Accounts 288 264 229
Fees for Other Banking Services 1,067 1,040 959
Trading Account and Foreign Exchange Revenue 1,073 853 671
Securities Gains 142 53 110
Other Revenue 710 190 247
- - - -------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST REVENUE 4,024 3,026 2,862
- - - -------------------------------------------------------------------------------------------------------------------------------

NONINTEREST EXPENSE
Salaries 2,070 1,977 1,995
Employee Benefits 396 372 374
Occupancy Expense 587 566 568
Equipment Expense 337 316 310
Foreclosed Property Expense 287 283 154
Restructuring Charge 158 -- 625
Other Expense 1,458 1,416 1,281
- - - -------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE 5,293 4,930 5,307
- - - -------------------------------------------------------------------------------------------------------------------------------
Income Before Income Tax Expense and Effect of Accounting Changes 2,108 1,329 290
Income Tax Expense 539 243 136
- - - -------------------------------------------------------------------------------------------------------------------------------
Income Before Effect of Accounting Changes 1,569 1,086 154
Net Effect of Changes in Accounting Principles 35 -- --
- - - -------------------------------------------------------------------------------------------------------------------------------
NET INCOME $1,604 $1,086 $ 154
- - - -------------------------------------------------------------------------------------------------------------------------------
Net Income Applicable to Common Stock $1,449 $ 936 $ 20
- - - -------------------------------------------------------------------------------------------------------------------------------

PER COMMON SHARE:
Income Before Effect of Accounting Changes $ 5.63 $ 3.90 $ .11
Net Effect of Changes in Accounting Principles .14 -- --
Net Income $ 5.77 $ 3.90 $ .11
- - - -------------------------------------------------------------------------------------------------------------------------------
Average Common Shares and Common Stock Equivalents Outstanding 251.2 240.4 181.4
- - - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
Statements.

B54
<PAGE> 66

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK
Balance at Beginning of Year $ 1,848 $1,598 $1,398
Issuance of Stock 400 550 200
Redemption of Stock (594) (300) --
- - - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR 1,654 1,848 1,598
- - - -------------------------------------------------------------------------------------------------------------------------------

COMMON STOCK
Balance at Beginning of Year 247 183 2,134
Issuance of Stock 6 64 5
Change in Par Value -- -- (1,956)
- - - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR 253 247 183
- - - -------------------------------------------------------------------------------------------------------------------------------

CLASS B COMMON STOCK
Balance at Beginning of Year -- 34 34
Conversion of Class B Common Stock -- (34) --
- - - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR -- -- 34
- - - -------------------------------------------------------------------------------------------------------------------------------

CAPITAL SURPLUS
Balance at Beginning of Year 6,376 4,734 2,685
Issuance of Stock 194 1,642 93
Redemption of Preferred Stock (17) -- --
Change in Par Value -- -- 1,956
- - - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR 6,553 6,376 4,734
- - - -------------------------------------------------------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at Beginning of Year 1,392 752 1,008
Net Income 1,604 1,086 154
Cash Dividends Declared:
Preferred Stock (155) (153) (134)
Common Stock (345) (295) (247)
Class B Common Stock -- -- (10)
Accumulated Translation Adjustment(a) 5 2 (19)
- - - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR 2,501 1,392 752
- - - -------------------------------------------------------------------------------------------------------------------------------

NET UNREALIZED GAIN ON SECURITIES AVAILABLE-FOR-SALE (NET OF TAXES)
Balance at Beginning of Year -- -- --
Impact of Accounting Change 215 -- --
- - - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR 215 -- --
- - - -------------------------------------------------------------------------------------------------------------------------------

PREFERRED STOCK IN TREASURY, AT COST
Balance at Beginning of Year -- (8) (8)
Redemption of Stock -- 8 --
- - - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR -- -- (8)
- - - -------------------------------------------------------------------------------------------------------------------------------

COMMON STOCK IN TREASURY, AT COST
Balance at Beginning of Year (12) (12) (13)
Issuance of Treasury Stock -- -- 1
- - - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT END OF YEAR (12) (12) (12)
- - - -------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $11,164 $9,851 $7,281
- - - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Balance was ($10) million, ($15) million and ($17) million at December 31,
1993, 1992, and 1991, respectively. The Notes to Consolidated Financial
Statements are an integral part of these statements.

B55
<PAGE> 67

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,604 $ 1,086 $ 154
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Losses 1,259 1,365 1,345
Restructuring Charge 158 -- 594
Depreciation and Amortization 333 319 325
Proceeds from the Maturity of Available-for-Sale Securities 1,608 304 --
Proceeds from the Sale of Available-for-Sale Securities 5,352 684 --
Purchases of Available-for-Sale Securities (7,568) -- --
Net Change In:
Trading Related Assets (10,513) 2,149 (1,602)
Accrued Interest Receivable (20) 101 496
Accrued Interest Payable 22 (76) (548)
Other, Net (721) (175) (494)
- - - ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (8,486) 5,757 270
- - - ----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Net Change In:
Deposits with Banks (4,169) 1,241 (292)
Federal Funds Sold and Securities Purchased Under Resale Agreements (2,424) (951) (664)
Loans Due to Sales and Securitizations 12,403 7,857 4,198
Other Loans (5,657) (7,559) (6,039)
Other, Net 2,082 440 1,252
Proceeds from the Maturity of Held-to-Maturity Securities 4,968 6,344 3,853
Proceeds from the Sale of Held-to-Maturity Securities 152 3,736 8,238
Purchases of Held-to-Maturity Securities (6,444) (14,386) (12,647)
Cash Used in Acquisitions (481) -- --
- - - ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 430 (3,278) (2,101)
- - - ----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net Change In:
Noninterest Bearing Domestic Demand Deposits (115) 4,696 (1,460)
Domestic Time and Savings Deposits (1,716) (1,076) 183
Foreign Deposits 2,887 (3,051) 4,226
Federal Funds Purchased, Securities Sold Under Repurchase
Agreements and Other Borrowed Funds 3,347 (4,449) 366
Other Liabilities 1,326 131 (781)
Other, Net (344) 115 (440)
Proceeds from the Issuance of Long-Term Debt 3,451 1,654 880
Redemption and Maturity of Long-Term Debt (2,299) (549) (908)
Proceeds from the Issuance of Stock 591 2,117 291
Redemption of Preferred Stock (610) (292) --
Cash Dividends Paid (480) (438) (405)
- - - ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 6,038 (1,142) 1,952
- - - ----------------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Due From Banks 24 (20) (8)
Net Increase (Decrease) in Cash and Due from Banks (1,994) 1,317 113
Cash and Due from Banks at the Beginning of the Year 8,846 7,529 7,416
- - - ----------------------------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS AT THE END OF THE YEAR $ 6,852 $ 8,846 $ 7,529
- - - ----------------------------------------------------------------------------------------------------------------------------------
Cash Interest Paid $ 3,745 $ 4,626 $ 7,538
Taxes Paid (Refunded) $ 390 $ 166 $ (109)
- - - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
Statements.

B56
<PAGE> 68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE ONE

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Chemical Banking Corporation (the "Corporation") is a bank holding company
organized under the laws of the State of Delaware in 1968 and registered under
the Bank Holding Company Act of 1956, as amended. On December 31, 1991,
Manufacturers Hanover Corporation ("MHC") was merged with and into the
Corporation. The merger was accounted for as a pooling of interests and, as a
result, the Corporation's financial statements include the consolidated
accounts of MHC. In addition, on June 19, 1992, Manufacturers Hanover Trust
Company ("MHT") was merged with and into Chemical Bank.
The Corporation conducts domestic and international financial services
businesses through various bank and non-bank subsidiaries. The principal bank
subsidiaries of the Corporation are Chemical Bank, a New York State bank
("Chemical Bank"), and Texas Commerce Bank National Association, a subsidiary
of Texas Commerce Bancshares Inc. ("Texas Commerce"), a bank holding company
organized under the laws of the State of Delaware. The accounting and financial
reporting policies of the Corporation and its subsidiaries conform to generally
accepted accounting principles and prevailing industry practices. The following
is a description of significant accounting policies.

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Corporation
and its majority-owned subsidiaries, after eliminating intercompany balances
and transactions. Equity investments in less than majority-owned companies
(20%-50% ownership interest) are generally accounted for in accordance with the
equity method of accounting. The Corporation's pro-rata share of earnings
(losses) of equity investments is included in other noninterest revenue.
Securities and other property held in a fiduciary or agency capacity
are not included in the Consolidated Balance Sheet since these are not assets
or liabilities of the Corporation.
Certain amounts in prior periods have been reclassified to conform to
the current presentation.

STATEMENT OF CASH FLOWS

For purposes of preparing the Consolidated Statement of Cash Flows, the
Corporation defines cash and cash equivalents as those amounts included in the
balance sheet caption "cash and due from banks". Cash flows from loans and
deposits are reported on a net basis.

TRADING ACCOUNT ASSETS

Trading account assets include securities, refinancing country loans, money
market, credit and certain derivative instruments held for trading purposes.
Obligations to deliver securities sold but not yet purchased are included in
other borrowed funds. Trading account assets and liabilities are carried at
fair value. Gains and losses on trading account assets and liabilities,
including market value adjustments, are included in trading account and foreign
exchange revenue.

HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES

Effective December 31, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). Securities that may be sold in response to or
in anticipation of changes in interest rates and resulting prepayment risk, or
other factors, are classified as available-for-sale and carried at fair value.
The unrealized gains and losses on these securities, along with any unrealized
gains and losses on related hedges, are reported net of applicable taxes in a
separate component of stockholders' equity. At December 31, 1992, securities
available-for-sale were carried at the lower of aggregate cost or market value
(see Note Four). Securities that the Corporation has the positive intent and
ability to hold to maturity continue to be carried at amortized cost.
Interest income on securities, including amortization of premiums and
accretion of discounts, is recognized using the interest method. The
Corporation anticipates prepayments of principal in the calculation of the
effective yield for collateralized mortgage obligations and mortgage-backed
securities. The specific identification method is used to determine realized
gains and losses on sales of securities, which are reported in securities
gains.

LOANS

Loans are generally reported at the principal amount outstanding, net of
unearned income and net deferred loan fees (deferred nonrefundable
yield-related loan fees, net of related direct origination costs). Mortgage
loans held for sale are carried at the lower of aggregate cost or market value.
Loans meeting the accounting definition of a security are reported as loans but
are valued consistent with SFAS 115.
Interest income is recognized using the interest method or on a basis
approximating a level rate of return over the term of the loan. Net deferred
loan fees are amortized into interest income over the term of the loan.
Nonaccrual loans are those on which the accrual of interest has
ceased. Loans, other than certain consumer loans discussed below, are placed on
nonaccrual status immediately if, in the opinion of management, principal or
interest is not likely to be paid in accordance with the terms of the loan
agreement, or when principal or interest is past due 90 days or more and

B57
<PAGE> 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

collateral, if any, is insufficient to cover principal and interest. Interest
accrued but not collected at the date a loan is placed on nonaccrual status is
reversed against interest income. In addition, the amortization of net deferred
loan fees is suspended when a loan is placed on nonaccrual status. Interest
income is recognized on nonaccrual loans only to the extent received in cash.
However, where there is doubt regarding the ultimate collectibility of the loan
principal, cash receipts, whether designated as principal or interest, are
thereafter applied to reduce the carrying value of the loan. Loans are restored
to accrual status only when interest and principal payments are brought current
and future payments are reasonably assured.
Renegotiated loans are those for which concessions, such as the
reduction of interest rates or deferral of interest or principal payments, have
been granted due to a deterioration in the borrower's financial condition.
Interest on renegotiated loans is accrued at the renegotiated rates. Certain
renegotiated loan agreements call for additional interest to be paid on a
deferred or contingent basis. Such interest is taken into income only as
collected.
Consumer loans (exclusive of residential mortgage products which are
accounted for in accordance with the nonaccrual loan policy discussed above)
are generally charged to the allowance for losses upon reaching specified
stages of delinquency. Accrued interest is reversed against interest income
when such consumer loans are charged off.

ALLOWANCE FOR LOSSES

The allowance for losses is based on periodic reviews and analysis of the
portfolio, which comprises primarily loans and other financial instruments,
including commitments to extend credit, guarantees, letters of credit, and
derivatives and foreign exchange contracts. The analysis includes consideration
of such factors as the risk rating of individual credits, the size and
diversity of the portfolio (particularly in terms of industry and geography),
economic and political conditions, prior loss experience and results of
periodic credit reviews of the portfolio. The allowance for losses is increased
by charges against income and reduced by charge-offs, net of recoveries, and
losses on sales and swaps of loans to countries engaged in debt rescheduling.

PREMISES AND EQUIPMENT

Premises and equipment, including leasehold improvements, are carried at cost
less accumulated depreciation and amortization. Capital leases are included in
premises and equipment at the capitalized amount less accumulated amortization.
Depreciation and amortization of premises are included in occupancy expense
while depreciation of equipment is included in equipment expense. Depreciation
and amortization are computed using the straight-line method over the estimated
useful life of the owned asset and, for leasehold improvements, over the
estimated useful life of the related asset or the lease term, whichever is
shorter.

ASSETS ACQUIRED AS LOAN SATISFACTIONS

Assets acquired in full or partial satisfaction of debt, either formally or
through in-substance foreclosure, are reported at the lower of cost or fair
value less estimated costs to sell. These are primarily real estate assets.
Writedowns of such assets subsequent to six months from the date of acquisition
are included in foreclosed property expense. Operating expenses, net of related
revenue, and gains and losses on sales of such assets are reported net in
foreclosed property expense.

INTANGIBLES

Goodwill and other acquisition intangibles are amortized over the estimated
periods to be benefited, the majority of which are being amortized over periods
not exceeding 25 years.

OFF-BALANCE SHEET INSTRUMENTS USED IN TRADING ACTIVITIES

The Corporation deals in interest rate, foreign exchange, equity and commodity
contracts to generate trading revenues. Such contracts include futures,
forwards, swaps and options. Contracts used in trading activities are adjusted
to fair value. Realized and unrealized gains and losses on trading positions
are recognized in trading account and foreign exchange revenue. A portion of
the market valuation relating to certain contracts is deferred and accreted to
income over the life of the contracts to match ongoing servicing costs and
credit risks, as appropriate.

OFF-BALANCE SHEET INSTRUMENTS USED IN
ASSET/LIABILITY MANAGEMENT ACTIVITIES

As part of its asset/liability management activities, the Corporation may enter
into interest rate futures, forwards, swaps and options contracts. Gains and
losses realized on futures and forward contracts are deferred and amortized
over the terms of the related assets or liabilities and are included as
adjustments to interest income or interest expense. Settlements on interest
rate swaps and options contracts are recognized over the lives of the
agreements as adjustments to interest income or interest expense.
Interest rate contracts used in connection with the securities
portfolio that is designated as available-for-sale are carried at fair value
with gains and losses, net of applicable tax, reported in a separate component
of stockholders' equity, consistent with the reporting of unrealized gains and
losses on such securities.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities denominated in foreign currencies are translated to U.S.
dollars using prevailing rates of exchange. Gains and losses on foreign
currency translation from operations for which the functional currency is other
than the U.S.

B58
<PAGE> 70

dollar, together with related hedges and tax effects, are reported in
stockholders' equity. For foreign operations for which the U.S. dollar is the
functional currency, translation gains and losses, including the related
hedges, are included in trading account and foreign exchange revenue.

CORPORATE FINANCE AND SYNDICATION FEES

Corporate finance and syndication fees primarily include fees received for
managing and syndicating loan arrangements; providing investment banking and
financial advisory services in connection with leveraged buyouts,
recapitalizations, and mergers and acquisitions; underwriting debt securities;
and arranging private placements. Syndication fees are recognized upon receipt
when certain yield tests are satisfied. Corporate finance and underwriting fees
are generally recognized when all services to which they relate have been
provided.

FEES FOR OTHER BANKING SERVICES

Fees received in connection with loan commitments, standby letters of credit,
related administrative services performed and other fees are generally
recognized over the period the related service is provided.

INCOME TAXES
Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under
SFAS 109, the deferred tax liability (asset) is determined based on enacted tax
rates which will be in effect when the underlying items of income and expense
are expected to be reported to the taxing authorities. Annual deferred tax
expense (benefit) is equal to the change in the deferred tax liability (asset)
account from the beginning to the end of the year. A current tax liability or
asset is recognized for the estimated taxes payable or refundable for the
current year. During 1992 and 1991, the Corporation followed Statement of
Financial Accounting Standards No. 96, "Accounting for Income Taxes" ("SFAS
96"). See Note Sixteen for further discussion.

NET INCOME PER COMMON SHARE

Net income per common share is computed by dividing net income, after deducting
preferred stock dividends, by the weighted average number of common shares and
common stock equivalents outstanding during the period.
On December 31, 1991, MHC merged with and into the Corporation.
Pursuant to the merger, each share of common stock of MHC was converted into
1.14 shares of common stock of the Corporation, or 91,238,025 common shares,
and each share of preferred stock of MHC outstanding immediately prior to the
merger was converted into one share of newly created preferred stock of the
Corporation having terms similar to those of such MHC preferred stock. Common
shares and common stock equivalents outstanding for 1991 is based on the
combined weighted average number of shares of the Corporation's common stock
and MHC's common stock outstanding during the period as adjusted to reflect the
conversion of the MHC 97/8% Mandatorily Convertible Preferred Stock into shares
of MHC common stock prior to the merger and the conversion of each share of MHC
common stock outstanding immediately prior to the merger into 1.14 shares of
the Corporation's common stock as a result of the merger.
For 1991 (due to the existence during such period of the Corporation's
Class B Common Stock), the earnings per share using the if-converted basis was
$0.11 and using the two-class basis was $0.06.
Other common stock equivalents such as stock options are not included
in the calculation since their dilutive effect is immaterial.

NOTE TWO

ACQUISITIONS

In February 1993, the Corporation, through its Texas Commerce subsidiary,
acquired $3.8 billion in assets and assumed $3.4 billion in deposit liabilities
of four banks (the "First City Banks") of the former First City Bancorporation
of Texas, Inc. ("First City") from the Federal Deposit Insurance Corporation
(the "FDIC") in a federally-assisted transaction. The First City Banks were
primarily engaged in providing commercial banking services in Texas. The
premium paid to the FDIC was $333 million.
In September 1993, the Corporation, through Texas Commerce Bank
National Association, a wholly-owned bank subsidiary of Texas Commerce,
acquired Ameritrust Texas Corporation ("Ameritrust"), a corporation engaged in
the delivery of personal, corporate and institutional trust and investment
services. The purchase price included a premium of $130 million.
These acquisitions were recorded using the purchase method of
accounting. Under this method of accounting, the purchase price is allocated to
the respective assets acquired and liabilities assumed based on their estimated
fair values. Intangibles related to the Ameritrust acquisition are being
amortized over a 10-year period. Deposit premiums and other intangibles related
to the First City acquisition are being amortized over the estimated periods of
benefit. Goodwill related to both acquisitions is being amortized over 25
years.

B59
<PAGE> 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE THREE

TRADING ACCOUNT ASSETS

Trading account assets at December 31, 1993 and 1992, which are valued at fair
value, are presented in the following table.

<TABLE>
<CAPTION>
DECEMBER 31, (IN MILLIONS) 1993 1992
- - - ---------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government and Federal Agencies $ 2,792 $ 1,583
Obligations of State and Political Subdivisions 604 277
Certificates of Deposit, Bankers' Acceptances,
and Commercial Paper 1,794 691
Debt Securities Issued by Foreign Governments 4,025 1,005
Foreign Financial Institutions 1,496 847
Other(a) 968 93
- - - ---------------------------------------------------------------------------------
Total Trading Account Assets $ 11,679 $ 4,496
- - - ---------------------------------------------------------------------------------
</TABLE>
(a) Primarily includes corporate debt and eurodollar bonds.

NOTE FOUR

SECURITIES

On December 31, 1993, the Corporation adopted SFAS 115, which addresses the
accounting for investments in equity securities that have readily determinable
fair values and for investments in all debt securities. Such securities are
classified in three categories and accounted for as follows: debt securities
that the Corporation has the positive intent and ability to hold to maturity
are classified as held-to-maturity and are measured at amortized cost; debt and
equity securities bought and held principally for the purpose of selling in the
near term are classified as trading securities and are measured at fair value,
with unrealized gains and losses included in earnings; debt and equity
securities not classified as either held-to-maturity or trading securities are
deemed available-for-sale and are measured at fair value, with unrealized gains
and losses, net of applicable taxes, reported in a separate component of
stockholders' equity.
Prior to the adoption of SFAS 115, securities deemed
available-for-sale were carried at the lower of aggregate amortized cost or
market value.
As a result of the adoption of SFAS 115, debt and equity securities in
the amount of $15,444 million that were previously measured at amortized cost
or at the lower of aggregate amortized cost or market are measured at fair
value.

HELD-TO-MATURITY SECURITIES

The amortized cost and estimated fair value of held-to-maturity securities were
as follows for the dates indicated:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1993 (IN MILLIONS) COST GAINS LOSSES VALUE(a)
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and Federal Agency/Corporation obligations:
Mortgage-backed Securities $ 3,666 $132 $ -- $ 3,798
Collateralized Mortgage Obligations 5,375 45 11 5,409
Other, primarily U.S. Treasuries 101 -- -- 101
Obligations of State and Political Subdivisions 13 1 -- 14
Debt Securities Issued by Foreign Governments 1 -- -- 1
Collateralized Mortgage Obligations(b) 153 5 1 157
Other 799 9 -- 808
- - - ------------------------------------------------------------------------------------------------------------------------
Total Held-to-Maturity Securities $ 10,108 $192 $ 12 $ 10,288
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1992 (IN MILLIONS) COST GAINS LOSSES VALUE(a)
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and Federal Agency/Corporation obligations:
Mortgage-backed Securities $ 5,638 $121 $ 9 $ 5,750
Collateralized Mortgage Obligations 6,273 70 24 6,319
Other, primarily U.S. Treasuries 197 1 -- 198
Obligations of State and Political Subdivisions 4 -- -- 4
Debt Securities Issued by Foreign Governments 342 1 11 332
Corporate Debt Securities 27 -- 2 25
Collateralized Mortgage Obligations(b) 2,055 20 14 2,061
Other 500 7 1 506
- - - ------------------------------------------------------------------------------------------------------------------------
Total Held-to-Maturity Securities $ 15,036 $220 $ 61 $ 15,195
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Corporation's portfolio of securities generally consists of
investment-grade securities. The fair value of actively-traded securities is
determined by the secondary market, while the fair value for
non-actively-traded securities is based on independent broker quotations.
(b) Collateralized mortgage obligations of private issuers generally have
underlying collateral consisting of obligations of U.S. Government and Federal
agencies and corporations.

B60
<PAGE> 72

AVAILABLE-FOR-SALE SECURITIES

The amortized cost and estimated fair value of available-for-sale securities at
December 31, 1993 and 1992 were as follows:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1993 (IN MILLIONS) COST GAINS LOSSES VALUE(a)
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and Federal Agency/Corporation obligations:
Mortgage-backed Securities $ 8,298 $ 349 $ 14 $ 8,633
Collateralized Mortgage Obligations 837 4 2 839
Other, primarily U.S. Treasuries 2,400 42 17 2,425
Debt Securities Issued by Foreign Governments 2,174 49 9 2,214
Corporate Debt Securities 326 11 3 334
Collateralized Mortgage Obligations(b) 618 3 1 620
Other 791 -- 16 775
- - - ------------------------------------------------------------------------------------------------------------------------
Total Available-for-Sale Securities Carried at Fair Value $ 15,444 $ 458 $ 62 $ 15,840
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1992 (IN MILLIONS) COST GAINS LOSSES VALUE(a)
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and Federal Agency/Corporation obligations:
Mortgage-backed Securities $ 5,204 $ 261 $ -- $ 5,465
Other, primarily U.S. Treasuries 1,364 38 -- 1,402
Debt Securities Issued by Foreign Governments 1,267 3 6 1,264
Corporate Debt Securities 306 11 10 307
Other 249 -- 13 236
- - - ------------------------------------------------------------------------------------------------------------------------
Total Available-for-Sale Securities Carried at Lower of
Aggregate Cost or Market $ 8,390 $ 313 $ 29 $ 8,674
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Corporation's portfolio of securities generally consists of
investment-grade securities. The fair value of actively-traded securities is
determined by the secondary market, while the fair value for
non-actively-traded securities is based on independent broker quotations.
(b) Collateralized mortgage obligations of private issuers generally have
underlying collateral consisting of obligations of U.S. Government and Federal
agencies and corporations.

Cash proceeds from the sales of held-to-maturity securities during
1993, 1992 and 1991 were $152 million, $3,736 million, and $8,238 million,
respectively. Cash proceeds from the sale of available-for-sale securities
during 1993 and 1992 were $5,352 million and $684 million, respectively. Net
gains from available-for-sale securities sold in 1993 amounted to $139 million
(gross gains of $178 million and gross losses of $39 million). Gross gains from
held-to-maturity securities sold amounted to $3 million in 1993. Net gains from
securities sold in 1992 and 1991 were $53 million (gross gains of $140 million
and gross losses of $87 million) and $110 million (gross gains of $198 million
and gross losses of $88 million), respectively.
The amortized cost, estimated fair value and average yield of
securities at December 31, 1993 by contractual maturity were as follows:

<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES HELD-TO-MATURITY SECURITIES
MATURITIES SCHEDULE OF SECURITIES AMORTIZED FAIR AVERAGE AMORTIZED FAIR AVERAGE
DECEMBER 31, 1993 (IN MILLIONS) COST VALUE YIELD(a) COST VALUE YIELD(a)
- - - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Due in One Year or Less $ 767 $ 775 4.67% $ 97 $ 97 3.17%
Due After One Year Through Five Years 1,898 1,943 7.60 1,047 1,061 5.40
Due After Five Years Through Ten Years 1,917 1,946 6.89 875 885 6.39
Due After Ten Years(b) 10,862 11,176 7.00 8,089 8,245 7.15
- - - --------------------------------------------------------------------------------------------------------------------------------
Total Securities $ 15,444 $ 15,840 6.95% $ 10,108 $ 10,288 6.87%
- - - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The average yield is based on effective rates on book balances at the end
of the year. Yields are derived by dividing interest income, adjusted for
amortization of premiums and accretion of discounts, by total amortized cost.
(b) Securities with no stated maturity are included with securities with a
remaining maturity of ten years or more. Substantially all of the Corporation's
mortgage-backed securities are due in ten years or more based on contractual
maturity. The weighted-average maturity of mortgage-backed securities, which
reflects anticipated future prepayments based on a consensus of dealers in the
market, is approximately 5 years.

B61
<PAGE> 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE FIVE

LOANS

The composition of the loan portfolio at each of the dates indicated was as
follows:

<TABLE>
<CAPTION>
1993 1992
DECEMBER 31, (IN MILLIONS) DOMESTIC FOREIGN TOTAL DOMESTIC FOREIGN TOTAL
- - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-LDC Loans:
Commercial and Industrial $ 19,000 $ 6,174 $ 25,174 $23,223 $ 7,041 $30,264

Financial Institutions 4,848 3,598 8,446 6,054 4,564 10,618
Commercial Real Estate 7,338 601 7,939 8,103 448 8,551
Foreign Governments and Official Institutions -- 5,386 5,386 -- 5,230 5,230
Consumer 25,798 117 25,915 23,599 347 23,946
- - - ------------------------------------------------------------------------------------------------------------------------
Total Non-LDC Loans 56,984 15,876 72,860 60,979 17,630 78,609
- - - ------------------------------------------------------------------------------------------------------------------------
LDC Loans(a) -- 2,998 2,998 -- 3,896 3,896
- - - ------------------------------------------------------------------------------------------------------------------------
Total Loans 56,984 18,874 75,858 60,979 21,526 82,505
Unearned Income (270) (207) (477) (320) (175) (495)
- - - -------------------------------------------------------------------------------------------------------------------------
Loans, Net of Unearned Income $ 56,714 $ 18,667 $ 75,381 $60,659 $21,351 $82,010
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) LDC denotes activity related to loans to countries engaged in debt
rescheduling.

As discussed in Note Four, the Corporation adopted SFAS 115 effective
December 31, 1993. Certain loans that meet the accounting definition of a
security are classified as loans and are measured pursuant to SFAS 115. Bonds
that have been issued by foreign governments (such as Mexico and Venezuela) to
financial institutions, including the Corporation, as part of a debt
renegotiation are subject to the provisions of SFAS 115. Such loans are
classified as loans to foreign governments or as LDC loans. At December 31,
1993, $3,783 million of loans, primarily renegotiated loans, were measured
under SFAS 115, including $1,962 million that are classified as
held-to-maturity and that are carried at amortized cost. Pre-tax gross
unrealized gains and gross unrealized losses related to these held-to-maturity
loans totaled $13 million and $362 million, respectively, at December 31, 1993.
Loans that were previously recorded at amortized cost and that were designated
as available-for-sale at December 31, 1993 are carried at fair value in the
amount of $1,821 million. Pre-tax gross unrealized gains and gross unrealized
losses on these loans totaled $86 million and $122 million, respectively, and
are reported net of taxes in a separate component of stockholders' equity. The
fair value of loans designated as available-for-sale was calculated after
consideration of the allowance for losses that would be available to cover
credit losses. Substantially all foreign government and LDC loans that meet the
accounting definition of a security mature in over 10 years.

RENEGOTIATED LOANS

In 1992, the Corporation exchanged $375 million of its medium- and long-term
loans to the Philippines for an equal amount of uncollateralized 151/2-year
interest rate reduction bonds with stated interest rates of 4% for years one
through two, 5% for years three through five, 6% for year six, and LIBOR plus
13/16% for each year thereafter.
In 1991, the Corporation exchanged $135 million of its Uruguayan
medium- and long-term loans for an equal amount of 30-year interest rate
reduction bonds, which have been collateralized by zero-coupon U.S. Treasury
obligations and carry a fixed rate of 6.75%.
In accordance with the Mexican debt restructuring agreement of 1990,
the Corporation exchanged approximately $2,527 million of Mexican medium- and
long-term loans for $663 million of 30-year principal reduction bonds, $1,515
million of 30-year interest rate reduction bonds and a $7 million contribution
of new money. Principal on the bonds is collateralized by zero-coupon U.S.
Treasury obligations. Principal reduction bonds carry a floating rate of
interest of LIBOR plus 13/16%. Interest rate reduction bonds carry a fixed rate
of 6.25%.
In accordance with the Republic of Venezuela 1990 Financing Plan, the
Corporation exchanged approximately $605 million of Venezuelan medium- and
long-term loans for an equal amount

B62
<PAGE> 74

of 30-year interest rate reduction bonds, which have been collateralized by
zero-coupon U.S. Treasury obligations and carry a fixed interest rate of 6.75%.
In addition, under the new money option of the Venezuelan 1990
Financing Plan, the Corporation purchased $194 million of new money bonds and
then converted $968 million of existing outstandings into debt conversion
bonds. Debt conversion bonds have a 17-year maturity and bear interest at a
rate of LIBOR plus 7/8%. New money bonds have a 15-year maturity, and bear
interest at rates ranging from LIBOR plus 7/8% to LIBOR plus 1%.
Aside from renegotiated loans to the Philippines, Uruguay, Mexico, and
Venezuela, the Corporation's remaining renegotiated loans at December 31, 1993
and 1992 were not significant.

NOTE SIX

ALLOWANCE FOR LOSSES

The table below summarizes the changes in the allowance for losses during 1993,
1992 and 1991.

Non-LDC Allowance:
Balance at January 1 2,206 2,012 1,852
Provision for Losses 1,259(a) 1,365 1,345
Gross Charge-Offs (1,405)(a) (1,502) (1,351)
Recoveries 146 137 160
- - - -----------------------------------------------------------------------------------------------------------------------
Net Charge-Offs (1,259) (1,365) (1,191)
Reallocation from LDC Allowance 200 200 --
Allowance Related to Purchased Assets 19(b) -- --
Other (2) (6) 6
- - - -----------------------------------------------------------------------------------------------------------------------
Total Non-LDC Allowance at December 31 2,423 2,206 2,012
- - - -----------------------------------------------------------------------------------------------------------------------
LDC Allowance:
Balance at January 1 819 1,263 2,377
Provision for Losses -- -- --
Gross Charge-Offs (67) (99) (1,024)
Recoveries 197 10 12
- - - -----------------------------------------------------------------------------------------------------------------------
Net (Charge-Offs) Recoveries 130 (89) (1,012)(c)
Losses on Sales and Swaps (152) (155) (102)(c)
Reallocation to Non-LDC Allowance (200) (200) --
- - - -----------------------------------------------------------------------------------------------------------------------
Total LDC Allowance at December 31 597 819 1,263
- - - -----------------------------------------------------------------------------------------------------------------------
Total Allowance at December 31 $ 3,020 $3,025 $3,275
- - - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes $55 million related to the decision to accelerate the disposition
of certain nonperforming residential mortgages.
(b) Related to the First City Banks acquisition.
(c) Includes $895 million of net charge-offs and $7 million of losses on sales
and swaps related to Brazilian loans.

During each of 1993 and 1992, the Corporation transferred $200 million
of the allowance for losses allocated to the LDC portfolio to the non-LDC
portion of the allowance. The reallocations reflect the Corporation's ongoing
analysis and evaluation of its LDC loan portfolio, including the finalization
of the Argentine financing program and progress in debt negotiations with
Brazil. In addition, during 1993, the Corporation specifically allocated a
portion of the LDC allowance to Brazilian outstandings as a result of the
Corporation's evaluation of its refinancing country portfolio and in
consideration of recent recommendations of the Interagency Country Exposure
Review Committee. The LDC allowance allocated to Brazil was $82 million at
December 31, 1993.

B63
<PAGE> 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE SEVEN

NONPERFORMING ASSETS

The Corporation's nonperforming assets were as follows:

<TABLE>
<CAPTION>
NONPERFORMING ASSETS
DECEMBER 31, (IN MILLIONS) 1993 1992
- - - ---------------------------------------------------------------------------------
<S> <C> <C>
Total Domestic Nonperforming Loans $1,698 $2,974
Total Foreign Nonperforming Loans,
excluding LDC 271 494
- - - ---------------------------------------------------------------------------------
Total Nonperforming Loans, excluding LDC 1,969 3,468
Total LDC Nonperforming Loans 622 1,348
- - - ---------------------------------------------------------------------------------
Total Nonperforming Loans 2,591 4,816
Assets Acquired as Loan Satisfactions
(primarily Real Estate) 934 1,276
- - - ---------------------------------------------------------------------------------
Total Nonperforming Assets $3,525 $6,092
- - - ---------------------------------------------------------------------------------
</TABLE>

Certain assets ("shared loss assets") acquired from First City are
subject to the loss-sharing provisions of the Purchase and Assumption
Agreements between the FDIC and Texas Commerce relating to the First City Banks
based in Houston and Dallas/Ft. Worth. These agreements provide that, for a
period of five years following the acquisition, the FDIC will absorb 80% of
future losses arising from such shared loss assets up to $61 million from the
Houston bank and $21 million from the Dallas/Ft. Worth bank and 95% of losses
in excess of such respective amounts. Shared loss assets are certain specified
commercial and real estate loans acquired by Texas Commerce at those two banks.
At December 31, 1993, nonperforming shared loss assets were $98 million. Such
assets are not included in the amount of nonperforming assets in the table
above.
The following table presents the amount of interest income recorded by
the Corporation on its nonaccrual and renegotiated loans (including LDC loans)
and the amount of interest income on the carrying value of such loans that
would have been recorded if these loans had been current in accordance with
their original terms (interest at original rates).

IMPACT OF NONPERFORMING LOANS ON INTEREST INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic:
Gross Amount of Interest That Would Have
Been Recorded at the Original Rate $180 $254 $346
Interest That Was Recognized in Income (38) (28) --
- - - -------------------------------------------------------------------------------------------
Negative Impact-Domestic 142 226 346
- - - -------------------------------------------------------------------------------------------
Foreign:
Gross Amount of Interest That Would Have
Been Recorded at the Original Rate 54 161 206
Interest That Was Recognized in Income (85) (94) (141)
- - - -------------------------------------------------------------------------------------------
Negative (Positive) Impact-Foreign (31) 67 65
- - - -------------------------------------------------------------------------------------------
Total Negative Impact on Interest Income $111 $293 $411
- - - -------------------------------------------------------------------------------------------
</TABLE>

NOTE EIGHT

SHORT-TERM AND OTHER BORROWINGS

<TABLE>
<CAPTION>
(IN MILLIONS) 1993 1992 1991
- - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal funds purchased and securities
sold under repurchase agreements:
Balance at year end $12,857 $15,051 $ 16,213
Average balance during the year(a) 15,461 15,658 19,354
Maximum month-end balance 16,071 17,594 23,495
Weighted-average rate at
December 31 2.85% 3.23% 4.81%
Weighted-average rate during the year 3.05% 3.98% 6.05%
- - - -------------------------------------------------------------------------------------------
Commercial paper:
Balance at year end $ 2,423 $ 2,377 $ 2,159
Average balance during the year(a) 2,438 2,190 2,252
Maximum month-end balance 2,764 2,377 2,736
Weighted-average rate at
December 31 2.81% 3.51% 5.10%
Weighted-average rate during the year 3.42% 3.92% 6.46%
- - - -------------------------------------------------------------------------------------------
Other borrowings:
Balance at year end $ 9,485 $ 5,643 $ 7,836
Average balance during the year(a) 6,663 6,376 8,343
Maximum month-end balance 11,501 12,188 10,491
Weighted-average rate at
December 31 8.31% 8.10% 10.59%
Weighted-average rate during the year 6.56% 8.17% 8.75%
- - - -------------------------------------------------------------------------------------------
</TABLE>
(a) Average balances were computed using daily balances.

Federal funds purchased and securities sold under repurchase agreements are
generally issued on an overnight or demand basis. Commercial paper is
generally issued in amounts not less than $100,000 and with maturities of 270
days or less. Other borrowings consist of demand notes and various other
borrowings in domestic and foreign offices that generally have maturities of
less than one year.
At December 31, 1993, the Corporation had unused lines of credit
available for general corporate purposes, including the payment of commercial
paper borrowings, amounting to $750 million.

B64
<PAGE> 76

NOTE NINE

<TABLE>
<CAPTION>
LONG-TERM DEBT
UNDER DUE DUE OVER 1993 1992
BY REMAINING MATURITY AT DECEMBER 31, (IN MILLIONS) 1 YEAR 1-5 YEARS 6-15 YEARS 15 YEARS TOTAL TOTAL
- - - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chemical Banking Corporation:
Parent Company:
Fixed Rate $ 247 $ 633 $ 1,554 $-- $ 2,434 $ 2,184
Variable Rate 690 1,958 346 -- 2,994 2,851
- - - ------------------------------------------------------------------------------------------------------------------------------
Subtotal 937 2,591 1,900 -- 5,428 5,035
- - - ------------------------------------------------------------------------------------------------------------------------------
Subsidiaries:
Fixed Rate 37 106 1,046 -- 1,189 552
Variable Rate 690 455 400 30 1,575 1,211
- - - ------------------------------------------------------------------------------------------------------------------------------
Subtotal 727 561 1,446 30 2,764 1,763
- - - ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Debt $1,664 $ 3,152 $ 3,346 $30 $ 8,192(a) $6,798(a)
- - - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes subordinated notes in aggregate principal amounts of $3.8 billion
and $3.1 billion at December 31, 1993 and 1992, respectively.

The accompanying table is a summary of long-term debt (net of
unamortized original issue debt discount, where applicable) displayed by
remaining maturity at December 31, 1993. The distribution by remaining maturity
is based on contractual maturity or the earliest date on which the debt is
redeemable at the option of the holder.
Fixed-rate debt outstanding at December 31, 1993 matures at various
dates through 2008 at interest rates ranging from 3.26% to 11.83%. The
consolidated weighted-average interest rates on fixed-rate debt at December 31,
1993 and 1992 were 8.03% and 8.70%, respectively. Variable-rate debt
outstanding, with interest rates ranging from 3.32% to 6.67% at December 31,
1993, matures at various dates through 2011. The consolidated weighted-average
interest rates on variable-rate debt at December 31, 1993 and 1992 were 3.94%
and 4.60%, respectively.
Included in long-term debt are equity commitment notes and equity
contract notes totalling $923 million and $1,826 million at December 31, 1993
and 1992, respectively.
Equity commitment notes require that the Corporation issue, prior to
their maturity, shares of common stock or perpetual preferred stock or other
securities of the Corporation (collectively, "Capital Securities") approved by
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") equal to 100% of the original aggregate principal amount of the notes.
Equity contract notes require the Corporation to exchange the notes at
maturity for Capital Securities with a market value equal to the principal
amount of the notes or, at the Corporation's option, to pay the principal of
the notes from amounts representing designated proceeds from the sale of
Capital Securities.
At December 31, 1993, the Corporation had designated proceeds from the
sale of Capital Securities in an amount sufficient to satisfy fully the
dedication requirements of its equity commitment and equity contract notes.
The Corporation has guaranteed several long-term debt issues of its
subsidiaries. Such guaranteed debt totaled $300 million and $291 million at
December 31, 1993 and 1992, respectively.
At December 31, 1993, long-term debt aggregating $640 million was
redeemable at the option of the Corporation, in whole or in part, prior to
maturity, based on the terms specified in the respective notes.
The Corporation's aggregate amounts of maturities and sinking fund
requirements for the five years subsequent to December 31, 1993 are $1,664
million in 1994, $1,167 million in 1995, $701 million in 1996, $679 million in
1997 and $605 million in 1998.

