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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 1-6052
FIRST CHICAGO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 36-2669970
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60670
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
Registrant's telephone number, including area code: (312) 732-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $5.00 par value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Preferred Stock with Cumulative and Adjustable
Dividends ($50 stated value), no par value New York Stock Exchange
Preferred Stock with Cumulative and Adjustable
Dividends, Series B ($100 stated value), no par value New York Stock Exchange
Preferred Stock with Cumulative and Adjustable
Dividends, Series C ($100 stated value), no par value New York Stock Exchange
Depositary Shares, each representing one-twenty-fifth
of a share of 8.45% Cumulative Preferred Stock,
Series E ($625 stated value), no par value New York Stock Exchange
Depositary Shares, each representing one-hundredth of
a share of 5 3/4% Cumulative Convertible Preferred
Stock, Series B ($5,000 stated value), no par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
8 1/2% Notes Due June 1, 1998 New York Stock Exchange
5 1/2% Exchangeable Notes Due February 15, 1997 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
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TITLE OF CLASS
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8.45% Cumulative Preferred Stock, Series E ($625
stated value)
5 3/4% Cumulative Convertible Preferred Stock, Series
B ($5,000 stated value)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
Corporation as of December 31, 1994, was approximately $3,976,000,000. At
December 31, 1994, the Corporation had 89,859,798 shares of its Common Stock,
$5.00 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE CORPORATION'S 1994 ANNUAL REPORT TO STOCKHOLDERS ARE
INCORPORATED BY REFERENCE INTO PARTS I, II AND IV HEREOF, AND PORTIONS OF THE
CORPORATION'S DEFINITIVE PROXY STATEMENT DATED MARCH 17, 1995, ARE INCORPORATED
BY REFERENCE INTO PART III HEREOF.
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FIRST CHICAGO CORPORATION
FORM 10-K INDEX
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PAGE
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PART I
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Item 1. Business................................................... 2
Description of Business.................................... 2
Employees.................................................. 5
Competition................................................ 5
Monetary Policy and Economic Controls...................... 5
Supervision and Regulation................................. 6
Financial Review........................................... 10
Certain Statistical Information............................ 11
Item 2. Properties................................................. 20
Item 3. Legal Proceedings.......................................... 21
Item 4. Submission of Matters to a Vote of Security Holders........ 21
Executive Officers of the Registrant..................................... 21
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 21
Item 6. Selected Financial Data.................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Item 8. Financial Statements and Supplementary Data................ 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 22
PART III
Item 10. Directors and Executive Officers of the Registrant......... 22
Item 11. Executive Compensation..................................... 22
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 22
Item 13. Certain Relationships and Related Transactions............. 22
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................. 22
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PART I
ITEM 1. BUSINESS
DESCRIPTION OF BUSINESS
General
First Chicago Corporation (the "Corporation") is a multibank holding company
incorporated in Delaware in l969. The principal asset of the Corporation is the
capital stock of The First National Bank of Chicago ("FNBC"). The Corporation
also owns all the outstanding capital stock of American National Corporation
("ANC") and FCC National Bank. ANC is the holding company for American National
Bank and Trust Company of Chicago ("ANB") and American National Bank and Trust
Company of Wisconsin. FCC National Bank is a Delaware-based bank primarily
engaged in the issuance of VISA and MasterCard credit cards. In addition to
these banking organizations, the Corporation, directly or indirectly, owns the
stock of various nonbank companies engaged in businesses related to banking and
finance, including venture capital, leasing and investment management
subsidiaries.
In addition to its equity investments in subsidiaries, the Corporation,
directly or indirectly, raises funds principally to finance the operations of
its nonbank subsidiaries. A substantial portion of the Corporation's annual
income typically has been derived from dividends from its subsidiaries and from
interest on loans to its subsidiaries.
The Corporation's business strategy focuses on two customer segments-
corporate banking and consumer banking. Corporate banking consists of corporate
and institutional banking and middle market banking. Consumer banking consists
of the credit card business and community banking. Each of these businesses is
supported through the organizational structures of the Corporation's banking
and nonbanking subsidiaries, as described below.
The Corporation's U.S. offices and international facilities are listed on
page 71 of the Corporation's 1994 Annual Report to Stockholders, and such
listing is expressly incorporated herein by reference.
Corporate Banking
Corporate and institutional banking encompasses the broad range of commercial
and investment banking products and services that FNBC, along with the
subsidiaries referenced below, provides to domestic and foreign customers. The
principal focus of corporate and institutional banking activities is the
delivery of corporate financial services and noncredit services and the
extension of credit to commercial, financial and governmental customers.
Serving the larger business marketplace within the United States, Canada,
Europe, Mexico, Latin America, the Middle East, Africa and the Asia-Pacific
regions, corporate and institutional banking provides products and services to
industries including: retailing, commodities, banking, finance, insurance,
transportation, securities, real estate, mortgage banking, communications,
utilities, and petroleum and mining, as well as health, education and service
organizations, and municipalities. Upper middle market customers within the
Midwest are also served by corporate and institutional banking.
In the global financial marketplace, corporate and institutional banking is
responsible for FNBC's investment activities in United States government
securities, municipal money markets, fixed income securities, federal agency
securities, foreign exchange and the futures markets. Risk insurance products,
such as foreign exchange options, interest rate options, and interest rate and
currency swaps, are also provided.
A separate subsidiary of the Corporation, First Chicago Capital Markets, Inc.
("FCCM"), is a primary government bond dealer and, as such, reports its
positions daily to the Federal Reserve Open Market Committee Trading Desk. FCCM
also is primarily responsible for activities in the securities of states,
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municipalities and other governmental entities, and certain corporate entities,
including trading, sales, underwriting, research, and maintenance of an active
secondary market with national sales distribution.
Certain financial products and services such as global merchant banking,
private placement of debt securities, merger and acquisition advisory services,
subordinated debt investments, highly leveraged transaction financings, asset
sales and distributions, loan syndications, and financial advisory services to
troubled companies are coordinated with corporate and institutional banking.
These products and services are provided through FNBC, through nonbank
subsidiaries of the Corporation and through international banking subsidiaries
of FNBC.
Corporate and institutional banking also develops, markets and delivers cash
management, operating, clearing and other noncredit products, both overseas and
domestically. These include money transfer, collection, disbursement,
documentary, remittance, trade finance, international securities clearing,
custody, corporate trust and shareholder services.
Corporate and institutional banking includes the operations of three
subsidiaries of the Corporation and FNBC: First Chicago National Processing
Corporation, which provides noncredit clearing services, including lock box
processing, on a nationwide basis; First Chicago International, which provides
clearing and documentary services; and First Chicago Trust Company of New York,
a New York state-chartered trust company, which provides custody, corporate
trust, special agency, stock transfer, and securities issuing, paying and
clearance services. In addition, the First Chicago Clearing Center in London is
that city's principal depository for certificates of deposit and other short-
term securities.
Middle market banking is conducted primarily through ANC, which, through ANB
and ANC's other subsidiaries, offers a wide range of banking and financial
products and services, with primary emphasis on middle market companies in the
Chicago metropolitan area. ANB has 17 Chicago and suburban locations, including
its main office in downtown Chicago. Suburban branches are located in Arlington
Heights, Bensenville, Deerfield, Des Plaines, Elgin, Libertyville, Lisle,
Matteson, Melrose Park, Skokie and Willowbrook. ANB maintains one foreign
branch in Grand Cayman. ANC also owns American National Bank and Trust Company
of Wisconsin, whose activities are coordinated with those of ANB.
ANB provides commercial banking products and services to correspondent banks
and commercial customers, including commercial loans, demand and time deposit
accounts, and cash management services. Separate divisions target small
businesses, commercial real estate and asset-based lending opportunities.
In addition, ANB offers a wide array of ancillary products and services
targeted primarily to its commercial middle market customer base. Corporate
finance services and products offered include merger and acquisition advisory
services, financial advisory services and interest rate hedging products and,
through its affiliate ANB Mezzanine Corporation, mezzanine debt capabilities.
International trade banking services and foreign exchange capabilities are
offered to commercial customers involved in both import and export activities.
Treasury and investment products, which include short-term investment
management and employee benefit plans, are offered to commercial customers.
Personal banking, personal trust, and investment services, including loan and
deposit services, estate planning, fiduciary management and portfolio
management, are offered to business owners and executives, and other
individuals. Corporate trust services include land trust services offered to
companies and individuals, and indenture trustee services offered to companies,
municipalities and institutions that issue public or privately placed debt.
Consumer Banking
The credit card business ("First Card") has primary responsibility for
developing and marketing the Corporation's credit card services to individuals
nationwide using direct response, telemarketing and other techniques that do
not require a local physical presence. While VISA and MasterCard accounts are
the primary products sold by First Card, other services include check-accessed
lines of credit and certificates of deposit.
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The majority of the Corporation's credit card accounts are owned and
administered by FCC National Bank ("FCCNB"), headquartered in Wilmington,
Delaware. First Card operations centers are located in Wilmington, Delaware;
Elgin, Illinois; and Uniondale (Long Island), New York.
During 1994, First Card continued to expand, primarily through marketing
programs offering FCCNB's proprietary First Card line of VISA and MasterCard
accounts. FCCNB ranks among the largest issuers of bank credit cards in the
United States.
Community banking has primary responsibility for developing and marketing
diversified financial services to individuals and small businesses located in
the Chicago metropolitan area. These services include traditional deposit and
loan services, investment advisory and trust services, brokerage services,
mutual funds, annuities and mortgage loans. In addition, beginning in 1995, a
new "direct banking" department, using various resources such as 24-hour
telephone support and nationwide debit card access to automatic teller machines
("ATM"s) and merchants, will focus on sales and service to consumers beyond the
Chicago metropolitan area.
Community banking services are distributed through more than 80 consumer
banking facilities and more than 500 ATMs in the Chicago metropolitan area, and
through Bank-by-Mail, Bank-at-Work and telephone and computer home-banking
programs.
ATM services are provided to consumer banking clients in the Chicago market
through a shared network called CASH STATION and through the CIRRUS system
nationwide.
Other Subsidiaries
In addition to the banking subsidiaries described above, the Corporation owns
subsidiaries that are engaged in businesses related to banking and finance,
including leasing real and personal property; providing specialized financing
that supplements FNBC's commercial lending activities; engaging in certain
permissible investment banking activities; and engaging in investment
management activities.
First Chicago Financial Corporation raises funds to finance the operations of
its subsidiaries: First Chicago Leasing Corporation, First Chicago Investment
Corporation and FCCM. First Chicago Leasing Corporation provides advice on, and
invests in, leases for commercial aircraft, facilities and major industrial
equipment. First Chicago Investment Corporation provides various forms of
equity financing for acquisitions, management buyouts and growing businesses.
FCCM engages in certain permissible securities distribution and trading
activities as described on pages 2-3 of this Form 10-K.
First Capital Corporation of Chicago, a small business investment company
licensed under the Small Business Investment Act of 1958, offers equity
financing for small business ventures.
First Chicago Investment Management Company ("FCIMC"), a newly organized
subsidiary of FNBC, provides investment advisory, management and administrative
services to a variety of clients, including: retail mutual funds; individuals;
defined contribution retirement plans; businesses and institutional investors;
and, through its wholly-owned subsidiary ANB Investment Management and Trust
Company ("ANB IMC") (formerly a subsidiary of ANB), traditional pension plans.
Financial Policy
The Finance Committee oversees the implementation of policies established by
the Office of the Chairman related to the financial management of the
Corporation, specifically: liquidity management, interest rate risk management,
capital management, investment accounts, tax planning and accounting risk. The
Office of the Chairman comprises the Chairman of the Board, the President and
the Vice Chairman of the Board. The Finance Committee is chaired by the
Corporation's Chief Financial Officer. Through the Chief
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Financial Officer's staff, the Finance Committee documents established
financial management policies, develops strategies to effect policies, reviews
compliance with policies and recommends new policies or modifications to
existing policies. The tactical execution of strategies to effect policies is
accomplished through various organizational units which, in that capacity, are
responsible to the Finance Committee.
Credit Strategy
The Credit Strategy Committee is responsible for providing strategic
direction and senior management oversight for the credit risk management
process. This process includes identifying, measuring and managing potential
credit risk inherent in loans, leases, letters of credit, and other product
offerings such as interest rate and currency risk insurance products, service
products, securities placement products and trading products. The Credit
Strategy Committee is chaired by the Corporation's Vice Chairman.
Market Risk Policy
The Market Risk Committee is responsible for providing strategic direction
and senior management oversight for the market risk management process. This
process includes identifying, measuring and managing potential capital, balance
sheet and income effects associated with interest rate, exchange rate and other
market risks. The Market Risk Committee is chaired by the Corporation's Vice
Chairman.
Investment Risk Management
The Investment Risk Management Committee oversees all activities with
inherent market risk that are not covered by the Market Risk Committee and are
not within the asset and liability management oversight of the Finance
Committee. The activities over which this committee has oversight
responsibilities will generally have a holding period longer than six months,
and involve markets with limited liquidity. The Investment Risk Management
Committee is chaired by the Corporation's Vice Chairman.
Staff Departments
Staff support for FNBC, the Corporation and certain of their subsidiaries is
supplied by the Administration, Audit, Community Affairs, Corporate Affairs,
Corporate Strategy, Credit and Market Risk Policy, Economic Forecasting, Human
Resources and Law Departments, and the Finance Group.
EMPLOYEES
As of December 3l, 1994, the Corporation and its subsidiaries had
approximately 17,630 employees on a full-time-equivalent basis.
COMPETITION
All phases of the Corporation's activities, including banking, are highly
competitive. The Corporation's banking subsidiaries (the "Banks") compete
actively with money market mutual funds, national and state banks, mutual
savings banks, savings and loan associations, finance companies, credit unions
and other financial institutions located throughout the United States. For
international business, the Banks compete with other United States financial
institutions that have foreign installations, and with other major banks and
financial institutions throughout the world. In addition, the Corporation's
subsidiaries are subject to competition from a variety of financial and other
institutions that provide a wide array of products and services.
MONETARY POLICY AND ECONOMIC CONTROLS
The earnings of the Banks and, therefore, the earnings of the Corporation,
are affected by the policies of regulatory authorities, including the Board of
Governors of the Federal Reserve System (the "Board"). An important function of
the Board is to promote orderly economic growth by influencing interest rates
and the
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supply of money and credit. Among the methods that have been used to achieve
this objective are open market operations in United States government
securities, changes in the discount rate on member bank borrowings, and changes
in reserve requirements against bank deposits. These methods are used in
varying combinations to influence overall growth and distribution of bank
loans, investments and deposits, interest rates on loans and securities, and
rates paid for deposits.
The Board's monetary policies strongly influence the behavior of interest
rates and can, therefore, have a significant effect on the operating results of
commercial banks. During the past year, economic growth accelerated. If growth
continues to be strong, inflationary pressures will develop. Given such
circumstances, the Board has been tightening credit conditions, pushing up
interest rates.
The effects of the various measures used by the Board on the future business
and earnings of the Banks and the Corporation cannot be predicted. Other
economic controls also have affected the Corporation's operations in the past.
The Corporation cannot predict the nature or extent of any effects that
possible future governmental controls or legislation may have on its business
and earnings.
SUPERVISION AND REGULATION
Bank Holding Company Regulation
The Corporation is a bank holding company as defined under the Bank Holding
Company Act of 1956, as amended (the "Act"), and is registered as such with the
Board. Under the Act, bank holding companies are prohibited, with certain
exceptions, from engaging in, or from acquiring more than 5% of the voting
stock of any company engaging in, activities other than banking, managing or
controlling banks, or performing services for their subsidiaries. The Act also
prohibits bank holding companies from acquiring more than 5% of the voting
shares of any bank that is not already majority-owned without the prior
approval of the Board.
The Act authorizes the Board to permit bank holding companies to engage in,
and to acquire or retain shares of companies that engage in, activities that
the Board has determined to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. The Board has determined
that a number of activities meet this standard. Among the activities so
approved are: making and servicing loans; performing certain fiduciary
functions; leasing real and personal property; underwriting and dealing in
government obligations and certain money market instruments; underwriting and
dealing, to a limited extent, in corporate debt obligations and other
securities that banks may not deal in; providing foreign exchange advisory and
transactional services; acting as a futures commission merchant; and owning,
controlling or operating a savings association if the association engages only
in deposit-taking activities, lending and other activities that are permissible
for bank holding companies. The Board, from time to time, may revise and expand
the list of permitted activities.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Riegle-Neal Act") significantly revises prior laws applicable to interstate
acquisitions of banks and bank holding companies and the branching powers of
national banks. Prior to the Riegle-Neal Act, the Board was not permitted to
approve an application to acquire shares of a bank located outside the state in
which the operations of the applicant's bank subsidiaries were principally
conducted unless the acquisition was specifically authorized by a statute of
the acquired bank's state. Commencing September 29, 1995, the Board is
authorized to approve an application of an adequately capitalized and
adequately managed bank holding company to acquire control of a bank located in
another state without regard to whether such transaction is prohibited under
the law of such state. The Board may not, however, approve such an application
if, following the acquisition, the applicant would control either (1) more than
10% of all insured depository institution deposits in the United States or (2)
under certain circumstances, 30% or more of all insured depository institution
deposits in any state where either the applicant or the acquired bank is
located. The 30% limit on aggregate deposits that may be controlled by an
applicant can be adjusted by the states on a non-discriminatory basis.
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The Riegle-Neal Act also revises the rules applicable to mergers between
insured banks located in different states. Before passage of the Riegle-Neal
Act, such mergers generally were not authorized. Commencing June 1, 1997,
however, adequately capitalized and adequately managed insured banks in
different states may merge without regard to whether the merger is authorized
under the law of any state. States may elect to prohibit interstate bank
mergers or may elect to permit early interstate bank mergers by adopting, prior
to June 1, 1997, legislation that expressly so provides, and that applies on
equal terms to all out-of-state banks. The Riegle-Neal Act provides that an
interstate merger involving the acquisition of a branch (as distinguished from
an entire bank) or the de novo establishment of a national bank branch in
another state may be approved only if the law of the host state expressly
permits such action. An interstate merger may not be approved if, following the
merger, the resulting bank would control (1) more than 10% of all insured
depository institution deposits in the United States or (2) under certain
circumstances, 30% or more of all insured depository institution deposits in
any state where the resulting bank will be located. The 30% limit on aggregate
deposits that may be controlled by the resulting bank can be adjusted by the
states on a non-discriminatory basis. The laws of the host state regarding
community reinvestment, consumer protection, fair lending and the establishment
of intrastate branches will apply to any out-of-state branch of a national bank
unless preempted by federal law or the Office of the Comptroller of the
Currency (the "Comptroller") determines that application of such laws would
have a discriminatory effect on the national bank.
The Riegle-Neal Act contains a number of other provisions related to banks
and bank holding companies, including: authorization of interstate branching by
foreign banks; additional branch closing notice requirements for interstate
banks proposing to close a branch in a low or moderate income area; amendments
to the Community Reinvestment Act of 1977 to require separate written
evaluations of an insured depository institution for each state in which it
maintains branches; a prohibition on interstate banks maintaining out-of-state
deposit production offices; and authorization for a bank subsidiary of a bank
holding company to receive deposits, renew time deposits, close and service
loans and receive payments on loans as agent for a depository institution
affiliate of such bank.
The extent to, and terms on, which full interstate branching and certain
other actions authorized under the Riegle-Neal Act are implemented will depend
on the actions of entities other than the Corporation and the Banks, including
the legislatures of the various states. Further developments by state and
federal authorities, including legislation, with respect to matters covered by
the Riegle-Neal Act reasonably can be anticipated to occur in the future. In
addition, there may be new, significant banking legislation introduced in the
current Congress related to bank holding companies and their powers; the
likelihood of passage and effect, if any, of such legislation on the
Corporation and the Banks cannot be predicted.
The Illinois Bank Holding Company Act (the "Illinois Act") provides that any
out-of-state bank holding company whose principal place of business is in a
state that grants Illinois bank holding companies reciprocal authority may
acquire control of an Illinois bank or bank holding company. The approval of
the Illinois Commissioner of Banks and Trust Companies is required to complete
such an interstate acquisition in Illinois. The Illinois Act also permits
intrastate acquisitions throughout Illinois by Illinois bank holding companies.
All interstate and intrastate bank acquisitions by the Corporation are subject
to the approval of the Board.
The Corporation is required to file with the Board annual reports and such
additional information as the Board may require pursuant to the Act. The Board
periodically examines the Corporation and its nonbank subsidiaries, and is
authorized to impose reserve requirements and interest rate limitations on
certain debt obligations issued by bank holding companies.
As a bank holding company, the Corporation and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with
extensions of credit or providing property or services.
The Board has adopted risk-based capital guidelines for bank holding
companies that require bank holding companies to maintain a minimum ratio of
total capital to risk-weighted assets (including certain off-balance-sheet
items, such as standby letters of credit) of 8%. At least half of total capital
must be composed
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of common stockholders' equity, noncumulative perpetual preferred stock and a
limited amount of cumulative perpetual preferred stock, less disallowed
intangibles and other adjustments (primarily goodwill) ("Tier I capital"). The
remainder ("Tier II capital") may consist of subordinated debt, other preferred
stock, certain other instruments and a limited amount of loan loss reserves. At
December 31, 1994, the Company's consolidated Tier I capital and total capital
ratios were 8.8% and 13.4%, respectively.
In addition, the Board has established minimum leverage ratio guidelines for
bank holding companies. These guidelines provide for a minimum ratio of Tier I
capital to total average assets (the "leverage ratio") of 3% for bank holding
companies that meet certain specified criteria, including those having the
highest regulatory rating. All other bank holding companies generally are
required to maintain a leverage ratio of at least 3% plus an additional cushion
of 100 to 200 basis points. The Corporation's leverage ratio at December 31,
1994, was 7.5%. The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Board has indicated that it will consider a "tangible Tier I capital leverage
ratio" (deducting all intangibles) and other indicia of capital strength in
evaluating proposals for expansion or new activities.
Banking Regulation
The Corporation and its nonbank subsidiaries are affiliates of the Banks
within the meaning of the Federal Reserve Act and, as such, are subject to
certain restrictions on loans made by the Banks to the Corporation or such
other subsidiaries, on investments made by the Banks in their stock or
securities, on the Banks taking such stock and securities as collateral for
loans, and on the terms of transactions between the Banks and other
subsidiaries. The Corporation and its subsidiaries, including the Banks, are
also subject to certain restrictions with respect to engaging in the issuance,
flotation, underwriting, public sale or distribution of securities.
There are various additional requirements and restrictions in the laws of the
United States and the State of Illinois affecting the Banks and their
operations, including the requirement to maintain reserves against deposits,
restrictions on the nature and amount of loans that may be made by the Banks,
and restrictions related to investments and other activities of the Banks. The
Banks are subject to regulation by the Comptroller, the Board and the Federal
Deposit Insurance Corporation ("FDIC"); as national banks, they are examined by
the Comptroller. FNBC's and ANB's operations in other countries are subject to
various restrictions imposed by the laws of such countries.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
significantly expanded the regulatory and enforcement powers of federal banking
regulators and has important consequences for the Corporation, the Banks and
other depository institutions located in the United States.
A major feature of FDICIA is the comprehensive directions it gives to federal
banking regulators to promptly direct or require the correction of problems at
inadequately capitalized banks in the manner that is least costly to the
federal deposit insurance funds. The degree of corrective regulatory
involvement in the operations and management of banks and their holding
companies is, under FDICIA, largely determined by the actual or anticipated
capital position of the subject institution.
FDICIA established five tiers of capital measurement for regulatory purposes
ranging from "well capitalized" to "critically undercapitalized." FDICIA
requires banking regulators to take increasingly strong corrective steps, based
on the capital tier of any subject bank, to cause such bank to achieve and
maintain capital adequacy. Even if a bank is adequately capitalized, however,
the banking regulators are authorized to apply corrective measures if the bank
is determined to be in an unsafe or unsound condition or engaging in an unsafe
or unsound activity.
Depending on the capital level of an insured depository institution, the
banking regulatory agencies' corrective powers can include: requiring a capital
restoration plan; placing limits on asset growth and restrictions on
activities; requiring the institution to reduce total assets; requiring the
institution to issue
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additional stock (including voting stock) or to be acquired; placing
restrictions on transactions with affiliates; restricting the interest rate the
institution may pay on deposits; ordering a new election for the institution's
board of directors; requiring that certain senior executive officers or
directors be dismissed; prohibiting the institution from accepting deposits
from correspondent banks; requiring the institution to divest certain
subsidiaries; prohibiting the payment of principal or interest on subordinated
debt; prohibiting the institution's parent bank holding company from making
capital distributions without prior regulatory approval; and, ultimately,
appointing a receiver or conservator for the institution.
If an insured depository institution is undercapitalized, the parent bank
holding company is required to guarantee that the institution will comply with
any capital restoration plan submitted to, and approved by, the appropriate
federal banking agency in an amount equal to the lesser of (1) 5% of the
institution's total assets at the time the institution became undercapitalized
or (2) the amount that is necessary (or would have been necessary) to bring the
institution into compliance with all applicable capital standards as of the
time the institution fails to comply with the capital restoration plan. If such
parent bank holding company guarantee is not obtained, the capital restoration
plan may not be accepted by the banking regulators. As a result, such
institution would be subject to the more severe restrictions imposed on
significantly undercapitalized institutions. Further, the failure of such a
depository institution to submit an acceptable capital plan is grounds for the
appointment of a conservator or receiver.
FDICIA also contains a number of other provisions affecting depository
institutions, including additional reporting and independent auditing
requirements, the establishment of safety and soundness standards, the changing
of FDIC insurance premiums from flat amounts to the system of risk-based
assessments described below, a review of accounting standards, and supplemental
disclosures and limits on the ability of depository institutions to acquire
brokered deposits. The Riegle-Community Development and Regulatory Improvement
Act of 1994, however, among other things, contains a number of specific
provisions easing the regulatory burden on banks and bank holding companies,
including some imposed by FDICIA, and making the bank regulatory system more
efficient. Federal banking regulators have taken actions to implement these
provisions.
Bank regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations beyond current levels. Each of
the Banks and the Corporation were in compliance with applicable minimum
capital requirements as of December 31, 1994. The management of the
Corporation, however, is unable to predict whether higher capital requirements
will be imposed and, if so, at what levels and on what schedule.
The Banks are subject to FDIC deposit insurance assessments. Under the FDIC's
risk-based assessment system effective January 1, 1994, the prior flat
assessment rate of 0.23% per annum on the amount of domestic deposits has been
changed to a rate based on classification of a depository institution in one of
nine risk assessment categories. Such classification is based upon the
institution's capital level and upon certain supervisory evaluations of the
institution by its primary regulator. The assessment rate schedule currently in
effect creates a 0.08% spread in assessment rates, ranging from 0.23% per annum
to 0.31% per annum, between banks classified as strongest and weakest by the
FDIC. In February 1995, the FDIC proposed reducing the minimum assessment rate
applicable to the strongest banks from .23% per annum to .04% per annum. Under
this proposal, the premium for the weakest banks would remain at .31% per
annum.
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA"), among other things, provides generally that, upon the default of
any bank of a multi-unit holding company, the FDIC may assess an affiliated
insured depository institution for the estimated losses incurred by the FDIC.
Specifically, FIRREA provides that a depository institution insured by the FDIC
can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC in connection with (1) the default of a commonly
controlled FDIC-insured depository institution or (2) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of default. "Default" is defined generally
9
<PAGE>
as the appointment of a conservator or receiver. "In danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. All of the
Banks are FDIC-insured depository institutions.
There are certain regulatory limitations on the Banks' payment of dividends
to the Corporation. Dividend payments by a national bank are limited to the
lesser of (1) the level of "undivided profits then on hand" less the amount of
bad debts, as defined, in excess of the allowance for credit losses, and (2)
absent regulatory approval, an amount not in excess of its "net profits" for
the current year combined with the "retained net profits" for the preceding two
years. As of December 3l, 1994, the Banks could have declared additional
dividends of approximately $664 million without approval of the Comptroller.
The payment of dividends by any Bank may also be affected by other factors,
such as the maintenance of adequate capital for such Bank. In addition, the
Comptroller has authority to prohibit a national bank from paying dividends if,
in the Comptroller's opinion, the payment of dividends would, in light of the
financial condition of such bank, constitute an unsafe or unsound practice.
FNBC and ANB are registered with the Comptroller as transfer agents and are
subject to the rules and regulations of the Securities and Exchange Commission
(the "Commission") and the Comptroller with respect to their activities as
transfer agents.
Certain organizational units within FNBC and ANB are registered with the
Commission as municipal securities dealers. These units are subject to the
applicable rules and regulations of the Commission and the Municipal Securities
Rulemaking Board with respect to transactions in municipal securities performed
in a municipal securities dealer capacity. FNBC also is a regulated government
securities broker and dealer under the Government Securities Act, and is
subject to regulations issued thereunder in connection with the conduct of its
United States government securities business.
In addition, First Chicago Investment Services, Inc. ("FCIS"), a brokerage
subsidiary of FNBC, is registered as a broker-dealer with the Commission and is
a member of the National Association of Securities Dealers ("NASD"). The
brokerage activities of FCIS are subject to the applicable rules and
regulations of the Commission and the NASD. FCCM is also registered as a
broker-dealer with the Commission and is a member of the NASD. The securities
distribution and trading activities of FCCM are subject to the applicable rules
and regulations of the Board, the Commission and the NASD.
First Chicago Futures, Inc. ("FCFI"), a subsidiary of FNBC that conducts a
commodities brokerage business and is a market maker in foreign currency
options, is registered with the Commission as a broker-dealer and with the
Commodity Futures Trading Commission ("CFTC") as a futures commission merchant,
and is a member of the National Futures Association ("NFA"). FCFI is subject to
the applicable rules and regulations of the Commission, the CFTC, the NFA, and
certain commodities and securities exchanges of which FCFI is a member with
respect to its activities as a foreign currency market maker and a futures
commission merchant.
FCIMC and ANB IMC are registered with the Commission as investment advisers
and, as such, are subject to the Investment Advisers Act of 1940. In addition,
as an adviser to regulated investment companies, FCIMC also may be subject to
certain provisions of the Investment Company Act of 1940.
FINANCIAL REVIEW
Additional information responsive to this Item 1 is set forth in the
Corporation's 1994 Annual Report to Stockholders on pages 17-39 of the
"Financial Review" section and is expressly incorporated herein by reference.
10
<PAGE>
CERTAIN STATISTICAL INFORMATION
In addition to the statistical information set forth on the following pages
of this Form 10-K, the information set forth in "Selected Statistical
Information" on pages 66-69 of the Corporation's 1994 Annual Report to
Stockholders is expressly incorporated herein by reference.
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
1994 1993 1992
DECEMBER 31 (IN MILLIONS) ------ ------ ------
<S> <C> <C> <C>
Debt securities
U.S. government and federal agency
Held for investment..................................... $ -- $ -- $ 330
Held to maturity........................................ 276 245 --
Available for sale...................................... 465 243 195
------ ------ ------
Total................................................. 741 488 525
States and political subdivisions
Held for investment..................................... -- -- 244
Held to maturity........................................ 176 162 --
------ ------ ------
Total................................................. 176 162 244
Other bonds, notes and debentures
Held for investment..................................... -- -- 134
Held to maturity........................................ 4 4 --
Available for sale...................................... 51 15 --
------ ------ ------
Total................................................. 55 19 134
------ ------ ------
Total debt securities................................. 972 669 903
Equity securities (1)...................................... 1,620 1,587 1,497
------ ------ ------
Total................................................. $2,592 $2,256 $2,400
====== ====== ======
</TABLE>
- --------
(1) Includes venture capital portfolio and Federal Reserve stock.
As of December 31, 1994, debt investment securities had the following
maturity and yield characteristics.
<TABLE>
<CAPTION>
HELD TO AVAILABLE
MATURITY FOR SALE TOTAL
----------- ----------- -----------
BOOK BOOK BOOK
VALUE YIELD VALUE YIELD VALUE YIELD
(DOLLARS IN MILLIONS) ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AND FEDERAL AGENCY
Maturing within one year................... $ 84 5.01% $368 5.48% $452 5.39%
Maturing after one but within five years... 191 5.20 92 5.02 283 5.14
Maturing after five but within ten years... -- -- 3 5.87 3 5.87
Maturing after ten years................... 1 8.11 2 8.50 3 8.35
---- ---- ---- ---- ---- ----
$276 5.15% $465 5.40% $741 5.31%
==== ==== ==== ==== ==== ====
STATES AND POLITICAL SUBDIVISIONS*
Maturing within one year................... $ 20 9.84% -- -- $ 20 9.84%
Maturing after one but within five years... 74 9.41 -- -- 74 9.41
Maturing after five but within ten years... 51 8.95 -- -- 51 8.95
Maturing after ten years................... 31 9.52 -- -- 31 9.52
---- ---- ---- ---- ---- ----
$176 9.34% -- -- $176 9.34%
==== ==== ==== ==== ==== ====
OTHER BONDS, NOTES AND DEBENTURES
Maturing within one year................... $ 1 5.91% $ 2 8.53% $ 3 7.64%
Maturing after one but within five years... 1 7.35 2 5.08 3 6.02
Maturing after five but within ten years... 1 8.17 -- -- 1 8.17
Maturing after ten years................... 1 2.95 47 6.55 48 6.52
---- ---- ---- ---- ---- ----
$ 4 6.62% $ 51 6.58% $ 55 6.58%
==== ==== ==== ==== ==== ====
</TABLE>
- --------
*Yields for obligations of states and political subdivisions are calculated on
a tax-equivalent basis using a tax rate of 35%.
11
<PAGE>
LOAN COMPOSITION
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
DECEMBER 31 (IN MILLIONS) ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Commercial risk
Domestic
Commercial............................ $ 7,806 $ 6,007 $ 7,020 $ 8,612 $ 9,037
Commercial real estate
Construction......................... 256 315 432 867 1,170
Other................................ 2,240 2,094 2,240 3,387 3,596
Financial institutions................ 1,027 1,292 1,307 1,180 1,259
Other................................. 2,869 2,746 2,712 2,425 2,783
------- ------- ------- ------- -------
Total domestic......................... 14,198 12,454 13,711 16,471 17,845
Foreign office
Commercial............................ 1,080 783 937 1,380 1,777
Governments and official institutions. 89 166 222 298 419
Banks and other financial
institutions......................... 390 754 766 871 1,004
Real estate........................... 48 65 123 149 161
Other................................. 225 207 61 167 76
------- ------- ------- ------- -------
Total foreign office................... 1,832 1,975 2,109 2,865 3,437
------- ------- ------- ------- -------
Total commercial.................... 16,030 14,429 15,820 19,336 21,282
------- ------- ------- ------- -------
Consumer risk
Credit cards........................... 6,337 5,778 4,135 3,843 3,930
Secured by real estate
Mortgage.............................. 1,581 1,469 1,319 1,125 1,110
Home equity........................... 832 780 827 782 703
Other.................................. 1,167 647 591 575 681
------- ------- ------- ------- -------
Total consumer...................... 9,917 8,674 6,872 6,325 6,424
------- ------- ------- ------- -------
Total loans............................. $25,947 $23,103 $22,692 $25,661 $27,706
======= ======= ======= ======= =======
</TABLE>
12
<PAGE>
FOREIGN OUTSTANDINGS
The Corporation's cross-border outstandings to countries where such
outstandings exceeded 1.0% of the Corporation's total assets ($659 million as
of December 31, 1994, $526 million as of December 31, 1993, and $493 million as
of December 31, 1992) are shown in the table below. They consist of loans
(including accrued interest), acceptances, interest-bearing deposits with other
banks, equity investments, other interest-bearing investments and other
nonlocal currency monetary assets.
<TABLE>
<CAPTION>
BANKS AND
GOVERNMENT OTHER COMMERCIAL
(IN MILLIONS) AND OFFICIAL FINANCIAL AND
COUNTRY DECEMBER 31 INSTITUTIONS INSTITUTIONS INDUSTRIAL OTHER TOTAL
- ------------- ----------- ------------ ------------ ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Japan............ 1994 $ -- $4,627 $149 $30 $4,806
1993 -- 3,617 77 21 3,715
1992 -- 3,263 81 33 3,377
Canada........... 1994 $ * $ * $ * $ * $ *
1993 1 289 183 60 533
1992 4 535 113 5 657
Italy............ 1994 $ * $ * $ * $ * $ *
1993 7 600 -- -- 607
1992 4 564 15 -- 583
France........... 1994 $ 6 $ 733 $ 23 $-- $ 762
1993 * * * * *
1992 6 551 2 2 561
United Kingdom... 1994 $210 $ 375 $193 $78 $ 856
1993 * * * * *
1992 * * * * *
Korea............ 1994 $ -- $ 456 $435 $ 5 $ 896
1993 * * * * *
1992 * * * * *
Germany.......... 1994 $ -- $ 625 $ 32 $-- $ 657
1993 * * * * *
1992 * * * * *
</TABLE>
- --------
*Outstandings less than 1%.
At year-end 1994, the only country for which cross-border outstandings
totaled between 0.75% and 1.0% of the Corporation's total assets was Italy;
such outstandings totaled $550 million.
At December 31, 1993, the only country for which cross-border outstandings
totaled between 0.75% and 1.0% of the Corporation's total assets was Korea;
such outstandings totaled $489 million.
At December 31, 1992, the countries for which cross-border outstandings
totaled between 0.75% and 1.0% of the Corporation's total assets were Korea and
the United Kingdom; such outstandings totaled $962 million.
HIGHLY LEVERAGED TRANSACTIONS
During 1994, exposure to highly leveraged transactions (HLTs) did not reflect
a significant concentration in loans outstanding or revenue. At year-end 1994,
outstanding HLT loans were $0.5 billion and constituted just 3% of the total
commercial loan portfolio of $16.0 billion. At year-end 1994, the HLT committed
exposure was $0.6 billion. The 1994 HLT outstandings and committed exposure are
essentially unchanged relative to outstandings at the end of 1993. Policies and
procedures are maintained for the management and
13
<PAGE>
reporting of HLT exposure. The Corporation continues to disclose this exposure
using the HLT definition established by federal banking regulatory agencies.
The Corporation's venture capital subsidiaries have invested in companies
that have substantially higher leverage than would normally exist in their
industries. At December 31, 1994, this portfolio consisted of 38 HLT
investments with a carrying value of $423 million. At December 31, 1994, gross
unrealized gains related to HLT investments totaled $103 million, while gross
unrealized losses were $52 million. At December 31, 1993, the carrying value of
HLT investments in the venture capital portfolio totaled $397 million. Unfunded
commitments related to the HLT segment of the venture capital portfolio totaled
$2 million at December 31, 1994.
MATURITY DISTRIBUTION AND INTEREST RATE SENSITIVITY OF LOANS
The following table shows a distribution of the maturity of loans and, for
those loans due after one year, a breakdown between those loans that have
floating interest rates and those that have predetermined interest rates. The
amounts exclude domestic consumer loans, residential mortgage loans and
domestic lease-financing receivables.
<TABLE>
<CAPTION>
ONE YEAR ONE TO OVER
DECEMBER 31, 1994 OR LESS FIVE YEARS FIVE YEARS TOTAL
(IN MILLIONS) -------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Domestic
Commercial............................ $2,321 $ 881 $4,604 $ 7,806
Real estate........................... 563 822 1,111 2,496
Financial institutions................ 38 10 979 1,027
Other................................. 989 136 725 1,850
------ ------ ------ -------
Total domestic...................... 3,911 1,849 7,419 13,179
Foreign................................. 1,058 384 390 1,832
------ ------ ------ -------
Total............................... $4,969 $2,233 $7,809 $15,011
====== ====== ====== =======
Loans with floating interest rates...... $1,693 $7,242 $ 8,935
Loans with predetermined interest rates. 540 567 1,107
------ ------ -------
Total............................... $2,233 $7,809 $10,042
====== ====== =======
</TABLE>
NONPERFORMING LOANS
Nonperforming loans include loans on which the Corporation does not accrue
interest (nonaccrual loans) and loans that bear a rate of interest that has
been reduced below market rates due to the deteriorating financial condition of
the borrower (accrual renegotiated loans).
<TABLE>
<CAPTION>
DECEMBER 31 1994 1993 1992 1991 1990
(IN MILLIONS) ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Nonaccrual loans....................................... $126 $230 $386 $838 $844
Accrual renegotiated loans............................. 4 4 5 5 10
---- ---- ---- ---- ----
Total nonperforming loans.......................... $130 $234 $391 $843 $854
==== ==== ==== ==== ====
Nonperforming loans
Domestic............................................. $124 $171 $286 $645 $620
Foreign.............................................. 6 63 105 198 234
---- ---- ---- ---- ----
Total nonperforming loans.......................... $130 $234 $391 $843 $854
==== ==== ==== ==== ====
</TABLE>
ACCELERATED ASSET DISPOSITION PORTFOLIO
The accelerated asset disposition portfolio was established in September,
1992. Nonperforming assets in this portfolio totaled $37 million at year-end
1994, $87 million at year-end 1993 and $372 million at year-end 1992.
14
<PAGE>
RECONCILIATION OF CHANGE IN NONPERFORMING LOANS
<TABLE>
<CAPTION>
COMMERCIAL
REAL
ESTATE OTHER TOTAL
(IN MILLIONS) ---------- ----- -----
<S> <C> <C> <C>
Nonperforming loans--December 31, 1993................. $108 $126 $234
Loans placed on nonperforming status................... 50 83 133
Charge-offs............................................ (22) (30) (52)
Transferred to other real estate....................... (20) -- (20)
Transferred to accrual status.......................... (24) (25) (49)
Other:
Mergers and acquisitions............................. 5 21 26
Impact of Brazilian debt restructuring............... -- (49) (49)
Principally payments................................. (29) (64) (93)
---- ---- ----
Nonperforming loans--December 31, 1994................. $ 68 $ 62 $130
==== ==== ====
</TABLE>
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING INTEREST
<TABLE>
<CAPTION>
DECEMBER 31 1994 1993 1992 1991 1990
(IN MILLIONS) ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Domestic............................................... $89 $63 $59 $121 $68
Foreign................................................ -- -- -- 3 --
--- --- --- ---- ---
Total.............................................. $89 $63 $59 $124 $68
=== === === ==== ===
</TABLE>
INTEREST SHORTFALL ON NONPERFORMING LOANS
Interest at original contractual rates (based on average outstanding
balances) and interest actually recorded for those periods at December 31 was
as follows.
<TABLE>
<CAPTION>
1994 1993
---------------------------------- ----------------------------------
ACCELERATED ACCELERATED
DISPOSITION DISPOSITION
DOMESTIC FOREIGN PORTFOLIO TOTAL DOMESTIC FOREIGN PORTFOLIO TOTAL
(IN MILLIONS) -------- ------- ----------- ----- -------- ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest at original
contract rates......... $10 $1 $-- $11 $14 $ 9 $ 3 $26
Interest actually recog-
nized.................. 5 -- -- 5 6 3 2 11
--- --- ---- --- --- --- --- ---
Interest shortfall, be-
fore income tax effect. $ 5 $1 $-- $ 6 $ 8 $ 6 $ 1 $15
=== === ==== === === === === ===
</TABLE>
At December 31, 1994 and 1993, the Corporation was committed to lend
additional funds of approximately $6 million and $12 million, respectively, in
connection with nonperforming loans and nonperforming loans in the accelerated
asset disposition portfolio.
15
<PAGE>
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
(IN MILLIONS) ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year
Commercial.................................... $488 $488 $627 $770 $1,073
Consumer...................................... 195 136 132 127 159
---- ---- ---- ---- ------
Total balance, beginning of year........... 683 624 759 897 1,232
Provision for credit losses
Commercial.................................... 3 78 261 274 322
Consumer...................................... 221 192 164 166 172
---- ---- ---- ---- ------
Total provision for credit losses.......... 224 270 425 440 494
Provision for loans held for accelerated
disposition................................... -- -- 491 -- --
Charge-offs
Commercial
Domestic
Commercial.................................. 21 31 68 41 29
Real estate................................. 22 53 116 183 83
Other....................................... 4 6 48 149 20
Foreign, other than TCD (1).................. 5 16 48 29 35
Troubled-country debtor...................... -- 17 16 49 489
Consumer
Credit card (2).............................. 179 149 157 168 191
Other........................................ 11 7 8 8 6
---- ---- ---- ---- ------
Total charge-offs.......................... 242 279 461 627 853
Recoveries
Commercial
Domestic
Commercial.................................. 12 21 12 5 3
Real estate................................. 3 2 1 -- 4
Other....................................... 7 6 6 2 2
Foreign, other than TCD...................... 39 10 17 19 11
Troubled-country debtor...................... -- 6 5 8 11
Consumer
Credit card.................................. 27 51 46 41 39
Other........................................ 3 1 1 2 2
---- ---- ---- ---- ------
Total recoveries........................... 91 97 88 77 72
Net charge-offs
Commercial.................................... (9) 78 255 417 625
Consumer...................................... 160 104 118 133 156
---- ---- ---- ---- ------
Total net charge-offs...................... 151 182 373 550 781
Charge-offs of loans upon transfer to
accelerated disposition
portfolio (commercial)........................ -- -- 636 -- --
Other
Commercial (3)................................ 16 -- -- -- --
Consumer (4).................................. (49) (29) (42) (28) (48)
---- ---- ---- ---- ------
Total other................................ (33) (29) (42) (28) (48)
Balance, end of year
Commercial.................................... 516 488 488 627 770
Consumer...................................... 207 195 136 132 127
---- ---- ---- ---- ------
Total balance, end of year................. $723 $683 $624 $759 $ 897
==== ==== ==== ==== ======
</TABLE>
- --------
(1) 1992 amounts include $12 million defined as commercial real estate.
(2) As of January 1, 1991, the Corporation no longer charges off unpaid
interest and fees on credit cards to the allowance for credit losses but
instead reverses them against their respective income statement lines.
Charge-offs and the provision for credit losses decreased by $21.0 million
in 1990.
(3) Related to the merger with Lake Shore Bancorp., Inc. in 1994.
(4) Primarily reflects the reclassification of reserves related to securitized
credit card receivables to other assets for all periods presented.
16
<PAGE>
ALLOCATED ALLOWANCE FOR CREDIT LOSSES
While the allowance for credit losses is available to absorb credit losses in
the entire portfolio, the tables below present an estimate of the allowance for
credit losses allocated by loan type and the percentage of loans in each
category to total loans.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
DECEMBER 31 (DOLLARS IN MILLIONS) ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial
Domestic
Commercial (1).............................. $436 $368 $365 $417 $439
Real estate................................. 7 24 19 51 46
Other (2)................................... 18 23 29 27 16
Foreign (1)................................... 55 73 75 132 269
Consumer
Credit card (3)............................... 201 188 129 124 121
Other......................................... 6 7 7 8 6
---- ---- ---- ---- ----
Total....................................... $723 $683 $624 $759 $897
==== ==== ==== ==== ====
Percentage of loans in each category to total
loans
Commercial
Domestic
Commercial.................................. 30% 26% 31% 33% 33%
Real estate................................. 10 10 12 17 17
Other....................................... 15 17 18 14 15
Foreign....................................... 7 9 9 11 12
Consumer
Credit card................................... 25 25 18 15 14
Other......................................... 13 13 12 10 9
--- --- --- --- ---
Total....................................... 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
- --------
(1) Includes allocation for potential losses not specifically identified in the
commercial segment of the portfolio.
(2) Includes financial institutions, lease-financing and other.
(3) Adjusted to exclude reserves for securitized credit card receivables.
DEPOSITS
The following tables show a maturity distribution of domestic time
certificates of deposit of $100,000 and over, other domestic time deposits of
$100,000 and over, and deposits in foreign offices, predominantly in amounts in
excess of $100,000, at December 31, 1994.
DOMESTIC TIME CERTIFICATES OF DEPOSIT OF $100,000 AND OVER
<TABLE>
<CAPTION>
AMOUNT PERCENT
(DOLLARS IN MILLIONS) ------ -------
<S> <C> <C>
Three months or less....................................... $ 799 39%
Over three months to six months............................ 571 28
Over six months to twelve months........................... 361 18
Over twelve months......................................... 304 15
------ ---
Total.................................................. $2,035 100%
====== ===
</TABLE>
17
<PAGE>
DOMESTIC OTHER TIME DEPOSITS OF $100,000 AND OVER
<TABLE>
<CAPTION>
AMOUNT PERCENT
(DOLLARS IN MILLIONS) ------ -------
<S> <C> <C>
Three months or less....................................... $457 81%
Over three months to six months............................ 17 3
Over six months to twelve months........................... 14 2
Over twelve months......................................... 78 14
---- ---
Total.................................................. $566 100%
==== ===
</TABLE>
FOREIGN OFFICES
<TABLE>
<CAPTION>
AMOUNT PERCENT
(DOLLARS IN MILLIONS) ------- -------
<S> <C> <C>
Three months or less...................................... $10,611 93%
Over three months to six months........................... 268 2
Over six months to twelve months.......................... 542 5
Over twelve months........................................ 1 --
------- ---
Total................................................. $11,422 100%
======= ===
</TABLE>
The following table shows the breakdown of deposits on an average basis for
the past three years.
DEPOSITS--AVERAGE BALANCES
<TABLE>
<CAPTION>
1994 1993 1992
(IN MILLIONS) ------- ------- -------
<S> <C> <C> <C>
Domestic
Demand deposits................................. $ 7,072 $ 6,980 $ 6,136
Savings and time deposits....................... 10,873 11,357 11,915
Time certificates of deposit over $100,000...... 1,837 2,137 3,286
------- ------- -------
Total domestic................................ 19,782 20,474 21,337
Foreign offices................................... 9,648 9,203 10,357
------- ------- -------
Total deposits................................ $29,430 $29,677 $31,694
======= ======= =======
</TABLE>
FUNDS BORROWED
Federal funds purchased, securities under repurchase agreements and
commercial paper are other major nonretail sources of funds. Details on the
outstandings and rates of these instruments during the past three years follow.
<TABLE>
<CAPTION>
1994 1993 1992
(DOLLARS IN MILLIONS) ------- ------- -------
<S> <C> <C> <C>
Federal funds purchased and securities under
repurchase agreements(1)
Outstanding at year-end.......................... $13,026 $ 8,255 $ 6,962
Highest outstanding at any month-end............. 16,543 12,588 12,930
Average interest rate at year-end................ 4.36% 2.95% 3.34%
Commercial paper
Outstanding at year-end.......................... $ 147 $ 164 $ 172
Highest outstanding at any month-end............. 323 239 334
Average interest rate at year-end................ 5.79% 2.90% 3.73%
Other funds borrowed
Outstanding at year-end.......................... $ 7,518 $ 5,843 $ 3,997
Highest outstanding at any month-end............. 9,573 7,991 4,554
Average interest rate at year-end................ 5.73% 4.19% 5.15%
Total funds borrowed
Daily average outstanding during the year........ $20,786 $17,155 $14,177
Approximate daily average interest rate during
the year........................................ 4.52% 3.52% 4.13%
</TABLE>
- --------
(1) Substantially all of the securities under repurchase agreements are short-
term in nature and involve no significant counterparty risk.
18
<PAGE>
The maturities of other funds borrowed as of December 31, 1994, were (in
millions):
<TABLE>
<S> <C>
Other Funds Borrowed
1995............................................................. $5,773
1996............................................................. 930
1997............................................................. 691
1998............................................................. 2
1999 and beyond.................................................. 122
------
Total.......................................................... $7,518
======
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
FINANCIAL RATIOS
Net income as a percentage of:
Average stockholders' equity.................. 15.5% 20.7% 2.8% 4.0% 9.0%
Average common stockholders' equity........... 17.0 24.2 1.8 3.2 9.4
Average total assets.......................... 1.08 1.42 0.17 0.22 0.47
Average earning assets........................ 1.31 1.66 0.20 0.26 0.55
Stockholders' equity at year-end as a percentage
of:
Total assets at year-end...................... 6.9 8.1 6.9 6.1 5.5
Total loans at year-end....................... 17.5 18.5 15.0 11.6 10.1
Total deposits at year-end.................... 14.3 15.1 11.4 9.3 8.6
Average stockholders' equity as a percentage of:
Average assets................................ 6.9 6.8 6.1 5.6 5.2
Average loans................................. 19.1 17.7 13.6 10.8 9.0
Average deposits.............................. 15.1 13.1 10.5 9.0 8.1
Income to fixed charges:
Excluding interest on deposits................ 1.9x 2.7x 0.7x* 1.2x 1.3x
Including interest on deposits................ 1.6x 1.9x 0.9x* 1.1x 1.1x
</TABLE>
*In 1992, earnings (as defined) were insufficient to cover fixed charges. The
coverage deficiency was approximately $201 million.
19
<PAGE>
ANALYSIS OF CHANGES IN NET INTEREST MARGIN
The following table shows the approximate effect on the net interest margin
of volume and rate changes for the years 1994 and 1993. For purposes of this
table, changes that are not due solely to volume or rate changes are allocated
to volume.
<TABLE>
<CAPTION>
1994 OVER 1993 1993 OVER 1992
YEAR ENDED DECEMBER 31 ---------------------- -------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
(IN MILLIONS) ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
Interest income
Due from banks--interest-
bearing.................. $ 18.6 $ 45.1 $ 63.7 $ 2.6 $ (62.6) $ (60.0)
Federal funds sold and
securities under resale
agreements............... 111.3 159.1 270.4 100.8 (40.8) 60.0
Trading account assets.... 3.3 52.5 55.8 18.4 (54.9) (36.5)
Investment securities
U.S. government and
federal agency.......... 0.1 2.9 3.0 8.4 (9.1) (0.7)
States and political
subdivisions............ (4.4) (0.4) (4.8) (4.9) (0.4) (5.3)
Other.................... 1.9 (6.0) (4.1) 1.9 0.8 2.7
Loans
Domestic offices......... 133.4 112.1 245.5 (139.0) (10.9) (149.9)
Foreign offices.......... (22.1) (0.2) (22.3) (38.8) (23.1) (61.9)
Assets held for
accelerated disposition
(1)...................... (34.7) 9.4 (25.3) 8.3 2.0 10.3
------ ------ ------ ------- ------- -------
Total................... 207.4 374.5 581.9 (42.3) (199.0) (241.3)
Increase (decrease) in
Interest expense
Deposits
Savings.................. (1.7) 27.5 25.8 9.2 (48.6) (39.4)
Time..................... (25.5) 49.4 23.9 (57.7) (105.4) (163.1)
Foreign offices.......... 19.5 66.2 85.7 (42.3) (84.8) (127.1)
Federal funds purchased
and securities under
repurchase agreements.... 93.3 124.8 218.1 6.3 (43.5) (37.2)
Commercial paper.......... (0.8) 2.4 1.6 (1.2) (1.5) (2.7)
Other funds borrowed...... 71.7 44.1 115.8 118.8 (61.0) 57.8
Long-term debt............ 14.9 4.9 19.8 23.5 (0.1) 23.4
------ ------ ------ ------- ------- -------
Total................... 171.4 319.3 490.7 56.6 (344.9) (288.3)
------ ------ ------ ------- ------- -------
Increase (decrease) in net
interest margin............ $ 36.0 $ 55.2 $ 91.2 $ (98.9) $ 145.9 $ 47.0
====== ====== ====== ======= ======= =======
</TABLE>
- --------
(1)Excludes other real estate held for accelerated disposition.
ITEM 2. PROPERTIES
The Corporation and FNBC occupy space in a 60-story combined bank and office
building at One First National Plaza, Chicago, Illinois. One First National
Plaza is master-leased by FNBC from an owner trust that purchased the building
from FNBC's wholly owned subsidiary First Chicago Building Corporation in May
1993, pursuant to a leveraged lease-financing transaction. The building has
approximately l,850,000 square feet of rentable space, of which the Corporation
occupies approximately 59% and the balance is sub-leased to others. It is
located on the north half of a block in the heart of the Chicago "Loop," the
entire block being owned by FNBC. The south half of the block includes a plaza,
parking and restaurant facilities, and a general-purpose auditorium.
In addition, the Corporation, or its subsidiaries, own or lease more than 130
bank locations throughout the Chicago metropolitan area and own or lease office
space in various other locations as required for the conduct of business.