NOTE TEN

PREFERRED STOCK

At December 31, 1993, the Corporation was authorized to issue 200 million
shares of preferred stock, in one or more series, with a par value of $1 per
share. During 1993, the Corporation redeemed all 3.87 million outstanding
shares of its Adjustable Rate Cumulative Preferred Stock, Series E, at a
redemption price of $51.50 per share plus accrued but unpaid dividends; all
four million outstanding shares of its Adjustable Rate Cumulative Preferred
Stock, Series F, at a redemption price of $50.00 per share plus accrued but
unpaid dividends; and all two million outstanding shares of its 103/4%
Cumulative Preferred Stock, at a redemption price of $105.375 per share plus
accrued but unpaid dividends. Two issues of preferred stock totaling $400
million were issued during 1993. At December 31, 1993, four million shares of
preferred stock designated as Junior Participating Preferred Stock were
reserved for issuance under the Corporation's Shareholders' Rights Plan (see
Note Twentythree).
During 1992, the Corporation redeemed all 3.83 million outstanding
shares of its Adjustable Rate Cumulative Preferred

B65
<PAGE> 77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock, Series A, all 2 million outstandings shares of its Adjustable Rate
Cumulative Preferred Stock, Series B, and also retired all 170,000 shares of
preferred stock that were held in treasury.
The following is a summary of the Corporation's preferred stocks
outstanding at December 31, 1993:

<TABLE>
<CAPTION>
DIVIDEND RATES
---------------------------------------
SHARES
DECEMBER 31, 1993 OUTSTANDING MAXIMUM MINIMUM CURRENT
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Adjustable Rate Cumulative, Series C(a) 33,647,591 11.50% 5.50% 5.50%
(Stated Value $12.00)
10.96% Cumulative(b) 4,000,000 10.96 10.96 10.96
(Stated Value $25.00)
10% Convertible(c) 4,000,000 10.00 10.00 10.00
(Stated Value $50.00)
83/8% Cumulative(d) 14,000,000 8.38 8.38 8.38
(Stated Value $25.00)
7.92% Cumulative(e) 2,000,000 7.92 7.92 7.92
(Stated Value $100.00)
7.58% Cumulative(f) 2,000,000 7.58 7.58 7.58
(Stated Value $100.00)
7.50% Cumulative(g) 2,000,000 7.50 7.50 7.50
(Stated Value $100.00)
- - - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Shares may be redeemed (at option of the Corporation) in whole or in part
through May 1, 1997 at $12.36 per share and at $12.00 per share thereafter.
(b) Shares may be redeemed (at option of the Corporation) in whole or in part
on or after June 30, 2000 at $25.00 per share.
(c) Shares may be redeemed (at option of the Corporation) from May 1, 1995 at
$53.00 per share, and at decreasing prices thereafter declining to $50.00 per
share on May 1, 2001 and thereafter. The shares are convertible at any time at
the option of the holder into shares of common stock at a conversion price
equal to $26.20, subject to adjustments as set forth in the terms of the
preferred stock.
(d) Shares were issued in 1992 and may be redeemed (at the option of the
Corporation) from June 1, 1997 at $25.00 per share.
(e) Shares were issued in 1992 and may be redeemed (at the option of the
Corporation) from October 1, 1997 at $100 per share. Such shares are
represented by 8,000,000 depositary shares, each representing .25 of a share.
(f) Shares were issued in 1993 and may be redeemed (at the option of the
Corporation) from April 1, 1998 at $100 per share. Such shares are represented
by 8,000,000 depositary shares, each representing .25 of a share.
(g) Shares were issued in 1993 and may be redeemed (at the option of the
Corporation) from June 1, 1998 at $100 per share. Such shares are represented
by 8,000,000 depositary shares, each representing .25 of a share.

The dividend rate on the Adjustable Rate Cumulative Preferred Stock,
Series C, is adjusted quarterly based on a formula that considers the interest
rates of selected short- and long-term U.S. Treasury securities prevailing at
the time the rate is set. All the preferred stocks outstanding have preference
over the Corporation's common stock with respect to the payment of dividends
and the distribution of assets in the event of a liquidation or dissolution of
the Corporation.

NOTE ELEVEN

COMMON STOCK

At December 31, 1993, the Corporation was authorized to issue 400 million
shares of common stock, $1 par value per share. At December 31, the number of
shares of common stock issued and outstanding were as follows:

<TABLE>
<CAPTION>
1993 1992 1991
- - - -----------------------------------------------------------
<S> <C> <C> <C>
Issued 253,397,864 247,323,972 182,978,555
Held in Treasury (515,782) (515,782) (527,102)
- - - -----------------------------------------------------------
Outstanding 252,882,082 246,808,190 182,451,453
- - - -----------------------------------------------------------
</TABLE>

As of December 31, 1993, approximately 18,472,629 shares of common
stock were reserved for issuance under various employee incentive and stock
purchase plans and under the Corporation's Dividend Reinvestment Plan. In
addition, as of such date, the Corporation had reserved 7,700,000 shares of
common stock for issuance upon the conversion of its 10% Convertible Preferred
Stock.
Under the Corporation's Dividend Reinvestment Plan, stockholders may
reinvest all or part of their quarterly dividends in shares of common stock.
Common stock issued during 1993, 1992 and 1991 was as follows:

<TABLE>
<CAPTION>
1993 1992 1991
- - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Public Offerings 3,800,000 57,500,000 --
Mandatory Stock
Purchase Contracts -- 2,842,299 --
Dividend Reinvestment
and Stock Purchase Plans 539,919 1,108,523 3,505,199
Class B Common
Stock Conversion -- 1,014,064 --
Employee Benefit and
Compensation Plans 1,733,973 1,891,851 1,649,409
- - - -------------------------------------------------------------------------------------------
Total Shares Issued 6,073,892 64,356,737 5,154,608
- - - -------------------------------------------------------------------------------------------
</TABLE>

B66
<PAGE> 78

NOTE TWELVE

FEES FOR OTHER BANKING SERVICES AND OTHER REVENUE

Details of fees for other banking services were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fees in Lieu of Compensating Balances $ 209 $ 212 $ 196
Credit Card Services Revenue 238 210 214
Commissions on Letters of Credit
and Acceptances 155 162 166
Loan Commitment Fees 90 81 74
Mortgage Servicing Fees 63 57 51
Other 312 318 258
- - - -------------------------------------------------------------------------------------------
Total Fees for Other Banking Services $1,067 $ 1,040 $ 959
- - - -------------------------------------------------------------------------------------------
</TABLE>

In 1992, the Corporation reclassified the amortization of purchased
mortgage servicing rights from other expenses to fees for other banking
services. Such amounts are recorded as reductions to mortgage servicing fees.
Prior period amounts have been restated to conform with the 1992 presentation.

Other Revenue: Included in other revenue was venture capital income of $301
million in 1993, compared with $100 million in 1992 and $66 million in 1991.
Also included in other revenue in 1993 were $179 million of gains related to
the sale of Argentine past-due interest bonds and $152 million related to the
sale of Brazilian interest-due-and-unpaid bonds.

NOTE THIRTEEN

POSTRETIREMENT BENEFITS

Pension Plans: The Corporation amended its noncontributory pension plan as of
January 1, 1993 (the "noncontributory plan"). It covers substantially all
domestic employees and provides for defined benefits pursuant to a cash balance
feature and a final-average-pay feature. Contributions will be made to the
noncontributory plan within the range of levels permitted under applicable law.
Through December 31, 1992, employees of the Corporation and the former MHC had
separate noncontributory pension plans that covered substantially all domestic
employees who satisfied minimum age and length-of-service requirements (the
"prior domestic plans"). Both prior domestic plans provided a defined benefit
that was determined based on years of service and either annual compensation
during employment or a percentage of qualifying compensation during final years
of employment. Certain benefits accrued under such prior domestic plans are
added to benefits accrued after January 1, 1993 under the noncontributory plan.
The Corporation also maintains a number of pension plans in foreign
jurisdictions covering the employees of certain foreign operations. A new
defined contribution plan was adopted in 1992 for United Kingdom employees.
Contributions are made to the foreign plans in accordance with local plan and
legal requirements.
The accompanying tables present the aggregate funded status and the
net asset amounts recognized in the Consolidated Balance Sheet and the
components of net pension expense recognized in the Consolidated Statement of
Income for those plans in effect at the respective dates that had assets in
excess of benefit obligations. At December 31, 1993, the assumptions used to
determine the actuarial present value of the benefit obligation included: a
7.5% discount rate and a 5% annual rate of increase in future compensation. For
1993 expense, an 8.75% discount rate, a 6% annual rate of increase in future
compensation and a 9.5% annual long-term rate of return on plan assets were
assumed. The 1992 and 1991 amounts in the accompanying tables reflect the
following weighted-average assumptions: discount rates of 8.75% in 1992 and
8.5% to 9.5% in 1991; annual rates of increase in future compensation of 6% in
both 1992 and 1991; and annual long-term rates of return on plan assets of 9.5%
in 1992, and 9% to 10% in 1991.

<TABLE>
<CAPTION>
FUNDED STATUS OF PENSION PLANS

DECEMBER 31, (IN MILLIONS) 1993 1992
- - - -------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial Present Value of Benefit Obligation:
Accumulated Benefit Obligation
Vested Benefits $(753) $ (613)
Nonvested Benefits (73) (47)
Additional Benefits Based on Future
Salary Levels (185) (155)
- - - -------------------------------------------------------------------------------------------
Projected Benefit Obligation for Service
Rendered to Date (1,011) (815)
Plan Assets at Fair Value, primarily Listed
Stocks, U.S. Bonds and Commingled Funds 1,373 1,274
- - - -------------------------------------------------------------------------------------------
Plan Assets in Excess of Projected Benefit
Obligation 362 459
Unrecognized Net Loss 146 16
Unrecognized Net Asset (72) (74)
Unrecognized Prior Service (Benefit) Cost (27) 30
- - - -------------------------------------------------------------------------------------------
Prepaid Pension Cost Included in Other Assets $ 409 $ 431
- - - -------------------------------------------------------------------------------------------
</TABLE>

In 1993, the changes in the benefits design in connection with the
noncontributory pension plan resulted in significantly higher net periodic
pension expense. The increase in the unrecognized net loss at December 31, 1993
resulted primarily from the change in assumptions. Amortization of the loss in
excess of a 10% corridor will result in an increase in expense in 1994 and
subsequent years. In addition, the assumed annual long-term rate of return on
plan assets will be lowered to 8.5% in 1994.

B67
<PAGE> 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 1992, the Corporation recognized a one-time, pre-tax charge of $41
million relating to costs incurred in combining the Corporation's employee
benefit plans. The $41 million included: $17 million of special-window
termination benefits, net of settlement and curtailment gains, that related to
the prior domestic plans; and a $24 million cost for restructuring plans
covering United Kingdom employees.

<TABLE>
<CAPTION>
COMPONENTS OF NET PENSION EXPENSE

YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cost of Benefits Earned During
the Year $ 87 $ 60 $ 64
Interest Cost on Projected Benefit
Obligation 69 70 62
Actual Gain on Plan Assets (157) (151) (223)
Net Amortization and Deferral 24 24 106
- - - -------------------------------------------------------------------------------------------
Net Periodic Pension Expense $ 23 $ 3 $ 9
Special-Window Termination Benefits -- 37 --
Net Curtailment and Settlement Loss -- 4 --
Dividend Income Recognized -- (9) --
- - - -------------------------------------------------------------------------------------------
</TABLE>

The Corporation also has several defined benefit plans that it has
elected not to prefund fully based on plan and legal requirements. At each of
December 31, 1993 and 1992, the Corporation's accrued liability related to
those plans totaled $43 million and $37 million, respectively, and expense was
$8 million in both 1993 and 1992.

Postretirement Benefits Other Than Pensions: The Corporation provides
postretirement health care and life insurance benefits to substantially all
domestic employees hired prior to April 15, 1992 who meet certain age and
length-of-service requirements at retirement. The amount of benefits provided
varies with length of service and date of hire. The Corporation has not
prefunded these benefits.
Effective January 1, 1993, the Corporation adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS
106"). SFAS 106 requires recognition, during the years of the employees' active
service, of the employer's expected cost and obligation of providing
postretirement health care and other postretirement benefits other than
pensions to employees and eligible dependents.
The Corporation elected to expense the entire unrecognized accumulated
obligation as of the date of adoption of SFAS 106 via a one-time pre-tax charge
of $415 million. During 1993, the Corporation accrued $38 million of periodic
expense, which was comprised of $35 million of interest and $3 million related
to the cost of benefits earned during the year. Of the $38 million, $31 million
related to current retirees. Through December 31, 1992, the Corporation
recognized the costs of providing postretirement benefits on a cash basis. In
1992, the Corporation recognized cash-basis costs of $22 million.
At December 31, 1993, the Corporation's accumulated benefit obligation
totaled $481 million, of which $419 million related to current retirees, with
the remainder attributable to active employees. After consideration of an
unrecognized net loss of $68 million, the accrued obligation included in
accounts payable and accrued expenses on the Consolidated Balance Sheet at
December 31, 1993 totaled $413 million. The unrecognized net loss in excess of
a 10% corridor will be amortized commencing in 1994; however, the increase in
expense resulting from such amortization will be offset by lower interest cost.
As of December 31, 1993, a 7.5% discount rate was used to determine the
actuarial present value of the benefit obligation. A 9% rate was used to
compute the 1993 interest expense. The assumed medical benefits cost trend rate
was 15% for 1993, declining by 1% per year to a floor of 6%. The effect of a 1%
increase in the assumed medical-benefits cost trend rate would be to increase
the December 31, 1993 accumulated obligation and related periodic expense by
approximately 10%.

NOTE FOURTEEN

EMPLOYEE STOCK INCENTIVE PLANS

In 1992, the Corporation adopted a new, consolidated stock incentive plan (the
"current plan"). The current plan provides for stock-based awards, including
stock options and restricted stock. The former plans of the Corporation and MHC
generally provided for similar types of awards. The following discussion
applies to outstanding awards issued under all of the Corporation's current and
former employee stock incentive plans (the "plans").
At each of December 31, 1993 and 1992, 223,365 and 587,653 shares,
respectively, of the Corporation's common stock were reserved for issuance and
available for future awards under the current plan.
Stock options are issued at prices at least equal to the market value
of the Corporation's common stock on the grant date. Under generally accepted
accounting principles, no expense is currently required to be recognized in
conjunction with options granted or exercised; amounts received upon the
exercise of options are recorded as common stock and capital surplus. Options
generally expire ten years after the grant date. Options cannot be exercised
until one year after the grant date and generally become exercisable over
various periods as determined in the grant. At December 31, 1993, stock options
covering 4,616,083 shares of the Corporation's common stock were exercisable
under the plans.

B68
<PAGE> 80

Restricted stock is issued and valued as of the grant date, and the
value is amortized to compensation expense over the restriction period. During
1993 and 1992, 48,500 and 28,500 shares, respectively, of restricted stock were
issued under the current plan.
The following table presents a summary of the aggregate options
transactions which occurred under all of the Corporation's plans during 1993
and 1992.

<TABLE>
<CAPTION>
1993 1992
NUMBER OF NUMBER OF
YEAR ENDED DECEMBER 31, OPTIONS OPTION PRICE OPTIONS OPTION PRICE
- - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options Outstanding, January 1 8,825,955 $10.88 --$42.21 5,831,991 $10.88 --$42.21
Granted 4,063,150 38.06 -- 43.13 4,718,825 27.56 -- 38.88
Exercised 1,250,019 10.88 -- 42.21 1,401,156 10.88 -- 33.33
Cancelled 198,538 10.88 -- 43.13 323,705 10.88 -- 42.21
- - - -------------------------------------------------------------------------------------------------------------------------
Options Outstanding, December 31 11,440,548 $10.88 --$43.13 8,825,955 $10.88 --$42.21
- - - -------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE FIFTEEN

RESTRUCTURING CHARGES AND OTHER EXPENSE

In 1993, the Corporation completed an assessment of costs associated with the
merger of the Corporation and MHC and, as a result, included in noninterest
expense a charge of $115 million. The charge is related principally to changes
in the Corporation's facilities plans since the merger announcement and revised
estimates of occupancy-related costs associated with headquarters and branch
consolidations. At December 31, 1993, the merger reserve balance was
approximately $80 million.
The Corporation's Texas Commerce subsidiary incurred a restructuring
charge of $43 million in 1993 in connection with the acquisition of assets and
assumption of liabilities of the First City Banks from the FDIC. The
restructuring charge is being utilized for expenses associated with cost-saving
actions arising from the acquisition. These actions include the consolidation
of operations and the elimination of redundant expenses.
In 1991, in connection with the merger with MHC, the Corporation
incurred a pre-tax restructuring charge of $625 million, principally for
expenses associated with staff reductions and office consolidations.

Other Expense: Included in other expense were FDIC assessments of $175 million
in 1993, compared with $159 million in 1992 and $143 million in 1991.
Professional services expense in 1993 was $193 million compared with $196
million in 1992 and $213 million in 1991, and marketing expense in 1993 was
$187 million compared with $111 million in 1992 and $100 million in 1991.

NOTE SIXTEEN

INCOME TAXES

The Corporation adopted SFAS 109 as of January 1, 1993 and, after taking into
account the additional tax benefits associated with the adoption of SFAS 106
(see Note Thirteen), the Corporation recognized a favorable cumulative effect
on income tax expense of $450 million (or $1.81 per common share). Prior-years'
financial statements have not been restated to apply the provisions of SFAS
109.
Prior to 1993, the Corporation followed Statement of Financial
Accounting Standards No. 96, "Accounting for Income Taxes" ("SFAS 96"). The
primary difference between SFAS 109 and SFAS 96 is that SFAS 96 precluded the
recognition of deferred tax assets the realization of which was dependent on
taxable earnings of future years. SFAS 109 requires recognition of such
deferred tax assets except where, in management's judgement, the realization of
such tax benefits appears unlikely.
The cumulative effect adjustment upon adoption of SFAS 109 was less
than the unrecognized benefits available at December 31, 1992 because of the
timing of anticipated future income, tax law limitations on the utilization of
tax-attribute carryovers, and the recognition of losses at the two predecessor
institutions in recent years.
A valuation reserve was established as of January 1, 1993, in
accordance with the requirements of SFAS 109, for tax benefits available to the
Corporation but for which realization was in doubt. The Corporation's valuation
reserve for Federal taxes of $452 million upon adoption of SFAS 109, as
restated for the Omnibus Budget Reconciliation Act of 1993 ("OBRA"), was
reevaluated and reduced by $331 million during 1993 due to the strength of the
Corporation's earnings. The remaining Federal valuation reserve of $121 million
relates to tax benefits

B69
<PAGE> 81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

which are subject to tax law limitations on realization. At this time, the
Corporation believes that realization of these benefits is sufficiently in
doubt to preclude recognition in accordance with the criteria of SFAS 109.
Additionally, a valuation reserve approximating $148 million was
established as of January 1, 1993 against all New York State and City deferred
tax assets. Because of the lack of any loss carryover provision under New York
statutes, the Corporation is uncertain at this time whether these tax benefits
can be realized. The Corporation has recorded deferred New York State and City
tax liabilities of approximately $202 million, after valuation reserve, as of
December 31, 1993. Foreign deferred taxes are not material.
On August 10, 1993, President Clinton signed OBRA, which increased the
corporate Federal tax rate from 34% to 35% retroactive to January 1, 1993. The
impact on current and deferred tax assets and liabilities resulted in a
decrease in the Corporation's tax expense of approximately $8 million.
Deferred income tax expense (benefit) results from differences between
amounts of assets and liabilities as measured for income tax return and
financial reporting purposes. The significant components of Federal deferred
tax assets and liabilities as of December 31, 1993 are reflected in the
following table.

<TABLE>
<CAPTION>
DECEMBER 31, (IN MILLIONS) 1993
- - - -------------------------------------------------------------------------------
<S> <C>
Federal Deferred Tax Assets:
Reserves for credit losses $ 784
Reserves other than credit losses 396
Interest and fee accrual differences 225
Tax credits and foreign losses not currently utilizable 166
Non-pension retirement benefits 145
Other 147
- - - -------------------------------------------------------------------------------
Gross Federal Deferred Tax Assets $1,863
- - - -------------------------------------------------------------------------------
Federal Deferred Tax Liabilities:
Leasing transactions $ 634
Pension benefits 137
Depreciation and amortization 131
Market value adjustments 110
Other 161
- - - -------------------------------------------------------------------------------
Gross Federal Deferred Tax Liabilities $1,173
- - - -------------------------------------------------------------------------------
Deferred Federal Tax Asset Valuation Reserve $ 121
- - - -------------------------------------------------------------------------------
Net Federal Deferred Tax Asset After Valuation Reserve $ 569
- - - -------------------------------------------------------------------------------
</TABLE>

The components of income tax expense included in the Consolidated
Statement of Income were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current Income Tax Expense (Benefit):
Federal $ 360 $ 75 $ (68)
Foreign 201 70 84
State and Local 203 36 72
- - - -------------------------------------------------------------------------------------------
Total Current 764 181 88
- - - -------------------------------------------------------------------------------------------
Deferred Income Tax Expense (Benefit):
Federal (229) -- 48
Foreign (17) (6) 4
State and Local 21 68 (4)
- - - -------------------------------------------------------------------------------------------
Total Deferred (225) 62 48
- - - -------------------------------------------------------------------------------------------
Total Income Tax Expense $ 539 $ 243 $ 136
- - - -------------------------------------------------------------------------------------------
</TABLE>

Not reflected in the accompanying table are the tax effects of foreign
currency translation adjustments related to the hedging of foreign net
investments. Because the functional currency used in the hedging of foreign
investments is not the U.S. dollar, the tax effects are recorded directly in
stockholders' equity and are not included in consolidated income. These tax
effects amounted to a decrease of $2 million in 1993 and $4 million in 1992 and
an increase of $4 million in 1991. Additionally, the tax effects of SFAS 115 on
unrealized gains and losses, with respect to available-for-sale securities, are
recorded directly in stockholders' equity and in 1993 amounted to a decrease of
$145 million.
The tax expense applicable to securities gains and losses for the
years 1993, 1992 and 1991 was $62 million, $17 million and $31 million,
respectively.
A reconciliation of the income tax expense computed at the applicable
statutory U.S. income tax rate to the actual income tax expense for the past
three years is shown in the following table.

<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TAX TO TAX EXPENSE

YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. Federal Tax Expense $ 738 $ 452 $ 99
Increase (Decrease) in Taxes
Resulting From:
Settlement of Prior Years' Federal
Income Taxes -- -- (55)
(Recognized) Unrecognized Tax
Benefits (331) (278) 50
Tax-Exempt Interest and Dividends (34) (37) (43)
State and Local Income Taxes, Net of
Federal Income Tax Benefit 145 69 45
Nondeductible Expense 24 21 20
Foreign Operations 4 13 33
Other--Net (7) 3 (13)
- - - -------------------------------------------------------------------------------------------
Total Income Tax Expense $ 539 $ 243 $ 136
- - - -------------------------------------------------------------------------------------------
</TABLE>

B70
<PAGE> 82

The following table presents the domestic and foreign components of
income before income taxes for the past three years.

<TABLE>
<CAPTION>
DOMESTIC AND FOREIGN COMPONENTS OF INCOME

YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - ----------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ 1,783 $ 997 $340
Foreign(a) 325 332 (50)
- - - ----------------------------------------------------------------------
Income Before Income Taxes $ 2,108 $1,329 $290
- - - ----------------------------------------------------------------------
</TABLE>
(a) For purposes of this disclosure, foreign income is defined by Securities
and Exchange Commission regulations as income generated from operations located
outside the United States.

NOTE SEVENTEEN

RESTRICTIONS ON CASH AND INTERCOMPANY FUNDS TRANSFERS

Federal Reserve Board regulations require depository institutions to maintain
cash reserves with a Federal Reserve Bank. The average amount of reserve
balances deposited by the Corporation with various Federal Reserve Banks was $1
billion during both 1993 and 1992.
Restrictions imposed by Federal law prohibit the Corporation and
certain other affiliates from borrowing from banking subsidiaries unless the
loans are secured in specified amounts. Such secured loans to the Corporation
or to each of certain other affiliates generally are limited to 10% of the
banking subsidiary's capital and surplus; the aggregate amount of all such
loans is limited to 20% of the banking subsidiary's capital and surplus.
The principal sources of the Corporation's income are dividends and
interest from Chemical Bank and the other banking and non-banking subsidiaries
of the Corporation. Federal law imposes limitations on the payment of dividends
by the subsidiaries of the Corporation that are state member banks of the
Federal Reserve System (a "state member bank") or are national banks. Under
such limitations, dividend payments by such banks are limited to the lesser of
(i) the amount of "undivided profits then on hand" (as defined) less the amount
of "bad debts" (as defined) in excess of the allowance for losses and (ii)
absent regulatory approval, an amount not in excess of "net profits" (as
defined) for the current year plus "retained net profits" (as defined) for the
preceding two years. Non-bank subsidiaries of the Corporation are not subject
to such limitations.
At December 31, 1993, in accordance with the foregoing restrictions,
the Corporation's bank subsidiaries could, without the approval of their
relevant banking regulators, pay dividends of approximately $1.7 billion to
their respective bank holding companies, plus an additional amount equal to
their net profits from January 1, 1994 through the date of any such dividend
payment.
In addition to dividend restrictions, the Federal Reserve Board, the
Office of the Comptroller of the Currency and the FDIC have authority under the
Financial Institutions Supervisory Act to prohibit or to limit the payment of
dividends by the banking organizations they supervise, including the
Corporation and its subsidiaries that are banks or bank holding companies, if,
in the banking regulator's opinion, payment of a dividend would constitute an
unsafe or unsound practice in light of the financial condition of the banking
organization.

NOTE EIGHTEEN

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Derivatives and Foreign Exchange Products: In the normal course of its
business, the Corporation utilizes various financial instruments to meet the
financing needs of its customers, to generate revenues through its trading
activities, and to manage its exposure to fluctuations in interest and currency
rates. Derivatives and foreign exchange transactions involve, to varying
degrees, credit risk and market risk. Credit risk is the possibility that a
loss may occur because a party to a transaction fails to perform according to
the terms of the contract. Market risk is the possibility that a change in
interest or currency rates will cause the value of a financial instrument to
decrease or become more costly to settle.
The Corporation controls the credit risk arising from derivative and
foreign exchange transactions by using the same credit procedures when entering
into such transactions as it does for traditional lending products. The credit
approval process involves first evaluating each counterparty's
creditworthiness, then assessing the applicability of derivative instruments to
the risks the counterparty is attempting to manage and determining if there are
specific transaction characteristics which alter the risk profile. If
collateral is deemed necessary to reduce credit risk, the amount and nature of
the collateral obtained is based

B71
<PAGE> 83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

on management's credit evaluation of the customer. Collateral held varies but
may include cash, investment securities, accounts receivable, inventory,
property, plant and equipment, and real estate.
The market risk associated with derivatives and foreign exchange
products, the prices of which are constantly fluctuating, is regulated by
imposing strict limits as to the types, amounts and degree of risk that traders
may undertake. These limits are approved by senior management, and the risk
positions of traders are reviewed on a daily basis to monitor compliance with
the limits.
The notional principal of derivatives and foreign exchange products is
the amount upon which interest and other payments in a transaction are based.
For derivative transactions, the notional principal typically does not change
hands; it is simply a quantity that is used to calculate payments. While
notional principal is the most commonly used volume measure in the derivatives
and foreign exchange markets, it is not a measure of credit exposure. The
Corporation believes that the true measure of credit exposure is the
replacement cost (the cost to replace the contract at current market rates
should the counterparty default prior to the settlement date). This is also
referred to as the mark-to-market exposure amount.
Overall counterparty credit risk assumed by the Corporation is
substantially reduced through master netting agreements. The Corporation enters
into master netting agreements which permit the Corporation to offset the
mark-to-market exposure for derivative or foreign exchange contracts with the
same counterparty. During 1993, the Corporation began to expand the number of
master netting agreements for all of its instruments executed with its
counterparties.
Credit exposure not recorded on the consolidated balance sheet at each
of December 31, 1993 and 1992 is summarized in the following table. The amount
of mark-to-market exposure presented for 1993 takes into account the effects of
master netting agreements in effect at December 31, 1993.

<TABLE>
<CAPTION>
DECEMBER 31, (IN BILLIONS) 1993 1992
- - - -----------------------------------------------------------
<S> <C> <C>
Credit Exposure:
Interest Rate Contracts $ 8.6 $ 7.5
Foreign Exchange Contracts 8.1 14.9
Stock Index Option and Commodity
Contracts 0.2 0.6
- - - -----------------------------------------------------------
Total Credit Exposure 16.9 23.0
Less: Amounts Recorded as Assets on
Consolidated Balance Sheet 3.3 2.3
- - - -----------------------------------------------------------
Credit Exposure Not Recorded on the
Consolidated Balance Sheet $13.6 $20.7
- - - -----------------------------------------------------------
</TABLE>

The Corporation's actual credit losses arising from such transactions
have been immaterial during 1993, 1992 and 1991.
The following table summarizes the aggregate notional amounts of
interest rates and foreign exchange contracts as of December 31, 1993 and 1992.
The table should be read in conjunction with the preceding narrative as well as
the descriptions of these products and their risks immediately following.

<TABLE>
<CAPTION>
OFF-BALANCE SHEET INSTRUMENTS-DERIVATIVES
AND FOREIGN EXCHANGE INSTRUMENTS 1993 1992
CONTRACT/NOTIONAL AMOUNTS
DECEMBER 31, (IN MILLIONS) TRADING ALM(a) TOTAL TOTAL
- - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Instruments, the Credit Risk of Which is
Represented by Other Than Notional or Contract Amounts:
Interest Rate Contracts:
Futures and Forward Rate Agreements $ 780,418 $ 14,004 $ 794,422 $ 545,907
Interest Rate Swaps 630,537 37,381 667,918 389,685
Purchased Options 87,465 26,269 113,734 60,192
Written Options 145,976 19,316 165,292 70,570
- - - -------------------------------------------------------------------------------------------------------------------------
Total Interest Rate Contracts (Notional Amount) $ 1,644,396 $ 96,970 $ 1,741,366 $1,066,354
- - - -------------------------------------------------------------------------------------------------------------------------
Foreign Exchange Contracts:
Spot, Forward and Futures Contracts $ 656,984 $ 11,003 $ 667,987 $ 491,313
Purchased Options 21,888 -- 21,888 17,336
Written Options 23,697 -- 23,697 18,217
Cross-Currency Interest Rate Swaps 18,224 358 18,582 22,097
- - - -------------------------------------------------------------------------------------------------------------------------
Total Foreign Exchange Contracts (Notional Amount) $ 720,793 $ 11,361 $ 732,154 $ 548,963
- - - -------------------------------------------------------------------------------------------------------------------------
Total Stock Index Options and Commodity Derivative
Contracts (Notional Amount) $ 5,751 $ -- $ 5,751 $ 5,502
- - - -------------------------------------------------------------------------------------------------------------------------
Total Off-Balance Sheet Instruments (Notional Amount) $ 2,370,940 $ 108,331 $ 2,479,271 $1,620,819
- - - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) ALM: Asset/Liability Management.

B72
<PAGE> 84

The Corporation deals in interest-rate and foreign exchange contracts
to generate fee income and trading revenues and also utilizes interest rate
contracts to manage its own asset/liability risk.
Interest rate swaps are contracts in which a series of interest rate
flows in a single currency are exchanged over a prescribed period. The notional
amount on which the interest payments are based is not exchanged. Most interest
rate swaps involve the exchange of fixed and floating interest payments.
Cross-currency interest rate swaps are contracts that involve the exchange of
both interest and principal amounts in two different currencies. The risks
inherent in interest rate and cross currency swap contracts are the potential
inability of a counterparty to meet the terms of each contract and the risk
associated with changes in the market values of the underlying interest rates.
To reduce its exposure to market risk, the Corporation may enter into
offsetting positions.
Interest rate options, which include caps and floors, are contracts
which transfer, modify, or reduce interest rate risk in exchange for the
payment of a premium when the contract is initiated. As a writer of interest
rate caps, floors, and other options, the Corporation receives a premium in
exchange for bearing the risk of unfavorable changes in interest rates. Foreign
currency options are similar to interest rate option contracts, except that
they are based on currencies instead of interest rates. To reduce its exposure
to market risk related to writing or purchasing options the Corporation may
enter into offsetting positions.
Forward rate agreements are contracts to exchange payments on a
certain future date, based on a market change in interest rates from trade date
to contract maturity date. The maturity of these agreements is typically less
than two years. To reduce its exposure to market risk, the Corporation may
enter into offsetting positions.
Foreign exchange contracts are contracts for the future receipt or
delivery of foreign currency at previously agreed upon terms. The risks
inherent in these contracts are the potential inability of a counterparty to
meet the terms of each contract and the risk associated with changes in the
market values of the underlying currencies. To reduce its exposure to market
risk, the Corporation may enter into offsetting positions.
Futures and forwards are contracts for the delayed delivery of
securities or money market instruments in which the seller agrees to deliver on
a specified future date, a specified instrument, at a specified price or yield.
The credit risk inherent in futures is the risk that the exchange may default.
Futures contracts settle in cash daily and, therefore, there is minimal credit
risk to the Corporation. The credit risk inherent in forwards arises from the
potential inability of counterparties to meet the terms of their contracts.
Both futures and forwards are also subject to the risk of movements in interest
rates or the value of the underlying securities or instruments.
The Corporation enters into other contracts such as stock index option
contracts and commodity contracts. Stock index option contracts are contracts
to pay or receive cash flows from counterparties based upon the increase or
decrease in the underlying index. Commodity contracts include swaps, caps and
floors and are similar to interest rate contracts, except that they are based
on commodity indices instead of interest rates.
The Corporation also enters into transactions involving "when-issued
securities". When-issued securities are commitments to purchase or sell
securities authorized for issuance, but not yet actually issued. Accordingly,
they are not recorded on the balance sheet until issued. At December 31, 1993
and 1992, commitments to purchase were $2,194 million and $2,799 million,
respectively, and commitments to sell were $1,790 million and $3,158 million,
respectively.

Credit-related financial instruments: In meeting the financing needs of its
customers, the Corporation issues commitments to extend credit, standby and
other letters of credit and guarantees, and also provides securities lending
services. For these instruments, the contractual amount of the financial
instrument represents the maximum potential credit risk if the counterparty
does not perform according to the terms of the contract. A large majority of
these commitments expire without being drawn upon. As a result, total
contractual amounts do not represent future credit exposure or liquidity
requirements.
The following table summarizes the Corporation's maximum credit risk,
which is represented by contract amounts relating to these financial
instruments at December 31, 1993 and 1992.

<TABLE>
<CAPTION>
OFF-BALANCE SHEET INSTRUMENTS-CREDIT-
RELATED FINANCIAL INSTRUMENTS

DECEMBER 31, (IN MILLIONS) 1993 1992
- - - ---------------------------------------------------------------------------------
<S> <C> <C>
Commitments to Extend Credit $47,540(a) $41,177(a)
Standby Letters of Credit (Net of Risk
Participations of $1,285 and $926) 11,224 10,729
Other Letters of Credit 2,325 2,822
Customers' Securities Lent 14,530 14,716
- - - ---------------------------------------------------------------------------------
</TABLE>
(a) Excludes credit card commitments of $18 billion and $13 billion at December
31, 1993 and 1992, respectively.

Unfunded commitments to extend credit are agreements to lend to a
customer who has complied with predetermined contractual conditions.
Commitments generally have fixed expiration dates.
Standby letters of credit and guarantees are conditional commitments
issued by the Corporation generally to guarantee the performance of a customer
to a third party in borrowing arrangements, such as commercial paper, bond
financing, construction and similar transactions. The credit risk involved in
issuing standby letters of credit is essentially the same as that involved in
extending loan facilities to customers and may be reduced by participations to
third parties. The Corporation holds collateral to support those standby
letters of credit and guarantees written for which collateral is deemed
necessary. At December 31, 1993, 94% of the Corporation's standby letters of
credit and guarantees written expire in less than five years.

B73
<PAGE> 85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Customers' securities lent are customers' securities held by the
Corporation which are lent to third parties. The Corporation obtains
collateral, with a market value exceeding 100% of the contract amount, for all
such customers' securities lent, which is used to indemnify customers against
possible losses resulting from third-party defaults.

CONCENTRATIONS OF CREDIT RISK

Concentrations of credit risk arise when a number of customers are engaged in
similar business activities, or activities in the same geographic region, or
have similar economic features that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic
conditions.
Concentrations of credit risk indicate the relative sensitivity of the
Corporation's performance to both positive and negative developments affecting
a particular industry. Based on the nature of the banking business, management
does not believe that any of these concentrations are unusual.
The accompanying table presents the Corporation's significant
concentrations of credit risk for all financial instruments. The Corporation
has procedures to monitor counterparty credit risk and to obtain collateral
when deemed necessary. Accordingly, management believes that the total credit
exposure shown below is not representative of the potential risk of loss
inherent in the portfolio.

<TABLE>
<CAPTION>
1993 1992
DISTRIBUTIONS DISTRIBUTIONS
TOTAL CREDIT % OF ON-BALANCE OFF-BALANCE TOTAL CREDIT % OF ON-BALANCE OFF-BALANCE
DECEMBER 31, (IN BILLIONS) EXPOSURE TOTAL SHEET SHEET EXPOSURE TOTAL SHEET SHEET
- - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consumer $ 45 18% $ 26 $ 19 $38 16% $ 24 $ 14
Real Estate 12 5 10 2 13 6 11 2
Financial Institutions 61 24 26 35 55 23 22 33
U.S. Government and Agencies 24 9 24 -- 30 13 30 --
Foreign Governments and
Official Institutions 15 6 13 2 12 5 11 1
Brokers and Dealers 30 12 11 19 22 9 3 19
All Other 67 26 32 35 67 28 32 35
- - - -------------------------------------------------------------------------------------------------------------------------
Total $ 254 100% $ 142 $ 112 237 100% $133 $104
- - - -------------------------------------------------------------------------------------------------------------------------
</TABLE>

Geographic concentrations are a factor most directly affecting the
credit risk of the real estate and LDC segments of the Corporation's loan
portfolio. The Corporation's real estate portfolio is primarily concentrated in
the New York Metropolitan area and in Texas. Its LDC portfolio is concentrated
in Latin America.

NOTE NINETEEN

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments" ("SFAS 107"), requires the Corporation to
disclose fair value information about financial instruments for which it is
practicable to estimate the value, whether or not such financial instruments
are recognized on the balance sheet. Fair value is the amount at which a
financial instrument could be exchanged in a current transaction between
willing parties, other than in a forced sale or liquidation, and is best
evidenced by a quoted market price if one exists.
Quoted market prices are not available for a significant portion of
the Corporation's financial instruments. As a result, the fair values presented
are estimates derived using present value or other valuation techniques and may
not be indicative of the net realizable or liquidation value. In addition, the
calculation of estimated fair value is based on market conditions at a specific
point in time and may not be reflective of current or future fair values.
Certain financial instruments and all nonfinancial instruments are
excluded from the scope of SFAS 107. Accordingly, the fair value disclosures
required by SFAS 107 provide only a partial estimate of the fair value of the
Corporation; for example, the values associated with the various ongoing
businesses which the Corporation operates are excluded. The Corporation has
estimated the value related to the long-term relationships with its customers
through its deposit base and its credit card accounts, commonly referred to as
core deposit intangibles and credit card relationships, respectively, as well
as the value of its portfolio of mortgage servicing rights and its owned and
leased premises. In the aggregate, these items add significant value to the
Corporation but their fair value is not disclosed in this Note.
The following summary presents the methodologies and assumptions used
to estimate the fair value of the Corporation's financial instruments required
to be valued pursuant to SFAS 107.

B74
<PAGE> 86

FINANCIAL ASSETS

Assets for Which Fair Value Approximates Book Value: The fair value of certain
financial assets carried at cost, including cash and due from banks, deposits
with banks, federal funds sold and securities purchased under resale
agreements, due from customers on acceptances, short-term receivables and
accrued interest receivable is considered to approximate their respective book
values due to their short-term nature and negligible credit losses. In
addition, the Corporation carries trading account assets and derivatives used
in trading activities at fair value. See Note One for a description of these
financial instruments.

Securities: Securities held-to-maturity are carried at amortized cost at each
of December 31, 1993 and 1992. Securities available-for-sale and interest rate
contracts used in connection with such portfolio are carried at fair value at
December 31, 1993. Such securities were carried at lower of aggregate amortized
cost or market value at December 31, 1992. The valuation methodologies for
securities are discussed in Note Four.

Loans: The fair value of the Corporation's non-LDC commercial loan portfolio
was estimated by assessing the two main risk components of the portfolio:
credit and interest. The estimated cash flows were adjusted to reflect the
inherent credit risk and then discounted, using rates appropriate for each
maturity that incorporate the effects of interest rate changes. Generally, LDC
loans were valued based on secondary market prices.
For consumer installment loans and residential mortgages, for which
market rates for comparable loans are readily available, the fair value was
estimated by discounting cash flows, adjusted for prepayments. The discount
rates used for consumer installment loans were current rates offered by
commercial banks and thrifts; for residential mortgages, secondary market
yields for comparable mortgage-backed securities, adjusted for risk were used.
The fair value of credit card receivables was estimated by discounting expected
net cash flows. The discount rate used incorporated the effects of interest
rate changes only, since the estimated cash flows were adjusted for credit
risk.
The estimated fair value of net loans increased from 100% of carrying
value at December 31, 1992 to 104% of carrying value at December 31, 1993
primarily due to the positive effect of a $2.2 billion reduction in
nonperforming loans during 1993.

Other: Included in other assets are equity investments, venture capital
investments and securities acquired as loan satisfactions. The fair value of
these investments was determined on an individual basis. The valuation
methodologies included market values of publicly-traded securities, independent
appraisals, and cash flow analyses.

FINANCIAL LIABILITIES

Liabilities for Which Fair Value Approximates Book Value: SFAS 107 requires
that the fair value disclosed for deposit liabilities with no stated maturity
(i.e., demand, savings and certain money market deposits) be equal to the
carrying value. SFAS 107 does not allow for the recognition of the inherent
funding value of these instruments.
The fair value of foreign deposits, federal funds purchased and
securities sold under repurchase agreements, other borrowed funds, acceptances
outstanding, short-term payables and accounts payable and accrued liabilities
are considered to approximate their respective book values due to their
short-term nature.

Domestic Time Deposits: The fair value of time deposits was estimated by
discounting cash flows based on contractual maturities at the average interest
rates offered by commercial banks and thrifts.

Long-Term Debt: The valuation of long-term debt takes into account several
factors, including current market interest rates and the Corporation's credit
rating. Quotes were gathered from various investment banking firms for
indicative yields for the Corporation's securities over a range of maturities.

Derivatives Used for Asset/Liability Management: The Corporation employs
off-balance sheet financial instruments to manage its asset/liability exposure
to fluctuations in interest rates. These instruments are mostly used to manage
overall exposure as opposed to hedging specific on-balance sheet items. The
estimated fair value and carrying value of these instruments at December 31,
1993 was $725 million and $300 million, respectively. The estimated fair value
and carrying value of these instruments at December 31, 1992 was $756 million
and $246 million, respectively. Interest rate contracts were valued at the net
present value of expected cash flows based upon prevailing market rates.

Unused Commitments and Letters of Credit: The Corporation has reviewed the
unfunded portion of commitments to extend credit as well as standby and other
letters of credit, and has determined that the fair value of such financial
instruments is not material.
The following table presents the financial assets and liabilities
required to be valued for SFAS 107.

B75
<PAGE> 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
1993 1992
CARRYING ESTIMATED FAIR CARRYING ESTIMATED FAIR
DECEMBER 31, (IN MILLIONS) VALUE VALUE VALUE VALUE
- - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets:
Assets for Which Fair Value Approximates Book Value $ 43,744 $ 43,744 $ 30,453 $ 30,453
Securities:
Held-to-Maturity 10,108 10,288 15,036 15,195
Available-for-Sale 15,840 15,840(a) 8,390 8,674
Loans, Net 72,361 74,918(b) 78,985 79,367
Other Assets 1,670 2,171 1,566 2,024
- - - -------------------------------------------------------------------------------------------------------------------------
TOTAL FINANCIAL ASSETS $ 143,723 $ 146,961 $134,430 $135,713
- - - -------------------------------------------------------------------------------------------------------------------------
Financial Liabilities:
Liabilities for Which Fair Value Approximates Book
Value $ 113,202 $ 113,202 $105,470 $105,470

Domestic Time Deposits 16,703 17,050 17,536 17,813
Long-Term Debt 8,192 8,489(c) 6,798 6,986
- - - -------------------------------------------------------------------------------------------------------------------------
TOTAL FINANCIAL LIABILITIES $ 138,097 $ 138,741 $129,804 $130,269
- - - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Estimated fair value in 1993 includes a decrease of approximately $2
million representing estimated fair value amounts of interest rate contracts,
used in connection with available-for-sale securities.
(b) Estimated fair value in 1993 includes an increase of approximately $2
million representing estimated fair value amounts of interest rate contracts,
used in connection with mortgages held-for-sale.
(c) Estimated fair value in 1993 includes an increase of approximately $7
million representing estimated fair value amounts of interest rate contracts,
used in connection with long-term debt.

NOTE TWENTY

COMMITMENTS AND CONTINGENCIES

At December 31, 1993, the Corporation and its subsidiaries were obligated under
a number of noncancelable operating leases for premises and equipment used
primarily for banking purposes. Certain leases contain rent escalation clauses
for real estate taxes and other operating expenses and renewal option clauses
calling for increased rents. No lease agreement imposes any restrictions on the
Corporation affecting its ability to pay dividends, engage in debt or equity
financing transactions or to enter into further lease agreements. Future
minimum rental payments required under operating leases with initial or
remaining noncancelable lease terms in excess of one year as of December 31,
1993 were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS)
- - - -----------------------------------------------------------------------
<S> <C>
1994 $ 256
1995 227
1996 193
1997 165
1998 152
After 919
- - - -----------------------------------------------------------------------
Total Minimum Payments Required $1,912
- - - -----------------------------------------------------------------------
Less: Sublease Rentals Under Noncancelable Subleases $ (162)
- - - -----------------------------------------------------------------------
Net Minimum Payment Required $1,750
- - - -----------------------------------------------------------------------
</TABLE>

Total rental expense in 1993, 1992 and 1991 was as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - -----------------------------------------------------------------------
<S> <C> <C> <C>
Gross Rentals $384 $372 $370
Sublease Rentals (60) (55) (54)
- - - -----------------------------------------------------------------------
Total $324 $317 $316
- - - -----------------------------------------------------------------------
</TABLE>

At December 31, 1993 and 1992, assets amounting to $18 billion and $26
billion, respectively, were pledged to secure public deposits and for other
purposes. The significant components of the $18 billion of assets pledged at
December 31, 1993 to secure public deposits and for other purposes were as
follows: $4 billion were securities, $8 billion were loans, and the remaining
$6 billion were primarily trading account assets. These amounts compare with
$11 billion of securities, $8 billion of loans and $7 billion of trading
account assets pledged at December 31, 1992.
The Corporation and its subsidiaries are defendants in a number of
legal proceedings. After reviewing with counsel all such actions and
proceedings pending against or involving the Corporation and its subsidiaries,
management does not expect the aggregate liability or loss, if any, resulting
therefrom to have a material adverse effect on the consolidated financial
condition of the Corporation.

B76
<PAGE> 88

NOTE TWENTYONE

INTERNATIONAL OPERATIONS

The accompanying table presents total assets and income statement information
for 1993, 1992 and 1991 pertaining to international and domestic operations of
the Corporation by major geographic areas, based on the domicile of the
customer. The Corporation defines international activities as business
transactions that involve customers residing outside of the United States.
However, a definitive separation of the Corporation's domestic and foreign
businesses cannot be performed because many of the Corporation's domestic
operations service international business.
As these operations are highly integrated, estimates and subjective
assumptions have been made to apportion revenue and expenses between domestic
and international operations. Estimates of the following are allocated on a
management accounting basis: stockholders' equity, interest costs charged to
users of funds, and overhead, administrative and other expenses incurred by one
area on behalf of another. The provision for losses is allocated based on
actual net charge-offs and changes in outstandings.
Although the Corporation considers the balance in the non-LDC
allowance for losses to be available for both domestic and foreign losses, a
portion of the allowance is allocated, based on a methodology consistent with
the allocation of the provision for losses, to international operations.
<TABLE>
<CAPTION>
INCOME (LOSS) NET
TOTAL TOTAL TOTAL BEFORE INCOME
AS OF OR FOR THE YEAR ENDED DECEMBER 31, (IN MILLIONS) ASSETS REVENUE EXPENSE INCOME TAXES (LOSS)
- - - -------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
1993
Europe $ 18,598 $ 1,806 $ 1,438 $ 368 $ 221
Latin America and the Caribbean 8,203 990 536 454 272
Asia and Pacific 6,765 471 336 135 72
Middle East and Africa 1,015 78 49 29 17
Other(a) 774 49 60 (11) (6)
- - - ----- ----------------------------------------------------------------------------------------------------------------
Total International 35,355 3,394 2,419 975 576
Total Domestic 114,533 9,033 7,900 1,133 1,028
- - - ------------------------------------------------------------------------------------------------------------------------
Total Corporation $ 149,888 $ 12,427 $ 10,319 $ 2,108 $1,604
- - - ------------------------------------------------------------------------------------------------------------------------

1992
Europe $ 12,718 $ 1,603 $ 1,437 $ 166 $ 100
Latin America and the Caribbean 8,716 1,046 886 160 113
Asia and Pacific 4,771 383 331 52 32
Middle East and Africa 1,312 90 73 17 10
Other(a) 2,305 164 173 (9) (6)
- - - ----- ----------------------------------------------------------------------------------------------------------------
Total International 29,822 3,286 2,900 386 249
Total Domestic 109,833 8,888 7,945 943 837
- - - ------------------------------------------------------------------------------------------------------------------------
Total Corporation $ 139,655 $ 12,174 $ 10,845 $ 1,329 $1,086
- - - ------------------------------------------------------------------------------------------------------------------------

1991
Europe $ 13,168 $ 1,583 $ 1,605 $ (22) $ (16)
Latin America and the Caribbean 8,504 1,101 985 116 86
Asia and Pacific 4,963 571 456 115 81
Middle East and Africa 1,354 129 155 (26) (25)
Other(a) 1,490 88 150 (62) (53)
- - - ----- ----------------------------------------------------------------------------------------------------------------
Total International 29,479 3,472 3,351 121 73
Total Domestic 109,451 10,639 10,470 169 81
- - - ------------------------------------------------------------------------------------------------------------------------
Total Corporation $ 138,930 $ 14,111 $ 13,821 $ 290 $ 154
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) No geographic region included in other international amounts to more than
10% of the total for the Corporation.

NOTE TWENTYTWO

PARENT COMPANY

Condensed financial information of Chemical Banking Corporation, the Parent
Company, is presented on the next page.
For purposes of preparing the Statement of Cash Flows, cash and cash
equivalents are those amounts included in the balance sheet caption cash with
banks.

B77
<PAGE> 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
BALANCE SHEET

DECEMBER 31, (IN MILLIONS) 1993 1992
- - - -------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash with Banks $ 69 $ 97
Deposits with Banking Subsidiaries 1,205 1,050
Securities Purchased Under Resale
Agreements-Chemical Securities Inc. 586 --
Short-Term Advances to Subsidiaries:
Banking 12 --
Nonbanking 2,027 2,203
Long-Term Advances to Subsidiaries:
Banking 2,287 2,937
Nonbanking 5 5
Investment (at Equity) in Subsidiaries:
Banking 11,174 9,609
Nonbanking 1,021 814
Other Assets 648 579
- - - -------------------------------------------------------------------------------------------
Total Assets $19,034 $17,294
- - - -------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Other Borrowed Funds, primarily
Commercial Paper $ 2,040 $ 2,029
Other Liabilities 263 239
Long-Term Debt(a) 5,567 5,175
- - - -------------------------------------------------------------------------------------------
Total Liabilities 7,870 7,443
Stockholders' Equity 11,164 9,851
- - - -------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $19,034 $17,294
- - - -------------------------------------------------------------------------------------------
</TABLE>
(a) At December 31, 1993, aggregate annual maturities and sinking fund
requirements for all issues for the years 1994 through 1998 were $937 million,
$844 million, $679 million, $472 million, and $596 million, respectively.

<TABLE>
<CAPTION>
STATEMENT OF INCOME

YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income
Dividends from Subsidiaries:
Banking $ 588 $ 204 $ 256
Nonbanking 23 18 17
Interest from Subsidiaries 326 296 364
All Other Income -- 5 1
- - - -------------------------------------------------------------------------------------------
Total Income 937 523 638
- - - -------------------------------------------------------------------------------------------
Expense
Interest on:
Other Borrowed Funds, primarily
Commercial Paper 75 71 111
Long-Term Debt 361 339 383
All Other Expense 96 102 118
- - - -------------------------------------------------------------------------------------------
Total Expense 532 512 612
- - - -------------------------------------------------------------------------------------------
Income Before Income Tax
Expense (Benefit) and Equity
in Undistributed Net Income
of Subsidiaries 405 11 26
Income Tax Expense (Benefit) (76) (79) (83)
Equity in Undistributed Net
Income of Subsidiaries 1,123 996 45
- - - -------------------------------------------------------------------------------------------
Net Income $1,604 $1,086 $ 154
- - - -------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, (IN MILLIONS) 1993 1992 1991
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net Income $1,604 $1,086 $154
Less--Net Income of Subsidiaries 1,734 1,218 318
- - - ------------------------------------------------------------------------------------------------------------------------
Parent Company Net Loss (130) (132) (164)
Add--Dividends from Subsidiaries 611 222 270
Other--Net (131) (69) 47
- - - ------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 350 21 153
- - - ------------------------------------------------------------------------------------------------------------------------
Investing Activities
Net (Increase) Decrease in Deposits with Banking Subsidiaries (155) (704) 668
Net (Increase) Decrease in Short-Term Advances to Subsidiaries 242 336 195
Net (Increase) in Long-Term Advances to Subsidiaries 650 (1,077) (45)
Net (Increase) Decrease in Investments (at Equity) in Subsidiaries (430) (1,045) (191)
Net (Increase) Decrease in Securities Under Resale Agreement-Chemical
Securities Inc. (586) -- --
Other--Net -- 7 1
- - - ------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (279) (2,483) 628
- - - ------------------------------------------------------------------------------------------------------------------------
Financing Activities
Net Increase (Decrease) in Other Borrowed Funds 6 368 (625)
Proceeds from the Issuance of Long-Term Debt 2,408 1,306 500
Redemption and Maturity of Long-Term Debt (2,014) (517) (618)
Proceeds from the Issuance of Stock 591 2,117 291
Redemption of Preferred Stock (610) (292) --
Cash Dividends Paid (480) (438) (405)
Other--Net -- -- 4
- - - ------------------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities (99) 2,544 (853)
Net Increase (Decrease) in Cash (28) 82 (72)
Cash with Banks at the Beginning of the Year 97 15 87
- - - ------------------------------------------------------------------------------------------------------------------------
Cash with Banks at the End of the Year $ 69 $ 97 $ 15
- - - ------------------------------------------------------------------------------------------------------------------------
Cash Interest Paid $ 421 $ 409 $515
Taxes Paid (Refunded) $ 89 $ 58 $(42)
- - - ------------------------------------------------------------------------------------------------------------------------
</TABLE>

B78
<PAGE> 90

NOTE TWENTYTHREE

SHAREHOLDERS' RIGHTS PLAN

The Corporation has in place a Shareholders' Rights Plan. The Shareholders'
Rights Plan contains provisions intended to protect stockholders in the event
of unsolicited offers or attempts to acquire the Corporation, including offers
that do not treat all stockholders equally, acquisitions in the open market of
shares constituting control without offering fair value to all stockholders,
and other coercive or unfair takeover tactics that could impair the Board of
Directors' ability to represent stockholders' interests fully. The
Shareholders' Rights Plan provides that attached to each share of common stock
is one right (a "Right") to purchase a unit consisting of one one-hundredth of
a share (a "Unit") of Junior Participating Preferred Stock for an exercise
price of $150 per unit, subject to adjustment.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person that attempts to acquire the Corporation
without the approval of the Board of Directors unless the offer is conditioned
on a substantial number of Rights being acquired. The Rights, however, should
not affect offers for all outstanding shares of common stock at a fair price
and otherwise in the best interests of the Corporation and its stockholders as
determined by the Board of Directors. The Board of Directors may, at its
option, redeem all, but not fewer than all, of the then outstanding Rights at
any time until the 10th business day following a public announcement that a
person or a group had acquired beneficial ownership of 20% or more of the
Corporation's outstanding common stock or total voting power.

<TABLE>
<CAPTION>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AND STOCK PRICE DATA) 1993 1992
- - - -------------------------------------------------------------------------------------------------------------------------
4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Interest Income $ 1,149 $ 1,163 $ 1,175 $ 1,149 $1,226 $1,158 $1,099 $1,115
Provision For Losses 286 298 363 312 315 330 345 375
Noninterest Revenue 1,053 1,004 1,042 925 717 767 737 805
Noninterest Expense 1,335 1,370 1,312 1,276 1,294 1,258 1,184 1,194
- - - --------------------------------------------------------------------------------------------------------------------------
Income Before Income Tax Expense
and Effect of Accounting Changes 581 499 542 486 334 337 307 351
Income Tax Expense (Benefit) 234 (3) 161 147 30 55 67 91
- - - --------------------------------------------------------------------------------------------------------------------------
Income Before Effect of
Accounting Changes 347 502 381 339 304 282 240 260
Net Effect of Changes in
Accounting Principles -- -- -- 35 -- -- -- --
- - - --------------------------------------------------------------------------------------------------------------------------
Net Income $ 347 $ 502 $ 381 $ 374 $ 304 $ 282 $ 240 $ 260
- - - --------------------------------------------------------------------------------------------------------------------------
Per Common Share:
Income Before Effect of
Accounting Changes $ 1.23 $ 1.84 $ 1.35 $ 1.21 $ 1.09 $ .98 $ .83 $ 1.00
Net Effect of Changes in
Accounting Principles -- -- -- .14 -- -- -- --
Net Income $ 1.23 $ 1.84 $ 1.35 $ 1.35 $ 1.09 $ .98 $ .83 $ 1.00
- - - --------------------------------------------------------------------------------------------------------------------------
Cash Dividends Declared Per Share $ .38 $ .33 $ .33 $ .33 $ .30 $ .30 $ .30 $ .30
Average Common Shares and
Equivalents Outstanding 252.5 252.1 251.7 248.5 246.2 245.8 244.9 224.7
- - - --------------------------------------------------------------------------------------------------------------------------
Stock Price Per Common Share(a)
High $ 46.38 $ 45.38 $ 44.13 $ 44.13 $39.38 $39.50 $39.38 $35.63
Low 36.00 38.75 35.00 37.00 30.25 30.25 29.00 21.88
Close 40.13 45.00 40.88 40.38 38.63 32.63 37.13 32.75
- - - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Corporation's common stock is listed and traded on the New York Stock
Exchange and the International Stock Exchange of the United Kingdom and
Republic of Ireland. The high, low and closing prices of the Corporation's
common stock are from the New York Stock Exchange Composite Transaction Tape.

B79
<PAGE> 91

AVERAGE CONSOLIDATED BALANCE SHEET, INTEREST AND RATES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993 1992
(TAXABLE-EQUIVALENT INTEREST AND RATES; IN MILLIONS)
BALANCE INTEREST RATE BALANCE INTEREST RATE
- - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Deposits With Banks $ 4,202 $ 268 6.39% $ 2,605 $ 274 10.52%
Federal Funds Sold and Securities Purchased
Under Resale Agreements 10,300 339 3.29 8,592 349 4.07
Trading Account Assets 8,039 449 5.59 6,205 419 6.76
Securities:
U.S. Government and Federal Agency/
Corporation Obligations 19,535 1,388 7.11 16,630 1,313 7.90
Obligations of States and Political Subdivisions 23 2 6.98 19 2 8.17
Other 4,096 341 8.32 5,025 443 8.81
- - - ---------------------------------------------------------------------------------------------------------------------------
Total Securities 23,654 1,731 7.32 21,674 1,758 8.11
- - - ---------------------------------------------------------------------------------------------------------------------------
Domestic Loans 57,701 4,197 7.28 58,963 4,580 7.77
Foreign Loans 21,038 1,440 6.85 23,210 1,799 7.75
- - - ---------------------------------------------------------------------------------------------------------------------------
Total Loans 78,739 5,637 7.16 82,173 6,379 7.76
- - - ---------------------------------------------------------------------------------------------------------------------------
Total Interest-Earning Assets 124,934 8,424 6.74% 121,249 9,179 7.57%
- - - ---------------------------------------------------------------------------------------------------------------------------
Allowance for Losses (3,084) (3,327)
Cash and Due from Banks 8,537 8,051
All Other Assets 14,494 13,356
- - - ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 144,881 $139,329
- - - ---------------------------------------------------------------------------------------------------------------------------

LIABILITIES
Domestic Retail Deposits $ 46,598 $ 1,237 2.65% $ 44,538 $1,438 3.23%
Domestic Negotiable Certificates of Deposit
and Other Deposits 6,242 191 3.05 7,506 296 3.94
Deposits in Foreign Offices 21,066 813 3.86 21,717 1,134 5.22
- - - ---------------------------------------------------------------------------------------------------------------------------
Total Time and Savings Deposits 73,906 2,241 3.03 73,761 2,868 3.89
- - - ---------------------------------------------------------------------------------------------------------------------------
Short-Term and Other Borrowings:
Federal Funds Purchased and Securities Sold
Under Repurchase Agreements 15,461 472 3.05 15,658 623 3.98
Commercial Paper 2,438 83 3.42 2,190 87 3.92
Other Borrowings 6,663 437 6.56 6,376 518 8.17
- - - ---------------------------------------------------------------------------------------------------------------------------
Total Short-Term and Other Borrowings 24,562 992 4.04 24,224 1,228 5.07
Long-Term Debt 8,053 534 6.64 6,220 454 7.31
- - - ---------------------------------------------------------------------------------------------------------------------------
Total Interest-Bearing Liabilities 106,521 3,767 3.54 104,205 4,550 4.37
- - - ---------------------------------------------------------------------------------------------------------------------------
Demand Deposits 21,750 18,989
All Other Liabilities 6,027 6,811
- - - ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 134,298 130,005
- - - ---------------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY
Preferred Stock 1,887 1,751
Common Stockholders' Equity 8,696 7,573
- - - ---------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 10,583 9,324
- - - ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 144,881 $ 139,329
- - - ---------------------------------------------------------------------------------------------------------------------------
Spread on Interest-Bearing Liabilities 3.20% 3.20%
- - - ---------------------------------------------------------------------------------------------------------------------------
Net Interest Income and Net Yield on
Interest-Earning Assets $4,657 3.73% $4,629 3.82%
- - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Fees and commissions on loans included in loan interest amounted to $176
million, $159 million, $149 million, $162 million and $204 million in
1993-1989, respectively.
The ratio of average stockholders' equity to average assets was 7.3%, 6.7%,
5.4%, 5.1% and 4.8% in 1993-1989, respectively.

B80
<PAGE> 92

<TABLE>
<CAPTION>
1991 1990 1989
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
- - - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 2,788 $ 363 13.02% $ 4,563 $ 627 13.75% $ 6,036 $ 665 11.02%

10,455 598 5.72 14,575 1,166 8.00 12,878 1,108 8.60
7,398 586 7.92 7,924 717 9.05 6,005 597 9.95

13,348 1,214 9.10 12,917 1,193 9.24 8,804 798 9.07
37 4 10.26 440 42 9.59 3,220 343 10.67
6,318 575 9.11 4,819 426 8.83 4,826 408 8.45
- - - --------------------------------------------------------------------------------------------------------------------------
19,703 1,793 9.10 18,176 1,661 9.14 16,850 1,549 9.20
- - - --------------------------------------------------------------------------------------------------------------------------
60,460 5,604 9.27 58,767 6,202 10.55 65,101 7,332 11.26
24,060 2,352 9.77 25,960 2,729 10.51 26,611 2,862 10.76
- - - --------------------------------------------------------------------------------------------------------------------------
84,520 7,956 9.41 84,727 8,931 10.54 91,712 10,194 11.12
- - - --------------------------------------------------------------------------------------------------------------------------
124,864 11,296 9.05% 129,965 13,102 10.08% 133,481 14,113 10.57%
- - - --------------------------------------------------------------------------------------------------------------------------
(3,999) (4,743) (4,718)
7,101 7,169 7,298
13,259 13,415 13,239
- - - --------------------------------------------------------------------------------------------------------------------------
$141,225 $145,806 $149,300
- - - --------------------------------------------------------------------------------------------------------------------------

$ 43,193 $ 2,373 5.49% $ 41,004 $ 2,813 6.87% $ 37,213 $ 2,717 7.30%

8,458 494 5.84 10,058 730 7.25 11,002 935 8.50
22,754 1,801 7.92 24,771 2,522 10.22 27,459 2,694 9.81
- - - --------------------------------------------------------------------------------------------------------------------------
74,405 4,668 6.28 75,833 6,065 8.00 75,674 6,346 8.39
- - - --------------------------------------------------------------------------------------------------------------------------

19,354 1,171 6.05 21,849 1,729 7.91 16,861 1,480 8.78
2,252 145 6.46 3,244 268 8.26 6,620 619 9.36
8,343 730 8.75 7,276 850 11.68 6,886 833 12.11
- - - --------------------------------------------------------------------------------------------------------------------------
29,949 2,046 6.83 32,369 2,847 8.79 30,367 2,932 9.66
5,880 455 7.75 5,925 540 9.12 9,869 962 9.76
- - - --------------------------------------------------------------------------------------------------------------------------
110,234 7,169 6.51 114,127 9,452 8.28 115,910 10,240 8.84
- - - --------------------------------------------------------------------------------------------------------------------------
16,698 16,962 18,011
6,678 7,305 8,214
- - - --------------------------------------------------------------------------------------------------------------------------
133,610 138,394 142,135
- - - --------------------------------------------------------------------------------------------------------------------------

1,589 1,422 1,333
6,026 5,990 5,832
- - - --------------------------------------------------------------------------------------------------------------------------
7,615 7,412 7,165
- - - --------------------------------------------------------------------------------------------------------------------------
$141,225 $145,806 $149,300
- - - --------------------------------------------------------------------------------------------------------------------------
2.54% 1.80% 1.73%
- - - --------------------------------------------------------------------------------------------------------------------------

$ 4,127 3.30% $ 3,650 2.81% $ 3,873 2.90%
- - - --------------------------------------------------------------------------------------------------------------------------
</TABLE>

B81
<PAGE> 93
CHEMICAL BANK
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, (IN MILLIONS, EXCEPT SHARE DATA) 1993 1992
- - - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 4,335 $ 6,408
Deposits with Banks 5,829 1,652
Federal Funds Sold and Securities Purchased Under Resale Agreements 4,271 3,375
Trading Account Assets 8,556 2,797
Securities:
Held-to-Maturity (Market Value: $8,429 and $12,769) 8,269 12,706
Available-for-Sale (Market Value: $13,562 and $7,341) 13,562 7,129
Loans (Net of Unearned Income: $332 and $326) 59,350 67,246
Allowance for Losses (2,447) (2,391)
Premises and Equipment 1,238 1,088
Due from Customers on Acceptances 1,063 1,379
Accrued Interest Receivable 899 700
Assets Acquired as Loan Satisfactions 759 961
Other Assets 7,318 5,601
- - - --------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 113,002 $108,651
- - - --------------------------------------------------------------------------------------------------------------------------

LIABILITIES
Deposits:
Demand (Noninterest Bearing) $ 15,950 $ 16,416
Time and Savings 35,626 37,053
Foreign 24,886 21,823
- - - --------------------------------------------------------------------------------------------------------------------------
Total Deposits 76,462 75,292
Federal Funds Purchased and Securities Sold Under Repurchase Agreements 13,508 13,096
Other Borrowed Funds 4,426 3,872
Acceptances Outstanding 1,084 1,431
Accounts Payable and Accrued Liabilities 2,190 1,386
Other Liabilities 2,945 2,509
Long-Term Debt 2,537 1,251
Long-Term Debt Payable to Parent Company 1,867 2,817
- - - --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 105,019 101,654
- - - --------------------------------------------------------------------------------------------------------------------------

STOCKHOLDER'S EQUITY
Common Stock ($12 Par Value; Issued and Outstanding 51,633,170 and 51,587,026 Shares) 620 619
Capital Surplus 4,501 4,496
Retained Earnings 2,703 1,882
Net Unrealized Gain on Securities Available-for-Sale (Net of Taxes) 159 --
- - - --------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 7,983 6,997
- - - --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 113,002 $108,651
- - - --------------------------------------------------------------------------------------------------------------------------
</TABLE>

B82
<PAGE> 94
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on behalf of the undersigned, thereunto duly authorized on the 15th day of
March, 1994.

CHEMICAL BANKING CORPORATION
(Registrant)

By WALTER V. SHIPLEY
----------------------
(Walter V. Shipley,
Chairman of the Board and
Chief Executive Officer)

This report has been reviewed by each member of the Board of Directors and
pursuant to the requirements of the Securities Exchange Act of 1934, signed on
behalf of the registrant by members present at the meeting of the Board of
Directors on the date indicated. The Corporation does not exercise the power of
attorney to sign on behalf of any Director.

<TABLE>
<CAPTION>
Capacity Date
-------- ----
<S> <C> <C>
WALTER V. SHIPLEY Director and Chairman of )
- - - ----------------- the Board )
(Walter V. Shipley) (Principal Executive Officer) )
)
EDWARD D. MILLER Director and President )
- - - ---------------- )
(Edward D. Miller) )
)
WILLIAM B. HARRISON, JR. Director and Vice Chairman )
- - - ------------------------ )
(William B. Harrison, Jr.) )
)
FRANK A. BENNACK, JR. Director ) March 15, 1994
- - - --------------------- )
(Frank A. Bennack, Jr.) )
)
MICHEL C. BERGERAC Director )
- - - ------------------ )
(Michel C. Bergerac) )
)
RANDOLPH W. BROMERY Director )
- - - ------------------- )
(Randolph W. Bromery) )
)
CHARLES W. DUNCAN, JR. Director )
- - - ---------------------- )
(Charles W. Duncan, Jr.) )
)
ROBERT G. GOELET Director )
- - - ---------------- )
(Robert G. Goelet) )
)
MELVIN R. GOODES Director )
- - - ---------------- )
(Melvin R. Goodes) )

</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
Capacity Date
-------- ----
<S> <C> <C>
GEORGE V. GRUNE Director )
- - - --------------- )
(George V. Grune) )
)
HAROLD S. HOOK Director )
- - - -------------- )
(Harold S. Hook) )
)
HELENE L. KAPLAN Director )
- - - ---------------- )
(Helene L. Kaplan) )
)
J. BRUCE LLEWELLYN Director )
- - - ------------------ )
(J. Bruce Llewellyn) )
)
JOHN P. MASCOTTE Director )
- - - ---------------- )
(John P. Mascotte) )
)
JOHN F. MCGILLICUDDY Director )
- - - -------------------- )
(John F. McGillicuddy) )
)
ROBERT E. MERCER Director )
- - - ---------------- )
(Robert E. Mercer) )
)
ANDREW C. SIGLER Director ) March 15, 1994
- - - ---------------- )
(Andrew C. Sigler) )
)
MICHAEL I. SOVERN Director )
- - - ----------------- )
(Michael I. Sovern) )
)
JOHN R. STAFFORD Director )
- - - ---------------- )
(John R. Stafford) )
)
W. BRUCE THOMAS Director )
- - - --------------- )
(W. Bruce Thomas) )
)
MARINA V.N. WHITMAN Director )
- - - ------------------- )
(Marina V.N. Whitman) )
)
RICHARD D. WOOD Director )
- - - --------------- )
(Richard D. Wood) )
)
PETER J. TOBIN Executive Vice President )
- - - -------------- and Chief Financial Officer )
(Peter J. Tobin) (Principal Financial Officer) )
)
JOSEPH L. SCLAFANI Controller )
- - - ------------------ (Principal Accounting Officer) )
(Joseph L. Sclafani) )

</TABLE>

<PAGE> 96
APPENDIX I

NARRATIVE DESCRIPTION OF GRAPHIC IMAGE MATERIAL

Pursuant to Item 304 of Regulation S-T, the following is a description of the
graphic image material included in the foregoing Management's Discussion and
Analysis of Financial Condition and Results of Operations in Section B.

<TABLE>
<CAPTION>
Graphic
Number Page Description
- - - ------ ---- -----------
<S> <C> <C>
1 26 Bar Graph entitled "Net Income (a) (in millions of dollars)"
presenting the following information:

1991 1992 1993
---- ---- ----

Net Income $779 $1,086 $1,604

(a) Excludes impact of $625 million restructuring charge in 1991.

2 26 Bar Graph entitled "Return on Average Common Stockholders' Equity
(a)" presenting the following information:

1991 1992 1993
---- ---- ----

Return on Average
Common Stockholders'
Equity 10.70% 12.36% 16.66%

(a) Excludes impact of $625 million restructuring charge in 1991.

3 27 Bar Graph entitled "Net Interest Income (in millions of dollars)"
presenting the following information:

1991 1992 1993
---- ---- ----

Net Interest Income $4,080 $4,598 $4,636

4 28 Pie Chart entitled "Composition of Interest-Earning Assets"
presenting the following information:

1992 1993
---- ----

Loans 67.8% 63.0%
Securities 17.9% 19.0%
Liquid Assets 14.3% 18.0%

</TABLE>

<PAGE> 97
<TABLE>
<CAPTION>
Graphic
Number Page Description
------ ---- -----------
<S> <C> <C>
5 29 Bar Graph entitled "Noninterest Revenue (in millions of dollars)"
presenting the following information:

1991 1992 1993
---- ---- ----

Fee-Based Revenue $1,834 $1,930 $2,099
Combined Trading 671 853 1,073
All Other Noninterest
Revenue 357 243 852

6 31 Bar Graph entitled "Overhead Ratio" presenting the following
information:

1991 1992 1993

Overhead Ratio 67.4% 63.7% 59.1%

Text on page 30 also discloses exclusion of one-time charges.

7 36 Bar Graph entitled "Nonperforming Assets (in millions of dollars)"
presenting the following information:

At December 31, 1991 1992 1993
---- ---- ----

Non-LDC Nonperforming
Loans $3,380 $3,468 $1,969
Assets Acquired as
Loan Satisfactions 1,527 1,276 934
LDC Nonperforming Loans 1,248 1,348 622

8 42 Bar Graph entitled "Total Stockholders' Equity (in billions of
dollars)" presenting the following information:

At December 31, 1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Total Stockholders'
Equity $7.3 $9.9 $11.2

9 43 Bar Graph entitled "Risk-Based Capital Ratios" presenting the
following information:

At December 31, 1991 1992 1993
---- ---- ----

Tier 1 Capital Ratios (4.00% Required) 5.13% 7.33%
8.12%

Total Capital Ratios
(8.00% Required) 9.13% 11.55% 12.22%

</TABLE>

<PAGE> 98

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
- - - ------- -----------

<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of Chemical Banking Corporation.

3.2 By-laws of Chemical Banking Corporation, as amended.

11.1 Computation of Net Income per common share.

12.0 Computation of ratio of earnings to fixed charges.

12.1 Computation of ratio of earnings to fixed charges and preferred stock dividend requirements.

21.1 List of Subsidiaries of Chemical Banking Corporation.

23.1 Consent of Independent Accountants.

</TABLE>

<PAGE> 1

RESTATED CERTIFICATE OF INCORPORATION

CHEMICAL BANKING CORPORATION

Under Section 245

of the

General Corporation Law of the State of Delaware

We, Walter V. Shipley, Chairman, and John B. Wynne, Secretary, of
Chemical Banking Corporation (the "Corporation") do hereby certify under the
seal of the Corporation as follows:

First: The name of the Corporation is Chemical Banking Corporation;
the Corporation was originally incorporated as Chemical New York Corporation.

Second: The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware in Dover, Delaware, on the
28th day of October, 1968.

Third: This Restated Certificate of Incorporation was duly adopted in
accordance with Section 245 of the General Corporation Law of the State of
Delaware and only restates and integrates, and does not further amend, the
provisions of the Corporation's Certificate of Incorporation as heretofore
amended and supplemented. There is no discrepancy between those provisions and
the provisions of this Restated Certificate.

Fourth: The text of the Certificate of Incorporation of said Chemical
Banking Corporation, as amended, is hereby restated to read in full, as
follows:

FIRST. The name of the corporation is

CHEMICAL BANKING CORPORATION

SECOND. The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, 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. Without limiting in

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<PAGE> 2

any manner the scope and generality of the foregoing, the Corporation shall
have the following purposes and powers:

(1) To acquire by purchase, subscription, or otherwise, and to
receive, hold, own, guarantee, sell, assign, exchange, transfer,
mortgage, pledge, or otherwise dispose of or deal in and with any and
all securities, as such term is hereinafter defined, issued or created
by any corporation, firm, organization, association or other entity,
public or private, whether formed under the laws of the United States
of America or of any state, commonwealth, territory, dependency or
possession thereof, or of any foreign country or of any political
subdivision, territory, dependency, possession or municipality
thereof, or issued or created by the United States of America or any
state or commonwealth thereof or any foreign country, or by any
agency, subdivision, territory, dependency, possession or municipality
of any of the foregoing, and as owner thereof to possess and exercise
all the rights, powers and privileges of ownership, including the
right to execute consents and vote thereon;

(2) to make, establish and maintain investments in securities,
and to supervise and manage such investments;

(3) to cause to be organized under the laws of the United
States of America or of any state, commonwealth, territory, dependency
or possession thereof, or of any foreign country or of any political
subdivision, territory, dependency, possession or municipality
thereof, one or more corporations, firms, organizations, associations
or other entities and to cause the same to be dissolved, wound up,
liquidated, merged or consolidated;

(4) to acquire by purchase or exchange, or by transfer to or
by merger or consolidation with the Corporation or any corporation,
firm, organization, association or other entity owned or controlled,
directly or indirectly, by the Corporation, or to otherwise acquire,
the whole or any part of the business, good will, rights or other
assets of any corporation, firm, organization, association or other
entity, and to undertake or assume in connection therewith the whole
or any part of the liabilities and obligations thereof, to effect any
such acquisition in whole or in part by delivery of cash or other
property, including securities issued by the Corporation, or by any
other lawful means;

(5) to make loans and give other forms of credit, with or
without security, and to negotiate and make contracts and agreements
in connection therewith;

(6) to aid by loan, subsidy, guaranty or in any other lawful
manner any corporation, firm, organization, association

-2-
<PAGE> 3

or other entity of which any securities are in any manner directly or
indirectly held by the Corporation or in which the Corporation or any
such corporation, firm, organization, association or entity may be or
become otherwise interested; to guarantee the payment of dividends on
any stock issued by any such corporation, firm, organization,
association or entity; to guarantee or, with or without recourse
against any such corporation, firm, organization, association or
entity, to assume the payment of the principal of, or the interest on,
any obligations issued or incurred by such corporation, firm,
organization, association or entity; to do any and all other acts and
things for the enhancement, protection or preservation of any
securities which are in any manner, directly or indirectly, held,
guaranteed or assumed by the Corporation, and to do any and all acts
and things designed to accomplish any such purpose;

(7) to borrow money for any business, object or purpose of the
Corporation from time to time, without limit as to amount; to issue
any kind of evidence of indebtedness, whether or not in connection
with borrowing money, including evidences of indebtedness convertible
into stock of the Corporation, to secure the payment of any evidence
of indebtedness by the creation of any interest in any of the property
or rights of the Corporation, whether at that time owned or thereafter
acquired;

(8) to render service, assistance, counsel and advice to, and
to act as representative or agent in any capacity (whether managing,
operating, financial, purchasing, selling, advertising or otherwise)
of, any corporation, firm, organization, association or other entity;
and

(9) to engage in any commercial, financial, mercantile,
industrial, manufacturing, marine, exploration, mining, agricultural,
research, licensing, servicing, or agency business not prohibited by
law, and any, some or all of the foregoing.

The term "securities" as used in this Certificate of
Incorporation shall mean any and all notes, stocks, treasury stocks, bonds,
debentures, evidences of indebtedness, certificates of interest or
participation in any profit-sharing agreement, collateral-trust certificates,
preorganization certificates or subscriptions, transferable shares, investment
contracts, voting trust certificates, certificates of deposit for a security,
fractional undivided interests in oil, gas, or other mineral rights, or, in
general, any interests or instruments commonly known as "securities", or any
and all certificates of interest or participation in, temporary or interim
certificates for, receipts for, guaranties of, or warrants or rights to
subscribe to or purchase, any of the foregoing.

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<PAGE> 4
The purposes and powers specified in the foregoing paragraphs
shall, except where otherwise expressed, be in nowise limited or restricted by
reference to, or inference from, the terms of any other paragraph in this
Certificate of Incorporation, but the purposes and powers specified in each of
the foregoing paragraphs of this Article THIRD shall be regarded as independent
purposes and powers.

The Corporation shall possess and may exercise all powers and
privileges necessary or convenient to effect any or all of the foregoing
purposes, or to further any or all of the foregoing powers, and the enumeration
herein of any specific purposes or powers shall not be held to limit or
restrict in any manner the exercise by the Corporation of the general powers
and privileges now or hereafter conferred by the laws of the State of Delaware
upon corporations formed under the General Corporation Law of Delaware.