20
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The information required by this Item is set forth in Note 18 on page 63 of
the Corporation's 1994 Annual Report to Stockholders and is expressly
incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
PRESENT POSITION HELD
WITH THE CORPORATION AND
EFFECTIVE DATE FIRST ELECTED OTHER POSITIONS HELD
NAME AND AGE TO OFFICE INDICATED DURING PAST FIVE YEARS
------------ ---------------------------- ----------------------
<S> <C> <C>
Richard L. Thomas Director and Chairman of the *
(64) Board (1-1-92)
Leo F. Mullin (52) Director and President (11-15- *
93)
David J. Vitale (48) Director and Vice Chairman of *
the Board (11-15-93)
W.G. Jurgensen (43) Executive Vice President (1- Various executive posi-
11-91) tions with Norwest Corpo-
ration and its subsidiar-
ies (banking)
Scott P. Marks, Jr. Executive Vice President (1- *
(48) 12-90)
Marvin James Alef, Executive Vice President (1- *
Jr. (50) 10-92)
John W. Ballantine Executive Vice President (1- *
(48) 10-92)
Sherman I. Goldberg Executive Vice President (1- *
(52) 12-90), General Counsel and
Secretary (4-8-88)
Thomas H. Hodges Executive Vice President (12- *
(49) 9-94)
Donald R. Hollis Executive Vice President (1- *
(59) 10-86)
Robert A. Rosholt Executive Vice President (1- *
(44) 14-94) and Chief Financial
Officer
(1-1-93)
</TABLE>
- --------
*Has served as an officer of the Corporation or a subsidiary for at least the
past five years.
Officers of the Corporation serve until the annual meeting of the Board of
Directors (April 21, 1995).
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is set forth in the first paragraph on
page 10 of this Form 10-K, and in the Corporation's 1994 Annual Report to
Stockholders in the "Five-Year Summary of Selected Financial Information" on
page 18, the "Common Stock and Stockholder Data" table on page 66, the
"Quarterly Earnings and Market Price Summary" table on page 67, the
"Consolidated Summary of Quarterly Financial Information" table on page 67, and
under "Corporate Information" on page 72; such portions of the Annual Report
are expressly incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is set forth in the "Financial Ratios"
table on page 19 of this Form 10-K, and in the Corporation's 1994 Annual Report
to Stockholders in the "Five-Year Summary of Selected Financial Information" on
page 18, which is expressly incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is set forth in the Corporation's 1994
Annual Report to Stockholders on pages 17-39 of the "Financial Review" section
and is expressly incorporated herein by reference.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is set forth under "Certain Statistical
Information" on pages 11-20 of this Form 10-K, and in the Corporation's 1994
Annual Report to Stockholders in the consolidated financial statements and the
notes thereto on pages 40-63, the "Report of Independent Public Accountants" on
page 65, and in the "Selected Statistical Information" section on pages 66-69;
such portions of the Annual Report are expressly incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item pertaining to executive officers of the
Corporation is set forth in Part I of this Form 10-K under the heading
Executive Officers of the Registrant. The information required by this Item
pertaining to directors of the Corporation is set forth on pages 2-6 of the
Corporation's definitive proxy statement dated March 17, 1995, and is expressly
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth on pages 12-23 of the
Corporation's definitive proxy statement dated March 17, 1995, and is expressly
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth on pages 11-12 of the
Corporation's definitive proxy statement dated March 17, 1995, and is expressly
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth on pages 8 and 26 of the
Corporation's definitive proxy statement dated March 17, 1995, and is expressly
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS (See Item 8 for a listing of all financial
statements).
(2) FINANCIAL STATEMENT SCHEDULES.
All schedules normally required by Form 10-K are omitted since they either
are not applicable or the required information is shown in the financial
statements or the notes thereto.
(3) EXHIBITS.
<TABLE>
<C> <S> <C>
3(A). Restated Certificate of Incorporation of the Corporation,
as amended.
3(B). By-Laws of the Corporation, as amended [Exhibit 4(B) to
the Corporation's Form S-3 Registration Statement (File
No. 33-37717) incorporated herein by reference].
10(A). Stock Incentive Plan [Exhibit 10(A) to the Corporation's
1990 Annual Report on Form 10-K (File No. 1-6052) incor-
porated herein by reference].*
10(B). Strategic Stock Incentive Plan, as amended [Exhibit 10(A)
to the Corporation's 1988 Annual Report on Form 10-K
(File No. 1-6052) incorporated herein by reference].*
</TABLE>
22
<PAGE>
<TABLE>
<C> <S> <C>
10(C). 1983 Stock Option Plan, as amended and restated [Exhibit
28 to the Corporation's Post-Effective Amendment No. 1 to
Form S-8 Registration Statement (File No. 33-15779) in-
corporated herein by reference].*
10(D). First Chicago Corporation Compensation Agreement, as
amended [Exhibit 10(D) to the Corporation's 1992 Annual
Report on Form 10-K (File No. 1-6052) incorporated herein
by reference].*
10(E). The First National Bank of Chicago Compensation Agreement,
as amended [Exhibit 10(E) to the Corporation's 1992 An-
nual Report on Form 10-K (File No. 1-6052) incorporated
herein by reference].*
10(F). Director Retainer Stock Plan [Exhibit 10(G) to the Corpo-
ration's 1990 Annual Report on Form 10-K (File No. 1-
6052) incorporated herein by reference].*
10(G). First Chicago Corporation Savings Incentive Plan, as
amended and restated.*
10(H). 401(k) Supplemental Savings Incentive Plan [Exhibit 10(I)
to the Corporation's 1990 Annual Report on Form 10-K
(File No. 1-6052) incorporated herein by reference].*
10(I). Executive Retirement Plan [Exhibit 10(I) to the Corpora-
tion's 1992 Annual Report on Form 10-K (File No. 1-6052)
incorporated herein by reference].*
10(J). Individual Change of Control Employment Agreement.*
10(K). First Chicago Corporation Trust Agreement (Trust A) [Ex-
hibit 10(K) to the Corporation's 1992 Annual Report on
Form 10-K (File No. 1-6052) incorporated herein by refer-
ence].*
10(L). First Chicago Corporation Trust Agreement (Trust B) [Ex-
hibit 10(L) to the Corporation's 1992 Annual Report on
Form 10-K (File No. 1-6052) incorporated herein by refer-
ence].*
10(M). First Chicago Corporation Director Retirement Income
Plan.*
10(N). First Chicago Corporation Senior Management Annual Incen-
tive Plan.*
12. Statements re computation of ratios.
13. The Corporation's 1994 Annual Report to Stockholders.
21. Subsidiaries of the Corporation.
23. Consents of experts and counsel.
27. Financial Data Schedule
</TABLE>
(b) The Corporation filed the following Current Reports on Form 8-K during
the quarter ended December 31, 1994:
<TABLE>
<CAPTION>
DATE ITEM REPORTED
---- -------------
<C> <S>
October 18, 1994 The Corporation's earnings for the quarter ended
September 30, 1994.
November 14, 1994 Announcement that the Corporation increased the common
stock quarterly dividend.
November 17, 1994 Announcement that the Corporation incurred a loss as a
result of the purchase of certain structured notes
related to the trust business of FNBC, and that the
Commission initiated an informal inquiry regarding
certain mutual funds advised by FNBC.
</TABLE>
- --------
*MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT REQUIRED TO BE FILED
AS AN EXHIBIT TO THIS FORM 10-K.
23
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE CORPORATION HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, THIS 10TH DAY OF
FEBRUARY, 1995.
First Chicago Corporation
(Registrant)
/s/ Richard L. Thomas
By___________________________________
Richard L. Thomas
Chairman of the Board
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
CORPORATION AND IN THE CAPACITIES INDICATED, THIS 10TH DAY OF FEBRUARY, 1995.
/s/ John H. Bryan /s/ Jerry K. Pearlman
- --------------------- ----------------------------------------
John H. Bryan Jerry K. Pearlman
Director Director
/s/ Dean L. Buntrock /s/ Jack F. Reichert
- --------------------- ----------------------------------------
Dean L. Buntrock Jack F. Reichert
Director Director
/s/ James S. Crown /s/ Patrick G. Ryan
- --------------------- ----------------------------------------
James S. Crown Patrick G. Ryan
Director Director
/s/ Donald V. Fites /s/ Adele Simmons
- --------------------- ----------------------------------------
Donald V. Fites Adele Simmons
Director Director
/s/ Donald P. Jacobs /s/ Roger W. Stone
- --------------------- ----------------------------------------
Donald P. Jacobs Roger W. Stone
Director Director
/s/ Andrew J. McKenna /s/ Richard L. Thomas
- --------------------- ----------------------------------------
Andrew J. McKenna Richard L. Thomas
Director Director and Principal Executive Officer
/s/ Richard M. Morrow /s/ David J. Vitale
- --------------------- ----------------------------------------
Richard M. Morrow David J. Vitale
Director Director
/s/ Leo F. Mullin /s/ Robert A. Rosholt
- --------------------- ----------------------------------------
Leo F. Mullin Robert A. Rosholt
Director Principal Financial Officer
/s/ Earl L. Neal /s/ William J. Roberts
- --------------------- ----------------------------------------
Earl L. Neal William J. Roberts
Director Principal Accounting Officer
/s/ James J. O'Connor
- ---------------------
James J. O'Connor
Director
24
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT DESCRIPTION NUMBER
------- ------------------- ------
<C> <S> <C>
3(A). Restated Certificate of Incorporation of the Corporation,
as amended.
3(B). By-Laws of the Corporation, as amended (incorporated herein
by reference). N/A
10(A). Stock Incentive Plan (incorporated herein by reference). N/A
10(B). Strategic Stock Incentive Plan, as amended (incorporated
herein by reference). N/A
10(C). 1983 Stock Option Plan, as amended and restated (incorpo-
rated herein by reference). N/A
10(D). First Chicago Corporation Compensation Agreement, as
amended (incorporated herein by reference). N/A
10(E). The First National Bank of Chicago Compensation Agreement,
as amended (incorporated herein by reference). N/A
10(F). Director Retainer Stock Plan (incorporated herein by refer-
ence). N/A
10(G). First Chicago Corporation Savings Incentive Plan, as
amended and restated.
10(H). 401(k) Supplemental Savings Incentive Plan (incorporated
herein by reference). N/A
10(I). Executive Retirement Plan (incorporated herein by reference). N/A
10(J). Individual Change of Control Employment Agreement.
10(K). First Chicago Corporation Trust Agreement (Trust A)
(incorporated herein by reference). N/A
10(L). First Chicago Corporation Trust Agreement (Trust B)
(incorporated herein by reference). N/A
10(M). First Chicago Corporation Director Retirement Income Plan.
10(N). First Chicago Corporation Senior Management Annual
Incentive Plan.
12. Statements re computation of ratios.
13. The Corporation's 1994 Annual Report to Stockholders.
21. Subsidiaries of the Corporation.
23. Consents of experts and counsel.
27. Financial Data Schedule.
</TABLE>
<PAGE>
EXHIBIT 3(A)
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE
TWENTY-THIRD DAY OF JANUARY, A.D. 1969, AT 10 O'CLOCK A.M.
* * * * * * * * * *
/s/ William T. Quillen
(Seal) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902038
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF INCORPORATION
OF
FIRST CHICAGO CORPORATION
------------
FIRST. The name of the corporation is
FIRST CHICAGO CORPORATION
SECOND. The address of its registered office in the State of Delaware is No.
100 West Tenth Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
corporation shall have authority to issue is 1,010 shares which shall be divided
into two classes as follows: 10 shares of Preferred Stock without par value
(Preferred Stock) and 1,000 shares of Common Stock of the par value of $20.00
per share (Common Stock). The designations, voting powers,
<PAGE>
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of the above classes of stock and
other general provisions relating thereto shall be as follows:
PART I
PREFERRED STOCK
---------------
1. Shares of Preferred Stock may be issued in one or more series at such time
or times and for such consideration or considerations as the Board of Directors
may determine. All shares of any one series shall be of equal rank and
identical in all respects except the dates from which dividends accrue or
accumulate with respect thereto may vary.
2. 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 Direc-
2
<PAGE>
tors, 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 distinctive designation and number of shares comprising such series,
which number may (except where otherwise provided by the Board of Directors in
creating such series) be increased or decreased (but not below the number of
shares then outstanding) from time to time by action of the Board of Directors.
(b) The dividend rate or rates on the shares of such series and the relation
which such dividends shall bear to the dividends payable on any other class or
classes or of any other series of capital stock, the terms and conditions upon
which and the periods in respect of which dividends shall be payable, whether
and upon what conditions such dividends shall be cumulative and, if cumulative,
the date or dates from which dividends shall accumulate.
(c) Whether the shares of such series shall be redeemable, the limitations
and restrictions with respect to such redemption, the time or times when, the
price or prices at which and the manner in which such shares shall be
redeemable, including the manner of selecting shares of such series for
redemption if less than all shares are to be redeemed.
3
<PAGE>
(d) The rights to which the holders of shares of such series shall be
entitled, and the preferences, if any, over any other series (or of any other
series over such series), upon the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of the corporation, which
rights may vary depending on whether such liquidation, dissolution, distribution
or winding up is voluntary or involuntary, and, if voluntary, may vary at
different dates.
(e) Whether the shares of such series shall be subject to the operation of a
purchase, retirement or sinking fund, and, if so, whether and upon what
conditions such purchase, retirement or sinking fund shall be cumulative or
noncumulative, the extent to which and the manner in which such fund shall be
applied to the purchase or redemption of the shares of such series for
retirement or to other corporate purposes and the terms and provisions relative
to the operation thereof.
(f) Whether 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 so convertible
or exchangeable, the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same, and any other
4
<PAGE>
terms and conditions of such conversion or exchange.
(g) The voting powers, full and/or limited, if any, of the shares of such
series; and whether and under what conditions the shares or such series (alone
or together with the shares of one or more other series having similar
provisions) shall be entitled to vote separately as a single class, for the
election of one or more additional directors of the corporation in case of
dividend arrearages or other specified events, or upon other matters.
(h) Whether the issuance of any additional shares of such series, or of any
shares of any other series, shall be subject to restrictions as to issuance, or
as to the powers, preferences or rights of any such other series.
(i) Any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of such series, as the Board of Directors may deem advisable
and as shall not be inconsistent with the provisions of this Certificate of
Incorporation.
3. No dividends shall be paid or declared or set apart on any particular
series of Preferred Stock in respect of any period
5
<PAGE>
unless accumulated dividends shall be or shall have been paid, or declared and
set apart for payment, pro rata on all shares of Preferred Stock at the time
outstanding of each other series which ranks equally as to dividends with such
particular series, so that the amount of dividends declared on such particular
series shall bear the same ratio to the amount declared on each such other
series as the dividend rate of such particular series shall bear to the dividend
rate of such other series.
4. Unless and except to the extent otherwise required by law or provided in
the resolution or resolutions of the Board of Directors creating any series of
Preferred Stock pursuant to this Part I, the holders of the Preferred Stock
shall have no voting power with respect to any matter whatsoever. In no event
shall the Preferred Stock be entitled to more than one vote in respect of each
share of stock.
5. Shares of Preferred Stock redeemed, converted, exchanged, purchased,
retired or surrendered to the corporation, or which have been issued and
reacquired in any manner, shall, upon compliance with any applicable provisions
of the General Corporation Law of the State of Delaware, have the status of
authorized and unissued shares of Preferred Stock and may be reissued by the
Board of Directors as part of the series of which they were
6
<PAGE>
originally a part or may be reclassified into and reissued as part of a new
series or as a part of any other series, all subject to the protective
conditions or restrictions of any outstanding series of Preferred Stock.
PART II
COMMON STOCK
------------
1. Except as provided by law or this Certificate of Incorporation, each
holder of Common Stock shall have one vote in respect of each share of stock
held by him of record on the books of the corporation on all matters voted upon
by the stockholders.
2. Subject to the preferential dividend rights, if any, applicable to shares
of Preferred Stock and subject to applicable requirements, if any, with respect
to the setting aside of sums for purchase, retirement or sinking funds for
Preferred Stock, the holders of Common Stock shall be entitled to receive, to
the extent permitted by law, such dividends as may be declared from time to time
by the Board of Directors.
3. In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the corporation, after distribution in
full of the preferential
7
<PAGE>
amounts, if any, to be distributed to the holders of shares of Preferred Stock,
holders of Common Stock shall be entitled to receive all of the remaining assets
of the corporation of whatever kind available for distribution to stockholders
ratably in proportion to the number of shares of Common Stock held by them
respectively. The Board of Directors may distribute in kind to the holders of
Common Stock such remaining assets of the corporation or may sell, transfer or
otherwise dispose of all or any part of such remaining assets to any other
corporation, trust or other entity and receive payment therefor in cash, stock
or obligations of such other corporation, trust or entity, or any combination
thereof, and may sell all or any part of the consideration so received and
distribute any balance thereof in kind to holders of Common Stock. The merger
or consolidation of the corporation into or with any other corporation, or the
merger of any other corporation into it, or any purchase or redemption of shares
of stock of the corporation of any class, shall not be deemed to be a
dissolution, liquidation or winding up of the corporation for the purposes of
this paragraph.
4. Such numbers of shares of Common Stock as may from time to time be required
for such purpose shall be reserved for issuance (i) upon conversion of any
shares of Preferred Stock or any obligation of the corporation convertible into
shares of
8
<PAGE>
Common Stock which is at the time outstanding or issuable upon exercise of any
options or warrants at the time outstanding and (ii) upon exercise of any
options or warrants at the time outstanding to purchase shares of Common Stock.
PART III
GENERAL PROVISIONS
------------------
1. At any meeting of stockholders, the presence in person or by proxy of the
holders of record of outstanding shares of stock of the corporation entitled to
vote a majority of the votes entitled to be voted at such meeting shall
constitute a quorum for all purposes, except as otherwise provided by this
Certificate of Incorporation or required by applicable law.
2. Subject to the protective conditions or restrictions of any outstanding
series of Preferred Stock, any amendment to this Certificate of Incorporation
which shall increase or decrease the authorized capital stock of any class or
classes may be adopted by the affirmative vote of the holders of a majority of
the outstanding shares of the voting stock of the corporation.
3. No holder of stock of any class of the corporation shall be entitled as a
matter of right to purchase or subscribe for any part of any unissued stock of
any class, or of any ad-
9
<PAGE>
ditional stock of any class of capital stock of the corporation, or of any
bonds, certificates of indebtedness, debentures, or other securities convertible
into stock of the corporation, now or hereafter authorized, but any such stock
or other securities convertible into stock may be issued and disposed of
pursuant to resolution by the Board of Directors to such persons, firms,
corporations or associations and upon such terms and for such consideration (not
less than the par value or stated value thereof) as the Board of Directors in
the exercise of its discretion may determine and as may be permitted by law
without action by the stockholders. The Board of Directors may provide for
payment therefor to be received by the corporation in cash, personal property,
real property (or leases thereof) or services. Any and all shares of stock so
issued for which the consideration so fixed has been paid or delivered, shall
be deemed fully paid and not liable to any further call or assessment.
4. Any corporate action upon which a vote of stockholders is required or
permitted may be taken without a meeting or vote of stockholders with the
written consent of stockholders having not less than a majority of all of the
stock entitled to vote upon the action if a meeting were held; provided, that in
no case shall the written consent be by holders having less than the minimum
percentage of the vote required by statute fixed for
10
<PAGE>
the proposed corporate action and further provided that prompt notice be given
to all stockholders of the corporation of the taking of corporate action without
a meeting and by less than unanimous written consent.
FIFTH. The name and mailing address of the incorporator are:
Name Mailing Address
---- ---------------
Kenneth G. Pigott 1400 First National Bank Building
Chicago, Illinois 60603
SIXTH. Elections of directors need not be by written ballot unless the By-laws
of the corporation shall so provide.
SEVENTH. Subject to the provisions of this Certificate of Incorporation
requiring an increase or increases in the number of directors, the number of
directors constituting the Board of Directors shall be that number as shall be
fixed by the By-laws of the corporation.
In furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to make, alter or repeal the By-laws
of the corporation.
Wherever the term "Board of Directors" is used in this Certificate of
Incorporation, such term shall mean the Board of Directors of the corporation;
provided, however, that, to
11
<PAGE>
the extent any committee of directors of the corporation is lawfully entitled to
exercise the powers of the Board of Directors, such committee may exercise any
right or authority of the Board of Directors under this Certificate of
Incorporation.
EIGHTH. No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the Board
or committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(a) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the contract or
transaction by a vote sufficient for such purpose without counting the vote of
the interested director or directors; or
(b) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the stock-
12
<PAGE>
holders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders.
Interested directors may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
NINTH. (a) The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or
13
<PAGE>
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or plea of nolo
----
contendere or its equivalent, shall not, of itself, create a presumption that
- ----------
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in
14
<PAGE>
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of Delaware
or such other court shall deem proper.
(c) To the extent that any person referred to in paragraphs (a) and (b) of
this Article has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to therein or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under paragraphs (a) and (b) of this Article (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a de-
15
<PAGE>
termination that indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable standard of
conduct set forth in paragraphs (a) and (b). Such determination shall be made
(i) by the Board of Directors by a majority vote of a quorum (as defined in
the By-laws of the corporation) 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.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation.
(f) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statute, By-law, agreement, vote or stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as
16
<PAGE>
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Notwithstanding the provisions of this Article, the corporation may
indemnify any person referred to in paragraphs (a) and (b) of this Article to
the full extent permitted under the laws of Delaware and any other applicable
laws, now or hereafter in effect.
(g) The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article.
TENTH. 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 the
17
<PAGE>
laws of Delaware, and all rights conferred herein upon stockholders and
directors are granted subject to this reservation.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true, and accordingly have
hereto set my hand this 21st day of January, 1969.
/s/ Kenneth G. Pigott
-------------------------------------------
STATE OF ILLINOIS)
) SS.
COUNTY OF COOK )
BE IT REMEMBERED that on this 21st day of January, A.D. 1969, personally
came before me, a Notary Public for the State of Illinois, KENNETH G. PIGOTT,
the party to the foregoing Certificate of Incorporation, known to me personally
to be such, and acknowledged said certificate to be the act and deed of the
signer and that the facts stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
NANCY STEHNO
NOTARY PUBLIC
COOK COUNTY, ILL.
/s/ Nancy Stehno
-----------------------------------------
Notary Public
18
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RESTATED
CERTIFICATE OF INCORPORATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE
ON THE TWENTY-FIFTH DAY OF JUNE, A.D. 1969, AT 10 O'CLOCK A.M.
* * * * * * * * * *
/s/ William T. Quillen
(Seal) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902040
DATE: 05/18/1993
723138037
<PAGE>
DRAFT OF CERTIFICATE OF INCORPORATION
OF
FIRST CHICAGO CORPORATION
Pursuant to Title 8, Sections
242 and 245 of the Delaware Code.
-------------------
Original Certificate of Incorporation
was filed with the Secretary of State
of Delaware on January 23, 1969.
--------------------
FIRST. The name of the corporation is
FIRST CHICAGO CORPORATION
SECOND. The address of its registered office in the State of Delaware is No.
100 West Tenth Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
corporation shall have authority to issue is 14,500,000 shares which shall be
divided into two classes as follows:
<PAGE>
1,000,000 shares of Preferred Stock without par value (Preferred Stock) and
13,500,000 shares of Common Stock of the par value of $20.00 per share (Common
Stock). The designations, voting powers, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of the above classes of stock and other general provisions
relating thereto shall be as follows:
PART I
PREFERRED STOCK
---------------
1. Shares of Preferred Stock may be issued in one or more series at such time
or times and for such consideration or considerations as the Board of Directors
may determine. All shares of any one series shall be of equal rank and
identical in all respects except the dates from which dividends accrue or
accumulate with respect thereto may vary.
2. 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
-2-
<PAGE>
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 distinctive designation and number of shares comprising such series,
which number may (except where otherwise provided by the Board of Directors in
creating such series) be increased or decreased (but not below the number of
shares then outstanding) from time to time by action of the Board of Directors.
(b) The dividend rate or rates on the shares of such series and the relation
which such dividends shall bear to the dividends payable on any other class or
classes or of any other series of capital stock, the terms and conditions upon
which and the periods in respect of which dividends shall be payable, whether
and upon what conditions such dividends shall be cumulative and, if cumulative,
the date or dates from which dividends shall accumulate.
(c) Whether the shares of such series shall be redeemable, the limitations
and restrictions with respect to such redemption, the time or times when, the
price or prices at which and the manner in which such shares shall be
redeemable, including the
-3-
<PAGE>
manner of selecting shares of such series for redemption if less than all shares
are to be redeemed.
(d) The rights to which the holders of shares of such series shall be
entitled, and the preferences, if any, over any other series (or of any other
series over such series), upon the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of the corporation, which
rights may vary depending on whether such liquidation, dissolution, distribution
or winding up is voluntary or involuntary, and, if voluntary, may vary at
different dates.
(e) Whether the shares of such series shall be subject to the operation of a
purchase, retirement or sinking fund, and, if so, whether and upon what
conditions such purchase, retirement or sinking fund shall be cumulative or
noncumulative, the extent to which and the manner in which such funds shall be
applied to the purchase or redemption of the shares of such series for
retirement or to other corporate purposes and the terms and provisions relative
to the operation thereof.
(f) Whether 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 so convertible
or exchangeable, the price or prices or the rate or rates of conversion or
exchange
-4-
<PAGE>
and the method, if any, of adjusting the same, and any other terms and
conditions of such conversion or exchange.
(g) The voting powers, full and/or limited, if any, of the shares of such
series; and whether and under what conditions the shares of such series (alone
or together with the shares of one or more other series having similar
provisions) shall be entitled to vote separately as a single class, for the
election of one or more additional directors of the corporation in case of
dividend arrearages or other specified events, or upon other matters.
(h) Whether the issuance of any additional shares of such series, or of any
shares of any other series, shall be subject to restrictions as to issuance, or
as to the powers, preferences or rights of any such other series.
(i) Any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of such series, as the Board of Directors may deem advisable and
as shall not be inconsistent with the provisions of this Certificate of
Incorporation.
3. No dividends shall be paid or declared or set apart on any particular
series of Preferred Stock in respect of any period unless accumulated dividends
shall be or shall have been paid,
-5-
<PAGE>
or declared and set apart for payment, pro rata on all shares of Preferred Stock
at the time outstanding of each other series which ranks equally as to
dividends with such particular series, so that the amount of dividends declared
on such particular series shall bear the same ratio to the amount declared on
each such other series as the dividend rate of such particular series shall bear
to the dividend rate of such other series.
4. Unless and except to the extent otherwise required by law or provided in
the resolution or resolutions of the Board of Directors creating any series of
Preferred Stock pursuant to this Part I, the holders of the Preferred Stock
shall have no voting power with respect to any matter whatsoever. In no event
shall the Preferred Stock be entitled to more than one vote in respect of each
share of stock.
5. Shares of Preferred Stock redeemed, converted, exchanged, purchased,
retired or surrendered to the corporation, or which have been issued and
reacquired in any manner, shall, upon compliance with any applicable provisions
of the General Corporation Law of the State of Delaware, have the status of
authorized and unissued shares of Preferred Stock and may be reissued by the
Board of Directors as part of the series of which they were originally a part or
may be reclassified into and reissued as part of a new series or as a part of
any other series, all sub-
-6-
<PAGE>
ject to the protective conditions or restrictions of any outstanding series of
Preferred Stock.
PART II
COMMON STOCK
1. Except as provided by law or this Certificate of Incorporation, each
holder of Common Stock shall have one vote in respect of each share of stock
held by him of record on the books of the corporation on all matters voted upon
by the stockholders.
2. Subject to the preferential dividend rights, if any, applicable to shares
of Preferred Stock and subject to applicable requirements, if any, with respect
to the setting aside of sums for purchase, retirement or sinking funds for
Preferred Stock, the holders of Common Stock shall be entitled to receive, to
the extent permitted by law, such dividends as may be declared from time to time
by the Board of Directors.
3. In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the corporation, after distribution in
full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled to
-7-
<PAGE>
receive all of the remaining assets of the corporation of whatever kind
available for distribution to stockholders ratably in proportion to the number
of shares of Common Stock held by them respectively. The Board of Directors may
distribute in kind to the holders of Common Stock such remaining assets of the
corporation or may sell, transfer or otherwise dispose of all or any part of
such remaining assets to any other corporation, trust or other entity and
receive payment therefor in cash, stock or obligations of such other
corporation, trust or entity, or any combination thereof, and may sell all or
any part of the consideration so received and distribute any balance thereof in
kind to holders of Common Stock. The merger or consolidation of the
corporation into or with any other corporation, or the merger of any other
corporation into it, or any purchase or redemption of shares of stock of the
corporation of any class, shall not be deemed to be a dissolution, liquidation
or winding up of the corporation for the purposes of this paragraph.
4. Such numbers of shares of Common Stock as may from time to time be
required for such purpose shall be reserved for issuance (i) upon conversion of
any shares of Preferred Stock or any obligation of the corporation convertible
into shares of Common Stock which is at the time outstanding or issuable upon
exercise of any options or warrants at the time outstanding and
-8-
<PAGE>
(ii) upon exercise of any options or warrants at the time outstanding to
purchase shares of Common Stock.
PART III
GENERAL PROVISIONS
1. At any meeting of stockholders, the presence in person or by proxy of the
holders of record of outstanding shares of stock of the corporation entitled to
vote a majority of the votes entitled to be voted at such meeting shall
constitute a quorum for all purposes, except as otherwise provided by this
Certificate of Incorporation or required by applicable law.
2. Subject to the protective conditions or restrictions of any outstanding
series of Preferred Stock, any amendment to this Certificate of Incorporation
which shall increase or decrease the authorized capital stock of any class or
classes may be adopted by the affirmative vote of the holders of a majority of
the outstanding shares of the voting stock of the corporation.
3. No holder of stock of any class of the corporation shall be entitled as a
matter of right to purchase or subscribe for any part of any unissued stock of
any class, or of any additional stock of any class of capital stock of the
corporation, or of any bonds, certificates of indebtedness, debentures, or
-9-
<PAGE>
other securities convertible into stock of the corporation, now or hereafter
authorized, but any such stock or other securities convertible into stock may be
issued and disposed of pursuant to resolution by the Board of Directors to such
persons, firms, corporations or associations and upon such terms and for such
consideration (not less than the par value or stated value thereof) as the Board
of Directors in the exercise of its discretion may determine and as may be
permitted by law without action by the stockholders. The Board of Directors may
provide for payment therefor to be received by the corporation in cash, personal
property, real property (or leases thereof) or services. Any and all shares of
stock so issued for which the consideration so fixed has been paid or delivered,
shall be deemed full paid and not liable to any further call or assessment.
4. Any corporate action upon which a vote of stockholders is required or
permitted may be taken without a meeting or vote of stockholders with the
written consent of stockholders having not less than a majority of all of the
stock entitled to vote upon the action if a meeting were held; provided, that in
no case shall the written consent by holders having less than the minimum
percentage of the vote required by statute fixed for the proposed corporate
action and further provided that prompt notice be given to all stockholders of
the corporation of the
-10-
<PAGE>
taking of corporate action without a meeting and by less than unanimous written
consent.
FIFTH. The name and mailing address of the incorporator are:
NAME MAILING ADDRESS
---- ---------------
Kenneth G. Pigott 1400 First National Bank Building
Chicago, Illinois 60603
SIXTH. Elections of directors need not be by written ballot unless the By-laws
of the corporation shall so provide.
SEVENTH. Subject to the provisions of this Certificate of Incorporation
requiring an increase or increases in the number of directors, the number of
directors constituting the Board of Directors shall be that number as shall be
fixed by the By-laws of the corporation.
In furtherance and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized to make, alter or repeal the By-laws
of the corporation.
Wherever the term "Board of Directors" is used in this Certificate of
Incorporation, such term shall mean the Board of Directors of the corporation;
provided, however, that, to the extent any committee of directors of the
corporation is lawfully entitled to exercise the powers of the Board of Direc-
-11-
<PAGE>
tors, such committee may exercise any right or authority of the Board of
Directors under this Certificate of Incorporation.
EIGHTH. No contract or transaction between the corporation and one or more of
its directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the Board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(a) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the contract or
transaction by a vote sufficient for such purpose without counting the vote of
the interested director or directors; or
(b) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or
-12-
<PAGE>
(c) The contract or transaction is fair as to the corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders.
Interested directors may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
NINTH. (a) The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or
-13-
<PAGE>
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged
-14-
<PAGE>
to be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery of Delaware
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery of Delaware or such
other court shall deem proper.
(c) To the extent that any person referred to in paragraphs (a) and (b) of
this Article has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to therein or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under paragraphs (a) and (b) of this Article (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum (as defined in the
-15-
<PAGE>
By-laws of the corporation) 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.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such acton, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation.
(f) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnificiation may be
entitled under any statute, By-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person. Notwithstanding the provisions of this Article, the
corporation
-16-
<PAGE>
may indemnify any person referred to in paragraphs (a) and (b) of this Article
to the full extent permitted under the laws of Delaware and any other
applicable laws, now or hereafter in effect.
(g) The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article.
TENTH. 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 the laws of Delaware, and all rights conferred herein
upon stockholders and directors are granted subject to this reservation.
I, RUDOLPH E. PALLUCK, Executive Vice President of the aforesaid corporation,
hereby certify that the foregoing Restated Certificate of Incorporation of said
corporation was adopted by its Board of Directors and adopted separately by
-17-
<PAGE>
the stockholders of said corporation in accordance with the provisions of Title
8, Sections 141, 242 and 245 of the Delaware Code.
WITNESS my hand and the seal of said FIRST CHICAGO CORPORATION this 13th day
of June, 1969.
/s/ Rudolph E. Palluck
----------------------------------------
Rudolph E. Palluck
Executive Vice President
FIRST CHICAGO CORPORATION
(Corporate Seal)
DELAWARE
1969
ATTEST:
/s/ Christopher W. Wilson
- -----------------------------
Christopher W. Wilson
Secretary
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<PAGE>
STATE OF ILLINOIS)
) SS
COUNTY OF COOK )
BE IT REMEMBERED, that on this 13th day of June, 1969, personally came before
me, LOUISE KAEHLER, a Notary Public in and for said State and
County, RUDOLPH E. PALLUCK, Executive Vice President of FIRST CHICAGO
CORPORATION, the corporation described in the foregoing Certificate, known to me
personally to be such Officer, and he duly acknowledged said Certificate to be
the act and deed of said corporation, and that the facts stated therein are
true.
IN WITNESS WHEREOF, I have hereto set my hand and official seal the day and
year aforesaid.
/s/ Louise Kaehler
-----------------------------------
Notary Public
LOUISE KAEHLER
NOTARY PUBLIC
COOK COUNTY, ILL.
-19-
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE THIRD DAY OF
SEPTEMBER, A.D. 1971, AT 10 O'CLOCK A.M.
* * * * * * * * * *
/s/ William T. Quillen
(SEAL) ------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902041
DATE: 05/18/1993
723138067
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST CHICAGO CORPORATION
FIRST CHICAGO CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
First: That at a meeting of the Board of Directors of FIRST CHICAGO
CORPORATION resolutions were duly adopted setting forth a proposed amendment to
the Restated Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
"RESOLVED, that the first sentence of Article Fourth of the Corporation's
Restated Certificate of Incorporation be amended to read as follows:
'FOURTH. The total number of shares of all classes of stock which the
corporation shall have authority to issue is 28,000,000 shares which
shall be divided into two classes as follows: 1,000,000 shares of
Preferred Stock without par value (Preferred Stock) and 27,000,000
shares of Common Stock of the par value of $10.00 per share (Common
Stock).'"
Second: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
<PAGE>
Third: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
Fourth: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, said FIRST CHICAGO CORPORATION has caused its corporate
seal to be hereunto affixed and this Certificate to be signed by Gaylord
Freeman, its Chairman of the Board, and attested to by Neil McKay, its
Secretary, this 1st day of September, 1971.
/s/ Gaylord Freeman
By ____________________________________________
Chairman of the Board
ATTEST:
/s/ Neil McKay
____________________________________
Secretary
(CORPORATE SEAL)
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
Be it remembered that on this 1st day of September, A.D. 1971 personally came
before me, Karen F. Kizer, a Notary Public in and for the county and State
aforesaid, Gaylord Freeman, Chairman of the Board of FIRST CHICAGO
CORPORATION, a corporation of the State of Delaware, the corporation described
in and which executed the foregoing Certificate, known to me personally to be
such, and he, the said Chairman of the Board, as such Chairman
<PAGE>
of the Board, duly executed said Certificate before me and acknowledged the said
Certificate to be his act and deed and the act and deed of said corporation;
that the signature of the said Chairman of the Board of said corporation to said
foregoing Certificate is in the handwriting of the said Chairman of the Board of
said corporation, and that the seal affixed to said Certificate is the common or
corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and
year aforesaid.
/s/ Karen F. Kizer
_____________________________________
Notary Public
(SEAL)
NOTARIAL SEAL
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE NINTH DAY OF APRIL,
A.D. 1976, AT 10 O'CLOCK A.M.
* * * * * * * * * *
/s/ William T. Quillen
(SEAL) -------------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902044
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST CHICAGO CORPORATION
FIRST CHICAGO CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
First: That at a meeting of the Board of Directors of FIRST CHICAGO
CORPORATION resolutions were duly adopted setting forth a proposed amendment to
the Restated Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and that said amendment be submitted for the
consideration and approval of the stockholders of said corporation at the Annual
Meeting of Stockholders of said corporation to be held on April 9, 1976. The
resolution setting forth the proposed amendment is as follows:
"RESOLVED, that the first sentence of Article Fourth of the
Corporation's Restated Certificate of Incorporation be amended
to read as follows:
'FOURTH. The total number of shares of all classes of
stock which the corporation shall have authority to issue
is 59,000,000 shares which shall be divided into two
classes as follows: 5,000,000 shares of Preferred Stock without
par value (Preferred Stock) and 54,000,000 shares of Common
Stock of the par value of $5.00 per share (Common Stock).'"
Second: That thereafter, the Annual Meeting of Stockholders of said
corporation was duly held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware, at which meeting the
necessary number of shares as required by
<PAGE>
statute were voted in favor of the amendment.
Third: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
Fourth: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
Fifth: That said amendment shall become effective at the close of business on
the day it is filed in the office of the Secretary of State of Delaware.
IN WITNESS WHEREOF, said FIRST CHICAGO CORPORATION has caused its corporate
seal to be hereunto affixed and this Certificate to be signed by Neil McKay,
Vice Chairman of the Board, and attested to be Laurence Goldman, Assistant
Secretary, this 9th day of April, 1976.
/s/ Neil McKay
By _________________________________________
Neil McKay
Vice Chairman of the Board
ATTEST:
/s/ Laurence Goldman
_____________________________
Assistant Secretary
(CORPORATE SEAL)
<PAGE>
STATE OF DELAWARE
OFFICE OF SECRETARY OF STATE
----------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK
DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE
EIGHTEENTH DAY OF OCTOBER, A.D. 1982, AT 2 O'CLOCK P.M.
* * * * * * * * * *
/s/ William T. Quillen
(Seal) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902046
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF THE DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE RESTATED CERTIFICATE
OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS
(Without Par Value)
OF
FIRST CHICAGO 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 First Chicago Corporation, a Delaware
corporation (hereinafter called the "Corporation"), at a meeting duly convened
and held on October 8, 1982, at which a quorum was present and acting
throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of First Chicago Corporation, a Delaware corporation (the
"Corporation"), by the Restated Certificate of Incorporation (the "Certificate
of Incorporation") of the Corporation, the Board hereby provides for and
authorizes the issuance of a series of Preferred Stock of the Corporation to
consist of 2,500,000 shares, and hereby fixes the 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 "Preferred Stock with Cumulative and Adjustable
Dividends" (hereinafter called this "Series") and the number of shares
constituting this Series is 2,500,000. Shares of this Series shall have a
stated value of $50 per share. The number of authorized shares of this Series
may be reduced by further resolution duly adopted by the Board and by the filing
of a certificate pursuant to the provisions of the
<PAGE>
2
General Corporation Law of the State of Delaware stating that such reduction has
been so authorized, but the number of authorized shares of this Series shall not
be increased.
(b) Dividend Rate.
(1) Dividend rates on the shares of this Series shall be: (i) for the period
(the "Initial Dividend Period") from the date of their original issue to and
including December 31, 1982, at such rate per annum as shall be approved by a
resolution duly adopted by the Board of Directors of the Corporation, or by a
committee of the Board duly authorized by the Board to fix such rate, 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 1.00% below the Applicable Rate (as defined in paragraph (2) of this
Section (b) in respect of such Quarterly Dividend Period. Anything to the
contrary herein notwithstanding, the dividend rate for any Quarterly Dividend
Period shall in no event be less than 7.00% or greater than 15.00% per annum.
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, on March 31,
June 30, September 30 and December 31 of each year, commencing December 31,
1982. Each such dividend shall be paid to the holders of record of shares of
this Series as they appear on the stock register of the Corporation on such
record date, not exceeding 30 days preceding the payment date thereof, as shall
be fixed by the Board. Dividends on account of arrears for any past Dividend
Periods may be declared and paid at any time, without reference to any regular
dividend payment date, to holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the Board.
(2) Except as provided below in this paragraph, the "Applicable Rate" for any
Quarterly Dividend Period
<PAGE>
3
shall be the highest of the Treasury Bill Rate, the Ten Year Constant Maturity
Rate or the Twenty Year Constant Maturity Rate (each as hereinafter defined) for
such Dividend Period. In the event that the Corporation determines in good
faith that for any reason one or more of such rates cannot be determined for
any Quarterly Dividend Period, then the Applicable Rate for such Dividend Period
shall be the higher of whichever of such rates can be so determined. In the
event that the Corporation determines in good faith that none of such rates can
be determined for any Quarterly Dividend Period, then the Applicable Rate in
effect for the preceding Dividend Period shall be continued for such Dividend
Period.
(3) Except as provided below in this paragraph, the "Treasury Bill Rate" for
each Quarterly Dividend Period shall be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period as provided below) for three-month U.S. Treasury bills,
as published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the March 31,
June 30, September 30 or December 31, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum market discount rate during such Calendar Period, then the Treasury Bill
Rate for such Dividend Period shall be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period as provided below) for three-month U.S. Treasury bills,
as published weekly during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the Corporation. In the
event that a per annum market discount rate for three-month U.S. Treasury bills
shall not be published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar Period,
then the Treasury Bill Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only one such rate shall be
published
<PAGE>
4
during the relevant Calendar Period as provided below) for all of the U.S.
Treasury bills then having maturities of not less than 80 nor more than 100
days, as published during such Calendar Period by the Federal Reserve Board or,
if the Federal Reserve Board shall not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason no such U.S. Treasury Bill Rates are published as provided above
during such Calendar Period, then the Treasury Bill Rate for such Dividend
Period shall be the arithmetic average of the per annum market discount rates
based upon the closing bids during such Calendar Period for each of the issues
of marketable noninterest-bearing U.S. Treasury securities with a maturity of
not less than 80 nor more than 100 days from the date of each such quotation, as
quoted daily for each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Corporation by at least
three recognized U.S. Government securities dealers selected by the Corporation.
In the event that the Corporation determines in good faith that for any reason
the Corporation cannot determine the Treasury Bill Rate for any Quarterly
Dividend Period as provided above in this paragraph, the Treasury Bill Rate for
such Dividend Period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for each
of the issues of marketable interest-bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
(4) Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or the
one weekly per annum Ten Year Average Yield, if only one such Yield shall be
published during the relevant Calendar Period as provided below), as published
weekly by the Federal Reserve Board during the Calendar Period immediately prior
to the ten calendar days immediately preceding the March 31,
<PAGE>
5
June 30, September 30 or December 31, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum Ten Year Average Yield during such Calendar Period, then the Ten Year
Constant Maturity Rate for such Dividend Period shall be the arithmetic average
of the two most recent weekly per annum Ten Year Average Yields (or the one
weekly per annum Ten Year Average Yield, if only one such Yield shall be
published during the relevant Calendar Period as provided below), as published
weekly during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event that
a per annum Ten Year Average Yield shall not be published by the Federal Reserve
Board or by any Federal Reserve Bank or by any U.S. Government department or
agency during such Calendar Period, then the Ten Year Constant Maturity Rate for
such Dividend Period shall be the arithmetic average of the two most recent
weekly per annum average yields to maturity (or the one weekly average yield to
maturity, if only one such yield shall be published during the relevant
Calendar Period as provided below) for all of the actively traded marketable
U.S. Treasury fixed interest rate securities (other than Special Securities)
then having maturities of not less than eight nor more than twelve years, as
published during such Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board shall not publish such yields, by any Federal Reserve Bank
or by any U.S. Government department or agency selected by the Corporation. In
the event that the Corporation determines in good faith that for any reason the
Corporation cannot determine the Ten Year Constant Maturity Rate for any
Quarterly Dividend Period as provided above in this paragraph, then the Ten Year
Constant Maturity Rate for such Dividend Period shall be the arithmetic average
of the per annum average yields to maturity based upon the closing bids during
such Calendar Period for each of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) with a
final maturity date not less than eight nor more than twelve years from the date
of each such quotation, as quoted daily for each business day in New York City
(or less frequently if daily quotations shall not be generally available) to
the Corporation by at least three
<PAGE>
6
recognized U.S. Government securities dealers selected by the Corporation.
(5) Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the March 31,
June 30, September 30 or December 31, as the case may be, prior to the
Quarterly Dividend Period for which the dividend rate on this Series is being
determined. In the event that the Federal Reserve Board does not publish such
a weekly per annum Twenty Year Average Yield during such Calendar Period, then
the Twenty Year Constant Maturity Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per annum Twenty Year Average
Yields (or the one weekly per annum Twenty Year Average Yield, if only one such
Yield shall be published during the relevant Calendar Period as provided below),
as published weekly during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the Corporation. In the
event that a per annum Twenty Year Average Yield shall not be published by any
Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum average yields to maturity (or the one weekly
average yield to maturity, if only one such yield shall be published during the
relevant Calendar Period as provided below) for all of the actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) then having maturities of not less than eighteen nor more than
twenty-two years, as published during such Calendar Period by the Federal
Reserve Board or, if the Federal Reserve Board shall not publish such yields,
by any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. In the event that the Corporation determines in
good faith that for any reason the Corporation cannot determine the Twenty Year
Constant
<PAGE>
7
Maturity Rate for any Quarterly Dividend Period as provided above in this
paragraph, then the Twenty Year Constant Maturity Rate for such Dividend Period
shall be the arithmetic average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period for each of the issues
of actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date not less than
eighteen nor more than twenty-two years from the date of each such quotation,
as quoted daily for each business day in New York City (or less frequently if
daily quotations shall not be generally available) to the Corporation by at
least three recognized U.S. Government securities dealers selected by the
Corporation.
(6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
(7) The dividend rate with respect to each Quarterly Dividend Period will be
calculated as promptly as practicable by the Corporation according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new Quarterly Dividend Period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of shares of this Series.
(8) For purposes of this Section (b), the term
(i) "Calendar Period" shall mean 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the option
of the holder, be surrendered at face value in payment of any Federal estate
tax or which provide tax benefits to the holder and are priced to reflect
such tax benefits or which were originally issued at a deep or substantial
discount;
<PAGE>
8
(iii) "Ten Year Average Yield" shall mean the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of ten years); and
(iv) "Twenty Year Average Yield" shall mean the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 20 years).
(9) No full dividends shall be declared or paid or set apart for payment on
Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to this Series for any period unless full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(10) So long as any shares of this Series are outstanding, no dividend (other
than a dividend in Common Stock or in any other stock ranking junior to this
Series as to dividends and upon liquidation and other than as provided in
paragraph (9) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a
<PAGE>
9
parity with this Series as to dividends or upon liquidation, nor shall any
Common Stock nor any other stock of the Corporation ranking junior to or on a
parity with this Series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys paid to or
made available for a sinking fund for the redemption of any shares of any such
stock) by the Corporation (except by conversion into or exchange for stock of
the Corporation ranking junior to this Series as to dividends and upon
liquidation) unless, in each case, the full cumulative dividends on all
outstanding shares of this Series shall have been paid for all past dividend
payment periods.
(11) Dividends payable on each share of this Series for each full
Quarterly Dividend Period shall be computed by dividing the dividend rate for
such Quarterly Dividend Period by four and applying such rate against the stated
value per share of this Series. Dividends payable on this Series for any period
less than a full Quarterly Dividend Period, and for the Initial Dividend Period,
shall be computed on the basis of a 360 day year consisting of 30 day months.
(c) Redemption.
(1) The shares of this Series shall not be redeemable prior to October 1,
1987. On and after October 1, 1987, 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 (i) in the case of any redemption on a redemption date
occurring on or after October 1, 1987, and prior to October 1, 1992, of $51.50
per share, and (ii) in the case of any redemption on a redemption date occurring
on or after October 1, 1992, of $50 per share, plus, in each case, accrued and
unpaid dividends thereon to the date fixed for redemption.
(2) In the event that fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board and the shares to be redeemed shall be determined by lot or pro rata
as may be determined by the Board or by any other method as may be determined by
the Board in its sole discretion to be equitable.
<PAGE>
10
(3) In the event the Corporation shall redeem shares of this Series, notice
of such redemption shall be given by first class mail, postage prepaid, mailed
not less than 30 nor more than 60 days prior to the redemption date, to each
holder of record of the shares to be redeemed, at such holder's address as the
same appears on the stock register of the Corporation. Each such notice shall
state: (i) the redemption date; (ii) the number of shares of this Series to be
redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said notice
of the certificates for any shares so redeemed (properly endorsed or assigned
for transfer, if the Board shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are
<PAGE>
11
simultaneously redeemed, and the Corporation shall not purchase or otherwise
acquire any shares of this Series; provided, however, that the foregoing shall
not prevent the purchase or acquisition of shares of this Series pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of this Series.
(d) Conversion or Exchange. The holders of shares of this Series shall not
have any rights herein to convert such shares into or exchange such shares for
shares of any other class or classes or of any other series of any class or
classes of capital stock of the Corporation.
(e) Voting. The shares of this Series shall not have any voting powers
either general or special, except that
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66-2/3% of all of the shares of this Series at the time outstanding, given
in person or by proxy, either in writing or by a vote at a meeting called
for the purpose at which the holders of shares of this Series shall vote
together as a separate class, shall be necessary for authorizing, effecting
or validating the amendment, 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,
Preferences and Rights or any similar document relating to any series of
Preferred Stock) which would adversely affect the preferences, rights,
powers or privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at
least 66-2/3% of all of the shares of this Series and all other series of
Preferred Stock ranking on a parity with shares of this Series, either as to
dividends or upon liquidation, at the time outstanding, given in person or
by proxy, either in writing or by a vote at a meeting called for the purpose
at which the holders of shares of
<PAGE>
12
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 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
<PAGE>
13
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 or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $50 per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business of
the Corporation, nor the merger or consolidation of the Corporation into or with
any other corporation or the merger or consolidation of any other corporation
into or with the Corporation, shall be deemed to be a dissolution, liquidation
or winding up, voluntary or involuntary, for the purposes of this Section (f).
(3) After the payment to the holders of the shares of this Series of the full
preferential amounts provided for in this Section (f), the holders of this
<PAGE>
14
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
(4) In the event the assets of the Corporation available for distribution to
the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Secton (f), no such distribution shall be made
on account of any shares of any other class or series of Preferred Stock ranking
on a parity with the shares of this Series upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on account
of the shares of this Series, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of this Series then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in
preference or priority to the holders of shares of this Series.
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be
<PAGE>
15
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."
IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal to
be hereunto affixed and this certificate to be signed by J. Mikesell Thomas,
its Vice President, and the same to be attested by Kenneth G. Arneson, its
Secretary, this 15th day of October, 1982.
FIRST CHICAGO CORPORATION
by
/s/ J. Mikesell Thomas
--------------------------
Vice President
[Corporate Seal]
ATTEST:
/s/ Kenneth G. Arneson
- --------------------------
Secretary
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK
DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE
TWENTY-SECOND DAY OF FEBRUARY, A.D. 1983, AT 10 O'CLOCK A.M.
* * * * * * * * * *
/s/ William T. Quillen
(Seal) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902047
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS,
SERIES B
(Without Par Value)
OF
FIRST CHICAGO 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 First Chicago Corporation, a Delaware
corporation (hereinafter called the "Corporation"), at a meeting duly convened
and held on February 11, 1983, at which a quorum was present and acting
throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of First Chicago Corporation, a Delaware corporation (the
"Corporation"), by the Restated Certificate of Incorporation (the "Certificate
of Incorporation") of the Corporation, the Board hereby provides for and
authorizes the issuance of a series of Preferred Stock of the Corporation to
consist of 1,250,000 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 "Preferred Stock with Cumulative and
Adjustable Dividends, Series B" (hereinafter called this "Series") and the
number of shares constituting this Series is 1,250,000. Shares of this
Series shall have a stated value of $100 per share. The number of
authorized shares of this Series may be reduced by further resolution duly
adopted by the Board and by the filing of a certificate pursuant to the
provisions of the
<PAGE>
2
General Corporation Law of the State of Delaware stating that such reduction
has been so authorized, but the number of authorized shares of this Series
shall not be increased.
(b) Dividend Rate.
(1) Dividend rates on the shares of this Series shall be: (i) for the
period (the "Initial Dividend Period") from the date of their original issue
to and including May 31, 1983, at such rate per annum as shall be approved by
a resolution duly adopted by the Board of Directors of the Corporation, or by
a committee of the Board duly authorized by the Board to fix such rate, 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 March 1, June 1, September 1 and
December 1 in each year and shall end on and include the day next preceding
the first day of the next Quarterly Dividend Period, at a rate per annum of
the stated value thereof 3.75% below the Applicable Rate (as defined in
paragraph (2) of this Section (b)) in respect of such Quarterly Dividend
Period. Anything to the contrary herein notwithstanding, the dividend rate
for any Quarterly Dividend Period shall in no event be less than 6.00% or
greater than 12.00% per annum. Such dividends shall be cumulative from the
date of original issue of such shares and shall be payable, when and as
declared by the Board, on the last day of February, May, August and November
of each year, commencing the last day of May, 1983. Each such dividend shall
be paid to the holders of record of shares of this Series as they appear on
the stock register of the Corporation on such record date, not exceeding 30
days preceding the payment date thereof, as shall be fixed by the Board.
Dividends on account of arrears for any past Dividend Periods may be declared
and paid at any time, without reference to any regular dividend payment date,
to holders of record on such date, not exceeding 45 days preceding the
payment date thereof, as may be fixed by the Board.
(2) Except as provided below in this paragraph, the "Applicable Rate" for
any Quarterly Dividend Period
<PAGE>
3
shall be the highest of the Treasury Bill Rate, the Ten Year Constant
Maturity Rate or the Twenty Year Constant Maturity Rate (each as hereinafter
defined) for such Dividend Period. In the event that the Corporation
determines in good faith that for any reason one or more of such rates cannot
be determined for any Quarterly Dividend Period, then the Applicable Rate for
such Dividend Period shall be the higher of whichever of such rates can be so
determined. In the event that the Corporation determines in good faith that
none of such rates can be determined for any Quarterly Dividend Period, then
the Applicable Rate in effect for the preceding Dividend Period shall be
continued for such Dividend Period.
(3) Except as provided below in this paragraph, the "Treasury Bill Rate"
for each Quarterly Dividend Period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate shall be published during
the relevant Calander Period as provided below) for three-month U.S. Treasury
bills, as published weekly by the Federal Reserve Board during the Calendar
Period immediately prior to the ten calendar days immediately preceding the
last day of February, May, August or November, as the case may be, prior to
the Quarterly Dividend Period for which the dividend rate on this Series is
being determined. In the event that the Federal Reserve Board does not
publish such a weekly per annum market discount rate during such Calendar
Period, then the Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per annum market discount
rates (or the one weekly per annum market discount rate, if only one such rate
shall be published during the relevant Calendar Period as provided below) for
three-month U.S. Treasury bills, as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that a per annum market
discount rate for three-month U.S. Treasury bills shall not be published by
the Federal Reserve Board or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar Period, then
the Treasury Bill Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only one such rate shall be
published
<PAGE>
4
during the relevant Calendar Period as provided below) for all of the U.S.