FOURTH. The Corporation shall have authority to issue capital
stock as set forth in Parts I, II and III of this Article FOURTH.

PART I

Authorized Capital Stock

The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is SIX HUNDRED THIRTY FOUR MILLION,
SEVEN HUNDRED THOUSAND shares, of which TWO HUNDRED MILLION shares shall be
shares of preferred stock of the par value of $1 per share (hereinafter called
"Preferred Stock"), FOUR HUNDRED MILLION shares shall be shares of common stock
of the par value of $1 per share (hereinafter called "Common Stock") and
THIRTY-FOUR MILLION, SEVEN HUNDRED THOUSAND shares shall be shares of Class B
common stock without par value (hereinafter called "Class B Common Stock").

Subject to any specific provisions contained in Part II of this
Article Fourth, any amendment to this Certificate of Incorporation which shall
increase or decrease the authorized capital stock of the Corporation may be
adopted by the affirmative vote of the holders of capital stock representing
not less than a majority of the voting power represented by the outstanding
shares of capital stock of the Corporation entitled to vote.

PART II

Common Stock and Class B Common Stock

The Common Stock and the Class B Common Stock shall be identical in
all respects and shall have equal rights and

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<PAGE> 5
privileges, except as otherwise provided in this Article Fourth. The relative
rights, privileges and restrictions of the shares of each class are as follows
(certain definitions applicable thereto, or the location of such definitions,
being set forth in subparagraph (h)(1)):

(a) Dividend Rights. Subject to the express terms of any
outstanding series of Preferred Stock, dividends may be paid in cash
or otherwise upon the Common Stock and the Class B Common Stock out of
the assets of the Corporation in the relationship and upon the terms
provided for below with respect to each such class:

(1) Dividends on Common Stock. Dividends on the
Common Stock may be declared and paid only to the extent of
the assets of the Corporation legally available therefor.
Subject to the foregoing and to the second proviso to
subparagraph (a)(2), the declaration and payment of dividends
on the Common Stock, and the amount thereof, shall at all
times be solely in the discretion of the Board of Directors of
the Corporation.

(2) Dividends on Class B Common Stock. Dividends
on the Class B Common Stock may be declared and paid only to
the extent of the assets of the Corporation legally available
therefor; provided, however, that no dividend shall be paid or
set aside for payment or other distribution made upon the
Class B Common Stock unless a dividend shall have been so paid
or set aside for payment or other distribution made upon the
Common Stock at (A) the time of such payment, setting aside or
other distribution upon the Class B Common Stock or (B) any
previous time during the Fiscal Quarter in which such payment,
setting aside or other distribution upon the Class B Common
Stock is to be made; provided, further, however, that from and
after the Reset Date no dividend shall be paid or set aside
for payment or other distribution made upon the Common Stock
unless a dividend shall, at the same time and in respect of
the same declaration date and record date as applicable to the
Common Stock, be so paid or set aside for payment or other
distribution made upon the Class B Common Stock in an amount
per share of Class B Common Stock not less than the product of
(x) the amount of the payment, setting aside or other
distribution in respect of one share of Common Stock and (y)
the Applicable Ratio fixed as of the Reset Date, as it may be
thereafter adjusted pursuant to subparagraphs (e)(1) and
(e)(2). Subject to the foregoing, the declaration and payment
of dividends on the Class B Common Stock, and the amount
thereof, shall at all times be solely in the discretion of the
Board of Directors of the Corporation.

-5-
<PAGE> 6
(3) Discrimination Between Common Stock and Class
B Common Stock. The Board of Directors, subject to the
provisions of subparagraphs (a)(1) and (a)(2), may, in its
sole discretion, declare dividends payable exclusively to the
holders of Common Stock, exclusively to the holders of Class B
Common Stock or to the holders of both of such classes in
equal or unequal amounts and in like or in unlike kind,
notwithstanding the respective voting and liquidation rights
of each class, the conversion rights applicable to the Class B
Common Stock, the amount of prior dividends declared on each
class or any other factor.

(b) Voting Rights. The holders of Common Stock and Class
B Common Stock shall vote together as a single class on all matters;
provided, however, that (i) the holders of Common Stock voting
separately as a class shall be entitled to approve by the vote of a
majority of the shares of Common Stock then outstanding any amendment,
alteration or repeal of any of the provisions of this Certificate of
Incorporation which adversely affects the rights, powers or privileges
of the Common Stock; (ii) the holders of Class B Common Stock voting
separately as a class shall be entitled to approve by the vote of a
majority of the shares of Class B Common Stock then outstanding any
amendment, alteration or repeal of any of the provisions of this
Certificate of Incorporation which adversely affects the rights,
powers, or privileges of the Class B Common Stock; and (iii) any
increase in the number of authorized shares of Class B Common Stock
shall be subject to approval by both (A) the holders of a majority of
shares of Common Stock and Class B Common Stock then outstanding,
voting together as a single class based upon their respective voting
rights, and (B) the holders of a majority of the shares of Class B
Common Stock then outstanding, voting separately as a class. Each
holder of Common Stock shall be entitled to one vote, in person or by
proxy, for each share of Common Stock standing in his name on the
stock transfer books of the Corporation, and each holder of Class B
Common Stock shall be entitled to one-fifth (0.2) of a vote, in person
or by proxy, for each share of Class B Common Stock standing in his
name on the stock transfer books of the Corporation; provided,
however, that the voting power of a share of Class B Common Stock
shall be adjusted from time to time concurrently with any adjustment
in the Applicable Ratio pursuant to subparagraphs (e)(1) and (e)(2) by
multiplying the voting power then in effect by a fraction of which (x)
the numerator shall be the Applicable Ratio in effect immediately
after such adjustment and (y) the denominator shall be the Applicable
Ratio in effect immediately before such adjustment.

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<PAGE> 7
"Liquidation"), whether voluntary or involuntary, after there shall
have been paid or set apart for the holders of Preferred Stock the
full preferential amounts to which they are entitled, the holders of
Common Stock and (other than in connection with or following a
conversion of Class B Common Stock into Common Stock pursuant to
paragraph (d)) Class B Common Stock shall be entitled to receive the
assets of the Corporation remaining for distribution to its
stockholders on a per share basis in proportion to the aggregate
liquidation units attributable to such classes. For purposes of the
foregoing, each share of Common Stock shall be entitled to one
liquidation unit and each share of Class B Common Stock shall be
entitled to the following fraction of a liquidation unit: (A) in the
case of a voluntary Liquidation, 0.4500, and (B) in the case of an
involuntary Liquidation, 0.2000;provided, however, that each such
fraction of a liquidation unit applicable to a share of Class B Common
Stock shall be adjusted from time to time concurrently with any
adjustment in the Applicable Ratio pursuant to subparagraphs (e)(1)
and (e)(2) by multiplying the fraction then in effect by a fraction of
which (x) the numerator shall be the Applicable Ratio in effect
immediately after such adjustment and (y) the denominator shall be the
Applicable Ratio in effect immediately before such adjustment.

(d) Convertibility.

(1) Optional Conversion. The Board of Directors
of the Corporation, in its sole discretion and by a majority
vote of the directors then in office, may at any time effect a
recapitalization of the Corporation by declaring that each of
the outstanding shares of Class B Common Stock shall be
converted into the number of fully paid and nonassessable
shares of Common Stock provided for in subparagraph (d)(3).

(2) Automatic Conversion. In the event of the
sale, transfer, assignment or other disposition by the
Corporation of a majority of the assets or voting stock of
Texas Commerce to one or more persons, entities or groups of
which the Corporation is not a majority owner (whether by
merger, consolidation, sale of assets or stock, liquidation,
dissolution, winding up or otherwise), effective upon
consummation of such sale, transfer, assignment or other
disposition (or, in the case of a related series of such
transactions, effective upon the consummation of the first
thereof after the consummation of which a majority of the
assets or voting stock of Texas Commerce shall have been so
sold, transferred, assigned or otherwise disposed of) and
automatically without any action on the part of the
Corporation or its Board of Directors or stockholders,

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<PAGE> 8
the Corporation shall be recapitalized and each of the
outstanding shares of Class B Common Stock shall be converted
into the number of fully paid and nonassessable shares of
Common Stock provided for in subparagraph (d)(3).

(3) Number of Shares of Common Stock into which
Shares of Class B Common Stock Shall Be Convertible. The
number of shares of Common Stock into which each share of
Class B Common Stock shall be convertible upon any conversion
pursuant to this paragraph (d) shall be: (A) prior to the
Reset Date, 0.4500, as such number may be adjusted pursuant to
subparagraphs (e)(1) and (e)(2), and (B) thereafter, a number
equal to the Applicable Ratio.

(4) Conversion Procedures.

(A) No fraction of a share of Common
Stock shall be issued in connection with the conversion of
shares of Class B Common Stock into Common Stock, but in lieu
thereof each holder of Class B Common Stock who would
otherwise be entitled to a fractional interest of a share of
Common Stock shall, upon surrender of such holder's
certificate or certificates representing shares of Class B
Common Stock, receive a cash payment (without interest) (the
"Fractional Payment") equal to the product resulting from
multiplying (I) the fraction of a share of Common Stock to
which such holder would otherwise have been entitled by (II)
the Average Market Price per Share of Common Stock (as defined
in the next sentence) on the Conversion Date. The "Average
Market Price per Share of Common Stock" shall be the average
of the daily closing prices per share for the Common Stock for
the 15 consecutive trading days ending one trading day prior
to either (I) in the case of a conversion pursuant to
subparagraph (d)(1), the date the Conversion Notice is mailed
or (II) in the case of a conversion pursuant to subparagraph
(d)(2), the date of the public announcement by the Corporation
or one of its subsidiaries of the first to occur of the
following: that the Corporation or one of its subsidiaries (1)
has entered into an agreement in principle with respect to
such transaction or (2) has entered into a definitive
agreement with respect thereto. The closing price for each
day shall be the closing sales price as reported in The Wall
Street Journal or, if not reported therein, as reported in
another newspaper of national circulation chosen by the Board
of Directors of the Corporation or the Executive Committee
thereof or, in case no such sale takes place on such day, the
average of the closing bid and asked prices regular way on the
New York Stock Exchange or, if the Common Stock is not then
listed or admitted to trading on the New York Stock

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<PAGE> 9
Exchange, on the largest national securities exchange on which
such stock is then listed or admitted to trading or, if not
listed or admitted to trading on any national securities
exchange, then the last reported sale prices for such shares
in the over-the-counter market as reported on the National
Association of Securities Dealers Automated Quotation System
or, if such sale prices shall not be reported thereon, the
average of the closing bid and asked prices so reported or, if
such bid and asked prices shall not be reported thereon, as
the same shall be reported by the National Quotation Bureau
Incorporated or, in all other cases, an appraised market value
furnished by any New York Stock Exchange member firm selected
from time to time by the Board of Directors of the Corporation
or the Executive Committee thereof for that purpose.

(B) No adjustments in respect of Class B Common
Stock dividends shall be made upon the conversion of any
shares of Class B Common Stock (and the provisions of
subparagraph (d)(4)(E) shall govern with respect to Common
Stock dividends payable on converted shares of Class B Common
Stock); provided, however, that, if the Conversion Date shall
be subsequent to the record date for the payment of a dividend
or other distribution thereon or with respect thereto but
prior to the payment or distribution thereof, the registered
holders of such shares at the close of business on such record
date shall be entitled to receive the dividend or other
distribution payable on such shares on the date set for
payment of such dividend or other distribution notwithstanding
the conversion of such shares or the Corporation's default in
payment of the dividend or distribution due on such date;
provided further, however, that so long as any shares of Class
B Common Stock shall remain outstanding, the record dates for
the payment of regular quarterly cash dividends (to the
extent, if any, declared) with respect to the Common Stock and
Class B Common Stock shall be the same.

(C) At such time as the Corporation exercises its
right to cause all of the shares of Class B Common Stock to be
converted into Common Stock in accordance with subparagraph
(d)(1) or at such time as there occurs the automatic
conversion of such Class B Common Stock into Common Stock as a
result of a sale, transfer, assignment or other disposition of
the type referred to in subparagraph (d)(2), the Corporation
shall (i) fix a date for conversion, which in the case of
conversion in accordance with subparagraph (d)(1) shall be not
less than 10 nor more than 60 days after the giving of notice
provided for below and in the case of conversion in accordance
with subparagraph (d)(2) shall be as soon as

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<PAGE> 10
practicable before or after the date of such notice (any such
date fixed for conversion or any such date of conversion being
called the "Conversion Date"), and (ii) give notice of
conversion to the holders of Class B Common Stock by mailing
by first- class mail a notice of such conversion (the
"Conversion Notice") to such holders' last addresses as they
shall appear on the Corporation's books. Each such Conversion
Notice shall specify the Conversion Date, the number of shares
of Common Stock into which a share of Class B Common Stock
shall be convertible and the information required by
subparagraphs (h)(3)(A) through (E) for the period ending on
the Conversion Date (or, with respect to the information
required by subparagraphs (h)(3)(A) through (E), if the
Conversion Date shall not be the last day of a Fiscal Quarter,
for the period ending on the last day of the Fiscal Quarter
immediately preceding the Conversion Date) and shall state
that issuance of certificates representing Common Stock to be
received upon conversion of shares of Class B Common Stock
shall be conditioned upon surrender of certificates
representing such shares of Class B Common Stock.

(D) Before any holder of shares of Class B Common
Stock converted into shares of Common Stock shall be entitled
to receive certificates representing such shares of Common
Stock, he shall surrender at such office as the Corporation
shall specify certificates for such shares of Class B Common
Stock duly endorsed to the Corporation or in blank or
accompanied by proper instruments of transfer to the
Corporation or in blank, unless the Corporation shall waive
such requirement. The Corporation shall, as soon as
practicable after such surrender of certificates representing
such shares of Class B Common Stock, issue and deliver, at the
office of the transfer agent for the Common Stock, to the
person for whose account such shares of Class B Common Stock
were so surrendered (or to his nominee or nominees),
certificates representing the number of whole shares of Common
Stock to which he shall be entitled as aforesaid, together
with the Fractional Payment, if any.

(E) From and after the Conversion Date, all
rights of a holder of shares of Class B Common Stock which
were converted into shares of Common Stock shall cease except
for the right, upon surrender of the certificates representing
such shares of Class B Common Stock, to receive certificates
representing shares of Common Stock together with a Fractional
Payment, if any, as contemplated by subparagraphs (d)(4)(D)
and (d)(4)(A) and the rights to Class B Common Stock dividends
as provided in subparagraph (d)(4)(B). No holder of a
certificate

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<PAGE> 11
which immediately prior to the applicable Conversion Date
represented shares of Class B Common Stock shall be entitled
to receive any dividend or other distribution with respect to
such shares of Common Stock until surrender of such holder's
certificate for a certificate or certificates representing
shares of Common Stock. Upon such surrender, there shall be
paid to the holder the amount of any dividends or other
distributions (without interest) which theretofore became
payable with respect to a record date after the Conversion
Date, but which were not paid by reason of the foregoing, with
respect to the number of whole shares of Common Stock
represented by the certificate or certificates issued upon
such surrender. From and after the Conversion Date, the
Corporation shall, however, be entitled to treat the
certificates for Class B Common Stock which have not yet been
surrendered in respect of conversion as evidencing the
ownership of the number of whole shares of Common Stock into
which the shares of Class B Common Stock represented by such
certificates shall have been converted, notwithstanding the
failure to surrender the certificates.

(F) If any certificate for shares of Common Stock
is to be issued in a name other than that in which the
certificate representing shares of Class B Common Stock
surrendered in respect of conversion is registered, it shall
be a condition of such issuance that the person requesting
such issuance shall pay any transfer or other taxes required
by reason of the issuance of certificates for such shares of
Common Stock in a name other than that of the record holder of
the certificate surrendered, or shall establish to the
satisfaction of the Corporation or its agent that such tax has
been paid or is not applicable. Notwithstanding anything to
the contrary in this paragraph (F), the Corporation shall not
be liable to a holder of shares of Class B Common Stock for
any shares of Common Stock or dividends or distributions
thereon delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.

(G) At any time prior to the Conversion Date, the
Corporation shall reserve and keep available, solely for the
purpose of issuance upon conversion of Class B Common Stock,
the maximum number of shares of Common Stock that shall be
issuable upon the conversion of the shares of Class B Common
Stock outstanding at such time; provided, that nothing
contained herein shall be construed to preclude the
Corporation from satisfying its obligations in respect of
conversion of the outstanding shares of Class B Common Stock
by delivery of purchased shares of

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<PAGE> 12
Common Stock which are held in the treasury of the Corporation.

(H) All computations of the number of shares of
Common Stock into which a share of Class B Common Stock shall
be convertible, except to the extent more specific provision
is made in this Part II of this Article Fourth, shall be made
by the firm of independent certified public accountants
regularly employed by the Corporation, and a written statement
thereof shall be filed with and retained by the office of the
Secretary of the Corporation. Such firm shall not be bound by
the rules of evidence when making any such computation. All
such computations shall be binding and conclusive on the
Corporation and the holders from time to time of the shares of
common stock. No such determination shall be subject to
review by or appeal to any court.

(e) Recapitalizations, Mergers, etc.; Authority to Issue
and Reissue Class B Common Stock.

(1) Capital Events. If, after the Effective
Date, the Corporation shall in any manner subdivide (by stock
split or otherwise) or combine (by reverse stock split or
otherwise) the outstanding shares of the Common Stock or the
Class B Common Stock or otherwise recapitalize the common
stocks of the Corporation or pay a stock dividend (subject to
subparagraph (e)(3)) (any such subdivision, combination,
recapitalization or stock dividend being called a "Capital
Event"), the Applicable Ratio and, where not based on the
Applicable Ratio, the number of shares of Common Stock into
which a share of Class B Common Stock shall be convertible
shall be appropriately and proportionately adjusted.

(2) Adjustments Generally. The determination of
any adjustment required under subparagraph (e)(1) shall be
made by the Corporation's Board of Directors, and evidence
thereof shall be filed with and retained by the office of the
Secretary of the Corporation.

(3) Prohibited Stock Dividends. The Corporation
shall not effect any Capital Event which shall be, or which
shall have the effect of, a stock dividend (i) of either class
of common stock with respect to shares of Class B Common Stock
or (ii) of Class B Common Stock with respect to shares of
Common Stock.

(4) Mergers, etc. In the event of any merger or
consolidation or similar transaction (a "Merger") (it being
understood that for these purposes a sale of all or
substantially all the assets of the Corporation shall

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<PAGE> 13
not, in itself, constitute a Merger) between the Corporation
and any other person or entity in which the Corporation is not
the surviving corporation (other than a Capital Event effected
as a Merger between the Corporation and a wholly owned
subsidiary of the Corporation (without consideration of
directors' qualifying shares) in which the certificate of
incorporation of the surviving corporation provides for two
classes of common equity correlative to the Common Stock and
Class B Common Stock and defines the relative rights,
privileges and restrictions of the shares of each class as
herein defined), each share of Class B Common Stock shall
represent the right to receive, at the time or times to be
received by the holders of shares of Common Stock in respect
of such shares in the Merger, the type or types and amount or
amounts of consideration so to be received in respect of
0.4500 shares of Common Stock (as such number 0.4500 may be
adjusted from time to time for Capital Events between the
Effective Date and the date of the Merger) and subject to such
provisions for settlement of fractional share amounts,
elections by holders among types and amounts of consideration
receivable by them and the like as the agreement or plan
governing the Merger shall provide.

(5) Authority to Issue and Reissue Class B Common
Stock. From and after the earlier of the Reset Date and the
Conversion Date, the Corporation shall cease to have the
authority to issue or to reissue Class B Common Stock.

(f) Applicable Ratio. The "Applicable Ratio" shall be
based on Texas Commerce Adjusted Additional Retained Earnings per
Share calculated as of the close of the Fiscal Quarter preceding the
occurrence of the event requiring the calculation (but in no event as
of a date later than December 31, 1991) pursuant to paragraph (g) and
shall be adjusted pursuant to subparagraphs (e)(1) and (e)(2). If
Texas Commerce Adjusted Additional Retained Earnings per Share
computed as of the relevant date shall be less than $8.87, the
Applicable Ratio shall be 0.0300. If Texas Commerce Adjusted
Additional Retained Earnings per Share computed as of the relevant
date shall be equal to or greater than $30.56, the Applicable Ratio
shall be 0.4500. In all other cases, the Applicable Ratio shall be
based on the Factors (the numbers set forth under the headings Y and Z
in the table below) corresponding to the adjacent range of Texas
Commerce Adjusted Retained Earnings per Share computed as of the
relevant date (the numbers set forth under the headings W and X in the
table below) and shall be equal, for any particular value ("N") of
Texas Commerce Adjusted Additional Retained Earnings per Share
computed as of the relevant date, to the number (rounded to

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<PAGE> 14
the nearest 0.001, with 0.00005 being rounded up) obtained from the
following formula:

N - W
Y + (Z-Y) -----
X - W

where W, X, Y and Z shall have the following corresponding values:

Texas Commerce Adjusted
Additional Retained Earnings per Share Factors
-------------------------------------- -------

W X Y Z
- - - -
$ 8.87 or greater, but less than $ 9.87 0.0300 0.0466
$ 9.87 or greater, but less than $10.16 0.0466 0.0547
$10.16 or greater, but less than $10.68 0.0547 0.0691
$10.68 or greater, but less than $10.87 0.0691 0.0744
$10.87 or greater, but less than $11.49 0.0744 0.0917
$11.49 or greater, but less than $11.87 0.0917 0.0981
$11.87 or greater, but less than $12.87 0.0981 0.1151
$12.87 or greater, but less than $13.87 0.1151 0.1520
$13.87 or greater, but less than $14.87 0.1520 0.1690
$14.87 or greater, but less than $15.03 0.1690 0.1717
$15.03 or greater, but less than $15.87 0.1717 0.1859
$15.87 or greater, but less than $16.87 0.1859 0.2029
$16.87 or greater, but less than $17.87 0.2029 0.2198
$17.87 or greater, but less than $18.87 0.2198 0.2368
$18.87 or greater, but less than $19.87 0.2368 0.2537
$19.87 or greater, but less than $20.79 0.2537 0.2693
$20.79 or greater, but less than $20.87 0.2693 0.2707
$20.87 or greater, but less than $21.57 0.2707 0.2826
$21.57 or greater, but less than $22.87 0.2826 0.2855
$22.87 or greater, but less than $23.87 0.2855 0.3069
$23.87 or greater, but less than $24.87 0.3069 0.3283
$24.87 or greater, but less than $25.87 0.3283 0.3497
$25.87 or greater, but less than $26.87 0.3497 0.3711
$26.87 or greater, but less than $27.87 0.3711 0.3925
$27.87 or greater, but less than $28.87 0.3925 0.4139
$28.87 or greater, but less than $29.87 0.4139 0.4353
$29.87 or greater, but less than $30.56 0.4353 0.4500

(g) Texas Commerce Adjusted Additional Retained Earnings
per Share. "Texas Commerce Adjusted Additional Retained Earnings per
Share" shall be equal at any date to the quotient (rounded to the
nearest cent, with one-half of a cent being rounded up) of (x) the
difference between Texas Commerce Earnings and Deemed Dividends, in
each case cumulated from the first day of the calendar month in which
the Effective Date occurs through the date as of which Texas Commerce
Adjusted Additional Retained Earnings per Share is to be calculated,

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<PAGE> 15
and (y) the number of shares of Class B Common Stock outstanding as of
the calculation date plus the number of shares of Class B Common Stock
deliverable upon exercise of all employee stock options issued by
Texas Commerce before the Effective Date and outstanding as of the
calculation date. The amount in clause (x) is referred to as "Texas
Commerce Adjusted Additional Retained Earnings".

(1) Texas Commerce Earnings. "Texas Commerce
Earnings" shall mean the consolidated pretax earnings or
losses of Texas Commerce and its consolidated subsidiaries,
determined in accordance with GAAP and the following special
provisions (B) through (H), and adjusted for taxes pursuant to
the following special provision (A):

(A) Adjustments in respect of Federal,
state, local and foreign income and franchise taxes
shall be calculated in accordance with GAAP as if
such calculations were being made with respect to the
Texas Commerce consolidated group (the "group")
standing alone. Adjustments shall be made in
accordance with the following two rules. First, any
revenues or expenses pursuant to subparagraphs
(g)(1)(B) through (H) shall be eliminated from
consolidated pretax earnings or losses of Texas
Commerce and its consolidated subsidiaries. The
number resulting from the foregoing calculation and
elimination shall be referred to as "pretax Texas
Commerce GAAP Earnings". To the extent that tax
benefits (including those arising prior to the
Effective Date but unrecognized in the determination
of income tax expense for financial statement
purposes through the date of the balance sheet
mentioned below) would be recognized in accordance
with GAAP with respect to pretax Texas Commerce GAAP
Earnings for the fiscal period ending on the date as
of which the calculation of Texas Commerce Earnings
is being made (the "calculation date"), such benefits
shall be recognized in full by Texas Commerce for
purposes of calculating Texas Commerce Earnings for
such period: (i) To the extent that such recognition
shall not as of the calculation date be permitted
under GAAP and (ii) if such unrecognized benefit
shall be about to expire at the calculation date (and
for these purposes all unrecognized benefits shall be
deemed to be about to expire if the calculation date
is December 31, 1991) and (iii) if the Corporation's
consolidated financial statements as of the
calculation date shall reflect a net Federal deferred
tax credit, then: Texas Commerce Earnings

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<PAGE> 16
shall be increased by one-half of the difference (if
positive) between the Corporation's consolidated net
Federal deferred tax credit as of the calculation
date and $25,000,000, to the extent to which such
difference does not exceed one-half of such expiring
unrecognized tax benefit; and such benefit to which
such adjustment is attributable shall not thereafter
be available for further recognition by the group for
purposes of calculating Texas Commerce Earnings.
With respect to the calculation to be made for
purposes of the Reset Date, if the group shall, as of
December 31, 1991, after giving effect to the
preceding sentence, have a net debit balance in a
deferred tax account which shall be maintained and
adjusted in accordance with GAAP solely for purposes
of effectuating the foregoing procedures (and which
shall reflect an initial opening balance derived from
the consolidated balance sheet mentioned in
subparagraph (g)(4)), the amount of such net debit
balance shall be added to the amount of tax expense
for Texas Commerce Earnings for the fiscal year ended
December 31, 1991. Second, with respect to the
calculation to be made in respect of each of the
above-mentioned taxes as of any calculation date for
purposes of the component of Texas Commerce Earnings
represented by the total revenues and expenses
provided for in subparagraphs (g)(1)(B) through (H),
adjustment shall be made by multiplying the aggregate
of such revenues and expenses (whether positive or
negative) by the applicable statutory rate for the
applicable year and including the resulting product
in the applicable tax provision.

(B) In the event that the Corporation or
any of its subsidiaries (other than Texas Commerce or
any of its subsidiaries) makes any loan or advance to
Texas Commerce or any of its subsidiaries (whether or
not such loan or advance qualifies as debt capital)
(a renewal of any such loan or advance being
considered a new loan or advance), the interest
expense attributable to any such loan or advance
shall, for purposes of calculating Texas Commerce
Earnings, be deemed to be the interest expense
determined pursuant to this subparagraph (g)(1)(B),
notwithstanding the nominal interest rate, if any, of
such loan or advance. If such loan or advance shall
be for a term of one year or less (a "short-term
loan"), then the interest expense from time to time
attributable to such loan or advance for purposes of
calculating Texas

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<PAGE> 17
Commerce Earnings shall be deemed to be either (x)
the interest expense from time to time attributable
to the funds received by the Corporation or its
subsidiaries pursuant to instruments or arrangements
by which the Corporation or such subsidiaries funded
the loan or advance to Texas Commerce or its
subsidiaries (a "match-funded rate") or (y) the
interest expense from time to time attributable to
that interest rate which the Corporation would pay,
at the time of the making of such loan or advance,
for obligations of comparable denomination and
maturity sold in the public market (a "market rate").
The Corporation shall determine whether the funding
was at a match-funded rate or a market rate and such
determination shall be binding and conclusive and
shall not be subject to review by or appeal to any
court. The Corporation shall also determine the
interest expense attributable to the relevant rate
and shall notify Texas Commerce in writing of the
same. If Texas Commerce shall disagree, the matter
shall be submitted to a firm of independent certified
public accountants, in the case of a match-funded
rate, and to an investment banking firm, in the case
of a market rate, in either case of recognized
standing and mutually acceptable to the Corporation
and Texas Commerce; and the determination of such
firm, or of the Corporation if such firm is unable to
make the determination within a reasonable time,
shall be binding, conclusive, nonreviewable and
nonappealable as aforesaid. If the loan or advance
is not a short-term loan, the same procedures shall
apply, except that if the Corporation shall have
determined as aforesaid that the loan or advance was
funded with market-rate funds, then the initial
determination of the applicable market rate shall be
made by the investment banking firm, and the
Corporation shall make the determination (in each
case binding, conclusive, nonreviewable and
nonappealable as aforesaid) only if such firm is
unable to make its determination within a reasonable
time. Any determination of interest expense pursuant
to this subparagraph (g)(1)(B) shall be made on an
"all-in" basis, reflecting any original issue
discount, costs of issuance and similar factors. The
Corporation shall not require Texas Commerce to pay
interest to the Corporation in respect of any loan or
advance at a rate in excess of that determined
pursuant to this subparagraph (g)(1)(B).

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<PAGE> 18
(C) In the event that the Corporation or
any of its subsidiaries (other than Texas Commerce or
any of its subsidiaries) provides any equity capital
to Texas Commerce or any of its subsidiaries, in the
event that Texas Commerce issues any capital stock to
the Corporation or any of its subsidiaries other than
subsidiaries of Texas Commerce or in the event of any
other capital transactions not covered by
subparagraph (g)(1)(B), the Corporation and Texas
Commerce may charge and/or credit each other to
reflect fairly and equitably the economic effect of
such transactions on the parties involved. For such
purposes of calculating Texas Commerce Earnings, the
amount by which Deemed Dividends for any fiscal
period shall exceed the fair market value of
dividends actually paid to the Corporation by Texas
Commerce with respect to the Corporation's ownership
of capital stock of Texas Commerce may be deemed to
be a provision of equity capital of which a charge
may be made, and the amount by which the fair market
value of dividends actually paid as aforesaid in any
fiscal period shall exceed Deemed Dividends may be
deemed to be a reduction of equity capital for which
a charge may be made. Any such charge or credit may
be stated to be determined on a pretax or aftertax
basis for purposes of the tax adjustments provided
for in subparagraph (g)(1)(A).

(D) Texas Commerce Earnings shall be
reduced by the amount by which the Corporation or any
of its subsidiaries other than Texas Commerce and its
subsidiaries shall have incurred expenses relating to
employees of Texas Commerce or any of its
subsidiaries in connection with salaries or employee
benefit plans or arrangements, except to the extent
that any such expenses shall have been recorded by
Texas Commerce.

(E) Texas Commerce Earnings shall not
reflect any purchase accounting adjustments resulting
from the merger of Texas Commerce on the Effective
Date but shall continue to reflect the amortization
of the goodwill and other intangibles on the books of
Texas Commerce as before the Effective Date.

(F) Texas Commerce Earnings shall
exclude any nonrecurring revenues and expenses, which
term shall mean for purposes hereof revenues and
expenses attributable to (i) extraordinary items, as
defined by GAAP (excluding tax benefits realized in
accordance with subparagraph (g)(1)(A)), (ii)

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<PAGE> 19
any one-time effect of any change in tax rates if the
liability method of accounting shall be required
under GAAP and (iii) sales of real estate (including
leasehold) interests (other than sales of other real
estate owned);provided, howeve, that if clause (iii)
results in an exclusion from Texas Commerce Earnings
of any revenue on the sale-and- leaseback of any
property owned by Texas Commerce or its subsidiaries
and used in their operations, the calculation of
Texas Commerce Earnings shall disregard, in an amount
no greater than such revenue, the pretax amount by
which the resulting incremental leasehold expenses
would reduce Texas Commerce Earnings.

(G) Texas Commerce Earnings shall not
reflect any gains or losses recorded by Texas
Commerce in connection with the distribution or
disposition by Texas Commerce of shares of common
stock of the Distributed Bank after the Effective
Date.

(H) Texas Commerce Earnings shall be
reduced by direct expenses incurred in administering
the provisions of this Part II of this Article Fourth
as they relate to the determination of the Applicable
Ratio, including without limitation expenses relating
to the performance of subparagraph (h)(2), in each
case except to the extent such expenses shall have
been recorded by Texas Commerce.

(2) Deemed Dividend. The "Deemed Dividend" for
any period shall be equal to the amount of the dividends
declared during such period (to the extent subsequently paid)
by the Corporation with respect to the Class B Common Stock.

(3) Calculation of Texas Commerce Adjusted
Additional Retained Earnings. Texas Commerce Adjusted
Additional Retained Earnings shall be calculated at least
quarterly, commencing with the first Fiscal Quarter following
the Effective Date, in connection with the preparation of the
notices required by paragraph (h)(3) and in connection with
any conversion of shares of Class B Common Stock into shares
of Common Stock. In the case of any such calculation (p) as
of December 31 of any year or (q) for purposes of any actual
conversion, such calculation shall be made initially by the
firm of independent certified public accountants regularly
employed by Texas Commerce after the Effective Date for the
examination of its financial statements. A second firm of
independent certified public accountants of

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<PAGE> 20
recognized standing retained by Texas Commerce shall review
such calculation and if such second firm (x) agrees with the
calculation of such first firm or (y) disagrees with the
calculation of such first firm by an amount less than
$5,000,000, then (x) the amount so agreed upon or (y) the
arithmetic mean of the two varying amounts, as the case may
be, shall be set forth in a written statement or statements of
such two firms and filed with and retained by the office of
the Secretary of the Corporation. If such two firms are
unable to furnish such written statement or statements, then
the Corporation and Texas Commerce shall elect either to
accept the higher calculation or to cause the two firms of
independent certified public accountants to choose a third
firm of independent certified public accountants of recognized
standing to review the calculation of Texas Commerce Adjusted
Additional Retained Earnings, which firm shall furnish a
written statement setting forth its calculation, which shall
be filed with the office of the Secretary of the Corporation,
and such calculation shall thereupon be final. Such firms
shall not be bound by the rules of evidence when making any
calculation or estimate and shall not be required to state in
writing any reasons for making any calculation. All such
calculations, when final as provided above, shall be binding
and conclusive on the Corporation and the holders from time to
time of the shares of common stock. No such calculation shall
be subject to review by or appeal to any court. No
calculation of Texas Commerce Adjusted Additional Retained
Earnings other than as of December 31 of any year shall have
any binding effect on any calculation thereof as of any
previous or subsequent date.

(4) Initial Accounting Period. The cumulation of
Texas Commerce Earnings shall begin on the basis of a
consolidated Texas Commerce balance sheet as of the close of
the calendar month preceding the Effective Date, which balance
sheet shall have been prepared (i) in the same manner (and
supported by the requisite closing of the books of Texas
Commerce and its consolidated subsidiaries) as if Texas
Commerce had been obligated to file a Quarterly Report on Form
10-Q with the Securities and Exchange Commission for a fiscal
period ending on such day but (ii) on the basis that the share
exchange described in the definition of "Distributed Bank" has
previously occurred.

(5) Termination of Calculations, etc. The
Corporation shall not be obligated by this Part II of this
Article Fourth to provide for the calculation of Texas
Commerce Adjusted Additional Earnings per Share or any
component thereof after the earlier of (x) the date

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<PAGE> 21
on which all shares of Class B Common Stock have been
converted pursuant to paragraph (d) and (y) the Reset Date.

(h) Miscellaneous.

(1) Definitions. As used in this Part II of
this Article Fourth, the following definitions shall apply:

"Applicable Ratio" shall have the meaning
assigned such term in, and shall be calculated in
accordance with, paragraph (f).

"Capital Event" shall have the meaning
assigned such term in subparagraph (e)(1).

"Class B Common Stock" shall have the meaning
assigned such term in the first paragraph of Part I
of this Article Fourth.

"Common Stock" shall have the meaning
assigned such term in the first paragraph of Part I
of this Article Fourth.

"common stock" shall mean Common Stock or
Class B Common Stock or both, as the context requires.

"Conversion Date" shall have the meaning
assigned such term in subparagraph (d)(4)(C).

"Conversion Notice" shall have the meaning
assigned such term in subparagraph (d)(4)(C).

"Deemed Dividend" shall have the meaning
assigned such term in subparagraph (g)(2).

"Distributed Bank" shall mean the national
bank subsidiary of Texas Commerce, shares of the
common stock of which were exchanged, in connection
with the Effective Date, for the shares of common
stock of Texas Commerce owned by stockholders of
Texas Commerce.

"Effective Date" shall mean the date on which
the merger of Texas Commerce with a wholly owned
subsidiary of the Corporation became effective under
the General Corporation Law of the State of Delaware.

"Expert" shall have the meaning assigned
such term in subparagraph (h)(2).

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<PAGE> 22
"Fiscal Quarter" shall mean the three-month
period ended each March 31, June 30, September 30 or
December 31.

"Fractional Payment" shall have the meaning
assigned such term in subparagraph (d)(4)(A).

"GAAP" shall mean generally accepted
accounting principles as provided in subparagraph
(h)(5).

"Preferred Stock" shall have the meaning
assigned such term in the first paragraph of Part I
of this Article Fourth.

"Reset Date" shall mean March 1, 1992, or the
first date thereafter on which the Applicable Ratio
as of December 31, 1991, can be calculated.

"Texas Commerce" shall mean Texas Commerce
Bancshares, Inc., a Delaware corporation, and any
subsidiary, division or other business unit of the
Corporation that may succeed to such corporation or
substantially all the business of such corporation or
such successor.

"Texas Commerce Adjusted Additional Retained
Earnings" shall have the meaning assigned such term
in the second sentence of paragraph (g) and shall be
calculated in accordance with subparagraph (g)(3).

"Texas Commerce Adjusted Additional Retained
Earnings per Share" shall have the meaning assigned
such term, and shall be calculated in accordance
with, the first sentence of paragraph (g).

"Texas Commerce Earnings" shall have the
meaning assigned such term in subparagraph (g)(1) and
shall be calculated in accordance with subparagraph
(g)(1).

(2) General Provisions Relating to Independent
Certified Public Accountants and Investment Banking Firms.
The independent certified public accountants and investment
banking firms engaged to take any action under this Part II of
this Article Fourth ("Experts") shall have full access to the
books and records and personnel of the Corporation and Texas
Commerce and their subsidiaries to enable them to perform
their responsibiities set forth herein. The Experts shall
have access to the portions of meetings of directors and

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<PAGE> 23
officers and other employees of the Corporation and Texas
Commerce and their subsidiaries at which discussions are held
which are relevant to any determination. The Corporation,
Texas Commerce and their subsidiaries shall provide work space
and all secretarial and other services reasonably requested by
the Experts to enable them to perform such responsibilities.
Each of the Experts shall be entitled to adopt and amend rules
and regulations from time to time governing the performance of
such responsibilities. The Corporation shall pay compensation
to each Expert in such amounts as shall from time to time be
agreed to by the Corporation and each Expert, and such amounts
shall at all times be sufficient to retain or obtain qualified
firms to serve in such capacities. The Corporation shall
indemnify each Expert against all losses and expenses incurred
or suffered by it in the performance of its responsibilities
hereunder except to the extent that such losses or expenses
are attributable to such Expert's willful misconduct. The
Corporation may acquire and pay for insurance for any Expert
covering such losses and expenses to the extent covered by the
foregoing indemnity. No Expert shall be liable to the holders
from time to time of the shares of either common stock of the
Corporation for the performance of their responsibilities
hereunder or for any damage to any such holder except to the
extent that any such damage is attributable to the willful
misconduct of such Expert. Each such holder shall be bound by
the provisions of the foregoing sentence.

(3) Notices to Stockholders. No later than 90
days after the close of each Fiscal Quarter ending on December
31 and 45 days after the close of each other Fiscal Quarter,
ending on the earlier of the last such date preceding the
conversion of shares of Class B Common Stock into Common Stock
or the first such date following the Reset Date, the
Corporation shall notify each holder of record of Class B
Common Stock, by first-class mail, postage prepaid, of the
following information, determined as of the close of the
Fiscal Quarter immediately preceding such notice; provided,
however, that the information set forth in (B) through (F)
shall only be provided in notices delivered in respect of
Fiscal Quarters ending on December 31; provided further,
however, that the Corporation may comply with this
subparagraph (h)(3) by including the required information in
annual and quarterly reports to stockholders furnished in
timely manner in accordance with the requirements of the
Securities Exchange Act of 1934 or any successor Federal law;
provided further, however, that the giving of any such notice
may be deferred until the earliest practicable date after the
date otherwise required if the

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<PAGE> 24
delay is caused by the inability of the Corporation to
determine any information required to be furnished in such
notice because of the time required to comply with the
provisions of this Part II of this Article Fourth with respect
to the review of, and resolution of disputes concerning, such
information.

(A) Texas Commerce Adjusted Additional
Retained Earnings and Texas Commerce Adjusted
Additional Retained Earnings per Share as of the
March 31, June 30, September 30 or December 31 on
which the relevant Fiscal Quarter shall end.

(B) Texas Commerce Earnings during the
applicable fiscal year.

(D) The difference between the amounts
set forth in (B) and (C) during such period.

(E) The nature of any Capital Events
during such period and any changes in the number
corresponding to clause (y) in the first sentence of
paragraph (g).

(F) Information on the range of possible
Applicable Ratios, and the variables relating
thereto, reasonably comparable to that provided
pursuant to subparagraph (d)(3).

A copy of each such notice shall be filed with and retained at
the office of the Secretary of the Corporation.

(4) Documents and Certificates. The notices sent
to holders of Class B Common Stock pursuant to subparagraph
(h)(3) shall be available for inspection and copying (at
stockholder expense) during regular business hours by a holder
of record at such time of one or more shares of either common
stock of the Corporation. Except as stated in the preceding
sentence, such holders will not be permitted to inspect or
copy any of the certificates, opinions or other documents
produced or relied upon by the Experts in making any
determinations. The Corporation shall retain all documents,
certificates and other writings filed at the office of the
Secretary of the Corporation pursuant hereto until the
expiration of three years after the earlier of (x) the date on
which all shares of Class B Common Stock have been converted
pursuant to paragraph (d) and (y) the Reset Date, unless
otherwise required by law. The failure to file any

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<PAGE> 25
document, certificate or writing at such office shall not
invalidate the certifications contained therein.

(5) Accounting Principles, Policies and
Procedures. Any determinations to be made under this Part II
of this Article Fourth with respect to Texas Commerce Adjusted
Additional Retained Earnings per Share or any component
thereof shall be made on the basis of generally accepted
accounting principles as in effect, and as applied by
(together with related accounting policies and procedures as
applied by) the Corporation, from time to time,
notwithstanding that prior to the Effective Date Texas
Commerce may have applied generally accepted accounting
principles differently or may have applied different related
policies and procedures, but subject to the adjustments set
forth in subparagraph (g)(1). Nothing in this Part II of this
Article Fourth shall be deemed, by direct application, by
implication or otherwise, to require that the Corporation or
any subsidiary thereof (including Texas Commerce and its
subsidiaries), with respect to any determination to be made
for any purpose other than such determinations pursuant to
this Part II of this Article Fourth, apply any accounting
principles or adhere to any policy with respect thereto other
than the principles and policies which would otherwise be
applicable for all such other purposes, including without
limitation financial, regulatory and tax reporting.

(6) Governance of Texas Commerce. In acting as
stockholder through Texas Commerce's Board of Directors to
cause Texas Commerce to act or not to act, insofar as the
rights of the holders of capital stock of the Corporation
shall be concerned, the Corporation and its officers,
directors, employees and agents shall be fully protected in
relying upon the opinions of Experts and the orders, requests
or directives of any court, administrative agency or
commission or other governmental authority or instrumentality
as to such action or inaction and shall be entitled to assert
such reliance as conclusive evidence of the reasonableness of
such action or inaction in any litigation brought by a holder
of capital stock of the Corporation, and each such holder by
his acceptance of shares acknowledges and agrees to the
provisions of this subparagraph (h)(6). Without limiting the
generality of the foregoing, the Corporation (as stockholder
acting as aforesaid) shall be permitted to require that Texas
Commerce and its subsidiaries shall conduct securities
transactions in a manner consistent with the policies and
practices of the Corporation from time to time relating to
interest rate risk and portfolio management.

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<PAGE> 26
(7) Preferred Stock Rights Unaffected. Whenever
the certificate of designations of any outstanding series of
Preferred Stock issued prior to the Effective Date confers
upon the holders thereof a power, preference or right as
against the holders of "Common Stock", the holders of shares
of such series shall be entitled to exercise each such power,
preference or right as against the holders of Common Stock and
Class B Common Stock.

(8) Headings. Headings in the subdivisions of
this Part II of this Article Fourth are included for
convenience of reference only and shall not be employed in the
construction or interpretation hereof.

PART III

Preferred Stock

The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the Preferred Stock
shall be as follows:

(1) 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 but not to exceed one vote per share, 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 Certificate of Incorporation, or any amendment thereto,
including (but without limiting the generality of the foregoing) the
following:

(a) the designation of such series;

(b) the dividend rate of such series, the conditions
and dates upon which such dividends shall be payable, the
preference or relation which such dividends shall bear to the
dividends payable on any other class or classes or on any
other series of any class or classes of capital stock, and
whether such dividends shall be cumulative or non-cumulative;

(c) whether the shares of such series shall be
subject to redemption by the Corporation, and, if made subject
to such redemption, the times, prices and other terms and
conditions of such redemption;

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<PAGE> 27
(d) the terms and amount of any sinking fund
provided for the purchase or redemption of the shares of such
series;

(e) whether or not the shares of such series shall
be convertible into or exchangeable for shares of any other
class or classes or of any other series of any class or
classes of capital stock of the Corporation, and, if provision
be made for conversion or exchange, the times, prices, rates,
adjustments and other terms and conditions of such conversion
or exchange;

(f) the extent, if any, to which the holders of the
shares of such series shall be entitled to vote as a class or
otherwise with respect to the election of the directors or
otherwise; provided, however, that in no event shall any
holder of any series of Preferred Stock be entitled to more
than one vote for each share of such Preferred Stock held by
him;

(g) the restrictions, if any, on the issue or
reissue of any additional Preferred Stock;

(h) the rights of the holders of the shares of such
series upon the dissolution of, or upon the distribution of
assets of, the Corporation.

(2) Except as otherwise required by law and except for such
voting powers with respect to the election of directors or other
matters as may be stated in the resolutions of the Board of Directors
creating any series of Preferred Stock, the holders of any such series
shall have no voting power whatsoever.

(3) The voting powers, designations, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the
Corporation's Junior Participating Preferred Stock are set forth in
Appendix A hereto and are incorporated herein by reference.

(4) The voting powers, designations, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the
Corporation's Adjustable Rate Cumulative Preferred Stock, Series C are
set forth in Appendix B hereto and are incorporated herein by
reference.

(5) The voting powers, designations, preferences, and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of

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<PAGE> 28
the Corporation's 10.96% Preferred Stock are set forth in Appendix C
hereto and are incorporated herein by reference.

(6) The voting powers, designations, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the
Corporation's 10% Convertible Preferred Stock are set forth in
Appendix D hereto and are incorporated herein by reference.

(7) The voting powers, designations, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the
Corporation's 8-3/8% Preferred Stock are set forth in Appendix E
hereto and are incorporated herein by reference.

(8) The voting powers, designations, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the
Corporation's 7.92% Cumulative Preferred Stock are set forth in
Appendix F hereto and are incorporated herein by reference.

(9) The voting powers, designations, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the
Corporation's 7.58% Cumulative Preferred Stock are set forth in
Appendix G hereto and are incorporated herein by reference.

(10) The voting powers, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the
Corporation's 7-1/2% Cumulative Preferred Stock are set forth in
Appendix H hereto and are incorporated herein by reference.

FIFTH. The by-laws may be made, altered, amended or repealed
by the Board of Directors. The books of the Corporation (subject to the
provisions of the laws of the State of Delaware) may be kept outside of the
State of Delaware at such places as from time to time may be designated by the
Board of Directors.

SIXTH. (1) To the fullest extent that the General
Corporation Law of the State of Delaware as it exists on the date
hereof or as it may hereafter be amended permits the limitation or
elimination of the liability of directors, no director of the
Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director.

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<PAGE> 29
(2) The Corporation shall have the power to indemnify any
director, officer, employee or agent of the Corporation or any other
person who is serving at the request of the Corporation in any such
capacity with another corporation, partnership, joint venture, trust
or other enterprise (including, without limitation, any employee
benefit plan) to the fullest extent permitted by the General
Corporation Law of the State of Delaware as it exists on the date
hereof or as it may hereafter be amended, and any such indemnification
may continue as to any person who has ceased to be a director,
officer, employee or agent and may inure to the benefit of the heirs,
executors and administrators of such a person.

(3) By action of its Board of Directors, notwithstanding any
interest of the directors in the action, the Corporation may purchase
and maintain insurance, in such amounts as the Board of Directors
deems appropriate, to protect any director, officer, employee or agent
of the Corporation or any other person who is serving at the request
of the Corporation in any such capacity with another corporation,
partnership, joint venture, trust or other enterprise (including,
without limitation, any employee benefit plan) against any liability
asserted against him or incurred by him in any such capacity or
arising out of his status as such (including, without limitation,
expenses, judgments, fines and amounts paid in settlement) to the
fullest extent permitted by the General Corporation Law of the State
of Delaware as it exists on the date hereof or as it may hereafter be
amended, and whether or not the Corporation would have the power or
would be required to indemnify any such person under the terms of any
agreement or by-law or the General Corporation Law of the State of
Delaware. For purposes of this paragraph (3), "fines" shall include
any excise taxes assessed on a person with respect to any employee
benefit plan.

SEVENTH. (1) Any action required or permitted to be taken by
the holders of Common Stock or Class B Common Stock of the Corporation
must be effected at a duly called annual or special meeting of the
stockholders of the Corporation and may not be effected by any consent
in writing.

(2) Whenever the vote of holders of shares of any class or
series other than Common Stock or Class B Common Stock at a meeting
thereof is required or permitted to be taken for or in connection with
any corporate action by any provision of the General Corporation Law
of the State of Delaware, the meeting and vote of such stockholders
may be dispensed with if such action is taken with the written consent
of such holders representing not less than a majority of the voting
power of all the capital stock of such class or series entitled to be
voted upon such action if a meeting were held;provided that in no case
shall the written consent be by such holders having

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<PAGE> 30
less than the minimum percentage of the vote required by statute for
such action, and provided that prompt notice is given in writing to
all such stockholders entitled to vote thereon of the taking of
corporate action without a meeting and by less than unanimous written
consent.

(3) Election of directors need not be by ballot unless the
by-laws so provide.

EIGHTH. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.

IN WITNESS WHEREOF, we have signed this certificate and caused the
corporate seal of the Corporation to be hereunto affixed this day
of March, 1994.

/s/ WALTER V. SHIPLEY
----------------------
Walter V. Shipley
Chairman

[Corporate Seal]

Attest:

/s/ JOHN B. WYNNE
- - - -----------------
John B. Wynne
Secretary

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<PAGE> 31

Appendix A

CERTIFICATE OF DESIGNATIONS

JUNIOR PARTICIPATING PREFERRED STOCK

CHEMICAL BANKING CORPORATION

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

The undersigned DOES HEREBY CERTIFY that the following resolution was
duly adopted by the Board of Directors of Chemical Banking Corporation, a
Delaware corporation (hereinafter called the "Corporation"), at a meeting duly
convened and held on April 13, 1989, at which a quorum was present and acting
throughout:

"RESOLVED that, pursuant to authority conferred upon the Board
of Directors by the Certificate of Incorporation of the Corporation
(hereinafter called the "Certificate of Incorporation"), the Board of
Directors hereby provides for the issuance of a series of Preferred
Stock of the Corporation to consist of 4,000,000 shares, and hereby
fixes the voting powers, designation, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the shares of
such series, in addition to those set forth in the Certificate of
Incorporation, as follows:

"(a) Designation. The designation of the series of
Preferred Stock created by this resolution shall be "Junior
Participating Preferred Stock" (hereinafter called this
"Series") and the number of shares constituting this Series is
four million (4,000,000).

"(b) Dividends.

"(1) Subject to the prior and superior rights
of the holders of any shares of any series of
Preferred Stock ranking prior and superior to the
shares of this Series with respect to dividends, the
holders of shares of this Series shall be entitled to
receive, when and as declared by the Board of
Directors out of funds legally available for the
purpose, quarterly dividends payable in

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<PAGE> 32
cash on March 31, June 30, September 30 and December
31 of each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction
of a share of this Series, in an amount per share
(rounded to the nearest cent) equal to the greater of
(A) $2.00 or (B) subject to the provision for
adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and
100 times the aggregate per share amount (payable in
kind) of all noncash dividends or other distributions
other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise),
declared on the Common Stock, par value $12.00 per
share, of the Corporation (the "Common Stock") since
the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of
any share or fraction of a share of this Series. In
the event the Corporation shall at any time after
April 13, 1989 (the "Rights Declaration Date") (i)
declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which
holders of shares of this Series were entitled
immediately prior to such event under clause (B) of
the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock
outstanding immediately after such event and the
denominator of which is the number of shares of
Common Stock that were outstanding immediately prior
to such event.

"(2) The Corporation shall declare a dividend
or distribution on this Series as provided in clause
(A) of the preceding paragraph (1) immediately after
it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of
Common Stock); provided that, in the event no
dividend or distribution shall have been declared on
the Common Stock during the period between any
Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a
dividend of $2.00 per share on this Series shall
nevertheless

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<PAGE> 33
be payable on such subsequent Quarterly Dividend
Payment Date.

"(3) Dividends shall begin to accrue and be
cumulative on outstanding shares of this Series from
the Quarterly Dividend Payment Date next preceding
the date of issue of such shares of this Series
unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record
date for the determination of holders of shares of
this Series entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of this
Series in an amount less than the total amount of
such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the
time outstanding. The Board of Directors may fix a
record date for the determination of holders of
shares of this Series entitled to receive payment of
a dividend or distribution declared thereon, which
record date shall be no more than 30 days prior to
the date fixed for the payment thereof.

"(4) No full dividends shall be declared or
paid or set apart for payment on the 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 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

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<PAGE> 34
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 dividends, whether
payable in cash, property or stock, 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.

"(5) 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 (4) of this
Section (b)) shall be declared or paid or set aside
for payment or other distribution declared or made
upon the Common Stock, the Class B 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, Class B 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 be 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.

"(c) Redemption.

"(1) The shares of this Series shall be
redeemable only as expressly provided in this Section
(c). 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
equal to, subject to the provisions for adjustment
hereinafter set forth, 100 times the "current per
share market price" of the Common Stock on the date
of the mailing of the notice of redemption, plus
accrued and unpaid dividends to the date fixed for
such redemption. In the event the Corporation shall
at any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the
outstanding Common

A-4
<PAGE> 35
Stock or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such
case the amount to which holders of shares of this
Series were otherwise entitled immediately prior to
such event under the preceding sentence shall be
adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common
Stock outstanding immediately after such event and
the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior
to such event. The "current per share market price"
on any date shall be deemed to be the average of the
closing price per share of such Common Stock for the
10 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date.
The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting
system with respect to securities listed or admitted
to trading on the New York Stock Exchange or, if the
Common Stock is not listed or admitted to trading on
the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system
with respect to securities listed or admitted to
trading on the principal national securities exchange
on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or
admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted
the average of the high bid and low asked prices in
the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other
system then in use or, if on any such date the Common
Stock is not quoted by any such organization, the
average of the closing bid and asked prices as
furnished by a professional market maker making a
market in the Common Stock selected by the Board of
Directors of the Corporation. If on such date no
such market maker is making a market in the Common
Stock, the fair value of the Common Stock on such
date as determined in good faith by the Board of
Directors of the Corporation shall be used. The term
"Trading Day" shall mean a day on which the principal
national securities exchange on which the Common
Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock
is not listed or admitted to trading

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<PAGE> 36
on any national securities exchange, a Monday,
Tuesday, Wednesday, Thursday or Friday on which
banking institutions in the State of New York are not
authorized or obligated by law or executive order to
close.

"(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 of Directors and the shares
to be redeemed shall be determined by lot or pro rata
as may be determined by the Board of Directors or by
any other method which may be determined by the Board
of Directors 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 the
close of business 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 of
Directors of the Corporation shall so require and the
notice shall so state), such shares shall be redeemed
by the Corporation at the redemption price aforesaid.
In

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<PAGE> 37
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 of Directors.

"(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 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
if at the time of any annual meeting of stockholders for the
election of directors 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 (whether or not the holders of such series of
Preferred Stock would be entitled to vote for the election of
directors if such default in preference dividends did not
exist), shall have the right at such meeting, voting together
as a single class without regard to series, to the exclusion
of the holders of Common Stock and Class B 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 for

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<PAGE> 38
the full term for which he shall have been elected,
notwithstanding that prior to the end of such term 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 the
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.

"(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, on the Class B Common Stock, without par
value, of the Corporation ("Class B 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

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<PAGE> 39
accrued and unpaid thereon to the date of final
distribution (the "Liquidation Preference").

Following the payment of the full amount of
the Liquidation Preference, no additional
distributions shall be made to the holders of shares
of this Series unless, prior thereto, the holders of
shares of Common Stock shall have received an amount
per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Liquidation
Preference by (ii) 100 (as appropriately adjusted as
set forth in paragraph (2) below to reflect such
events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock)
(such number in clause (ii), the "Adjustment Number")
and in the case of the holders of Class B Common
Stock, an amount per share equal to the quotient
obtained by dividing (x) the Liquidation Preference
by (y) the product of the Adjustment Number times the
fraction of a liquidation unit ("Class B Liquidation
Unit") to which each share of Class B Common Stock
shall be entitled pursuant to Part II of Article
Fourth of this Certificate of Incorporation (the
"Class B Adjustment"). Following the payment of the
full amount of the Liquidation Preference, the Common
Adjustment and the Class B Adjustment, in respect of
all outstanding shares of Junior Participating
Preferred Stock, Common Stock and Class B Common
Stock, respectively, holders of this Series and
holders of shares of Common Stock and Class B Common
Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in
the ratio of the Adjustment Number to 1 with respect
to such Junior Participating Preferred Stock and
Common Stock, on a per share basis, respectively, and
with respect to the Class B Common Stock, in the
ratio of the Adjustment Number to the Class B
Liquidation Unit, on a per share basis.

"(2) In the event the Corporation shall at
any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of
shares, then in each such case the Adjustment Number
in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after
such

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<PAGE> 40
event and the denominator of which is the number of
shares of Common Stock that were outstanding
immediately prior to such event.

"(3) The sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all the
property and assets of the Corporation shall be
deemed a voluntary dissolution, liquidation or
winding up of the Corporation for the purposes of
this Section (f), but 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 not be deemed to
be a dissolution, liquidation or winding up,
voluntarily or involuntarily, for the purposes of
this Section (f).

"(4) 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.

"(5) 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.

"(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

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<PAGE> 41
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 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 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."

A-11
<PAGE> 42

Appendix B

CERTIFICATE OF DESIGNATIONS

ADJUSTABLE RATE CUMULATIVE PREFERRED STOCK, SERIES C

CHEMICAL BANKING CORPORATION

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of Chemical New York Corporation, a Delaware
corporation (hereinafter called the "Corporation"), at a meeting duly convened
and held on April 28, 1987, at which a quorum was present and acting
throughout:

"RESOLVED that, pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Corporation
(hereinafter called the "Certificate of Incorporation"), the Board of
Directors hereby provides for the issuance of a series of Preferred Stock
of the Corporation to consist of 34,692,482 shares, and hereby fixes the
voting powers, designation, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of such series, in addition to those
set forth in the Certificate of Incorporation, as follows:

"(a) Designation. The designation of the series of
Preferred Stock created by this resolution shall be "Adjustable
Rate Cumulative Preferred Stock, Series C" (hereinafter called this
"Series") and the number of shares constituting this Series is
Thirty-four million six hundred ninety-two thousand four hundred
eighty-two (34,692,482). Shares of this Series shall have a stated
value of $12 per share. The number of authorized shares of this
Series may be reduced by further resolution duly adopted by the
Board of Directors of the Corporation or the Executive Committee
thereof 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-1
<PAGE> 43
"(b) Dividend Rates.

"(1) Dividend rates on the shares of this Series
shall be: (i) for the period (the "Initial Dividend
Period") from May 1, 1987, to and including June 30, 1987,
at 7.65% per annum of the stated value thereof and (ii)
for each quarterly dividend period (hereinafter referred
to as a "Quarterly Dividend Period"; and the Initial
Dividend Period or any Quarterly Dividend Period being
hereinafter individually referred to as a "Dividend
Period" and collectively referred to as "Dividend
Periods") thereafter, which quarterly dividend periods
shall commence on January 1, April 1, July 1 and October 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
equal to the Effective Rate (as defined in paragraph (2)
of this Section (b)) in respect of such quarterly dividend
period. Such dividends shall be cumulative from the date
of original issue of such shares and shall be payable,
when and as declared by the Board of Directors or by a
committee of said Board duly authorized by said Board to
declare such dividends on March 31, June 30, September 30
and December 31 of each year, commencing June 30, 1987.
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 of Directors of the
Corporation or by a committee of said Board of Directors
duly authorized to fix such date. 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 of Directors of the
Corporation or by a committee of said Board of Directors
duly authorized to fix such date.

"(2)Except as provided below in this paragraph,
the "Effective Rate" for any Quarterly Dividend Period
shall be (a) 1% less than (b) the highest of the Treasury
Bill Rate, the Ten Year Constant Maturity Rate and the
Thirty Year Constant Maturity Rate (each as hereinafter
defined) for such Dividend Period. In the event that the

B-2
<PAGE> 44
Corporation determines in good faith that for any reason

"(i) any one of the Treasury Bill Rate, the Ten
Year Constant Maturity Rate and the Thirty Year Constant
Maturity Rate cannot be determined for any Quarterly
Dividend Period, then the Effective Rate for such Dividend
Period shall be 1% less than the higher of whichever two
of such Rates can be so determined;

"(ii) only one of the Treasury Bill Rate, the Ten
Year Constant Maturity Rate and the Thirty Year Constant
Maturity Rate can be determined for any Quarterly Dividend
Period, then the Effective Rate for such Dividend Period
shall be 1% less than whichever such Rate can be so
determined; or

"(iii) none of the Treasury Bill Rate, the Ten
Year Constant Maturity Rate and the Thirty Year Constant
Maturity Rate can be determined for any Quarterly Dividend
Period, then the rate in effect for the preceding Dividend
Period (or, if the rate being so continued is for the
Initial Dividend Period, a rate .5% higher than such rate)
shall be continued for such Dividend Period.

Anything herein to the contrary notwithstanding, the Effective Rate
for any Quarterly Dividend Period shall in no event be less than
5-1/2% per annum or greater than 11-1/2% per annum.

"(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 Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") during the Calendar
Period immediately prior to the last ten calendar days of March,
June, September or December, 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

B-3
<PAGE> 45
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 chosen and 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 dealers in U.S. Government securities 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, as chosen and 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 dealers in U.S. Government securities selected by the
Corporation.

B-4
<PAGE> 46
"(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 last ten calendar days of March, June, September or
December, 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

B-5
<PAGE> 47
date not less than eight nor more than twelve years from the date
of each such quotation, as chosen and 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 recog- nized dealers in U.S. Government securities
selected by the Corporation.

"(5) Except as provided below in this paragraph, the
"Thirty Year Constant Maturity Rate" for each Quarterly Dividend
Period shall be the arithmetic average of the two most recent
weekly per annum Thirty Year Average Yields (or the one weekly per
annum Thirty 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 last ten calendar days of
March, June, September or December, 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 Thirty Year Average
Yield during such Calendar Period, then the Thirty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Thirty Year Average
Yields (or the one weekly per annum Thirty 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 Thirty 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 Thirty 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 twenty-eight nor more than
thirty 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

B-6
<PAGE> 48
Corporation cannot determine the Thirty Year Constant Maturity Rate
for any Quarterly Dividend Period as provided above in this
paragraph, then the Thirty 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
twenty-eight nor more than thirty years from the date of each such
quotation, as chosen and 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 dealers in U.S. Government securities selected by the
Corporation.

"(6) The Treasury Bill Rate, the Ten Year Constant
Maturity Rate and the Thirty Year Constant Maturity Rate shall each
be rounded to the nearest five hundredths of a percentage point.

"(7) The Effective 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 Effective 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 Effective 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;

B-7
<PAGE> 49
"(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) "Thirty 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 30 years).

"(9) No full dividends shall be declared or paid or set
apart for payment on the 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 dividends,
whether payable in cash, property or stock, 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, the Class B 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, Class B Common Stock or
any other stock of the Corporation

B-8
<PAGE> 50
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 be 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 this Series for each full
Quarterly Dividend Period (other than the Initial Dividend Period)
shall be computed by annualizing the Effective Rate and dividing by
four. Dividends payable on this Series for any period less than a
full Quarterly Dividend Period, and for the Initial Dividend
Period, shall be computed on the basis of a 360-day year of 30-day
months and the actual number of days elapsed in the period for
which payable.

"(c) Redemption

"(1) The shares of this Series shall be redeemable only as
expressly provided in this Section (c). On and after May 1, 1992,
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 (i) in the case of any redemption on a
redemption date occurring on or after May 1, 1992, and prior to May
1, 1997, $12.36 per share and (ii) in the case of any redemption on
a redemption date occurring on or after May 1, 1997, $12 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 of Directors and the
shares to be redeemed shall be determined by lot or pro rata as may
be determined by the Board of Directors or by any other method
which may be determined by the Board of Directors in its sole
discretion to be equitable.

B-9
<PAGE> 51
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 the close of business 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 of Directors of the Corporation 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 of Directors.

"(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.

B-10
<PAGE> 52
"(d) Conversion or Exchange. The holders of shares of this Series
shall not have any rights 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, alteration or repeal of any of the
provisions of the Certificate of Incorporation or of any
certificate amendatory thereof or supplemental thereto (including
any Certificate of Designation and Terms or any similar document
relating to any series of Preferred Stock) so as to affect
adversely 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) 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 a majority of all of the shares
of this Series and all other series of referred Stock ranking on a
parity with this Series,

B-11
<PAGE> 53
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 either of the
following:

"(a) any increase of the authorized
amount of the Preferred Stock, or the creation or
authorization of any shares of any other class of
stock of the Corporation ranking on a parity with
the shares of this Series as to dividends or upon
liquidation, or the reclassification of any
authorized stock of the Corporation into any such
parity shares, or the creation or authorization of
any obligation or security convertible into or
evidencing the right to purchase any such parity
shares; or

"(b) the sale, lease or conveyance of all
or substantially all the property or business of
the Corporation or the merger or consolidation of
the Corporation into or with any other
corporation; provided, however, that no such vote
or consent of the holders of shares of this Series
and such other series of Preferred Stock, voting
as a class without regard to series, shall be
required for the merger or consolidation of
another corporation into or with the Corporation
if none of the preferences, rights, powers or
privileges of this Series or such other series of
Preferred Stock or the holders thereof will be
adversely affected thereby and there shall not be
authorized or outstanding after such merger or
consolidation any class of stock or other
securities (except such stock or securities of the
Corporation as may have been authorized or
outstanding immediately preceding such merger or
consolidation) ranking prior to the shares of this
Series and such other series of Preferred Stock as
to dividends or upon liquidation; and provided
further, however, that there shall not be
authorized or outstanding after such merger or
consolidation more than 75,000,000 shares of
Preferred Stock or any class of stock or other
securities (except such stock or securities of the
Corporation as may have been authorized or
outstanding immediately preceding such merger or
consolidation) ranking on a parity with the shares
of this Series as to dividends or upon
liquidation,

B-12
<PAGE> 54
in which case the vote specified by this paragraph
(3) shall be required;

"(4) If at the time of any annual meeting of
stockholders for the election of directors 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
(whether or not the holders of such series of Preferred
Stock would be entitled to vote for the election of
directors if such default in preference dividends did not
exist), shall have the right at such meeting, voting
together as a single class without regard to series, to
the exclusion of the holders of Common Stock and Class B
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 for
the full term for which he shall have been elected,
notwithstanding that prior to the end of such term 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 the 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

B-13
<PAGE> 55
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, on the Class B Common Stock
or on any other class of stock ranking junior to the
Preferred Stock upon liquidation, the amount of $12 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) The sale, conveyance, exchange or transfer
(for cash, shares of stock, securities or other
consideration) of all or substantially all the property
and assets of the Corporation shall be deemed a voluntary
dissolution, liquidation or winding up of the Corporation
for the purposes of this Section (f), but 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 not 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 involun- tary,
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

B-14
<PAGE> 56
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 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 Class B 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."

B-15
<PAGE> 57
Appendix C

CERTIFICATE OF DESIGNATIONS

10.96% PREFERRED STOCK

CHEMICAL BANKING CORPORATION

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

CHEMICAL BANKING CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES that
the following resolution was duly adopted by the Board of Directors of the
Corporation at a meeting duly held and convened on July 14, 1991, at which a
quorum was present and acting throughout:

"RESOLVED, that pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), the Board of Directors
hereby provides for the issuance of 4,000,000 shares of a series of
Preferred Stock, $1 par value, of the Corporation ranking on a parity with
the series of Preferred Stock designated as the Corporation's "Adjustable
Rate Cumulative Preferred Stock", the Corporation's "Adjustable Rate
Cumulative Preferred Stock, Series B", the Corporation's "Adjustable Rate
Cumulative Preferred Stock, Series C", the Corporation's "10 3/4%
Cumulative Preferred Stock", the Corporation's "Adjustable Rate Cumulative
Preferred Stock, Series E", the Corporation's "Adjustable Rate Cumulative
Preferred Stock, Series F," and the Corporation's "10% Convertible
Preferred Stock", and the designations, preferences and privileges,
relative, participating, optional and other special rights, and
qualifications, limitations and restrictions of all 4,000,000 shares of
this series, in addition to those set forth in the Certificate of
Incorporation of the Corporation are hereby fixed as follows:

"(a) Designation. The designation of this series shall be
10.96% Preferred Stock (hereinafter referred to as this "Series") and
the number of shares constituting this Series shall be 4,000,000
shares. Shares of this Series shall have a stated value of $25 per
share. The number of authorized shares of this Series may be reduced

C-1
<PAGE> 58
by further resolution duly adopted by the Board of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors 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 not below the
number of shares of this Series then outstanding), but the number of
authorized shares of this Series shall not be increased.

"(b) Dividend Rights.

"(1) Dividends shall be payable on the shares of this Series
for the Initial Dividend Period (as defined below) and each quarterly
dividend period (a "Quarterly Dividend Period") thereafter (the
Initial Dividend Period and each such subsequent Quarterly Dividend
Period being hereinafter referred to as a "Dividend Period" and
collectively referred to as "Dividend Periods"), which Quarterly
Dividend Periods shall commence on March 31, June 30, September 30
and December 31 in each year, commencing with the first such date to
occur after the effective time of the merger of the Corporation with
Manufacturers Hanover Corporation (the "Effective Time"), 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 equal to 10.96%. The Initial Dividend Period is the period
commencing on the most recent date next preceding the Effective Time
on which a dividend was paid on the 10.96% Preferred Stock of
Manufacturers Hanover Corporation (or commencing on the date of the
Effective Time if such date was such a dividend payment date) and
shall end on and include the date next preceding the first day of the
next Quarterly Dividend Period; provided, however, that in the event
the Effective Time shall occur after the record date for the payment
of a regular quarterly dividend on the 10.96% Preferred Stock of
Manufacturers Hanover Corporation but prior to the payment date for
such dividend, then the Initial Dividend Period shall be the first
Quarterly Dividend Period as described in the preceding sentence.
Dividends shall be cumulative from the date on which the Initial
Dividend Period commences and shall be payable, when, as and if
declared by the Board of Directors or by the Preferred Stock
Committee of the Board of Directors, on March 31, June 30, September
30 and December 31 in each year, commencing with such date that next
follows the end of the Initial Dividend Period. 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 45 days preceding the payment date thereof,

C-2
<PAGE> 59
as shall be fixed by the Board of Directors of the Corporation or by
the Preferred Stock Committee of the Board of Directors. 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
of Directors of the Corporation or by the Preferred Stock Committee
of the Board of Directors.

"(2) Dividends payable on this Series for any period greater
or less than a Quarterly Dividend Period, including the Initial
Dividend Period, shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. Dividends payable on this Series
for each Quarterly Dividend Period shall be computed by annualizing
the Dividend Rate and dividing by four.

"(3) No full dividends shall be declared or paid or set apart
for payment on the Preferred Stock or 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
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 series of
Preferred Stock ranking on a parity as to dividends with this Series,
all dividends declared upon shares of this Series and any other
series of 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 series of
Preferred Stock shall in all cases bear to each other the same ratio
that accrued and unpaid dividends per share on the shares of this
Series and such other series of 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.

"(4) So long as any shares of this Series are outstanding, no
dividend (other than a dividend in Common Stock or Class B Common
Stock of the Corporation (collectively, the "Common Stock") or in any
other stock ranking junior to this Series as to dividends and upon

C-3
<PAGE> 60
liquidation and other than as provided in Section (3) 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
be paid to or made available for a sinking fund for the redemption of
any shares of any such stock) by the Corporation unless, in each
case, the full cumulative dividends on all outstanding shares of this
Series shall have been paid for all past Dividend Periods.

"(c) Redemption.

"(1) Shares of this series are not redeemable prior to June
30, 2000. On or after such date, the Corporation may elect to redeem
the shares of this Series, as a whole or in part, any time or from
time to time at a redemption price of $25 per share, plus accrued and
unpaid dividends thereon to the redemption date. In the event the
Corporation shall elect to redeem shares of this Series, the
Corporation shall give notice to the holders of record of shares of
this Series being so redeemed, not less than 30 nor more than 60 days
prior to such redemption, by first class mail, postage prepaid, at
their addresses as shown on the stock registry books of the
Corporation that said shares are being redeemed, provided that
without limiting the obligation of the Corporation hereunder to give
the notice provided in this Section (c)(1), the failure of the
Corporation to give such notice shall not invalidate any corporate
action by 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 the redemption date.

"(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 of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors and the shares to be redeemed shall be determined by lot or
pro rata as may be determined by the Board of Directors

C-4
<PAGE> 61
of the Corporation or the Preferred Stock Committee of the Board of
Directors or by any other method as may be determined by the Board of
Directors of the Corporation or the Preferred Stock Committee of the
Board of Directors in its sole discretion to be equitable provided
that such method satisfies any applicable requirements of any
securities exchange on which this Series is listed.

"(3) Notice having been mailed as aforesaid, from and after
the applicable 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 to be redeemed on such
redemption date 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 of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors 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.

"(4) 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 of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors.

"(5) 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. The holders of shares of this Series shall
not have any rights to convert such shares

C-5
<PAGE> 62
into shares of any other class or series of capital stock of the
Corporation.

"(e) Voting Rights. The shares of this Series of Preferred
Stock 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 that 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
Certificate of Incorporation or of any certificate amendatory thereof
or supplemental thereto (including any Certificate of Designations or
any similar documents 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 that 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 the time of any annual meeting of stockholders for
the election of directors 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 such meeting, voting together as a single class without regard to
series, to the exclusion

C-6
<PAGE> 63
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 for the full term for which he
shall have been elected, notwithstanding that prior to the end of
such term 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 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 the 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 Dividend Period.

"(f) Liquidation Rights.

"(1) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the holders of the
shares of this Series shall be entitled to receive and to be paid out
of the assets of the Corporation available for distribution to its
stockholders, before any payment or distribution shall be made on the
Common

C-7
<PAGE> 64
Stock or on any other class of stock ranking junior to this Series
upon liquidation, a liquidation preference in the amount of $25 per
share of this Series, plus accrued and unpaid dividends thereon.

"(2) After the payment to the holders of the shares of this
Series of the full amount of the liquidating distribution to which
they are entitled under 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.

"(3) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the amounts payable
with respect to the liquidation preference of the shares of this
Series and any other shares of stock of the Corporation ranking as to
any such distribution on a parity with the shares of this Series are
not paid in full, the holders of the shares of this Series and of
such other shares will share ratably in any such distribution of
assets of the Corporation in proportion to the full respective
liquidation preference to which they are entitled.

"(4) Neither the sale of all or substantially all of 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).

"(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 Section (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 to this Series upon
liquidation.

"(g) Ranking. 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

C-8
<PAGE> 65
may be, in preference or priority to the holders of shares of this
Series; and

"(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 provision, if any, be different from those of this
Series, 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."

C-9
<PAGE> 66

Appendix D

CERTIFICATE OF DESIGNATIONS

10% CONVERTIBLE PREFERRED STOCK

CHEMICAL BANKING CORPORATION

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

CHEMICAL BANKING CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation") HEREBY CERTIFIES that the
following resolution was duly adopted by the Board of Directors of the
Corporation at a meeting duly held and convened on July 14, 1991, at which a
quorum was present and acting throughout:

"RESOLVED, that pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Corporation, as
amended (the "Certificate of Incorporation"), the Board of Directors
hereby provides for the issuance of 4,000,000 shares of a series of
Preferred Stock, $1 par value, of the Corporation ranking on a parity with
the series of Preferred Stock designated as the Corporation's "Adjustable
Rate Cumulative Preferred Stock", the Corporation's "Adjustable Rate
Cumulative Preferred Stock, Series B", the Corporation's "Adjustable Rate
Cumulative Preferred Stock, Series C", the Corporation's "10 3/4%
Cumulative Preferred Stock", the Corporation's "10.96% Preferred Stock",
and the Corporation's "Adjustable Rate Cumulative Preferred Stock, Series
E", and the Corporation's "Adjustable Rate Cumulative Preferred Stock,
Series F", and the designations, preferences and privileges, relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions of all 4,000,000 shares of this series, in
addition to those set forth in the Certificate of Incorporation of the
Corporation, are hereby fixed as follows:

"(1) Designation. The designation of this series shall be 10%
Convertible Preferred Stock (hereinafter referred to as this
"Series") and the number of shares constituting this Series shall be
4,000,000 shares. Shares of this Series shall have a stated value of
$50 per share. The number of authorized shares of this

D-1
<PAGE> 67
Series may be reduced by further resolution duly adopted by the Board
of Directors of the Corporation or the Preferred Stock Committee of
the Board of Directors 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 not
below the number of shares of this Series then outstanding), but the
number of authorized shares of this Series shall not be increased.

"(2) Dividend Rights.

"(a) Dividends shall be payable on the shares of this Series
for the Initial Dividend Period (as defined below) and each quarterly
dividend period (a "Quarterly Dividend Period") thereafter (the
Initial Dividend Period and each such subsequent Quarterly Dividend
Period being hereinafter referred to as a "Dividend Period" and
collectively referred to as "Dividend Periods"), which Quarterly
Dividend Periods shall commence on February 1, May 1, August 1 and
November 1 in each year, commencing with the first such date to occur
after the effective time of the merger of the Corporation with
Manufacturers Hanover Corporation (the "Effective Time"), 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 equal to 10%. The Initial Dividend Period is the period
commencing on the most recent date next preceding the Effective Time
on which a dividend was paid on the 10% Convertible Preferred Stock
of Manufacturers Hanover Corporation (or commencing on the date of
the Effective Time if such date was such a dividend payment date) and
shall end on and include the date next preceding the first day of the
next Quarterly Dividend Period; provided, however, that in the event
the Effective Time shall occur after the record date for the payment
of a regular quarterly dividend on the 10% Convertible Preferred
Stock of Manufacturers Hanover Corporation but prior to the payment
date for such dividend, then the Initial Dividend Period shall be the
first Quarterly Dividend Period as described in the preceding
sentence. Dividends shall be cumulative from the date on which the
Initial Dividend Period commences and shall be payable, when, as and
if declared by the Board of Directors or by the Preferred Stock
Committee of the Board of Directors, on February 1, May 1, August 1
and November 1 in each year, commencing with such date that next
follows the end of the Initial Dividend Period. 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 45 days preceding the payment date thereof, as

D-2
<PAGE> 68
shall be fixed by the Board of Directors of the Corporation or by the
Preferred Stock Committee of the Board of Directors. 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 of
Directors of the Corporation or by the Preferred Stock Committee of
the Board of Directors.

"(b) Dividends payable on this Series for any period greater
or less than a Quarterly Dividend Period, including the Initial
Dividend Period, shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. Dividends payable on this Series
for each Quarterly Dividend Period shall be computed by annualizing
the Dividend Rate and dividing by four.

"(c) No full dividends shall be declared or paid or set apart
for payment on the 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
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 series of
Preferred Stock ranking on a parity as to dividends with this Series,
all dividends declared upon shares of this Series and any other
series of 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 series of
Preferred Stock shall in all cases bear to each other the same ratio
that accrued and unpaid dividends per share on the shares of this
Series and such other series of 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.

D-3
<PAGE> 69
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 be 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 or declared and set aside for payment for all past
Dividend Periods.

"(3) Redemption.

"(a) The shares of this Series are not redeemable prior to May
1, 1995. At any time on or after such date, the shares of this
Series are redeemable, in whole or in part, at the option of the
Corporation, during the twelve-month periods commencing on May 1 of
the years indicated below at the following redemption prices per
share of this Series, plus accrued and unpaid dividends thereon to
the date fixed for redemption.