Treasury bills then having maturities of not less than 80 nor more than 100
days, as published during such Calendar Period by the Federal Reserve Board
or, if the Federal Reserve Board shall not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason no such U.S. Treasury Bill Rates are published as provided
above during such Calendar Period, then the Treasury Bill Rate for such
Dividend Period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for
each of the issues of marketable noninterest-bearing U.S. Treasury securities
with a maturity of not less than 80 nor more than 100 days from the date of
each such quotation, as quoted daily for each business day in New York City
(or less frequently if daily quotations shall not be generally available) to
the Corporation by at least three recognized U.S. Government securities
dealers selected by the Corporation. In the event that the Corporation
determines in good faith that for any reason the Corporation cannot determine
the Treasury Bill Rate for any Quarterly Dividend Period as provided above in
this paragraph, the Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the per annum market discount rates based upon the
closing bids during such Calendar Period for each of the issues of marketable
interest-bearing U.S. Treasury securities with a maturity of not less than 80
nor more than 100 days from the date of each such quotation, as quoted daily
for each business day in New York City (or less frequently if daily quotations
shall not be generally available) to the Corporation by at least three
recognized U.S. Government securities dealers selected by the Corporation.
(4) Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or
the one weekly per annum Ten Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding
<PAGE>
5
the last day of February, May, August or November, as the case may be, prior
to the Quarterly Dividend Period for which the dividend rate on this Series
is being determined. In the event that the Federal Reserve Board does not
publish such a weekly per annum Ten Year Average Yield during such Calendar
Period, then the Ten Year Constant Maturity Rate for such Dividend Period
shall be the arithmetic average of the two most recent weekly per annum Ten
Year Average Yields (or the one weekly per annum Ten Year Average Yield, if
only one such Yield shall be published during the relevant Calendar Period as
provided below), as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or agency selected
by the Corporation. In the event that a per annum Ten Year Average Yield
shall not be published by the Federal Reserve Board or by any Federal Reserve
Bank or by any U.S. Government department or agency during such Calendar
Period, then the Ten Year Constant Maturity Rate for such Dividend Period
shall be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield to maturity, if
only one such yield shall be published during the relevant Calendar Period as
provided below) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) then having
maturities of not less than eight nor more than twelve years, as published
during such Calendar Period by the Federal Reserve Board or, if the Federal
Reserve Board shall not publish such yields, by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the Corporation. In
the event that the Corporation determines in good faith that for any reason
the Corporation cannot determine the Ten Year Constant Maturity Rate for any
Quarterly Dividend Period as provided above in this paragraph, then the Ten
Year Constant Maturity Rate for such Dividend Period shall be the arithmetic
average of the per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) with a final maturity date not less than eight nor more than
twelve years from the date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if daily quotations shall
not be generally available) to the Corporation by at least three
<PAGE>
6
recognized U.S. Government securities dealers selected by the Corporation.
(5) Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield
shall be published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day
of February, May, August or November, as the case may be, prior to the
Quarterly Dividend Period for which the dividend rate on this Series is being
determined. In the event that the Federal Reserve Board does not publish
such a weekly per annum Twenty Year Average Yield during such Calendar
Period, then the Twenty Year Constant Maturity Rate for such Dividend Period
shall be the arithmetic average of the two most recent weekly per annum
Twenty Year Average Yields (or the one weekly per annum Twenty Year Average
Yield, if only one such Yield shall be published during the relevant Calendar
Period as provided below), as published weekly during such Calendar Period by
any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Corporation. In the event that a per annum Twenty Year
Average Yield shall not be published by any Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or agency during
such Calendar Period, then the Twenty Year Constant Maturity Rate for such
Dividend Period shall be the arithmetic average of the two most recent weekly
per annum average yields to maturity (or the one weekly average yield to
maturity, if only one such yield shall be published during the relevant
Calendar Period as provided below) for all of the actively traded marketable
U.S. Treasury fixed interest rate securities (other than Special Securities)
then having maturities of not less than eighteen nor more than twenty-two
years, as published during such Calendar Period by the Federal Reserve Board
or, if the Federal Reserve Board shall not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason the Corporation cannot determine the Twenty Year Constant
<PAGE>
7
Maturity Rate for any Quarterly Dividend Period as provided above in this
paragraph, then the Twenty Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar Period for each of
the issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity date not less
than eighteen nor more than twenty-two years from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
(6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
(7) The dividend rate with respect to each Quarterly Dividend Period will
be calculated as promptly as practicable by the Corporation according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new Quarterly Dividend Period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of shares of this Series.
(8) For purposes of this Section (b), the term
(i) "Calendar Period" shall mean 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the option
of the holder, be surrendered at face value in payment of any Federal estate
tax or which provide tax benefits to the holder and are priced to reflect
such tax benefits or which were orginally issued at a deep or substantial
discount;
<PAGE>
8
(iii) "Ten Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of ten years); and
(iv) "Twenty Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of 20 years).
(9) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to this Series for any period unless full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on this Series
for all dividend payment periods terminating on or prior to the date of
payment of such full cumulative dividends. When dividends are not paid in
full, as aforesaid, upon the shares of this Series and any other Preferred
Stock ranking on a parity as to dividends with this Series, all dividends
declared upon shares of this Series and any other Preferred Stock ranking on a
parity as to dividends with this Series shall be declared pro rata so that the
amount of dividends declared per share on this Series and such other Preferred
Stock shall in all cases bear to each other the same ratio that accrued
dividends per share on the shares of this Series and such other Preferred
Stock bear to each other. Holders of shares of this Series shall not be
entitled to any dividend, whether payable in cash, property or stocks, in
excess of full cumulative dividends, as herein provided, on this Series. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on this Series which may be in arrears.
(10) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided
in paragraph (9) of this Section (b)) shall be declared or paid or set aside
for payment or other distribution declared or made upon the Common Stock or
upon any other stock ranking junior to or on a
<PAGE>
9
parity with this Series as to dividends or upon liquidation, nor shall any
Common Stock or any other stock of the Corporation ranking junior to or on a
parity with this Series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys paid to
or made available for a sinking fund for the redemption of any shares of any
such stock) by the Corporation (except by conversion into or exchange for
stock of the Corporation ranking junior to this Series as to dividends and
upon liquidation) unless, in each case, the full cumulative dividends on all
outstanding shares of this Series shall have been paid for all past dividend
payment periods.
(11) Dividends payable on each share of this Series for each full
Quarterly Dividend Period shall be computed by dividing the dividend rate for
such Quarterly Dividend Period by four and applying such rate against the
stated value per share of this Series. Dividends payable on this Series for
any period less than a full Quarterly Dividend Period, and for the Initial
Dividend Period, shall be computed on the basis of a 360 day year consisting
of 30 day months.
(c) Redemption.
(1) The shares of this Series shall not be redeemable prior to March 1,
1988. On and after March 1, 1988, 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 (i) in the case of any redemption on a redemption
date occurring on or after March 1, 1988, and prior to March 1, 1993, of $103
per share, and (ii) in the case of any redemption on a redemption date
occurring on or after March 1, 1993, of $100 per share, plus, in each case,
accrued and unpaid dividends thereon to the date fixed for redemption.
(2) In the event that fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed shall be determined
by the Board and the shares to be redeemed shall be determined by lot or pro
rata as may be determined by the Board or by any other method as may be
determined by the Board in its sole discretion to be equitable.
<PAGE>
10
(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) he place or places
where certificates for such shares are to be surrendered for payment of the
redemption price; and (v) that dividends on the shares to be redeemed will
cease to accrue on such redemption date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for
the payment of the redemption price) dividends on the shares of this Series
so called for redemption shall cease to accrue, and said shares no longer be
deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in accordance
with said notice of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board shall so require and the
notice shall so state), such shares shall be redeemed by the Corporation at
the redemption price aforesaid. In case fewer than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued
shares of Preferred Stock, without designation as to series until such shares
are once more designated as part of a particular series by the Board.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are
<PAGE>
11
simultaneously redeemed, and the Corporatioon shall not purchase or otherwise
acquire any shares of this Series; provided, however, that the foregoing shall
not prevent the purchase or acquisition of shares of this Series pursuant to a
purchase or exchange offer made on the same terms to holders of all
outstanding shares of this Series.
(d) Conversion or Exchange. The holders of shares of this Series shall
not have any rights herein to convert such shares into or exchange such
shares for shares of any other class or classes or of any other series of any
class or classes of capital stock of the Corporation.
(e) Voting. The shares of this Series shall not have any voting powers
either general or special, except that
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66-2/3% of all of the shares of this Series at the time outstanding, given
in person or by proxy, either in writing or by a vote at a meeting called
for the purpose at which the holders of shares of this Series shall vote
together as a separate class, shall be necessary for authorizing, effecting
or validating the amendment, 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,
Preferences and Rights or any similar document relating to any series of
Preferred Stock) which would adversely affect the preferences, rights,
powers or privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66-2/3% of all of the shares of this Series and all other series of
Preferred Stock ranking on a parity with shares of this Series, either as
to dividends or upon liquidation, at the time outstanding, given in person
or by proxy, either in writing or by a vote at a meeting called for the
purpose at which the holders of shares of
<PAGE>
12
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 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
<PAGE>
13
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 or on any other class of stock ranking junior to the
Preferred Stock upon liquidation, the amount of $100 per share, plus a sum
equal to all dividends (whether or not earned or declared) on such shares
accrued and unpaid thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary, for the
purposes of this Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of
this
<PAGE>
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the
full distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to
the receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in
preference or priority to the holders of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or
upon liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation prices per share or sinking fund provisions,
if any, be
<PAGE>
15
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."
IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by J. Mikesell Thomas,
its Vice President, and the same to be attested by Laurence Goldman, its
Assistant Secretary, this 17th day of February, 1983.
FIRST CHICAGO CORPORATION
by /s/ J. Mikesell Thomas
____________________________
Vice President
[Corporate Seal]
ATTEST:
/s/ Laurence Goldman
______________________
Assistant Secretary
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK
DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE
SEVENTEENTH DAY OF FEBRUARY, A.D. 1984, AT 10 O'CLOCK A.M.
* * * * * * * * * *
/s/ William T. Quillen
(Seal) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902049
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS,
SERIES C
(Without Par Value)
OF
FIRST CHICAGO 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 First Chicago Corporation, a Delaware
corporation (hereinafter called the "Corporation"), at a meeting duly
convened and held on November 18, 1983, at which a quorum was present and
acting throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of First Chicago Corporation, a Delaware corporation (the
"Corporation"), by the Restated Certificate of Incorporation (the "Certificate
of Incorporation") of the Corporation, the Board hereby provides for and
authorizes the issuance of a series of Preferred Stock of the Corporation to
consist of 750,000 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 "Preferred Stock with Cumulative and Adjustable
Dividends, Series C" (hereinafter called this "Series") and the number of
shares constituting this Series is 750,000. Shares of this Series shall have
a stated value of $100 per share. The number of authorized shares of this
Series may be reduced by further resolution duly adopted by the Board and by
the filing
<PAGE>
2
of a certificate pursuant to the provisions of the General Corporation Law of
the State of Delaware stating that such reduction has been so authorized, but
the number of authorized shares of this Series shall not be increased.
(b) Dividend Rate.
(1) Dividend rates on the shares of this Series shall be: (i) for the
period (the "Initial Dividend Period") from the date of their original issue
to and including May 31, 1984, at such rate per annum as shall be approved
by a resolution duly adopted by the Board of Directors of the Corporation,
or by a committee of the Board duly authorized by the Board to fix such
rate, 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 March 1,
June 1, September 1 and December 1 in each year and shall end on and
include the day next preceding the first day of the next Quarterly Dividend
Period, at a rate per annum of the stated value thereof % below the
Applicable Rate (as defined in paragraph (2) of this Section (b)) in respect
of such Quarterly Dividend Period. Anything to the contrary herein
notwithstanding, the dividend rate for any Quarterly Dividend Period shall
in no event be less than 6.50% or greater than 12.50% per annum. Such
dividends shall be cumulative from the date of original issue of such shares
and shall be payable, when and as declared by the Board, on the last day
of February, May, August and November of each year, commencing the last day
of May 1984. Each such dividend shall be paid to the holders of record of
shares of this Series as they appear on the stock register of the
Corporation on such record date, not exceeding 30 days preceding the
payment date thereof, as shall be fixed by the Board. Dividends on account
of arrears for any past Dividend Periods may be declared and paid at any
time, without reference to any regular dividend payment date, to holders of
record on such date, not exceeding 45 days preceding the payment date
thereof, as may be fixed by the Board.
<PAGE>
3
(2) Except as provided below in this paragraph, the "Applicable Rate"
for any Quarterly Dividend Period shall be the highest of the Treasury Bill
Rate, the Ten Year Constant Maturity Rate or the Twenty Year Constant
Maturity Rate (each as hereinafter defined) for such Dividend Period. In
the event that the Corporation determines in good faith that for any reason
one or more of such rates cannot be determined for any Quarterly Dividend
Period, then the Applicable Rate for such Dividend Period shall be the
higher of whichever of such rates can be so determined. In the event that
the Corporation determines in good faith that none of such rates can be
determined for any Quarterly Dividend Period, then the Applicable Rate in
effect for the preceding Dividend Period shall be continued for such
Dividend Period.
(3) Except as provided below in this paragraph, the "Treasury Bill Rate"
for each Quarterly Dividend Period shall be the arithmetic average of the
two most recent weekly per annum market discount rates (or the one weekly
per annum market discount rate, if only one such rate shall be published
during the relevant Calendar Period as provided below) for three-month U.S.
Treasury bills, as published weekly by the Federal Reserve Board during the
Calendar Period immediately prior to the ten calendar days immediately
preceding the last day of February, May, August or November, as the case may
be, prior to the Quarterly Dividend Period for which the dividend rate on
this Series is being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum market discount rate during
such Calendar Period, then the Treasury Bill Rate for such Dividend Period
shall be the arithmetic average of the two most recent weekly per annum
market discount rates (or the one weekly per annum market discount rate, if
only one such rate shall be published during the relevant Calendar Period
as provided below) for three-month U.S. Treasury bills, as published weekly
during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event
that a per annum market discount rate for three-month U.S. Treasury bills
shall not be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Treasury Bill Rate for such Dividend Period shall
be the arithmetic average of the two most recent weekly per annum market
<PAGE>
4
discount rates (or the one weekly per annum market discount rate, if only
one such rate shall be published during the relevant Calendar Period as
provided below) for all of the U.S. Treasury bills then having maturities
of not less than 80 nor more than 100 days, as published during such
Calendar Period by the Federal Reserve Board or, if the Federal Reserve
Board shall not publish such rates, by any Federal Reserve Bank or by any
U.S. Government department or agency selected by the Corporation. In the
event that the Corporation determines in good faith that for any reason no
such U.S. Treasury Bill Rates are published as provided above during such
Calendar Period, then the Treasury Bill Rate for such Dividend Period shall
be the arithmetic average of the per annum market discount rates based upon
the closing bids during such Calendar Period for each of the issues of
marketable noninterest-bearing U.S. Treasury securities with a maturity of
not less than 80 nor more than 100 days from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation. In the event that the Corporation determines
in good faith that for any reason the Corporation cannot determine the
Treasury Bill Rate for any Quarterly Dividend Period as provided above in
this paragraph, the Treasury Bill Rate for such Dividend Period shall be
the arithmetic average of the per annum market discount rates based upon
the closing bids during such Calendar Period for each of the issues of
marketable interest-bearing U.S. Treasury securities with a maturity of not
less than 80 nor more than 100 days from the date of each such quotation,
as quoted daily for each business day in New York City (or less frequently
if daily quotations shall not be generally available) to the Corporation by
at least three recognized U.S. Government securities dealers selected by
the Corporation.
(4) Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly 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
<PAGE>
5
Board during the Calendar Period immediately prior to the ten calendar days
immediately preceding the last day of February, May, August or November, as
the case may be, prior to the Quarterly Dividend Period for which the
dividend rate on this Series is being determined. In the event that the
Federal Reserve Board does not publish such a weekly per annum Ten Year
Average Yield during such Calendar Period, then the Ten Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of
the two most recent weekly per annum Ten Year Average Yields (or the one
weekly per annum Ten Year Average Yield, if only one such Yield shall be
published during the relevant Calendar Period as provided below), as
published weekly during such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected by the Corporation. In
the event that a per annum Ten Year Average Yield shall not be published by
the Federal Reserve Board or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar Period, then the Ten
Year Constant Maturity Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per annum average yields
to maturity (or the one weekly average yield to maturity, if only one such
yield shall be published during the relevant Calendar Period as provided
below) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) then having
maturities of not less than eight nor more than twelve years, as published
during such Calendar Period by the Federal Reserve Board or, if the
Federal Reserve Board shall not publish such yields, by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith
that for any reason the Corporation cannot determine the Ten Year Constant
Maturity Rate for any Quarterly Dividend Period as provided above in this
paragraph, then the Ten Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar Period for each
of the issues of actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities) with a final maturity date
not less than eight nor more than twelve years from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be
<PAGE>
6
generally available) to the Corporation by at least three recognized U.S.
Government securities dealers selected by the Corporation.
(5) Except as provided below in this paragraph, the "Twenty Year
Constant Maturity Rate" for each Quarterly Dividend Period shall be the
arithmetic average of the two most recent weekly per annum Twenty Year
Average Yields (or the one weekly per annum Twenty Year Average Yield, if
only one such Yield shall be published during the relevant Calendar Period
as provided below), as published weekly by the Federal Reserve Board during
the Calendar Period immediately prior to the ten calendar days immediately
preceding the last day of February, May, August or November, as the case may
be, prior to the Quarterly Dividend Period for which the dividend rate on
this Series is being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum Twenty Year Average Yield
during such Calendar Period, then the Twenty Year Constant Maturity Rate
for such Dividend Period shall be the arithmetic average of the two most
recent weekly per annum Twenty Year Average Yields (or the one weekly per
annum Twenty Year Average Yield, if only one such Yield shall be published
during the relevant Calendar Period as provided below), as published weekly
during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event
that a per annum Twenty Year Average Yield shall not be published by any
Federal Reserve Board or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar Period, then the
Twenty Year Constant Maturity Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per annum average yields
to maturity (or the one weekly average yield to maturity, if only one such
yield shall be published during the relevant Calendar Period as provided
below) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) then having
maturities of not less than eighteen nor more than twenty-two years, as
published during such Calendar Period by the Federal Reserve Board or, if
the Federal Reserve Board shall not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason the
<PAGE>
7
Corporation cannot determine the Twenty Year Constant Maturity Rate for any
Quarterly Dividend Period as provided above in this paragraph, then the
Twenty Year Constant Maturity Rate for such Dividend Period shall be the
arithmetic average of the per annum average yields to maturity based upon
the closing bids during such Calendar Period for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity date not less than
eighteen nor more than twenty-two years from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Coporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
(6) the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundreths of a percentage point.
(7) The dividend rate with respect to each Quarterly Dividend Period
will be calculated as promptly as practicable by the Corporation according
to the appropriate method described herein. The mathematical accuracy of
each such calculation will be confirmed in writing by independent
accountants of recognized standing. The Corporation will cause each
dividend rate to be published in a newspaper of general circulation in New
York City prior to the commencement of the new Quarterly Dividend Period to
which it applies and will cause notice of such dividend rate to be enclosed
with the dividend payment checks next mailed to the holders of shares of
this Series.
(8) For purposes of this Section (b), the term
(i) "Calendar Period" shall mean 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the
option of the holder, be surrendered at face value in payment of any
Federal estate tax or which provide tax benefits to the holder and are
priced to reflect such tax benefits or which were originally issued at a
deep or substantial discount;
<PAGE>
8
(iii) "Ten Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of ten years); and
(iv) "Twenty Year Average Yield" shall mean the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of 20 years).
(9) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with
or junior to this Series for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on this
Series for all dividend payment periods terminating on or prior to the date
of payment of such full cumulative dividends. When dividends are not paid
in full, as aforesaid, upon the shares of this Series and any other
Preferred Stock ranking on a parity as to dividends with this Series, all
dividends declared upon shares of this Series and any other Preferred Stock
ranking on a parity as to dividends with this Series shall be declared pro
rata so that the amount of dividends declared per share on this Series and
such other Preferred Stock shall in all cases bear to each other the same
ratio that accrued dividends per share on the shares of this Series and such
other Preferred Stock bear to each other. Holders of shares of this
Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein
provided, on this Series. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on this
Series which may be in arrears.
(10) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior
to this Series as to dividends and upon liquidation and other than as
provided in paragraph (9) of this Section (b)) shall be declared or paid or
set aside for payment or other distribution declared or made upon the
Common Stock or upon any other stock ranking junior to or on a
<PAGE>
9
parity with this Series as to dividends or upon liquidation, nor shall any
Common Stock or any other stock of the Corporation ranking junior to or on
a parity with this Series as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys paid to
or made available for a sinking fund for the redemption of any shares of
any such stock) by the Corporation (except by conversion into or exchange
for stock of the Corporation ranking junior to this Series as to dividends
and upon liquidation) unless, in each case, the full cumulative dividends
on all outstanding shares of this Series shall have been paid for all past
dividend payment periods.
(11) Dividends payable on each share of this Series for each full
Quarterly Dividend Period shall be computed by dividing the dividend rate
for such Quarterly Dividend Period by four and applying such rate against
the stated value per share of this Series. Dividends payable on this Series
for any period less than a full Quarterly Dividend Period, and for the
Initial Dividend Period, shall be computed on the basis of a 360 day year
consisting of 30 day months.
(c) Redemption.
(1) The shares of this Series shall not be redeemable prior to March 1,
1989. On and after March 1, 1989, 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 (i) in the case of any redemption on a
redemption date occurring on or after March 1, 1989, and prior to March 1,
1994, of $103 per share, and (ii) in the case of any redemption on a
redemption date occurring on or after March 1, 1994, of $100 per share,
plus, in each case, accrued and unpaid dividends thereon to the date fixed
for redemption.
(2) In the event that fewer than all the outstanding shares of this
Series are to be redeemed, the number of shares to be redeemed shall be
determined by the Board and the shares to be redeemed shall be determined
by lot or pro rata as may be determined by the Board or by any other method
as may be determined by the Board in its sole discretion to be equitable.
<PAGE>
10
(3) In the event the Corporation shall redeem shares of this Series,
notice of such redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the
redemption date, to each holder of record of the shares to be redeemed, at
such holder's address as the same appears on the stock register of the
Corporation. Each such notice shall state: (i) the redemption date; (ii)
the number of shares of this Series to be redeemed and, if fewer than all
the shares held by such holder are to be redeemed, the number of such
shares to be redeemed from such holder; (iii) the redemption price; (iv)
the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that dividends on
the shares to be redeemed will cease to accrue on such redemption date.
(4) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price) dividends on the
shares of this Series so called for redemption shall cease to accrue, and
said shares shall no longer be deemed to be outstanding, and all rights of
the holders thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price) shall cease. Upon
surrender in accordance with said notice of the certificates for any shares
so redeemed (properly endorsed or assigned for transfer, if the Board shall
so require and the notice shall so state), such shares shall be redeemed by
the Corporation at the redemption price aforesaid. In case fewer than all
the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without cost
to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued
shares of Preferred Stock, without designation as to series until such
shares are once more designated as part of a particular series by the Board.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are
<PAGE>
11
simultaneously redeemed, and the Corporation shall not purchase or
otherwise acquire any shares of this Series; provided, however, that the
foregoing shall not prevent the purchase or acquisition of shares of this
Series pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of this Series.
(d) Conversion or Exchange. The holders of shares of this Series shall not
have any rights herein to convert such shares into or exchange such shares
for shares of any other class or classes or of any other series of any class
or classes of capital stock of the Corporation.
(e) Voting. The shares of this Series shall not have any voting powers
either general or special, except that
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at
least 66-2/3% of all of the shares of this Series at the time outstanding,
given in person or by proxy, either in writing or by a vote at a meeting
called for the purpose at which the holders of shares of this Series shall
vote together as a separate class, shall be necessary for authorizing,
effecting or validating the amendment, 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, Preferences and Rights or any similar document relating to any
series of Preferred Stock) which would adversely affect the preferences,
rights, powers or priviledges 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
<PAGE>
12
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 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
<PAGE>
13
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 a default in preference dividends shall
no longer exist, the number of directors constituting the Board of
Directors of the Corporation shall be reduced by two. For the purposes
hereof, a "default in preference dividends" on the Preferred Stock shall be
deemed to have occurred whenever the amount of accrued dividends upon any
series of the Preferred Stock shall be equivalent to six full quarter-
yearly dividends or more, and, having so occurred, such default shall be
deemed to exist thereafter until, but only until, all accrued dividends on
all shares of Preferred Stock of each and every series then outstanding
shall have been paid to the end of the last preceding quarterly dividend
period.
(f) Liquidation Rights.
(1) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive out of
the assets of the Corporation, before any payment or distribution shall be
made on the Common Stock or on any other class of stock ranking junior to
the Preferred Stock upon liquidation, the amount of $100 per share, plus a
sum equal to all dividends (whether or not earned or declared) on such
shares accrued and unpaid thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or
business of the Corporation, nor the merger or consolidation of the
Corporation into or with any other corporation or the merger consolidation
of any other corporation into or with the Corporation, shall be deemed to
be a dissolution, liquidation or winding up, voluntary or involuntary, for
the purposes of this Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of
this
<PAGE>
14
Series as such shall have no right or claim to any of the remaining assets
of the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred
Stock ranking on a parity with the shares of this Series upon such
dissolution, liquidation or winding up unless proportionate distributive
amounts shall be paid on account of the shares of this Series, ratably, in
proportion to the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such dissolution, liquidation
or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to
be paid out of the assets of the Corporation available for distribution to
its stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to
the receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in
preference or priority to the holders of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or
upon liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation prices per share or sinking fund provisions, if
any, be
<PAGE>
15
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."
IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by J. Mikesell Thomas,
its Senior Vice President, and the same to be attested by Laurence Goldman, its
Assistant Secretary, this 17th day of February, 1984.
FIRST CHICAGO CORPORATION
by
/s/ J. Mikesell Thomas
-----------------------------
Senior Vice President
(Corporate Seal)
ATTEST:
/s/ Laurence Goldman
- -----------------------
Assistant Secretary
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE EIGHTEENTH DAY OF
APRIL, A.D. 1984, AT 12 O'CLOCK P.M.
* * * * * * * * * *
/s/ William T. Quillen
(Seal) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902051
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST CHICAGO CORPORATION
FIRST CHICAGO CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
First: That at a meeting of the Board of Directors of FIRST CHICAGO
CORPORATION resolutions were duly adopted setting forth a proposed amendment to
the Restated Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and that said amendment be submitted for the
consideration and approval of the stockholders of said corporation at the
Annual Meeting of Stockholders of said corporation to be held on April 13,
1984. The resolution setting forth the proposed amendment is as follows:
"RESOLVED, that the first sentence of Article Fourth
of the Corporation's Restated Certificate of Incorporation
be amended to read as follows:
'FOURTH. The total number of shares of all classes of stock
which the corporation shall have authority to issue is 64,000,000
shares which shall be divided into two classes as follows: 10,000,000
shares of Preferred Stock without par value (Preferred Stock) and
54,000,000 shares of Common Stock of the par value of $5.00 per share
(Common Stock).'"
Second: That thereafter, the Annual Meeting of Stockholders of said
corporation was duly held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware at which meeting the necessary
number of shares as required by statute were voted in favor of the amendment.
<PAGE>
Third: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
Fourth: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
Fifth: That said amendment shall become effective at the close of business on
the day it is filed in the office of the Secretary of State of Delaware.
IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused its corporate seal
to be hereunto affixed and this Certificate to be signed by Richard L. Thomas,
President of the Corporation, and attested to by Michael E. Jehle, Assistant
Secretary, this 13th day of April, 1984.
/s/ Richard L. Thomas
-----------------------------------------
Richard L. Thomas
President
ATTEST:
/s/ Michael E. Jehle
- ----------------------------
Assistant Secretary
(CORPORATE SEAL)
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF CERTIFICATE OF CHANGE OF
ADDRESS OF REGISTERED AGENT AS IT APPLIES TO "FIRST CHICAGO CORPORATION" AS
RECEIVED AND FILED IN THIS OFFICE ON THE TWENTH-SEVENTH DAY OF JULY, A.D. 1984
AT 4:30 O'CLOCK P.M.
* * * * * * * * * *
/s/ William T. Quillen
(Seal) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902052
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF CHANGE OF ADDRESS OF
REGISTERED OFFICE AND OF REGISTERED AGENT
PURSUANT TO SECTION 134 OF TITLE 8 OF THE DELAWARE CODE
To: DEPARTMENT OF STATE
Division of Corporations
Townsend Building
Federal Street
Dover, Delaware 19903
Pursuant to the provisions of Section 134 of Title 8 of the Delaware Code,
the undersigned Agent for service of process, in order to change the address
of the registered office of the corporations for which it is registered agent,
hereby certifies that:
1. The name of the agent is: The Corporation Trust Company
2. The address of the old registered office was:
100 West Tenth Street
Wilmington, Delaware 19801
3. The address to which the registered office is to be changed is:
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
The new address will be effective on July 30, 1984.
4. The name of the corporations represented by said agent are set forth
on the list annexed to this certificate and made a part hereof by
reference.
IN WITNESS WHEREOF, said agent has caused this certificate to be signed
on its behalf by its Vice-President and Assistant Secretary this 25th day
of July, 1984.
THE CORPORATION TRUST COMPANY
-------------------------------------------
(Name of Registered Agent)
/s/ Virginia Colvell
By -----------------------------------------
(Vice-President)
ATTEST:
/s/ Mary G. Murray
- ------------------------------
(Assistant Secretary)
<PAGE>
PAGE 218
STATE OF DELAWARE - DIVISION OF CORPORATIONS
CHANGE OF ADDRESS FILING FOR
CORPORATION TRUST AS OF JULY 27, 1984
DOMESTIC
0700130 FIRST CHICAGO CORPORATION 01/23/1969 D DE
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE FIFTEENTH DAY OF
APRIL, A.D. 1985, AT 2 O'CLOCK P.M.
* * * * * * * * * *
/s/ WILLIAM T. QUILLEN
(SEAL) ----------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902054
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST CHICAGO CORPORATION
FIRST CHICAGO CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
First: That at a meeting of the Board of Directors of FIRST CHICAGO
CORPORATION resolutions were duly adopted setting forth a proposed amendment to
the Restated Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and that said amendment be submitted for the
consideration and approval of the stockholders of said corporation at the
Annual Meeting of Stockholders of said corporation to be held on April 12,
1985. The resolution setting forth the proposed amendment is as follows:
"RESOLVED, that the first sentence of Article Fourth
of the Corporation's Restated Certificate of Incorporation
be amended to read as follows:
'FOURTH. The total number of shares of all classes of stock
which the corporation shall have authority to issue is 90,000,000
shares which shall be divided into two classes as follows: 10,000,000
shares of Preferred Stock without par value (Preferred Stock) and
80,000,000 shares of Common Stock of the par value of $5.00 per share
(Common Stock).'"
Second: That thereafter, the Annual Meeting of Stockholders of said
corporation was duly held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware at which meeting the necessary
number of shares as required by statute were voted in favor of the amendment.
<PAGE>
Third: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
Fourth: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
Fifth: That said amendment shall become effective at the close of business on
the day it is filed in the office of the Secretary of State of Delaware.
IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused its corporate seal
to be hereunto affixed and this Certificate to be signed by Richard L. Thomas,
President of the Corporation, and attested to by Michael E. Jehle, Assistant
Secretary, this 12th day of April, 1985.
/s/ RICHARD L. THOMAS
-------------------------------------------
Richard L. Thomas
President
ATTEST:
/s/ MICHAEL E. JEHLE
- ----------------------------
Assistant Secretary
(CORPORATE SEAL)
3120S
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
---------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF CORRECTION
OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE THIRTEENTH DAY OF
APRIL, A.D. 1987, AT 10 O'CLOCK A.M.
* * * * * * * * * *
/s/ WILLIAM T. QUILLEN
----------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902056
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE CERTIFICATE OF
THE VOTING POWERS, DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET
FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION
OR IN ANY AMENDMENT THEREOF, OF THE PREFERRED
STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS
SERIES C (WITHOUT PAR VALUE) OF FIRST CHICAGO
CORPORATION FILED IN THE OFFICE OF THE SECRETARY
OF STATE OF DELAWARE ON FEBRUARY 17, 1984
First Chicago Corporation, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the Corporation is First Chicago Corporation.
2. That a CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN
SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY
AMENDMENT THEREOF, OF THE PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE
DIVIDENDS SERIES C (WITHOUT PAR VALUE) OF FIRST CHICAGO CORPORATION was
filed by the Secretary of State of Delaware on February 17, 1984 and that
said certificate requires correction as permitted by subsection (F) of
section 103 of The General Corporation Law of the State of Delaware.
3. The inaccuracy or defect of said certificate to be corrected is as follows:
To insert a number in a blank in the calculation of the dividend rate on
the Preferred Stock, Series C.
4. Paragraph (b)(1) of the certificate is corrected to read as follows:
Dividend rates on the shares of this Series shall be: (i)
for the period (the "Initial Dividend Period") from the date
of their original issue to and including May 31, 1984, at such
rate per annum as shall be approved by a resolution duly adopted
by the Board of Directors of the Corporation, or by a committee
of the Board duly authorized by the Board to fix such rate, and (ii)
for each quarterly dividend period (hereinafter referred to as a
"Quarterly Dividend Period";
<PAGE>
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 March 1, June 1,
September 1 and December 1 in each year and shall end on and include
the day next preceding the first day of the next Quarterly Dividend
Period, at a rate per annum of the stated value thereof 1.80% below
the Applicable Rate (as defined in paragraph (2) of this Section (b)) in
respect of such Quarterly Dividend Period. Anything to the contrary
herein notwithstanding, the dividend rate for any Quarterly Dividend
Period shall in no event be less than 6.50% or greater than 12.50%
per annum. Such dividends shall be cumulative from the date of original
issue of such shares and shall be payable, when and as declared by the
Board, on the last day of February, May, August and November of each
year, commencing the last day of May 1984. Each such dividend shall
be paid to the holders of record of shares of this Series as they
appear on the stock register of the Corporation on such record date,
not exceeding 30 days preceding the payment date thereof, as shall be
fixed by the Board. Dividends on account of arrears for any past
Dividend Periods may be declared and paid at any time, without
reference to any regular dividend payment date, to holders of record
on such date, not exceeding 45 days preceding the payment date
thereof, as may be fixed by the Board.
IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused this certificate to
be signed by Kenneth G. Arnesen, its Executive Vice President, General Counsel
and Secretary, and attested by Ilona M. Berry, its Assistant Secretary, this
10th day of April, 1987.
First Chicago Corporation
By /s/ Kenneth G. Arnesen
----------------------------------
Kenneth G. Arnesen
Executive Vice President, General
Counsel and Secretary
ATTEST:
By: /s/ Ilona M. Berry
-------------------
Assistant Secretary
(CORPORATE SEAL)
7851E
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF ''FIRST CHICAGO CORPORATION'' FILED IN THIS OFFICE ON THE THIRTEENTH DAY OF
APRIL, A.D. 1987, AT 10:01 O'CLOCK A.M.
* * * * * * * * * *
/s/ William T. Quillen
(SEAL) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902058
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST CHICAGO CORPORATION
FIRST CHICAGO CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
First: That at a meeting of the Board of Directors of FIRST CHICAGO
CORPORATION resolutions were duly adopted setting forth a proposed amendment to
the Restated Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and that said amendment be submitted for the
consideration and approval of the stockholders of said corporation at the
Annual Meeting of Stockholders of said corporation to be held on April 10,
1987. The resolution setting forth the proposed amendment is as follows:
"RESOLVED, that Article Ninth of the Corporation's Restated Certificate of
Incorporation be amended to read as follows:
'NINTH. (a) No director shall be personally liable to the corporation or
any stockholder for monetary damages for breach of fiduciary duty as a
director, except for any matter in respect of which such director shall be
liable under Section 174 of Title 8 of the Delaware Code (relating to the
General Corporation Law of Delaware) or any amendment thereto or successor
provision thereto or shall be liable by reason that, in addition to any and
all other requirements for such liability, he (i) shall have breached his
duty of loyalty to the corporation or its stockholders, (ii) shall not have
acted in good faith or, in failing to act, shall not have acted in good
faith, (iii) shall have acted in a
<PAGE>
manner involving intentional misconduct or a knowing violation of law or,
failing to act, shall have acted in a manner involving intentional
misconduct or a knowing violation of law, or (iv) shall have derived an
improper personal benefit.
(b) The corporation shall indemnify and hold harmless each person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he, or a person
of whom he is the legal respresentative,is or was a director, officer or
employee of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation,partnership, joint venture, trust or other enterprise, to the
fullest extent permitted by the General Corporation Law of Delaware, as the
same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the corporation
to provide broader indemnification rights than said law permitted the
corporation to provide prior to such amendment) against all expenses
(including attorney's fees, judgments, fines, penalties and amounts paid in
settlement) actually and reasonably incurred by him in connection therewith.
The corporation may, by action of the Board of Directors, provide
indemnification to agents of the corporation with a lesser or the same scope
and effect as the foregoing indemnification of directors, officers and
employees of the corporation.
(c) Expenses incurred by a director, officer or employee in defending a
civil or criminal action, suit or proceeding shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director,
officer or employee to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation.
Such expenses incurred by agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
<PAGE>
(d) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article Ninth shall not be deemed exclusive of any other
rights to which a person seeking indemnification or advancement of expenses
may be entitled under any statute, By-law, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in his offical
capacity and as to action in another capacity while holding such office.
(e) Neither the amendment nor repeal of this Article Ninth, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with
this Article Ninth, shall eliminate or reduce the effect of this Article
Ninth in respect of any matter occurring, or any cause of action, suit or
claim that, but for this Article Ninth, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provison.' ''
Second: That thereafter, the Annual Meeting of Stockholders of said
corporation was duly held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware at which meeting the necessary
number of shares as required by statute were voted in favor of the amendment.
Third: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
Fourth: That said amendment shall become effective at the close of business on
the day it is filed in the office of the Secretary of State of Delaware.
<PAGE>
IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused its corporate seal
to be hereunto affixed and this Certificate to be signed by Kenneth G. Arnesen,
Executive Vice President, General Counsel and Secretary of the Corporation, and
attested to by Ilona M. Berry, Assistant Secretary, this 10th day of April,
1987.
/s/ Kenneth G. Arnesen
----------------------------------
Kenneth G. Arnesen
Executive Vice President, General
Counsel and Secretary
ATTEST:
/s/ Ilona M. Berry
- ------------------------
Assistant Secretary
(CORPORATE SEAL)
7851E
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK
DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE
THIRTIETH DAY OF SEPTEMBER, A.D. 1987, AT 10 O'CLOCK A.M.
* * * * * * * * * *
/s/ William T. Quillen
(SEAL) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902060
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS, OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
$3.75 CUMULATIVE CONVERTIBLE PREFERRED STOCK,
SERIES A
(Without Par Value)
OF
FIRST CHICAGO 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 First Chicago Corporation, a Delaware
corporation (hereinafter called the "Corporation''), at a meeting duly convened
and held on May 8, 1987, at which a quorum was present and acting throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of the Corporation, by the Restated Certificate of Incorporation
(the "Certificate of Incorporation") of the Corporation, the Board hereby
provides for and authorizes the issuance of a series of Preferred Stock of the
Corporation to consist of 2,150,000 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 "$3.75 Cumulative Convertible Preferred Stock, Series
A" (hereinafter called this "Series") and the number of shares constituting
the Series is 2,150,000. Shares of this Series shall have a stated value of
$50 per share. The number of authorized shares of this Series may be reduced
by further resolution duly adopted by the Board and by the filing of a
certificate pursuant to the provisions of the General Corporation Law of the
State of Delaware stating that such reduction has been so authorized, but the
number of authorized shares of this Series shall not be increased.
<PAGE>
(b) Dividend Rate.
(1) Shares of this Series shall be entitled to receive dividends at a fixed
annual rate of $3.75 per share. Such dividends shall be cumulative from the
date of original issue of such shares, that is, October 1, 1987, and shall be
payable, when and as declared by the Board, on the first day of January,
April, July and October of each year, commencing the first day of January,
1988. 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 the
applicable record date, not exceeding 30 days preceding the payment date
thereof, as shall be fixed by the Board. Dividends on account of arrears for
any past dividend periods may be declared and paid at any time, without
reference to any regular dividend payment date, to holders of record on such
date as may be fixed by the Board which shall not exceed 45 days preceding
such dividend payment date thereof.
(2) No full dividends shall be declared or paid or set apart for payment on
Preferred Stock of any series ranking, as to dividends, on a parity with this
Series for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this
Series and any other Preferred Stock ranking on a parity as to dividends with
this Series shall be declared pro rata so that the amount of dividends
declared per share on this Series and such other Preferred Stock shall in all
cases bear to each other the same ratio that accrued dividends per share on
the shares of this Series and such other Preferred Stock bear to each other.
Holders of shares of this Series shall not be entitled to any dividend,
whether payable in cash, property or stocks, in excess of full cumulative
dividends, as herein provided, on this Series. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on this Series which may be in arrears.
(3) 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 (2) 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
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<PAGE>
junior to or on a parity with this Series as to dividends or upon
liquidation, nor shall any Common Stock or any other stock of the Corporation
ranking junior to or on a parity with this Series as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to
this Series as to dividends and upon liquidation) unless, in each case, the
full cumulative dividends on all outstanding shares of this Series shall have
been paid for all past dividend payment periods.
(4) Dividends payable on this Series for any period less than a full
quarterly dividend period, and for the dividend period beginning on the date
of issuance of the shares of this Series, shall be computed on the basis of a
360-day year consisting of twelve 30-day months. The amount of dividends
payable on shares of this Series for each full quarterly dividend period shall
be computed by dividing by four the annual rate per share set forth in
Section (b)(1).
(c) Redemption.
(1) The shares of this Series shall not be redeemable prior to October 1,
1992. On and after October 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
prior to the conversion thereof pursuant to Section (d) hereof, at a
redemption price per share as indicated below, if such redemption is during
the periods indicated:
<TABLE>
<CAPTION>
If redeemed during Redemption
the twelve month Price
period beginning Per Share
------------------ ----------
<S> <C>
October 1, 1992 $51.50
October 1, 1993 $51.20
October 1, 1994 $50.90
October 1, 1995 $50.60
October 1, 1996 $50.30
October 1, 1997 and thereafter $50.00
</TABLE>
plus, in each case, accrued and unpaid dividends thereon to the date fixed for
redemption.
(2) In the event that fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board and the shares to be redeemed shall be determined by lot or pro
rata as may be determined by the Board or by any other method as may be
determined by the Board in its sole discretion to be equitable.
-3-
<PAGE>
(3) In the event the Corporation shall redeem shares of this Series,
notice of such redemption shall be given by first class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the redemption date, to
each holder of record of the shares to be redeemed, at such holder's address
as the same appears on the stock register of the Corporation. Each such
notice shall state: (i) the redemption date; (ii) the number of shares of
this Series to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the
redemption price; (v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date; and (vi) the day on which conversion rights
will terminate with respect to shares called for redemption as determined
pursuant to paragraph (d)(1).
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for
the payment of the redemption price) dividends on the shares of this Series
so called for redemption shall cease to accrue, and said shares shall no
longer be deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in accordance
with said notice of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board shall so require and the
notice shall so state), such shares shall be redeemed by the Corporation at
the redemption price aforesaid. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued
shares of Preferred Stock, without designation as to series until such shares
are once more designated as part of a particular series by the Board.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any
shares of this Series; provided, however, that the foregoing shall not prevent
the purchase or acquisition of shares of this Series (i) upon the conversion
of the Series into shares of Common Stock pursuant to Section (d), (ii) in
exchange for shares of Common Stock or any other class of stock ranking junior
to the Series as to dividends or upon
-4-
<PAGE>
liquidation, or (iii) pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding shares of this Series.
(d) Conversion.
(1) Subject to the provisions for adjustment hereinafter set forth, each
share of the Series shall be convertible at the option of the holder thereof,
in the manner hereinafter set forth, into fully paid and nonassessable shares
of Common Stock (as hereinafter defined) at the conversion rate, determined as
hereinafter set forth, provided that if any shares of the Series are called
for redemption, the conversion rights pertaining thereto will terminate at the
close of business on the day which is five Business Days (as hereinafter
defined) prior to the redemption date. Common Stock shall be delivered upon
conversion of shares of the Series at an initial rate (the "Conversion Rate")
of 1.391 shares of Common Stock for each share of this Series. The Conversion
Rate shall be adjusted in certain instances as provided in paragraph (2) of
this Section (d).
Any holder of shares of the Series desiring to convert such shares into
shares of Common Stock shall surrender the certificate or certificates for the
shares being converted, duly endorsed or assigned to the Corporation or in
blank, at the principal office of the Corporation or at a bank or trust
company appointed by the Corporation for that purpose, accompanied by a
written notice of conversion specifying the number of shares of the Series to
be converted and the name or names in which such holder wishes the certificate
or certificates for shares of Common Stock to be issued; in case such notice
shall specify a name or names other than that of such holder, such notice
shall be accompanied by payment of all transfer taxes payable upon the issue
of shares of Common Stock in such name or names. Promptly after receipt of
such notice of conversion, the Corporation shall issue and deliver or cause to
be issued and delivered to such holder a certificate or certificates for
shares of Common Stock resulting from such conversion. In case less than all
of the shares of the Series represented by a certificate are to be converted
by a holder, upon such conversion the Corporation shall also issue and deliver
or cause to be issued and delivered to such holder a certificate or
certificates for the shares of the Series not so converted. The holders of
shares of the Series at the close of business on a dividend payment record
date shall be entitled to receive the dividend payable on such shares (except
shares redeemed on a redemption date between such record date and the 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; provided, however, that shares surrendered
for conversion during the period from the close of business on any dividend
payment record date for the Series to the opening of business on the
corresponding dividend payment date (except shares called for
-5-
<PAGE>
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 on a dividend payment record date
who (or whose transferee) converts shares on a dividend payment date will
receive the dividend payable on such shares by the Corporation on such date,
and the converting holder need not include payment in the amount of such
dividend upon surrender of shares for conversion. Except as provided above,
no payment or adjustment will be made on account of accrued or unpaid
dividends upon the conversion of shares of the Series.
(2) The Conversion Rate shall be adjusted from time to time as follows:
(A) In case the Corporation shall pay or make a dividend or other
distribution on all shares of any class of capital stock of the Corporation
in shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall
be increased by multiplying such Conversion Rate by a fraction of which the
numerator shall be the sum of (i) the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and (ii) the total number of shares constituting such dividend
or other distribution, and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination, such increase to become effective immediately after the
opening of business on the day following the date fixed for such
determination.
(B) In case the Corporation shall issue rights or warrants to all holders
of its shares of Common Stock entitling them to subscribe for or purchase
Common Stock at a price per share less than the current market price per
share (determined as provided in paragraph (3) hereof) of the Common Stock
on the date fixed for the determination of stockholders entitled to receive
such rights or warrants, the Conversion Rate in effect at the opening of
business on the day following the date fixed for such determination shall be
increased by multiplying such Conversion Rate by a fraction of which the
numerator shall be the sum of (i) the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and (ii) the number of shares of Common Stock so offered for
subscription or purchase, and the denominator shall be the sum of (x) the
number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination and (y) the number of shares of Common
Stock which the aggregate offering price of the total number of shares of
-6-
<PAGE>
Common Stock so offered for subscription or purchase would purchase at such
current market price, such increase to become effective immediately after
the opening of business on the day following the date fixed for such
determination. In the event that any such rights or warrants are not so
issued, or to the extent any such rights or warrants expire without having
been exercised, the Conversion Rate shall again be readjusted retroactively
to the Conversion Rate which would then be in effect if such record date had
not been fixed with respect to such unissued or expired rights or warrants;
such subsequent adjustment shall not affect the number of Common Shares
issued upon any conversion prior to the date such subsequent adjustment is
made.
(C) In case the outstanding shares of Common Stock shall be subdivided
into a greater number of shares, the Conversion Rate in effect at the
opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately increased, and,
conversely, in case outstanding shares of Common Stock shall each be
combined into a smaller number of shares, the Conversion Rate in effect at
the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately reduced, such
increase or reduction, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(D) In case the Corporation shall, by dividend or otherwise, distribute
to all holders of shares of Common Stock evidences of indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
paragraph (2)(B), any dividend or distribution paid in cash out of the
surplus or retained earnings of the Corporation and any dividend or
distribution referred to in paragraph (2)(A)), the Conversion Rate shall be
adjusted so that it shall equal the rate determined by multiplying the
Conversion Rate in effect immediately prior to the close of business on the
date fixed for the determination of stockholders entitled to receive such
distribution by a fraction, the numerator of which shall be the current
market price per share (determined as provided in paragraph (3)) of the
Common Stock on the date fixed for such determination, the denominator of
which shall be such current market price per share of Common Stock less the
then fair market value (as determined by the Board of the Corporation,
whose determination shall be conclusive) of the portion of the assets or
evidences of indebtedness so distributed allocable to one share of Common
Stock, such adjustment to become effective immediately prior to the opening
of
-7-
<PAGE>
business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution.
(E) The reclassification of Common Stock into securities other than Common
Stock (other than any reclassification upon a consolidation or merger to
which paragraph (6) applies) shall be deemed to involve (i) a distribution
of such securities other than Common Stock to all holders of Common Stock
(and the effective date of such reclassification shall be deemed to be "the
date fixed for the determination of stockholders entitled to receive such
distribution" and the "date fixed for such determination" within the meaning
of paragraph (2)(D)), and (ii) a subdivision or combination, as the case may
be, of the number of shares of Common Stock outstanding immediately prior to
such reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification
shall be deemed to be "the day upon which such subdivision becomes
effective", or "the day upon which such combination becomes effective", as
the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (2)(C) of this Section
(d)).
(3) For the purpose of any computation under paragraphs (2)(B) and (D), the
current market price per share of Common Stock on any day shall be deemed to
be the average of the daily Closing Prices (as hereinafter defined) per share
of Common Stock for the 30 consecutive Trading Days (as hereinafter defined)
ending five Trading Days before the day in question.
(4) Notwithstanding the provisions of paragraph (2) above, no adjustment in
the Conversion Rate shall be required unless such adjustment (plus any
adjustments not previously made by reason of this paragraph (4)) would require
an increase or decrease of at least 2 1/2% in such Conversion Rate; provided,
however, that any adjustments which by reason of this paragraph (4) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section (d) shall be made
to the nearest one-thousandth of a Common Share.
(5) The Corporation may make such increases in the Conversion Rate, in
addition to those required by this Section (d), as it considers to be
advisable in order to avoid or diminish any income tax liability to any holder
of shares of Common Stock resulting from any dividend or distribution of stock
or issuance of rights or warrants to purchase or subscribe for stock or from
any event treated as such for income tax purposes or for any other reasons.
The Corporation shall have the power to resolve any ambiguity or correct any
error in this Section (d) and its actions in so doing shall be final and
conclusive in the absence of manifest error.
-8-
<PAGE>
(6) In case the Corporation shall effect any capital reorganization of the
Common Stock (other than a subdivision, combination, capital reorganization or
reclassification provided for in paragraph (2)) or shall consolidate, merge or
engage in a statutory share exchange with or into any other corporation (other
than a consolidation, merger or share exchange in which the Corporation is the
surviving corporation and each share of Common Stock outstanding immediately
prior to such consolidation or merger is to remain outstanding immediately
after such consolidation or merger) or shall sell or transfer all or
substantially all its assets to any other corporation, lawful provision shall
be made as a part of the terms of such transaction whereby the holders of
shares of the Series shall receive upon conversion thereof, in lieu of each
share of Common Stock which would have been issuable upon conversion of such
stock if converted immediately prior to the consummation of such transaction,
the same kind and amount of stock (or other securities, cash or property, if
any) as may be issuable or distributable in connection with such transaction
with respect to each share of Common Stock outstanding at the effective time
of such transaction, subject to subsequent adjustments for subsequent stock
dividends and distributions, subdivisions or combinations of shares, capital
reorganizations, reclassifications, consolidations, mergers or share
exchanges, as nearly equivalent as possible to the adjustments provided for in
this Section (d).
(7) Whenever the Conversion Rate is adjusted as herein provided:
(A) the Corporation shall compute the adjusted Conversion Rate and shall
cause to be prepared a certificate signed by the chief financial or
accounting officer or treasurer of the Corporation setting forth the
adjusted Conversion Rate and showing in reasonable detail the facts upon
which such adjustment is based and the computation thereof and such
certificate shall forthwith be filed with each transfer agent for the
Series; and
(B) a notice stating that the Conversion Rate has been adjusted and
setting forth the adjusted Conversion Rate shall, as soon as practicable, be
mailed to the holders of record of outstanding shares of the Series.
(8) Conversion shall be deemed to have been made as of the date of
surrender of certificates for the shares of this Series to be converted, and
the giving of written notice and payment, as prescribed in paragraph (1) of
this Section (d); and the person entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such Common Stock on such date. The Corporation shall not be
required to deliver
-9-
<PAGE>
certificates for shares of its Common Stock while the stock transfer books
for such stock or for this Series are duly closed for any purpose, but
certificates for shares of Common Stock shall be issued and delivered as soon
as practicable after the opening of such books.
(9) The term "Common Stock" as used in this resolution means the
Corporation's Common Stock, $5.00 par value per share, as the same exists at
the date of filing of the Certificate of Designation relating to this Series
or any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
(10) Any shares of this Series which shall at any time have been converted
shall, after such conversion, 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. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, for the purpose of issuance
upon conversion of shares of the Series, the full number of shares of Common
Stock then issuable upon the conversion of all shares of the Series then
outstanding and shall take all action necessary so that shares of Common Stock
so issued will be validly issued, fully paid and non-assessable; provided,
however, that nothing contained herein shall preclude the Corporation from
satisfying its obligations in respect of the conversion of the shares by
delivery of purchased shares of Common Stock which are held in the treasury of
the Corporation.
(11) The Corporation will pay any and all stamp or similar taxes that may
be payable in respect of the issuance or delivery of shares of Common Stock on
conversion of shares of the Series. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares of Common Stock in a name
other than that in which the shares of the Series so converted were
registered, and no such issuance or delivery shall be made unless and until
the person requesting such issuance 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.
(12) No fractional shares or scrip representing fractional shares of Common
Stock shall be issued upon the conversion of shares of the Series. If any such
conversion would otherwise require the issuance of such a fractional share
(determined to the extent of four decimal places after taking into account all
shares of the Series being converted into Common Stock by the holder), an
amount equal to such fraction multiplied by the Closing Price per share of
Common Stock for the day of conversion shall be paid to the holder in cash by
the Corporation.
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<PAGE>
(13) Notwithstanding anything elsewhere contained herein, any funds which
at any time shall have been deposited by the Corporation or on its behalf
with any paying agent for the purpose of paying dividends on or the
redemption price of any shares of the Series and which shall not be required
for such purposes because of the conversion of such shares shall after such
conversion be repaid to the Corporation by the paying agent.
(14) The certificate of any independent firm of public accountants of
recognized standing selected by the Board verifying the correctness of any
computation made under this Section (d) shall, in the absence of manifest
error, be conclusive and final.
(15) For purposes of this resolution, the term
(i) "Closing Price" shall mean the last sale price as shown on the New
York Stock Exchange Composite Transactions Tape, or in case no such sale
takes place on such day, the average of the closing bid and asked prices on
the New York Stock Exchange, or, if the Common Stock is not listed or
admitted to trading on such Exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, or, if
it is not listed or admitted to trading on any national securities exchange,
on the National Association of Securities Dealers Automated Quotations
National Market System, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on such National
Market System, the average of the closing bid and asked prices as furnished
by any New York Stock Exchange member firm selected from time to time by the
Board for such purposes (other than the Corporation or a subsidiary
thereof).
(ii) "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 on any national securities exchange, a day
which is a Business Day.
(iii) "Business Day" shall mean a day which is not a Saturday, Sunday or
other day on which commercial banking institutions in the City of Chicago,
Illinois or The City of New York, New York are authorized or obligated by
law or executive order to close.
-11-
<PAGE>
(e) Voting
------
(1) The shares of this Series 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 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
provision of the Certificate of Incorporation or of any certificate
amendatory thereof or supplemental thereto (including any Certificate of
Designation, Preferences and Rights or any similar document relating to any
series of Preferred Stock) which would adversely affect the preferences,
rights, powers or privileges of this Series;
(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 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;
(C) If at the time of any annual meeting of stockholders for the election
of directors a default in preference dividends (as defined below) on the
Preferred Stock shall exist, the number of directors constituting the Board
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
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<PAGE>
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, (i) any vacancy in the office of a Preferred
Director may be filled (except as provided in the following clause (ii)) by
an instrument in writing signed by the remaining Preferred Director and
filed with the Corporation and (ii) 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 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.
(2) A holder of shares of this Series shall be entitled to one vote per
share of the Series held by him when such holder is permitted to vote pursuant
to the foregoing.
(f) Liquidation Rights.
(1) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made
on the Common Stock or on any other class of stock ranking junior to the
Preferred Stock upon liquidation, the amount of $50 per share, plus a sum
equal to all dividends (whether or not earned or declared) on such shares
accrued and unpaid thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business of
the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary, for the
purposes of this Section (f).
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<PAGE>
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of
this Series as such shall have no right or claim to any of the remaining
assets of the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the
full distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of this Series then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(q) Priority. For purposes of this resolution, any stock of any class or
classes of the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in
preference or priority to the holders of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if
any, be different from those of this Series, if such stock is the
Corporation's Preferred Stock with Cumulative and Adjustable Dividends
(Without Par Value), Preferred Stock with Cumulative and Adjustable
Dividends, Series B (Without Par Value) or Preferred Stock with Cumulative
and Adjustable Dividends, Series C (Without Par Value), or if the holders of
such stock shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation,
as the case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority, one over the other, as
between the holders of such stock and the holders of shares of this Series;
and
<PAGE>
(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.
(h) Sinking or Retirement Fund. The shares of this Series shall not be
entitled to the benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such stock."
IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Robert A. Rosholt,
its Senior Vice President and Treasurer, and the same to be attested by Jeffrey
S. Lillien, its Assistant Secretary, this 29th day of September, 1987.
FIRST CHICAGO CORPORATION
/s/ Robert A. Rosholt
By:_____________________________
Senior Vice President and
Treasurer
(Corporate Seal)
ATTEST:
/s/ Jeffrey S. Lillien
_________________________
Assistant Secretary
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK
DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE FIFTEENTH
DAY OF DECEMBER, A.D. 1987, AT 10 O'CLOCK A.M.
* * * * * * * * * *
/s/ William T. Quillen
(SEAL) ----------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902063
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF INCREASE TO
CERTIFICATE OF AMENDMENT
OF
FIRST CHICAGO CORPORATION
-----------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------------------
The undersigned DOES HEREBY CERTIFY that the following action was taken
pursuant to authority granted by the Board of Directors of First Chicago
Corporation, a Delaware corporation (hereinafter called the "Corporation"), at a
meeting duly convened and held on May 8, 1987, at which a quorum was present and
acting throughout:
The Certificate of Stock Designation relating to the Corporation's
$3.75 Cumulative Convertible Preferred Stock, Series A, executed
on September 29, 1987, and adopted pursuant to a resolution of
the corporation's Board of Directors on May 8, 1987 is amended as
follows: That the authorized number of shares of the series of "$3.75
Cumulative Convertible Preferred Stock, Series A" be increased from
2,150,000 to 2,152,462 shares; and
This increase shall be deemed made as of the original effective
date of the Corporation's Certificate of Designation relating to
its $3.75 Cumulative Convertible Preferred Stock Series A.
IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Robert A. Rosholt,
its Senior vice President and Treasurer, and the same to be attested by
Paul K. Johnson, its Assistant Secretary, this 11th day of December, 1987.
FIRST CHICAGO CORPORATION
/s/ Robert A. Rosholt
By: ______________________________
Senior Vice President and
Treasurer
(Corporate Seal)
/s/ Paul K. Johnson
Attest: _______________________
Assistant Secretary
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE EIGHTH
DAY OF APRIL, A.D. 1988, AT 12 O'CLOCK P.M.
* * * * * * * * * *
/s/ William T. Quillen
(SEAL) ----------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902066
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST CHICAGO CORPORATION
FIRST CHICAGO CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
First: That at a meeting of the Board of Directors of FIRST CHICAGO
CORPORATION resolutions were duly adopted setting forth a proposed amendment to
the Restated Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and that said amendment be submitted for the
consideration and approval of the stockholders of said corporation to be held
on April 8, 1988. The resolution setting forth the proposed amendment is as
follows:
"RESOLVED, that the first sentence of Article Fourth
of the Corporation's Restated Certificate of Incorporation
be amended to read as follows:
'FOURTH. The total number of shares of all classes of stock
which the corporation shall have authority to issue is 115,000,000
shares which shall be divided into two classes as follows: 15,000,000
shares of Preferred Stock without par value (Preferred Stock) and
100,000,000 shares of Common Stock of the par value of $5.00 per share
(Common Stock).'"
Second: That thereafter, the Annual Meeting of Stockholders of said
corporation was duly held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware, at which meeting the
necessary number of shares as required by statute were voted in favor
of the amendment.
Third: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
<PAGE>
Fourth: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
Fifth: That said amendment shall become effective at the close of business on
the day it is filed in the office of the Secretary of State of Delaware.
IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused its corporate seal
to be hereunto affixed and this Certificate to be signed by J. Mikesell Thomas,
Executive Vice President and Chief Financial Officer of the Corporation,
and attested to by Laurence Goldman, Assistant Secretary, this 8th day
of April, 1988.
/s/ J. Mikesell Thomas
-----------------------------------------
J. Mikesell Thomas
Executive Vice President and
Chief Financial Officer
ATTEST:
/s/ Laurence Goldman
- ----------------------------
Assistant Secretary
(CORPORATE SEAL)
723138037
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE,
DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE
OF STOCK DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON
THE TWENTIETH DAY OF JANUARY, A.D. 1989, AT 10 O'CLOCK A.M.
* * * * * * * * * *
/s/ William T. Quillen
(SEAL) ----------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902068
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
FIRST CHICAGO CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
--------------------------------
First Chicago Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted
by the Board of Directors of the Corporation as required by Section 151 of
the General Corporation Law at a meeting duly called and held on November 18,
1988:
RESOLVED, that pursuant to the authority granted to and vested in the Board of
Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") in accordance with the provisions of the Certificate of
Incorporation, the Board of Directors hereby creates a series of Preferred
Stock, without par value (the "Preferred Stock"), of the Corporation and hereby
states the designation and number of shares, and fixes the relative rights,
preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 1,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than
the number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
<PAGE>
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of Common Stock, par
value $5.00 per share (the "Common Stock"), of the Corporation, and of any other
junior stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September and
December in 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 Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1 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 non-cash 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 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
Series A Preferred Stock. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Comon Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of Series A
Preferred Stock 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.
(B) The Corporation shall declare a dividend or distribution on the Series A
Preferred Stock as pro-
-2-
<PAGE>
vided in paragraph (A) of this Section 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 $1 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, 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 Series A Preferred Stock 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 Series A
Preferred Stock 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 Series A Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be not more than
60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Each share of Series A Preferred Stock shall entitle the holder
thereof to one vote on all matters submitted to a vote of the stockholders
of the Corporation.
-3-
<PAGE>
(B) Except as otherwise provided herein, in any other Certificate of
Designation, Preferences and Rights creating a series of Preferred Stock
or any similar stock, or by law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock and any other
capital stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of stockholders
of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire
-4-
<PAGE>
shares of any such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred
Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and
in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other Certificate
of Designations creating a series of Preferred Stock or any similar stock or
as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A Preferred Stock shall
have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, provided that the holders of shares of Series A Preferred Stock
shall be enti-
-5-
<PAGE>
tled to receive an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of shares of Common Stock,
or (2) to the holders of shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series
A Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall
at any time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the
proviso in clause (1) 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.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case
each share of Series A Preferred Stock shall at the same time be similarly
exchanged or changed into an amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of
shares of Series A Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of
Common
-6-
<PAGE>
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.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all other
series of any class of the Corporation's Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change
the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders
of at least two-thirds of the outstanding shares of Series A Preferred Stock,
voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporatin by J. Mikesell Thomas, its Executive Vice President and
Chief Financial Officer, and attested by an Assistant Secretary of the
Corporation this 20th day of January, 1989.
/s/ J. Mikesell Thomas
------------------------------------
J. Mikesell Thomas
Executive Vice President and
Chief Financial Officer
Attest:
/s/ Laurence Goldman
- ---------------------
Assistant Secretary
[SEAL]
-7-
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE TWENTIETH
DAY OF APRIL, A.D. 1990, AT 2:30 O'CLOCK P.M.
* * * * * * * * * *
/s/ William T. Quillen
(SEAL) ----------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902072
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST CHICAGO CORPORATION
FIRST CHICAGO CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
First: That at a meeting of the Board of Directors of FIRST CHICAGO
CORPORATION resolutions were duly adopted setting forth a proposed amendment to
the Restated Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and that said amendment be submitted for the
consideration and approval of the stockholders of said corporation to be held
on April 20, 1990. The resolution setting forth the proposed amendment
is as follows:
"RESOLVED, that the first sentence of Article Fourth
of the Corporation's Restated Certificate of Incorporation
be amended to read as follows:
'FOURTH. The total number of shares of all classes of stock
which the corporation shall have the authority to issue is 165,000,000
shares which shall be divided into two classes as follows: 15,000,000
shares of Preferred Stock without par value (Preferred Stock) and
150,000,000 shares of Common Stock of the par value of $5.00 per share
(Common Stock).'"
Second: That thereafter, the Annual Meeting of Stockholders of said
corporation was duly held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware, at which meeting the
necessary number of shares as required by statute were voted in favor
of the amendment.
<PAGE>
Third: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
Fourth: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
Fifth: That said amendment shall become effective at the close of business on
the day it is filed in the office of the Secretary of State of Delaware.
IN WITNESS WHEREOF, FIRST CHICAGO CORPORATION has caused its corporate seal
to be hereunto affixed and this Certificate to be signed by Robert A. Rosholt,
Senior Vice President and Treasurer of the Corporation, and attested to
by Laurence Goldman, Assistant Secretary, this 20th day of April, 1990.
/s/ Robert A. Rosholt
----------------------------------------------
Robert A. Rosholt
Senior Vice President and
Treasurer
ATTEST:
/s/ Laurence Goldman
- ----------------------------
Assistant Secretary
(CORPORATE SEAL)
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK
DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE
TWENTY-EIGHTH DAY OF MAY, A.D. 1991, AT 4:30 O'CLOCK P.M.
* * * * * * * * * *
/s/ William T. Quillen
(Seal) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: 3902073
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
10% CUMULATIVE PREFERRED STOCK
SERIES D
(Stated Value $25 per share)
OF
FIRST CHICAGO CORPORATION
-------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------------------
The undersigned DOES HEREBY CERTIFY that the following resolutions were duly
adopted by the Board of Directors (the "Board of Directors") of First Chicago
Corporation, a Delaware corporation (the "Corporation"), and by the Preferred
Stock Committee of the Board of Directors (the "Preferred Stock Committee"),
respectively, pursuant to authority conferred upon the Board of Directors by the
provisions of the Restated Certificate of Incorporation of the Corporation which
authorizes the issuance of up to 15,000,000 shares of Preferred Stock without
par value, and pursuant to authority conferred upon the Preferred Stock
Committee by Section 141(c) of the General Corporation Law of the State of
Delaware, by Article III, Section 10 of the By-Laws of the Corporation, by
Section 141(f) of the General Corporation Law of the State of Delaware, and by
the resolutions of the Board of Directors adopted at a meeting duly convened and
held on June 8, 1990, at which a quorum was present and acting throughout:
1. The Board of Directors on June 8, 1990 adopted the following resolutions:
RESOLVED, that the Corporation issue up to 6,000,000 shares of its Preferred
Stock, without par value, having an aggregate issuance price of not more than
$150,000,000 (the "Preferred Shares") by filing with the Secretary of the
State of Delaware, pursuant to Section 151 of the General Corporation Law of
the State of Delaware, a certificate prepared in accordance with such Section
151 (the "Certificate of Designation") in such form as is approved by
subsequent action of the Board of Directors or by the Preferred Stock
Committee of the Board of Directors (the "Preferred Stock Committee")
relating to such Preferred Shares; and that the resolution set forth in said
Certificate of Designation be, and it hereby is, adopted by the Board of
Directors, and that the proper officers of the Corporation are authorized to
execute and file such Certificate of
<PAGE>
Designation pursuant to the General Corporation Law of the State of Delaware;
FURTHER RESOLVED, that the Board of Directors appoints a Preferred Stock
Committee, composed of Messrs. Barry F. Sullivan and Richard L. Thomas, which
shall have the powers set forth in these resolutions and in the General
Corporation Law of the State of Delaware and that execution and delivery of
any document or certificate signed by any member of the Preferred Stock
Committee or by the Secretary of the Corporation shall be conclusive evidence
of the action taken by the Preferred Stock Committee as contemplated,
required or authorized by these resolutions; and the Preferred Stock
Committee or any member thereof be, and they hereby are, given full power and
authority to authorize the execution of such documents and the taking of such
actions (including the filings with all necessary governmental or regulatory
agencies) as may be necessary or desirable to effectuate the issuance and
sale of the Preferred Shares as contemplated by these resolutions;
FURTHER RESOLVED, that the Preferred Stock Committee is authorized and
empowered, with full power and authority, to act on behalf and in the stead of
the Board of Directors to authorize the issuance of the Preferred Shares, to
fix the dividend rate or rates of the Preferred Shares, to determine the
number of Preferred Shares, to determine the price at which the Preferred
Shares will be sold by the Corporation, to determine whether the Preferred
Shares shall be convertible into shares of the Corporation's Common Stock, $5
par value per share (the "Common Shares") and, if determined to be so
convertible, the basis (which may be by formula) and terms upon which the
shares of Preferred Shares shall be so convertible into the Common Shares, to
determine the liquidation preference (which may be less than the offering
price) of the Preferred Shares, to determine any redemption provisions of the
Preferred Shares and to determine the designations, preferences and
privileges, the relative, participating, optional or other special rights,
and the qualifications, limitations and restrictions thereof, to the fullest
extent permitted by the General Corporation Law of the State of Delaware as
it now exists or is hereafter amended;
FURTHER RESOLVED, that the Certificate of Designation for the Preferred Shares
shall provide that such series of Preferred Stock (the "Series") shall have
the following voting rights:
(1) The shares of this Series 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 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
<PAGE>
the provisions of the Certificate of Incorportion or of any certificate
amendatory thereof or supplemental thereto (including any Certificate of
Designation, Preferences and Rights or any similar document relating to any
series of Preferred Stock) which would adversely affect the preferences,
rights, powers or privileges of this Series;
(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 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;
(C) If at the time of any annual meeting of stockholders for the
election of directors a default in preference dividends (as defined below) 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, (i) any vacancy in the office
of a Preferred Director may be filled (except as provided in the following
clause (ii)) by an instrument in writing signed by the remaining Preferred
Director and filed with the Corporation
<PAGE>
and (ii) 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.
(2) A holder of shares of this Series shall be entitled to one vote
per share of the Series held by him when such holder is permitted to vote
pursuant to the foregoing.
2. The Preferred Stock Committee on May 22, 1991, pursuant to the authority
conferred upon the Preferred Stock Committee by Section 141(c) of the General
Corporation Law of the State of Delaware, by Article III, Section 10 of the
By-Laws of the Corporation and Section 141(f) of the General Corporation Law of
the State of Delaware and by the resolutions of the Board of Directors set forth
above, adopted the following resolutions:
RESOLVED, that pursuant to authority conferred upon the Preferred Stock
Committee of the Corporation, pursuant to resolutions adopted by the Board of
Directors of the Corporation on June 8, 1990, the Preferred Stock Committee
hereby provides for and authorizes the issuance of a series of Preferred
Stock of the Corporation to consist of 6,000,000 shares, and hereby fixes
the 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 "10% Cumulative Preferred Stock, Series
D" (hereinafter called this "Series") and the number of shares constituting
this Series is 6,000,000. Shares of this Series shall have a stated value of
$25 per share. The number of authorized shares of this Series may be reduced
by further resolution duly adopted by the Board of Directors or the Preferred
Stock Committee and by the filing of a certificate pursuant to the
provisions of the General Corporation Law of the State of Delaware stating
that such
<PAGE>
reduction has been so authorized, but the number of authorized shares of
this Series shall not be increased.
(b) Dividend Rate.
(1) Shares of this Series shall be entitled to receive dividends at a
fixed annual rate of $2.50 per share. Such dividends shall be cumulative
from the date of original issue of such shares, that is, May 30, 1991,
and shall be payable, when and as declared by the Board of Directors, on the
first day of January, April, July and October of each year, commencing the
first day of July, 1991. 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 the applicable record date, not exceeding 30 days preceding
the payment date thereof, as shall be fixed by 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 as may be fixed by the
Board of Directors which shall not exceed 45 days preceding such dividend
payment date thereof.
(2) No full dividends shall be declared or paid or set apart for
payment on Preferred Stock of any series ranking, as to dividends, on a
parity with this Series for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on this Series
for all dividend payment periods terminating on or prior to the date of
payment of such full cumulative dividends. When dividends are not paid in
full, as aforesaid, upon the shares of this Series and any other Preferred
Stock ranking on a parity as to dividends with this Series, all dividends
declared upon shares of this Series and any other Preferred Stock ranking on
a parity as to dividends with this Series shall be declared pro rata so
that the amount of dividends declared per share on this Series and such
other Preferred Stock shall in all cases bear to each other the same ratio
that accrued dividends per share on the shares of this Series and such other
Preferred Stock bear to each other. Holders of shares of this Series shall
not be entitled to any dividend, whether payable in cash, property or
stocks, in excess of full cumulative dividends, as herein provided, on this
Series. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on this Series which may be
in arrears.
(3) 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 (2) 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
<PAGE>
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.
(4) Dividends payable on this Series for any period less than a full
quarterly dividend period, and for the dividend period beginning on the date
of issuance of the shares of this Series, shall be computed on the basis
of a 360-day year consisting of twelve 30-day months. The amount of
dividends payable on shares of this Series for each full quarterly dividend
period shall be computed by dividing by four the annual rate per share set
forth in Section (b)(1).
(c) Redemption.
(1) The shares of this Series shall not be redeemable prior to June 1,
1994. On and after June 1, 1994, the Corporation, at its option, and with
the prior consent of the Board of Governors of the Federal Reserve System
may redeem shares of this Series, as a whole or in part, at any time or from
time to time, at a redemption price per share as indicated below, if such
redemption is during the periods indicated:
<TABLE>
<CAPTION>
If redeemed during Redemption
the twelve month Price
period beginning Per Share
------------------ ----------
<S> <C>
June 1, 1994 $25.75
June 1, 1995 $25.375
June 1, 1996 and thereafter $25.00
</TABLE>
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 as 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
<PAGE>
holder; (iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the
redemption price; and (v) that dividends on the shares to be redeemed will
cease to accrue on such redemption date.
(4) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price) dividends on the
shares of this Series so called for redemption shall cease to accrue, and
said shares shall no longer be deemed to be outstanding, and all rights of
the holders thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price) shall cease. Upon
surrender in accordance with said notice of the certificates for any shares
so redeemed (properly endorsed or assigned for transfer, if the Board 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.
(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) Nothwithstanding 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 herein to convert such shares into or exchange such shares for shares
of any other class or classes or of any other series of any class or
classes of capital stock of the Corporation.
(e) Liquidation Rights.
(1) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of the shares of this Series shall be entitled to
receive out of the assets of the Corporation, before any payment or
distribution shall be made on the Common Stock or on any other class of
stock ranking junior to the Preferred Stock upon liquidation, the amount of
$25 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.
<PAGE>
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into
or with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary, for the
purposes of this Section (e).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (e), the holders of
this Series as such shall have no right or claim to any of the remaining
assets of the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation
or winding up of the Corporation, whether voluntary or involuntary, shall
be insufficient to pay in full all amounts to which such holders are
entitled pursuant to paragraph (1) of this Section (e), no such
distribution shall be made on account of any shares of any other class or
series of Preferred Stock ranking on a parity with the shares of this
Series upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the shares
of this Series, ratably, in proportion to the full distributable amounts for
which holders of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of this Series then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders all amounts to which such holders are
entitled pursuant to paragraph (1) of this Section (e) 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.
(f) Priority. 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 holder of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or
upon liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation prices per share or sinking fund provisions,
if any, be different from those of this Series, if such stock is the
Corporation's Preferred Stock with Cumulative and Adjustable Dividends
(Without Par Value), Preferred Stock Cumulative and Adjustable Dividends,
Series B (Without Par Value), Preferred Stock with Cumulative and
Adjustable Dividends, Series C (Without Par Value), or the Corporation's
$3.75 Cumulative
<PAGE>
Convertible Preferred Stock, Series A (Without Par Value) or if the holders
of such stock shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in proportion to their respective dividend
rates or liquidation prices, without preference or priority, one over the
other, as between the holders of such stock and the holders of shares of
this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the holders of
shares of this Series shall be entitled to receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the holders
of shares of such class or classes.
(g) Sinking or Retirement Fund. The shares of this Series shall not be
entitled to the benefit of a sinking or retirement fund to be applied to
the purchase or redemption of such stock."
IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Richard L.
Thomas, its President, and the same to be attested by Mark K. Cullen, its
Assistant Secretary, this 22nd day of May, 1991.
FIRST CHICAGO CORPORATION
By: /s/ Richard L. Thomas
----------------------
President
(Corporate Seal)
ATTEST:
/s/ Mark K. Cullen
- -------------------
Assistant Secretary
7489E
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
STOCK DESIGNATION OF FIRST CHICAGO CORPORATION FILED IN THIS OFFICE ON THE
TWELFTH DAY OF NOVEMBER, A.D. 1992, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE COUNTY
RECORDER OF DEEDS FOR RECORDING.
* * * * * * * * * *
/s/ William T. Quillen
(SEAL) --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902075
DATE: 05/18/1993
723138037
<PAGE>
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
8.45% CUMULATIVE PREFERRED STOCK,
SERIES E
(Stated Value $625 per share)
OF
FIRST CHICAGO CORPORATION
-------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------------------
The undersigned DOES HEREBY CERTIFY that the following resolutions were duly
adopted by the Board of Directors (the "Board of Directors") of First Chicago
Corporation, a Delaware corporation (the "Corporation"), and by the Preferred
Stock Committee of the Board of Directors (the "Preferred Stock Committee"),
respectively, pursuant to authority conferred upon the Board of Directors by the
provisions of the Restated Certificate of Incorporation of the Corporation which
authorizes the issuance of up to 15,000,000 shares of Preferred Stock without
par value, and pursuant to authority conferred upon the Preferred Stock
Committee by Section 141(c) of the General Corporation Law of the State of
Delaware, by Article III, Section 10 of the By-Laws of the Corporation, by
Section 141(f) of the General Corporation Law of the State of Delaware, and by
the resolutions of the Board of Directors adopted by means of a unanimous
written consent of the Board of Directors dated August 21, 1992:
1. The Board of Directors on August 21, 1992 adopted the following
resolutions:
RESOLVED, that the Corporation issue up to 480,000 shares of its Preferred
Stock, without par value, having an aggregate issuance price of not more
than $300,000,000 (the "Preferred Shares") by filing with the Secretary of
State of Delaware, pursuant to Section 151 of the General Corporation Law
of the State of Delaware, a certificate prepared in accordance with such
Section 151 (the "Certificate of Designation") in such form as is approved
by subsequent action of the Board of Directors or by the Preferred Stock
Committee of the Board of Directors (the "Preferred Stock Committee")
relating to such Preferred Shares; and that the resolution set forth in
said Certificate of Designation be, and it hereby is, adopted by the Board
of Directors, and that the proper officers of the Corporation are
authorized to execute and file such Certificate of
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 11/12/1992
732317001 - 700130
<PAGE>
Designation pursuant to the General Corporation Law of the State of Delaware;
FURTHER RESOLVED, that the Board of Directors appoints a Preferred Stock
Committee, composed of Messrs. Richard L. Thomas and John H. Bryan, which shall
have the powers set forth in these resolutions and in the General Corporation
Law of the State of Delaware and that execution and delivery of any document or
certificate signed by any member of the Preferred Stock Committee or by the
Secretary of the Corporation shall be conclusive evidence of the action taken
by the Preferred Stock Committee as contemplated, required or authorized by
these resolutions; and the Preferred Stock Committee or any member thereof be,
and they hereby are, given full power and authority to authorize the execution
of such documents and the taking of such actions (including the filings with
all necessary governmental or regulatory agencies) as may be necessary or
desirable to effectuate the issuance and sale of the Preferred Shares as
contemplated by these resolutions;
FURTHER RESOLVED, that the Preferred Stock Committee is authorized and
empowered, with full power and authority, to act on behalf and in the stead of
the Board of Directors to authorize the issuance of the Preferred Shares, to fix
the dividend rate or rates of the Preferred Shares, to determine the number of
Preferred Shares, to determine the price at which the Preferred Shares will be
sold by the Corporation, to determine whether the Preferred Shares shall be
convertible into shares of the Corporation's Common Stock, $5 par value per
share (the "Common Shares") and, if determined to be so convertible, the basis
(which may be by formula) and terms upon which the shares of Preferred Shares
shall be so convertible into the Common Shares, to determine whether the
Preferred Shares shall be represented by depositary shares (the "Depositary
Shares") and, if so determined, the fractional interest of a Preferred Share to
be represented by each Depositary Share, to determine the liquidation preference
(which may be less than the offering price) of the Preferred Shares, to
determine any redemption provisions of the Preferred Shares and to determine the
designations, preferences and privileges, the relative, participating, optional
or other special rights, and the qualifications, limitations and restrictions
thereof, to the fullest extent permitted by the General Corporation Law of the
State of Delaware as it now exists or is hereafter amended;
FURTHER RESOLVED, that the Certificate of Designation for the Preferred Shares
shall provide that such series of Preferred Stock (the "Series") shall have the
following voting rights:
(1) The shares of this Series 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
<PAGE>
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,
Preferences and Rights or any similar document relating to any series of
Preferred Stock) which would adversely affect the preferences, rights,
powers or privileges of this Series;
(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 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;
(C) If at the time of any annual meeting of stockholders for the election
of directors a default in preference dividends (as defined below) 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
<PAGE>
Stock, called for that purpose. So long as a default in any preference
dividends on the Preferred Stock shall exist, (i) any vacancy in the office
of a Preferred Director may be filled (except as provided in the following
clause (ii)) by an instrument in writing signed by the remaining Preferred
Director and filed with the Corporation and (ii) 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.
(2) A holder of shares of this Series shall be entitled to one vote per
share of the Series held by him when such holder is permitted to vote
pursuant to the foregoing.
2. The Preferred Stock Committee on November 5, 1992, pursuant to the
authority conferred upon the Preferred Stock Committee by Section 141(c) of the
General Corporation Law of the State of Delaware, by Article III, Section 10 of
the By-Laws of the Corporation and Section 141(f) of the General Corporation Law
of the State of Delaware and by the resolutions of the Board of Directors set
forth above, adopted the following resolutions:
RESOLVED, that pursuant to authority conferred upon the Preferred Stock
Committee of the Corporation, pursuant to resolutions adopted by the Board
of Directors of the Corporation on August 21, 1992, the Preferred Stock
Committee hereby provides for and authorizes the issuance of a series of
Preferred Stock of the Corporation to consist of 160,000 shares, and
hereby fixes the 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 "8.45% Cumulative Preferred Stock,
Series E" (hereinafter called this "Series") and the number of
<PAGE>
shares constituting this Series is 160,000. Shares of this Series shall have
a stated value of $625 per share. The number of authorized shares of this
Series may be reduced by further resolution duly adopted by the Board of
Directors or the Preferred Stock Committee and by the filing of a
certificate pursuant to the provisions of the General Corporation Law of
the State of Delaware stating that such reduction has been so authorized,
but the number of authorized shares of this Series shall not be increased.
(b) Dividend Rate.
(1) Shares of this Series shall be entitled to receive dividends at a
fixed annual rate of $52.8125 per share. Such dividends shall be cumulative
from the date of original issue of such shares, that is, November 16, 1992,
and shall be payable, when and as declared by the Board of Directors, on
the first day of January, April, July and October of each year, commencing
the first day of January, 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 the applicable record date, not exceeding 30
days preceding the payment date thereof, as shall be fixed by 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 as may be fixed by
the Board of Directors which shall not exceed 45 days preceding such
dividend payment date thereof.
(2) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with
this Series for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on this Series for all
dividend payment periods terminating on or prior to the date of payment of
such full cumulative dividends. When dividends are not paid in full, as
aforesaid, upon the shares of this Series and any other Preferred Stock
ranking on a parity as to dividends with this Series, all dividends
declared upon shares of this Series and any other Preferred Stock ranking on
a parity as to dividends with this Series shall be declared pro rata so
that the amount of dividends declared per share on this Series and such
other Preferred Stock shall in all cases bear to each other the same ratio
that accrued dividends per share on the shares of this Series and such other
Preferred Stock bear to each other. Holders of shares of this Series shall
not be entitled to any dividend, whether payable in cash, property or
stocks, in excess of full cumulative dividends, as herein provided, on this
Series. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on this Series which may be
in arrears.
(3) 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 (2) of this Section (b)) shall be declared or paid or
set aside for payment or
<PAGE>
other distribution declared or made upon the Common Stock or upon any other
stock ranking junior to or on a parity with this Series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends
or upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to
this Series as to dividends and upon liquidation) unless, in each case, the
full cumulative dividends on all outstanding shares of this Series shall have
been paid for all past dividend payment periods.
(4) Dividends payable on this Series for any period less than a full
quarterly dividend period, and for the dividend period beginning on the date
of issuance of the shares of this Series, shall be computed on the basis of
a 360-day year consisting of twelve 30-day months. The amount of dividends
payable on shares of this Series for each full quarterly dividend period shall
be computed by dividing by four the annual rate per share set forth in
Section (b)(1).
(c) Redemption.
(1) The shares of this Series shall not be redeemable prior to November 16,
1997. On and after November 16, 1997, the Corporation, at its option, and
with the prior consent of the Board of Governors of the Federal Reserve
System may redeem shares of this Series, as a whole or in part, at any time or
from time to time, at a redemption price per share of $625, 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 as 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 such redemption date.
<PAGE>
(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 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.
(d) Conversion. The holders of shares of this Series shall not have any
rights herein to convert such shares into or exchange such shares for shares
of any other class or classes or of any other series of any class or classes
of capital stock of the Corporation.
(e) Liquidation Rights.
(1) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive out of
the assets of the Corporation, before any payment or distribution shall be
made on the Common Stock or on any other class of stock ranking junior to
the Preferred Stock upon liquidation, the amount of $625 per share, plus a
sum equal to all dividends (whether or not earned or declared) on such
shares accrued and unpaid thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into
or with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary, for the
purposes of this Section (e).
<PAGE>
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (e), the holders of
this Series as such shall have no right or claim to any of the remaining
assets of the Corporation.
(4) In the event the assets of the Corporation available for distribution to
the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (e), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the
full distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of this Series then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (e) 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.
(f) Priority. 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 holder of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends (Without Par Value),
Preferred Stock with Cumulative and Adjustable Dividends, Series B (Without
Par Value), Preferred Stock with Cumulative and Adjustable Dividends, Series
C (Without Par Value), $3.75 Cumulative Convertible Preferred Stock, Series A
(Without Par Value), or the Corporation's 10% Cumulative Peferred Stock,
Series D (stated value $25 per share), or if the holders of such stock shall
be entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the 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
<PAGE>
(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.
(g) Sinking or Retirement Fund. The shares of this Series shall not
be entitled to the benefit of a sinking or retirement fund to be applied to
the purchase or redemption of such stock.
IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by Robert A. Rosholt,
its Treasurer, and the same to be attested by Michael Lipsitz, its Assistant
Secretary, this 5th day of November, 1992.
FIRST CHICAGO CORPORATION
/s/ Robert A. Rosholt
By:______________________________
Senior Vice President and
Treasurer
(Corporate Seal)
ATTEST:
/s/ Michael Lipsitz
___________________________
Assistant Secretary
1295E/1-9
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK
DESIGNATION OF "FIRST CHICAGO CORPORATION" FILED IN THIS OFFICE ON THE FIFTH DAY
OF MARCH, A.D. 1993, AT 10 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE COUNTY
RECORDER OF DEEDS FOR RECORDING.
* * * * * * * * * *
(SEAL)
/s/ William T. Quillen
--------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3902077
DATE: 05/18/1993
723138037
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:00 AM 03/05/1993
733064007-700130
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT
BEEN SET FORTH IN THE RESTATED CERTIFICATE OF INCORPORATION OR IN ANY
AMENDMENT THEREOF, OF THE
5 3/4% CUMULATIVE CONVERTIBLE PREFERRED STOCK,
SERIES B
(Stated Value $5,000 per share)
OF
FIRST CHICAGO CORPORATION
--------------
Pursuant to Secton 151 of the
General Corporation Law of the State of Delaware
--------------
The undersigned DOES HEREBY CERTIFY that the following resolutions
were duly adopted by the Board of Directors (the "Board of
Directors") of First Chicago Corporation, a Delaware corporation (the
"Corporation"), and by the Preferred Stock Committee of the Board of
Directors (the "Preferred Stock Committee"), respectively, pursuant
to authority conferred upon the Board of Directors by the provisions
of the Restated Certificate of Incorporation of the Corporation which
authorizes the issuance of up to 15,000,000 shares of Preferred Stock
without par value, and pursuant to authority conferred upon the
Preferred Stock Committee by Section 141(c) of the General
Corporation Law of the State of Delaware, by Article III, Section 10
of the By-Laws of the Corporation, by Section 141(f) of the General
Corporation Law of the State of Delaware, and by the resolutions of
the Board of Directors adopted by means of a unanimous written
consent of the Board of Directors dated August 21, 1992 and by
resolutions adopted by the Board of Directors on February 12, 1993:
1. The Board of Directors on August 21, 1992 adopted the following
resolutions:
RESOLVED, that the Corporation issue up to 480,000 shares of its
Preferred Stock, without par value, having an aggregate issuance
price of not more than $300,000,000 (the "Preferred Shares") by
filing with the Secretary of the State of Delaware, pursuant to
Section 151 of the General Corporation Law of the State of Delaware,
a certificate prepared in accordance with such Section 151 (the
"Certificate of Designation") in such form as is approved by
subsequent action of the Board of Directors or by the Preferred
Stock Committee of the Board of Directors (the "Preferred Stock
Committee") relating to such Preferred Shares; and that the
resolution set forth in said Certificate of Designation be, and it
hereby is, adopted by the Board of Directors, and that the proper
1
<PAGE>
officers of the Corporation are authorized to execute and file such Certificate
of Designation pursuant to the General Corporation Law of the State of Delaware;
FURTHER RESOLVED, that the Board of Directors appoints a Preferred Stock
Committee, composed of Messrs. Richard L. Thomas and John H. Bryan, which shall
have the powers set forth in these resolutions and in the General Corporation
Law of the State of Delaware and that execution and delivery of any document or
certificate signed by any member of the Peferred Stock Committee or by the
Secretary of the Corporation shall be conclusive evidence of the action taken by
the Preferred Stock Committee as contemplated, required or authorized by these
resolutions; and the Preferred Stock Committee or any member thereof be, and
they hereby are, given full power and authority to authorize the execution of
such documents and the taking of such actions (including the filings with all
necessary governmental or regulatory agencies) as may be necessary or desirable
to effectuate the issuance and sale of the Preferred Shares as contemplated by
these resolutions;
FURTHER RESOLVED, that the Preferred Stock Committee is authorized and
empowered, with full power and authority, to act on behalf and in the stead of
the Board of Directors to authorize the issuance of the Preferred Shares, to
fix the dividend rate or rates of the Preferred Shares, to determine the number
of Preferred Shares, to determine the price at which the Preferred Shares will
be sold by the Corporation, to determine whether the Preferred Shares shall be
convertible into shares of the Corporation's Common Stock, $5 par value per
share (the "Common Shares") and, if determined to be so convertible, the basis
(which may be by formula) and terms upon which the shares of Peferred Shares
shall be so convertible into the Common Shares, to determine whether the
Preferred Shares shall be represented by depositary shares (the "Depositary
Shares") and, if so determined, the fractional interest of a Preferred Share to
be represented by each Depositary Share, to determine the liquidation preference
(which may be less than the offering price) of the Preferred Shares, to
determine any redemption provisions of the Preferred Shares and to determine the
designations, preferences and privileges, the relative, participating, optional
or other special rights, and the qualifications, limitations and restrictions
thereof, to the fullest extent permitted by the General Corporation Law of the
State of Delaware as it now exists or is hereafter amended;
FURTHER RESOLVED, that the Certificate of Designation for the Preferred Shares
shall provide that such series of Preferred Stock (the "Series") shall have the
following voting rights:
(1) The shares of this Series 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
2
<PAGE>
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 provisons of the Certificate of
Incorportion or of any certificate amendatory thereof or supplemental thereto
(including any Certificate of Designation, Preferences and Rights or any similar
document relating to any series of Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of this Series;
(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 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;
(C) If at the time of any annual meeting of stockholders for the election of
directors a default in preference dividends (as defined below) 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 Corporaton 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
3
<PAGE>
Preferred Stock, called for that purpose. So long as a default in any
preference dividends on the Preferred Stock shall exist, (i) any vacancy in
the office of a Preferred Director may be filled (except as provided in the
following clause (ii)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (ii) 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.
(2) A holder of shares of this Series shall be entitled to one vote per
share of the Series held by him when such holder is permitted to vote
pursuant to the foregoing.
2. The Board of Directors on February 12, 1993 adopted the following
resolutions:
RESOLVED, that the second paragraph of the Resolution duly adopted by this Board
of Directors on August 12, 1993 (the "Resolution") providing for the appointment
of a Preferred Stock Committee of this Board of Directors is hereby amended and
restated in its entirety as follows:
FURTHER RESOLVED, that the Board of Directors appoints a Preferred Stock
Committee, composed of Messrs. Richard L. Thomas, Leo F. Mullin and David J.
Vitale, which shall have the powers set forth in these resolutions and in the
General Corporation Law of the State of Delaware and that execution and
delivery of any document or certificate signed by any member of the Preferred
Stock Committee or by the Secretary of the Corporation shall be conclusive
evidence of the action taken by the Peferred Stock Committee as contemplated,
required or authorized by these resolutions; and the Preferred Stock
Committee or any member thereof be, and they hereby are, given full power and
authority to authorize the execution of such documents and the taking of such
actions (including
4
<PAGE>
the filings with all necessary governmental or regulatory agencies) as may
be necessary or desirable to effectuate the issuance and sale of the Shares
(as defined below) as contemplated by these resolutions;
FURTHER RESOLVED, that except as set forth above, the Resolution is and shall
be in full force and effect as of its date.
3. The Preferred Stock Committee on March 1, 1993, pursuant to the
authority conferred upon the Preferred Stock Committee by Section 141(c) of the
General Corporation Law of the State of Delaware, by Article III, Section 10 of
the By-Laws of the Corporation and Section 141(f) of the General Corporation Law
of the State of Delaware and by the resolutions of the Board of Directors set
forth above, adopted the following resolutions:
RESOLVED, that pursuant to authority conferred upon the Preferred Stock
Committee of the Corporation, pursuant to resolutions adopted by the Board of
Directors of the Corporation on August 21, 1992, as amended on February 12,
1993, the Preferred Stock Committee hereby provides for and authorizes the
issuance of a series of Preferred Stock of the Corporation to consist of
40,000 shares, and hereby fixes the 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 "5 3/4% Cumulative Convertible Preferred Stock,
Series B" (hereinafter called this "Series") and the number of shares
constituting this Series is 40,000. Shares of this Series shall have a stated
value of $5,000 per share. The number of authorized shares of this Series may
be reduced by further resolution duly adopted by the Board of Directors or the
Preferred Stock Committee and by the filing of a certificate pursuant to the
provisions of the General Corporation Law of the State of Delaware stating
that such reduction has been so authorized, but the number of authorized
shares of this Series shall not be increased.
(b) Dividend Rate.
(1) Shares of this Series shall be entitled to receive dividends at a fixed
annual rate of $287.50 per share. Such dividends shall be cumulative from the
date of original issue of such shares, that is, March 9, 1993, and shall be
payable, when and as declared by the Board of Directors, on the first day of
January, April, July and October of each year, commencing the first day of
July, 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 the applicable record date, not exceeding 30 days preceding the payment
date thereof, as shall be fixed by the Board of Directors. Dividends on
account of arrears for any past dividend periods may be declared and paid at
any time.
5
<PAGE>
without reference to any regular dividend payment date, to holders of record on
such date as may be fixed by the Board of Directors which shall not exceed 45
days preceding such dividend payment date thereof.
(2) No full dividends shall be declared or paid or set apart for payment on
Preferred Stock of any series ranking, as to dividends, on a parity with 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 Peferred 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 Peferred 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.
(3) 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 (2) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this Series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of this Series shall have been
paid for all past dividend payment periods.
(4) Dividends payable on this Series for any period less than a full quarterly
dividend period, and for the dividend period beginning on the date of issuance
of the shares of this Series, shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. The amount of dividends payable on shares of
this Series for each full quarterly dividend period shall be computed by
dividing by four the annual rate per share set forth in Section (b)(1).
6
<PAGE>
(c) Redemption.
(1) The shares of this Series shall not be redeemable prior to April 1,
1997. On and after April 1, 1997, the Corporation, at its options, and with
the prior consent of the Board of Governors of the Federal Reserve System may
redeem shares of this Series, as a whole or in part, at any time or from time
to time, at a redemption price as set forth below, plus, in each case,
accrued and unpaid dividends thereon to the date fixed for redemption:
If Redeemed During the
Twelve-Month Period Redemption Price
Beginning on April 1, per share
---------------------- ----------------
1997 $5,172.50
1998 5,143.75
1999 5,115.00
2000 5,086.25
2001 5,057.50
2002 5,028.75
2003 and thereafter 5,000.00
(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 as 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 then current Conversion Price (as
defined herein), together with a statement that all conversion rights with
respect to the shares of the Series called for redemption will terminate at
the close of business on the fifth Business Day preceding the redemption
date; (v) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; and (v) that dividends on
the shares to be redeemed will cease to accrue on such redemption date.
(4) Notice having been mailed as aforesaid, from and after the redemption
7
<PAGE>
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 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 (i) upon the conversion of
shares of the Series into shares of Common Stock pursuant to Section (d) hereof
or (ii) pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of this Series.
(d) Conversion.
(1) (A) Subject to the provisions for adjustment hereinafter set forth, each
share of the Series shall be convertible at the option of the holder thereof, in
whole or part, in the manner hereinafter set forth, into fully paid and
nonassessable shares of Common Stock (as hereinafter defined) at the conversion
price, determined as hereinafter provided, in effect on the date of conversion,
each share of the Series being credited at its stated value; provided that if
any shares of the Series are called for redemption, the conversion rights
pertaining thereto will terminate at the close of business on the fifth
Business Day preceding the redemption date, unless the Corporation shall
default in providing money for the payment of the redemption price as provided
in Section (c) hereof. The price at which shares of Common Stock shall be
delivered upon conversion of the shares of the Series (hereinafter referred to
as the "Conversion Price") shall be initially $53.625 per share of Common
Stock. The Conversion Price shall be adjusted in certain instances as provided
in paragraph (2) of this Section (d).
8
<PAGE>
(B) Any holder of shares of the Series desiring to convert such stock into
shares of Common Stock shall surrender the certificate or certificates for the
shares of the Series being converted, duly endorsed or assigned to the
Corporation or in blank, at the principal office of the Corporation for that
purpose, accompanied by a written notice of conversion specifying the number of
shares of the Series to be converted and the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued;
in case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issue of shares of Common Stock in such name or names. In case
less than all of the shares of the Series represented by a certificate are to be
converted by a holder, upon such conversion the Corporation shall issue and
deliver or cause to be issued and delivered to such holder a certificate or
certificates for the shares of the Series not so converted. The holders of
shares of the Series at the close of business on a dividend payment record date
shall be entitled to receive the dividend payable on such shares of the Series
(except shares of the Series redeemed on a redemption date between such record
date and the dividend payment date) on the corresponding dividend payment date
notwithstanding the subsequent conversion thereof or the Corporation's default
in payment of the dividend due on such dividend payment date. However, shares of
the Series surrendered for conversion during the period from the close of
business on any dividend payment record date for the Series to the opening of
business on the corresponding dividend payment date (except shares of the Series
called for redemption on a redemption date after the dividend payment record
date and on or before the fifth business day following the dividend payment
date) must be accompanied by payment of an amount equal to the dividend payable
on such shares of the Series on such dividend payment date. A holder of shares
of the Series on a dividend payment record date who (or whose transferee)
converts shares of the Series on a dividend payment date will receive the
dividend payable on such shares of the Series by the Corporation on such date,
and the converting holder need not include payment in the amount of such
dividend upon surrender of shares of the Series for conversion. Except as
provided above, no payment or adjustment will be made on account of accrued or
unpaid dividends upon the conversion of shares of the Series.
(C) As promptly as practicable after the surrender of certificates for
shares of the Series as aforesaid, the Corporation shall issue and shall deliver
at such office to such holder, or on his or her 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 (d),
and any fractional interest in respect of a share of Common Stock arising upon
such conversion shall be promptly settled as provided in paragraph (11) of this
Section (d).
(D) 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
the 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;
9
<PAGE>
the shares of the Series so surrendered for conversion shall no longer be deemed
to be outstanding and all rights with respect to such shares of the Series shall
cease, except the right of the holders thereof to receive full shares of Common
Stock in exchange therefor and payment for any fractional shares; 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 that 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 received by the
Corporation. All shares of Common Stock delivered upon conversions of shares of
the Series will upon delivery be duly and validly issued and fully paid and
nonassessable.
(2) The Conversion Price shall be adjusted from time to time as follows:
(A) In case the Corporation shall pay or make a dividend or other
distribution on any class of capital stock of the Corporation in shares of
Common Stock, the Conversion Price in effect at the opening of business on the
date following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination, and the denominator shall be the sum of (i) such number
of shares and (ii) the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately after the
opening of business on the date following the date fixed for such determination.
(B) In case the Corporation shall issue rights or warrants (in each case,
other than the Preferred Share Purchase Rights) to all holders of its shares of
Common Stock entitling them to subscribe for or purchase Common Stock at a price
per share less than the current market price per share (determined as provided
in paragraph (3)) of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights or warrants, the Conversion Price
in effect at the opening of business on the date following the date fixed for
such determination shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be the sum of (i) the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus (ii) the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market price, and the
denominator shall be the sum of (x) the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus
10
<PAGE>
(y) the number of shares of Common Stock so offered for subscription or
purchase, such reduction to become effective immediately after the opening of
business on the date following the date fixed for such determination.
(C) In case the Corporation shall, by dividend or otherwise, distribute to all
holders of shares of Common Stock evidences of indebtedness or assets (including
securities, but excluding any rights or warrants referred to in paragraph
(2)(B), the Preferred Share Purchase Rights, any dividend or distribution paid
in cash out of the surplus or retained earnings of the Corporation and any
dividend or distribution referred to in paragraph (2)(A)), 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 close of
business on the date fixed for the determination of stockholders entitled to
receive such distribution by a fraction of which the numerator shall be the
current market price per share (determined as provided in paragraph (3)) of the
Common Stock on the date fixed for such determination, less the then fair market
value (as determined by the Board of Directors of the Corporation, whose
determination shall be conclusive) of the portion of the assets or evidences of
indebtedness so distributed allocable to one share of Common Stock, and the
denominator shall be such current market price per share of Common Stock, such
adjustment to become effective immediately prior to the opening of business on
the day following the date fixed for the determination of stockholders entitled
to receive such distribution. Notwithstanding the foregoing, in the event that
the Corporation shall distribute or shall have distributed any rights or
warrants to acquire capital stock ("Rights") pursuant to this subparagraph (C),
this distribution of separate certificates representing the Rights subsequent to
their initial distribution (whether or not the initial distribution of the
Rights shall have occurred prior to the date of the issuance of the Series)
shall be deemed to be the distribution of the Rights for purposes of this
subparagraph (C); provided that the Corporation may, in lieu of making any
adjustment pursuant to this subparagraph (C) upon a distribution of separate
certificates representing the Rights, make proper provision so that each holder
of the Series who converts the shares of this Series (or any portion thereof)
(i) on or before the record date for such distribution of separate certificates
shall be entitled to receive upon conversion shares of Common Stock issued with
Rights and (ii) after such record date and prior to the expiration, redemption
or termination of the Rights shall be entitled to receive upon conversion, in
addition to the shares of Common Stock issuable upon conversion, the same number
of Rights as would a holder of the number of shares of Common Stock that the
shares of such Series so converted would have entitled the holder thereof to
purchase in accordance with the terms and provisions applicable to the Rights if
the shares of such Series were converted immediately prior to the record date
for such distribution. Common Stock owned by or held for the account of the
Corporation or any majority owned subsidiary shall not be deemed outstanding for
the purpose of any adjustment required under this subparagraph (C).
(D) In case the outstanding shares of Common Stock shall be subdivided into a
greater number of shares, the Conversion Price in effect at the opening of
business on
11
<PAGE>
the date following the date upon which such subdivision becomes effective
shall be proportionately reduced, and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number of
shares, the Conversion Price in effect at the opening of business on the
date following the date upon which such combination becomes effective shall
be proportionately increased, such reduction or increase, as the case may
be, to become effective immediately after the opening of business on the
day following the date upon which such subdivision or combination becomes
effective.
(E) The reclassification of Common Stock into securities other than
Common Stock (other than any reclassification upon a consolidation or
merger to which paragraph (6) applies) shall be deemed to involve (i) a
distribution of such securities other than Common Stock to all holders of
Common Stock (and the effective date of such reclassification shall be
deemed to be "the date fixed for the determination of stockholders entitled
to receive such distribution" and the "date fixed for such determination"
within the meaning of paragraph (2)(C)), and (ii) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of
shares of Common Stock oustanding immediately thereafter (and the effective
date of such reclassification shall be deemed to be "the day upon which
such subdivision becomes effective," or "the day upon which such combination
becomes effective," as the case may be, and "the day upon which such
subdivision or combination becomes effective" within the meaning of
paragraph (2)(D) of this Section (d)).
(3) For the purpose of any computation under paragraphs (2)(B) and (2)(C),
the current market price per share of Common Stock on any day shall be deemed to
be the average of the daily Closing Prices (as hereinafter defined) per share of
Common Stock for the 30 consecutive Trading Days (as hereinafter defined) ending
on the fifth Trading Day before the day in question.
(4) Notwithstanding the provisions of paragraph (2) above, no adjustment in
the Conversion Price shall be required unless such adjustment (plus any
adjustments not previously made by reason of this paragraph (4)) would require
an increase or decrease of at least 1% in such price; provided, however, that
any adjustments which by reason of this paragraph (4) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. Notwithstanding any other provisions of this Section (d), the
Corporation shall not be required to make any adjustment to the Conversion Price
for the issuance of any shares of Common Stock pursuant to any plan providing
for the reinvestment of dividends or interest payable on securities of the
Corporation and the investment of additional optional amounts in shares of
Common Stock under such plan. All calculations under this Section (d) shall be
made to the nearest 1/100 of a cent (with $.00005 being rounded upward) or to
the nearest 1/10,000 of a share (with .00005 of a share being rounded upward),
as the case may be.
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<PAGE>
(5) The Corporation may make such reductions in the Conversion Price, in
addition to those required by this Section (d), as it considers to be advisable
in order to avoid or diminish any income tax to any holder of shares of Common
Stock resulting from any dividend or distribution of stock or issuance of
rights or warrants to purchase or subscribe for stock or from any event treated
as such for income tax purposes or for any other reasons. The Corporation shall
have the power to resolve any ambiguity or correct any error in this Section (d)
and its actions in so doing shall be final and conclusive.
(6) In case the Corporation shall effect any capital reorganization of the
Common Stock (other than a subdivision, combination, capital reorganization or
reclassification provided for in paragraph (2)) or shall consolidate, merge or
engage in a statutory share exchange with or into any other corporation (other
than a consolidation, merger or share exchange in which the Corporation is the
surviving corporation and each share of Common Stock outstanding immediately
prior to such consolidation or merger is to remain outstanding immediately after
such consolidation or merger) or shall sell or transfer all or substantially all
its assets to any other corporation, lawful provision shall be made as a part of
the terms of such transaction whereby the holders of shares of the Series shall
receive upon conversion thereof, in lieu of each share of Common Stock which
would have been issuable upon conversion of such stock if converted immediately
prior to the consummation of such transaction, the same kind and amount of stock
(or other securities, cash or property, if any) as may be issuable or
distributable in connection with such transaction with respect to each share of
Common Stock outstanding at the effective time of such transaction subject to
subsequent adjustments for subsequent stock dividends and distributions,
subdivisions or combinations of shares, capital reorganizations,
reclassifications, consolidations, mergers or share exchanges, as nearly
equivalent as possible to the adjustments provided for in this Section (d).
(7) Whenever the Conversion Price is adjusted as herein provided:
(A) the Corporation shall compute the adjusted Conversion Price and shall
cause to be prepared a certificate signed by the chief financial or
accounting officer of the Corporation setting forth the adjusted Conversion
Price and showing in reasonable detail the facts upon which such adjustment is
based and the computation thereof and such certificate shall forthwith be
filed with each transfer agent for the Series; and
(B) a notice stating that the Conversion Price has been adjusted and setting
forth the adjusted Conversion Price shall, as soon as practicable, be mailed
to the holders of record of outstanding shares of the Series.
(8) In case:
(A) the Corporation shall declare a dividend or other distribution on the
Common Stock other than in cash out of its surplus or retained earnings and
other than the Preferred Share Purchase Rights;
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<PAGE>
(B) the Corporation shall authorize the granting to the holders of the
Common Stock of rights or warrants (other than the Preferred Share Purchase
Rights) entitling them to subscribe for or purchase any shares of capital
stock of any class or of any other rights (other than the Preferred Share
Purchase Rights);
(C) of any reclassification of the Common Stock (other than a subdivision or
combination of outstanding shares of Common Stock), or of any consolidation,
merger or share exchange to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or of the sale or
transfer of all or substantially all the assets of the Corporation; or
(D) of the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation;
then the Corporation shall cause to be mailed to each transfer agent for the
Series and to the holders of record of the outstanding shares of the Series, at
least 20 days (or 10 days in any case specified in paragraphs (A) or (B) above)
prior to the applicable record or effective date hereinafter specified, a notice
stating (i) the date as of which the holders of record of shares of Common Stock
to be entitled to such dividend, distribution, rights or warrants are be
determined, or (ii) the date on which such reclassification, consolidation,
merger, share exchange, sale, transfer, liquidation, dissolution or winding up
is expected to become effective and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their shares for
securities or other property, if any, deliverable upon such reclassification,
consolidation, merger, share exchange, sale, transfer, liquidation, dissolution
or winding up. Such notice shall also state whether such transaction will result
in any adjustment in the Conversion Price applicable to the Series and, if so,
shall state what the adjusted Conversion Price will be and when it will become
effective. Neither the failure to give the notice required by this paragraph
(8), nor any defect therein, to any particular holder shall affect the
sufficiency of the notice or the legality or validity of the proceedings
described in paragraphs (8)(A) through (8)(D).
(9) Any shares of this Series which shall at any time have been converted
shall, after such conversion, have the status as 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. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock for the purpose of issuance upon conversion
of shares of the Series, the full number of shares of Common Stock then issuable
upon the conversion of all shares of the Series then outstanding and shall take
all action necessary so that shares of Common Stock so issued will be validly
issued, fully paid and nonassessable; provided, however, that nothing contained
herein shall preclude the Corporation from satisfying its obligations in
respect of the conversion of the shares by delivery of purchased shares of
Common Stock which are held in the treasury of the Corporation.
14
<PAGE>
(10) The Corporation will pay any and all stamp or similar taxes that may
be payable in respect of the issuance or delivery of shares of Common Stock
on conversion of shares of the Series. The Corporation shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares of Common Stock in a name
other than that in which the shares of the Series so converted were
registered, and no such issuance or delivery shall be made unless and until
the person requesting such issuance 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.
(11) No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon the conversion of shares of the Series. If
any such conversion would otherwise require the issuance of such a
fractional share (determined to the extent of four decimal places after
taking into account all shares of the Series being converted into Common
Stock by the holder), an amount equal to such fraction multiplied by the
Closing Price per share of Common Stock for the day of conversion shall be
paid to the holder in cash by the Corporation. Any share of the Series may
be converted, at the request of its holder, in part into Common Stock. If a
part of a share of the Series is converted, then the Corporation will
convert such shares into the requested shares of Common Stock (subject to
this paragraph (11)) and issue a fractional share of the Series evidencing
the remaining interest of such holder.