<TABLE>
<CAPTION>
Year Redemption Price Year Redemption Price
---- ---------------- ---- ----------------
<S> <C> <C> <C>
1995 $53.00 1998 $51.50
1996 52.50 1999 51.00
1997 52.00 2000 50.50
2001 and 50.00
thereafter
</TABLE>
"(b) In the event the Corporation shall elect to redeem
shares of this Series, the Corporation shall give notice to the
holders of record of shares of this Series being so redeemed, not
less than 30 nor more then 60 days prior to such redemption, by
first class mail, postage prepaid, at their addresses as shown on
the stock registry books of the Corporation that said shares are
being redeemed, provided that without limiting the obligation of
the Corporation hereunder to give the notice provided in this
Section 3(b), the failure of the Corporation to give such notice
shall not invalidate any corporate action by the Corporation. Each
such notice shall state: (1) the redemption date; (ii) the number
of shares of this Series to be redeemed and, if fewer than all the
shares held by such holders are to be redeemed, the number of such
shares to be redeemed from such holder; (iii) the

D-4
<PAGE> 70
redemption price; (iv) the place or places where certificates for
such shares are to be surrendered for payment of the redemption
price; (v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date and (vi) that such holder has the
right to convert such shares into a number of shares of Common
Stock prior to the close of business on such redemption date.

"(c) 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 of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors and the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Board of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors or by any other method as may be determined by the Board
of Directors of the Corporation or the Preferred Stock Committee of
the Board of Directors in its sole discretion to be equitable
provided that such method satisfies any applicable requirements or
any securities exchange on which this Series is listed.

"(d) Notice having been mailed as aforesaid, from and
after the applicable 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 to be
redeemed on such redemption date 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; provided that, notwithstanding the foregoing, if
notice of redemption has been given pursuant to this Section 3 and
any holder of shares of this Series shall, prior to the close of
business on the redemption date, surrender for conversion any or
all of the shares to be redeemed held by such holder in accordance
with Section 4, then the conversion of such shares to be redeemed
shall become effective as provided in Section 4. Upon surrender of
the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the Corporation
or the Preferred Stock Committee of the Board of Directors 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.

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<PAGE> 71
more designated as part of a particular series by the Board of
Directors of the Corporation or the Preferred Stock Committee of
the Board of Directors.

"(f) Notwithstanding the foregoing provisions of this
Section 3, 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.

"(4) Conversion.

"(a) Subject to and upon compliance with the provisions
of this Section 4, each holder of shares of this Series shall have
the right, at such holder's option, at any time 40 days after the
date of issuance of shares of this Series, to convert any or all of
the shares of this Series held by such holder into the number of
fully paid and nonassessable shares of Common Stock (calculated as
to each conversion, for the purpose of determining the amount of
any cash payments provided for under paragraph (c) of this Section
4, to the nearest .01 of a share of Common Stock as the case may
be, with one-half cent and .005 of a share, respectively, being
rounded upward), obtained by dividing the stated value of a share
of this Series by the Conversion Price (as defined below) and
multiplying such resulting number by the number of shares of this
Series to be converted, and by surrender of such shares of this
Series so to be converted, such surrender to be made in the manner
provided in paragraph (b) of this Section 4; provided, however,
that the right to convert shares called for redemption pursuant to
Section 3 hereof shall terminate at the close of business on the
date fixed for such redemption unless the Corporation shall default
in making payment of the amount payable upon such redemption.

The term "Applicable Price" means (i) in the event of a Fundamental
Change (as defined below) in which the holders of the Common Stock
receive only cash, the amount of cash received by a holder of one
share of Common Stock and (ii) in the event of any other
Fundamental Change, the average of the reported last sales price
for one share of the Common Stock (determined as set forth in
subparagraph (d)(v) of this Section 4) during the ten Trading Days
(as defined in subparagraph (d)(v) of this Section 4) prior to the
record date for the determination of the holders of Common Stock
entitled to receive cash, securities, property or other assets in
connection with such Fundamental Change, or if there is no

D-6
<PAGE> 72
such record date, prior to the date upon which the holders of
Common Stock shall have the right to receive such cash, securities,
property or other assets.

The term "Common Stock" shall mean the Common Stock, par value
$1.00, and the Class B Common Stock, without par value, of the
Corporation as the same exists at the date of this Certificate of
Designations or as such stock may be constituted from time to time.

The term "Common Stock Fundamental Change" means any Fundamental
Change in which more than 50% (by value as determined in good faith
by the Board of Directors of the Corporation) of the consideration
received by holders of Common Stock consists of common stock that
for the ten Trading Days (as defined in subparagraph (d)(v) of this
Section 4) prior to such Fundamental Change, has been admitted for
listing on a national securities exchange or quoted on the National
Market System of the National Association of Securities Dealers,
Inc. Automated Quotations System.

The term "Conversion Price" shall mean $26.20, as adjusted in
accordance with the provisions of this Section 4.

The term "Fundamental Change" means the occurrence of any
transaction or event in connection with which all or substantially
all the Common Stock shall be exchanged for, converted into,
acquired for or shall constitute solely the right to receive cash,
securities, property or other assets (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise). In
the case of a plan involving more than one such transaction or
event, for purposes of adjustment of the Conversion Price, such
Fundamental Change shall be deemed to have occurred when
substantially all the Common Stock shall have been exchanged for,
converted into, or acquired for, or shall constitute solely the
right to receive, such cash, securities, property or other assets,
but the adjustment shall be based upon the consideration that the
holders of Common Stock received in the transaction or event as a
result of which more than 50% of the Common Stock shall have been
exchanged for, converted into, or acquired for, or shall constitute
solely the right to receive, such cash, securities, property or
other assets.

The term "Non-Stock Fundamental Change" means any Fundamental
Change other than a Common Stock Fundamental Change.

The term "Purchaser Stock Price" means, with respect to any Common
Stock Fundamental Change, the average of the reported last sales
price for one share of the common stock received by holders of
Common Stock in such Common Stock Fundamental

D-7
<PAGE> 73
Change (determined as set forth in subparagraph (d)(v) of this
Section 4 as if such subparagraph were applicable to such common
stock) during the ten Trading Days (as defined in subparagraph
(d)(v) of this paragraph 4) prior to the record date for the
determination of the holders of Common Stock entitled to receive
such common stock or, if there is no such record date, prior to the
date upon which the holders of Common Stock shall have the right to
receive such common stock.

The term "Reference Market Price" shall initially mean $14.85, and,
in the event of any adjustment to the Conversion Price pursuant to
subparagraphs (d)(i),(d)(ii), (d)(iii) or (d) (iv) or paragraph (h)
of this Section 4, the Reference Market Price shall also be
adjusted so that the ratio of the Reference Market Price to the
Conversion Price after giving effect to any such adjustment shall
always be the same as the ratio of $14.85 to the Conversion Price
set forth in this Certificate of Designations (without regard to
any adjustment thereto).

"(b) In order to exercise the conversion privilege, the
holder of each share of this Series to be converted shall surrender
the certificate representing such share at the office of any
transfer agent for the Common Stock and shall give written notice
to the Corporation at said office that such holder elects to
convert the same, specifying the name or names and denominations in
which such holder wishes the certificate or certificates for the
Common Stock to be issued (which notice may be in the form of a
notice of election to convert which may be printed on the reverse
of the certificates for the shares of this Series). Unless the
shares issuable on conversion are to be issued in the same name as
the name in which such share of this Series is registered, each
share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation,
duly executed by the holder or his duly authorized attorney, and by
an amount sufficient to pay any transfer or similar tax.

The holders of shares of this Series at the close of business on a
dividend payment record date shall be entitled to receive the
dividend payable on such shares (except that holders of shares
called for redemption on a redemption date between such record date
and the dividend payment date shall not be entitled to receive such
dividend on such dividend payment date) on the corresponding
dividend payment date notwithstanding the conversion thereof or the
Corporation's default in payment of the dividend due on such
dividend payment date. However, shares of this Series surrendered
for conversion during the period between the close of business on
any dividend payment record date and the opening of business on the
corresponding dividend payment date (except shares

D-8
<PAGE> 74
called for redemption on a redemption date during such period) must
be accompanied by payment of an amount equal to the dividend
payable on such shares on such dividend payment date. A holder of
shares of this Series on a dividend payment record date who (or
whose transferee) tenders any of such shares for conversion into
shares of Common Stock on a dividend payment date will receive the
dividend payable by the Corporation on such shares of this Series
on such date, and the converting holder need not include payment in
the amount of such dividend upon surrender of shares of this Series
for conversion. Except as provided above, the Corporation shall
make no payment or allowance for unpaid dividends, whether or not
in arrears, on converted shares or for dividends on the shares of
Common Stock issued upon such conversion.

As promptly as practicable after the surrender of the certificates
for shares of this Series as aforesaid, the Corporation shall issue
and shall deliver at the office of any transfer agent for the
Common Stock to such holder, or on his written order, a certificate
or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the
provisions of this Section 4, together with a certificate or
certificates representing any shares of this Series which are not
to be converted but which shall have constituted part of the shares
of this Series represented by the certificate or certificates so
surrendered, and any fractional interest in respect of a share of
Common Stock arising upon such conversion shall be settled as
provided in subparagraph (c) of this Section 4.

Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the
certificates for shares of this Series shall have been surrendered
and such notice (and, if applicable, payment of an amount equal to
the dividend payable on such shares) received by the Corporation as
aforesaid, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby at
such time on such date and such conversion shall be at the
Conversion Price in effect at such time on such date, unless the
stock transfer books of the Corporation shall be closed on such
date, in which event such person or persons shall be deemed to have
become such holder or holders of record at the close of business on
the next succeeding day on which such stock transfer books are
open, but such conversion shall be at the Conversion Price in
effect on the date upon which such shares shall have been
surrendered and such notice (and, if applicable, payment) received
by the Corporation. All shares of Common Stock delivered upon
conversion of the shares of this Series will upon delivery be duly
and validly issued and

D-9
<PAGE> 75
fully paid and nonassessable, free of all liens and charges and not
subject to any preemptive rights.

"(c) No fractional shares or scrip representing
fractions of shares of Common Stock shall be issued upon conversion
of shares of this Series. Instead of any fractional interest in a
share of Common Stock which would otherwise be deliverable upon the
conversion of a share of this Series, the Corporation shall pay to
the holder of such share of this Series an amount in cash (computed
to the nearest cent, with one-half cent being rounded upward) equal
to the reported last sales price (as defined in subparagraph
(d)(v)of this Section 4) of the Common Stock on the Trading Day (as
defined in subparagraph (d)(v) of this Section 4) next preceding
the day of conversion multiplied by the fraction of a share of
Common Stock represented by such fractional interest. If more than
one share of this Series shall be surrendered for conversion at one
time by the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of
the aggregate stated value of the shares of this Series so
surrendered.

"(d) The Conversion Price shall be adjusted from time to
time as follows:

"(i) In case the Corporation shall (x) pay a dividend or
make a distribution on the Common Stock in shares of Common Stock,
(y) subdivide the outstanding Common Stock into a greater number of
shares or (z) combine the outstanding Common Stock into a smaller
number of shares, the Conversion Price shall be adjusted so that
the holder of any share of this Series thereafter surrendered for
conversion shall be entitled to receive the number of shares of
Common Stock of the Corporation which he would have owned or have
been entitled to receive after the happening of any of the events
described above had such share been converted immediately prior to
the record date in the case of a dividend or the effective date in
the case of a subdivision or combination. An adjustment made
pursuant to this subparagraph (i) shall become effective
immediately after the record date in the case of a dividend, except
as provided in subparagraph (viii) below, and shall become
effective immediately after the effective date in the case of a
subdivision or combination. No adjustment in the Conversion Price
shall be made if, at the same time as the Corporation shall issue
shares of Common Stock as a dividend or distribution on the
outstanding shares of Common Stock which would otherwise call for
an adjustment in the Conversion Price, the Corporation shall issue
shares of Common Stock as a dividend or distribution on the
outstanding shares of this Series equivalent to the number of
shares distributable on the shares of Common Stock into which this
Series is then convertible.

D-10
<PAGE> 76
"(ii) In case the Corporation shall issue rights or
warrants to all holders of shares of Common Stock entitling them
(for a period expiring within 45 days after the record date
mentioned below) to subscribe for or purchase shares of Common
Stock at a price per share less than the current market price per
share of Common Stock (as defined for purposes of this subparagraph
(ii) in subparagraph (v) below), at the record date for the
determination of stockholders entitled to receive such rights or
warrants, the Conversion Price in effect after such record date
shall be determined by multiplying the Conversion Price in effect
immediately prior to such record date by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding
on the record date for issuance of such rights or warrants plus the
number of shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered would
purchase at such current market price, and the denominator of which
shall be the number of shares of Common Stock outstanding on the
record date for issuance of such rights or warrants plus the number
of additional shares of Common Stock receivable upon exercise of
such rights or warrants. Such adjustment shall be made successively
whenever any such rights or warrants are issued, and shall become
effective immediately, except as provided in subparagraph (viii)
below, after such record date. In determining whether any rights or
warrants entitled the holders of the shares of this Series to
subscribe for or purchase shares of Common Stock at less than such
current market price, and in determining the aggregate offering
price of such shares of Common Stock, there shall be taken into
account any consideration received by the Corporation for such
rights or warrants plus the exercise price thereof, the value of
such consideration or exercise price, as the case may be, if other
than cash, to be determined by the Board.

"(iii) In case the Corporation shall distribute to all
holders of Common Stock any shares of capital stock of the
Corporation (other than Common Stock) or evidences of its
indebtedness or assets (excluding cash dividends or distributions
paid from retained earnings of the Corporation or dividends payable
in Common Stock) or rights or warrants to subscribe for or purchase
any of its securities (excluding those rights or warrants referred
to in subparagraph (ii) above) (any of the foregoing being
hereinafter in this subparagraph (iii) called the "Securities"),
then, in each such case, unless the Corporation elects to reserve
such Securities for distribution to the holders of the shares of
this Series upon the conversion of the shares of this Series so
that any such holder converting shares of this Series will receive
upon such conversion, in addition to the shares of the Common Stock
to which such holder is entitled, the amount and kind of such
securities which such holder would have received

D-11
<PAGE> 77
if such holder had, immediately prior to the record date for the
distribution of the Securities, converted its shares of this Series
into Common Stock, the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of such
distribution by a fraction, the numerator of which shall be the
current market price per share (as defined for purposes of this
subparagraph (iii) in subparagraph (v) below) of the Common Stock
on the record date mentioned above less the then fair market value
(as determined by the Board of Directors of the Corporation, whose
determination shall be conclusive) or the portion of the Securities
so distributed applicable to one share of Common Stock, and the
denominator of which shall be the current market price per share
(as defined in subparagraph (v) below) of the Common Stock;
provided, however, that in the event the then fair market value (as
so determined) of the portion of the Securities so distributed
applicable to one share of Common Stock is equal to or greater than
the current market price per share (as defined in subparagraph (v)
below) of the Common Stock on the record date mentioned above, in
lieu of the forgoing adjustment, adequate provision shall be made
so that each holder of shares of this Series shall have the right
to receive the amount and kind of Securities such holder would have
received had he converted each such share of this Series
immediately prior to the record date for the distribution of the
Securities. Such adjustment shall become effective immediately,
except as provided in subparagraph (viii) below, after the record
date for the determination of shareholders entitled to receive such
distribution.

"(iv) If, pursuant to subparagraph (ii) or (iii) above,
the number of shares of Common Stock into which a share of this
Series is convertible shall have been adjusted because the
Corporation has declared a dividend, or made a distribution, on the
outstanding shares of Common Stock in the form of any right or
warrant to purchase securities of the Corporation, or the
Corporation has issued any such right or warrant, then, upon the
expiration of any such unexercised right or unexercised warrant,
the Conversion Price shall forthwith be adjusted to equal the
Conversion Price that would have applied had such right or warrant
never been declared, distributed or issued.

"(v) For the purpose of any computation under
subparagraph (ii) above, the current market price per share of
Common Stock on any date shall be deemed to be the average of the
reported last sales prices for the thirty consecutive Trading Days
(as defined below) commencing forty-five Trading Days before the
date in question. For the purpose of any computation under
subparagraph (iii) above, the current market price per share of
Common Stock on any date shall be deemed to

D-12
<PAGE> 78
be the average of the reported last sales prices for the ten
consecutive Trading Days before the date in question. The reported
last sales price for each day (whether for purposes of subparagraph
(ii) or subparagraph (iii)) shall be the reported last sales price,
regular way, or, in case no sale takes place on such day, the
average of the reported closing bid and asked prices, regular way,
in either case as reported on the New York Stock Exchange Composite
Tape or, if the Common Stock is not listed or admitted to trading
on the New York Stock Exchange at such time, on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading on any national securities exchange, on the
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or, if the
Common Stock is not quoted on such National Market System, the
average of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, if bid and asked
prices for the Common Stock on each such day shall not have been
reported through NASDAQ, the average of the bid and asked prices
for such date as furnished by any New York Stock Exchange member
firm regularly making a market in the Common Stock selected for
such purpose by the Board of Directors of the Corporation or a
committee thereof or, if no such quotations are available, the fair
market value of the Common Stock as determined by a New York Stock
Exchange member firm regularly making a market in the Common Stock
selected for such purpose by the Board of Directors of the
Corporation or a committee thereof. As used herein, the Term
"Trading Day" with respect to Common Stock means (x) if the Common
Stock is listed or admitted for trading on the New York Stock
Exchange or another national securities exchange, a day on which
the New York Stock Exchange or such other national securities
exchange is open for business or (y) if the Common Stock is quoted
on the National Market System of the NASDAQ, a day on which trades
may be made on such National Market System or (z) otherwise, any
day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated
by law or executive order to close.

"(vi) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided, however, that any
adjustments which by reason of this subparagraph (vi) are not
required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 4
shall be made to the nearest cent or to the nearest .01 of a share,
as the case may be, with one-half cent and .005 of a share,
respectively, being rounded upward. Anything in this paragraph (d)
to the contrary notwithstanding, the Corporation shall be entitled
to make such reductions in the Conversion Price, in addition to
those

D-13
<PAGE> 79
required by this paragraph (d), as it in its discretion shall
determine to be advisable in order that any stock dividend,
subdivision of shares, distribution of rights or warrants to
purchase stock or securities, or distribution of other assets
(other than cash dividends) hereafter made by the Corporation to
its stockholders shall not be taxable.

"(vii) Whenever the Conversion Price is adjusted as
herein provided, the Corporation shall file with the transfer agent
a certificate, signed by the Treasurer, chief financial officer,
principal accounting officer or Controller of the Corporation,
setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment; provided, however, that the failure
of the Corporation to file such officers' certificate shall not
invalidate any corporate action by the Corporation.

"(viii) In any case in which this paragraph (d) provides
that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the
occurrence of such event (y) issuing to the holder of any share of
this Series converted after such record date and before the
occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required
by such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and (z) paying
to such holder any amount of cash in lieu of any fractional share
of Common Stock pursuant to paragraph (c) of this Section 4.

"(e) Whenever the Conversion Price is adjusted as
provided in paragraph (d), the Corporation shall cause to be mailed
to each holder of shares of this Series at its then registered
address by first-class mail, postage prepaid, a notice of such
adjustment of the Conversion Price setting forth such adjusted
Conversion Price and the effective date of such adjusted Conversion
Price; provided, however, that the failure of the Corporation to
give such notice shall not invalidate any corporate action by the
Corporation.

"(f) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued shares of Common Stock or
its issued shares of Common Stock held in its treasury, or both,
for the purpose of effecting conversions of shares of this Series,
the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of this Series not theretofore
converted. For purposes of this paragraph (f), the number of shares
of Common Stock which shall be deliverable upon conversion of all
outstanding

D-14
<PAGE> 80
shares of this Series shall be computed as if at the time of
computation all such outstanding shares were held by a single
holder.

"(g) The Corporation will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on conversions of
shares of this Series pursuant hereto; provided, however, that the
Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the
holder of shares of this Series to be converted and no such issue
or delivery shall be made unless and until the person requesting
such issue or delivery has paid to the Corporation the amount of
any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.

"(h) Notwithstanding any other provision herein to the
contrary, if any of the following events occurs, namely (w) any
reclassification or change of outstanding shares of Common Stock
(other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a
subdivision or combination of the Common Stock), (x) any
consolidation, merger or combination of the Corporation with or
into another corporation as a result of which holders of Common
Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange
for such Common Stock, (y) any sale or conveyance of the properties
and assets of the Corporation as, or substantially as, an entirety
to any other entity as a result of which holders of Common Stock
shall be entitled to receive stock, securities or other property or
assets (including cash) with respect to or in exchange for such
Common Stock, or (z) any Fundamental Change (including any event
referred to in the foregoing clauses (w), (x) or (y) that
constitutes a Fundamental Change), then appropriate provision shall
be made so that the holder of each share of this Series then
outstanding shall have the right to convert such share into the
kind and amount of the shares of stock and securities or other
property or assets (including cash) that would have been receivable
upon such reclassification, change, consolidation, merger,
combination, sale, conveyance or Fundamental Change by a holder of
the number of shares of Common Stock issuable upon conversion of
such share of this Series immediately prior to such
reclassification, change, consolidation, merger, combination, sale,
conveyance or Fundamental Change; provided, however, that, if the
event referred to in clauses (w) through (z) above constitutes a
Non-Stock Fundamental Change, each holder of shares of this Series
shall be entitled, upon conversion thereof, to receive such amount
of shares of stock and securities or other

D-15
<PAGE> 81
property or assets (including cash) as is determined by the number
of shares of Common Stock receivable upon conversion at the
Conversion Price as adjusted in accordance with subparagraph (i) of
this paragraph (h); and provided, further, that, if the event
referred to in clauses (w) through (z) above constitutes a Common
Stock Fundamental Change, the foregoing provisions of this
paragraph (h) shall not apply, but each holder of shares of this
Series shall be entitled, upon conversion thereof at any time
following such Common Stock Fundamental Change, to receive such
number of shares of common stock of the successor or acquiring
entity as is determined by use of the Conversion Price as adjusted
in accordance with subparagraph (ii) of this paragraph (h). The
adjustments described in this paragraph (h) shall be subject to
further adjustments as appropriate that shall be as nearly
equivalent as may be practicable to the relevant adjustment
provided for in this paragraph (h). If, in the case of any such
consolidation, merger, combination, sale, conveyance or Fundamental
Change, the stock or other securities and property receivable
thereupon by a holder of shares of Common Stock includes shares of
stock, securities or other property or assets (including cash) of
an entity other than the successor or acquiring entity, as the case
may be, in such consolidation, merger, combination, sale,
conveyance or Fundamental Change, then the Corporation shall enter
into an agreement with such other entity for the benefit of the
holders of this Series that shall contain such provisions to
protect the interests of such holders as the Board of Directors of
the Corporation shall reasonably consider necessary by reason of
the foregoing.

For purposes of calculating any adjustment to be made in connection
with the occurrence of a Fundamental Change:

"(i) in the case of a Non-Stock Fundamental
Change, the Conversion Price shall be deemed to be the
lower of (1) the Conversion Price in effect immediately
prior to such Non-Stock Fundamental Change and (2) the
product of (a) the greater of the Applicable Price and
the Reference Market Price and (b) a fraction, the
numerator of which is $50.00 and the denominator of
which is the amount at which one share of this Series
would be redeemed by the Corporation if the redemption
date were the date of such Non-Stock Fundamental Change
(such denominator being the sum of (y) the amount set
forth in the table in Section 3 hereof or, at any time
prior to May 1, 1992, $55.00, or for the 12-month
periods commencing May 1, 1992, May 1, 1993 and May 1,
1994, the amount of $54.50, $54.00 and $53.50,
respectively, and (z) any accrued and unpaid dividends
on this Series); provided, however, that if there were
accrued and unpaid dividends with respect to this Series
at the time of such Non-Stock Fundamental

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Change ("Passed Dividends"), and if , thereafter, all
(or any portion) of such Passed Dividends are paid by
the Corporation, then the Conversion Price to be used in
determining the amount of consideration to which a
holder of shares of this Series who has not converted
his shares of this Series shall be entitled upon
conversion thereof shall be deemed to be the conversion
price that would have been used in making such
determination if all (or such portion) of such Passed
Dividends had not been accrued and unpaid at such time;
and

"(ii) in the case of a Common Stock Fundamental
Change, the Conversion Price of the shares of this
Series immediately following such Common Stock
Fundamental Change shall be the Conversion Price in
effect immediately prior to such Common Stock
Fundamental Change multiplied by a fraction, the
numerator of which is the Purchaser Stock Price and the
denominator of which is the Applicable Price.

"(i) Upon any conversion of shares of this Series, the
shares of this Series so converted shall have the status of
authorized and 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 of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors.

"(5) Voting Rights. The shares of this Series of
Preferred Stock shall not have any voting powers either general or
special, except that:

"(a) 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 that 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 Certificate of Incorporation or of any
certificate amendatory thereof or supplemental thereto (including
any Certificate of Designations or any similar document relating to
any series of Preferred Stock) which would adversely affect the
preferences, rights, powers or privileges of this Series;

"(b) 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

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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 that 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;

"(c) If at the time of any annual meeting of
stockholders for the election of directors 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 such meeting, 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 for the full term for which he shall have been
elected, notwithstanding that prior to the end of such term 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 the 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,

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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 Dividend Period.

"(6) Liquidation Rights.

"(a) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the holders of the
shares of this Series shall be entitled to receive and to be paid
out of the assets of the Corporation available for distribution to
its stockholders, before any payment or distribution shall be made
on the Common Stock or on any other class of stock ranking junior
to this Series upon liquidation, a stated value in the amount of
$50 per share of this Series, plus accrued and unpaid dividends
thereon.

"(b) After the payment to the holders of shares of this
Series of the full amount of the liquidating distribution to which
they are entitled under this Section 6, the holders of this Series
as such shall have no right or claim to any of the remaining assets
of the Corporation.

"(c) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the amounts payable
with respect to the stated value of the shares of this Series and
any other shares of stock of the Corporation ranking as to any such
distribution on a parity with the shares of this Series are not
paid in full, the holders of the shares of this Series and of such
other shares will share ratably in any such distribution of assets
of the Corporation in proportion to the full respective stated
values to which they are entitled.

"(d) Neither the sale of all or substantially all of 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 6.

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paragraph (a) of this Section 6 before any payment shall be made to
the holders of any class of capital stock of the Corporation
ranking junior to this Series upon liquidation.

"(7) Ranking. For purposes of this resolution, any stock
of any class or classes of the Corporation shall be deemed to rank:

"(a) 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; and

"(b) 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 provision, if any, be different from
those of this Series, 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

"(c) 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.

"(8) Transfer Restrictions. The shares of this Series
have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"). Accordingly, in connection with any
resale or other transfer of shares of this Series prior to May 9,
1994, a holder of shares of this Series will be required to furnish
to the transfer agent certifications, legal opinions and/or other
information to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. The certificates
evidencing the shares of this Series shall, during the period
referred to in the immediately preceding sentence, contain a legend
and other notations to the effect of the two preceding sentences
with such additions, changes or modifications as the Corporation
and the transfer agent shall, in their sole discretion, deem
necessary or appropriate."

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Appendix E

CERTIFICATE OF DESIGNATIONS

8-3/8% PREFERRED STOCK

CHEMICAL BANKING CORPORATION

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

CHEMICAL BANKING CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES that
the following resolutions were duly adopted by the Board of Directors of the
Corporation on March 17, 1992 and by the Preferred Stock Committee of the Board
of Directors on May 20, 1992, respectively, pursuant to authority conferred
upon the Board of Directors by the provisions of the Certificate of
Incorporation of the Corporation which authorize the issuance of up to
200,000,000 shares of preferred stock, $1 par value (the "Preferred Stock"),
and pursuant to authority conferred upon the Preferred Stock Committee of the
Board of Directors by Section 141(c) of the General Corporation Law of the
State of Delaware, by the By-Laws of the Corporation and by the resolutions of
the Board of Directors adopted at a meeting duly convened and held on March 17,
1992:

1. The Board of Directors on March 17, 1992 adopted the following
resolutions authorizing a Preferred Stock Committee of the Board of Directors
to act on behalf of the Board of Directors in connection with the issuance of
the Preferred Stock:

"RESOLVED that the Board of Directors of Chemical Banking Corporation
(the "Board of Directors") deems it advisable and in the best interests of
Chemical Banking Corporation (the "Corporation") to provide for the
issuance and sale by the Corporation from time to time of shares of
preferred stock ($1 par value), in one or more series, having an aggregate
liquidation preference over the Corporation's common stock, $1 par value
(the "Common Stock"), not in excess of $800,000, 000, with such voting
powers, designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions, as
are set forth in, or are determined in accordance with, these resolutions
(the "Preferred Shares");

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"RESOLVED that the Board of Directors deems it in the best interests
of the Corporation to delegate to the Preferred Stock Committee those
powers and duties set forth below;

"RESOLVED that the Preferred Stock Committee may, without the further
action of the Board of Directors, from time to time authorize the issuance
and sale from time to time of one or more series of Preferred Shares for
cash or other property, as shall be determined by the Preferred Stock
Committee, subject to the limitations above, and any such Preferred Shares
may be sold through agents, through underwriters, through dealers and
directly to purchasers, in one or more offerings registered under the
Securities Act of 1933 (the "Act") or in transactions not required to be
registered under the Act, all as shall be determined by the Preferred
Stock Committee; and any such issuance and sale of Preferred Shares,
including the issuance from time to time of any warrants for such
Preferred Shares, common or preferred stock of the Corporation into which
any series of Preferred Shares may be convertible or exchangeable and the
issuance and sale from time to time of Depositary Shares (as hereinafter
defined; it being intended that, unless the context shall otherwise
require, when used in these resolutions the term "Preferred Shares" shall
also include any warrants or Depositary Shares related thereto) related to
the Preferred Shares, be and hereby is authorized and approved;

"RESOLVED that the Preferred Stock Committee be and hereby is
authorized and empowered to act on behalf and in the stead of the Board of
Directors in connection with the issuance of one or more series of the
Preferred Shares and any common or preferred stock into which such
Preferred Shares may be convertible or exchangeable and, in connection
therewith, is hereby authorized, to the fullest extent permitted by the
Delaware General Corporation Law as it now exists or is hereafter amended,
to determine the price at which the Preferred Shares of each such series
will be sold by the Corporation, to declare dividends payable on the
Preferred Shares, to reserve for issuance on the books of the Corporation
or otherwise a sufficient number of shares of any common or preferred
stock of the Corporation into which any series of the Preferred Shares may
be convertible or exchangeable and to determine the designation,
preferences and privileges, the relative, participating, optional or other
special rights, and the qualifications, limitations and restrictions
thereof;

"RESOLVED that, without limiting the generality of the preceding
resolution, the Preferred Stock Committee is hereby expressly authorized:

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"(i) to determine whether the Preferred Shares will be issued
in one or more series and the number of shares of any such series;

"(ii) to fix the dividend rate or rates of such shares and/or
the methods of determining dividends and the dates on which dividends
shall be payable;

"(iii) to determine whether dividends of any series of
Preferred Shares shall be cumulative or noncumulative and, if
cumulative, the dates from which dividends shall commence to
cumulate;

"(iv) to determine the conversion or exchange provisions, if
any, of the shares of any series of the Preferred Shares, including
without limitation, the class and series of capital stock of the
Corporation into which such shares shall be convertible or
exchangeable;

"(v) to determine whether the Corporation shall elect to offer
(a) warrants for such Preferred Shares ("Warrants") or (b) depositary
shares evidenced by depositary receipts, each representing a fraction
(to be determined by the Preferred Stock Committee) of a share of a
particular series of the Preferred Shares ("Depositary Shares"),
which Preferred Shares will be issued and deposited with a
depositary, in each case, in lieu of offering full shares of such
series of the Preferred Shares;

"(vi) to fix the liquidation preference of the shares of any
series of the Preferred Shares, subject to the limitation that the
aggregate liquidation preference of all the Preferred Shares issued
shall not exceed $800,000,000;

"(vii) to determine whether the shares of any series of the
Preferred Shares shall be subject to redemption, optional or
mandatory or pursuant to a sinking fund, and, if such series shall be
subject to redemption, the redemption provisions of such series; and

"(viii) to fix or determine any additional dividend,
liquidation, redemption, sinking fund and other rights, preferences,
privileges, limitations and restrictions thereof;

"RESOLVED that the Preferred Stock Committee be and hereby is
authorized and empowered to authorize, approve and take such other action
as is deemed advisable in connection with the issuance of one or more
series of the Preferred Shares, including, without limitation, the
following:

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"(i) selecting the underwriters, dealers and agents, if any,
to or through which the Preferred Shares will be sold and offered;

"(ii) approving the form and substance, and the execution and
delivery, of any underwriting agreement, agency agreement, placement
agreement or other agreement to be entered into by the Corporation in
connection with the issuance and sale of the Preferred Shares,
including, without limitation, setting the amount of any underwriting
discounts and other items constituting underwriters' compensation and
any discounts and commissions allowed or paid to dealers or agents;

"(iii) selecting the bank or trust company which will act as
depositary if Depositary Shares are offered and approving the form
and substance, and the execution and delivery, of any deposit
agreement to be entered into by the Corporation with such depositary;
and

"(iv) appointing a registrar and transfer agent for the
registration, transfer and exchange of the Preferred Shares and
appointing a dividend disbursing agent for the Preferred Shares;

"RESOLVED that for each series of Preferred Shares a certificate
shall be prepared and filed on behalf of the Corporation with the
Secretary of State of the State of Delaware pursuant to Section 151 of the
General Corporation Law of the State of Delaware (a "Certificate of
Designations"); that each such Certificate of Designations be in such form
as is approved by action of the Board of Directors or the Preferred Stock
Committee; and that the proper officers of the Corporation be and hereby
are authorized to execute and file each such Certificate of Designations
pursuant to the General Corporation Law of the State of Delaware;"

2. The Board of Directors on March 17, 1992 adopted the following
resolution fixing the voting rights of the Preferred Stock authorized by
the preceding resolutions:

"RESOLVED that the Certificate of Designations for each series of the
Preferred Shares shall provide that the shares of such series shall not
have any voting powers either general or special, except that:

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a meeting called for the purpose at which the holders of shares of
such 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 Certificate of
Incorporation or of any certificate amendatory thereof or
supplemental thereto (including any Certificate of Designations or
any similar document relating to any series of Preferred Stock) so as
to affect adversely the preferences, rights, powers or privileges of
such series;

"(ii) 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 any such series
and all other series of Preferred Stock ranking on a parity with
shares of such 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 such 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 such 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; and

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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 Corporation's stockholders, or of the holders of
shares of Preferred Stock, called for the 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 dividend period."

3. The Preferred Stock Committee of the Board of Directors on May
20, 1992, pursuant to the authority conferred upon the Preferred Stock
Committee of the Board of Directors by Section 141(c) of the General
Corporation Law of the State of Delaware, by Section 3.03 of the By-Laws
of the Corporation and by the resolutions of the Board of Directors set
forth above, adopted the following resolution:

"RESOLVED that the issue of up to 14,000,000 shares of 8-3/8%
Preferred Stock, $1 par value, of the Corporation ranking on a parity with
the series of Preferred Stock of the Corporation designated as the
Corporation's "Adjustable Rate Cumulative Preferred Stock", the
Corporation's "Adjustable Rate Cumulative Preferred Stock, Series B", the
Corporation's "Adjustable Rate Cumulative Preferred Stock, Series C", the
Corporation's "10-3/4% Cumulative Preferred Stock", the

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Corporation's "Adjustable Rate Cumulative Preferred Stock, Series E", the
Corporation's "Adjustable Rate Cumulative Preferred Stock, Series F", the
Corporation's "10.96% Preferred Stock" and the Corporation's "10%
Convertible Preferred Stock" is hereby authorized and the designation,
preferences and privileges, relative, participating, optional and other
special rights, and qualifications, limitations and restrictions of all
14,000,000 shares of this Series, in addition to those set forth in the
Certificate of Incorporation of the Corporation and, with respect to
voting rights, in the resolutions of the Board of the Directors of the
Corporation adopted on March 17, 1992, are hereby fixed as follows:

"1. Designation. The designation of this Series shall be
8-3/8% Preferred Stock (hereinafter referred to as the "Series") and
the number of shares constituting this Series shall be Fourteen
Million (14,000,000). Shares of this Series shall have a stated
value of $25. The number of authorized shares of this Series may be
reduced by further resolution duly adopted by the Board of Directors
of the Corporation or the Preferred Stock Committee of the Board of
Directors 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.

"2. Dividends. (a) Dividends shall be payable on the shares
of this Series: (i) for the period (the "Initial Dividend Period")
from the date of original issue of shares of this Series to and
including September 30, 1992, and (ii) for each quarterly dividend
period thereafter (the Initial Dividend Period and each quarterly
dividend period thereafter being hereinafter individually referred to
as a "Dividend Period" and collectively referred to as "Dividend
Periods"), which quarterly Dividend Periods shall commence on January
1, April 1, July 1 and October 1 in each year, commencing October 1,
1992 and shall end on and include the day next preceding the first
day of the next Dividend Period, at a rate per annum of the stated
value thereof equal to 8-3/8% (the "Dividend Rate"). Dividends shall
be cumula-tive from such date of original issue and shall be payable,
when and as declared by the Board of Directors or by the Preferred
Stock Committee of the Board of Directors, on March 31, June 30,
September 30 and December 31 of each year, commencing on September
30, 1992. 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 45 days preceding the
payment date thereof,

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as shall be fixed by the Board of Directors of the Corporation or by
the Preferred Stock Committee of the Board of Directors. 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
of Directors of the Corporation or by the Preferred Stock Committee
of the Board of Directors.

"(b) Dividends payable on this Series for any period greater
or less than a full Dividend Period, including the Initial Dividend
Period, shall be computed on the basis of a 360-day year consisting
of twelve 30-day months and the actual number of days elapsed in the
period. Dividends payable on this Series for each full Dividend
Period shall be computed by annualizing the Dividend Rate and
dividing by four.

"(c) No full dividends shall be declared or paid or set apart
for payment on the 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
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 series of
Preferred Stock ranking on a parity as to dividends with this Series,
all dividends declared upon shares of this Series and any other
series of 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 and unpaid 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.

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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 be 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 or declared and set aside for payment for all past
Dividend Periods.

"3. Redemption. (a) The shares of this Series are not
redeemable prior to June 1, 1997. 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 on or after June 1, 1997, at a redemption price
of $25 per share, plus accrued and unpaid dividends thereon to the
date fixed for redemption.

"(b) 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 of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors and the shares to be redeemed shall be determined by lot or
pro rata as may be determined by the Board of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors or by any other method as may be determined by the Board of
Directors of the Corporation or the Preferred Stock Committee of the
Board of Directors in its sole discretion to be equitable, provided
that such method satisfies any applicable requirements of any
securities exchange on which this Series is listed.

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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 the redemption date.

"(d) 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 of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors 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.

"(e) 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 of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors.

"(f) Notwithstanding the foregoing provisions of this Section
3, 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.

"4. Conversion. The holders of shares of this Series shall
not have any rights to convert such shares

E-10
<PAGE> 96
into shares of any other class or series of capital stock of the
Corporation.

"5. Liquidation Rights.

"(a) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the holders of the
shares of this Series shall be entitled to receive and to be paid out
of the assets of the Corporation available for distribution to its
stockholders, before any payment or distribution shall be made on the
Common Stock or on any other class of stock ranking junior to this
Series upon liquidation, the amount of $25 per share, plus accrued
and unpaid dividends thereon.

"(b) After the payment to the holders of the shares of this
Series of the full preferential amounts provided for in this Section
5, the holders of this Series as such shall have no right or claim to
any of the remaining assets of the Corporation.

"(c) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the amounts payable
with respect to the stated value of the shares of this Series and any
other shares of stock of the Corporation ranking as to any such
distribution on a parity with the shares of this Series are not paid
in full, the holders of the shares of this Series and of such other
shares will share ratably in any such distribution of assets of the
Corporation in proportion to the full respective stated values to
which they are entitled.

"(d) 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 5.

"(e) 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 (a) of this Section 5
before any payment shall be made to the holder of any class of
capital stock of the Corporation ranking junior to this Series upon
liquidation.

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<PAGE> 97
"6. Ranking. For purposes of this resolution, any stock of
any class or classes of the Corporation shall be deemed to rank:

"(b) 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 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,
without preference or priority, one over the other, as between the
holders of such stock and the holders of shares of this Series; and

"(c) 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.

"7. Voting Rights. The shares of this Series shall have the
voting rights set forth in the resolutions of the Board of Directors
of the Corporation adopted on March 17, 1992."