(12) Notwithstanding anything elsewhere contained herein, any funds which
at any time shall have been deposited by the Corporation or on its behalf
with any paying agent for the purpose of paying dividends on, or the
redemption price of, any shares of the Series and which shall not be
required for such purposes because of the conversion of such shares shall
after such conversion be repaid to the Corporation by the paying agent.
(13) In any case in which paragraph (2) of this Section (d) provides that
an adjustment shall become effective on the day next following a record date
for an event, the Corporation may defer until the occurrence of such event
(a) issuance 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 (B) paying to such
holder any amount in cash in lieu of any fraction pursuant to paragraph
(11) of this Section (d).
(14) If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one paragraph of this Section 7, only
one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value.
(15) If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section (d), that in the opinion of the
Board of Directors would materially adversely affect the conversion rights
of the holders of the shares of the Series, the Conversion Price for the
Series may be adjusted, to the extent permitted by law, in such
15
<PAGE>
manner, if any, and at such time, as the Board of Directors may determine to be
equitable in the circumstances.
(16) The certificate of any independent firm of public accountants of
recognized standing selected by the Board shall be presumptive evidence of the
correctness of any computation made under this Section (d).
(17) For purposes of this resolution, the following terms shall have the
following meanings:
(i) "Closing Price" shall mean the last sale price as shown on the New
York Stock Exchange Composite Transactions Tape, or in case no such sale takes
place on such day, the average of the closing bid and asked prices on the New
York Stock Exchange, or, if the Common Stock is not listed or admitted to
trading on such Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or, if it is not
listed or admitted to trading on any national securities exchange, on the
National Association of Securities Dealers Automated Quotations National Market
System, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on such National Market System, the
average of the closing bid and asked prices as furnished by any New York Stock
Exchange member firm selected from time to time by the Board of Directors for
such purposes (other than the Corporation or a subsidiary thereof).
(ii) "Common Stock" shall mean the Corporation's Common Stock, $5.00 par
value per share, as the same exists at the date of filing of the Certificate of
Designation relating to this Series or any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par
value to par value.
(iii) "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 on any national securities exchange, a day which is a
Business Day.
(iv) "Business Day" shall mean a day which is not a Saturday, Sunday or
other day on which commercial banking institutions in the City of Chicago,
Illinois or The City of New York, New York are authorized or obligated by law
or executive order to close.
(v) "Preferred Share Purchase Rights" shall mean the preferred share
purchase rights of the Corporation which were declared as a dividend on each
outstanding share of the Corporation's Common Stock on November 18, 1988, and
are described in that certain Rights Agreement dated November 18, 1988 between
the Corporation and Bankers Trust Company, as Rights Agent, and as amended from
time to time, or rights
16
<PAGE>
to purchase any capital stock of the Corporation under any successor
shareholder rights plan or plan adopted in replacement of the Corporation's
Rights Agreement.
(e) Liquidation Rights.
(1) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive out of
the assets of the Corporation, before any payment or distribution shall be
made on the Common Stock or on any other class of stock ranking junior to
the Preferred Stock upon liquidation, the amount of $5,000 per share, plus a
sum equal to all dividends (whether or not earned or declared) on such
shares accrued and unpaid thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into
or with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary, for the
purposes of this Section (e).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (e), the holders of
this Series as such shall have no right or claim to any of the remaining
assets of the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (e), no such distribution shall be
made on account of any shares of any other class or series of Preferred
Stock ranking on a parity with the shares of this Series upon such
dissolution, liquidation or winding up unless proportionate distributive
amounts shall be paid on account of the shares of this Series, ratably, in
proportion to the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such dissolution, liquidation
or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to
be paid out of the assets of the Corporation available for distribution to
its stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (e) 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.
(f) Priority. For purposes of this resolution, any stock of any class or
classes of the Corporation shall be deemed to rank:
17
<PAGE>
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to
the receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, as the case may be, in
preference or priority to the holder 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 provisions, if
any, be different from those of this Series, if such stock is the
Corporation's Preferred Stock with Cumulative and Adjustable Dividends
(Without Par Value), Preferred Stock with Cumulative and Adjustable
Dividends, Series B (Without Par Value), Preferred Stock with Cumulative
and Adjustable Dividends, Series C (Without Par Value), $3.75 Cumulative
Convertible Preferred Stock, Series A (Without Par Value), 10% Cumulative
Preferred Stock, Series D (Stated Value $25 per share), or the
Corporation's 8.45% Cumulative Preferred Stock, Series E (Stated Value $625
per share), or if the holders of such stock shall be entitled to the receipt
of dividends or of amounts distributable upon dissolution, liquidation or
winding up of the Corporation, as the 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.
(g) Sinking or Retirement Fund. The shares of this Series shall not be
entitled to the benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such stock.
18
<PAGE>
IN WITNESS WHEREOF, First Chicago Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by David P. Bolger, its
Treasurer, and the same to be attested by Michael Lipsitz, its Assistant
Secretary, this 4th day of March, 1993.
FIRST CHICAGO CORPORATION
David P. Bolger
By:_______________________________
Senior Vice President and
Treasurer
(Corporate Seal)
ATTEST:
Michael Lipsitz
_________________________
Assistant Secretary
19
<PAGE>
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER,
WHICH MERGES:
"LAKE SHORE BANCORP., INC.", A DELAWARE CORPORATION, WITH AND INTO "FIRST
CHICAGO CORPORATION" UNDER THE NAME OF "FIRST CHICAGO CORPORATION", A
CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS
RECEIVED AND FILED IN THIS OFFICE THE EIGHTH DAY OF JULY, A.D. 1994, AT 1:30
O'CLOCK P.M.
[SEAL OF THE STATE OF DELAWARE]
[SEAL OF THE SECRETARY OF STATE]
/s/ EDWARD J. FREEL
------------------------------
SECRETARY OF STATE
0700130 8100M AUTHENTICATION: 7174855
944125619 DATE: 07-08-94
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 01:30 PM 07/08/1994
944125527 - 700130
CERTIFICATE OF MERGER
OF
LAKE SHORE BANCORP., INC.
INTO
FIRST CHICAGO CORPORATION
-------------------------
******
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
---- ----------------------
First Chicago Corporation Delaware
Lake Shore Bancorp., Inc. Delaware
SECOND: That an Amended and Restated Agreement and Plan of Merger effective
as of November 21, 1993, (the "Agreement") between the parties to the merger has
been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of subsection (c)
of section 251 of the General Corporation Law of the State of Delaware.
THIRD: That the name of the surviving corporation of the merger is
First Chicago Corporation.
FOURTH: That the Restated Certificate of Incorporation of First Chicago
Corporation shall be the certificate of incorporation of the surviving
corporation.
<PAGE>
FIFTH: That the executed Agreement is on file at the principal place
of business of the surviving corporation. The address of the principal place of
business of the surviving corporation is One First National Plaza, Suite 0287,
Chicago, Illinois 60670.
SIXTH: That a copy of the Agreement will be furnished by the surviving
corporation, on request and without cost to any stockholder of any constituent
corporation.
SEVENTH: This Certificate of Merger shall be effective upon filing (the
"Effective Time") in accordance with the provisions of Sections 103 and 251(c)
of the General Corporation Law of the State of Delaware.
Dated: July 8, 1994
FIRST CHICAGO CORPORATION
By: /s/ Robert A. Rosholt
---------------------------
Robert A. Rosholt
Executive Vice President
and Chief Financial Officer
ATTEST:
By: /s/ Michael Lipsitz
----------------------------
Michael Lipsitz
Assistant Secretary
2
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP,
WHICH MERGES:
"HAMPTON PARK CORPORATION", A ILLINOIS CORPORATION, WITH AND INTO "FIRST
CHICAGO CORPORATION" UNDER THE NAME OF "FIRST CHICAGO CORPORATION", A
CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS
RECEIVED AND FILED IN THIS OFFICE THE FOURTEENTH DAY OF OCTOBER, A.D. 1994, AT 9
O'CLOCK A.M.
[SEAL OF THE STATE OF DELAWARE]
[SEAL OF THE SECRETARY OF STATE]
/S/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7416113
DATE: 02-22-95
0700130 8100M
950039241
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
HAMPTON PARK CORPORATION
INTO
FIRST CHICAGO CORPORATION
* * * *
FIRST CHICAGO CORPORATION, a corporation organized and existing under the
laws of Delaware,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 23rd day of January,
1969, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That this corporation owns all of the outstanding shares of the
stock of Hampton Park Corporation, a corporation incorporated on the 1st day of
July, 1969, pursuant to the Business Corporation Act of the State of Illinois.
THIRD: That this corporation, in accordance with resolutions, attached
hereto as Attachment A, of its Board of Directors, duly adopted on the 12th day
of November, 1993, has determined to and does hereby merge into itself said
Hampton Park Corporation, pursuant to Section 253 of the General Corporation Law
of the State of Delaware, and assumes all of its obligations.
FOURTH: That the merger shall be effective upon the date of filing with the
Secretary of State of Delaware.
<PAGE>
FIFTH: Anything herein or elsewhere to the contrary notwithstanding, this
merger may be amended or terminated and abandoned by the Board of Directors of
First Chicago Corporation at any time prior to the date of filing the merger
with the Secretary of State.
IN WITNESS WHEREOF, said First Chicago Corporation has caused this
Certificate to be signed by W. G. Jurgensen, its Executive Vice President and
attested by Michael Lipsitz, its Assistant Secretary, this 14th day of October,
1994.
FIRST CHICAGO CORPORATION
BY /s/ W. G. Jurgensen
--------------------------
W. G. Jurgensen
Executive Vice President
ATTEST:
BY /s/ Michael Lipsitz
-----------------------
Michael Lipsitz
Assistant Secretary
2
<PAGE>
Attachment A
I, Michael Lipsitz, DO HEREBY CERTIFY, that I am an Assistant Secretary of
First Chicago Corporation, and keeper of its records and corporate seal, and
that attached hereto is a true and correct copy of resolutions duly adopted by
the Directors of the Corporation at a duly authorized meeting of the Board of
Directors of this Corporation duly held at Chicago, Illinois on the 12th day of
November, 1993, at which meeting a quorum of the Directors was present and voted
in favor thereof, as is set forth in the minutes of said meeting; and that said
resolutions have not been amended or rescinded and are in full force and effect.
IN WITNESS WHEREOF, I have subscribed my name and affixed the seal of this
Corporation this 1st day of October, 1994.
/s/ Michael Lipsitz
-----------------------
Assistant Secretary
(SEAL)
<PAGE>
RESOLVED, that the Corporation is authorized to acquire for a purchase price not
to exceed $7.1 million (subject to such adjustments and expense reimbursements
as may be provided for in the acquisition agreements referenced below) all of
the issued and outstanding shares of capital stock (the "Hampton Park Shares")
of Hampton Park Corporation ("Hampton Park");
FURTHER RESOLVED, that the purchase price for the Hampton Park Shares shall be
paid in cash as shall be set forth in the definitive acquisition agreements (the
"Acquisition Agreements"), and the acquisition of the Hampton Park Shares (the
"Acquisition") may be accomplished by means of (1) a merger with or into the
Corporation or one of its subsidiaries, or (2) the purchase thereof directly
from the stockholders of Hampton Park, or (3) a combination of the foregoing,
all as provided for in the Acquisition Agreements;
FURTHER RESOLVED, that any Senior Vice President or more senior officer of the
Corporation (each, an "Authorized Officer"), and each of them, be and hereby is
authorized and empowered to negotiate, execute and deliver in the name and on
behalf of the Corporation such documents relating to the acquisition of Hampton
Park as the Authorized Officer executing the same deems necessary or
appropriate, including, without limitation, a letter of intent, term sheet,
stockholder agreements, option agreement and Acquisition Agreements, such
agreements to contain such terms, provisions, representations, warranties,
covenants and closing conditions as the Authorized Officer executing the same
deems necessary or appropriate, and the approval of the terms of such agreements
to be conclusively evidenced by the execution thereof by such Authorized
Officer;
<PAGE>
FURTHER RESOLVED, that each and every Authorized Officer be and hereby is
authorized and empowered, for and in the name and on behalf of the Corporation,
to execute and deliver to (1) the Board of Governors of the Federal Reserve
System (the "Board") an application pursuant to the Bank Holding Company Act
of 1956, as amended, for prior approval by the Board of the acquisition by the
Corporation of the Hampton Park Shares and (2) any applicable federal or state
banking or other regulatory authority such application or applications as may
be deemed necessary or advisable by any officer of the Corporation in connection
with the Acquisition;
FURTHER RESOLVED, that this Board of Directors hereby adopts the form of any and
all resolutions required by any federal or state banking, securities or other
regulatory authority in connection with any application, report, issuer's
covenant, irrevocable consent to service of process, power of attorney or other
paper or instrument relating to the Acquisition, if (1) in the opinion of the
officer of the Corporation so acting, the adoption of such resolutions is
necessary or advisable, and (2) the Secretary of the Corporation evidences such
adoption by filing with the minutes of this meeting copies of such resolutions,
which shall thereupon be deemed to be adopted by this Board and incorporated in
the minutes as a part of this resolution and with the same force and effect as
if presented in terms to this meeting;
FURTHER RESOLVED, that, for purposes of carrying out the foregoing resolutions,
any person authorized to execute any document or take or cause to be taken any
action on behalf of the Corporation is authorized to grant, execute and deliver
the power of attorney of the Corporation or such person to any person or persons
(whether or not such individual is an employee of the Corporation) as the
individual executing the power of attorney may deem appropriate; and
FURTHER RESOLVED, that (1) the officers of the Corporation be and each of them
hereby is authorized to take or cause to be taken all such additional or other
actions and to execute or cause to be executed such additional or other
documents, certificates, writings or other instruments as may be deemed by such
officer or officers in their discretion necessary, desirable or appropriate in
order to carry
<PAGE>
out the intent and accomplish the purposes of the foregoing resolutions and
(2) any actions heretofore or hereafter taken by any officer of the Corporation
or any of its subsidiaries in good faith with respect to the acquisition of
Hampton Park are hereby in all respects ratified and confirmed as the official
actions of the Corporation.
<PAGE>
EXHIBIT 10(G).
FIRST CHICAGO CORPORATION
SAVINGS INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF APRIL 1, 1989, INCLUDING AMENDMENTS
THROUGH DECEMBER 15, 1994)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
------- ----
<C> <S> <C>
1 Introduction........................................................ 1
The Plan............................................................ 1
Purpose of the Plan................................................. 1
The Trust........................................................... 1
Effective Date...................................................... 1
Administration...................................................... 1
2 Definitions......................................................... 1
Account............................................................. 1
Active Participant.................................................. 1
Actual Deferral Percentage.......................................... 1
After-Tax Contributions............................................. 2
Bank................................................................ 2
Before-Tax Contributions............................................ 2
Code................................................................ 2
Committee........................................................... 2
Company Stock....................................................... 2
Compensation........................................................ 2
Contribution Percentage............................................. 2
Corporation......................................................... 2
Designated Beneficiary.............................................. 2
Earnings............................................................ 2
Effective Date...................................................... 2
Employer............................................................ 3
Employer Discretionary Contribution................................. 3
Highly Compensated Participant...................................... 3
Hour of Service..................................................... 3
Investment Funds.................................................... 4
Leave of Absence.................................................... 4
Matching Contributions.............................................. 4
Participant......................................................... 4
Plan................................................................ 4
Plan Year........................................................... 4
Settlement Date..................................................... 4
Trust............................................................... 4
Trust Fund.......................................................... 4
Valuation Date...................................................... 4
Year of Service..................................................... 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE PAGE
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<C> <S> <C>
3 Plan Participants.................................................. 5
Participation...................................................... 5
Employees of Foreign Subsidiaries.................................. 5
Cessation of Participation......................................... 5
Resumption of Participation........................................ 5
Participants' Right to Share in Employer Contributions............. 5
Notice of Participation............................................ 6
Leased Employees................................................... 6
4 Employers' Contributions........................................... 6
Employers' Contributions........................................... 6
Employers' Matching Contributions.................................. 6
Before-Tax Contributions........................................... 6
Employer Discretionary Contributions............................... 6
Payment of Employers' Contributions................................ 7
Deduction Limitation............................................... 7
Verification of Employers' Contributions........................... 7
5 Before-Tax and After-Tax Contributions............................. 7
Before-Tax Contributions........................................... 7
Distribution of Excess Deferrals................................... 8
Actual Deferral Percentage Test Limitation on Before-Tax
Contributions...................................................... 8
After-Tax Contributions............................................ 8
Form of Participant Contributions.................................. 8
Variation, Discontinuance and Resumption of Participant
Contributions...................................................... 9
Rollover Contributions............................................. 9
Transferred Benefits............................................... 9
Contribution Percentage Test Limitation on Employer Matching
Contributions and Participant After-Tax Contributions............. 9
Multiple Use....................................................... 10
6 Plan Accounting and Investment Alternatives........................ 10
Separate Participant Accounts...................................... 10
Investment Alternatives............................................ 10
Investment Elections............................................... 11
Charging Payments and Distributions................................ 11
Adjustment of Accounts............................................. 12
Statement of Accounts.............................................. 12
Investments in Company Stock....................................... 12
Allocation of Company Stock........................................ 12
Additional Accounting Rules for Company Stock...................... 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE PAGE
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<C> <S> <C>
Voting and Tender of Company Stock................................. 13
7 Distribution of Account Balances................................... 13
Settlement Date.................................................... 13
Methods of Benefit Payment......................................... 14
Selection of Time and Manner of Benefit Payment.................... 14
Designated Beneficiaries........................................... 14
Eligible Rollover Distributions.................................... 14
Payment of Certain Benefits From Transfer Account.................. 15
8 Withdrawals and Loans During Employment............................ 16
Withdrawal of Before-Tax Contributions, Employer Matching
Contributions and Employer Discretionary Contributions on Account
of Financial Hardship.............................................. 16
Withdrawal of After-Tax Contributions.............................. 17
Withdrawal of Prior Employer Contributions......................... 17
Withdrawal After Age 59 1/2........................................ 17
Loans to Participants.............................................. 17
Special Rule for Married Participants.............................. 18
9 Maximum Contributions.............................................. 18
Contribution Limitations........................................... 18
Participant Covered by Defined Contribution Plan Only.............. 18
Participant Covered by Defined Contribution Plan and Defined
Benefit Plan....................................................... 19
10 General Provisions................................................. 19
Payment to Substitute Beneficiaries................................ 19
Payment with Respect to Incapacitated Participants or
Beneficiaries...................................................... 20
Examination of Plan Documents...................................... 20
Notices............................................................ 20
Nonalienation of Plan Benefits..................................... 20
No Employment or Benefit Guaranty.................................. 20
Litigation......................................................... 20
Evidence........................................................... 21
Gender and Number.................................................. 21
Waiver of Notice................................................... 21
Applicable Law..................................................... 21
Severability....................................................... 21
Fiduciary Responsibilities......................................... 21
Funding of Plan Benefits........................................... 21
Supplements........................................................ 21
11 Relating to Plan Administration.................................... 22
Committee Appointed by Corporation................................. 22
Resignation or Removal of Committee Member......................... 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE PAGE
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<C> <S> <C>
Committee Secretary................................................. 22
Powers of Committee................................................. 22
Action by Committee................................................. 22
Committee Support................................................... 23
Decision of Committee Final......................................... 23
Review of Benefit Determinations.................................... 23
Uniform Rules....................................................... 23
Indemnification..................................................... 23
12 Relating to the Employers........................................... 23
Action by Employers................................................. 23
Additional Employers, the First Chicago Companies................... 24
Restrictions as to Reversion of Trust Fund to Employers............. 24
13 Amendment and Termination........................................... 24
Amendment........................................................... 24
Termination......................................................... 24
Vesting on Termination.............................................. 25
Plan Merger......................................................... 25
Notice of Amendment, Termination or Plan Merger..................... 25
14 Top-Heavy Plan Rules................................................ 25
Key Employees....................................................... 25
Top-Heavy Plan...................................................... 26
Aggregation Groups.................................................. 26
Special Minimum Contributions....................................... 26
</TABLE>
<PAGE>
FIRST CHICAGO CORPORATION SAVINGS INCENTIVE PLAN
ARTICLE 1
Introduction
1.1 The Plan. The First Chicago Corporation Savings Incentive Plan (the
"Plan") was first established as a profit sharing plan and trust known as "The
First National Bank of Chicago Employees' Profit-Sharing Trust" by The First
National Bank of Chicago (the "Bank") by trust agreement dated January 13,
1953. Effective January l, 1971 said profit-sharing plan was amended and
restated in the form of a separate document entitled "The First National Bank
of Chicago Profit-Sharing Plan," and such plan was subsequently amended and
restated effective January 1, 1980 and January 1, 1987. The First Chicago
Corporation ("Corporation") amended and restated such plan as this Plan
effective April 1, 1989. The provisions hereof constitute an amendment and
restatement effective April 1, 1989 of the Plan by the Corporation
incorporating all amendments to the Plan through December 15, 1994.
1.2 Purpose of the Plan. The purpose of the Plan is to enable eligible
employees of the Corporation and the Bank and eligible employees of the
Corporation's subsidiaries and other related companies which adopt the Plan
(the "Employers") with the Corporation's consent to accumulate their own funds
and share in the contributions of their Employers, and thereby assist such
employees in providing for their future security. The Plan is intended to meet
the requirements of Section 401(a) of the Internal Revenue Code of 1986
("Code"), as amended, and the Employee Retirement Income Security Act of 1974,
as amended. The Plan is intended to qualify as a cash and deferred arrangement
under Section 401(k) of the Code. The provisions of this Plan shall apply only
to an employee who is employed by an Employer on or after the Effective Date.
The rights and benefits, if any, of a former employee shall be determined in
accordance with provisions of the Plan in effect on the date his employment is
terminated.
1.3 The Trust. Funds contributed under the Plan will be held and invested
until distributed by the person or persons from time to time appointed by the
Corporation to serve as the trustee of the First Chicago Corporation Savings
Incentive Plan Trust (the "Trust").
1.4 Effective Date. The "Effective Date" of the Plan, as set forth herein, is
April 1, 1989.
1.5 Administration. The Plan will be administered by the Retirement Committee
(the "Committee") described in section 11 and any other persons so authorized
by the Committee. Copies of the Plan and Trust, which forms a part of the Plan,
are on file at the principal offices of the Bank where they may be examined by
any employee of an Employer. The provisions of and benefits under the Plan are
subject to the Trust.
ARTICLE 2
Definitions
The following terms, when used in the Plan, shall have the following
definitions unless the context expressly requires otherwise:
2.1 Account means the record, maintained by the Committee for each
Participant, of his interest in the Trust Fund. The Committee also will
maintain, for each Participant, (i) such separate accounts as it deems
necessary to reflect contributions to the Plan (as described in section 6.1)
and (ii) a record of the portion of his account that is invested in each of the
Investment Funds.
2.2 Active Participant means a Participant who is making Before-Tax or After-
Tax Contributions pursuant to Article 5.
2.3 Actual Deferral Percentage means for a specified group of Participants
for any Plan Year, the average of ratios (computed separately for each
Participant) of (i) the Before-Tax Contributions (and any other Employer
contributions which meet the withdrawal restrictions and vesting requirements
of Sections 401(k)(2)(B) and (C) of the Code, except, however, Employer
Matching Contributions are not intended to be used in the computation of this
percentage or for purposes of section 5.3) for each Participant in such group
for such Plan Year to (ii) the Participant's Earnings for such Plan Year.
G-1
<PAGE>
2.4 After-Tax Contributions means the voluntary contributions which an
employee elects to make under section 5.4.
2.5 Bank means The First National Bank of Chicago.
2.6 Before-Tax Contributions means the amount by which a Participant's
Compensation is reduced at his election pursuant to section 5.1 and which is
contributed to the Trust Fund on his behalf by the Employer pursuant to section
4.1(b).
2.7 Code means the Internal Revenue Code of 1986, as amended and in effect
from time to time.
2.8 Committee means the Retirement Committee of the Corporation.
2.9 Company Stock means "qualifying employer securities", as defined in
Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended, of the Corporation.
2.10 Compensation means the basic salary or regular hourly pay (estimated
where necessary) paid to or for the benefit of a Participant during a Plan Year
as a U.S.-based employee of an Employer for the Participant's services as an
employee not in excess of $200,000, ($150,000 after December 31, 1993) (or such
other amount as may be permitted from time to time by the Secretary of the
Treasury or his delegate or by law) including amounts withheld from his pay
pursuant to (i) a salary reduction agreement and which are not includible in
his gross income under Sections 125 and 402(a)(8) of the Code, or (ii) a
voluntary salary deferral program and excluding overtime and supplemental pay,
bonuses, sales commissions, shift differentials and amounts paid before the
date he became a Participant, or after the date he no longer is eligible to
participate.
2.11 Contribution Percentage means for a specified group of Participants for
any Plan Year the average of the ratios (computed separately for each
Participant in such group) (i) of Matching Contributions and After-Tax
Contributions (and any Employer contributions described in Section 401(m)(3)(A)
of the Code or which meets the withdrawal and vesting requirements of Section
401(k)(2)(B) and (C) of the Code, if the Employer elects, in accordance with
Treasury Regulations, to take such contributions into account) for each
eligible employee in such group for such Plan Year to (ii) the Participant's
Earnings for such Plan Year.
2.12 Corporation means First Chicago Corporation, a Delaware corporation, or
its successor or successors.
2.13 Designated Beneficiary means any person or persons designated by a
Participant in accordance with section 7.4 to receive any benefits on account
of the death of the Participant.
2.14 Earnings with respect to each employee of the Employer means total
remuneration for services rendered to the Corporation during the Plan Year as
reported for federal income tax purposes on Form W-2 plus any amounts which are
not includible in the employee's gross income under Sections 125 or 402(a)(8)
of the Code; but excluding amounts in excess of $200,000 ($150,000 after
December 31, 1993) (or such other amount as may be permitted by the Secretary
of the Treasury or his delegate or by law). Earnings shall not exceed the
applicable limit as defined herein for any "family group." A "family group"
includes a Participant who is a 5% owner as defined in subparagraph 14.1(c) or
is one of the ten "highly-compensated employees" (as defined in Code Section
414(q) and Regulations thereunder) paid the greatest compensation during the
Plan Year, and that Participant's spouse or descendants under age 19 who are
also Participants as of the close of the period used to compute Earnings. If
the aggregate Earnings for the family group exceeds the applicable limit, then
the Earnings considered under the Plan for each family group member is
proportionally reduced so the total equals the applicable limit described
herein.
2.15 Effective Date means April 1, 1989.
G-2
<PAGE>
2.16 Employer means the Corporation, the Bank and any subsidiary of the
Corporation or the Bank or any related company (as defined in section 12.2)
that has adopted or adopts the Plan with the Corporation's consent in
accordance with provisions of section 12.2. The Corporation and its
subsidiaries or related companies that adopt the Plan are sometimes referred to
herein collectively as the "Employers" and individually as an "Employer." For
purposes of Articles 9 and 14, Employer shall include any related company as
defined in section 12.2 notwithstanding whether such company or entity has
adopted the Plan.
2.17 Employer Discretionary Contribution means, effective as of January 1,
1994, the discretionary contribution an Employer may make on behalf of each
eligible employee as described in subsection (c) of section 4.1.
2.18 Highly Compensated Participant means an employee of an Employer who for
any Plan Year was at any time during the Plan Year or the preceding Plan Year:
a. a 5-percent owner as defined in Section 416(i)(1) of the Code, or
b. received Earnings from an Employer in excess of $75,000 (or such other
maximum amount as may be permitted from time to time by the Secretary of
the Treasury or his delegate or by law), or
c. received Earnings from an Employer in excess of $50,000 (or such other
maximum amount as may be permitted from time to time by the Secretary of
the Treasury or his delegate or by law) and was in the group consisting of
the top 20 percent of the Employer's employees when ranked on the basis of
Earnings paid during such year, or
d. was an officer and received Earnings greater than 150 percent of the
amount in effect under Section 415(c)(1)(A) of the Code for such year,
provided that no more than 50 employees (or, if lesser, the greater of
three employees or 10 percent of the employees) shall be treated as
officers and provided further that if for any year no officer of an
Employer is described in this subparagraph (d), the highest paid officer of
an Employer for such Plan Year shall nonetheless be treated as if he were
described herein.
In the case of the Plan Year for which a determination of Highly Compensated
Participants is required for purposes of sections 5.3 and 5.9, an employee not
described in section 2.17(b), (c) and (d) for the preceding Plan Year shall not
be treated as described in section 2.17(b), (c) and (d) unless such employee is
a member of the group consisting of the 100 employees paid the greatest
Earnings during the Plan Year for which such determination is being made. If
any individual is a member of the family of a 5-percent owner or of a Highly
Compensated Employee in the group consisting of the 10 Highly Compensated
Employees paid the greatest Earnings during the year, then such individual
shall not be considered a separate employee and any Earnings paid to such
individual (and any applicable contribution on behalf of such individual) shall
be treated as if it were paid to (or on behalf of) the 5-percent owner or
Highly Compensated Participant. The term "family" means for this purpose with
respect to any employee, such employee's spouse and lineal ascendants or
descendants and the spouses of such lineal ascendants or descendants. A former
employee of the Employer shall be treated as a Highly Compensated Participant
if such employee was a Highly Compensated Participant when such employee
separated from service or such employee was a Highly Compensated Participant at
any time after attaining age 55.
2.19 Hour of Service means:
a. Each hour for which an employee is employed is directly or indirectly
compensated, or employed, by a First Chicago Company (as defined in section
12.2). An employee shall be credited with 45 hours of service for each week
for which he is directly or indirectly compensated, or employed, by a First
Chicago Company;
b. Each other hour required by federal law to be counted as an "hour of
service," including (i) each such hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the First Chicago
Companies; and (ii) each such hour for which an employee is on maternity or
paternity leave of absence; provided, that not more than 501 hours of
service shall be credited for payments of
G-3
<PAGE>
back pay, to the extent that such back pay is awarded for a period of time
during which the employee did not or would not have performed duties as an
employee and not more than 501 hours of service shall be credited by reason
of a maternity or paternity leave of absence; and (iii) for any person who
becomes an employee of the First Chicago Companies who has at least 1,500
hours of service as a leased employee in any preceding Plan Year, each such
hour shall be counted but not to exceed one such year of service.
Hours described in subsection (b) next above for employees on a maternity or
paternity leave of absence shall be determined in the same manner as
compensated hours of service, hours shall be credited for the period in which
such duties were performed (regardless of when payment is due) or for which
such compensation was paid and for this purpose the rules for crediting hours
of service set forth in Section 2530.200b-2 of the Department of Labor
Regulations are hereby incorporated by reference.
2.20 Investment Funds means those funds to be established within the Trust
Fund for the investment of Participants' Accounts as described at section 6.2.
2.21 Leave of Absence means:
a. A leave of absence required by law or granted by an Employer on
account of service in military or governmental branches described in any
applicable statute granting reemployment rights to employees who enter such
branches, or any other military or governmental branch designated by the
Employer.
b. A Leave of Absence for any period the employee is absent from work by
reason of the employee's pregnancy, the birth of a child of the employee,
the placement of a child with the employee in connection with the adoption
of the child by the employee or the caring for the child for a period
beginning immediately after such birth or placement.
c. Any other absence from active employment with an Employer that is
approved by it and not treated by it as a termination of employment. Leaves
of Absence granted by an Employer will be governed by rules uniformly
applied to all similarly situated employees of that Employer.
2.22 Matching Contributions means contributions which the Employer makes as a
percentage of a Participant's Before-Tax Contributions under section 4.1(a).
2.23 Participant means an employee or former employee of an Employer who has
met the eligibility requirements of Article 3 to participate in the Plan. An
employee who becomes a Participant will continue as such until complete
distribution of his benefits is made to him or on his behalf under section 7.2.
2.24 Plan means the First Chicago Corporation Savings Incentive Plan.
2.25 Plan Year means the calendar year.
2.26 Settlement Date means, as to a Participant, the date as of which the
Committee receives sufficient written notice that a Participant has terminated
employment with all of the First Chicago Companies, whether because of death,
retirement or otherwise or, in the case of a Participant who has attained age
59 1/2, the date the Committee receives the election contemplated under section
8.4.
2.27 Trust means the First Chicago Corporation Savings Incentive Plan Trust.
2.28 Trust Fund means, as of any date, all property of every kind then held
by the trustee pursuant to the terms of the Trust.
2.29 Valuation Date means the last day of each calendar month and any other
date specified by the Committee. The one month period (or shorter period in the
case of a special Valuation Date) ending on each Valuation Date is sometimes
referred to herein as a "Valuation Period."
G-4
<PAGE>
2.30 Year of Service means a 12 consecutive month period commencing on the
date an employee first completes an Hour of Service and in which the employee
has completed at least 1,000 Hours of Service, provided, however, that an
employee will not be credited with a Year of Service until the end of such 12-
month period.
ARTICLE 3
Plan Participants
3.1 Participation. Each Participant in the Plan immediately prior to the
Effective Date will continue as a Participant in the Plan on and after that
date, subject to the conditions and limitations of the Plan. Each other
employee of an Employer will become a Participant in the Plan on the first
payroll date after April 1, 1989, coincident with or following the date he
meets all of the following requirements:
a. He is employed by the Employer. However, employees covered by a
collective bargaining agreement shall not participate unless the collective
bargaining agreement states otherwise;
b. He is either (i) a salaried employee (that is, an employee whose
compensation is expressed on his Employer's records as a rate per year
rather than rate per hour) who has completed one calendar month of
employment following the date he first performs an Hour of Service or (ii)
for any Plan Year beginning before January 1, 1993 and any Plan Year
beginning after December 31, 1993, an hourly employee scheduled to
regularly work 20 or more hours per week who has completed at least one
Year of Service and is at least age 21 (but in no event shall an employee
who actually works 1,000 hours during the Plan Year be excluded from
participating by virtue of being scheduled to work less than 20 hours per
week) or (iii) effective January 1, 1993, an hourly paid employee scheduled
to regularly work 20 or more hours per week who has completed at least one
Year of Service and is at least age 21 and was a Participant in the Plan as
of December 31, 1992;
c. He is classified by his Employer as a U.S.-based employee; and
d. He has completed and submitted the enrollment form to contribute to
the Plan, as provided by the Committee.
3.2 Employees of Foreign Subsidiaries. A United States citizen employed by a
foreign subsidiary (as defined in Section 3121(1)(8) of the Code) of any
domestic Employer shall be considered an employee of that Employer if it has
entered into an agreement under Section 3121(1) of the Code which applies to
such foreign subsidiary and if contributions under a funded plan of deferred
compensation are not provided by any person other than such Employer with
respect to the remuneration paid to such individual by such foreign subsidiary,
and in such event, his remuneration from, and employment with, said foreign
subsidiary shall be deemed to be Compensation and to be employment with an
Employer, respectively.
3.3 Cessation of Participation. Once an employee of an Employer has become a
Participant in the Plan in accordance with section 3.1 above, such employee
shall remain a Participant in the Plan until the date that the Participant's
entire account balances under the Plan have been distributed to him or on his
behalf in accordance with the Plan.
3.4 Resumption of Participation. A Participant who ceases to be a Participant
will become a Participant again when he meets the eligibility requirements of
section 3.1. A Participant who elects to discontinue making Before-Tax
Contributions in accordance with section 5.1 or After-Tax Contributions in
accordance with section 5.4, may elect again to contribute as of the first day
of any payroll period following a period of at least three months (six months
in the case of an officer, as defined under Section 16 of the Securities and
Exchange Act of 1934 and the regulations promulgated thereunder, investing in
Company Stock) from the date he ceased making contributions, by properly
completing and filing the written election described in section 5.1 or making
the election described in section 5.4.
3.5 Participants' Right to Share in Employer Contributions. Only those
Participants who are employed by an Employer and are receiving Compensation for
a pay period are entitled to share in Employer
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contributions made in accordance with subsections 4.1(a) and 4.1(b) with
respect to a pay period. Designated beneficiaries of deceased Participants will
be treated as Participants; provided, that such beneficiaries shall not be
entitled to share in Employer contributions under Article 4 and may not
designate additional beneficiaries in accordance with section 7.4, and,
accordingly, any unpaid benefits remaining upon the death of a Designated
Beneficiary of a deceased Participant shall be distributed in accordance with
the provisions of section 10.1.
3.6 Notice of Participation. Each employee will be notified of the date he
becomes a Participant.
3.7 Leased Employees. Any "leased employee," as defined below, shall not be
treated as a Participant; however, to the extent a leased employee later
becomes a Participant, his service while a leased employee shall be counted as
if he were a Participant. A "leased employee" means any person who is not
otherwise an employee and who, pursuant to an agreement between the recipient
Employer and any other person (the "leasing organization"), has performed
services for an Employer, or for an Employer and related persons (determined in
accordance with Section 414(n)(6) of the Code), on a substantially full-time
basis for a period of at least one year, and such services are of a type
historically performed by employees in the business field of the recipient;
provided, that a person shall not be treated as a leased employee for any Plan
Year if, during such Plan Year, (i) such person is covered by a money purchase
pension plan maintained by the leasing organization which provides for
immediate participation, full and immediate vesting, and a nonintegrated
employer contribution rate of at least 10% of such employee's compensation (as
defined in Section 415(c)(3) of the Code), and (ii) leased employees do not
constitute more than 20% of the Employer's nonhighly compensated workforce, as
defined in Section 414(n) of the Code. Notwithstanding anything to the contrary
in this paragraph, the Plan will treat an individual as a leased employee only
to the extent required under Treasury Regulations.
ARTICLE 4
Employers' Contributions
4.1 Employers' Contributions. Subject to the conditions and limitations of
this Article 4 and Article 9, for each Plan Year the Employers will make
contributions to the Trust Fund in an amount equal to the sum of the amounts
determined in accordance with subsections (a) and (b) below:
a. Employers' Matching Contributions. With respect to each Participant
who has made a Before-Tax Contribution to the Plan on or prior to the last
day of the calendar month, the Employers shall make, as of such last day of
the calendar month, a Matching Contribution on behalf of each such
Participant equal to fifty (50) percent of the Before-Tax Contributions
which such Participant makes to the Plan on the payroll dates occurring
during that month. Beginning May 1, 1992, the Employers shall make a
Matching Contribution on behalf of each Participant equal to one hundred
(100) percent of the first $500 of Before-Tax Contributions which such
Participant makes to the Plan after May 1, 1992 and a Matching Contribution
equal to fifty (50) percent of Before-Tax Contributions in excess of $500
made after such date during the 1992 Plan Year. Beginning January 1, 1993
and for all Plan Years thereafter, the Employers' Matching Contributions
shall equal one hundred (100) percent of the first $500 of Before-Tax
Contributions made by each Participant during the Plan Year and fifty (50)
percent of the Before-Tax Contributions in excess of $500. Effective
January 1, 1994 and for all Plan Years thereafter, the Employer's Matching
Contribution shall equal one hundred (100) percent of the first $750 of
Before-Tax Contributions made by each Participant during the Plan Year and
fifty (50) percent of the Before-Tax Contributions in excess of $750.
b. Before-Tax Contributions. For each payroll date of an Employer which
ends during a Plan Year, each Employer will contribute to the Trust Fund
100 percent of the Before-Tax Contributions, if any, elected by each Active
Participant employed by it on that payroll date.
c. Employer Discretionary Contribution. Effective as of January 1, 1994,
as of the first business day of each Plan Year, the Employers may
contribute a uniform amount to the account of each "eligible
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employee," as defined in the following sentence, such amount as to be
determined in the absolute discretion of the Corporation's Board of
Directors or Organization, Compensation and Nominating Committee (without
regard to the Corporation's current and accumulated net profits) on or
before such date; however, in the case of eligible employees designated by
their employer as hourly paid employees, the uniform amount contributed to
such employee's accounts may be a fixed percentage of the amount
contributed to eligible employees designated by their employer as salaried
paid employees. An eligible employee is any employee of an Employer who (i)
is otherwise eligible to participate in the Plan as of the first day of the
Plan Year for which the contribution is made (without taking into
consideration subsection 3.1(d)), (ii) is in salary grade 18 or below (or
its equivalent) and (iii) has completed a period of service determined by
the Organization, Compensation and Nominating Committee for purposes of
determining eligibility for an Employer Discretionary Contribution (which
period of service shall comply with Section 401(a) of the Code and shall
not discriminate in favor of Highly Compensated Participants).
4.2 Payment of Employers' Contributions. It is intended that each Employer's
contributions under the Plan to be made in accordance with subsection 4.1(a)
for a Plan Year shall be paid to the Trust Fund (as described in section 10.14)
under the Plan, without interest, to the extent practicable as of the last day
of each calendar month, but in no event later than the time prescribed by law
for filing the Employer's federal income tax return for its fiscal year
coinciding with the Plan Year for which such contributions are made, including
any extensions of time thereof. Each Employer's contributions under the Plan to
be made in accordance with subsection 4.1(b) for any payroll date shall be paid
to the Trust Fund, without interest, as soon as practicable after that payroll
date, but in any event no later than 90 days from the end of the applicable
payroll date. Each Employer's contributions under the Plan to be made in
accordance with subsection 4.1(c) shall be paid to the Trust Fund, without
interest, as soon as practicable following the first day of the Plan Year for
which the contribution is made, but in no event later than the time prescribed
by law for filing the Employer's federal income tax return for its fiscal year
coinciding with the Plan Year for which such contributions are made, including
any extensions.
4.3 Deduction Limitation. Each Employer's aggregate contributions under the
Plan for any Plan Year in no event shall exceed an amount equal to the maximum
amount deductible on account thereof by that Employer for its fiscal year
coinciding with that Plan Year as an expense for purposes of federal taxes on
income.
4.4 Verification of Employers' Contributions. The certificate of an
independent certified public accountant selected by the Corporation as to the
correctness of any amounts or calculations relating to the Employers'
contributions under the Plan for any Plan Year shall be conclusive on all
persons.
ARTICLE 5
Before-Tax and After-Tax Contributions
5.1 Before-Tax Contributions. Subject to the conditions and limitations of
this Article 5 and Article 9, for each payroll date beginning after April 1,
1989 each Participant may elect to reduce his Compensation from his Employer by
an amount equal to not less than one percent nor more than six percent (in
multiples of one whole percent) of his Compensation for such payroll date, and
his Employer shall in accordance with subsection 4.1(b) contribute the amount
of each such reduction for a payroll date to the Plan on his behalf as a
Before-Tax Contribution; provided that a Participant's aggregate Before-Tax
Contributions may not exceed $7,000 (or such other maximum amount as may be
permitted from time to time by the Secretary of the Treasury or his delegate or
by law) in any calendar year. Each Participant desiring to have Before-Tax
Contributions made on his behalf shall file a written election with the
Committee on such form, in such manner and at such times as the Committee shall
require. Completion of such election form shall evidence the Participant's
authorization of his Employer to reduce his Compensation and, accordingly, his
agreement (until subsequently modified by him as permitted in section 5.6) to
have Before-Tax Contributions made on his behalf at his chosen rate.
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5.2 Distribution of Excess Deferrals. If not later than the March 1 next
following the end of a calendar year, a Participant notifies the Committee that
he has made Before-Tax Contributions to this Plan and one or more other plans
in excess of the maximum Before-Tax Contributions permissible during such
calendar year and further notifies the Committee of the amount of such excess
allocated to this Plan, such excess amount shall be paid to such Participant
(along with any income or loss allocable thereto) as soon as practicable
following such notification, but in any event by the April 15 following the
calendar year with respect to which such excess deferrals were made.
5.3 Actual Deferral Percentage Test Limitation on Before-Tax Contributions.
In addition to being subject to the contribution limitations of sections 5.1,
9.2 and 9.3, Before-Tax Contributions shall be subject to the nondiscrimination
limitations of Sections 401(k)(3) and 401(m)(9) of the Code and Treasury
Regulations (S)(S)1.401(k)-1(b) and 1.401(m)-2. For this purpose, Before-Tax
Contributions shall be adjusted each Plan Year by the Committee as provided
below in this section, by making the adjustment necessary, so that either:
a. The Actual Deferral Percentage for the group of Highly Compensated
Participants shall not exceed 125 percent of the Actual Deferral Percentage
for all other Participants for such Plan Year; or
b. The Actual Deferral Percentage for the group of Highly Compensated
Participants shall not exceed the Actual Deferral Percentage for all other
Participants for such Plan Year by more than two percentage points, and the
Actual Deferral Percentage for Highly Compensated Participants shall not
exceed 200 percent of the Actual Deferral Percentage for all other
Participants or such lesser amount as the Secretary of the Treasury
prescribes to prevent the multiple use of this alternative with respect to
any Highly Compensated Participant.
An adjustment shall be made hereunder only if neither subsection (a) nor (b)
above is satisfied. If any adjustment is required hereunder, then, in the first
instance, where it is determined that an adjustment is required before the end
of the Plan Year, the maximum amount of Before-Tax Contributions that may be
elected by each Highly Compensated Participant shall be reduced on a
prospective basis for the remainder of the Plan Year to the smallest whole
percentage which will cause either subsection (a) or (b) above to be satisfied.
Alternatively, (or in addition as the case may be) if upon conclusion of the
Plan Year, it is determined that further adjustment is required, then the
Before-Tax Contributions elected by all Highly Compensated Participants which
are in excess of such reduced maximum percentage shall be reduced to cause
either subsection (a) or (b) to be satisfied. The amount by which a
Participant's Before-Tax Contributions are reduced hereunder shall be paid to
such Participant (along with any income or loss allocable thereto) as soon as
practicable following such determination, but in any event by the fifteenth day
of the third calendar month following the end of the Plan Year with respect to
which such Before-Tax Contributions were made or shall be treated as an After-
Tax Contribution under section 5.4 of the Plan to the extent permitted in
regulations under Section 401(k) of the Code and subject to the limitations of
section 5.9 of the Plan. Employer Discretionary Contributions may be utilized
in computing the Actual Deferral Percentage for each Participant to the extent
necessary to satisfy the limitations of this section.
5.4 After-Tax Contributions. Subject to the conditions of this Article 5 or
Article 9 and in addition to, or in lieu of, Before-Tax Contributions permitted
under section 5.1, any Participant may elect to make After-Tax Contributions
with respect to a Plan Year in an amount of not less than one percent nor more
than ten percent (in multiples of one whole percent) of the Participant's
Compensation for such Plan Year. The Committee may adopt appropriate
regulations, procedures or forms pertaining to After-Tax Contributions.
5.5 Form of Participant Contributions. All After-Tax Contributions shall be
made by payroll deduction (or periodically corresponding to payroll deduction)
or by any other method agreed to by the Committee; provided that all After-Tax
Contributions for a Plan Year must be made within 30 days after the end of that
Plan Year. After-Tax Contributions must be made in the form of cash. After-Tax
Contributions shall be credited to a Participant's account and paid to the
Trust Fund, without interest, as soon as practicable following the payroll for
which they are made but in any event no later than 90 days from the end of the
applicable payroll date.
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5.6 Variation, Discontinuance and Resumption of Participant Contributions.
Each Participant shall initially elect his rate of Before-Tax Contributions and
After-Tax Contributions effective as of the date he is first eligible to
participate in the Plan or by written notice filed with the Committee twenty-
one days in advance of any payroll date, which written election will evidence
the Participant's agreement (until subsequently modified by him in accordance
with this section) to have his Compensation reduced and contributions made on
his behalf in accordance with sections 5.1 and 5.4. A Participant may elect to
change the rate of his contributions (within the limits specified in this
Article 5 and, for changes prior to September 1, 1994, no more than four times
during any 12-month period) as of any payroll date by filing a superseding
written election with the Committee within a time period announced from time to
time by the Committee to Participants. A Participant may elect to discontinue
making all contributions as of any payroll date by filing a superseding written
election with the Committee at least 21 days before such date (or by such
earlier date as the Committee may require). A Participant who has discontinued
making some or all contributions hereunder may resume making such contributions
by filing an election form with the Committee at least 21 days prior to any
payroll date, provided that if a Participant completely discontinues making
Before-Tax Contributions or After-Tax Contributions, such Participant may not
resume making the type of contributions which were discontinued for at least
three months following the payroll date as of which the contributions were
discontinued. Any elections made in accordance with this section 5.6 shall be
made on a form provided by the Committee for such purposes and shall be signed
by the Participant.
5.7 Rollover Contributions. A Participant may not make a rollover
contribution to this Plan of amounts distributed from another plan or from an
individual retirement account.
5.8 Transferred Benefits. If an employee of an Employer had previously
participated in any other qualified pension, profit sharing stock bonus or
other retirement or employee benefit plan maintained by the Employer and such
other plan permits the transfer to this Plan of the vested portion of such
employee's benefits under such other plan, and if so directed by the Committee
in its discretion, the trustee of the Trust Fund shall accept a transfer of
cash to this Plan equal to the vested benefits of such employee under such
other plan which are being transferred to this Plan (and such covered employee
shall thereby become a Participant if he was not already a Participant)
provided that the amount transferred shall not consist of After-Tax
Contributions.
5.9 Contribution Percentage Test Limitation on Employer Matching
Contributions and Participant After-Tax Contributions. In addition to being
subject to the contribution limitations of sections 5.4, 9.2 and 9.3, Matching
Contributions and After-Tax Contributions shall be subject to the
nondiscrimination limitations of Section 401(m) of the Code and Treasury
Regulations (S)(S)1.401(m)-1(b) and 1.401(m)-2. For this purpose, such Matching
Contributions and After-Tax Contributions shall be adjusted each Plan Year by
the Committee as provided below in this section, by making the adjustment
necessary, so that either:
a. The Contribution Percentage for the group of Highly Compensated
Participants shall not exceed 125 percent of the Contribution Percentage
for all other Participants for such Plan Year; or
b. The Contribution Percentage for the group of Highly Compensated
Participants shall not exceed the Contribution Percentage for all other
Participants for such Plan Year by more than two percentage points, and the
Contribution Percentage for Highly Compensated Participants shall not
exceed 200 percent of the Contribution Percentage for all other
Participants or such lesser amount as the Secretary of the Treasury
prescribes to prevent the multiple use of this alternative with respect to
any Highly Compensated Participant.
An adjustment shall be made hereunder only if neither subsection (a) nor (b)
above is satisfied. If any adjustment for a Plan Year is required hereunder the
After-Tax Contributions of the Highly Compensated Participants shall be reduced
or eliminated first on a prospective basis for the remainder of the Plan Year.
Alternatively, upon conclusion of the Plan Year, the excess for such Plan Year
of the aggregate amount of Employer Matching Contributions and After-Tax
Contributions over the maximum amount of such contributions permitted under the
limitations of this section (determined first by reducing aggregate
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contributions made on behalf of Highly Compensated Participants in order of
their Contribution Percentages beginning with the highest of such percentages),
along with any income allocable thereto, shall be distributed to such Highly
Compensated Participants as soon as practicable following such determination,
but in any event by the fifteenth day of the third calendar month following the
end of the Plan Year with respect to which such contributions were made.
Employer Discretionary Contributions may be utilized in computing the
Contribution Percentage for each Participant to the extent necessary to satisfy
the limitations of this section.
5.10 Multiple Use. The Committee will administer the Plan to prevent the
"multiple use" of the alternative limitations of sections 5.3(b) and 5.9(b) in
accordance with regulations issued by the Secretary of the Treasury. If the
Committee determines that multiple use exists, then the Committee, at its
option, may elect to reduce the Actual Deferral Percentage, Contribution
Percentage, or both using the method described in sections 5.3 or 5.9 or such
other method prescribed in the regulations to eliminate any multiple use.
ARTICLE 6
Plan Accounting and Investment Alternatives
6.1 Separate Participant Accounts. The Committee will establish and maintain
the following separate Accounts with respect to Participants:
a. An "Employer Matching Contributions Account" will be maintained in the
name of each Participant which will reflect the Employers Matching
Contributions made on his behalf to this Plan and the income, losses,
appreciation and depreciation attributable thereto.
b. A "Before-Tax Contributions Account" will be maintained in the name of
each Participant which will reflect the Before-Tax Contributions made on
his behalf to this Plan and the income, losses, appreciation and
depreciation attributable thereto.
c. An "After-Tax Contributions Account" will be maintained in the name of
each Participant which will reflect the amount of the After-Tax
Contributions made by him and the income, losses, appreciation and
depreciation attributable thereto.
d. A "Transfer Account" will be maintained in the name of each
Participant with respect to whom a transfer of benefits (as described in
section 5.8) is made which will reflect the portions of his transferred
benefits from another plan and the income, losses, appreciation and
depreciation attributable thereto.
e. Effective January 1, 1994, an "Employer Discretionary Contribution
Account" will be maintained in the name of each Participant with respect to
whom an Employer Discretionary Contribution is made which will reflect the
Employer Discretionary Contributions made on his behalf to this Plan and
the income, losses, appreciation and depreciation attributable thereto.
The Committee also may maintain such other Accounts in the names of
Participants as it considers desirable, including Accounts reflecting
contributions made to the Plan as in effect prior to the Effective Date. Unless
the context indicates otherwise, reference in the Plan to a Participant's
Accounts or Account balances shall refer to all accounts maintained in his name
under the Plan. The maintenance of separate Accounts as provided above shall
not require any physical segregation of the Trust Fund with respect to such
Accounts. Participants shall at all times have 100 percent vested and
nonforfeitable interests in all of their Accounts under the Plan.
6.2 Investment Alternatives. In addition to other investment alternatives,
from time to time the trustee of the Trust Fund at the direction of the
Committee may cause one or more Investment Funds to be established. The
continued availability of any Investment Fund is necessarily conditioned upon
the terms and conditions of the applicable investment management agreements and
the continued availability of Investment Funds established cannot be assured on
the same terms and conditions as may apply from time to time. Participants
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will be informed from time to time of the availability of Investment Funds as
they are established or superseded. As of the Effective Date, the following
Investment Funds are maintained:
a. A "cash management fund" which will be invested in the Institutional
Cash Management Fund maintained by the trustee.
b. An "equity fund" which will be invested in the Institutional Equity
Fund and Institutional Foreign Equity Fund maintained by the trustee or its
successor.
c. A "diversified fund" which will be invested in the Institutional
Multi-Asset Portfolio maintained by the trustee or its successor.
d. A "Company Stock Fund" which will be invested primarily in Company
Stock and, to the extent needed for liquidity for distribution and while
contributions are pending investment in Company Stock, the Institutional
Cash Management Fund maintained by the trustee or its successor.
e. Effective September 1, 1994, a "global bond fund" which will be
invested in the Global Bond Fund maintained by the Brinson Trust Company or
its successor.
6.3 Investment Elections. Account balances maintained under the Plan as in
effect prior to the Effective Date will be invested in accordance with the
terms of the Plan as in effect prior to the Effective Date until June 30, 1989,
or such later date as the Committee determines; thereafter and until the next
investment election date, as provided below, such Account balances shall be
allocated among the Investment Funds described in section 6.2 in accordance
with the directions of the Committee. As of the investment election date next
following June 30, 1989 or such later date as the Committee determines in
accordance with the previous sentence, each Participant may elect to invest
such Account balances in accordance with the rules applicable to contributions
made after April 1, 1989, as described below. Effective June 1, 1989, and on
the first day of each month thereafter, (but, for elections made prior to
September 1, 1994, no more than four times in any twelve month period), each
Participant may elect, by giving written notice to the Committee at least two
weeks in advance (or such other date as the Committee may require), in
accordance with uniform rules established by the Committee and on a form
provided by it for this purpose, to have his Account balances as of the opening
of business on that date invested in accordance with his election entirely in
one of the Investment Funds or partially in each of two or more of the
Investment Funds so that a multiple of five (5) percent of his Account balances
is invested as of such date in each Investment Fund. Alternatively, a
Participant may similarly elect that any whole percentage of, or whole dollar
amount in, an Investment Fund be transferred to one or more of the remaining
Investment Funds. Similarly, as of the first day of each month (effective
September 1, 1994, as of the first pay day of each month), each Participant may
elect, (but, for elections made prior to September 1, 1994, no more than four
times in any twelve month period), by giving written notice to the Committee at
least two weeks in advance (or such other date as the Committee may require),
in accordance with uniform rules established by the Committee and on a form
provided by it for this purpose, to have future contributions (including loan
payments) made by him or on his behalf (prior to any subsequent election he may
make) invested in accordance with his election entirely in one of the
Investment Funds or partially in each of two or more of the Investment Funds so
that a multiple of five (5) percent of such future contributions is invested in
each Investment Fund. During any period for which a Participant has not made
either or both of the above elections, he will be considered to have elected to
have his Account balances or his future contributions (including loan
payments), or both, as the case may be, invested entirely in the cash
management fund. The Committee shall from time to time notify each trustee with
custody of an Investment Fund of the aggregate amounts to be invested in each
Investment Fund in accordance with Participants' elections.