E-12
<PAGE> 98

Appendix F

CERTIFICATE OF DESIGNATIONS

7.92% CUMULATIVE PREFERRED STOCK

CHEMICAL BANKING CORPORATION

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

CHEMICAL BANKING CORPORATION, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES
that the following resolutions were duly adopted by the Board of Directors of
the Corporation on March 17, 1992 and by the Preferred Stock Committee of the
Board of Directors on September 10, 1992, respectively, pursuant to authority
conferred upon the Board of Directors by the provisions of the Certificate of
Incorporation of the Corporation which authorize the issuance of up to
200,000,000 shares of preferred stock, $1 par value (the "Preferred Stock"),
and pursuant to authority conferred upon the Preferred Stock Committee of the
Board of Directors by Section 141(c) of the General Corporation Law of the
State of Delaware, by the By-Laws of the Corporation and by the resolutions of
the Board of Directors adopted at a meeting duly convened and held on March 17,
1992:

1. The Board of Directors, on March 17, 1992 adopted the following
resolutions authorizing a Preferred Stock Committee of the Board of Directors
to act on behalf of the Board of Directors in connection with the issuance of
the Preferred Stock:

"RESOLVED that the Board of Directors of Chemical Banking Corporation
(the "Board of Directors") deems it advisable and in the best interests of
Chemical Banking Corporation (the "Corporation") to provide for the
issuance and sale by the Corporation from time to time of shares of
preferred stock ($1 par value), in one or more series, having an aggregate
liquidation preference over the Corporation's common stock, $1 par value
(the "Common Stock"), not in excess of $800,000,000, with such voting
powers, designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions, as
are set forth in, or are determined in accordance with, these resolutions
(the "Preferred Shares");

F-1
<PAGE> 99
"RESOLVED that the Board of Directors deems it in the best interests
of the Corporation to delegate to the Preferred Stock Committee those
powers and duties set forth below;

"RESOLVED that, without limiting the generality of the preceding
resolution, the Preferred Stock Committee is hereby expressly authorized:

F-2
<PAGE> 100
"(i) to determine whether the Preferred Shares will be issued
in one or more series and the number of shares of any such series;

"(ii) to fix the dividend rate or rates of such shares and/or
the methods of determining dividends and the dates on which dividends
shall be payable;

"(iii) to determine whether dividends of any series of
Preferred Shares shall be cumulative or noncumulative and, if
cumulative, the dates from which dividends shall commence to
cumulate;

"(viii) to fix or determine any additional dividend,
liquidation, redemption, sinking fund and other rights, preferences,
privileges, limitations and restrictions thereof;

F-3
<PAGE> 101
"(i) selecting the underwriters, dealers and agents, if any,
to or through which the Preferred Shares will be sold and offered;

"(iv) appointing a registrar and transfer agent for the
registration, transfer and exchange of the Preferred Shares and
appointing a dividend disbursing agent for the Preferred Shares;

2. The Board of Directors on March 17, 1992 adopted the following
resolution fixing the voting rights of the Preferred Stock authorized by the
preceding resolutions:

F-4
<PAGE> 102
a meeting called for the purpose at which the holders of shares of
such 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 Certificate of
Incorporation or of any certificate amendatory thereof or
supplemental thereto (including any Certificate of Designations or
any similar document relating to any series of Preferred Stock) so as
to affect adversely the preferences, rights, powers or privileges of
such series;

F-5
<PAGE> 103
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 Corporation's stockholders, or of the holders of
shares of Preferred Stock, called for the 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 dividend period."

3. The Preferred Stock Committee of the Board of Directors on
September 10, 1992, pursuant to the authority conferred upon the Preferred
Stock Committee of the Board of Directors by Section 141(c) of the General
Corporation Law of the State of Delaware, by Section 3.03 of the By-Laws of the
Corporation and by the resolutions of the Board of Directors set forth above,
adopted the following resolution:

"RESOLVED that, pursuant to resolutions of the Board of Directors of
Chemical Banking Corporation (the "Corporation") adopted on March 17,
1992, the issue of up to 2,000,000 shares of 7.92% Cumulative Preferred
Stock, $100 stated value per share ($1 par value), of the Corporation
ranking on a parity with the series of Preferred Stock of the Corporation
designated as the Corporation's "Adjustable Rate Cumulative Preferred
Stock, Series B", the Corporation's "Adjustable Rate

F-6
<PAGE> 104
Cumulative Preferred Stock, Series C", the Corporation's "10-3/4%
Cumulative Preferred Stock", the Corporation's "Adjustable Rate Cumulative
Preferred Stock, Series E", the Corporation's "Adjustable Rate Cumulative
Preferred Stock, Series F", the Corporation's "10.96% Preferred Stock",
the Corporation's "10% Convertible Preferred Stock" and the Corporation's
"8-3/8% Preferred Stock" is hereby authorized and the designation,
preferences and privileges, relative, participating, optional and other
special rights, and qualifications, limitations and restrictions of all
2,000,000 shares of this Series, in addition to those set forth in the
Certificate of Incorporation of the Corporation and, with respect to
voting rights, in the resolutions of the Board of Directors of the
Corporation adopted on March 17, 1992, are hereby fixed as follows:

"1. Designation. The designation of this Series shall be
7.92% Cumulative Preferred Stock (hereinafter referred to as the
"Series") and the number of shares constituting this Series shall be
Two Million (2,000,000). Shares of this Series shall have a stated
value of $100. The number of authorized shares of this Series may be
reduced by further resolution duly adopted by the Board of Directors
of the Corporation or the Preferred Stock Committee of the Board of
Directors 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.

F-7
<PAGE> 105
record of shares of this Series as they appear on the stock register
of the Corporation on such record date, not exceeding 45 days
preceding the payment date thereof, as shall be fixed by the Board of
Directors of the Corporation or by the Preferred Stock Committee of
the Board of Directors. 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 of Directors of the Corporation
or by the Preferred Stock Committee of the Board of Directors.

"(c) No full dividends shall be declared or paid or set apart
for payment on the 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
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 series of
Preferred Stock ranking on a parity as to dividends with this Series,
all dividends declared upon shares of this Series and any other
series of 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 and unpaid 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.

"(d) So long as any shares of this Series are outstanding, no
dividend (other than a dividend in Common

F-8
<PAGE> 106
Stock or in any other stock ranking junior to this Series as to
dividends and upon liquidation and other than as provided in
paragraph (c) of this Section 2) 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 be 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 or declared
and set aside for payment for all past Dividend Periods.

"3. Redemption. (a) The shares of this Series are not
redeemable prior to October 1, 1997. 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 on or after October 1, 1997, at a redemption
price of $100 per share, plus accrued and unpaid dividends thereon to
the date fixed for redemption.

F-9
<PAGE> 107
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 the redemption date.

"(f) Notwithstanding the foregoing provisions of this Section
3, 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.

F-10
<PAGE> 108
"4. Conversion. The holders of shares of this Series
shall not have any rights to convert such shares into shares of any
other class or series of capital stock of the Corporation.

"5. Liquidation Rights.

"(a) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the holders of the
shares of this Series shall be entitled to receive and to be paid out
of the assets of the Corporation available for distribution to its
stockholders, before any payment or distribution shall be made on the
Common Stock or on any other class of stock ranking junior to this
Series upon liquidation, the amount of $100 per share, plus accrued
and unpaid dividends thereon.

"(c) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the amounts payable
with respect to the stated value of the shares of this Series and any
other shares of stock of the Corporation ranking as to any such
distribution on a parity with the shares of this Series are not paid
in full, the holders of the shares of this Series and of such other
shares will share ratably in any such distribution of assets of the
Corporation in proportion to the full respective stated values to
which they are entitled.

"(d) 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 5.

F-11
<PAGE> 109
class of capital stock of the Corporation ranking junior to this
Series upon liquidation.

"6. Ranking. For purposes of this resolution, any stock of
any class or classes of the Corporation shall be deemed to rank:

"(b) 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 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,
without preference or priority, one over the other, as between the
holders of such stock and the holders of shares of this Series; and

"(c) 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.

"7. Voting Rights. The shares of this Series shall have
the voting rights set forth in the resolutions of the Board of
Directors of the Corporation adopted on March 17, 1992."

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<PAGE> 110

Appendix G

CERTIFICATE OF DESIGNATIONS

7.58% CUMULATIVE PREFERRED STOCK

CHEMICAL BANKING CORPORATION

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

CHEMICAL BANKING CORPORATION, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES
that the following resolutions were duly adopted by the Board of Directors of
the Corporation on "March 17, 1992 and September 15, 1992, and by the Preferred
Stock Committee of the Board of Directors on March 16, 1993, respectively,
pursuant to authority conferred upon the Board of Directors by the provisions
of the Certificate of Incorporation of the Corporation which authorize the
issuance of up to 200,000,000 shares of preferred stock, $1 par value (the
"Preferred Stock"), and pursuant to authority conferred upon the Preferred
Stock Committee of the Board of Directors by Section 141(c) of the General
Corporation Law of the State of Delaware, by the By-Laws of the Corporation and
by the resolutions of the Board of Directors adopted at meetings duly convened
and held on March 17, 1992 and September 15, 1992:

"RESOLVED that the Board of Directors of Chemical Banking
Corporation (the "Board of Directors") deems it advisable and in the
best interests of Chemical Banking Corporation (the "Corporation") to
provide for the issuance and sale by the Corporation from time to time
of shares of preferred stock ($1 par value), in one or more series,
having an aggregate liquidation preference over the Corporation's
common stock, $1 par value (the "Common Stock"), not in excess of
$800,000,000, with such voting powers, designations, preferences, and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions, as are set forth

G-1
<PAGE> 111
in, or are determined in accordance with, these resolutions (the
"Preferred Shares");

"RESOLVED that the Board of Directors deems it in the best
interest of the Corporation to delegate to the Preferred Stock
Committee those powers and duties set forth below;

"RESOLVED that the Preferred Stock Committee may, without the
further action of the Board of Directors, from time to time authorize
the issuance and sale from time to time of one or more series of
Preferred Shares for cash or other property, as shall be determined by
the Preferred Stock Committee, subject to the limitations above, and
any such Preferred Shares may be sold through agents, through
underwriters, through dealers and directly to purchasers, in one or
more offerings registered under the Securities Act of 1933 (the "Act")
or in transactions not required to be registered under the Act, all as
shall be determined by the Preferred Stock Committee; and any such
issuance and sale of Preferred Shares, including the issuance from time
to time of any warrants for such Preferred Shares, common or preferred
stock of the Corporation into which any series of Preferred Shares may
be convertible or exchangeable and the issuance and sale from time to
time of Depositary Shares (as hereinafter defined; it being intended
that, unless the context shall otherwise require, when used in these
resolutions the term "Preferred Shares" shall also include any warrants
or Depositary Shares related thereto) related to the Preferred Shares,
be and hereby is authorized and approved;

"RESOLVED that the Preferred Stock Committee be and hereby is
authorized and empowered to act on behalf and in the stead of the Board
of Directors in connection with the issuance of one or more series of
the Preferred Shares and any common or preferred stock into which such
Preferred Shares may be convertible or exchangeable and, in connection
therewith, is hereby authorized, to the fullest extent permitted by the
Delaware General Corporation Law as it now exists or is hereafter
amended, to determine the price at which the Preferred Shares of each
such series will be sold by the Corporation, to declare dividends
payable on the Preferred Shares, to reserve for issuance on the books
of the Corporation or otherwise a sufficient number of shares of any
common or preferred stock of the Corporation into which any series of
the Preferred Shares may be convertible or exchangeable and to
determine the designation, preferences and privileges, the relative,
participating, optional or other special rights, and the
qualifications, limitations and restrictions thereof;

G-2
<PAGE> 112
"RESOLVED that, without limiting the generality of the
preceding resolution, the Preferred Stock Committee is hereby expressly
authorized:

"(i) to determine whether the Preferred Shares will
be issued in one or more series and the number of shares of any
such series;

"(ii) to fix the dividend rate or rates of such
shares and/or the methods of determining dividends and the
dates on which dividends shall be payable;

"(iii) to determine whether dividends of any series
of Preferred Shares shall be cumulative or noncumulative and,
if cumulative, the dates from which dividends shall commence to
cumulate;

"(iv) to determine the conversion or exchange
provisions, if any, of the shares of any series of the
Preferred Shares, including without limitation, the class and
series of capital stock of the Corporation into which such
shares shall be convertible or exchangeable;

"(v) to determine whether the Corporation shall elect
to offer (a) warrants for such Preferred Shares ("Warrants") or
(b) depositary shares evidenced by depositary receipts, each
representing a fraction (to be determined by the Preferred
Stock Committee) of a share of a particular series of the
Preferred Shares ("Depositary Shares"), which Preferred Shares
will be issued and deposited with a depositary, in each case,
in lieu of offering full shares of such series of the Preferred
Shares;

"(vi) to fix the liquidation preference of the shares
of any series of the Preferred Shares, subject to the
limitation that the aggregate liquidation preference of all the
Preferred Shares issued shall not exceed $800,000,000;

"(vii) to determine whether the shares of any series
of the Preferred Shares shall be subject to redemption,
optional or mandatory or pursuant to a sinking fund, and, if
such series shall be subject to redemption, the redemption
provisions of such series; and

"(viii) to fix or determine any additional dividend,
liquidation, redemption, sinking fund and other rights,
preferences, privileges, limitations and restrictions thereof;

G-3
<PAGE> 113
"RESOLVED that the Preferred Stock Committee be and hereby is
authorized and empowered to authorize, approve and take such other
action as is deemed advisable in connection with the issuance of one or
more series of the Preferred Shares, including without limitation, the
following:

"(i) selecting the underwriters, dealers and agents,
if any, to or through which the Preferred Shares will be sold
and offered;

"(ii) approving the form and substance, and the
execution and delivery, of any underwriting agreement, agency
agreement, placement agreement or other agreement to be entered
into by the Corporation in connection with the issuance and
sale of the Preferred Shares, including, without limitation,
setting the amount of any underwriting discounts and other
items constituting underwriters' compensation and any discounts
and commissions allowed or paid to dealers or agents;

"(iii) selecting the bank or trust company which will
act as depositary if Depositary Shares are offered and
approving the form and substance, and the execution and
delivery, of any deposit agreement to be entered into by the
Corporation with such depositary; and

"(iv) appointing a registrar and transfer agent for
the registration, transfer and exchange of the Preferred Shares
and appointing a dividend disbursing agent for the Preferred
Shares;

"RESOLVED that for each series of Preferred Shares a
certificate shall be prepared and filed on behalf of the Corporation
with the Secretary of State of the State of Delaware pursuant to
Section 151 of the General Corporation Law of the State of Delaware (a
"Certificate of Designations"); that each such Certificate of
Designations be in such form as is approved by action of the Board of
Directors or the Preferred Stock Committee; and that the proper
officers of the Corporation be and hereby are authorized to execute and
file each such Certificate of Designations pursuant to the General
Corporation Law of the State of Delaware."

2. The Board of Directors on September 15, 1992 adopted the following
resolution authorizing a Preferred Stock Committee of the Board of Directors to
act on behalf of the Board of Directors in connection with the issuance of
additional shares of the Preferred Stock:

"RESOLVED that the Board of Directors of Chemical Banking
Corporation (the "Board of Directors") deems it advisable and

G-4
<PAGE> 114
in the best interests of Chemical Banking Corporation (the
"Corporation") to amend certain resolutions adopted by the Board of
Directors on March 17, 1992 pertaining to the authority of the
Preferred Stock Committee of the Board (the "March 17, 1992
Resolutions") to authorize the Preferred Stock Committee of the Board
of Directors to approve the issuance and sale by the Corporation from
time to time of Preferred Shares as defined in the March 17, 1992
Resolutions, in one or more series, having an additional aggregate
liquidation preference over the Corporation's common stock, $1 par
value, not in excess of $1,300,000,000 (an increase of $500,000,000
from the $800,000,000 authorized under the March 17, 1992 Resolutions),
with such voting powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions, as are set forth in, or are determined in
accordance with the March 17, 1992 Resolutions which shall in all other
respects remain in full force and effect and are hereby ratified and
affirmed."

3. The Board of Directors on March 17, 1992 adopted the following
resolution fixing the voting rights of the Preferred Stock authorized by the
preceding resolutions:

"RESOLVED that the Certificate of Designations for each series
of the Preferred Shares shall provide that the shares of such series
shall not have any voting powers either general or special except that:

"(i) 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 any 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 such 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 Certificate of
Incorporation or of any certificate amendatory thereof or
supplemental thereto (including any Certificate of Designations
or any similar document relating to any series of Preferred
Stock) so as to affect adversely the preferences, rights,
powers or privileges of such series;

G-5
<PAGE> 115
in writing or by a vote at a meeting called for the purpose at
which the holders of shares of such 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 such 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; and

"(iii) If at the time of any annual meeting of the
Corporation's stockholders for the election of directors there
is a default in preference dividends on the Preferred Stock,
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 (whether or not the holders
of such series of Preferred Stock would be entitled to vote for
the election of directors if such default in preference
dividends did not exist), shall have the right at such meeting,
voting together as a single class without regard to series, to
the exclusion of the holders of Common Stock and Class B 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 (a "Preferred Director"), shall continue to serve as such
director for the full term for which he shall have been
elected, notwithstanding that prior to the end of such term 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 Corporation's
stockholders, or of the holders of shares of Preferred Stock,
called for the 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

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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 dividend period."

4. The Preferred Stock Committee of the Board of Directors on March
16, 1993, pursuant to the authority conferred upon the Preferred Stock
Committee of the Board of Directors by Section 141(c) of the General
Corporation Law of the State of Delaware, by Section 3.03 of the By-Laws of the
Corporation and by the resolutions of the Board of Directors set forth above,
adopted the following resolution:

"RESOLVED that, pursuant to resolutions of the Board of
Directors of Chemical Banking Corporation (the "Corporation") adopted
on March 17, 1992 and September 15, 1992, the issue of up to 2,300,000
shares of 7.58% Cumulative Preferred Stock, $100 stated value per share
($1 par value) of the Corporation ranking on a parity with the series
of Preferred Stock of the Corporation designated as the Corporation's
"Adjustable Rate Cumulative Preferred Stock, Series C", the
Corporation's "10-3/4% Cumulative Preferred Stock", the Corporation's
"Adjustable Rate Cumulative Preferred Stock, Series E", the
Corporation's "Adjustable Rate Cumulative Preferred Stock, Series F",
the Corporation's "10.96% Preferred Stock", the Corporation's "10%
Convertible Preferred Stock", the Corporation's "8-3/8% Preferred
Stock" and the Corporation's "7.92% Cumulative Preferred Stock" is
hereby authorized and the designation, preferences and privileges,
relative, participating, optional and other special rights, and
qualifications, limitations and restrictions of all 2,300,000 shares of
this Series, in addition to those set forth in the Certificate of
Incorporation of the Corporation and, with respect to voting rights, in
the resolutions of the Board of Directors of the Corporation adopted on
March 17, 1992 and September 15, 1992, are hereby fixed as follows:

"1. Designation. The designation of this Series
shall be 7.58% Cumulative Preferred Stock (hereinafter

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referred to as the "Series") and the number of shares
constituting this Series shall be 2,300,000. Shares of this
Series shall have a stated value of $100. The number of
authorized shares of this Series may be reduced by further
resolution duly adopted by the Board of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors 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.

"2. Dividends. (a) Dividends shall be payable on
the shares of this Series: (i) for the period (the "Initial
Dividend Period") from the date of original issue of shares of
this Series to and including June 30, 1993, and (ii) for each
quarterly dividend period thereafter (the Initial Dividend
Period and each quarterly dividend period thereafter being
hereinafter individually referred to as a "Dividend Period" and
collectively referred to as "Dividend Periods"), which
quarterly Dividend Periods shall commence on January 1, April
1, July 1 and October 1 in each year, commencing July 1, 1993,
and shall end on and include the day next preceding the first
day of the next Dividend Period, at a rate per annum of the
stated value thereof equal to 7.58% (the "Dividend Rate").
Dividends shall be cumulative from such date of original issue
and shall be payable, when and as declared by the Board of
Directors or by the Preferred Stock Committee of the Board of
Directors, on March 31, June 30, September 30 and December 31
of each year, commencing on June 30, 1993. 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 45 days preceding the payment date
thereof, as shall be fixed by the Board of Directors of the
Corporation or by the Preferred Stock Committee of the Board of
Directors. 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 on
such date, not exceeding 45 days preceding the payment date
thereof, as may be fixed by the Board of Directors of the
Corporation or by the Preferred Stock Committee of the Board of
Directors.

"(b) Dividends payable on this Series for any period
greater or less than a full Dividend Period, including the
Initial Dividend Period, shall be computed on the basis of a
360-day year consisting of twelve 30-day months and the actual
number of days elapsed in the period. Dividends payable on
this Series for each full

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Dividend Period shall be computed by annualizing the Dividend
Rate and dividing by four.

"(c) No full dividends shall be declared or paid or
set apart for payment on the 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 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 series of
Preferred Stock ranking on a parity as to dividends with this
Series, all dividends declared upon shares of this Series and
any other series of 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 and unpaid 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 stock, 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.

"(d) 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 (c) of this Section 2) 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 be 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 or

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declared and set aside for payment for all past Dividend
Periods.

"3. Redemption. (a) The shares of this Series are
not redeemable prior to April 1, 1998. 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 on or after April 1,
1998, at a redemption price of $100 per share plus accrued and
unpaid dividends thereon to the date fixed for redemption.

"(b) 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 of Directors of
the Corporation or the Preferred Stock Committee of the Board
of Directors and the shares to be redeemed shall be determined
by lot or pro rata as may be determined by the Board of
Directors of the Corporation or the Preferred Stock Committee
of the Board of Directors or by any other method as may be
determined by the Board of Directors of the Corporation or the
Preferred Stock Committee of the Board of Directors in its sole
discretion to be equitable, provided that such method satisfies
any applicable requirements of any securities exchange on which
this Series is listed.

"(c) 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 or
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 the redemption
date.

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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 of Directors of the
Corporation or the Preferred Stock Committee of the Board of
Directors 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.

"(e) 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 of
Directors of the Corporation or the Preferred Stock Committee
of the Board of Directors.

"(f) Notwithstanding the foregoing provisions of this
Section 3, 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.

"4. Conversion. The holders of shares of this Series
shall not have any rights to convert such shares into shares of
any other class or series of capital stock of the Corporation.

"5. Liquidation Rights. (a) Upon the voluntary or
involuntary dissolution, liquidation or winding up of the
Corporation, the holders of the shares of this Series shall be
entitled to receive and to be paid out of the assets of the
Corporation available for distribution to its stockholders,
before any payment or distribution shall be made on the Common
Stock or on any other class of stock ranking junior to this
Series upon liquidation, the amount of $100 per share, plus
accrued and unpaid dividends thereon.

"(b) After the payment to the holders of the shares
of this Series of the full preferential amounts provided

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for in this Section 5, the holders of this Series as such shall
have no right or claim to any of the remaining assets of the
Corporation.

"(c) If, upon any voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation, the
amounts payable with respect to the stated value of the shares
of this Series and any other shares of stock of the Corporation
ranking as to any such distribution on a parity with the shares
of this Series are not paid in full, the holders of the shares
of this Series and of such other shares will share ratably in
any such distribution of assets of the Corporation in
proportion to the full respective stated values to which they
are entitled.

"(d) 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 5.

"(e) 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 (a) of this Section 5 before any payment shall be
made to the holder of any class of capital stock of the
Corporation ranking junior to this Series upon liquidation.

"6. Ranking. For purposes of this resolution, any
stock of any class or classes of the Corporation shall be
deemed to rank:

"(a) 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;

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holders of such 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, without
preference or priority, one over the other, as between the
holders of such stock and the holders of shares of this Series;
and

"(c) 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.

"7. Voting Rights. The shares of this Series shall
have the voting rights set forth in the resolutions of the
Board of Directors of the Corporation adopted on March 17,
1992."

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Appendix H

CERTIFICATE OF DESIGNATIONS

7-1/2% CUMULATIVE PREFERRED STOCK

CHEMICAL BANKING CORPORATION

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

CHEMICAL BANKING CORPORATION, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), HEREBY
CERTIFIES that the following resolutions were duly adopted by the Board of
Directors of the Corporation on March 17, 1992 and September 15, 1992, and by
the Preferred Stock Committee of the Board of Directors on March 16, 1993,
respectively, pursuant to authority conferred upon the Board of Directors by
the provisions of the Certificate of Incorporation of the Corporation which
authorize the issuance of up to 200,000,000 shares of preferred stock, $1 par
value (the "Preferred Stock"), and pursuant to authority conferred upon the
Preferred Stock Committee of the Board of Directors by Section 141(c) of the
General Corporation Law of the State of Delaware, by the By-Laws of the
Corporation and by the resolutions of the Board of Directors adopted at
meetings duly convened and held on March 17, 1992 and September 15, 1992:

1. The Board of Directors on March 17, 1992 adopted the
following resolutions authorizing a Preferred Stock Committee of the Board of
Directors to act on behalf of the Board of Directors in connection with the
issuance of the Preferred Stock:

"RESOLVED that the Board of Directors of Chemical Banking
Corporation (the "Board of Directors") deems it advisable and in the
best interests of Chemical Banking Corporation (the "Corporation") to
provide for the issuance and sale by the Corporation from time to time
of shares of preferred stock ($1 par value), in one or more series,
having an aggregate liquidation preference over the Corporation's
common stock, $1 par value (the "Common Stock"), not in excess of
$800,000,000, with such voting powers, designations, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions, as are set forth in, or
are determined in accordance with, these resolutions (the "Preferred
Shares");

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"RESOLVED that the Board of Directors deems it in the best
interests of the Corporation to delegate to the Preferred Stock
Committee those powers and duties set forth below;

"RESOLVED that the Preferred Stock Committee may, without the
further action of the Board of Directors, from time to time authorize
the issuance and sale from time to time of one or more series of
Preferred Shares for cash or other property, as shall be determined by
the Preferred Stock Committee, subject to the limitations above, and
any such Preferred Shares may be sold through agents, through
underwriters, through dealers and directly to purchasers, in one or
more offerings registered under the Securities Act of 1933 (the "Act")
or in transactions not required to be registered under the Act, all as
shall be determined by the Preferred Stock Committee; and any such
issuance and sale of Preferred Shares, including the issuance from
time to time of any warrants for such Preferred Shares, common or
preferred stock of the Corporation into which any series of Preferred
Shares may be convertible or exchangeable and the issuance and sale
from time to time of Depositary Shares (as hereinafter defined; it
being intended that, unless the context shall otherwise require, when
used in these resolutions the term "Preferred Shares" shall also
include any warrants or Depositary Shares related thereto) related to
the Preferred Shares, be and hereby is authorized and approved;

"RESOLVED that the Preferred Stock Committee be and hereby is
authorized and empowered to act on behalf and in the stead of the
Board of Directors in connection with the issuance of one or more
series of the Preferred Shares and any common or preferred stock into
which such Preferred Shares may be convertible or exchangeable and, in
connection therewith, is hereby authorized, to the fullest extent
permitted by the Delaware General Corporation Law as it now exists or
is hereafter amended, to determine the price at which the Preferred
Shares of each such series will be sold by the Corporation, to declare
dividends payable on the Preferred Shares, to reserve for issuance on
the books of the Corporation or otherwise a sufficient number of
shares of any common or preferred stock of the Corporation into which
any series of the Preferred Shares may be convertible or exchangeable
and to determine the designation, preferences and privileges, the
relative, participating, optional or other special rights, and the
qualifications, limitations and restrictions thereof;

"RESOLVED that, without limiting the generality of the
preceding resolution, the Preferred Stock Committee is hereby
expressly authorized:

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"(i) to determine whether the Preferred Shares will
be issued in one or more series and the number of shares of
any such series;

"(ii) to fix the dividend rate or rates of such
shares and/or the methods of determining dividends and the
dates on which dividends shall be payable;

"(iii) to determine whether dividends of any series
of Preferred Shares shall be cumulative or noncumulative and,
if cumulative, the dates from which dividends shall commence
to cumulate;

"(iv) to determine the conversion or exchange
provisions, if any, of the shares of any series of the
Preferred Shares, including without limitation, the class and
series of capital stock of the Corporation into which such
shares shall be convertible or exchangeable;

"(v) to determine whether the Corporation shall elect
to offer (a) warrants for such Preferred Shares ("Warrants")
or (b) depositary shares evidenced by depositary receipts,
each representing a fraction (to be determined by the
Preferred Stock Committee) of a share of a particular series
of the Preferred Shares ("Depositary Shares"), which Preferred
Shares will be issued and deposited with a depositary, in each
case, in lieu of offering full shares of such series of the
Preferred Shares;

"(vi) to fix the liquidation preference of the shares
of any series of the Preferred Shares, subject to the
limitation that the aggregate liquidation preference of all
the Preferred Shares issued shall not exceed $800,000,000;

"(vii) to determine whether the shares of any series
of the Preferred Shares shall be subject to redemption,
optional or mandatory or pursuant to a sinking fund, and, if
such series shall be subject to redemption, the redemption
provisions of such series; and

"(viii) to fix or determine any additional dividend,
liquidation, redemption, sinking fund and other rights,
preferences, privileges, limitations and restrictions thereof;

"RESOLVED that the Preferred Stock Committee be and hereby is
authorized and empowered to authorize, approve and take such other
action as is deemed advisable in connection with the issuance of one
or more series of the Preferred Shares, including, without limitation,
the following:

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"(i) selecting the underwriters, dealers and agents,
if any, to or through which the Preferred Shares will be sold
and offered;

"(ii) approving the form and substance, and the
execution and delivery, of any underwriting agreement, agency
agreement, placement agreement or other agreement to be
entered into by the Corporation in connection with the
issuance and sale of the Preferred Shares, including, without
limitation, setting the amount of any underwriting discounts
and other items constituting underwriters' compensation and
any discounts and commissions allowed or paid to dealers or
agents;

"(iii) selecting the bank or trust company which will
act as depositary if Depositary Shares are offered and
approving the form and substance, and the execution and
delivery, of any deposit agreement to be entered into by the
Corporation with such depositary; and

"(iv) appointing a registrar and transfer agent for
the registration, transfer and exchange of the Preferred
Shares and appointing a dividend disbursing agent for the
Preferred Shares;

"RESOLVED that for each series of Preferred Shares a
certificate shall be prepared and filed on behalf of the Corporation
with the Secretary of State of the State of Delaware pursuant to
Section 151 of the General Corporation Law of the State of Delaware (a
"Certificate of Designations"); that each such Certificate of
Designations be in such form as is approved by action of the Board of
Directors or the Preferred Stock Committee; and that the proper
officers of the Corporation be and hereby are authorized to execute
and file each such Certificate of Designations pursuant to the General
Corporation Law of the State of Delaware."

2. The Board of Directors on September 15, 1992 adopted the
following resolution authorizing a Preferred Stock Committee of the Board of
Directors to act on behalf of the Board of Directors in connection with the
issuance of additional shares of the Preferred Stock:

"RESOLVED that the Board of Directors of Chemical Banking
Corporation (the "Board of Directors") deems it advisable and in the
best interests of Chemical Banking Corporation (the "Corporation") to
amend certain resolutions adopted by the Board of Directors on March
17, 1992 pertaining to the authority of the Preferred Stock Committee
of the Board (the "March 17, 1992 Resolutions") to authorize the
Preferred Stock Committee of the Board of Directors to approve the
issuance

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and sale by the Corporation from time to time of Preferred Shares as
defined in the March 17, 1992 Resolutions, in one or more series,
having an additional aggregate liquidation preference over the
Corporation's common stock, $1 par value, not in excess of
$1,300,000,000 (an increase of $500,000,000 from the $800,000,000
authorized under the March 17, 1992 Resolutions), with such voting
powers, designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions, as are set forth in, or are determined in accordance
with the March 17, 1992 Resolutions which shall in all other respects
remain in full force and effect and are hereby ratified and affirmed."

3. The Board of Directors on March 17, 1992 adopted the
following resolution fixing the voting rights of the Preferred Stock authorized
by the preceding resolutions:

"RESOLVED that the Certificate of Designations for each series
of the Preferred Shares shall provide that the shares of such series
shall not have any voting powers either general or special, except
that:

"(i) 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 any 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 such
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 Certificate of Incorporation or of any certificate
amendatory thereof or supplemental thereto (including any
Certificate of Designations or any similar document relating
to any series of Preferred Stock) so as to affect adversely
the preferences, rights, powers or privileges of such series;

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class of stock of the Corporation ranking prior to the shares
of such 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; and

"(iii) If at the time of any annual meeting of the
Corporation's stockholders for the election of directors there
is a default in preference dividends on the Preferred Stock,
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 (whether or not the holders
of such series of Preferred Stock would be entitled to vote
for the election of directors if such default in preference
dividends did not exist), shall have the right at such
meeting, voting together as a single class without regard to
series, to the exclusion of the holders of Common Stock and
Class B 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 (a "Preferred Director"),
shall continue to serve as such director for the full term for
which he shall have been elected, notwithstanding that prior
to the end of such term 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 Corporation's stockholders, or of
the holders of shares of Preferred Stock, called for the
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

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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 dividend period."

4. The Preferred Stock Committee of the Board of Directors on
May 17, 1993, pursuant to the authority conferred upon the Preferred Stock
Committee of the Board of Directors by Section 141(c) of the General
Corporation Law of the State of Delaware, by Section 3.03 of the By-Laws of the
Corporation and by the resolutions of the Board of Directors set forth above,
adopted the following resolution:

"RESOLVED that, pursuant to resolutions of the Board of
Directors of Chemical Banking Corporation (the "Corporation") adopted
on March 17, 1992 and September 15, 1992, the issue of up to 2,300,000
shares of 7-1/2% Cumulative Preferred Stock, $100 stated value per
share ($1 par value), of the Corporation ranking on a parity with the
series of Preferred Stock of the Corporation designated as the
Corporation's "Adjustable Rate Cumulative Preferred Stock, Series C",
the Corporation's "10-3/4% Cumulative Preferred Stock", the
Corporation's "Adjustable Rate Cumulative Preferred Stock, Series F",
the Corporation's "10.96% Preferred Stock", the Corporation's "10%
Convertible Preferred Stock", the Corporation's "8-3/8% Preferred
Stock", the Corporation's "7.92% Cumulative Preferred Stock" and the
Corporation's "7.58% Cumulative Preferred Stock" is hereby authorized
and the designation, preferences and privileges, relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions of all 2,300,000 shares of this Series,
in addition to those set forth in the Certificate of Incorporation of
the Corporation and, with respect to voting rights, in the resolutions
of the Board of Directors of the Corporation adopted on March 17, 1992
and September 15, 1992, are hereby fixed as follows:

"1. Designation. The designation of this Series
shall be 7-1/2% Cumulative Preferred Stock (hereinafter
referred to as the "Series") and the number of shares
constituting this Series shall be 2,300,000. Shares of this
Series shall have a stated value of $100. The number of
authorized shares of this Series may be reduced by further
resolution duly adopted by the Board of Directors of the
Corporation or the Preferred Stock

H-7
<PAGE> 130
Committee of the Board of Directors 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.

"2. Dividends. (a) Dividends shall be payable on
the shares of this Series: (i) for the period (the "Initial
Dividend Period") from the date of original issue of shares of
this Series to and including June 30, 1993, and (ii) for each
quarterly dividend period thereafter (the Initial Dividend
Period and each quarterly dividend period thereafter being
hereinafter individually referred to as a "Dividend Period"
and collectively referred to as "Dividend Periods"), which
quarterly Dividend Periods shall commence on January 1, April
1, July 1 and October 1 in each year, commencing June 30,
1993, and shall end on and include the day next preceding the
first day of the next Dividend Period, at a rate per annum of
the stated value thereof equal to 7-1/2% (the "Dividend
Rate"). Dividends shall be cumulative from such date of
original issue and shall be payable, when and as declared by
the Board of Directors or by the Preferred Stock Committee of
the Board of Directors, on March 31, June 30, September 30 and
December 31 of each year, commencing on June 30, 1993. 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 45 days
preceding the payment date thereof, as shall be fixed by the
Board of Directors of the Corporation or by the Preferred
Stock Committee of the Board of Directors. 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 of Directors of the
Corporation or by the Preferred Stock Committee of the Board
of Directors.

"(b) Dividends payable on this Series for any period
greater or less than a full Dividend Period, including the
Initial Dividend Period, shall be computed on the basis of a
360-day year consisting of twelve 30-day months and the actual
number of days elapsed in the period. Dividends payable on
this Series for each full Dividend Period shall be computed by
annualizing the Dividend Rate and dividing by four.

"(c) No full dividends shall be declared or paid or
set apart for payment on the Preferred Stock of any series
ranking, as to dividends, on a parity with or

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<PAGE> 131
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 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 series
of Preferred Stock ranking on a parity as to dividends with
this Series, all dividends declared upon shares of this Series
and any other series of 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 and unpaid 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 stock, 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.

"(d) 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 (c) of this Section 2) 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 be 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 or declared and set aside for payment for all past
Dividend Periods.

"3. Redemption. (a) The shares of this Series are
not redeemable prior to June 1, 1998. 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, on or

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<PAGE> 132
after June 1, 1998, at a redemption price of $100 per share
plus accrued and unpaid dividends thereon to the date fixed
for redemption.

"(b) 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 of Directors
of the Corporation or the Preferred Stock Committee of the
Board of Directors and the shares to be redeemed shall be
determined by lot or pro rata as may be determined by the
Board of Directors of the Corporation or the Preferred Stock
Committee of the Board of Directors or by any other method as
may be determined by the Board of Directors of the Corporation
or the Preferred Stock Committee of the Board of Directors in
its sole discretion to be equitable, provided that such method
satisfies any applicable requirements of any securities
exchange on which this Series is listed.

"(c) 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 or
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
the redemption date.

"(d) 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 of
Directors of the Corporation or the Preferred Stock Committee
of the Board of Directors shall so require and the notice
shall so state), such shares shall be redeemed

H-10
<PAGE> 133
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.

"(e) 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 of
Directors of the Corporation or the Preferred Stock Committee
of the Board of Directors.

"(f) Notwithstanding the foregoing provisions of this
Section 3, 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.

"4. Conversion. The holders of shares of this Series
shall not have any rights to convert such shares into shares
of any other class or series of capital stock of the
Corporation.

"(b) After the payment to the holders of the shares
of this Series of the full preferential amounts provided for
in this Section 5, the holders of this Series as such shall
have no right or claim to any of the remaining assets of the
Corporation.

"(c) If, upon any voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation,
the amounts payable with respect to the

H-11
<PAGE> 134
stated value of the shares of this Series and any other shares
of stock of the Corporation ranking as to any such
distribution on a parity with the shares of this Series are
not paid in full, the holders of the shares of this Series and
of such other shares will share ratably in any such
distribution of assets of the Corporation in proportion to the
full respective stated values to which they are entitled.

"(d) 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 5.

"(e) 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 (a) of this Section 5 before any payment shall be
made to the holder of any class of capital stock of the
Corporation ranking junior to this Series upon liquidation.

"6. Ranking. For purposes of this resolution, any
stock of any class or classes of the Corporation shall be
deemed to rank:

"(a) 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;

"(b) 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 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, without preference
or priority, one over the other, as between the holders of
such stock and the holders of shares of this Series; and

H-12
<PAGE> 135
"(c) 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.

"7. Voting Rights. The shares of this Series shall
have the voting rights set forth in the resolutions of the
Board of Directors of the Corporation adopted on March 17,
1992."

H-13

<PAGE> 1

BY-LAWS
OF
CHEMICAL BANKING CORPORATION

ARTICLE I

Meetings of Stockholders

Section 1.01. Annual Meeting. The annual meeting of
the stockholders of Chemical Banking Corporation (the
``Corporation'') shall be held on the third Tuesday in May in
each year (or, if that day shall be a legal holiday then on the
next preceding business day) at such time and place within or
without the State of Delaware, as may be specified in the notice
thereof, as shall be fixed by the Board of Directors (the
``Board''), for the purpose of electing directors and for the
transaction of such other business as may properly be brought
before such meeting. If any annual meeting shall not be held on
the day designated or the directors shall not have been elected
thereat or at any adjournment thereof, thereafter the Board shall
cause a special meeting of the stockholders to be held as soon as
practicable for the election of directors. At such special
meeting the stockholders may elect directors and transact other
business with the same force and effect as at an annual meeting
of the stockholders duly called and held.

Section 1.02. Special Meetings. A special meeting of
the stockholders may be called at any time by the Board, the
Chairman of the Board (herein called the Chairman), the President
or a Vice Chairman of the Board or otherwise as provided by the
General Corporation Law of the State of Delaware (herein called
Delaware General Corporation Law). Such meetings shall be held at
such places, within or without the State of Delaware, as may from
time to time be designated by the Board or in the respective
notices or waivers of notice thereof.

Section 1.03. Notice of Meetings. Except as may
otherwise expressly be required by law, notice of the place, date
and hour of holding each annual and special meeting of the
stockholders and the purpose or purposes thereof shall be
delivered personally or mailed in a postage prepaid envelope, not
less than ten (10) nor more than sixty (60) days before the date
of such meeting, to each person who appears on the stock books
and records of the Corporation as a stockholder entitled to vote
at such meeting, and, if mailed, it shall be directed to such
stockholder at his address as it appears on such records unless
he shall have filed with the Secretary of the Corporation a
written request that notice intended for him be mailed to some
other address, in which case it shall be mailed to the address
designated in such request. Notice of any meeting of
stockholders shall not be required to be given to any stockholder
who shall attend such meeting in person or by proxy and shall
not, at the beginning of such meeting, object to the transaction
of any business because the meeting has not been lawfully called
or convened, or who shall, either before or after the meeting,
submit a signed waiver of notice, in person or by proxy. Unless
the Board shall fix a new record date for an adjourned meeting,
notice of such adjourned
<PAGE> 2

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meeting need not be given if the time and place to which the
meeting shall be adjourned were announced at the meeting at which
the adjournment was taken, provided that the adjournment is not
for more than thirty (30) days.