6.4 Charging Payments and Distributions. All payments, withdrawals or other
distributions made to or on behalf of a Participant or his beneficiary will be
charged to the Participant's Accounts as of the appropriate Valuation Date.
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6.5 Adjustment of Accounts. As of each Valuation Date, the Committee shall
adjust the Account balances of Participants to reflect payments and withdrawals
of benefits, adjustments in the values of the Investment Funds and Employers'
and Participants' contributions, as follows:
a. First, the Accounts of each Participant shall be credited with his pro
rata share of any increase, or charged with his pro rata share of any
decrease, since the next preceding Valuation Date in the value of the
adjusted net worth (as defined below) of each Investment Fund in which he
has an interest as of that date;
b. Next, the Employers' contributions that are to be credited as of that
date shall be credited to the proper Participants' Employer Matching
Contributions Account and Before-Tax Contributions Account;
c. Next, the After-Tax Contributions which are to be credited as of that
date shall be credited to the proper Participant's After-Tax Contributions
Account;
d. Next, all payments, loans, withdrawals and transfers of benefits made
since the last preceding Valuation Date that have not been charged
previously shall be charged to the proper Accounts; and
e. Finally, transferred benefits, if any, that are to be credited as of
that date shall be credited to the proper Participants' Accounts.
The "adjusted net worth" of an Investment Fund as of any date means the then
net worth of the Investment Fund as determined by the trustee, less an amount
equal to the sum of any Employers' contributions and Participants'
contributions (including transferred benefits) not yet credited to the Accounts
of Participants and further adjusted as appropriate to reflect other activity
affecting the Investment Funds such as loan prepayments and advance
distributions.
6.6 Statement of Accounts. As soon as practicable after the last day of each
calendar quarter, and at such other times as the Committee considers desirable,
each Participant will be furnished with a statement reflecting the balance of
his Accounts as of the Valuation Date coincident with the end of the calendar
quarter. No Participant, except a member of the Committee, shall have the right
to inspect the records reflecting the Accounts of any other Participant.
6.7 Investments in Company Stock. Participants may elect to have a portion or
all of their Accounts invested by the trustee in the Company Stock Fund. For
this purpose it is intended that the Plan be considered an "eligible individual
account plan" which explicitly provides for the acquisition and holding of
"qualifying employer securities" (as those terms are defined in Sections
407(d)(3) and 407(d)(5) of the Employee Retirement Income Security Act of 1974,
as amended) and that the trustee may invest up to 100 percent of the Trust Fund
held by it in Company Stock, to the extent elected by Participants. Company
Stock may be acquired by the trustee through purchases on the open market,
private purchases, purchases from the Employers (including purchases from the
Corporation of treasury shares or authorized but unissued shares),
contributions in kind by the Employers, or otherwise. The trustee in its
discretion may hold a portion of the Company Stock Fund in cash or cash
equivalents to meet liquidity needs for distribution and while pending
investment in Company Stock.
6.8 Allocation of Company Stock. As of each Valuation Date all unallocated
Company Stock then held under the Trust shall be considered as purchased for
the Accounts of Participants who have elected to invest in Company Stock to the
extent their respective Accounts can be charged therefore on the basis of the
average purchase price paid for such stock, and such Company Stock shall be so
allocated to Participants' Accounts and their Accounts charged therefore. For
purposes of allocating Company Stock and charging Accounts therefore, the
average purchase price of Company Stock to be charged to Participants' Accounts
shall be determined by dividing the total purchase price paid for all Company
Stock purchased by the trustee since the preceding Valuation Date by the total
number of shares of unallocated Company Stock (excluding Company Stock
resulting from stock dividends on or split ups of allocated Company Stock). In
applying the provisions of the next preceding sentence, unallocated Company
Stock which has been contributed by the
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Employers as a part of the Employers' contribution shall be deemed to have been
purchased by the trustee for an amount equal to the fair market value of such
shares when they were contributed. In addition, any unallocated Company Stock
to be allocated as of a Valuation Date shall include Company Stock resulting
from trades which have been executed but not settled by that Valuation Date.
Company Stock which becomes available for sale as a result of the election of
separating Participants to receive their distribution in cash or elections to
transfer funds from the Company Stock Fund to another Investment Fund shall
likewise be allocated to Participants' Accounts, and their Accounts charged
therefore. For purposes of allocating said shares of Company Stock and charging
Accounts therefore, the average purchase price of such Company Stock shall be
the fair market value of such shares on the preceding Valuation Date.
6.9 Additional Accounting Rules For Company Stock. The following additional
accounting rules apply regarding Company Stock:
a. As of each Valuation Date, uncredited cash dividends attributable to
Company Stock previously allocated to a Participant's Accounts shall be
credited to his Accounts.
b. As of each Valuation Date, uncredited whole and fractional Company
Stock resulting from stock dividends or splits attributable to Company
Stock previously allocated to a Participant's Accounts shall be credited to
his Accounts.
c. If rights or warrants are issued with respect to any Company Stock
held by the trustee, such rights or warrants shall be appropriately
reflected in Participants' Accounts in accordance with rules established by
the Committee and uniformly applied until sold or exercised by the trustee
and the proceeds appropriately reflected as directed by the Committee.
6.10 Voting and Tender of Company Stock. The Committee shall furnish to each
Participant who has Company Stock credited to his Accounts notice of the date
and purpose of each meeting of the stockholders of the Corporation at which
Company Stock are entitled to be voted. The Committee shall request from each
such Participant instructions as to the voting at that meeting of Company Stock
credited to his Accounts. If the Participant furnishes such instructions within
the time specified in the notification given to him, the trustee shall vote
such Company Stock in accordance with the Participant's instructions. All
Company Stock credited to Accounts as to which the trustee does not receive
voting instructions as specified above and all unallocated Company Stock held
by the trustee shall be voted by the trustee proportionately in the same manner
as it votes Company Stock to which the trustee has received voting instructions
as specified above. Similarly, the Committee shall furnish to each Participant
who has Company Stock credited to his Accounts notice of any tender offer for,
or a request or invitation for tenders of, Company Stock made to the trustee.
The Committee shall request from each such Participant instructions as to the
tendering of Company Stock credited to his Accounts and for this purpose the
Participants shall be provided with a reasonable period of time in which they
may consider any such tender offer for, or request or invitation for tenders
of, Company Stock. The trustee shall tender the Company Stock as to which the
trustee has received instructions to tender from Participants within the time
specified. Company Stock credited to Accounts as to which the trustee has not
received instructions from Participants shall not be tendered. As to all
unallocated Company Stock held by the trustee, the trustee shall tender the
same proportion thereof of the Company Stock as to which the trustee has
received instructions from Participants to tender bear to all Company Stock
with respect to which the trustee has received instructions from Participants
to tender and not to tender.
ARTICLE 7
Distribution of Account Balances
7.1 Settlement Date. A Participant's Account balances shall be distributable
to the Participant or, in the event of his death, to his beneficiary, in
accordance with section 7.2, as of the Valuation Date coincident with or next
following (i) his Settlement Date and (ii) the receipt by the Committee of the
required tax withholding
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instructions and distribution election instructions, if applicable, but only
after all adjustments required under the Plan as of that date have been made,
and subject to any further adjustments required under the Plan as of subsequent
Valuation Dates prior to complete distribution of his Accounts.
7.2 Methods of Benefit Payment. A Participant's Account balances which are
distributable under section 7.1 shall be paid to or for the benefit of the
Participant or his beneficiary following his Settlement Date by (i) payment in
a lump sum, or (ii) payment in a series of substantially equal annual or more
frequent installments over a period of time not exceeding the lesser of (A) 15
years, or (B) the life expectancy of the Participant or, if the Participant has
designated a beneficiary who is an individual, the joint life and last survivor
expectancy of the Participant and his Designated Beneficiary (as determined by
the Committee in accordance with actuarial tables adopted by it for this
purpose and in accordance with incidental death benefit rules of Code Section
401(a)(9) and Regulations thereunder). Payments shall be in cash; however,
Company Stock held in a Participant's Account shall be distributed in kind,
unless the Participant requests such distribution or a portion of such
distribution to be made in cash or elects an installment distribution.
Effective April 1, 1989 through December 3, 1993 and notwithstanding the
provisions of section 6.7, if payment hereunder is made wholly or partially in
installment payments or deferred beyond the Participant's Settlement Date, the
Participant's Accounts shall be liquidated and transferred to the cash
management fund. Notwithstanding the foregoing, if a Participant dies before
his entire interest has been distributed to him, the remaining portion of such
interest will be distributed to his Designated Beneficiary in a lump sum.
7.3 Selection of Time and Manner of Benefit Payment. Unless the Participant
whose Account balances exceed $3,500 elects to defer payment, payment of a
Participant's benefits normally will be made within a reasonable period of time
after a Participant's Settlement Date as described in section 7.1 (or the date
of a Participant's consent described in the next sentence, if later); however,
in no event shall payments commence later than 60 days after the end of the
Plan Year in which occurs the later of the Participant's (i) termination of
employment, (ii) completion of 10 years of service or (iii) his attainment of
age 65 years; provided that payment of each Participant's Account balances must
be made (or installments must commence) no later than the April 1 of the
calendar year following the calendar year in which he attains age 70 1/2 years.
In addition, notwithstanding anything in this Article 7 to the contrary if and
while a Participant's Account balances exceed $3,500 as of a Valuation Date, no
amount shall be distributable to the Participant without his consent prior to
the date he attains age 65 years. If, upon attaining age 65 or at any time
thereafter, a Participant ceases to be employed by the Corporation or any of
its affiliates and the Participant has not elected installment distributions,
the Participant shall be paid his entire interest in the Plan in a lump sum as
soon as administratively practicable.
7.4 Designated Beneficiaries. A Participant may from time to time designate a
beneficiary or beneficiaries to whom the Participant's benefits will be
distributed in the event of the Participant's death prior to complete payment
of his benefits under the Plan. A Participant may designate contingent or
successive beneficiaries and may name individuals, legal persons or entities,
trusts, estates, trustees or other legal representatives as beneficiaries.
Notwithstanding the foregoing or any beneficiary designation filed by a
Participant, if a Participant is married at the date of his death, the
Participant's surviving spouse will be his Designated Beneficiary for all
purposes of the Plan unless the surviving spouse consents to the Participant's
designation of another beneficiary. The consent of a Participant's spouse to
the designation of another beneficiary must (i) be in writing, (ii) designate
the beneficiary or beneficiaries, (iii) acknowledge the effect of such
designation, and (iv) be witnessed by a Plan representative or a notary public.
In addition, such designation of another beneficiary may not be changed without
further spousal consent unless the consent of the spouse expressly permits
further designations without any requirement of further consent. Beneficiary
designations must be completed on a form prescribed by the Committee and filed
with the Committee during the Participant's lifetime. A beneficiary designation
properly completed and filed will cancel all such designations filed earlier.
7.5 Eligible Rollover Distributions: This section applies to distributions
made on or after January 1, 1993.
a. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this section, a distributee
may elect, at the time and in the manner prescribed
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by the Committee, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee
in a direct rollover. The terms "distributee," "eligible rollover
distribution," "eligible retirement plan" and "direct rollover" are defined
in paragraphs (b) through (e) of this section 7.5 and are only applicable
for purposes of this section 7.5.
b. Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not
include: (i) any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for the
life (or life expectancy) of the distributee or the joint lives (or joint
life expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; (ii) any
distribution to the extent such distribution is required under Section
401(a)(9) of the Code; and (iii) the portion of any distribution that is
not includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to Company Stock).
c. Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
d. Distributee: A distributee includes a Participant. In addition, the
Participant's surviving spouse and the Participant's spouse or former
spouse who is the alternate payee under a qualified domestic relations
order, as defined in Section 414(p) of the Code, are distributees with
regard to the interest of the spouse or former spouse.
e. Direct rollover: A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
7.6 Payment of Certain Benefits from Transfer Account.
a. Notwithstanding anything to the contrary in this Plan, if a
Participant is married on the date his account becomes distributable and if
any portion of the amounts credited to a Participant's Account were
transferred from a plan to which Section 401(a)(11) of the Code applies,
the amounts so transferred (or any of the earnings attributable thereto)
which are available for distribution shall be used to purchase a single
premium, nontransferable annuity contract which shall be distributed to the
Participant or, in the event of his death, to his surviving spouse. Such
annuity contract shall provide for the payment of benefits in the form of a
"qualified joint and survivor annuity" if the Participant is living and
married on the date his accounts become distributable, (in the form of a
"straight life annuity" if the Participant is living and not married on the
date his accounts become distributable), or in the form of a "qualified
survivor annuity" if the Participant is not living on such date. For the
purposes of this paragraph:
(i) the term "qualified joint and survivor annuity" means an annuity
for the life of the Participant, with a survivor annuity for the
Participant's surviving spouse which is 50% of the amount payable
during the joint lives of the Participant and his spouse. Such joint
and survivor annuity shall be the actuarial equivalent (determined
under the assumptions then in use for such purpose by the insurer from
which the contract is purchased) of a single annuity for the life of
the Participant;
(ii) the term "qualified survivor annuity" means a single annuity for
the life of the Participant's surviving spouse.
b. Paragraph (a) shall not apply to any Participant if:
(i) the amount available for distribution which is attributable to
such transferred amounts does not exceed $3,500; or
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(ii) in the case of a qualified joint and survivor, the Participant
elects (as provided below in this paragraph) to waive such form of
benefit; or
(iii) in the case of a qualified survivor annuity: (A) the
Participant has effectively designated someone other than his spouse as
his Designated Beneficiary, or (B) the Participant's spouse elects a
different form of payment during the period specified in paragraph (c)
below, or (C) the Participant has not been married for at least one
year on the date of his death.
An election to waive the straight life or qualified joint and survivor annuity
shall be made in writing filed with the Committee at any time during the period
specified in paragraph (c) below, and shall not be effective unless accompanied
by a valid written consent which is signed by the Participant's spouse. Such
consent shall be valid only if it is signed by the spouse to whom the
Participant is married on the earlier of the date of his death or the date his
benefit payments commence, and then only if it acknowledges the effect of the
Participant's election, is witnessed by a Plan representative or a notary
public and, if applicable, designates the beneficiary or beneficiaries. An
election to waive a straight life or qualified joint and survivor annuity may
be revoked by the Participant, in writing, at any time during the period
specified in paragraph (c) below.
c. The elections referred to above shall be made in writing by the
Participant or his Beneficiary during the 90 day period ending on the date
the Participant's benefit payments are scheduled to commence; provided,
that in the case of a Participant who is entitled to make the elections
described above, such period shall not end until at least 90 days after the
date on which the Participant is provided with a written explanation of:
(i) the terms and conditions of the joint and survivor and qualified
survivor annuities;
(ii) the Participant's right to make, and the effect of, an election
to waive the joint and survivor annuity;
(iii) the rights of the Participant's spouse with respect to any such
election; and
(iv) the Participant's right to make, and the effect of, a revocation
of such election.
ARTICLE 8
Withdrawals and Loans During Employment
8.1 Withdrawal of Before-Tax Contributions, Employer Matching Contributions
and Employer Discretionary Contributions on Account of Financial Hardship. A
Participant experiencing a financial hardship may at any time request a
withdrawal of all or any portion of his Account attributable to Before-Tax
Contributions, Employer Matching Contributions and Employer Discretionary
Contributions, as well as any amounts attributable to elective deferrals made
under the Plan in effect prior to the Effective Date, credited as of the
immediately preceding Valuation Date to such Accounts (but not earnings
credited after December 31, 1988), by filing a written request with the
Committee (on such form and at such time as the Committee may require).
Notwithstanding the foregoing, amounts attributable to a Participant's Employer
Matching Contributions Account (including the earnings thereon) and Employer
Discretionary Contributions (including earnings thereon) may not be withdrawn
under this section 8.1 to the extent the Employer uses such Employer Matching
Contributions to meet the actual deferral percentage test under section 5.3. A
Participant may not withdraw any amount in accordance with this section 8.1
unless he has first withdrawn all amounts which could then be withdrawn by him
in accordance with section 8.2. Each request for a hardship withdrawal must
describe the hardship for which the withdrawal is requested. A withdrawal shall
be considered on account of financial hardship only if (i) it is on account of
the Participant's immediate and heavy financial need (including the purchase of
a principal residence for the Participant (excluding mortgage payments),
payment of tuition and related educational fees of post-secondary education for
the next 12 months for the Participant, his spouse or his dependents, medical
expenses of the Participant, his spouse or his dependents or prevention of
eviction from or foreclosure on the mortgage of the Participant's principal
residence), (ii) it does not exceed the amount required to relieve such
financial need and (iii) it cannot be reasonably met through other sources. The
Committee will have discretion to grant or deny requests for
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withdrawals in accordance with the above-stated standards and to establish
rules or guidelines in responding to such requests as it considers appropriate.
All withdrawals of Before-Tax Contributions shall be made in cash and must
normally be at least $500. Amounts used as security for loans provided under
section 8.4 may not be withdrawn under this section 8.1.
8.2 Withdrawal of After-Tax Contributions. A Participant may request at any
time a withdrawal of all or any portion of the amount in his After-Tax
Contributions Account as of the immediately preceding Valuation Date by filing
a written request with the Committee (on such form and at such time as the
Committee may require). All withdrawals of After-Tax Contributions and earnings
thereon shall be in cash and normally must be at least $500.
8.3 Withdrawal of Prior Employer Contributions. A Participant may request, in
accordance with rules and procedures established by the Committee and subject
to applicable law, a withdrawal of all or any portion of Employer contributions
made on behalf of Plan Years ending prior to the Effective Date; provided that
except in the case of a financial hardship (as defined in section 8.1 above), a
Participant may not withdraw any amounts that he could have, but did not, elect
to receive in cash and further provided that amounts contributed by an Employer
from 1980 through 1986 which a Participant could not elect to receive in cash
may not be withdrawn for any reason.
8.4 Withdrawal After Age 59 1/2. A Participant who has attained age 59 1/2
may request a withdrawal of all or any portion of his Accounts by filing a
written request with the Committee (on such form and at such time as the
Committee may require). All withdrawals pursuant to this section 8.4 shall be
made in a lump sum.
8.5 Loans to Participants. While it is the primary purpose of the Plan to
provide funds for Participants when they retire, it is recognized under some
circumstances that it would be in the best interests of Participants to permit
loans to be made to them from their Accounts. Accordingly, the Committee may
direct that a loan be made to a Participant for such purposes as are described
below, subject to the following:
a. Each request for a loan under this section must be by written
application to the Committee on a form furnished by the Committee,
supported by such evidence as it requests to review and approve the
Participant's request. A Participant may not have more than one home loan
and one personal loan outstanding at any time. Such request must be
received by the Committee by the 15th of the month preceding the month in
which payment of the loan proceeds is desired.
b. Each loan must be evidenced by a note in a form furnished by the
Committee and must be secured by a pledge of the Participant's Accounts.
c. Each loan will bear interest at a commercially reasonable fixed rate
of interest determined by the Committee as of the date of the loan, and
must be amortized in level biweekly payments over the life of the loan.
Repayment of a loan will be through biweekly deductions from each
Participant's payroll. A Participant may, as of the last day of any
calendar month, repay in full an outstanding loan; however, partial
prepayments are not permitted.
d. The aggregate principal amount of all loans may not exceed the lesser
of $50,000 (reduced by the aggregate amount of principal payments made on
any other Plan loans during the one year period prior to the date of the
new loan) or 50 percent of the Participant's eligible Account balances. The
minimum loan amount a Participant may request is $1,000. "Eligible Account
balances" shall not include the Participant's After-Tax Contributions
Account.
e. Each loan will be for a term not exceeding five years; provided that
the term of a loan may be for a term not exceeding fifteen years where the
loan is to be used to acquire any dwelling unit which within a reasonable
time is to be used as a principal residence of the Participant.
f. If after any Participant's Settlement Date any loan made to him or any
part thereof, together with accrued interest thereon, remains unpaid, the
total of the unpaid balance or balances and accrued
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interest shall be charged to the balances of the Participant's Accounts, as
otherwise adjusted under the Plan as of that date. The distribution of a
Participant's cancelled note to him (or to his beneficiary in the event of
his death) shall be considered as a payment for purposes of the Plan.
g. Each note evidencing a loan to a Participant shall be held on the
Participant's behalf and shall be considered an investment of his Accounts.
Accordingly, principal and interest payments on the note shall be credited
to such Accounts on the Participant's behalf.
8.6 Special Rule for Married Participants. If a Participant is married on the
date as of which a loan or withdrawal is requested pursuant to this Article 8,
and if any portion of the amounts credited to such Participant's Account was
transferred from a plan to which Section 401(a)(11) of the Code applies, no
portion of the amounts so transferred (or of any earnings attributable thereto)
shall be loaned or distributed to the Participant unless the Participant's
spouse consents in writing to such loan or distribution and such consent is
witnessed by a representative of the Plan or a notary public.
ARTICLE 9
Maximum Contributions
9.1 Contribution Limitations. Section 415 of the Code imposes certain
limitations on the amount of contributions that may be allocated to a
Participant under a defined contribution plan (as defined in Section 414(i) of
the Code) maintained by his Employer. If a Participant in a defined
contribution plan maintained by his Employer also is a Participant in a defined
benefit plan (as defined in Section 414(j) of the Code) maintained by his
Employer, Section 415 of the Internal Revenue Code imposes certain combined
limitations as to the aggregate amount of contributions and benefits that may
be provided for the Participant under both types of Plans. This Plan is a
defined contribution plan and, therefore, each Participant in the Plan shall be
subject to the maximum contribution and benefit limitations set forth in
section 9.2 or section 9.3, whichever applies, irrespective of any other
provisions of the Plan. For purposes of Section 415 of the Code and this
Article 9, the "limitation year" with respect to this Plan is the Plan Year,
and a Participant's "total compensation" means, with respect to any Plan Year,
the total compensation paid to the Participant during that year for services
rendered to the Employer as an employee that is subject to withholding for
federal income tax purposes (before taking into account any withholding
exemptions), but excluding any noncash compensation and any compensation
deferred beyond the Participant's Settlement Date. In applying the limitations
set forth in sections 9.2 and 9.3, reference to the Plan shall mean the Plan
and all other defined contribution plans (whether or not terminated) maintained
by the Employers and reference to a defined benefit plan maintained by the
Employer shall mean that plan and all other defined benefit plans (whether or
not terminated) maintained by the Employers.
9.2 Participant Covered by Defined Contribution Plan Only. If a Participant
in the Plan is not covered by a defined benefit plan maintained by the
Employers, the annual addition (as defined below) which is allocated to his
Accounts under this Plan and under any other defined contribution plans
maintained by the Employers shall not exceed the lesser of (i) $30,000 (or, if
greater, one-fourth of the defined benefit dollar limitation set forth in
Section 415(b)(1) of the Code for such year) or (ii) 25 percent of the
Participant's total compensation (as defined in section 9.1). In applying the
preceding limitation, the annual addition to a Participant's Accounts under any
such other defined contribution plan will be limited before the annual addition
to his Account under this Plan is limited. Any Employers' Matching
Contributions described in subsection 4.1(a) which cannot be credited to a
Participant's Accounts because of the limitations of section 5.10, this section
9.2 or section 9.3 shall be returned to the Employers. Any Employer
Discretionary Contributions described in section 4.1(c) which cannot be
credited to a Participant's Accounts because of the limitations of sections 9.2
or 9.3 shall be returned to the Employers. Any Before-Tax Contributions
described in subsection 4.1(b) elected by a Participant in accordance with
section 5.1 which cannot be credited to a Participant's Accounts because of the
limitations of section 5.3, this section 9.2 or section 9.3 shall be paid to
such Participant as soon as practicable. A Participant's "annual addition" for
any Plan Year means the sum for that year of his
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contributions and the contributions of the Employer credited to his accounts
under defined contribution plans maintained by the Corporation, Bank or any
related company (as defined under section 12.2) in which the Participant is an
active Participant.
9.3 Participant Covered by Defined Contribution Plan and Defined Benefit
Plan. If a Participant in the Plan also is a Participant in a defined benefit
plan maintained by the Employer, the contributions made on behalf of the
Participant and the benefits payable to the Participant shall be determined in
a manner consistent with Section 415 of the Code, as follows:
a. A fraction shall be determined indicating the ratio of the
Participant's annual additions under the defined contribution plans of the
Employer for each Plan Year to the aggregate of the "defined contribution
limitation amount" in effect for each year of the Participant's employment
by the Employer. The "defined contribution limitation amount" for any Plan
Year shall be the lesser of (i) 1.25 multiplied by the dollar limitation in
effect under Section 415(c)(1)(A) of the Code for such year, provided that
in any year in which the Plan would be a top-heavy Plan if 90 percent were
substituted for 60 percent in section 14.2, 1.0 shall be substituted for
1.25, or (ii) 1.4 multiplied by 25 percent of the Participant's total
compensation (as defined in section 9.1) for such year.
b. A fraction shall also be determined which will equal the benefits
accrued or payable to or for such Participant under the defined benefit
plans of the Employers as of the end of the Plan Year divided by the
"defined benefit limitation amount" in effect for that year. The "defined
benefit limitation amount" for any Plan Year shall be the lesser of (i)
1.25 multiplied by the dollar limitation in effect under Section
415(b)(1)(A) of the Code for such year, provided that in any year in which
the Plan would be a top-heavy plan if 90 percent were substituted for 60
percent in section 14.2, 1.0 shall be substituted for 1.25, or (ii) 1.4
multiplied by 100 percent of the Participant's average annual total
compensation for the three consecutive Plan Years during which he actively
participated in a defined benefit plan of the Employers and in which his
aggregate total compensation was the greatest; provided that such amount
shall be appropriately adjusted if necessary as provided in Section 415(b)
of the Code.
c. The contributions under this Plan and under any other defined
contribution plans of the Employer and the benefits under all defined
benefit plans of the Employer will be adjusted to the extent necessary (by
first adjusting the benefits and contributions under such other Plans) so
that the sum of the fractions determined with respect to any Participant in
accordance with subsections (a) and (b) above will not exceed 1.0 (or such
other applicable maximum amount permitted by law).
ARTICLE 10
General Provisions
10.1 Payment to Substitute Beneficiaries. If benefits remain to be paid with
respect to a Participant at a time when the Committee is unable to locate the
Participant and his Designated Beneficiary, or following the death of the
Participant and such Designated Beneficiaries, then the Committee shall cause
the Participant's benefits to be distributed or paid to the person or persons
who can be located and agree to accept such amounts within the applicable
priority categories set forth below. Participants and Designated Beneficiaries
are required to maintain a current post office address on file with the
Committee. A substitute beneficiary will not be determined under this section
with respect to a missing Participant or missing Designated Beneficiary unless
the Participant or Designated Beneficiaries, as the case may be, have failed to
claim the Participant's Account balances or notify the Committee of their
whereabouts within three years after the Committee notifies such Participant or
Designated Beneficiaries of their entitlement to benefits at their last post
office addresses filed with the Committee. Such notice shall describe the
amounts to which the Participant or the Designated Beneficiaries are entitled
and shall describe the substitution procedures of this section. In disposing of
a Participant's benefits in accordance with this section, the Committee shall
cause the Participant's benefits to be distributed by lump sum in accordance
with the following priority categories:
a. In the event of a missing Participant benefits will be distributed to
the Participant's Designated Beneficiary.
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b. In the event the Participant, and all Designated Beneficiaries are
missing, benefits will be distributed in such proportions as the Committee
decides to one or more of the Participant's relatives by blood, marriage or
adoption.
c. After unsuccessful attempts have been made by the Committee to locate
persons described in the priority categories set forth above, the benefits
of the Participant or of any beneficiary will be disposed of in any manner
permitted by law which the Plan administrator considers to be fair and
equitable.
10.2 Payment with Respect to Incapacitated Participants or Beneficiaries. If
any person entitled to benefits under the Plan is under a legal disability or,
in the Committee's opinion, is incapacitated in any way so as to be unable to
manage his financial affairs, the Committee may in its sole discretion direct
the payment of such benefits to such person's legal representative or to a
relative or friend of such person for such person's benefit, or the Committee
may direct the application of such benefits for the benefit of such person in
any manner which the Committee may select that is permitted by federal law and
is consistent with the Plan. Any payments made in accordance with the foregoing
provisions of this section shall be a full and complete discharge of any
liability for such payments.
10.3 Examination of Plan Documents. Copies of the Plan and any amendments
thereto will be on file at the principal office of the Corporation where they
may be examined by any Participant or any other person entitled to benefits
under the Plan.
10.4 Notices. Any notice or document relating to the Plan required to be
given to or filed with the Committee or any Employer shall be considered as
given or filed if delivered or mailed by registered or certified mail, postage
prepaid, to the Committee, in care of the Company at the following address:
The Retirement Committee
First Chicago Corporation
Mail Suite 0002
Chicago, IL 60670-0002
10.5 Nonalienation of Plan Benefits. The rights or interests of any
Participant or any Participant's beneficiaries to any benefits or future
payments under the Plan shall not be subject to attachment or garnishment or
other legal process by any creditor of any such Participant or beneficiary, nor
shall any such Participant or beneficiary have any right to alienate,
anticipate, commute, pledge, encumber or assign any of the benefits or rights
which he may expect to receive (contingently or otherwise) under the Plan,
except as to any debt owing to an Employer with respect to which a Participant
entitled to a distribution has voluntarily issued a revocable assignment of an
amount not in excess of ten percent of the distribution, and except as may be
required by the tax withholding provisions of the Code or of a state's income
tax act or pursuant to a qualified domestic relations order (as defined in
Section 414(p) of the Code).
10.6 No Employment or Benefit Guaranty. None of the establishment of the
Plan, any modification thereof, the creation of any fund or Account, or the
payment of any benefits shall be construed as giving to any Participant or
other person any legal or equitable right against the Employers, the Committee
or any trustee except as provided herein. Under no circumstances shall the
maintenance of this Plan constitute a contract of employment or shall the terms
of employment of any Participant be modified or in any way affected hereby.
Accordingly, participation in the Plan will not give any Participant a right to
be retained in the employ of any Employer. Neither the Committee nor any
Employer in any way guarantees any assets of the Plan from loss or depreciation
or any payment to any person. The liability of the Committee or any Employer as
to any payment or distribution of benefits under the Plan is limited to the
available assets of the Trust Fund.
10.7 Litigation. In any action or proceeding regarding any Plan assets, any
Plan benefits or the administration of the Plan, employees or former employees
of the Employers, their beneficiaries and any other persons claiming to have an
interest in the Plan shall not be necessary parties and shall not be entitled
to any notice of process. Any final judgment which is not appealed or
appealable and which may be entered in any
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such action or proceeding shall be binding and conclusive on the parties hereto
and on all persons having or claiming to have any interest in the Plan. To the
extent permitted by law, if a legal action is begun against the Committee, an
Employer, or any trustee by or on behalf of any person and such action results
adversely to such person, or if a legal action arises because of conflicting
claims to a Participant's or other person's benefits, the cost of the
Employers, the Committee, or the trustee of defending the action will be
charged to the sums, if any, which were involved in the action or were payable
to the Participant or the other person concerned. Acceptance of participation
in the Plan shall constitute a release of the Employers, the Committee, any
trustee and their agents from any and all liability and obligation not
involving willful misconduct or gross neglect to the extent permitted by
applicable law. Notwithstanding any other provisions of the Plan, if the
Committee is required by a final court order to distribute the benefits of a
Participant other than in a manner required under the Plan, then the Committee
shall cause the Participant's benefits to be distributed in a manner consistent
with such final court order. The Committee shall not be required to comply with
the requirements of a final court order in an action in which the Committee, a
trustee, the Plan or the Trust was not a party, except to the extent such a
final court order is a qualified domestic relations order.
10.8 Evidence. Evidence required of anyone under the Plan shall be signed,
made or presented by the proper party or parties and may be by certificate,
affidavit, document or other information which the person acting thereon
considers pertinent and reliable.
10.9 Gender and Number. Words denoting the masculine gender shall include the
feminine and neuter genders, the singular shall include the plural and the
plural shall include the singular wherever required by the context.
10.10 Waiver of Notice. Any notice required under the Plan may be waived by
the person entitled to notice.
10.11 Applicable Law. The Plan shall be construed in accordance with the
provisions of the Employee Retirement Income Security Act of 1974, as amended
and other applicable federal laws and, to the extent not inconsistent with such
laws, with the laws of the State of Illinois and not the laws of conflict.
10.12 Severability. If any provisions of the Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of the Plan, and the Plan shall be construed and enforced
as if such illegal and invalid provisions had never been set forth in the Plan.
10.13 Fiduciary Responsibilities. It is specifically intended that all
provisions of the Plan shall be applied so that all fiduciaries with respect to
the Plan shall be required to meet the prudence and other requirements and
responsibilities of applicable law to the extent such requirements or
responsibilities apply to them. No provisions of the Plan are intended to
relieve a fiduciary from any responsibility, obligation, duty or liability
imposed by applicable law. In general, a fiduciary shall discharge his duties
with respect to the Plan solely in the interests of Participants and other
persons entitled to benefits under the Plan and with the care, skill, prudence
and diligence under the circumstances then prevailing that a prudent man acting
in a like capacity and familiar with such matters would use in the conduct of
an enterprise of like character and with like aims.
10.14 Funding of Plan Benefits. A "Trust Fund", as defined in section 2.27,
will be maintained in order to implement and carry out the provisions of the
Plan. The Trust Fund from time to time shall consist of one or more funds
established through one or more Trust agreements. Such funds shall be
maintained for the purpose of receiving and holding contributions to the Plan
and the interest and other income thereon and paying benefits provided under
the Plan. The trustee under the Trust or Trusts shall determine the form and
terms of each Trust agreement and from time to time may direct the transfer of
amounts held in any such fund to any such other fund in accordance with the
provisions of the applicable Trust agreements.
10.15 Supplements. From time to time supplements may by amendment be attached
to and form a part of this Plan. Such supplements may modify or supplement the
provisions of the Plan as they apply to
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particular groups of employees or groups of Participants, shall specify the
persons affected by such supplements and shall supersede the other provisions
of the Plan to the extent necessary to eliminate inconsistencies between the
Plan provisions and the provisions of such supplements.
ARTICLE 11
Relating to Plan Administration
11.1 Committee Appointed by Corporation. The Committee will be the Retirement
Committee of the Corporation which will consist of two or more persons
appointed from time to time by the Corporation.
11.2 Resignation or Removal of Committee Member. Each member of the Committee
shall serve until his death, resignation or removal from such office. Any
member may resign at any time by notice in writing to the Corporation and to
the remaining Committee members. The Corporation may remove any Committee
member at any time by written notice to him and to the remaining Committee
members.
11.3 Committee Secretary. The Committee may appoint a Secretary who may, but
need not, be a Committee member. Any document required to be filed with, or any
notice required to be given to, the Committee will be properly filed or given
if mailed by registered mail, or delivered, to the Secretary of the Committee
in care of the Corporation.
11.4 Powers of Committee. Effective November 9, 1990, the Committee may amend
the Plan in any non-material respect. Whether an amendment is material shall be
determined by the Committee in its sole discretion. In addition, the Committee
shall have the responsibility, and the full power and authority, to administer
the Plan and, within the limits provided by the Plan:
a. To determine in its sole discretion all benefits and resolve all
questions pertaining to the construction, interpretation and administration
of the Plan, including, but not by way of limitation, the determination of
the rights or eligibility under the Plan of employees, Participants, and
beneficiaries, and the amount of their respective benefits, and to
interpret and remedy ambiguities, inconsistencies, or omissions;
b. To adopt such rules and regulations as it may in its sole discretion
deem reasonably necessary for the proper and efficient administration of
the Plan and consistent with its purpose;
c. To enforce the Plan, in accordance with its terms and with the
Committee's rules and regulations;
d. To direct the trustee with respect to all matters involving
distributions from the Trust Fund;
e. To create subcommittees and appoint agents, and to delegate such of
its rights, powers, and discretions to such subcommittees or agents as it
deems desirable; and
f. To do all other acts, in its judgment necessary or desirable, for the
proper and advantageous administration of the Plan.
11.5 Action by Committee. During a period in which two or more Committee
members are acting, the following provisions shall apply:
a. The Committee members may act by meeting or by writing signed without
meeting and may sign any documents by signing one document or concurrent
documents;
b. Any action or decision of a majority of the Committee members as to a
matter shall be as effective as if taken or made by all Committee members;
c. If, because of the number qualified to act, there is an even division
of opinion among the Committee members as to a matter, the Company shall
decide the matter;
d. To the extent permitted by law, no Committee member shall be liable or
responsible for an act or omission of another Committee member in which the
former has not concurred;
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e. The certificate of the Secretary of the Committee or of a majority of
the Committee members that the Committee has taken or authorized any action
shall become conclusive in favor of any person relying on the certificate;
f. A Committee member who is a Participant may not take part in Committee
action on any matter that may affect his interest under the Plan in a
manner which is inconsistent with the members fiduciary responsibility to
the Plan; and
g. A Committee member may delegate, in writing, to any other member or
members any power, right or duty granted to, or imposed upon, the
delegating member by the Plan.
11.6 Committee Support. The Corporation and the Bank shall provide the
Committee with all the clerical, bookkeeping and stenographic help and
facilities that may be necessary to enable it to perform its functions
hereunder. The Committee may appoint consultants, accountants or other
assistants to perform any of the Committee's non-discretionary functions under
its supervision and upon its direction. No compensation will be paid to a
Committee member as such.
11.7 Decision of Committee Final. Subject to applicable law and the
provisions of section 11.8, any interpretation of the provisions of the Plan
and any decision on any matter within the discretion of the Committee made by
the Committee in good faith shall be final and binding on all persons. A
misstatement or other mistake of fact shall be corrected when it becomes known
and the Committee shall make such adjustment on account thereof as the
Committee considers equitable and practicable.
11.8 Review of Benefit Determinations. If a claim for benefits made by a
Participant or his beneficiary is denied, the Committee shall within 90 days
(or 180 days if special circumstances require an extension of time) after the
claim is made furnish the person making the claim with a written notice
specifying the reasons for the denial. Such notice shall also refer to the
pertinent Plan provisions on which the denial is based, describe any additional
material or information necessary for properly completing the claim and explain
why such material or information is necessary, and explain the Plan's claim
review procedures. If requested in writing, the Committee shall afford each
claimant whose claim has been denied a full and fair review of the Plan
administrator's decision and, within 60 days (120 days if special circumstances
require additional time) of the request for reconsideration of the denied
claim, the Committee shall notify the claimant in writing of the Committee's
final decision. If a Participant or beneficiary shall fail to file a request
for review of his claim denial, he shall have no right to review and shall have
no right to bring action in any court and the denial of his claim shall become
final and binding on all persons for all purposes.
11.9 Uniform Rules. The Committee shall perform its duties with respect to
Plan administration on a reasonable and nondiscriminatory basis and shall apply
uniform rules to all Participants similarly situated.
11.10 Indemnification. To the extent permitted by law, no person (including
the Employers, a trustee, any present or former Committee member, and any
present or former director, officer or employee of any Employer) shall be
personally liable for any act done or omitted to be done in good faith in the
administration of the Plan or the investment of the Trust Fund. To the extent
permitted by law, each present or former director, officer or employee of any
Employer to whom the Committee or an Employer has delegated any portion of its
responsibilities under the Plan and each present or former Committee member
shall be indemnified and saved harmless by the Employers (to the extent not
indemnified or saved harmless under any liability insurance or other
indemnification arrangement with respect to the Plan) from and against any and
all claims of liability to which they are subjected by reason of any act done
or omitted to be done in good faith in connection with the administration of
the Plan or the investment of the Trust Fund, including all expenses reasonably
incurred in their defense if the Employers fail to provide such defense.
ARTICLE 12
Relating to the Employers
12.1 Action by Employers. Any action required or permitted of an Employer
under the Plan shall be by resolution of its Board of Directors or by a duly
authorized committee of its Board of Directors, or by a person or persons
authorized by resolution of its Board of Directors or such committee.
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12.2 Additional Employers, the First Chicago Companies. Any subsidiary or
other related company that is not an Employer may adopt the Plan and become an
Employer thereunder by filing with the trustee and the Committee a certified
copy of a resolution of the Board of Directors of the subsidiary or other
related company providing for its adoption of the Plan and a certified copy of
a resolution of the Board of Directors of the Corporation consenting to such
adoption. For this purpose, a "subsidiary" means any corporation 50 percent or
more of the voting stock of which is directly or indirectly owned by the
Corporation and a "related company" means any corporation which directly or
indirectly owns 50 percent or more of the voting stock of the Corporation and
any corporation (other than the Corporation and its subsidiaries) 50 percent or
more of the voting stock of which is directly or indirectly owned by any
corporation which directly or indirectly owns 50 percent or more of the voting
stock of the Corporation. The term "First Chicago Companies" includes the
Employers and all subsidiaries and related companies that have not adopted the
Plan (and each such corporation is sometimes referred to herein individually as
a "First Chicago Company.") Any corporation which is not an Employer under the
Plan and which does not qualify as a subsidiary or related company but is
either (i) a member of a controlled group of corporations (within the meaning
of Section 1563(a) of the Code, determined without regard to Sections
1563(a)(4) and 1563(e)(3)(C) thereof) which contains an Employer under the
Plan, or (ii) a member of an affiliated service group (as defined in Section
414(m) of the Code) which contains an Employer under the Plan shall, for
purposes of the Plan, be considered as a subsidiary or related company that has
not adopted the Plan and, therefore, as a First Chicago Company for purposes of
certain determinations as to employment with the First Chicago Companies.
12.3 Restrictions as to Reversion of Trust Fund to Employers. The Employers
shall have no right, title or interest in the assets of the Plan, nor will any
part of the assets of the Plan at any time revert or be repaid to an Employer,
directly or indirectly, except as follows:
a. If the Internal Revenue Service initially determines that the Plan, as
applied to any Employer, does not meet the requirements of a "qualified
plan" under Section 401(a) of the Code, the assets of the Plan attributable
to contributions made by that Employer under the Plan shall be returned to
that Employer within one year of the date of denial of qualification of the
Plan as applied to that Employer.
b. If a contribution or a portion of a contribution is made by an
Employer as a result of a mistake of fact, such contribution shall not be
considered to have been contributed under the Plan by that Employer and,
after having been reduced by any losses of the Trust Fund allocable
thereto, shall be returned to that Employer within one year of the date the
amount is contributed under the Plan.
c. Each contribution made by an Employer is conditioned upon the
continued qualification of the Plan and the deductibility of such
contribution as an expense for federal income tax purposes and, therefore,
to the extent that a contribution is made by an Employer under the Plan for
a period for which the Plan is not a qualified plan or the deduction for a
contribution made by the Employer is disallowed, then such contribution or
portion of a contribution, after having been reduced by any losses of the
Trust Fund allocable thereto, shall be returned to that Employer within one
year of the date of determination of the nonqualified status of the Plan or
the date of disallowance of the deduction.
ARTICLE 13
Amendment and Termination
13.1 Amendment. While the Employers expect and intend to continue the Plan,
the Corporation must necessarily reserve and hereby does reserve the right,
subject to section 12.3, to amend the Plan from time to time, except that the
duties and liabilities of the Committee cannot be changed substantially without
its consent and no amendment shall reduce the value of a Participant's benefits
to less than the amount he would be entitled to receive if he had resigned from
the employ of all of the First Chicago Companies on the day of the amendment.
13.2 Termination. The Plan will terminate as to all Employers on any date
specified by the Corporation, and as to any Employer on any date specified by
that Employer, if thirty days' advance written notice of the
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termination is given to the Committee, the trustee, and, in the case of the
termination of the entire Plan, any other Employers. The Plan also will
terminate as to an individual Employer on the first to occur of the date that
Employer is judicially declared bankrupt or insolvent, the date that Employer
ceases to qualify as a subsidiary or related company, or the dissolution,
merger, consolidation or reorganization of that Employer, or the sale by that
Employer of all or substantially all of its assets, except that in any such
event arrangements may be made with the consent of the Corporation whereby the
Plan will be continued by any successor to that Employer or any purchaser of
all or substantially all of its assets without a termination thereof, in which
case the successor or purchaser will be substituted for that Employer under the
Plan; provided that if any Employer is merged, dissolved or in any way
reorganized into, or consolidated with, any other Employer, the Plan as applied
to the former Employer will automatically continue in effect without a
termination thereof. Notwithstanding the foregoing, if any of the events
described above should occur but some or all of the Participants employed by an
Employer are transferred to employment with one or more of the other Employers
coincident with or immediately after the occurrence of such event, the Plan as
applied to those Participants will automatically continue in effect without a
termination thereof.
13.3 Vesting on Termination. As provided in section 6.1, the rights of all
affected employees in their Account balances is nonforfeitable and shall remain
nonforfeitable on termination or partial termination of the Plan as respects
all Employers or any single Employer.
13.4 Plan Merger. In no event shall there be any merger or consolidation of
the Plan with, or transfer of assets or liabilities to, any other plan unless
each Participant in the Plan would (if the Plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit the Participant would have been entitled to
receive immediately before the merger, consolidation or transfer (if the Plan
had then terminated).
13.5 Notice of Amendment, Termination or Plan Merger. Participants affected
thereby will be notified of an amendment, termination, merger or consolidation
of the Plan within a reasonable time.
ARTICLE 14
Top-Heavy Plan Rules
14.1 Key Employees. An employee or former employee shall be a "key employee"
for any Plan Year if during such Plan Year or during any of the four preceding
Plan Years the employee is:
a. an officer of an employer (as defined below) having an annual
compensation (as defined in section 9.1) greater than 150 percent of the
amount in effect under Section 415(c)(1)(A) of the Code for any such Plan
Year, or
b. one of the ten employees of an employer having annual compensation
from an employer of more than the limitation in effect under Section
415(c)(1)(A) of the Code and owning (or considered as owning within the
meaning of Section 318 of the Code) the largest interests in the employer,
or
c. any person who owns (or is considered as owning within the meaning of
Section 318 of the Code) more than five percent of the outstanding stock of
the employer or stock possessing more than five percent of the total
combined voting power of all the Company Stock, or
d. any person having annual compensation in excess of $150,000 who owns
(or is considered as owning within the meaning of Section 318 of the Code)
more than one percent of the outstanding stock of the employer or stock
possessing more than one percent of the total combined voting power of all
the employer's stock.
For purposes of subparagraph (a) above, if the number of officers exceeds 50,
only the 50 officers with the highest compensation shall be considered key
employees and if the number of officers is less than 50, the number of officers
considered key employees shall not exceed the greater of three such officers or
ten percent of all employees. For purposes of subparagraphs (c) and (d) above,
Section 318(a)(2)(C) of the Code shall be
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applied by substituting "five percent" for the reference to "50 percent"
therein and the rules of Section 414(b), (c) and (m) of the Code shall not
apply for determining ownership in the employer. For purposes of this Article
14, the term "employer" includes all corporations which are members of a
controlled group of corporations which includes the Corporation under Section
414(b) of the Code, all trades or businesses (whether or not incorporated)
which are under common control with the Corporation under Section 414(c) of the
Code and any service or other organization which is a member of an affiliated
service group with the Corporation under Section 414(m) of the Code. The
beneficiary of a key employee shall be considered a key employee.
14.2 Top-Heavy Plan. The Plan will be considered a "top-heavy plan" for any
Plan Year if as of the last day of the preceding Plan Year (but the last day of
the initial Plan Year in the case of that year) (the "determination date") the
sum of (i) the aggregate of the Accounts of all key employees under the Plan
and all other defined contribution plans in an aggregation group of plans as
described in section 14.3 below, and (ii) the present value of the aggregate
cumulative accrued benefits for key employees under all defined benefit plans
in an aggregation group of plans exceeds 60 percent of such sum determined for
all Participants under all such plans, excluding Participants who are former
key employees. There shall be included in the determination of a Participant's
Accounts and accrued benefit under such plans any amounts distributed to him
during the preceding five year period. Notwithstanding the foregoing, if any
individual has not performed any services for the employer at any time during
the five-year period ending on the determination date, any Account of such
individual (and the accrued benefit for such individual) shall not be included
for purposes of this section. Furthermore, a rollover contribution initiated by
a Participant and made to any Plan in an aggregation group of plans shall not
be taken into account for purposes of determining whether the Plan is a top-
heavy plan.
14.3 Aggregation Groups. All employer plans in a required aggregation group
of plans shall be considered to be top-heavy plans if either the required or
permissive aggregation group of plans is determined to be top-heavy under
section 14.2 above. If the required or permissive aggregation group of plans is
not a top-heavy group, no employer plans in the group shall be considered to be
top-heavy plans. A "required aggregation group of plans" shall include each
employer plan in which a key employee participates and any other employer plan
which enables any plan in which a key employee participates to meet the
coverage and nondiscrimination requirements of Sections 401(a)(4) or 410 of the
Code. A "permissive aggregation group of plans" shall include all plans in the
required aggregation group plus any other employer plans which satisfy the
requirements of Sections 401(a)(4) and 410 of the Code when considered together
with the required aggregation group of plans.
14.4 Special Minimum Contributions. Notwithstanding the provisions of
subsections 3.1(a) above, the amount contributed by an employer in accordance
with subsections 3.1(a) for each Participant (whether active or inactive) for
each Plan Year in which the Plan is considered a top-heavy plan (as defined in
section 14.2) shall not be less than the lesser of (i) four percent of the
Participant's total compensation for that year, or (ii) the highest percentage
of compensation contribution (disregarding compensation in excess of $200,000
or such other maximum amount as may be permitted from time to time by the
Secretary of the Treasury or his delegate or by law) contributed by such
employer under subsection 4.1(a) for such Plan Year on behalf of a key
employee; provided, however, that in the case of an employee covered under this
Plan and a defined benefit plan maintained by the employer, for each Plan Year
for which this Plan and such defined benefit plans are considered top-heavy
plans, if such employee receives the top-heavy minimum contribution specified
in such defined benefit plan, such employee need not receive the minimum
contribution specified in this section.
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EXHIBIT 10(J).
INDIVIDUAL CHANGE OF CONTROL EMPLOYMENT AGREEMENT
Agreement by and between First Chicago Corporation, a Delaware corporation
(the "Company"), and (the "Executive"), dated as of the
day of , 1994.
The Board of Directors of the Company (the "Board") has determined that it is
in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control and to provide the
Executive with compensation and benefit arrangements upon a Change of Control
which ensure that the compensation and benefit expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
Now, Therefore, it is Hereby Agreed as Follows:
1. Certain Definitions. (a) The "Effective Date" shall mean the first date
during the Change of Control period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated or the Executive ceases
to be an officer of the Company prior to the date on which the Change of
Control occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment or cessation of status as an officer (i) was at the
request of a third party who has taken steps reasonably calculated to effect
the Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment or cessation of status as an officer.
(b) The "Change of Control Period" shall mean the period commencing on the
date hereof and ending on the third anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof shall be hereinafter referred to as the "Renewal Date"), the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless at least 60 days prior to the Renewal Date the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition, other than from the Company, by any individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either the then outstanding shares of common stock of the Company or
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors, but excluding,
for this purpose, any such acquisition by the Company or any of its
subsidiaries, or any employee benefit plan (or related trust) of the Company or
its subsidiaries, or any corporation with respect to which, following such
acquisition, more than 50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the common stock and voting securities of
the Company immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
then
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outstanding shares of Common Stock of the Company or the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors, as the case may be; or
(b) Individuals who, as of the date hereof, constitute the Board (as of the
date hereof, the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board, provided that any individual becoming a director
subsequent to the date hereof, whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act); or
(c) Approval by the stockholders of the Company of a reorganization, merger
or consolidation of the Company, in each case, with respect to which all or
substantially all of the individuals and entities who were the respective
beneficial owners of the common stock and voting securities of the Company
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation, or a complete liquidation or dissolution of the Company or of
the sale or other disposition of all or substantially all of the assets of the
Company.
3. Employment Period. The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company, subject to the terms of this Agreement, for the period commencing on
the Effective Date and ending on the third anniversary of such date (the
"Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the Employment
Period, (A) the Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date and (B) the Executive's services shall be
performed at the location where the Executive was employed immediately
preceding the Effective Date or any office which is the headquarters of the
Company and is less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid on a monthly basis, at least equal to twelve times the highest
monthly base salary paid or payable to the Executive by the Company and its
affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs.
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During the Employment Period, the Annual Base Salary shall be reviewed at least
annually and shall be increased at any time and from time to time as shall be
substantially consistent with increases in base salary generally awarded in the
ordinary course of business to other peer executives of the Company and its
affiliated companies. Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to Annual Base
Salary as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be
awarded, for each fiscal year ending during the Employment Period, an annual
bonus (the "Annual Bonus") in cash at least equal to the average annualized
(for any fiscal year consisting of less than twelve full months or with respect
to which the Executive has been employed by the Company for less than twelve
full months) bonus paid or payable, including by reason of any deferral, to the
Executive by the Company and its affiliated companies in respect of the three
fiscal years immediately preceding the fiscal year in which the Effective Date
occurs (the "Recent Average Bonus"). Each such Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus. As used below in this
Agreement, the term "Annual Bonus Reference Amount" shall mean, with respect to
any fiscal year of the Company, the lesser of (A) the Executive's Annual Base
Salary for such fiscal year and (B) the greater of (1) the Annual Bonus paid or
payable, including by reason of any deferral, to the Executive (and annualized
for any fiscal year consisting of less than twelve full months or for which the
Executive has been employed for less than twelve full months) for the most
recently completed fiscal year during the Employment Period, if any, and (2)
the Recent Average Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment Period,
the Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during
the 90-day period immediately preceding the Effective Date or if more favorable
to the Executive, those provided generally at any time after the Effective Date
to other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company
and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at
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any time during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive shall be
entitled, in the aggregate, to fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to exclusive personal secretarial and other assistance,
at least equal to the most favorable of the foregoing provided to the Executive
by the Company and its affiliated companies at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean
(i) repeated violations by the Executive of the Executive's obligations under
Section 4(a) of this Agreement (other than as a result of incapacity due to
physical or mental illness) which are demonstrably willful and deliberate on
the Executive's part, which are committed in bad faith or without reasonable
belief that such violations are in the best interests of the Company and which
are not remedied in a reasonable period of time after receipt of written notice
from the Company specifying such violations or (ii) the conviction of the
Executive of a felony involving moral turpitude.