Section 1.04. Quorum. At each meeting of the
stockholders, stockholders holding of record shares of common
stock constituting a majority of the voting power of stock of the
Corporation having general voting power (shares having such
general voting power being hereinafter sometimes referred to as a
``voting interest of the stockholders'') shall be present in
person or by proxy to constitute a quorum for the transaction of
business. In the absence of a quorum at any such meeting or any
adjournment or adjournments thereof, a majority in voting
interest of the stockholders present in person or by proxy and
entitled to vote thereat, or in the absence therefrom of all the
stockholders, any officer entitled to preside at, or to act as
secretary of, such meeting may adjourn such meeting from time to
time. At any such adjourned meeting at which a quorum may be
present, any business may be transacted which might have been
transacted at the meeting as originally called. The absence from
any meeting of stockholders holding the number of shares of stock
of the Corporation required by the laws of the State of Delaware
or by the Certificate of Incorporation of the Corporation or by
these By-laws for action upon any given matter shall not prevent
action at such meeting upon any other matter or matters which may
properly come before the meeting, if there shall be present
thereat in person or by proxy stockholders holding the number of
shares of stock of the Corporation required in respect of such
other matter or matters.

Section 1.05. Organization. At each meeting of the
stockholders, the Chairman, or, if he shall be absent therefrom,
the President, or a Vice Chairman of the Board, or, if they also
shall be absent therefrom, another officer of the Corporation
chosen as chairman of such meeting by a majority in voting
interest of the stockholders present in person or by proxy and
entitled to vote thereat, or, if all the officers of the
Corporation shall be absent therefrom, a stockholder holding of
record shares of stock of the Corporation so chosen, shall act as
chairman of the meeting and preside thereat; and the Secretary,
or, if he shall be absent from such meeting or shall be required
pursuant to the provisions of this Section to act as chairman of
such meeting, the person (who shall be an Assistant Corporate
Secretary, if an Assistant Corporate Secretary shall be present
thereat) whom the chairman of such meeting shall appoint shall
act as secretary of such meeting and keep the minutes thereof.

Section 1.06. Voting. Except as otherwise provided in
the Certificate of Incorporation, each stockholder shall, at each
meeting of the stockholders, be entitled to one vote in person or
by proxy for each share of stock of the Corporation held by him
and registered in his name on the stock books and records of the
Corporation:

(a) on the date fixed pursuant to the provisions of
Article VI of these By-laws as the record date for the
determination of stockholders who shall be entitled to
notice of and to vote at such meeting, or
<PAGE> 3

-3-

(b) if no such record date shall have been so fixed,
then at the close of business on the day next preceding the
day on which notice of the meeting shall be given.

Persons holding in a fiduciary capacity stock of the Corporation
shall be entitled to vote such stock so held, and persons whose
stock is pledged shall be entitled to vote such stock, unless in
the transfer by the pledgor on the books of the Corporation he
shall have expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or his proxy, may represent such
stock and vote thereon. If shares of stock of the Corporation
shall stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety or otherwise, or if
two or more persons shall have the same fiduciary relationship
respecting the same shares of stock of the Corporation, unless
the Secretary shall have been given written notice to the
contrary and have been furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the
following effect:

(a) if only one shall vote, his act shall bind all;

(b) if more than one shall vote, the act of the
majority so voting shall bind all; and

(c) if more than one shall vote, but the vote shall be
evenly split on any particular matter, then, except as
otherwise required by the Delaware General Corporation Law,
each faction may vote the shares in question proportionally.

If the instrument so filed shall show that any such tenancy is
held in unequal interests, the majority or even-split for the
purpose of the next foregoing sentence shall be a majority or
even-split in interest. Any vote on stock of the Corporation may
be given at any meeting of the stockholders by the stockholder
entitled thereto in person or by his proxy appointed by an
instrument in writing subscribed by such stockholder or by his
attorney thereunto authorized and delivered to the Secretary of
the Corporation or to the secretary of the meeting; provided,
however, that no proxy shall be voted or acted upon after three
(3) years from its date, unless said proxy shall provide for a
longer period. At all meetings of the stockholders all matters,
except those otherwise specified in these By-laws, and except
also those the manner of deciding upon which is otherwise
expressly regulated by law or by the Certificate of Incorporation
of the Corporation, shall be decided by the vote of a majority in
voting interest of the stockholders present in person or by proxy
and entitled to vote thereat, a quorum being present. Except in
the case of votes for the election of directors, unless demanded
by a stockholder of the Corporation present in person or by proxy
at any meeting of the stockholders and entitled to vote thereat
or so directed by the chairman of the meeting, the vote thereat
need not be by ballot. Upon a demand of any such stockholder for
a vote by ballot on any question or at the direction of such
chairman that a vote by ballot be taken on any question, such
vote shall be taken. On a vote by ballot
<PAGE> 4

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each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and shall state the number of
shares voted.

Section 1.07. List of Stockholders. It shall be the
duty of the Secretary or other officer of the Corporation who
shall have charge of its stock books and records, either directly
or through another officer of the Corporation designated by him
or through a transfer agent appointed by the Board, to prepare
and make, at least ten (10) days before every meeting of the
stockholders, a complete list of the stockholders entitled to
vote thereat, 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 (10) days prior to said meeting, either at a place within the
city where said meeting is to be held, which place shall be
specified in the notice of said meeting, or, if not so specified,
at the place where said meeting is to be held. The list shall
also be produced and kept at the time and place of said meeting
during the whole time thereof, and may be inspected by any
stockholder who shall be present thereat. Upon the willful
neglect or refusal of the directors to produce such list at any
meeting for the election of directors, they shall be ineligible
for election to any office at such meeting. The stock books and
records shall be the only evidence as to who are the stockholders
entitled to examine the stock books and records of the
Corporation, or such list, or to vote in person or by proxy at
any meeting of stockholders.

Section 1.08. Inspectors of Election. At each meeting
of the stockholders, the chairman of such meeting may appoint two
or more Inspectors of Election to act thereat. Each Inspector of
Election so appointed shall first subscribe an oath or
affirmation faithfully to execute the duties of an Inspector of
Election at such meeting with strict impartiality and according
to the best of his ability. Such Inspectors of Election, if any,
shall take charge of the ballots at such meeting and after the
balloting thereat on any question shall count the ballots cast
thereon and shall make a report in writing to the secretary of
such meeting of the results thereof. An Inspector of Election
need not be a stockholder of the Corporation, and any officer of
the Corporation may be an Inspector of Election on any question
other than a vote for or against his election to any position
with the Corporation or on any other question in which he may be
directly interested.

ARTICLE II

Board of Directors

Section 2.01. Number. The business and affairs of the
Corporation shall be managed by or under the direction of a Board
of Directors, of such number as may be fixed from time to time by
resolution adopted by the Board or by the stockholders, selected,
organized and continued in accordance with the provisions of the
laws of the State of Delaware. Each director hereafter elected
shall hold office until the annual meeting of stockholders and
until his successor is elected
<PAGE> 5

-5-

and has qualified, or until his death or until he shall resign or
shall have been removed.

Section 2.02. Vacancies. In case of any increase in
the number of directors, the additional director or directors,
and in case of any vacancy in the Board due to death,
resignation, removal, disqualification or any other cause, the
successors to fill the vacancies shall be elected by a majority
of the directors then in office, for a term expiring at the next
annual meeting of stockholders.

Section 2.03. Annual Meeting. An annual meeting of the
directors shall be held each year, without notice, immediately
following the annual meeting of stockholders. The time and place
of such meeting shall be designated by the Board. At such
meeting, the directors shall, after qualifying, elect from their
own number a Chairman of the Board, a President and one or more
Vice Chairmen of the Board, and shall elect or appoint such other
officers authorized by these By-laws as they may deem desirable,
and appoint the Committees specified in Article III hereof. The
directors may also elect to serve at the pleasure of the Board,
one or more Honorary Directors, not members of the Board.
Honorary Directors of the Board shall be paid such compensation
or such fees for attendance at meetings of the Board, and
meetings of other committees of the Board, as the Board shall
determine from time to time.

Section 2.04. Regular Meetings. The Board shall hold a
regular meeting without notice at the principal office of the
Corporation on the third Tuesday in each month, with the
exception of the month of August, at such time as shall be
determined by the Board, unless another time or place, within or
without the State of Delaware, shall be fixed by resolution of
the Board. Should the day appointed for a regular meeting fall
on a legal holiday, the meeting shall be held at the same time on
the preceding day or on such other day as the Board may order.

Section 2.05. Special Meetings. Special meetings of
the Board shall be held whenever called by the Chairman, the
President, a Vice Chairman of the Board, the Secretary or a
majority of the directors at the time in office. A notice shall
be given as hereinafter in this Section provided of each such
special meeting, in which shall be stated the time and place of
such meeting, but, except as otherwise expressly provided by law
or by these By-laws, the purposes thereof need not be stated in
such notice. Except as otherwise provided by law, notice of
each such meeting shall be mailed to each director, addressed to
him at his residence or usual place of business, at least two (2)
days before the day on which such meeting is to be held, or shall
be sent addressed to him at such place by telegraph, cable,
wireless or other form of recorded communication or be delivered
personally or by telephone not later than noon of the calendar
day before the day on which such meeting is to be held. At any
regular or special meeting of the Board, or any committee
thereof, one or more Board or comittee members may participate in
such meeting by means of a conference telephone or similar
communications equipment allowing all persons participating in
the meeting to hear each other at the same time. This type of
participation shall constitute
<PAGE> 6

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presence in person at the meeting. Notice of any meeting of the
Board shall not, however, be required to be given to any director
who submits a signed waiver of notice whether before or after the
meeting, or if he shall be present at such meeting; and any
meeting of the Board shall be a legal meeting without any notice
thereof having been given if all the directors of the Corporation
then in office shall be present thereat.

Section 2.06. Quorum. One-third of the members of the
entire Board, or the next highest integer in the event of a
fraction, shall constitute a quorum, but if less than a quorum be
present, a majority of those present may adjourn any meeting from
time to time and the meeting may be held as adjourned without
further notice.

Section 2.07. Rules and Regulations. The Board may
adopt such rules and regulations for the conduct of its meetings
and the management of the affairs of the Corporation as it may
deem proper, not inconsistent with the laws of the State of
Delaware or these By-laws.

Section 2.08. Compensation. Directors shall be
entitled to receive from the Corporation such amount per annum
and in addition, or in lieu thereof, such fees for attendance at
meetings of the Board or of any committee, or both, as the Board
from time to time shall determine. The Board may also likewise
provide that the Corporation shall reimburse each such director
or member of such committee for any expenses paid by him on
account of his attendance at any such meeting. Nothing in this
Section contained shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving
compensation therefor.

ARTICLE III

Committees

Section 3.01. Executive Committee. The Board, by
resolution adopted by a majority of the entire Board, shall
appoint an Executive Committee which, when the Board is not in
session, shall have and may exercise all the powers of the Board
that lawfully may be delegated, including without limitation the
power and authority to declare dividends. The Executive
Committee shall consist of such number of directors as the Board
shall from time to time determine, but not less than five and one
of whom shall be designated by the Board as Chairman thereof, as
follows: (a) the Chairman of the Board, the President, the Vice
Chairmen of the Board; and (b) such other directors, none of whom
shall be an officer of the Corporation, as shall be appointed to
serve at the pleasure of the Board. The Board, by resolution
adopted by a majority of the entire Board, may (a) designate one
or more directors as alternate members of the Executive Committee
or (b) specify that the member or members of the Executive
Committee present and not disqualified from voting at a meeting
of the Executive Committee, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board to
act at such meeting in place of any absent or disqualified
member. The attendance of one-third of the members of the
Committee or their substitutes, or the next highest integer in
the event of a fraction, at any meeting shall constitute a
quorum, and the act of a
<PAGE> 7

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majority of those present at a meeting thereof at which a quorum
is present shall be the act of the Committee. All acts done and
powers conferred by the Committee from time to time shall be
deemed to be, and may be certified as being done or conferred
under authority of the Board. The Committee shall fix its own
rules and procedures, and the minutes of the meetings of the
Committee shall be submitted at the next regular meeting of the
Board at which a quorum is present, or if impracticable, at the
next such subsequent meeting. The Committee shall hold meetings
``On Call'' and such meetings may be called by the Chairman of
the Executive Committee, the Chairman of the Board, the
President, a Vice Chairman of the Board, or the Secretary.
Notice of each such meeting of the Committee shall be given by
mail, telegraph, cable, wireless or other form of recorded
communication or be delivered personally or by telephone to each
member of the Committee not later than the day before the day on
which such meeting is to be held. Notice of any such meeting
need not be given to any member of the Committee who submits a
signed waiver of notice whether before or after the meeting, or
if he shall be present at such meeting; and any meeting of the
Committee shall be a legal meeting without any notice thereof
having been given, if all the members of the Committee shall be
present thereat. In the case of any meeting, in the absence of
the Chairman of the Executive Committee, such member as shall be
designated by the Chairman of the Executive Committee or the
Executive Committee shall act as Chairman of the meeting.

Section 3.02. Audit Committee. The Board, by
resolution adopted by a majority of the entire Board, shall
appoint an Audit Committee composed of not less than three of its
members, none of whom shall be an officer of the Corporation, to
hold office at its pleasure and one of whom shall be designated
by the Board as Chairman thereof. The Committee shall make such
examination into the affairs of the Corporation and make such
reports in writing thereof as may be directed by the Board. The
attendance of one-third of the members of the Committee, or the
next highest integer in the event of a fraction, at any meeting
shall constitute a quorum, and the act of a majority of those
present at a meeting thereof at which a quorum is present shall
be the act of the Committee.

Section 3.03. Other Committees. The Board, by
resolution adopted by a majority of the entire Board, may
appoint, from time to time, such other committees composed of not
less than two of its members for such purposes and with such
duties and powers as the Board may determine. The attendance of
one-third of the members of such other committees, or the next
highest integer in the event of a fraction, at any meeting shall
constitute a quorum, and the act of a majority of those present
at a meeting thereof at which a quorum is present shall be the
act of such other committees.

ARTICLE IV

Officers and Agents

Section 4.01. Officers. The officers of the
Corporation shall be (a) a Chairman of the Board, a President and
one or more Vice
<PAGE> 8

-8-

Chairmen of the Board, each of whom must be a director and shall
be elected by the Board; (b) a Chief Financial Officer, a
Controller, a Secretary, and a General Auditor, each of whom
shall be elected by the Board; and (c) such other officers as may
from time to time be elected by the Board or under its authority,
or appointed by the Chairman or the President or a Vice Chairman
of the Board.

Section 4.02. Clerks and Agents. The Board may elect
and dismiss, or the Chairman or the President or a Vice Chairman
of the Board may appoint and dismiss, or delegate to any other
officers authority to appoint and dismiss, such clerks, agents
and employees as may be deemed advisable for the prompt and
orderly transaction of the Corporation's business, and may
prescribe, or authorize the appointing officers to prescribe,
their respective duties, subject to the provisions of these
By-laws.

Section 4.03. Term of Office. The officers designated
in Section 4.01(a) shall be elected by the Board at its annual
meeting. The officers designated in Section 4.01(b) may be
elected at the annual or any other meeting of the Board. The
officers designated in Section 4.01(c) may be elected at the
annual or any other meeting of the Board or appointed at any time
by the designated proper officers. Any vacancy occurring in any
office designated in Section 4.01(a) may be filled at any regular
or special meeting of the Board. The officers elected pursuant
to Section 4.01(a) shall each hold office for the term of one
year and until their successors are elected, unless sooner
disqualified or removed by a vote of two-thirds of the whole
Board. All other officers, clerks, agents and employees elected
by the Board, or appointed by the Chairman, the President, or a
Vice Chairman of the Board, or under their authority, shall hold
their respective offices at the pleasure of the Board or officers
elected pursuant to Sections 4.01(a).

Section 4.04. Chairman of the Board. The Chairman
shall be the chief executive officer of the Corporation and shall
have, subject to the control of the Board, general supervision
and direction of the business and affairs of the Corporation and
of its several officers. He shall preside at all meetings of the
stockholders and at all meetings of the Board. He shall have the
right to execute any document or perform any act which could be
or is required to be executed or performed by the President of
the Corporation. He shall have the power to sign checks, orders,
contracts, leases, notes, drafts and other documents and
instruments in connection with the business of the Corporation,
and together with the Secretary or an Assistant Corporate
Secretary execute conveyances of real estate and other documents
and instruments to which the seal of the Corporation is affixed.
He shall perform such other duties as from time to time may be
prescribed by the Board.

Section 4.05. President. The President shall, subject
to the direction and control of the Board and the Chairman,
participate in the supervision of the business and affairs of the
Corporation. In general, the President shall perform all duties
incident to the office of President, and such other duties as
from time to time may be prescribed by the Board or the Chairman.
In the absence of the Chairman, the President, shall preside at
meetings of stockholders and of the Board. The
<PAGE> 9

-9-

President shall have the same power to sign for the Corporation
as is prescribed in these By-laws for the Chairman.

Section 4.06. Vice Chairman of the Board. The Vice
Chairman of the Board, or if there be more than one, then each of
them, shall, subject to the direction and control of the Board
and the Chairman, participate in the supervision of the business
and affairs of the Corporation, and shall have such other duties
as may be prescribed from time to time by the Board or the
Chairman. In the absence of the Chairman and the President, a
Vice Chairman, as designated by the Chairman or the Board, shall
preside at meetings of the stockholders and of the Board. Each
Vice Chairman shall have the same power to sign for the
Corporation as is prescribed in these By-laws for the Chairman.

Section 4.07. Chief Financial Officer. The Chief
Financial Officer shall have such powers and perform such duties
as the Board, the Chairman, the President or a Vice Chairman of
the Board may from time to time prescribe which may include,
without limitation, responsibility for strategic planning,
corporate finance, control, tax and auditing and shall perform
such other duties as may be prescribed by these By-laws.

Section 4.08. Controller. The Controller shall
exercise general supervision of the accounting departments of the
Corporation. He shall be responsible to the Chief Financial
Officer and shall render reports from time to time relating to
the general financial condition of the Corporation. He shall
render such other reports and perform such other duties as from
time to time may be prescribed by the Chief Financial Officer, a
Vice Chairman of the Board, the President or the Chairman.

Section 4.09. Secretary. The Secretary shall:

(a) record all the proceedings of the meetings of the
stockholders, the Board and the Executive Committee in one
or more books kept for that purpose;

(b) see that all notices are duly given in accordance
with the provisions of these By-laws or as required by law;

(c) be custodian of the seal of the Corporation; and
he may see that such seal or a facsimile thereof is affixed
to any documents the execution of which on behalf of the
Corporation is duly authorized and may attest such seal when
so affixed; and

(d) in general, perform all duties incident to the
office of Secretary and such other duties as from time to
time may be prescribed by the Board and the Chairman.

Section 4.10. Assistant Corporate Secretary. At the
request of the Secretary, or in case of his absence or inability
to act, the Assistant Corporate Secretary, or if there be more
than one, any of the Assistant Corporate Secretaries, shall
perform the duties of the Secretary and, when so acting, shall
have all the powers of, and be subject to all the
<PAGE> 10

-10-

restrictions upon, the Secretary. Each Assistant Corporate
Secretary shall perform such other duties as from time to time
may be prescribed by the Secretary, a Vice Chairman of the Board,
the President or the Chairman.

Section 4.11. General Auditor. The General Auditor
shall continously examine the affairs of the Corporation. He
shall have and may exercise such powers and duties as from time
to time may be prescribed by the Board, the Chairman, a Vice
Chairman of the Board, the President or the Chief Financial
Officer.

Section 4.12. Powers and Duties of Other Officers. The
powers and duties of all other officers of the Corporation shall
be those usually pertaining to their respective offices, subject
to the direction and control of the Board and as otherwise
provided in these By-laws.

ARTICLE V

Proxies re Stock or Other Securities of
Other Corporations

Unless otherwise provided by the Board, the Chairman,
the President, a Vice Chairman of the Board, the Chief Financial
Officer or the Secretary may from time to time (a) appoint an
attorney or attorneys or an agent or agents of the Corporation to
exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock
or other securities in any other corporation to vote or consent
in respect of such stock or other securities; (b) instruct the
person or persons so appointed as to the manner of exercising
such powers and rights; and (c) execute or cause to be executed
in the name and on behalf of the Corporation and under its
corporate seal, or otherwise, all such written proxies or other
instruments as he may deem necessary or proper in order that the
Corporation may exercise its said powers and rights.

ARTICLE VI

Shares and Their Transfer

Section 6.01. Certificates for Stock. Every owner of
stock of the Corporation of any class (or, if stock of any class
shall be issuable in series, any series of such class) shall be
entitled to have a certificate, in such form as the Board shall
prescribe, certifying the number of shares of stock of the
Corporation of such class, or such class and series, owned by
him. The certificates representing shares of stock of each class
(or, if there shall be more than one series of any class, each
series of such class) shall be numbered in the order in which
they shall be issued and shall be signed in the name of the
Corporation by the Chairman, the President, or a Vice Chairman of
the Board, and by the Secretary or an Assistant Corporate
Secretary; provided, however, that if any such certificate is
countersigned by a registrar and the Board shall by resolution so
authorize, the signatures of such Chairman, President, Vice
Chairman of the Board, Secretary or Assistant Corporate Secretary
or any transfer agent may be facsimiles. In case any officer or
officers or
<PAGE> 11

-11-

transfer agent of the Corporation who shall have signed, or whose
facsimile signature or signatures shall have been placed upon any
such certificate shall cease to be such officer or officers or
transfer agent before such certificate shall have been issued,
such certificate may be issued by the Corporation with the same
effect as though the person or persons who signed such
certificate, or whose facsimile signature or signatures shall
have been placed thereupon were such officer and officers or
transfer agent at the date of issue. A stock ledger shall be kept
of the respective names of the persons, firms or corporations
owning stock represented by certificates for stock of the
Corporation, the number, class and series of shares represented
by such certificates, respectively, and the respective dates
thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation
for exchange or transfer shall be cancelled and a new certificate
or certificates shall not be issued in exchange for any existing
certificate until such existing certificate shall have been so
cancelled, except in cases provided for in Section 6.04 or
otherwise required by law.

Section 6.02. Transfers of Stock. Transfers of shares
of the stock of the Corporation shall be made on the stock books
and records of the Corporation only by the registered holder
thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, or with a
transfer agent duly appointed, and upon surrender of the
certificate or certificates for such shares properly endorsed and
payment of all taxes thereon. The person in whose name shares of
stock stand on the stock books and records of the Corporation
shall be deemed the owner thereof for all purposes as regards the
Corporation.

Section 6.03. Regulations. The Board may make such
rules and regulations as it may deem expedient, not inconsistent
with these By-laws, concerning the issue, transfer and
registration of certificates for stock of the Corporation. The
Board may appoint, or authorize any officer or officers to
appoint, one or more transfer agents and one or more registrars,
and may require all certificates for stock to bear the signature
or signatures of any of them.

Section 6.04. Lost, Stolen, Destroyed and Mutilated
Certificates. The owner of any stock of the Corporation shall
immediately notify the Corporation of any loss, theft,
destruction or mutilation of the certificate therefor, and the
Corporation may issue a new certificate for stock in the place of
any certificate theretofore issued by it and alleged to have been
lost, stolen or destroyed, and the Board may, in its discretion,
require the owner of the lost, stolen or destroyed certificate or
his legal representatives to give the Corporation a bond in such
sum, limited or unlimited, and in such form and with such surety
or sureties, as the Board shall in its uncontrolled discretion
determine, to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss, theft or
destruction of any such certificate, or the issuance of such new
certificate. The Board may, however, in its discretion refuse to
issue any such new certificate except pursuant to legal
proceedings under the laws of the State of Delaware in such case
made and provided.
<PAGE> 12

-12-

Section 6.05. Fixing Date for Determination of
Stockholders of Record.

(a) 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, the
Board may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record
date is adopted by the Board, and which record date shall
not be more than sixty (60) nor less than ten (10) days
before the date of such meeting. If no record is fixed by
the Board, 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. 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 may fix a new record date for the adjourned meeting.

(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in
writing without a meeting, the Board may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board,
and which date shall not be more than ten (10) days after
the date upon which the resolution fixing the record date is
adopted by the Board. If no record date has been fixed by
the Board, the record date for determining stockholders
entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board is required by
Delaware General Corporation Law, shall be the first date on
which signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation by
delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of
the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded.
Delivery made to the Corporation's registered office shall
be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the
Board and prior action by the Board is required by Delaware
General Corporation Law, the record date for determining
stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business
on the day on which the Board adopts the resolution taking
such prior action.

(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or the
stockholders 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 may fix a
record date, which record
<PAGE> 13

-13-

date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date
shall be not more than sixty (60) days prior to such action.
If no record date is fixed, the record date for determining
stockholders for any such purpose shall be the close of
business on the day on which the Board adopts the resolution
relating thereto.

ARTICLE VII

Corporate Seal

The corporate seal of the Corporation shall be in the
form of a circle and shall bear the full name of the Corporation
and the words and figures "Corporate Seal 1968 Delaware".

ARTICLE VIII

Fiscal Year

The fiscal year of the Corporation shall be the
calendar year.

ARTICLE IX

Indemnification

Section 9.01. Right to Indemnification. The
Corporation shall to the fullest extent permitted by applicable
law as then in effect indemnify any person (the ``Indemnitee'')
who was or is involved in any manner (including, without
limitation, as a party or a witness), or is threatened to be made
so involved, in any threatened, pending or completed
investigation, claim, action, suit or proceeding, whether civil,
administrative or investigative (including without limitation,
any action, suit or proceeding by or in the right of the
Corporation to procure a judgment in its favor) (a
"Proceeding") by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or
was serving as the request of the Corporation as a director,
officer or employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against all expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with such Proceeding. Such indemnification shall be a contract
right and shall include the right to receive payment in advance
of any expenses incurred by the Indemnitee in connection with
such Proceeding, consistent with the provisions of applicable law
as then in effect.

Section 9.02 Contracts and Funding. The Corporation
may enter into contracts with any director, officer, employee or
agent of the Corporation in furtherance of the provisions of this
article IX and may create a trust fund, grant a security interest
or use other means (including, without limitation, a letter of
credit) to ensure the payment of such amounts as may be necessary
to effect indemnification as provided in this Article IX.
<PAGE> 14

-14-

Section 9.03. Employee Benefit Plans. For purposes of
this Article IX, references to ``other enterprises'' shall
include employee benefit plans; references to ``fines'' shall
include any excise taxes assessed on a person with respect to any
employee benefit plan; and references to ``serving at the request
of the Corporation'' shall include any service as a director,
officer, employee, or agent of the Corporation which imposes
duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner not
opposed to the best interest of a corporation.

Section 9.04. Indemnification Not Exclusive Right. The
right of indemnification and advancement of expenses provided in
this Article IX shall not be exclusive of any other rights to
which a person seeking indemnification may otherwise 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. The provisions of this Article IX shall
inure to the benefit of the heirs and legal representatives of
any person entitled to indemnity under this Article IX and shall
be applicable to Proceedings commenced or continuing after the
adoption of this Article IX, whether arising from acts or
omissions occurring before or after such adoption.

Section 9.05. Advancement of Expenses; Procedures. In
furtherance, but not in limitation, of the foregoing provisions,
the following procedures and remedies shall apply with respect to
advancement of expenses and the right to indemnification under
this Article IX:

(a) Advancement of Expenses. All reasonable expenses
incurred by or on behalf of the Indemnitee in connection with any
Proceeding shall be advanced to the Indemnitee by the Corporation
within twenty (20) days after the receipt by the Corporation of a
statement or statements from the indemnitee requesting such
advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or
statements shall reasonably evidence the expenses incurred by the
Indemnitee and, if required by law at the time of such advance,
shall include or be accompanied by an undertaking by or on behalf
of the Indemnitee to repay the amounts advanced if it should
ultimately be determined that the Indemnitee is not entitled to
be indemnified against such expenses.

(b) Written Request for Indemnification. To obtain
idemnification under this Article IX, an Indemnitee shall submit
to the Secretary of the Corporation a written request, including
such documentation and information as is reasonably available to
the Indemnitee and reasonably necessary to determine whether and
to what extent the Indemnitee is entitled to indemnification (the
``Supporting Documentation''). The determination of the
Indemnitee's entitlement to indemnification shall be made within
a reasonable time after receipt by the Corporation of the written
request for indemnification together with
<PAGE> 15

-15-

the Supporting Documentation. The Secretary of the Corporation
shall, promptly upon receipt of such a request for
indemnification, advise the Board in writing that the Indemnitee
has requested indemnification.

(c) Procedure for Determination. The Indemnitee's
entitlement to indemnification under this Article IX shall be
determined (i) by the Board by a majority vote of a quorum (as
defined in Article II of these By-laws) consisting of directors
who were not parties to such action, suit or proceeding, or (ii)
if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders,
but only if a majority of the disinterested directors, if they
constitute a quorum of the board, presents the issue of
entitlement to indemnification to the stockholders for their
determination.

ARTICLE X

By-laws

Section 10.01. Inspection. A copy of the By-laws shall
at all times be kept in a convenient place at the principal
office of the Corporation, and shall be open for inspection by
stockholders during business hours.

Section 10.02. Amendments. Except as otherwise
specifically provided by statute, these By-laws may be added to,
amended, altered or repealed at any meeting of the Board by vote
of a majority of the entire Board, provided that written notice
of any such proposed action shall be given to each director prior
to such meeting, or that notice of such addition, amendment,
alteration or repeal shall have been given at the preceding
meeting of the Board.

Section 10.03. Construction. The masculine gender,
where appearing in these By-laws, shall be deemed to include the
feminine gender.

I, JOHN B. WYNNE, Secretary of CHEMICAL BANKING
CORPORATION, New York, New York, hereby certify that the
foregoing is a correct copy of the By-laws of said Corporation
now in force.

Dated:

Secretary

<PAGE> 1
EXHIBIT 11.1

CHEMICAL BANKING CORPORATION
AND SUBSIDIARIES

COMPUTATION OF NET INCOME PER COMMON SHARE

Net income per common share is computed by dividing net income after deducting
dividends on preferred stock, by the weighted average number of common shares
and common stock equivalents outstanding during the period. Other common stock
equivalents such as stock options are not required to be included in the
calculation since the applicable dilution tests are not met.

<TABLE>
<CAPTION>
AVERAGE
COMMON SHARES
AND COMMON STOCK NET INCOME NET INCOME
YEAR ENDED EQUIVALENTS APPLICABLE TO PER
DECEMBER 31 OUTSTANDING COMMON SHARES (a) SHARE
- - - ----------- ---------------- ----------------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
1993 251,207,178 $ 1,449 $5.77 (b)
1992 240,402,159 936 3.90
1991 181,372,000 20 .11 (c)
</TABLE>

(a) After dividends on preferred stock of $155 million in 1993, $153
million in 1992 and $134 million in 1991.

(b) On January 1, 1993, the Corporation adopted SFAS 106 which resulted in a
charge of $415 million, or $1.67 per common share, relating to
postretirement benefits and also adopted SFAS 109 which resulted in an
income tax benefit of $450 million, or $1.81 per common share. Net income
before the effect of accounting changes was $5.63 per common share. The net
effect of changes in accounting principles increased net income per common
share by $0.14.

<PAGE> 1
EXHIBIT 12.0

CHEMICAL BANKING CORPORATION
AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT RATIOS)

<TABLE>
<CAPTION>
YEAR ENDED
EXCLUDING INTEREST ON DEPOSITS DECEMBER 31, 1993
- - - ------------------------------ -----------------
<S> <C>
Income before Income Taxes and
Effect of Accounting Changes $ 2,108
-------
Fixed charges:
Interest expense 1,526
One third of rents, net of income from subleases (a) 108
-------
Total fixed charges 1,634
-------
Less: Equity in undistributed income from subleases (84)
-------
Earnings before taxes, fixed charges, and effect of
accounting changes, excluding capitalized interest $ 3,658
=======
Fixed charges, as above $ 1,634
=======
Ratio of earnings to fixed charges 2.24
=======

INCLUDING INTEREST ON DEPOSITS
- - - ------------------------------
Fixed charges, as above $ 1,634

Add: Interest on Deposits 2,241
-------
Total fixed charges and interest on deposits $ 3,875
=======

Earnings before taxes, fixed charges, and effect of
accounting changes excluding capitalized
interest, as above $ 3,658
Add: Interest on deposits 2,241
----------
Total earnings before taxes, fixed charges,
effect of accounting changes and interest on deposits $ 5,899
=======

Ratio of earnings to fixed charges 1.52
=======
</TABLE>

(a) The proportion deemed representative of the interest factor.

<PAGE> 1

EXHIBIT 12.1

CHEMICAL BANKING CORPORATION
AND SUBSIDIARIES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(IN MILLIONS, EXCEPT RATIOS)

YEAR ENDED
EXCLUDING INTEREST ON DEPOSITS DECEMBER 31, 1993
- - - ------------------------------ -----------------
<S> <C>
Income before Income Taxes and
Effect of Accounting Changes $ 2,108
-------

Fixed charges:
Interest expense 1,526
One third of rents, net of income from subleases (a) 108
-------

Total fixed charges 1,634
-------
Less: Equity in undistributed income of affiliates (84)
-------

Earnings before taxes, fixed charges, and effect of
accounting changes, excluding capitalized interest $ 3,658
=======

Fixed charges, as above $ 1,634
=======

Preferred stock dividends 155
-------

Fixed charges including preferred stock dividends $ 1,789
=======

Ratio of earnings to fixed charges and
preferred stock dividend requirements 2.04
=======

INCLUDING INTEREST ON DEPOSITS
- - - ------------------------------
Fixed charges including preferred stock dividends $ 1,789

Add: Interest on Deposits 2,241
-------

Total fixed charges including preferred stock
dividends and interest on deposits $ 4,030
=======

Earnings before taxes, fixed charges, and effect
of accounting changes excluding capitalized
interest, as above $ 3,658
Add: Interest on deposits 2,241
-------

Total earnings before taxes, fixed charges, effect
of accounting changes and interest on deposits $ 5,899
=======

Ratio of earnings to fixed charges
and preferred stock dividend requirements 1.46
=======
</TABLE>

(a) The proportion deemed representative of the interest factor.

<PAGE> 1
EXHIBIT 21.1

CHEMICAL BANKING CORPORATION

LIST OF SUBSIDIARIES

The Corporation has the following subsidiaries, all of which are included in
the Corporation's Consolidated Financial Statements:

<TABLE>
<CAPTION>
PERCENTAGE
OF VOTING
SECURITIES
ORGANIZED OWNED BY
UNDER THE IMMEDIATE
NAME LAWS OF PARENT
---- --------- ----------
<S> <C> <C>
Chemical Bank . . . . . . . . . . . . . . . . . . . . . . . New York 100 %
CB Capital Investors Inc. . . . . . . . . . . . . . . . . New York 100
ChemLease Worldwide, Inc. . . . . . . . . . . . . . . . . New York 100
Chemco International, Inc. . . . . . . . . . . . . . . . . United States 100
Chemical International Finance, Ltd. . . . . . . . . United States 100
CB Beteiligungs und Verwaltungs GmbH . . . . . . Germany 100
Chemical Bank A.G. . . . . . . . . . . . . . Germany 100
Chemical Bank (Guernsey) Limited . . . . . . . . Channel Islands 100
Chemical Bank (U.K.) Holdings Limited . . . . . . United Kingdom 100
Chemical Investment Bank Limited . . . . . . United Kingdom 100
Chemical Bank & Trust (Bahamas) Limited . . . . . Bahamas 100
Chemical Bank - France . . . . . . . . . . . . . France 100
Chemical Ireland Limited . . . . . . . . . . . . Ireland 100
Chemical Trust and Banking Company Limited . . . Japan 100
Banco Chemical (Portugal) S.A. . . . . . . . . . Portugal 73
Chemical Bank of Canada . . . . . . . . . . . . . Canada 30
Chemical Bank of Canada . . . . . . . . . . . . . . . . . Canada 70
Chemical Mortgage Company . . . . . . . . . . . . . . . . Ohio 100
ChemCredit, Inc. . . . . . . . . . . . . . . . . . . . . . New York 100
Chemical Acceptance Corporation . . . . . . . . . . . . . Delaware 100
Chemical Acceptance Corporation I . . . . . . . . . . Delaware 100
Chemical Mortgage Acceptance Corp. . . . . . . . . . Delaware 100
Chemical Commercial Mortgage Securities Corp. . . . . . . New York 100
Chemical Community Development Inc. . . . . . . . . . . . Delaware 100
Manufacturers Hanover Leasing
Corporation . . . . . . . . . . . . . . . . . . . Delaware 100
Texas Commerce Bancshares, Inc. . . . . . . . . . . . . . . . Delaware 100
Texas Commerce Equity Holdings, Inc. . . . . . . . . . . . Delaware 100
Texas Commerce Bank, N.A. . . . . . . . . . . . . . . United States 100
Chemical New Jersey Holdings, Inc. . . . . . . . . . . . . . New Jersey 100
Chemical Bank New Jersey, N.A. . . . . . . . . . . . . . . United States 100
Princeton Bank and Trust Company . . . . . . . . . . . . . United States 100
Chemical Investors Services, Inc. . . . . . . . . . . . . New Jersey 100
Chemical Pennsylvania Corporation . . . . . . . . . . . . Delaware 100
</TABLE>

<PAGE> 2
LIST OF SUBSIDIARIES (CONTINUED)

<TABLE>
<CAPTION>
PERCENTAGE
OF VOTING
SECURITIES
ORGANIZED OWNED BY
UNDER THE IMMEDIATE
NAME LAWS OF PARENT
---- --------- ----------
<S> <C> <C>
Brown & Company Securities Corporation . . . . . . . . . . . Massachusetts 100 %
CBC-USA, Inc. . . . . . . . . . . . . . . . . Delaware 100
CBC Capital Partners, Inc. . . . . . . . . . . . . . . . . . Delaware 100
CBC Holding (Delaware) Inc. . . . . . . . . . . . . . . . . . Delaware 100
Chemical Bank Delaware . . . . . . . . . . . . . . . . . . Delaware 100
Chemical Insurance Agency, Inc. . . . . . . . . . . . Delaware 100
The CIT Group Holdings, Inc. . . . . . . . . . . . . . . . Delaware 40
Chatham Ventures, Inc. . . . . . . . . . . . . . . . . . . . New York 100
Chemical Venture Capital Associates . . . . . . . . . . . California 80
Chemical Equity Associates . . . . . . . . . . . . . . . . California 80
Chemical European Equity Associates L.P. . . . . . . . . . Delaware 80
Chemical Business Credit Corp. . . . . . . . . . . . . . . . Delaware 100
Chemical Capital Corporation . . . . . . . . . . . . . . . . New York 100
Chemical Connecticut Corporation . . . . . . . . . . . . . . Connecticut 100
Chemical Holding Delaware, Inc. . . . . . . . . . . . . . . . Delaware 100
Chemical Thrift Holdings Inc. . . . . . . . . . . . . . . Delaware 100
Chemical Bank Florida (Savings Bank) . . . . . . . . Florida 100
Chemical Trust Company of California . . . . . . . . . . . California 100
CBC Holding (California) Inc. . . . . . . . . . . . . . . California 100
Van Deventer & Hoch . . . . . . . . . . . . . . . . . California 50
Chemical Educational Services Corporation . . . . . . . . . . Delaware 100
Chemical Equity Incorporated . . . . . . . . . . . . . . . . New York 100
Chemical Financial Management Corporation . . . . . . . . . . Ohio 100
Chemical Financial Services Corp., Ltd. . . . . . . . . . . . Delaware 100
Chemical Futures & Options, Inc. . . . . . . . . . . . . . . New York 100
Chemical Investments, Inc. . . . . . . . . . . . . . . . . . Delaware 100
Chemical Mortgage Securities, Inc. . . . . . . . . . . . . . New York 100
Chemical New York, N.V. . . . . . . . . . . . . . . . . . . . Netherlands
Antilles 100
Chemical Realty Corporation . . . . . . . . . . . . . . . . . New York 100
Chemical Securities Inc. . . . . . . . . . . . . . . . . . . Delaware 100
Chemical Technologies Corporation . . . . . . . . . . . . . . New York 100
BankLink, Inc. . . . . . . . . . . . . . . . . . . . . New York 100
Manufacturers Hanover Wheelease, Inc. . . . . . . . . . . . . Delaware 100
Offshore Equities, Inc. . . . . . . . . . . . . . . . . . . . New York 100
The Portfolio Group, Inc. . . . . . . . . . . . . . . . . . . New York 100
</TABLE>

The names of certain other direct and indirect subsidiaries of the Corporation
have been omitted from the list above because such unnamed subsidiaries
considered in the aggregate as a single subsidiary would not constitute a
significant subsidiary.

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements on Form S-3 (Nos.
33-18640, 33-21488, 33-24224, 33-24654, 33-33220, 33-45228, 33-47105, 33-53306,
33-57104, 33-58634, 33-49965, 33-67742 and 33-68724) and in the Registration
Statements on Form S-8 (Nos. 33-01776, 33-13457, 33-14997, 33-19852, 33-26523,
33-40675, 33-40272, 33-45017, 33-45018, 33-49911 and 33-49909) of Chemical
Banking Corporation of our report dated January 18, 1994 appearing on page 52
of Section B of this Form 10-K.

PRICE WATERHOUSE

New York, New York
March 25, 1994