(c) Good Reason; Window Period. The Executive's employment may be terminated
(i) during the Employment Period by the Executive for Good Reason or (ii)
during the Window Period by the Executive without any reason. For purposes of
this Agreement, the "Window Period" shall mean the 30-day period immediately
following the first anniversary of the Effective Date. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities
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as contemplated by Section 4(a) of this Agreement, or any other action by
the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or
location other than that described in Section 4(a)(i)(B) hereof;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 11(c)
of this Agreement, provided that such successor has received at least ten
days prior written notice from the Company or the Executive of the
requirements of Section 11(c) of the Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or by
the Executive without any reason during the Window Period or for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 12(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than fifteen days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company hereunder or preclude the Executive or the Company from
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive during
the Window Period or for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be, (ii) if
the Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason or during the
Window Period; Other Than for Cause, Death or Disability. If, during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability or the Executive shall terminate employment either
for Good Reason or without any reason during the Window Period:
(i) the Company shall pay to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (2) the product of
(x) the Annual Bonus Reference Amount and (y) a fraction, the numerator
of which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued vacation
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pay, in each case to the extent not theretofore paid (the sum of the
amounts described in clauses (1), (2) and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount (such amount shall be hereinafter referred to as the
"Severance Amount") equal to the product of (1) two and one-half (2)
the sum of (x) the Executive's Annual Base Salary and (y) the Annual
Bonus Reference Amount; provided, however, that such amount shall be
reduced by the present value (determined as provided in Section
280G(d)(4) of the Internal Revenue Code of 1986, as amended (the
"Code")) of any other amount of severance relating to salary or bonus
continuation to be received by the Executive upon termination of
employment of the Executive under any severance plan, policy or
arrangement of the Company; and
C. a separate lump-sum supplemental retirement benefit equal to the
difference between (1) the actuarial equivalent (utilizing for this
purpose the actuarial assumptions utilized with respect to The First
National Bank of Chicago Pension Plan (or any successor plan thereto)
(the "Retirement Plan") during the 90-day period immediately preceding
the Effective Date) of the benefit payable under the Retirement Plan
and any supplemental and/or excess retirement plan of the Company and
its affiliated companies providing benefits for the Executive (the
"SERP") which the Executive would receive if the Executive's employment
continued at the compensation level provided for in Sections 4(b)(i)
and 4(b)(ii) of this Agreement for the remainder of the Employment
Period, assuming for this purpose that all accrued benefits are fully
vested and that benefit accrual formulas are no less advantageous to
the Executive than those in effect during the 90-day period immediately
preceding the Effective Date, and (2) the actuarial equivalent
(utilizing for this purpose the actuarial assumptions utilized with
respect to the Retirement Plan during the 90-day period immediately
preceding the Effective Date) of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and the SERP (the amount
of such benefit shall be hereinafter referred to as the "Supplemental
Retirement Amount"); and
(ii) for the remainder of the Employment Period, or such longer period as
any plan, program, practice or policy may provide, the Company shall
continue benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them in accordance with
the plans, programs, practices and policies described in Section 4(b)(iv)
of this Agreement if the Executive's employment had not been terminated in
accordance with the most favorable plans, practices, programs or policies
of the Company and its affiliated companies as in effect and applicable
generally to other peer executives and their families during the 90-day
period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies and
their families, provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive medical or other welfare
benefits under another employer-provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility (such
continuation of such benefits for the applicable period herein set forth
shall be hereinafter referred to as "Welfare Benefit Continuation"). For
purposes of determining eligibility of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until the end of the
Employment Period and to have retired on the last day of such period; and
(iii) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive and/or the Executive's family any
other amounts or benefits required to be paid or provided or which the
Executive and/or the Executive's family is eligible to receive pursuant to
this Agreement and under any plan, program, policy or practice or contract
or agreement of the Company and its affiliated companies as in effect and
applicable generally to other peer executives and their families during the
90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally thereafter with respect
to other peer executives of the Company and its affiliated companies and
their families (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
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(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for (i) payment of Accrued Obligations (which shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination) and the timely payment or
provision of the Welfare Benefit Continuation and Other Benefits (excluding, in
each case, Death Benefits (as defined below)) and (ii) payment to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination of an amount equal to the greater of (A) the
sum of the Severance Amount and the Supplemental Retirement Amount and (B) the
present value (determined as provided in Section 280G(d)(4) of the Code) of any
cash amount to be received by the Executive or the Executive's family as a
death benefit pursuant to the terms of any plan, policy or arrangement of the
Company and its affiliated companies, but not including any proceeds of life
insurance covering the Executive to the extent paid for directly or on a
contributory basis by the Executive (which shall be paid in any event as an
Other Benefit). (The benefits included in this clause (b) shall be hereinafter
referred to as the "Death Benefits".)
(c) Disability. If the Executive's employment is terminated by reason of the
Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for (i)
payment of Accrued Obligations (which shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination) and the timely payment
or provision of the Welfare Benefit Continuation and Other Benefits (excluding,
in each case, Disability Benefits (as defined below)) and (ii) payment to the
Executive in a lump sum in cash within 30 days of the Date of Termination of an
amount equal to the greater of (A) the sum of the Severance Amount and the
Supplemental Retirement Amount and (B) the present value (determined as
provided in Section 280G(d)(4) of the Code) of any cash amount to be received
by the Executive as a disability benefit pursuant to the terms of any plan,
policy or arrangement of the Company and its affiliated companies, but not
including any proceeds of disability insurance covering the Executive to the
extent paid for directly or on a contributory basis by the Executive (which
shall be paid in any event as an Other Benefit). (The benefits included in this
clause (B) shall be hereinafter referred to as the "Disability Benefits".)
(d) Cause; Other than for Good Reason. If the Executive's employment shall be
terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay to the Executive the Annual Base Salary through the Date of
Termination, plus the amount of any compensation previously deferred by the
Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Employment Period, excluding a termination
either for Good Reason or without any reason during the Window Period, this
Agreement shall terminate without further obligations to the Executive, other
than for Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Except as provided in Sections 6(a)(ii), 6(b)
and 6(c) of this Agreement, nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any plan, program, policy
or practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any
plan, policy, practice or program of, or any contract or agreement with, the
Company or any of its affiliated companies at, or subsequent to, the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
8. Full Settlement; Resolution of Disputes. (a) The Company's obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the Executive be obligated
to seek other employment or take any other
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action by way of mitigation of the amounts payable to the Executive under any
of the provisions of this Agreement and, except as provided in Section 6(a)(ii)
of this Agreement and the immediately following sentence, such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay promptly as incurred, to the full extent permitted by
law, all legal fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code.
(b) If there shall be any dispute between the Company and the Executive (i)
in the event of any termination of the Executive's employment by the Company,
whether such termination was for Cause, or (ii) in the event of any termination
of employment by the Executive, whether Good Reason existed, then, unless and
until there is a final, nonappealable judgment by a court of competent
jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the Executive's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
6(a) hereof as though such termination were by the Company without Cause or by
the Executive with Good Reason; provided, however, that the Company shall not
be required to pay any disputed amounts pursuant to this paragraph except upon
receipt of an undertaking by or on behalf of the Executive to repay all such
amounts to which the Executive is ultimately adjudged by such court not to be
entitled.
9. Certain Reduction of Payments by the Company. For purposes of this Section
9, (i) "Payment" shall mean any payment or distribution in the nature of
compensation to, or for the benefit of, the Executive (whether paid or payable
pursuant to this Agreement or otherwise, but determined without regard to any
reductions required by this Section 9); (ii) "Net After Tax Receipt" shall mean
the Present Value of a Payment net of all taxes imposed on the Executive with
respect thereto under the Code; (iii) "Present Value" shall mean such value as
determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced
Amount" shall mean the smallest Present Value of Payments which (a) is less
than the Present Value of all Payments and (b) results in aggregate Net After
Tax Receipts which are equal to or greater than the Net After Tax Receipts
which would result if the Present Value of Payments were any amount (x) other
than the Reduced Amount and (y) equal to or less than the Present Value of all
Payments.
Anything in this Agreement to the contrary notwithstanding, in the event
Arthur Andersen & Co. (the "Accounting Firm") shall determine that receipt of
all Payments would subject the Executive to tax under Section 4999 of the Code,
it shall determine whether some amount of Payments would meet the definition of
a Reduced Amount. If the Accounting Firm determines that there is a Reduced
Amount, the aggregate Payments shall be reduced to such Reduced Amount. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company.
If the Accounting Firm determines that aggregate Payments should be reduced
to the Reduced Amount, the Company shall promptly give Executive notice to that
effect and a copy of the detailed calculation thereof, and the Executive may
then elect which and how much of the Payments shall be eliminated or reduced
(as long as after such election the Present Value of the aggregate Payments
equals the Reduced Amount), and shall advise the Company in writing of such
election within ten days of his receipt of notice. If no such election is made
by the Executive within such ten-day period, the Company may elect which of
such Payments shall be eliminated or reduced (as long as after such election
the Present Value of the aggregate Payments equals the Reduced Amount) and
shall notify the Executive promptly of such election. All determinations made
by the Accounting Firm under this Section 9 shall be made within 15 business
days of the Date of Termination.
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As promptly as practicable following such determination, the Company shall pay
to or distribute to or for the benefit of the Executive such Payments as are
then due to the Executive and shall promptly pay to or distribute to or for the
benefit of the Executive in the future such Payments as become due to the
Executive.
While it is the intention of the Company and the Executive to reduce the
amounts payable or distributable to the Executive hereunder only if the
aggregate Net After Tax Receipts to the Executive would thereby be increased,
as a result of the uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting Firm hereunder, it
is possible that amounts will have been paid or distributed by the Company to
or for the benefit of the Executive pursuant to this Agreement which should not
have been so paid or distributed ("Overpayment") or that additional amounts
which will have not been paid or distributed by the Company to or for the
benefit of the Executive pursuant to this Agreement could have been so paid or
distributed ("Underpayment"), in each case, consistent with the calculation of
the Reduced Amount hereunder. In the event that the Accounting Firm, based upon
the assertion of a deficiency by the Internal Revenue Service against either
the Company or the Executive which the Accounting Firm believes has a high
probability of success, determines that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of the
Executive shall be treated for all purposes as a loan to the Executive which
the Executive shall repay to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have been made, and no
amount shall be payable by the Executive, to the Company if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Executive is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that the Accounting Firm, based
upon controlling precedent or substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it. In no event shall an asserted violation of
the provisions of this Section 10 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
11. Successors. (a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement
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are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
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If to the Company:
First Chicago Corporation
One First National Plaza
Chicago, Illinois 60670
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict compliance
with any provision hereof or any other provision of this Agreement or the
failure to assert any right that the Executive or the Company may have
hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is "at will" and, prior
to the Effective Date, may be terminated by either the Executive or the Company
at any time. Moreover, if prior to the Effective Date, (i) the Executive's
employment with the Company terminates or (ii) the Executive ceases to be an
officer of the Company, then the Executive shall have no further rights under
this Agreement.
(g) This Agreement embodies the entire agreement and understanding among the
Company and Executive and supersedes all prior agreements and understandings
among the Company and Executive relating to the subject matter thereof.
In Witness Whereof, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
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First Chicago Corporation
By: _________________________________
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EXHIBIT 10(M).
FIRST CHICAGO CORPORATION
DIRECTOR RETIREMENT INCOME PLAN
1. Purpose and Effective Date. The purpose of the First Chicago Corporation
Director Retirement Income Plan is to provide additional recognition and
compensation for service on the Board so as to align the remuneration of non-
officer directors with peer practice, and encourage director's continued
service on the Board, thus, helping to ensure the continued quality of Board
membership.
The effective date of the Plan shall be March 31, 1994.
2. Definitions. The following terms shall have the meanings set forth below,
if capitalized:
(a) "Annual Retainer" means the annual retainer paid to Board members for
service on the Board as adjusted from time to time. The definition does not
include any additional amounts paid, such as amounts paid pursuant to the
Director Retainer Stock Plan, or for service on a Board committee or as
Board committee chairman or any amount specifically paid for attendance at
Board or Board committee meetings.
(b) "Board" means the Board of Directors of First Chicago Corporation and
The First National Bank of Chicago.
(c) "Committee" means the Organization, Compensation and Nominating
Committee of the Board.
(d) "Designated Beneficiary" means the person designated by an Eligible
Director to receive payments pursuant to the terms of Section 3 or 4 of
this Plan in the case of the Eligible Director's death. The Eligible
Director's beneficiary shall be designated on a form provided by the
Committee and delivered by the Eligible Director to the Secretary of the
Committee. If a beneficiary is not designated, the Eligible Director's
estate shall be deemed the Designated Beneficiary.
(e) "Eligible Director" means a member of the Board who is not, and has
not been, an officer of First Chicago Corporation or any of its
subsidiaries. In order to be eligible, a director must also be a member of
the Board on or after the effective date of the Plan.
(f) "Plan" means the First Chicago Corporation Director Retirement Income
Plan, as amended from time to time.
(g) "Retirement" occurs when an Eligible Director ceases to be a member
of the Board either (i) after serving on the Board for all or part of any
20 calendar quarters or (ii) as a result of death or disability (disability
to be determined by the Committee in its sole discretion.)
3. Retirement payments.
(a) Quarterly benefit payments. Upon Retirement, an Eligible Director or
an Eligible Director's Designated Beneficiary (in the case of Retirement
due to death) shall be paid each quarter in cash an amount equal to one-
eighth of the current Annual Retainer. The initial payment shall be made as
of the last day of the calendar quarter in which Retirement occurs and the
payment shall continue until the number of quarterly benefit payments paid
to the Eligible Director equals the Eligible Director's number of calendar
quarters of service on the Board prior to Retirement; however, the number
of quarterly payments shall not exceed 40. Any portion of the calendar
quarter in which a director serves on the Board will be counted as a full
quarter of service for purposes of determining the occurrence of an
Eligible Director's Retirement and the amount and duration of retirement
payments.
(b) Lump sum election. An Eligible Director may elect to have the
benefits payable pursuant to paragraph (a) of this Section 3 paid to the
Eligible Director or the Eligible Director's Designated Beneficiary in a
single cash lump sum payment, discounted to present value, by filing a
written notice of election with the Secretary of the Committee prior to
completing 20 calendar quarters of service as a member of the Board or by
April 30, 1994, whichever occurs later.
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4. Payment in Case of Eligible Director's Death after Commencement of
Retirement Payments. If an Eligible Director dies after commencement of
retirement payments pursuant to Section 3, such Director's Designated
Beneficiary shall receive a lump sum payment equal to one-half of the remaining
quarterly payments the Eligible Director would have received but for his death.
5. Change of Control. Notwithstanding anything else contained in the Plan,
upon an Eligible Director's termination of service as a director within one
year following a Change of Control (as defined below), the entire amount of
retirement payments payable to each Eligible Director as calculated under
Section 3 hereof shall be immediately paid in a single cash lump sum
(discounted to present value) to each Eligible Director. Payment shall be made
to an Eligible Director irrespective of whether the termination of service
constitutes a Retirement of the Eligible Director. For purposes of this
Section, "Change of Control" means any of the following events:
(a) The acquisition, other than from the Corporation, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended) of 20% or more of either the then outstanding
shares of common stock of the Corporation or the combined voting power of
the then outstanding voting securities of the Corporation entitled to vote
generally in the election of directors, but excluding, for this purpose,
any such acquisition by the Corporation or any of its subsidiaries, or any
employee benefit plan (or related trust) of the Corporation or its
subsidiaries, or any corporation with respect to which, following such
acquisition, more than 50% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the common stock and
voting securities of the Corporation immediately prior to such acquisition
in substantially the same proportion as their ownership, immediately prior
to such acquisition, of the then outstanding shares of common stock of the
Corporation or the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the election of
directors, as the case may be; or
(b) Individuals who, as of the date hereof, constitute the Board of
Directors (as of the date hereof the "Incumbent Board of Directors") cease
for any reason to constitute at least a majority of the Board of Directors,
provided that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board of Directors shall be
considered as though such individual were a member of the Incumbent Board
of Directors, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the
Corporation (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended); or
(c) Approval by the stockholders of the Corporation of a reorganization,
merger or consolidation of the Corporation, in each case, with respect to
which all or substantially all of the individuals and entities who were the
respective beneficial owners of the common stock and voting securities of
the Corporation immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such reorganization, merger or consolidation, or
a complete liquidation or dissolution of the Corporation or of the sale or
other disposition of all or substantially all of the assets of the
Corporation.
6. Administration. The Plan shall be administered by the Committee who shall
have the sole authority to construe and interpret the Plan, and to establish or
adopt rules, regulations and forms relating to the administration of the Plan.
The Committee shall have no authority to add to, delete from or modify the
terms
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of the Plan without the prior approval of the Board. Neither the Committee nor
any member of the Board shall be liable for any act or determination made in
good faith. The Committee may delegate its administrative duties to any officer
of First Chicago Corporation or The First National Bank of Chicago.
7. Determination of Present Value. The present value of any payments
discounted to present value under this plan shall be calculated using the
Pension Benefit Guaranty Corporation's immediate annuity rate in effect on the
last day of the quarter in which the Eligible Director's Retirement occurs.
8. Gross Misconduct. If an Eligible Director ceases to serve on the Board as
a result of gross misconduct, as determined by the Board in its sole
discretion, any retirement benefits payable under the Plan to such Eligible
Director shall be immediately and irrevocably cancelled.
9. Amendment and Termination. The Board reserves the right to amend, suspend
or terminate this Plan at any time. However, no amendment, suspension or
termination will reduce an Eligible Director's benefits to less than an amount
equal to the amount the Eligible Director would have been entitled to receive
if such Eligible Director's Retirement had occurred on the day of the
amendment, suspension or termination.
10. Prohibition on Alienation. No Eligible Director shall have the right to
alienate, assign, encumber, hypothecate, or pledge such director's interest in
any payments to be made under the Plan, voluntarily or involuntarily, and any
attempt to dispose of any such interest shall be void. First Chicago
Corporation shall have the right to set off against retirement payments under
the Plan any amounts due and owing from the Eligible Director to First Chicago
Corporation or its subsidiaries or affiliates, to the extent permitted by law.
11. Unfunded Plan. The Plan is unfunded and First Chicago Corporation shall
not be required to physically segregate any cash or establish any separate
account or accounts to fund any retirement payment to be made under the Plan.
12. Entire Plan. This document is a complete statement of the Plan and as of
its effective date supersedes all prior plans, proposals, representations,
promises, inducements, written or oral, relating to its subject matter. First
Chicago Corporation shall not be bound by or liable to any director for any
representation, promise, or inducement made by any person which is not embodied
in this document or in any authorized written amendment to the Plan.
13. Applicable Law. The Plan will be construed and enforced in accordance
with the laws of Illinois.
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EXHIBIT 10(N).
FIRST CHICAGO CORPORATION SENIOR MANAGEMENT
ANNUAL INCENTIVE PLAN
1. PURPOSE
The First Chicago Corporation Senior Management Annual Incentive Plan is
designed to (i) assist First Chicago Corporation in attracting, retaining and
motivating senior management employees, (ii) associate Participants' interests
with those of the Corporation's stockholders and (iii) qualify compensation
paid to Participants who are "covered employees" as "other performance-based
compensation" within the meaning of Section 162(m) of the Code or a successor
provision.
2. DEFINITIONS
Terms not otherwise defined herein shall have the following meanings:
2.1 "Board" means the Board of Directors of First Chicago Corporation.
2.2 "Change of Control" means a change of control as defined in the First
Chicago Corporation Stock Incentive Plan or any successor thereto.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means the committee appointed by the Board to establish and
administer the Plan as provided herein. Unless otherwise determined by the
Board, the Organization, Compensation and Nominating Committee of the Board
shall be the Committee.
2.5 "Corporation" means First Chicago Corporation and its successors and
assigns and any corporation which shall acquire substantially all of its
assets. In addition, Corporation shall include any corporation or other entity,
whether domestic or foreign, in which the Corporation has or obtains, directly
or indirectly, a proprietary interest of more than 50% by reason of stock
ownership or otherwise.
2.6 "Incentive Payment" means a payment under this Plan made to a
Participant, subject to Sections 4.1 through 4.5 hereof. The Incentive Payment
for any Incentive Period for each Participant who is a "covered employee" under
Section 162(m) of the Code and/or a member of the Senior Management Committee
(as designated by the Chief Executive Officer of First Chicago Corporation)
shall in no event exceed 200% of the greater of (a) such Participant's base
salary rate as of the first day of the applicable Incentive Period or (b) such
Participant's base salary rate as set by the Board or Committee prior to or at
the time the Committee establishes the Performance Goals for the Incentive
Period pursuant to Section 4.1(a) or such later date as may be permitted under
Code Section 162(m), in Treasury Regulations or Internal Revenue Service
announcements, notwithstanding that payment of such base salary rate will not
commence until a later date.
2.7 "Incentive Period" means the calendar year, except to the extent the
Committee determines otherwise.
2.8 "Participant" means an employee of the Corporation who is a member of
senior management and is designated by the Committee as eligible to receive an
Incentive Payment under the Plan for an Incentive Period.
2.9 "Performance Goals" means (a) earnings per share, (b) return on average
equity, (c) return on average assets, or (d) any other objective performance
goals as may be established by the Committee for an Incentive Period.
Performance Goals may be absolute in their terms or measured against or in
relationship
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to other companies comparably, similarly or otherwise situated and may be based
on or adjusted for any other objective goals, events, or occurrences
established by the Committee for an Incentive Period, including earnings,
earnings growth, revenues, expenses, stock price, market share, charge-offs,
loan loss reserves, reductions in non-performing assets, return on assets,
return on equity or return on investment, regulatory compliance, satisfactory
internal or external audits, improvement of financial ratings, achievement of
balance sheet or income statement objectives, extraordinary charges, losses
from discontinued operations, restatements and accounting changes and other
unplanned special charges such as restructuring expenses, acquisition expenses
including goodwill, unplanned stock offerings and strategic loan loss
provisions. Such Performance Goals may be particular to a line of business,
subsidiary or other unit or may be based on the performance of the Corporation
generally. Such Performance Goals may cover such period as may be specified by
the Committee.
2.10 "Plan" means the First Chicago Corporation Senior Management Annual
Incentive Plan.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Committee. The Committee shall have
authority to determine the terms of all Incentive Payments hereunder,
including, without limitation, the Participants to whom, and the time or times
at which, payments are made, the amount of a Participant's Incentive Payments,
the Incentive Period to which each Incentive Payment shall relate, the actual
dollar amount to be paid, and when the Incentive Payments shall be made (which
payments may, without limitation, be made during or after an Incentive Period,
on a deferred basis or installments).
3.2 Subject to the express provisions of the Plan, the Committee shall have
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The determinations
of the Committee pursuant to its authority under the Plan shall be conclusive
and binding.
3.3 The Committee may, in its discretion, authorize the Chief Executive
Officer of First Chicago Corporation to act on its behalf, except with respect
to matters relating to such Chief Executive Officer or any executive vice
president or above of First Chicago Corporation.
4. DETERMINATION OF PARTICIPANTS, PERFORMANCE GOALS, PERFORMANCE/PAYOUT
SCHEDULE, INCENTIVE PAYMENTS
4.1 Prior to the completion of 25% of the Incentive Period or such earlier
date as required under Section 162(m) of the Code, the Committee shall, in its
sole discretion, for each such Incentive Period determine and establish in
writing the following:
(a) The Performance Goals applicable to the Incentive Period; and
(b) The performance/payout schedule detailing the total dollar amount
which may be available for payout to all Participants as Incentive Payments
based upon the relative level of attainment of the Performance Goals.
4.2 After the end of each Incentive Period, the Committee shall:
(a) Certify in writing, prior to the unconditional payment of any
Incentive Payment, that the Performance Goals for the Incentive Period were
satisfied and to what extent they were satisfied;
(b) Determine the total dollar amount available for Incentive Payments
pursuant to the performance/payout schedule established in Section 4.1(b)
above which amount shall be based upon the extent to which the Performance
Goals established by the Committee for the Incentive Period have been
achieved;
(c) In its sole discretion, reduce the size of or eliminate the total
dollars available for payment for an Incentive Period; and
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(d) In its sole discretion, determine the share, if any, of available
dollars to be paid to each Participant as that Participant's Incentive
Payment and authorize payment of such amount; except, however, in the case
of a Participant who is at or above the level of executive vice president
of First Chicago Corporation, the Board shall approve (but only to the
extent permitted under Section 162(m) of the Code and underlying
regulations) the Committee's determination of such Participant's share
before the Committee may authorize payment.
4.3 The Committee may authorize a conditional payment of a Participant's
Incentive Payment prior to the end of an Incentive Period based upon the
Committee's good faith determination of the projected size of (i) the total
dollar amount which will become available for payout as Incentive Payments for
the Incentive Period pursuant to Section 4.2 above, (ii) and such Participant's
share of such total dollar amount.
4.4 Unless otherwise determined by the Committee or required by applicable
law, no payment pursuant to this Plan shall be made to a Participant unless the
Participant is employed by the Corporation as of the date of payment.
4.5 Incentive Payments shall be subject to applicable federal, state and
local withholding taxes and other applicable withholding in accordance with the
Corporation's payroll practices as from time-to-time in effect.
5. TRANSFERABILITY
Incentive Payments shall not be subject to the claims of creditors and may
not be assigned, alienated, transferred or encumbered in any way by a
Participant other than by will or pursuant to the laws of descent and
distribution.
6. TERMINATION OR AMENDMENT
The Board may amend, modify or terminate the Plan in any respect at any time
without the consent of Participants. Any such action of the Board may be taken
without the approval of the Corporation's stockholders, but only to the extent
that such stockholder approval is not required by applicable law or regulation,
including specifically Section 162(m) of the Code.
7. CHANGE OF CONTROL
Notwithstanding anything contained in this Plan, in the event of a Change of
Control, the following provisions shall be applicable:
(a) The Incentive Period will be deemed to have concluded on the date of
the Change of Control and the dollar amount available pursuant to Section
4.2 will fund on a pro-rata basis (based upon the number of days in such
Incentive Period elapsed through the date of Change of Control) assuming
the Corporation had attained Performance Goals at a level generating
funding at 200% of target funding; and
(b) The Committee in its sole discretion will determine the share of
available dollars payable to each Participant as that Participant's
Incentive Payment (provided that in all events the entire amount of dollars
available as calculated pursuant to Section 7(a) shall be paid to
Participants as Incentive Payments) and payments shall be made to each
Participant as soon thereafter as is practicable.
8. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulations, including, with respect to those Participants who are "covered
employees," Section 162(m) of the Code. In case any one or more of the
provisions of this Plan shall be held invalid, illegal or unenforceable in any
respect under applicable law and regulations, the validity, legality and
enforceability of the remaining provisions shall not in any way be
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affected or impaired thereby and the invalid, illegal or unenforceable
provision shall be deemed null and void; however, to the extent permissible by
law, any provision which could be deemed null and void shall first be
construed, interpreted or revised retroactively to permit this Plan to be
construed in compliance with all applicable laws (including Code Section
162(m)), so as to foster the intent of this Plan.
9. CONFER NO OTHER RIGHTS
The establishment of the Plan shall not confer upon any Participant any legal
or equitable right against the Corporation, except as expressly provided in the
Plan.
10. NO RIGHT TO EMPLOYMENT
The Plan, an Incentive Payment, or the designation of an employee as a
Participant for an Incentive Period do not constitute an inducement or
consideration for the employment of any Participant, nor is the Plan or any
Incentive Payment a contract between the Corporation and any Participant.
Participation in the Plan shall not give a Participant any right to be retained
in the employ of the Corporation.
11. OTHER PLANS
Nothing contained in this Plan shall prevent the Board or Committee from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required, and such arrangements may benefit
Participants and may be either generally applicable or applicable only in
specific cases.
12. GOVERNING LAW
To the extent that federal laws do not control, the Plan shall be governed,
construed and administered in accordance with and governed by the internal laws
of the State of Illinois.
13. EFFECTIVE DATE; TERM OF THE PLAN
The Plan shall be effective as of January 1, 1995 subject to its approval by
the stockholders of the Corporation at the annual meeting to be held April 21,
1995, or any adjournment thereof. Unless sooner terminated by the Board
pursuant to Section 6, to the extent necessary to ensure that Incentive
Payments made to "covered employees" as defined under Section 162(m) of the
Code may be deductible for federal income tax purposes, the Plan shall
terminate as of the date of the first meeting of the Corporation's stockholders
occurring during the year 2000, unless the term of the Plan is extended and
reapproved at such stockholders' meeting. No additional Incentive Payments may
be paid after termination of the Plan. Termination of the Plan shall not affect
any Incentive Payments due and outstanding on the date of termination and such
Incentive Payments shall continue to be subject to the terms of the Plan
notwithstanding its termination.
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EXHIBIT 12.
STATEMENTS RE COMPUTATION OF RATIOS
The ratios of income to fixed charges have been computed on the basis of the
total enterprise (as defined by the Commission) by dividing income before fixed
charges and income taxes by fixed charges. Fixed charges consist of interest
expense on all long-term and short-term borrowings, excluding or including
interest on deposits as indicated.
The computations of other ratios presented in the Corporation's 1994 Annual
Report to Stockholders and incorporated by reference into the Form 10-K are
evident from the information presented in the 1994 Annual Report to
Stockholders.
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EXHIBIT 13
FIRST CHICAGO CORPORATION
[LOGO OF FIRST CHICAGO CORPORATION]
Annual Report
1994
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The mission of First Chicago Corporation
is to be a world-class financial services company with a reputation
for customer excellence.
To fulfill this mission, we commit to:
Focus on our customers. We will anticipate and meet our
customers' needs by providing quality products, technology, and service.
Invest in our employees. We will respect and value our work force
and will offer competitive opportunities for professional growth and
financial reward.
Reward our shareholders. We will produce attractive returns on
equity and long-term earnings growth based on a strong financial
position and prudent risk management practices.
Support our communities. We will be responsible corporate
citizens and participate in enriching the quality of community life.
Take personal responsibility for the success of First Chicago.
We will each demonstrate the highest level of professionalism and
integrity in all that we do.
We commit to being FIRST in all we do.
[FCC LOGO]
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Table of Contents
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3 Financial Highlights
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4 Letter to Stockholders
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12 Business Highlights, Outlook and Strategy
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16 Board of Directors
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17 Financial Review
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70 Executive Officers
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71 U.S. Offices and International Facilities
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72 Corporate Information
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First Chicago Corporation 2 Annual Report 1994
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<TABLE>
<CAPTION>
Financial Highlights
(Dollars in millions, except per share data) 1994 1993 Change
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<S> <C> <C> <C>
For the Year
Net interest income--tax-equivalent basis...... $1,355.2 $1,264.0 + 7%
Combined credit provisions..................... 225.7 274.2 -18
Noninterest income............................. 1,874.6 2,202.4 -15
Noninterest expense*........................... 1,916.9 1,853.9 + 3
Net income..................................... 689.7 804.5 -14
Return on assets............................... 1.08% 1.42%
Return on common stockholders' equity.......... 17.0% 24.2%
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At Year-End
Assets......................................... $65,900 $52,560 +25%
Loans.......................................... 25,947 23,103 +12
Deposits....................................... 31,666 28,186 +12
Common stockholders' equity.................... 3,922 3,503 +12
Risk-based capital ratio....................... 13.4% 13.6%
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Average Balances
Assets......................................... $64,138 $56,854 +13%
Loans.......................................... 23,293 21,997 + 6
Deposits....................................... 29,430 29,677 -1
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Common Share Data
Earnings per share
Net income--primary.......................... $ 7.04 $ 8.78 -20%
Net income--fully diluted.................... 6.88 8.43 -18
Dividends declared............................. 1.95 1.30 +50
Book value, year-end........................... 43.65 40.55 + 8
Market price, year-end......................... 47.75 43.25 +10
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Nonfinancial Data (Year-End)
Number of employees (full-time-equivalent)..... 17,630 17,355
Number of common stockholders of record........ 14,773 15,034
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</TABLE>
*Excludes provisions for other real estate.
First Chicago Corporation 3 Annual Report 1994
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To The Owners of First Chicago
Operating in the extremely competitive financial
services environment, it is our responsibility to man-
age the Corporation to produce attractive near-
term results at the same time that we provide for
the Corporation's long-term stability and growth.
First Chicago's senior management feels strongly
that communicating clearly our strategic direction,
our core values and our commitment to our various
constituencies is critically important to the
Corporation's success. For this reason, we have
developed a new corporate mission statement:
to be a world-class financial services company with
a reputation for customer excellence.
The key elements in this mission are a commit-
ment to focus on customers, to invest in employees,
to reward stockholders, to support our communi-
ties, and for each employee to take personal
responsibility for the success of First Chicago.
The basic elements of our strategy to fulfill
this mission are:
. a commitment to be a national player in both
consumer and corporate banking, and to enhance
our capability to serve corporations and institutions
on a global basis;
. a recognition that our success will depend on
tailoring and delivering value-added products to
customers;
. continued and increased investment in
technology; and
. prudent risk management and shareholder-
oriented management of our capital.
In conjunction with our mission statement, we
established a new goal for First Chicago: to become
one of the top ten U.S. bank holding companies
in market capitalization. This is an ambitious
goal, but we believe that it is attainable over time.
It symbolizes our desire to be a world-class
institution headquartered in a world-class city.
Our mission reinforces our focus on serving cus-
tomers with excellence, and it creates an energizing
environment for employees to work together toward
that purpose.
COMMITMENT TO CUSTOMERS
First Chicago's success is deeply rooted in its com-
mitment to customer relationships. This customer
focus across all our business lines -- credit card,
community banking, corporate and institutional
banking, and middle market banking -- has enabled
us to build leading market positions.
In 1994 we put even greater emphasis on
serving customers with quality and innovation. For
example, through our Corporate and Institutional
Banking "Customer First" program, we are imple-
menting new processes to deliver complex solutions
to customer needs, anchored in what our customers
tell us they value. This approach should broaden
and deepen our relationships, streamline our work
and improve our competitiveness.
Our commitment to customers is reinforced by
senior management throughout the Corporation,
particularly in programs recognizing employee
innovation and quality customer service.
We celebrate outstanding performance through
an extensive process that promotes the First
Chicago mission and recognizes "value-added"
activity, courteous action and responsive service
to external and internal customers. In this way we
continue to strengthen all parts of our franchise.
This valuable franchise provides First Chicago a
solid foundation for continued attractive financial
performance.
Information about 1994 business activities as well
as an overview of our strategy and outlook for each
business are presented in the section that follows
this letter.
First Chicago Corporation 4 Annual Report 1994
<PAGE>
RISK MANAGEMENT
Risk management has always been
an important part of First Chicago's
culture. However, the business of
banking has evolved over the past
several years in such a way that
understanding, assuming and man-
aging risk have become even more
complex and important.
[PHOTO APPEARS HERE]
We provide our diverse customer
base a broad range of products and
services to manage their risks, and
we devote substantial resources to [PHOTO CAPTION FOLLOWS]
the management of risk for our
own account. (Left to Right)
Leo F. Mullin
We believe that First Chicago's Richard L. Thomas
risk profile is excellent: David J. Vitale
. Credit quality is superior, with a low level of
non-performing assets and very strong reserves.
. Exposure to market risk is appropriate to
our size.
. Our vulnerability to changing interest rates
is minimal.
. Operating and liquidity risk are both modest.
The strength of our risk profile is the result
of a disciplined management approach and good
execution of policies over the past several years.
Our policy of minimizing structural interest rate
risk proved to be especially important in the
volatile climate of 1994 as we were able to protect
both asset values and net interest margins.
Our venture capital portfolio is another
example of our approach to risk management.
We made the strategic decision in 1992 to reduce
this portfolio over time because of its inherent
volatility and regulatory changes.
In 1994 our $1.6 billion portfolio generated
earnings of $95 million, representing a return
on equity of 26%, and we hedged a large portion
of our holdings to reduce future earnings volatility.
We anticipate that the venture capital portfolio will
continue to produce meaningful revenue over the
next several years.
CAPITAL MANAGEMENT
In conjunction with prudent risk management
policies, we are committed to managing capital
for the maximum benefit of our stockholders.
The Corporation's capital position is very
strong. Our regulatory capital ratios at year-end
continued to exceed "well-capitalized" guidelines
by a wide margin.
Our priority is to ensure that we have ample
capital to both support existing businesses and
invest in attractive new core business opportuni-
ties. When appropriate, we will also return excess
capital to stockholders. Since late 1993 we have
First Chicago Corporation 5 Annual Report 1994
<PAGE>
taken aggressive actions in this regard. During this
time we increased the annual dividend 83%, and we
repurchased 4.8 million shares of common stock.
INVESTING IN EMPLOYEES
In a rapidly changing industry like financial
services, our success depends on our talented and
motivated employees continuing to work together
in a spirit of teamwork. But this is not enough. To
accomplish First Chicago's mission, it is crucial that
we invest in our employees as both the work force
and the workplace change over time.
We must foster a healthy work environment, and
we must also provide our employees the products
and technology necessary to achieve competitive
advantage in the marketplace.
[PHOTO APPEARS HERE]
[PHOTO CAPTION FOLLOWS]
Based on the belief that quality health care is cost effective,
First Chicago's wellness programs promote employee health while
helping to constrain medical costs. Working in partnership
with the Benefits Unit, Medical Director Dr. Wayne Burton
develops and administers a variety of employee wellness
initiatives including prenatal care programs.
[PHOTO APPEARS HERE]
[PHOTO CAPTION FOLLOWS]
Investing in employees' development is an important part
of First Chicago's mission. Titus Fair, staff member of the
First Development Center, participates in a computer
training session.
We have an excellent record in addressing
issues of concern to our employees. We place
particular emphasis on providing a cost-effective,
quality health care program, and we have received
national recognition, including the C. Everett Koop
Award, for our activities related to employee wellness,
mammography, prenatal care and mental health.
In late 1993 the senior management of First
Chicago launched a new initiative to help us more
effectively promote and manage diversity through-
out the Corporation. We call this the LEAD initia-
tive, which stands for Leadership, Equality,
Affirmative Action and Diversity.
During 1994 we made significant progress with
LEAD. We strengthened our mentoring programs
to increase employee development and retention;
we expanded diversity awareness and appreciation
programs; and we initiated an awards program to
recognize employees who champion the LEAD
commitment.
First Chicago Corporation 6 Annual Report 1994
<PAGE>
Through our educational programs, we
continue to invest in our employees' ongoing
development, especially in the areas of leadership,
change management and technology-based skills.
In addition, we provide basic skills education for
entry-level employees.
Finally, we were very proud to have been select-
ed in 1994 by Working Mother magazine as one of
the 100 Best Companies in the United States. Our
award was based on our Work
and Family Resource Center,
which last year helped more
than 2,000 employees obtain
information about child care
or care for aging parents;
our continuing innovation
in helping employees design
flexible work arrangements;
our Women's Health Care
Program; and the First
Card Child Care Center.
These are just a few examples
of the ways that First Chicago is
investing in employees. And, we
are very encouraged by the fact
that employees, in turn, are
investing in First Chicago.
In aggregate, our employees
own more than 4 million shares
of the Corporation's common
stock, or nearly 5% of shares
outstanding. And, enrollment
in the 1994 offering of the
Employee Stock Purchase and
Savings Plan was at an all-time high -- nearly 43%
of our employees are participating in the program.
[PHOTO APPEARS HERE]
[PHOTO CAPTION FOLLOWS]
Through stock ownership, employees can experience the rewards
of taking personal responsibility for the success of First Chicago.
Executive Compensation Specialist Cristina Escueta adminis-
ters the Employee Stock Purchase and Savings Plan through
which employees can conveniently save for stock purchase
through payroll deduction.
First Chicago Corporation 7 Annual Report 1994
<PAGE>
SUPPORT FOR OUR COMMUNITIES
Although First Chicago has operations throughout
the world, we are especially fortunate to be head-
quartered in Chicago, a world-class city by any
definition. We have a sense of responsibility to
all the communities in which we do business, but
we feel a particular obligation to help make our
headquarters city and its suburban communities
an even better place in which to live and work.
[PHOTO APPEARS HERE]
[PHOTO CAPTION FOLLOWS]
Little Village Branch President Francisco Menchaca (right)
visits customers Mario and Guadalupe Salazar in their balloon
and party goods store, Roy's Funland. Mr. and Mrs. Salazar
were assisted in their business start-up by ACCION-Chicago,
a non-profit organization that helps Little Village entrepreneurs
obtain micro business loans. First Chicago played a key role in
establishing the ACCION program in Chicago.
First Chicago employees are active in many
facets of community life. They serve as directors
and trustees of more than 300 institutions and
organizations in Chicago, ranging from premier
health and cultural entities to small neighborhood
development associations.
Our employees also give generously to the
United Way/Crusade of Mercy. Indeed, in 1994
the combined pledges of the Corporation and the
employees to United Ways in
our various locations across the
country totaled $5.1 million.
In the Chicago area, our com-
bined pledge of $4.9 million
was the largest of the entire
metropolitan campaign.
We feel strongly that our
success is closely related to the
health and prosperity of our
community. In our lending and
investment activities we seek
to implement policies that will
benefit neighborhoods, assure
equal access to credit and
promote economic develop-
ment. We believe we are mak-
ing a difference, and we shall
strive to continue to do so.
REGIONAL ECONOMY
In the context of a national
economy that continues to
perform very well, we are
especially fortunate to be headquartered in
Chicago, one of the most vibrant metropolitan
areas in the country. Furthermore, economic
conditions in the entire Midwest region, driven
by strength in the capital goods and automotive
First Chicago Corporation 8 Annual Report 1994
<PAGE>
[PHOTO APPEARS HERE]
[PHOTO CAPTION FOLLOWS]
First Chicago provides community support through financial
contributions and employees' personal involvement in non-
profit organizations. As chairman of First Chicago's 1994
United Way campaign, John Ballantine tours the United Way-
funded Children's Home & Aid Society of Illinois' Rice Center
in Evanston where Occupancy Planner Penny Varnava
volunteers on weekends.
First Chicago Corporation 9 Annual Report 1994
<PAGE>
[PHOTO APPEARS HERE]
[PHOTO CAPTION FOLLOWS]
First Card's Visa(R) Gold Card is accepted by over 12 million
establishments around the world, including First Chicago
banking customer Keith Alm's Green Bay Maritime Galleries
in Winnetka. First Card is the world's largest issuer of
Gold Cards.
sectors, have been
exceptionally buoy-
ant during the past
year. The region
experienced record
highs in heavy manu-
facturing sector
profits, which in turn
generated service
sector gains.
With burgeoning
exports and low
unemployment,
the outlook for the
Midwest continues
to be positive, which
is very favorable for
First Chicago and
our customers.
1994 FINANCIAL RESULTS
First Chicago produced excellent results in 1994
with net income of $690 million, or $6.88 per fully
diluted share. Furthermore, with a 1994 return on
equity of 17%, we have established a pattern of
consistent performance. Our return on equity has
met or exceeded 15% for nine consecutive quar-
ters. These results reflect the superior mix of our
customer franchises as well as the diversity of our
earnings: an outstanding contribution from our
credit card, record performance in our middle
market business, improvement in community
banking and excellent venture capital results.
In large corporate banking, our business units
that serve customers in various market segments
performed well, and we continued to build our
position as a leading provider of finance, risk
management, cash management and other
First Chicago Corporation 10 Annual Report 1994
<PAGE>
operating services. However, trading results were
significantly lower due largely to very difficult
market conditions.
While achieving our earnings objectives for
1994, we further improved credit quality, strength-
ened the balance sheet, and protected our net
interest margin through disciplined management
of interest rate risk. In sum, we believe that First
Chicago is strongly positioned for 1995 and the
future.
We are very pleased that during 1994 First
Chicago stockholders saw tangible appreciation in
the value of their holdings. From year-end 1993 to
year-end 1994, the price of First Chicago common
stock increased by more than 10%, considerably
more than most bank stocks or the broader market
indices. Further, dividend increases announced
in November 1993, May 1994 and November 1994
brought the annual dividend rate from $1.20 to
$2.20 per share.
INDUSTRY OUTLOOK
As we enter 1995, the commercial banking
industry is extremely healthy. Its capital base is
stronger than at any time in recent history, credit
quality is generally very good, and the economic
environment is excellent.
Further, we are heartened by the favorable
Congressional actions of 1994: interstate banking,
regulatory relief and bankruptcy reform. In our
opinion, these legislative developments represent
a more constructive attitude in Washington
toward commercial banking.
Over the longer term, however, our industry
faces significant challenges. To compete against
financial service providers that are not subject to
bank regulations, the banking industry will need
greater authority to offer new products and to
operate with greater freedom and flexibility. We
are cautiously optimistic that we can build upon the
successes achieved in 1994, and we are committed
to working diligently to that end.
CONCLUSION
In committing to be FIRST in all we do, we are
confident that First Chicago will fulfill its mission
to be a world-class financial services company
with a reputation for customer excellence.
Our franchise is based in one of the finest
markets in the country, and our variety of
businesses provides a diversity of earnings that
serves to insulate us from unfavorable cycles in
any one market segment.
With continued focus on our customers, pru-
dent risk management and shareholder-oriented
capital management, and investments in both our
employees and our community, we are confident
that First Chicago can perform at the high level
necessary to generate superior returns for stock-
holders over time.
We are optimistic about First Chicago's future.
We are committed to fulfilling our mission. And,
we appreciate your ongoing support in our
endeavors toward that goal.
/s/ R. L. Thomas
Richard L. Thomas
Chairman
/s/ Leo F. Mullin
Leo F. Mullin
President
/s/ David J. Vitale
David J. Vitale
Vice Chairman
First Chicago Corporation 11 Annual Report 1994
<PAGE>
Business Highlights, Outlook and Strategy
CONSUMER BANKING
First Chicago has an exceptional consumer
franchise. We are a premier bankcard issuer in the
U.S. and the leader in the Chicago retail market.
Consumer banking, driven by our credit card
business, was our largest contributor to profits
in 1994 and, despite an increasingly competitive
marketplace, generated record earnings.
Credit Card
We are proud to have one of the foremost
bankcard operations in the United States. With
over 12 million customers nationwide, First Card
ranks among the industry leaders in receivables
and transaction volume and is the world's No.1
issuer of Gold Cards. First Card's extremely success-
ful Mileage Plus(R) program with United Airlines
also differentiates us from other issuers.
In 1994 First Card achieved record earnings
of $309 million, generating an exceptional return
on equity of 58%. For the third consecutive year,
more than 2 million new accounts were opened.
Average managed receivables grew about 20%,
and outstandings at year-end were $12 billion.
First Chicago has thrived in an extremely
competitive environment, which has presented
extensive challenges to all major bankcard issuers.
The reasons for our success are straightforward.
We offer valued-added competitive products; we
utilize sophisticated information-based marketing
techniques and credit management tools; our
operations are extremely efficient; and we benefit
from an experienced and loyal work force. These
strengths will continue to give us a competitive
edge.
We are committed to growing our bankcard
franchise. We will continue aggressive solicitation
and retention programs, and we may also consider
portfolio acquisitions to enhance growth.
We believe that the credit card industry will
enjoy sustained volume growth (12-15% annually)
as consumers increasingly favor the convenience of
bankcards over other forms of payment or credit.
We also anticipate that our credit card business
will equal or exceed that rate of growth for the
foreseeable future.
Although competitive price pressures are likely
to constrain earnings growth, we are confident
that our card operations will continue to generate
excellent returns.
Community Banking
With a 24% market share, First Chicago has the
strongest retail banking franchise in Chicagoland,
serving consumers and small businesses with
more than 80 branches. Including Chicago area
credit card customers, nearly 50% of the area's
2.7 million households have a relationship with
First Chicago.
To improve the profitability of this franchise,
we have implemented a three-year plan focusing
on strategy, cost and culture. Our strategy is based
on customer segmentation with approaches tailored
to customers' individual needs and preferences
for financial products and services.
Reducing cost while improving quality and
responsiveness is key to improving our retail
profitability. We have simplified sales and service
processes to increase the effectiveness of our
branches and backroom operations. And, as
recent acquisitions are integrated into Community
Banking, a common culture and operating philoso-
phy are being reinforced throughout the network.
In 1994 Community Banking generated earn-
ings of $22 million with a return on equity of 5%,
which reflect the repositioning it is undergoing.
First Chicago Corporation 12 Annual Report 1994
<PAGE>
[PHOTO APPEARS HERE]
[PHOTO CAPTION FOLLOWS]
Personal Banker Alice Farmer pays a call on her client
Stuart Brent at his vintage store, Stuart Brent Books, located
for 48 years on North Michigan Avenue. Having banked
with Lake Shore National Bank for 50 years, Brent is now
a valued First Chicago customer.
We believe substantial progress will be demonstrated
in 1995 toward our goals of improving net income
by $100 million and achieving a return on equity
of 15% or greater by 1997.
During 1994 the consumer business of Lake
Shore Bancorp., Inc. was successfully integrated into
Community Banking. To provide retail customers
even greater convenience and speed of service,
First Chicago will invest in emerging technology
to expand Direct Banking services in Chicago
and nationally.
In January 1995 First Chicago Investment
Management Company was launched to better
First Chicago Corporation 13 Annual Report 1994
<PAGE>
serve the mutual fund and 401(k) plan needs of
retail and business clients. We may also consider
acquisitions to bolster our product capabilities in
the investment management area.
CORPORATE BANKING
First Chicago serves the operational, financial and
advisory needs of large corporate and institutional
customers on a global basis and mid-sized compa-
nies in Chicago and throughout the Midwest. With
an excellent reputation in both our large corporate
and middle market segments, our customer rela-
tionships have never been stronger.
Corporate and Institutional Banking
In Corporate and Institutional Banking, First
Chicago ranks No.1 with Midwest companies and
among the top banks nationally. In capital markets,
[PHOTO APPEARS HERE]
[PHOTO CAPTION FOLLOWS]
Staying on top of fast-paced foreign exchange transactions are
(clockwise from bottom) traders Elizabeth Schulz, Joseph Busch
and Rajeev Bahri. First Chicago is well recognized as a key
player in foreign exchange, which is a critical core component
of our capital markets capabilities.
[PHOTO APPEARS HERE]
[PHOTO CAPTION FOLLOWS]
First Chicago's Procurement Card offers corporations like
Amoco the opportunity to reduce payment processing expense
on small-dollar purchases while maintaining appropriate
purchasing controls. Amoco employees Mark Byrnside, who
helped implement the program at Amoco, and Toni Blackmon
like the convenience the Procurement Card provides.
we are a key player in foreign exchange and in
interest rate and currency derivatives.
In operating products technology, we are a
recognized leader and rank among the top three
banks in cash management. In 1994 we won an
important new contract with the Internal Revenue
Service to process electronic tax payments, and we
made excellent progress in selling our innovative
Procurement Card to corporate customers.
Corporate and Institutional Banking had earn-
ings of $134 million and return on equity of 7%
in 1994. As discussed earlier, its performance was
affected by difficult financial market conditions.
The fundamental purpose of Corporate and
Institutional Banking is to meet our customers'
needs by providing a broad range of integrated
financial solutions in a manner that creates
shareholder value.
To accomplish this mission, we have broadened
our product range and dramatically improved our
risk profile over the past several years. Combined
with the reduction of our real estate portfolio and
a de-emphasis on customers who used only the
First Chicago Corporation 14 Annual Report 1994
<PAGE>
loan product, the broader range of product offer-
ings has significantly decreased the importance
of lending. In 1994 average loans outstanding
equaled $9.5 billion, a reduction of nearly 50%
from 1990, and loan product revenue was about
20% of Corporate and Institutional Banking's
total revenue.
Meeting the changing needs of large corporate
customers requires that we continually tailor our
approach to serving them. In this regard, we will
be making significant investments in technology
in 1995 and beyond.
During 1994 we renewed our commitment
to enhance our international capabilities
in light of our multinational customers'
increasing needs for global banking
services. We may also pursue acquisitions,
alliances and joint ventures to support
further growth and extend our capabilities
in both operating products and the
international arena.
With sound execution of our strategy,
aided by more favorable financial markets,
we believe that Corporate and Institutional
Banking offers good upside potential and
has the capacity to generate a double-digit
return on equity in 1995 and meet our
15% return on equity goal over time.
Middle Market Banking
Primarily through our subsidiary American
National Corporation, we serve the vibrant
middle market in greater Chicagoland, home
to almost 10,000 middle market companies with
annual sales of $5-$150 million. With an exemplary
reputation for customer service, American National
is the leader in the middle market with a 22%
market share. A key accomplishment in 1994 was
the integration of the commercial business of
Lake Shore Bancorp., Inc., which further
solidified American National's No.1 position
in the Chicagoland middle market.
In 1994 American National generated record
earnings, contributing net income of $74 million
and a 19% return on equity. This excellent
performance reflects strong loan growth and
the healthy Midwest economy. With this firm base,
we anticipate that American National should have
steady earnings growth and the capacity to earn
consistent returns on equity in the range of 16-18%.
[PHOTO APPEARS HERE]
[PHOTO CAPTION FOLLOWS]
Allan Maca (left), Chief Executive Officer of Sommer and Maca
Industries, meets with American National Commercial Banker
David Mook. A Cicero-based manufacturer of equipment for
the glass industry, Sommer and Maca has been an American
National customer for almost ten years. With exports growing
as trade barriers fall around the world, Sommer and Maca
benefits from American National's international banking
and trade services.
First Chicago Corporation 15 Annual Report 1994
<PAGE>
Board of Directors
Richard L. Thomas
Chairman of the Board and
Chief Executive Officer
First Chicago Corporation
Leo F. Mullin
President and
Chief Operating Officer
First Chicago Corporation
David J. Vitale
Vice Chairman of the Board
First Chicago Corporation
John H. Bryan*
Chairman of the Board and
Chief Executive Officer
Sara Lee Corporation
Global manufacturer and marketer
of brand name products
Dean L. Buntrock
Chairman of the Board and
Chief Executive Officer
WMX Technologies, Inc.
Comprehensive environmental and
engineering services company
James S. Crown
General Partner
Henry Crown and Company
(Not Incorporated)
Diversified investments
Donald V. Fites*
Chairman of the Board and
Chief Executive Officer
Caterpillar Inc.
Manufacturer of a wide range of
construction, earthmoving and
material handling equipment
and engines
Donald P. Jacobs
Dean of the J.L. Kellogg
Graduate School of Management
Northwestern University
Education and research
Andrew J. McKenna*
Chairman of the Board, President
and Chief Executive Officer
Schwarz Paper Company
Printer, converter and distributor
of packaging materials
Richard M. Morrow*
Retired Chairman
Amoco Corporation
Diversified international petroleum
company
Earl L. Neal
Principal
Earl L. Neal & Associates
Law firm
James J. O'Connor
Chairman and
Chief Executive Officer
Unicom Corporation
Production, distribution and sale
of electric energy
Jerry K. Pearlman
Chairman and
Chief Executive Officer
Zenith Electronics Corporation
Manufacturer and distributor of a
diversified line of electronics products
Jack F. Reichert
Chairman of the Board and
Chief Executive Officer
Brunswick Corporation
A multinational company with
leadership positions in marine power,
pleasure boating and recreation
Patrick G. Ryan
President and
Chief Executive Officer
Aon Corporation
A broad-based insurance holding
company
Adele Simmons
President
The John D. and Catherine T.
MacArthur Foundation
Philanthropic foundation
Roger W. Stone
Chairman of the Board, President
and Chief Executive Officer
Stone Container Corporation
Manufacturer of paper, paper-
related products and packaging
systems equipment
*Member of the Audit Committee
First Chicago Corporation 16 Annual Report 1994
<PAGE>
Index to Financial Review
- --------------------------------------------------------------------------
Five-Year Summary of Selected Financial Information 18
- --------------------------------------------------------------------------
Business Segments 19
- --------------------------------------------------------------------------
Earnings Analysis 21
- --------------------------------------------------------------------------
Risk Management 25
- --------------------------------------------------------------------------
Liquidity Risk Management 25
- --------------------------------------------------------------------------
Market Risk Management 26
- --------------------------------------------------------------------------
Credit Risk Management 31
- --------------------------------------------------------------------------
Derivative Financial Instruments 35
- --------------------------------------------------------------------------
Capital Management 37
- --------------------------------------------------------------------------
Consolidated Financial Statements 40
- --------------------------------------------------------------------------
Notes to Consolidated Financial Statements 44
- --------------------------------------------------------------------------
Report of Management on Responsibility for Financial Reporting 64
- --------------------------------------------------------------------------
Report of Independent Public Accountants 65
- --------------------------------------------------------------------------
Selected Statistical Information 66
- --------------------------------------------------------------------------
First Chicago Corporation 17 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
Five-Year Summary of Selected Financial Information
First Chicago Corporation and Subsidiaries
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share data) 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selected Financial Data for the Year
Net interest income............................ $1,331.0 $1,225.8 $1,183.0 $1,080.0 $1,197.6
Tax-equivalent adjustment...................... 24.2 38.2 34.0 37.9 44.2
--------- -------- -------- -------- --------
Net interest income--tax-equivalent basis...... 1,355.2 1,264.0 1,217.0 1,117.9 1,241.8
Combined credit provisions
Assets held for accelerated disposition...... -- -- 625.0 -- --
Other........................................ 225.7 274.2 481.9 544.3 518.8
Noninterest income............................. 1,874.6 2,202.4 1,488.2 1,225.2 1,199.3
Noninterest expense (1)........................ 1,916.9 1,853.9 1,764.4 1,597.0 1,565.9
Income (loss) before cumulative effect of
changes in accounting principles............. 689.7 804.5 (114.5) 116.3 249.3
Cumulative effect of changes in accounting
principles................................... -- -- 208.0 -- --
Net income..................................... 689.7 804.5 93.5 116.3 249.3
- -------------------------------------------------------------------------------------------------------------------------------
Earnings per share
Primary
Income (loss) before cumulative effect
of changes in accounting principles........ $7.04 $8.78 $(2.08) $1.15 $3.35
Net income................................... 7.04 8.78 0.64 1.15 3.35
Fully diluted
Income (loss) before cumulative effect
of changes in accounting principles........ 6.88 8.43 (2.08) 1.15 3.32
Net income................................... 6.88 8.43 0.64 1.15 3.32
Dividends declared per common share............ 1.95 1.30 1.20 2.00 2.00
- -------------------------------------------------------------------------------------------------------------------------------
At Year-End
Assets......................................... $65,900 $52,560 $49,281 $48,963 $50,779
Loans.......................................... 25,947 23,103 22,692 25,661 27,706
Deposits....................................... 31,666 28,186 29,740 32,091 32,543
Long-term debt................................. 2,271 2,065 1,705 1,725 1,428
Common stockholders' equity.................... 3,922 3,503 2,732 2,401 2,393
Stockholders' equity........................... 4,533 4,264 3,401 2,970 2,812
- -------------------------------------------------------------------------------------------------------------------------------
Average Balances
Assets......................................... $64,138 $56,854 $54,768 $52,655 $53,097
Earning assets................................. 52,627 48,517 46,706 44,512 45,502
Loans.......................................... 23,293 21,997 24,347 27,281 30,609
Deposits....................................... 29,430 29,677 31,694 32,819 34,213
Common stockholders' equity.................... 3,757 3,092 2,733 2,431 2,343
Stockholders' equity........................... 4,443 3,886 3,314 2,938 2,762
- -------------------------------------------------------------------------------------------------------------------------------
Financial Ratios
Return on stockholders' equity................. 15.5% 20.7% 2.8% 4.0% 9.0%
Return on common stockholders' equity.......... 17.0 24.2 1.8 3.2 9.4
Return on assets............................... 1.08 1.42 0.17 0.22 0.47
- -------------------------------------------------------------------------------------------------------------------------------
Capital Ratios (2)
Common-equity-to-assets........................ 6.6% 7.2% 5.9% 5.1% 4.8%
Regulatory leverage ratio...................... 7.5 8.0 6.6 5.8 5.0
Risk-based capital
Tier 1 ratio................................. 8.8 8.8 6.7 5.5 4.9
Total capital ratio.......................... 13.4 13.6 10.8 9.4 8.3
Tier 1 capital............................... $4,325 $4,098 $3,223 $2,804 $2,642
Total capital................................ 6,566 6,292 5,221 4,762 4,441
- -------------------------------------------------------------------------------------------------------------------------------
Common Share and Stockholder Data
Market price, end of year...................... $47-3/4 $43-1/4 $36-3/4 $24-5/8 $16-1/2
Book value, end of year........................ 43.65 40.55 33.19 34.90 36.27
Common dividends............................... 172.7 109.6 89.3 135.5 131.8
Preferred dividends (3)........................ 52.2 57.0 44.6 38.2 29.8
Dividend payout ratio.......................... 27.7% 14.8% 187.5% 174.0% 59.7%
Number of common stockholders of record........ 14,773 15,034 15,995 13,089 12,445
Average common and common-equivalent shares.... 90,529,136 85,173,941 76,496,506 67,666,850 65,525,045
</TABLE>
- ------------------------------------------------------------------------------
(1) Excludes provisions for other real estate.
(2) Net of investment in First Chicago Capital Markets, Inc.
(3) 1994 includes a $4.5 million premium related to the redemption of Preferred
Stock, Series D.
First Chicago Corporation 18 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
BUSINESS SEGMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Corporate Other First Chicago
Banking Banking Activities (1) Corporation
(Dollars in millions, ---------------- ---------------- ---------------- ----------------
except where noted) 1994 1993 1994 1993 1994 1993 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income....................... $ 331 $ 258 $ 208 $ 291 $151 $255 $ 690 $ 804
Return on equity................. 36% 35% 9% 15% N/M N/M 17% 24%
Average assets (presecuritized)
(in billions).................. $16.0 $14.4 $52.3 $45.5 $1.4 $1.8 $69.7 $61.7
Average common equity
(in billions).................. 0.9 0.7 2.1 1.7 0.8 0.7 3.8 3.1
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes results from the accelerated asset disposition portfolio, the
venture capital group and other special corporate items. See Note 4, on page
47, for further details.
N/M--Not meaningful.
Financial results are aligned by customer segment--
Consumer and Corporate--and by major businesses within
these categories. The results are derived from the internal
profitability reporting system and reflect full allocation
of all institutional and overhead items. This system uses
a detailed funds transfer methodology and a common
equity allocation based on risk elements. Consumer Bank-
ing results are presented before the securitization of credit
card receivables (``presecuritized'') to facilitate analysis
of trends. See the discussions of net interest income on
page 22 and a reconciliation of reported to presecuritized
results on page 66.
- ----------------------------------------------------
PIE CHART:
1994 Earnings Mix
($ In millions) %
Credit Card $309 44.8%
Community Banking 22 3.2
Corporate & Institutional 134 19.4
Middle Market 74 10.7
Venture Capital 95 13.8
Other 56 8.1
Total $690 100.0
- ----------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CONSUMER BANKING*
- -----------------------------------------------------------------------------------------------------------------------------------
Credit Card Community Banking
(Dollars in millions, --------------------------------- --------------------------------
except where noted) 1994 1993 1992 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income--tax-equivalent basis... $ 905 $783 $593 $363 $322 $314
Combined credit provisions.................. 454 405 349 31 26 25
Noninterest income.......................... 519 432 343 188 198 184
Noninterest expense (1)..................... 477 396 330 486 473 425
Net income.................................. $ 309 $248 $153 $ 22 $ 10 $ 29
Return on equity............................ 58% 60% 47% 5% 2% 10%
Efficiency ratio (2)........................ 33% 33% 35% 88% 91% 85%
Average assets (in billions)................ $10.5 $9.0 $7.4 $5.5 $5.4 $5.0
Average loans (in billions)................. 10.4 8.5 7.1 4.6 4.1 3.7
Average common equity (in billions)......... 0.5 0.4 0.3 0.4 0.3 0.2
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Contribution from $0.8 billion in Chicago credit card relationships is
split equally between Credit Card and Community Banking.
(1) Excludes provisions for other real estate.
(2) Noninterest expense as a percentage of total revenue.
CONSUMER BANKING
First Chicago serves local consumers and small businesses
through more than 80 retail banking branches. Nationally,
it reaches consumers through First Card, which is one of
the largest issuers of bank credit cards in the U.S. In total,
Consumer Banking earned $331 million, nearly half of the
Corporation's net income, in 1994. Return on equity, driven
by the credit card business, was 36%.
Credit Card
The Corporation continued to invest aggressively in its
credit card business, and by almost any measure First Card
had its most successful year in 1994. Despite increasing
competitive pressures, net income rose 25% to $309 mil-
lion, and return on equity was an outstanding 58%.
First Chicago Corporation 19 Annual Report 1994
<PAGE>
- -------------------------------------------------------------
Average credit card loans, including securitized receiv-
ables, increased 21%. (For business segment reporting, half
of the Chicagoland credit card accounts and profits are
included in Community Banking results.) Consequently,
net interest income for the year was up 16% and noninter-
est income grew 20%.
Community Banking
In 1994, Community Banking earned $22 million, gener-
ating a return on equity of 5%. During the year, a restruc-
turing plan was announced for this business, which calls
for a profit improvement of $100 million by 1997. A sig-
nificant initiative is under way to reduce the expense base
in Community Banking. A special charge of $7 million was
recorded related to the reduction of 600 staff positions.
Results for 1994 reflect the addition at midyear of a por-
tion of the portfolio of Lake Shore Bancorp., Inc. Net inter-
est income for the year increased 13% due to wider spreads
and higher volumes.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
CORPORATE BANKING
- ------------------------------------------------------------------------------------------------------------------------
Corporate and Institutional Banking Middle Market Banking (ANC)
(Dollars in millions, ----------------------------------- -----------------------------
except where noted) 1994 1993 1992 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income--tax-equivalent basis...... $ 393 $ 416 $ 482 $257 $224 $213
Combined credit provisions..................... (36) 35 261 29 42 53
Noninterest income............................. 511 825 556 82 81 72
Noninterest expense (1)........................ 716 771 721 191 192 184
Net income..................................... $ 134 $ 247 $ 38 $ 74 $ 44 $ 29
Return on equity............................... 7% 15% 1% 19% 13% 9%
Efficiency ratio (2)........................... 79% 62% 69% 57% 63% 65%
Average assets (in billions)................... $46.5 $40.0 $39.2 $5.8 $5.5 $5.5
Average loans (in billions).................... 9.5 10.2 13.6 4.3 3.8 3.7
Average common equity (in billions)............ 1.7 1.4 1.4 0.4 0.3 0.3
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes provisions for other real estate.
(2) Noninterest expense as a percentage of total revenue.
CORPORATE BANKING
The Corporation is the leading provider of banking serv-
ices to large corporations, governments, institutions and
investors in Chicago and the Midwest. It is also among the
top U.S. banking companies serving national and interna-
tional customers. The large corporate banking business is
conducted in Corporate and Institutional Banking.
The Corporation ranks first with Chicagoland's middle
market businesses, which are primarily served by its Amer-
ican National Corporation subsidiary.
For 1994, Corporate Banking businesses contributed
$208 million, or about 30% of total corporate earnings.
Return on equity was 9%.
Corporate and Institutional Banking
Profitability in Corporate and Institutional Banking was
down substantially from 1993, principally as a result of the
weakness in financial markets. Net income was $134 mil-
lion, and return on equity was 7% for the year. Total rev-
enues, which include net interest income and noninterest
income, declined to $0.9 billion from $1.2 billion in 1993.
- -----------------------------------------------------------------
Total Revenue (In millions) 1994 1993 1992
- -----------------------------------------------------------------
Trading....................... $130 $ 387 $ 332
Servicing..................... 377 370 316
Lending....................... 186 213 186
Financing..................... 152 208 117
Other......................... 59 63 87
---- ------ ------
Total....................... $904 $1,241 $1,038
==== ====== ======
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Trading Revenue (In millions) 1994 1993 1992
- -----------------------------------------------------------------
Foreign exchange and derivatives.... $ 40 $ 98 $103
Fixed income and derivatives........ 66 114 94
Emerging markets.................... (49) 57 21
Funding and arbitrage............... 39 63 74
Other trading....................... 34 55 40
---- ---- ----
Total............................. $130 $387 $332
==== ==== ====
- -----------------------------------------------------------------
Revenue related to trading activities was $130 million,
down from a record $387 million in 1993. Most of the
shortfall came in the emerging markets segment and in
the foreign exchange and derivatives category.
Net interest income, and lending revenue in particular,
continued to decline due to careful management of the
loan portfolio. Average loans dropped to $9.5 billion from
$10.2 billion in 1993. The year's results included $17 mil-
lion of cash interest collections related to Brazilian debt,
compared with $28 million in 1993.
The largest revenue source in Corporate and Institutional
Banking in 1994 was the broad category of servicing.
Although total servicing revenue was up only slightly
from 1993, revenue from cash management operations
increased while securities services fees were essentially
flat. Financing revenues decreased primarily because of
reduced equity securities gains related to the corporate
financing business; these revenues were exceptionally
high in 1993.
First Chicago Corporation 20 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
Credit quality in the large corporate business was excellent
in 1994 as reflected in the negative provision for credit
losses. This is a benefit of the successful accelerated asset
disposition program initiated in 1992.
Noninterest expense declined 7% to $716 million in 1994.
Much of the decrease was due to lower incentive compen-
sation payments.
Middle Market Banking (American National Corporation)
American National Corporation turned in a record per-
formance in 1994, reflecting its leading share of Chicago-
land's middle market business banking. The addition of
Lake Shore Bancorp., Inc.'s middle market portfolio in
July further strengthened American National's market
leadership position. American National's contribution to
total corporate earnings was $74 million in 1994, and
return on equity was a strong 19%.
Net interest income increased 15% and average loans grew
13% from 1993. Credit quality continued to improve as
provision expense dropped to $29 million from $42 mil-
lion in 1993. American National's disciplined expense
management also contributed to its excellent 1994 per-
formance.
OTHER ACTIVITIES
The venture capital portfolio contributed gains of
$189 million in 1994, compared with $381 million in
1993. Net income was $95 million and return on equity
26% in 1994.
Net gains from the management of assets held in the accel-
erated disposition portfolio totaled $46 million for the
year. A gain of $35 million from the sale of an interest in
an investment management business is also included in
noninterest income.
Key expense components included a charge of $25 million
related to the depreciation of personal computer equip-
ment, and other corporate expenses of $19 million.
STAFFING LEVELS
Staff levels for each business segment as well as corporate
support functions were as follows.
- ---------------------------------------------------------------
Average Full-Time-
Equivalent Staff 1994 1993 1992
- ---------------------------------------------------------------
Corporate and Institutional....... 6,349 6,280 6,178
Community Banking................. 4,558 4,640 4,592
Credit Card....................... 2,874 2,664 2,436
Middle Market..................... 2,108 2,032 2,090
Corporate Support................. 1,522 1,502 1,530
------ ------ ------
First Chicago Corporation....... 17,411 17,118 16,826
====== ====== ======
- ---------------------------------------------------------------
EARNINGS ANALYSIS
Summary
Net income for 1994 was $689.7 million, or $6.88 per com-
mon share, versus $804.5 million, or $8.43 per share, in
1993 and $93.5 million, or 64 cents per share, in 1992.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(In millions, except
per share data) 1994 1993 1992 1991 1990
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income
Income (loss) before cumu-
lative effect of changes in
accounting principles......... $689.7 $804.5 $(114.5) $116.3 $249.3
Cumulative effect of
changes in accounting
principles.................... -- -- 208.0 -- --
Net income...................... $689.7 $804.5 $ 93.5 $116.3 $249.3
Fully diluted earnings
per share
Income (loss) before cumu-
lative effect of changes in
accounting principles......... $6.88 $8.43 $(2.08) $1.15 $3.32
Cumulative effect of
changes in accounting
principles.................... -- -- 2.72 -- --
Net income...................... $6.88 $8.43 $ 0.64 $1.15 $3.32
- --------------------------------------------------------------------------------------
</TABLE>
The Corporation's 1994 results continued to reflect excel-
lent performance in its core businesses. Highlights of the
year were:
. The credit card business posted record earnings of
$309 million. Average credit card receivables increased
21% and overall managed receivables topped $12 billion
at year-end 1994.
. American National Corporation, which serves the
Corporation's middle market customers, posted record
results, principally through both loan growth and im-
proved credit quality.
. Credit quality continued to improve. Combined credit
provisions were $226 million, down 18% from 1993.
Nonperforming assets declined to $158 million at year-
end, resulting in a nonperforming asset ratio of 0.6%
and a reserve coverage ratio of 556%.
. Noninterest expense was well managed. Overall expense
growth in 1994 was limited to 3%.
. The Corporation expanded both its retail and middle
market businesses through its merger with Lake Shore
Bancorp., Inc. in July 1994.
. The venture capital portfolio produced excellent
results, with net income of $95 million and a 26% return
on equity.
. The Corporation remains in a healthy capital position
and has enhanced stockholder returns by increasing the
annual dividend to $2.20 per common share, an 83%
increase since 1993.
Return on common equity was 17.0% for 1994, compared
with 24.2% for 1993 and 1.8% for 1992. Return on assets
was 1.08% for 1994 and 1.42% for 1993.
The Corporation's regulatory capital ratios continued to
exceed the well-capitalized guidelines. At December 31,
1994, the risk-based capital ratio was 13.4%, while the reg-
ulatory leverage ratio was 7.5%. These ratios were 13.6%
and 8%, respectively, at December 31, 1993.
First Chicago Corporation 21 Annual Report 1994
<PAGE>
- ------------------------------------------------------------------------------
Net Interest Income
Net interest income includes fundamental spreads on
earning assets, as well as such items as loan fees, cash inter-
est collections on problem loans, dividend income, inter-
est reversals, and income or expense on interest rate
derivatives used to manage interest rate risk.
Net interest margin measures the efficiency of the use of
the Corporation's earning assets and its underlying capital.
In order to analyze fundamental trends in net interest
margin, it is useful to adjust for: 1) securitization of credit
card receivables and 2) the activities of First Chicago
Capital Markets, Inc. (FCCM).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
(In millions) 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reported:
Net interest income--
tax-equivalent basis....... $1,355 $1,264 $1,217 $1,118 $1,242
Average earning
assets..................... $52,627 $48,517 $46,706 $44,512 $45,502
Adjusted:
Net interest income--
tax-equivalent basis....... $1,891 $1,724 $1,554 $1,401 $1,421
Average earning
assets..................... $48,998 $46,610 $44,994 $44,857 $45,607
- -------------------------------------------------------------------------------------------
</TABLE>
When credit card receivables are sold in securitization
transactions, the Corporation's earnings are unchanged.
However, the net interest income related to these high-
yield assets is displaced by increased servicing fees, net
of related credit losses. The average levels of securitized
receivables were $5.5 billion in 1994, $4.8 billion in 1993
and $3.9 billion in 1992. Additional information on the
effect of securitization transactions on financial results is
presented on page 66.
FCCM is the Corporation's wholly owned subsidiary
engaged in permissible investment banking activities.
Because capital requirements for FCCM are risk-exposure
driven rather than based on asset levels, FCCM can gener-
ate substantial volumes of relatively riskless, thin-spread
earning assets that require little additional capital. The
Corporation's net interest margin trends can be better
analyzed if these earning assets and related margins are
excluded.
- --------------------------------------------------------
BAR CHART:
Net Interest Margin
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
Reported 2.73% 2.51% 2.61% 2.61% 2.58%
Adjusted 3.12% 3.12% 3.45% 3.70% 3.86%
- --------------------------------------------------------
Cash interest collections related to Brazilian debt added
3 basis points to adjusted net interest margin in 1994.
For 1993, the adjusted net interest margin included 9 basis
points from Brazilian cash interest collections and the
effect of revaluing the leveraged lease portfolio because
of a change in federal income tax rates. Excluding these
special items, the adjusted net interest margin in 1994
increased 22 basis points from 1993 levels.
Improved margins over the last three years resulted from
a more profitable earning asset mix, reflecting asset growth
from the credit card, retail and middle market businesses.
In 1994, this margin improvement was achieved despite a
significant increase in short-term interest rates because of
the Corporation's practice of limiting its structural interest
rate risk through asset and liability management practices.
A breakdown of average loans adjusted for credit card
securitizations is presented in the following chart.
- ------------------------------------------------------------------
BAR CHART:
Average Loans
$ in billions 1990 1991 1992 1993 1994
Corp. & Institutional 18.2 16.5 13.6 10.2 9.5
Credit Card 6.1 6.4 7.1 8.5 10.4
Community Banking 4.0 3.7 3.7 4.1 4.6
Middle Market 4.2 3.9 3.7 3.8 4.3
Yearly Totals 32.5 30.5 28.1 26.6 28.8
Rounded To 33.0 31.0 28.0 27.0 29.0
- ------------------------------------------------------------------
The cost of carrying nonperforming assets declined as
average nonperforming assets (including those held for
accelerated disposition) decreased to $0.3 billion in 1994
from $0.6 billion in 1993 and $1.2 billion in 1992.
Provision for Credit Losses
Details of the Corporation's 1994 credit risk management
strategy and performance, including the provision for
credit losses and provision for loans held for accelerated
disposition, are presented in the Credit Risk Management
section, beginning on page 31.
First Chicago Corporation 22 Annual Report 1994
<PAGE>
- ------------------------------------------------------------------------------
Noninterest Income
Noninterest income was $1.875 billion in 1994, down from
the record $2.202 billion in 1993 and compared with
$1.488 billion in 1992.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
(In millions) 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Combined trading
profits................. $ 65.7 $ 284.6 $ 177.3 $ 185.8 $ 163.4
Equity securities
gains................... 228.6 480.2 204.6 63.0 105.2
Investment securities
gains (losses).......... 1.2 0.3 8.6 (3.3) 7.5
-------- -------- -------- -------- --------
Market-driven
revenue................. 295.5 765.1 390.5 245.5 276.1
Credit card fee
revenue................. 832.1 694.2 516.1 411.8 354.5
Service charges and
commissions............. 421.9 432.5 381.0 348.7 307.4
Fiduciary and invest-
ment manage-
ment fees............... 199.2 200.7 189.8 174.8 168.3
Accelerated dispo-
sition portfolio
gains................... 45.9 60.0 -- -- --
Gain on sale of
investment advi-
sory business........... 34.5 -- -- 15.0 --
Gain on lease-
financing
residuals............... 7.4 18.1 3.0 14.7 1.6
Other..................... 38.1 31.8 7.8 14.7 35.9
Gain on partial settle-
ment of pension
obligations............. -- -- -- -- 55.5
-------- -------- -------- -------- --------
Total............. $1,874.6 $2,202.4 $1,488.2 $1,225.2 $1,199.3
======== ======== ======== ======== ========
- ------------------------------------------------------------------------------------
</TABLE>
The significant reduction in market-driven revenue, prin-
cipally trading profits and equity securities gains, was the
cause of the decline in noninterest income in 1994.
Combined trading profits were $65.7 million, compared
with a record $284.6 million in 1993 and $177.3 million
in 1992. The following factors contributed to depressed
trading profits in 1994:
. reduced market liquidity and significant volatility, which
caused losses in emerging market trading activities;
. the sharp rise in short-term interest rates, which led to
reduced financial asset values and profit opportunities;
and
. well-publicized issues related to the use of derivative
financial instruments throughout the banking industry,
which resulted in reduced customer transaction activity.
Equity securities gains during 1994 were $228.6 million,
compared with a record $480.2 million in 1993 and
$204.6 million in 1992. Equity securities gains arise prin-
cipally from the Corporation's venture capital activities,
and to a lesser extent from corporate finance activities
and from the sale of securities received in troubled-debt
restructurings, as presented in the following schedule.
- -----------------------------------------------------------------
(In millions) 1994 1993 1992
- -----------------------------------------------------------------
Venture capital.................... $189.3 $380.7 $188.1
Corporate finance.................. 38.6 65.0 6.3
Debt restructuring................. 0.7 34.5 10.2
------ ------ ------
Total equity securities gains...... $228.6 $480.2 $204.6
====== ====== ======
- -----------------------------------------------------------------
The venture capital and corporate finance gains include
changes in the fair value of investments. Details of the
venture capital activities are presented on page 30.
Fee-based revenue from credit card, fiduciary and invest-
ment management, and other product areas totaled
$1.45 billion in 1994, compared with $1.33 billion in 1993
and $1.09 billion in 1992.
Credit card fee revenue, adjusted for the effects of credit
card securitizations, grew 17% in 1994 to $535.5 million
and 26% in 1993 to $457.1 million. Revenue growth in both
periods resulted from increased transaction volume, due
in part to a growing cardholder base. The total number
of accounts at year-end 1994 was 12.2 million, compared
with 10.3 million in 1993 and 8.9 million in 1992.
Fiduciary and investment management fees were
$199.2 million in 1994, compared with $200.7 million
in 1993 and $189.8 million in 1992. First Chicago Trust
Company of New York, a leading provider of corporate
shareholder services, generated $80.6 million of these
revenues in 1994, compared with $81.4 million in 1993
and $72 million in 1992. Revenue growth in this business
was dampened somewhat by industry consolidation and
price competition.
Service charges and commissions in 1994 were $421.9 mil-
lion, compared with $432.5 million in 1993 and $381 mil-
lion in 1992. During 1994, the growth in retail deposit fees
was more than offset by a decline in deficient balance fees
and fees from corporate lending and syndication activities.
Net gains from the active management of assets held in
the accelerated disposition portfolio totaled $45.9 million
in 1994, compared with $60 million in 1993. Details of
the asset disposition portfolio activities are presented on
page 31 in the Credit Risk Management section.
Other noninterest income in 1994 included a $34.5 mil-
lion gain related to the sale of the Corporation's remaining
interest in Brinson Holdings, Inc. to Brinson's management.
First Chicago Corporation 23 Annual Report 1994
<PAGE>
- ------------------------------------------------------------------------------
Noninterest Expense
Operating expense in 1994 was $1.917 billion, compared
with $1.854 billion in 1993 and $1.764 billion in 1992.
Expense growth in 1994 was limited to 3%, representing
higher staff costs, increased equipment costs and invest-
ments in selected businesses.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries and em-
ployee benefits......... $ 868.9 $ 853.9 $ 748.0 $ 722.8 $ 688.8
Occupancy expense
of premises, net........ 137.3 147.7 186.0 152.8 138.9
Equipment rentals,
depreciation, and
maintenance............. 157.4 110.3 111.2 107.5 101.5
Amortization of
intangible assets....... 67.1 87.4 76.1 69.5 68.3
Deposit insurance
expense................. 43.1 52.9 49.9 44.0 23.2
Other..................... 643.1 601.7 593.2 433.4 526.7
-------- -------- -------- -------- --------
Operating
expense............. 1,916.9 1,853.9 1,764.4 1,530.0 1,547.4
Provision for other
real estate held
for accelerated
disposition............. -- -- 134.0 -- --
Provision for other
real estate............. 1.7 4.2 56.9 104.3 24.8
Restructuring
provision............... -- -- -- 67.0 18.5
-------- -------- -------- -------- --------
Total............. $1,918.6 $1,858.1 $1,955.3 $1,701.3 $1,590.7
======== ======== ======== ======== ========
Average Full-Time-
Equivalent Staff........ 17,411 17,118 16,826 17,018 17,153
====== ====== ====== ====== ======
- ----------------------------------------------------------------------------------------
</TABLE>
Employee expense increased in both 1994 and 1993 as a
result of higher staffing levels in specific business units as
well as increased pension and medical costs. This was par-
tially offset in 1994 by lower performance-based incentive
expense accruals related primarily to lower trading profits.
Occupancy expense declined by 7% in 1994 to $137.3 mil-
lion. Occupancy expense in 1993 included the incremental
costs associated with both the relocation of the Corpora-
tion's shareholder services business and a reduction in
other occupancy needs. Relocation and space reduction
costs of $29.1 million were included in occupancy expense
in 1992. Excluding these charges, occupancy expense was
6% lower in 1993 than in 1992.
Equipment expense in 1994 increased 43% to $157.4 mil-
lion, reflecting the expensing of personal computer equip-
ment; previously, purchases of such equipment were cap-
italized and depreciated. A special charge of $24.5 million
was taken in 1994 to reflect the reduction in the estimated
useful life of existing personal computer equipment.
Intangible amortization expense decreased $20.3 million
in 1994 as core deposit intangibles related to certain acqui-
sitions became fully amortized. 1993 results included a
$12.4 million charge for the accelerated amortization of
certain acquired intangibles.
Excluding special corporate expense items, other operat-
ing expense increased 6.2% in 1994 and 9.6% in 1993. The
expense growth in both periods reflects increased bank-
card solicitation and volume-related costs as well as costs
associated with the continued integration and reengineer-
ing of the Corporation's Consumer and Corporate Banking
businesses.
Special corporate expenses totaled $19 million in 1994,
$13.8 million in 1993 and $57 million in 1992, primarily
representing costs associated with litigation and other cor-
porate activities.
Applicable Income Taxes
The following table shows the Corporation's income before
income taxes, applicable income taxes and effective tax
rate for each of the past five years.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income (loss) before
income taxes................ $1,063.0 $1,300.1 $(200.1) $163.9 $312.2
Applicable income
taxes (benefit)............. 373.3 495.6 (85.6) 47.6 62.9
Effective tax rate............ 35.1% 38.1% 42.8% 29.0% 20.1%
- -------------------------------------------------------------------------------------
</TABLE>
The decrease in the effective tax rate for 1994 compared
with 1993 reflects a one-time tax benefit related to the
implementation of the final Internal Revenue Service bad
debt recapture regulations as well as the effect of favor-
able tax rulings, which occurred in 1994, and the effect of
an accelerated intangible charge in 1993.
Income tax expense for 1990 was reduced by tax benefits
related to the 1987 book net-operating loss and tax credit
carryforwards, which totaled $28.2 million. Excluding
these benefits, the effective tax rate in 1990 was 29.2%.
Also contributing to the difference in effective tax rates
between 1992 and both 1991 and 1990 is the relationship
between tax-exempt income and the level of income (loss)
before income taxes.
First Chicago Corporation 24 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
RISK MANAGEMENT
The Corporation's various business activities generate
liquidity, market and credit risks:
o Liquidity risk is the possibility of being unable to meet
all present and future financial obligations in a timely
manner.
o Market risk is the possibility that changes in future mar-
ket rates or prices will make the Corporation's positions
less valuable.
o Credit risk is the possibility that a loss might occur from
the failure of a customer to perform according to the
terms of a transaction.
The Corporation is compensated by customers for assum-
ing these risks; this compensation is reflected in interest
income, trading profits and fee income. In addition, the
Corporation considers these risks in allocating capital to
support its various business activities, as discussed in the
Capital Management section, on page 37.
The Corporation is a party to a broad range of financial
instruments that create risks that may or may not be
reflected in a traditional balance sheet. The Corporation's
risk management policies monitor and limit exposure to
liquidity, market and credit risks that arise from all these
financial instruments, which can be subdivided into three
categories:
o Cash financial instruments, generally characterized as
on-balance-sheet transactions, include such instruments
as loans, bonds, stocks and deposits.
o Credit-related financial instruments include such instru-
ments as commitments to extend credit and standby
letters of credit.
o Derivative financial instruments include such instru-
ments as interest rate, foreign exchange, commodity
price and equity price contracts, including forwards,
swaps and options.
Credit-related and derivative financial instruments are
generally characterized as off-balance-sheet transactions;
however, the carrying values of derivative financial instru-
ments are reflected in the Corporation's balance sheet.
LIQUIDITY RISK MANAGEMENT
Liquidity is used to satisfy customer needs and provide a
cushion for unforeseen events. In order to meet these obli-
gations, the Corporation has fashioned liquidity manage-
ment policies and guidelines, which are designed to cover
balance sheet assets and liabilities as well as off-balance-
sheet items that are potential sources and uses of liquidity.
The policy objectives are to:
o maintain adequate liquid assets;
o maintain liability diversification among markets, instru-
ments, maturities and customers;
o maintain a continuously strong market presence and
customer funding base;
o minimize total funds-gathering expense; and
o improve credit ratings.
The Corporation views strong capital ratios, high credit
quality and solid core earnings as essential to retaining
high credit ratings and, thereby, cost-effective access to
market liquidity. In addition to these policies, a contin-
gency funding plan has been established that identifies
actions to be taken in response to a liquidity event.
The Corporation's Statement of Cash Flows, on page 43,
presents data on cash and cash equivalents provided and
used by the Corporation in its operating, investing and
financing activities.
Asset Liquidity
The Corporation considers liquid assets to be an effective
and important vehicle for managing and providing overall
liquidity. Liquid assets are defined as federal funds sold
and interest-bearing deposit placements with other banks.
In 1994, as part of its overall liquidity management, the
Corporation set a minimum guideline of liquid assets to
total assets at 12% for The First National Bank of Chicago
(FNBC) and FCC National Bank (FCCNB) combined.
During 1994, as well as in 1993, these combined entities
maintained an average liquid asset ratio of 20%. While
there is a cost to providing higher liquidity by maintain-
ing lower-spread assets, this emphasis on liquidity allows
the Corporation to pursue such market opportunities as
offering unfunded commitments to customers, and the
Corporation believes that the capital necessary to support
these activities is minimal.
The investment securities portfolio includes U.S. govern-
ment, municipal and other debt securities, and equity
investments. The non-equity portion of the investment
portfolio is primarily used to meet collateral requirements
for certain customer deposits. The equity securities pri-
marily represent the Corporation's venture capital invest-
ments. These investments ultimately provide an additional
source of liquidity, but generally are not readily saleable
due to the form or size of the Corporation's equity interest
in the underlying entity. Also, the portfolio is not com-
monly used to manage structural interest rate risk but is
included in the Corporation's overall interest rate sensi-
tivity position. Note 5, on page 49, provides a detailed
breakdown of the investment portfolio.
As part of the Corporation's normal liquidity management
process, assets are securitized and sold. Securitization of
credit card receivables is an important funding vehicle that
enables the Corporation to diversify its funding sources
and to access large amounts of term funding in a cost-
effective manner. During 1994, $2 billion of credit card
receivables was securitized, bringing the total amount of
securitized credit card receivables to $6.1 billion at year-
end 1994.
Liability Liquidity
The Corporation, through FNBC, FCCNB and American
National Bank and Trust Company of Chicago (ANB),
maintains direct access to the local retail market as a source
of funds and uses a network of brokers for gathering retail
certificates of deposits on a national basis. The Corpora-
tion depends less on wholesale funding as the growth of
its retail deposits continues. However, the wholesale mar-
ket continues to be an important source of liquidity where
customer relationships are important to retaining a diver-
sified funding base. Consequently, it is the Corporation's
policy to maintain direct relationships with its large insti-
tutional funding customers. This approach has proved
successful in creating reliable sources of funds as the
Corporation maintains its active participation in global
capital markets.
First Chicago Corporation 25 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
The Corporation benefits from its diversified institutional
customer base in which concentrations among funding
sources are closely monitored. Commercial paper, cus-
tomer deposits, bank notes, bank investment contracts,
medium-term notes and long-term debt also provide fund-
ing for the Corporation and its subsidiaries. Access to
a variety of funding markets and customers is vital both
to liquidity management and to cost minimization.
The Corporation believes it has prudent policies to ensure
adequate liquidity to fund anticipated needs based on its
assessment of asset liquidity, core deposit levels, wholesale
funding sources, and contractual asset and liability matu-
rities. The following table shows the Corporation's funding
source mix.
<TABLE>
<CAPTION>
Deposits and Other Purchased Funds
- ------------------------------------------------------------------------------------------------------------
December 31 (In millions) 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic offices
Demand............................................ $ 7,647 $ 8,184 $ 7,575 $ 6,200 $ 7,065
Savings........................................... 7,448 7,541 7,618 7,059 5,166
Time
Under $100,000.................................. 2,548 2,312 2,737 3,865 3,828
$100,000 and over............................... 2,601 2,613 3,525 5,666 6,074
Foreign offices
Banks in foreign countries........................ 4,836 2,463 2,693 2,599 2,372
Foreign governments and official institutions..... 1,469 750 926 983 784
Other time and savings............................ 4,847 4,126 4,493 5,439 7,022
Other demand...................................... 270 197 173 280 232
------- ------- ------- ------- -------
Total deposits.............................. 31,666 28,186 29,740 32,091 32,543
- ------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities under
repurchase agreements............................. 13,026 8,255 6,962 5,145 6,250
Commercial paper.................................... 147 164 172 226 237
Other funds borrowed................................ 7,518 5,843 3,997 2,712 2,770
Long-term debt...................................... 2,271 2,065 1,705 1,725 1,428
------- ------- ------- ------- -------
Total other purchased funds................. 22,962 16,327 12,836 9,808 10,685
------- ------- ------- ------- -------
Total....................................... $54,628 $44,513 $42,576 $41,899 $43,228
======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------
</TABLE>
MARKET RISK MANAGEMENT
Overview
Market risk arises from changes in interest rates, exchange
rates, commodity prices and equity prices. The Corpora-
tion maintains risk management policies that monitor and
limit exposure to market risk. Through its trading activi-
ties, it strives to take advantage of profit opportunities avail-
able in interest and exchange rate movements. In asset and
liability management activities, the Corporation attempts
to minimize structural interest rate and foreign exchange
rate risk. The measurement of market risk associated with
financial instruments is meaningful only when all related
and offsetting on- and off-balance-sheet transactions are
aggregated, and the resulting net positions are identified.
Disclosures about fair value of financial instruments, which
reflect changes in market prices and rates, can be found
in Note 17, beginning on page 61.
Trading Activities
The Corporation maintains active trading positions in a
variety of markets and instruments, including U.S. govern-
ment, municipal and money market securities. It also main-
tains positions in derivative products associated with these
markets and instruments, such as interest rate and cur-
rency swaps, and commodity and equity index options.
Most of the Corporation's trading activities are customer-
oriented, and trading positions are established as necessary
for customers. However, in order to anticipate customer
demand for such transactions, the Corporation also car-
ries an inventory in capital markets instruments, and main-
tains its access to market liquidity by making bid-offer
prices to other market makers. Although these two activi-
ties constitute its proprietary trading business, they are
essential in order to continue providing customers with
capital markets products at competitive prices.
Many trading positions are kept open for brief periods of
time, often less than one day. Other trading positions are
maintained for longer periods, and these positions are
valued at prevailing market rates on a present value basis.
Realized and unrealized gains and losses on these trading
positions are also included in noninterest income as com-
bined trading profits.
The Corporation has adopted policies designed to strictly
monitor trading positions at all times. The overall market
risk that any business unit can assume is approved by a
committee of the Board of Directors through a risk point
limit. Risk points represent the Corporation's estimate of
the amount of potential overnight loss in a capital markets
product. Products that have more inherent price volatility
incur more risk points. A business unit will use up more
of its risk point limit if it trades in the more volatile prod-
ucts. The risk point system, therefore, is the means by
which the Corporation manages its value at risk.
First Chicago Corporation 26 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
The Corporation monitors value at risk in each of its signif-
icant trading portfolios on a daily basis. The following
charts show average, maximum and minimum daily value
at risk for each quarter of 1994, and the actual trading
revenue for each quarter.
- ---------------------------------------------------------------
BAR CHART:
Daily Value at Risk -- 1994 (In Millions)
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
Average $55 $41 $44 $42
Maximum $66 $46 $53 $47
Minimum $42 $34 $36 $38
BAR CHART:
Trading Revenue -- 1994* (In Millions)
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
-------- -------- -------- --------
$2 $42 $56 $30
*Includes trading profits and net interest income
- ---------------------------------------------------------------
Value at risk is estimated using statistical models calibrated
at a three-standard-deviation confidence interval, which
means that the actual daily result should exceed the value
at risk one day out of each two hundred. The value at risk
shown represents portfolio aggregates and overstates the
Corporation's value at risk because it only partially con-
siders offsets and correlations across different trading port-
folios. The Corporation is continuing its progress toward
a fully consolidated view of market risk.
A committee of the Board of Directors also approves the
Corporation's overall policies governing market risk. More
specific market risk policies are approved by the Corpora-
tion's Market Risk Committee, which is composed of senior
capital markets managers.
In addition to managing market risk through the risk point
system, each business unit establishes dollar limits govern-
ing intra-day trading activity, and allocates them to the
dealers depending on their trading experience. These
dollar limits are reviewed and approved by the Market Risk
Committee. This committee also reviews and approves
statistical models used for measuring market risk, or for
pricing and hedging transactions; reviews audit and inter-
nal control issues arising from the Corporation's trading
operations; and approves the business plans for new capi-
tal markets activities.
Independent oversight of trading activities is provided by
the Market Risk Management Department. As part of this
oversight role, the department monitors the credit risk
associated with capital markets products.
The credit exposure for certain derivative financial instru-
ments fluctuates as market prices change. As a result, the
credit exposure for these instruments includes both the
current fair value of the instrument and an incremental
amount that represents the potential adverse movement
in its fair value over its remaining life. This incremental
amount of credit exposure is calculated using statistical
models that estimate the change over time in exchange
rates, interest rates and other market indices.
The resultant credit exposure is used to monitor total cus-
tomer credit exposure and manage credit risks associated
with capital markets products.
Structural Interest Rate Risk Management
The Corporation actively manages its asset and liability
positions with the goal of minimizing the impact on earn-
ings of interest rate market volatility. Conservative manage-
ment of its asset and liability positions has allowed the
Corporation to maintain a relatively consistent net inter-
est margin despite a sharp rise in short-term interest rates.
As a result of this neutral interest rate risk profile, it is
estimated that an immediate change in rates of 100 basis
points would affect annual pretax earnings by only
$12 million.
Net interest income can fluctuate with movements in the
interest rate market due to an imbalance in the repricing
or maturity of the Corporation's assets and liabilities.
Whenever possible, assets are matched with liabilities of
similar repricing characteristics. However, the loans and
deposits generated through the Corporation's ordinary
business activity do not naturally create offsetting positions
with respect to repricing or maturity. For assets having
indefinite maturities or repricing sensitivities, liability
pools based on such assets' estimated maturities and repric-
ing characteristics may be used to match the interest rate
risk. Finally, asset and liability positions that are not appro-
priately offset with either specific on-balance-sheet trans-
actions or with liability pools are offset through off-balance-
sheet derivatives positions (ALM derivatives).
Traditional gap analysis is one of a variety of measure-
ment tools used to monitor and control the Corporation's
interest rate risk position. Gap analysis measures the dif-
ference between the volume of assets and liabilities matur-
ing or repricing in a given future time period. Certain
assumptions are made for those assets or liabilities whose
expected prepayment or withdrawal behavior may not be
reflected by their maturity dates. In addition, credit card
securitizations, which subject credit card servicing fee rev-
enue to interest rate risk, are included in the gap analysis
measure. In addition to static gap analysis, the Corpora-
tion identifies the more dynamic interest rate risk expo-
sures of its businesses through duration of equity measures,
stress testing of earnings simulation, and income sensitiv-
ity measurement of specific key portfolios.
First Chicago Corporation 27 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
The following table shows the "managerial" interest rate
gap analysis as of December 31, 1994, used to identify the
Corporation's exposure from domestic asset and liability
positions. Interest rate risks in trading and overseas earn-
ing asset and liability positions are excluded from the gap
analysis and managed principally as trading risks. A posi-
tive cumulative one-year gap position indicates more assets
than liabilities are anticipated to reprice over the next
12-month period. Such a position implies that, assuming
no management action, the Corporation's net interest
income would be positively affected by rising interest rates
and negatively affected by falling rates.
Interest Rate Sensitivity
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
December 31, 1994 0-90 91-180 181-365 1-5 Beyond
(Dollars in millions) days days days years 5 years Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans.......................................... $21,569 $1,376 $ 390 $ 2,171 $ 4,977 $30,483
Investment securities.......................... 341 161 194 1,556 392 2,644
Other earning assets........................... 21,057 95 70 181 281 21,684
Nonearning assets.............................. 5,816 39 47 127 438 6,467
------- ------ ------- ------- ------- -------
Total domestic assets...................... $48,783 $1,671 $ 701 $ 4,035 $ 6,088 $61,278
======= ====== ======= ======= ======= =======
- -----------------------------------------------------------------------------------------------------------------
Deposits....................................... $14,045 $1,030 $ 1,792 $ 1,195 $ 4,125 $22,187
Other interest-bearing liabilities............. 25,225 439 161 3,733 1,604 31,162
Noninterest-bearing liabilities................ 2,386 15 16 390 620 3,427
Equity......................................... 311 -- -- 100 4,091 4,502
------- ------ ------- ------- ------- -------
Total domestic liabilities and equity...... $41,967 $1,484 $ 1,969 $ 5,418 $10,440 $61,278
======= ====== ======= ======= ======= =======
- -----------------------------------------------------------------------------------------------------------------
Balance sheet sensitivity gap.................. $ 6,816 $ 187 $(1,268) $(1,383) $(4,352) --
- -----------------------------------------------------------------------------------------------------------------
Cumulative gap as % of domestic assets......... 11.12% 11.43% 9.36% 7.10% -- --
- -----------------------------------------------------------------------------------------------------------------
Effect of off-balance-sheet ALM
derivative transactions:
Specific transactions...................... $(2,522) $ (653) $ 347 $ 1,632 $ 1,196 --
Specific asset or liability pools.......... (2,632) (54) 730 1,864 92 --
- -----------------------------------------------------------------------------------------------------------------
Interest rate sensitivity gap.................. $ 1,662 $ (520) $ (191) $ 2,113 $(3,064) --
- -----------------------------------------------------------------------------------------------------------------
Cumulative gap................................. $ 1,662 $ 1,142 $ 951 $ 3,064 -- --
- -----------------------------------------------------------------------------------------------------------------
Cumulative gap as % of domestic assets......... 2.71% 1.86% 1.55% 5.00% -- --
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
As of December 31, 1994, the Corporation's on-balance-
sheet assets and liabilities created a cumulative one-year
gap position of 9.36% of total domestic assets. Because it is
the Corporation's policy to remain structurally neutral to
interest rate changes, off-balance-sheet transactions, prin-
cipally interest rate swaps, have been used to adjust the
interest sensitivity of specific transactions as well as pools
of assets or liabilities. The net result of the ALM deriva-
tives is to reduce the cumulative one-year gap position
from 9.36% to 1.55% of total domestic assets. It is the Cor-
poration's policy to maintain the cumulative one-year gap
position, including ALM derivatives, to within 2% of total
domestic assets.
The stability of this interest rate risk position is evident in
the following charts. Between year-end 1991 and year-end
1994, the Corporation's cumulative one-year gap has con-
sistently been within 2% of total domestic assets. This has
allowed the Corporation to maintain a consistent adjusted
net interest margin (adjusted for credit card securitizations
and FCCM) of between 3.5% and 4.0% despite a rise in
short-term interest rates of approximately 275 basis points
since the first quarter of 1993.
- ---------------------------------------------------------------
BAR CHART:
Cumulative 1-Year Gap as % of Total Domestic Assets
12/91 12/92 12/93 3/94 6/94 9/94 12/94
----- ----- ----- ---- ---- ---- -----
0.68% -0.24% 1.42% 1.42% 0.13% 1.12% 1.55%
Policy Guideline = -2% to +2%
- ---------------------------------------------------------------
First Chicago Corporation 28 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
2-LINE GRAPH:
Adjusted Net Interest Margin vs. Short-Term Interest Rates
3/93 6/93 9/93 12/93 3/94 6/94 9/94 12/94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Adj. Net Int. Margin 3.610% 3.580% 3.980% 3.620% 3.930% 3.930% 3.850% 3.740%
1-Month LIBOR 3.125% 3.125% 3.125% 3.190% 3.630% 4.500% 5.000% 5.940%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Access to the derivatives market is an important element
in the Corporation's ability to maintain its gap position
within policy guidelines. As of year-end 1994, the Corpo-
ration had a total of $8.5 billion in ALM interest rate swaps,
including $4.6 billion of ALM interest rate swaps against
specific transactions and $3.9 billion against specific pools
of assets or liabilities. Swaps used to adjust the interest
rate sensitivity of specific transactions will not need to be
replaced as they mature since the corresponding asset or
liability will mature along with the swap. However, swaps
against the asset and liability pools will have an impact on
the Corporation's risk position as they mature and, assum-
ing no change to the underlying pool's characteristics, will
need to be reissued to maintain the same neutral interest
rate risk profile. These swaps could create modest sensi-
tivity of earnings to changes in interest rates. Growth in
the volume of stable retail liabilities and declines in the
volume of longer-term fixed rate assets over the last few
years have made it necessary to increase the use of swaps
associated with specific pools of assets or liabilities to bal-
ance the Corporation's repricing risk. The following table
summarizes the interest rate swaps used by the Corpora-
tion for asset and liability management purposes.
Asset and Liability Management Swaps
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
December 31, 1994 Receive Fixed Pay Fixed Basis
(Notional amounts in millions) Pay Floating Receive Floating Swaps Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Swaps associated with: Specific Pool Specific Pool Pool
-------- ---- -------- ---- ----
Loans........................... $ -- $ 561 $ 30 $223 $275 $1,089
Securitizations................. 1,725 -- -- -- -- 1,725
Deposits........................ 306 2,325 -- -- 175 2,806
Other funds borrowed............ 429 -- 916 -- 325 1,670
Long-term debt.................. 1,238 -- -- -- -- 1,238
------ ------ ---- ---- ---- ------
Total......................... $3,698 $2,886 $946 $223 $775 $8,528
====== ====== ==== ==== ==== ======
- ----------------------------------------------------------------------------------------------------------
</TABLE>
For most of its asset and liability management swaps, the
Corporation receives a fixed rate and pays a floating rate
of interest. Substantially all interest rate swaps used by the
Corporation for asset and liability management activity are
standard interest rate swap contracts. The table that fol-
lows summarizes the contractual maturities and weighted
average pay and receive rates for the asset and liability
management swap position at December 31, 1994. The vari-
able interest rates, which generally are the three-month
and six-month LIBOR rates in effect on the date of repric-
ing, have been assumed to remain constant. However, the
variable interest rates will change with changes in interest
rates and would affect the related weighted average infor-
mation presented in the following table.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
(Dollars in millions) 1995 1996 1997 1998 1999 Thereafter Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive fixed swaps
Notional amount......... $1,731 $1,858 $1,373 $229 $86 $1,307 $6,584
Weighted average:
Receive rate........ 5.57% 6.96% 6.29% 6.57% 8.69% 7.21% 6.51%
Pay rate............ 6.14% 6.18% 6.34% 6.55% 7.32% 6.50% 6.29%
Pay fixed swaps
Notional amount......... $1,118 $ 25 $ 7 -- -- $ 19 $1,169
Weighted average:
Receive rate........ 6.25% 5.91% 6.47% 6.15% 6.24%
Pay rate............ 9.26% 7.34% 5.18% 6.23% 9.14%
Basis swaps
Notional amount......... $ 775 -- -- -- -- -- $ 775
Weighted average:
Receive rate........ 5.68% 5.68%
Pay rate............ 5.78% 5.78%
- -------------------------------------------------------------------------------------------------------
Total notional amount....... $3,624 $1,883 $1,380 $229 $86 $1,326 $8,528
- -------------------------------------------------------------------------------------------------------
</TABLE>
First Chicago Corporation 29 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
Foreign Exchange Risk Management
Wherever possible, foreign currency-denominated assets
are funded with liability instruments denominated in the
same currency. If a liability denominated in the same cur-
rency is not immediately available or desired, a forward
foreign exchange contract is used to fully hedge the for-
eign exchange risk due to cross-currency funding.
To minimize the earnings and capital impact of transla-
tion gains or losses measured on an after-tax basis, the
Corporation uses forward foreign exchange contracts to
hedge the exposure created by investments in overseas
branches and subsidiaries.
Venture Capital Activities
The Corporation's portfolio of venture capital investments
is composed of publicly traded equity securities held
directly, publicly traded equity securities held indirectly
(e.g., through limited partnerships), and investments in
private companies. Equity securities gains related to ven-
ture capital activities totaled $189.3 million in 1994,
$380.7 million in 1993 and $188.1 million in 1992. Net
income related to the venture capital portfolio in 1994
was $95 million, or $0.94 per share, compared with
$204 million, or $2.16 per share, in 1993.
While the Corporation intends to reduce its exposure to
equity risk in its existing venture capital portfolio, it will
continue to participate in this business primarily through
participation in a venture capital fund established by the
former management of the Corporation's venture capital
subsidiaries, through existing investment commitments
and through other corporate financing activities.
The Corporation uses fair value accounting for its venture
capital portfolio. Under this method, fair value of publicly
traded securities is determined by quoted market valua-
tions, adjusted for illiquidity due to the size or nature of
the Corporation's holdings. Privately held securities are
valued using traditional valuation techniques conser-
vatively applied.
Venture Capital Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Investments Investments
December 31, 1994 Held Held
(In millions) Directly Indirectly Total
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Publicly traded equity investments
Gross value....................... $448 $ 544 $ 992
Discount.......................... (15) (129) (144)
---- ----- ------
Fair value...................... $433 $ 415 848
==== =====
Investments in private companies.... 731
------
Total........................... $1,579
======
- --------------------------------------------------------------------------
</TABLE>
The Corporation has instituted a program intended to
reduce volatility relative to expected returns through the
use of equity derivatives, including options, and the sale of
investments. As an example, during the first quarter of
1994 the Corporation issued Debt Exchangeable for
Common Stock (DECS) related to 7.475 million shares of
its holdings in NEXTEL Communications, Inc. The DECS
transaction limits the Corporation's downside risk on this
investment to the $271 million DECS proceeds and, at the
same time, allows the Corporation to share in potential
market appreciation. At December 31, 1994, 68% of the
Corporation's $848 million in publicly traded investments
was hedged under this program. Management intends to
continue to use these and other techniques to hedge the
price risk inherent in this portfolio.
The following table provides fair value and sale informa-
tion on the portfolio during 1994.
Venture Capital Portfolio Activity
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Publicly
Traded Private
(In millions) Companies Companies Total
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Fair value, December 31, 1993....... $ 759 $698 $1,457
Additional investments.............. 92 124 216
Appreciation recorded as
equity securities gains........... 189 56 245
Sales proceeds (1).................. (189) (57) (246)
Other (2)........................... (3) (90) (93)
----- ---- ------
Fair value, December 31, 1994 (3)... $ 848 $731 $1,579
===== ==== ======
Unrealized appreciation at
December 31, 1994................. $ 554 $ 45 $ 599
===== ==== ======
- ------------------------------------------------------------------------
</TABLE>
(1) Net of transaction costs.
(2) Includes principal repayments, fund distribution and sales, and
certain reclassifications.
(3) Publicly traded amount includes net unrealized gains of $166 mil-
lion related to hedging instruments used to reduce the earnings
volatility of the venture capital portfolio.
In addition to the $1.6 billion of investments in the ven-
ture capital portfolio at December 31, 1994, there were
unfunded commitments of $145 million.
First Chicago Corporation 30 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
CREDIT RISK MANAGEMENT
Overview
The Corporation has developed policies and procedures
to manage the level and composition of risk in its credit
portfolio. The objective of this credit risk management
process is to reduce the risk of a loss resulting from a
customer's failure to perform according to the terms of
a transaction.
Customer transactions create credit exposure that is
reported both on and off the Corporation's balance sheet.
On-balance-sheet credit exposure includes such items as
loans and derivative financial instruments. Off-balance-
sheet credit exposure includes credit-related and deriv-
ative financial instruments.
Credit exposure is managed according to a clearly defined
process. The Credit Strategy Committee is responsible for
the strategic direction and management oversight of that
process, the elements of which include:
o identifying the types of customers that are consistent
with the Corporation's strategic business objectives;
o assessing the credit structure, return and potential risk
of loss for any extension of credit within market-driven
guidelines and prudent banking practice;
o monitoring the financial performance and compliance
with contractual obligations of credit customers in order
to identify deterioration on a timely basis;
o reviewing the credit portfolio to verify the risk assess-
ment of individual credits and to assess the risk profile
and composition of the portfolio; and
o verifying that policies and procedures have been fol-
lowed in the initial underwriting and ongoing monitor-
ing of the credit portfolio.
A major element of the credit risk management process
is portfolio diversification, which is achieved by limiting
credit concentrations in a number of ways. Concentrations
to individual customers or a related group of customers
are limited according to the degree of repayment risk. In
addition, concentrations are limited on a portfolio basis
by risk rating, credit product, industry and geography.
During 1994, the Corporation developed a commercial
credit risk measurement framework that incorporates sev-
eral dimensions of risk, including credit risk classification,
industry risk classification, term of the facility, funding
assumptions in the event of default, and severity of loss.
The Corporation believes this framework improves its
ability to allocate capital and set commercial portfolio
diversification limits.
Accelerated Asset Disposition Portfolio
During the third quarter of 1992, the Corporation segre-
gated approximately $2.0 billion of commercial real estate
exposure at The First National Bank of Chicago to be
managed under an accelerated disposition program. By
year-end 1994, the liquidation of this portfolio had been
virtually completed.
During 1994, assets having nearly $250 million in original
contractual exposure were sold or otherwise liquidated.
This resulted in a $75 million reduction in the portfolio's
carrying value and the recognition of net gains of $46 mil-
lion in noninterest income during 1994. The carrying value
of the remaining assets in the portfolio was $51 million at
year-end 1994, representing 22% of original contractual
exposure.
Remaining Credit Portfolio
The quality of the remaining credit portfolio, which
includes all credit exposure that was not transferred to
the accelerated asset disposition portfolio, continued to
improve in 1994. Nonperforming assets at year-end 1994
were $158 million, or 0.6% of total loans and other real
estate. This was the lowest absolute level of nonperforming
assets since 1976.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Five-Year Selected Statistical Information
- ---------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
At Year-End
Loans outstanding............................................ $25,947 $23,103 $22,692 $25,661 $27,706
Nonperforming loans.......................................... 130 234 391 843 854
Other real estate, net....................................... 28 43 23 457 529
Nonperforming assets......................................... 158 277 414 1,300 1,383
Allowance for credit losses (1).............................. 723 683 624 759 897
Nonperforming assets/loans outstanding and
other real estate, net..................................... 0.6% 1.2% 1.8% 5.0% 4.9%
Allowance for credit losses/loans outstanding (1)............ 2.8 3.0 2.8 3.0 3.2
Allowance for credit losses/nonperforming loans (1).......... 556 292 160 90 105
For the Year
Average loans outstanding.................................... $23,293 $21,997 $24,347 $27,281 $30,609
Net charge-offs (2).......................................... 151 182 373 550 781
Net charge-offs/average loans................................ 0.6% 0.8% 1.5% 2.0% 2.6%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The reserve related to securitized credit card receivables has been
reclassified to other assets for all periods presented.
(2) Excludes $636 million of charge-offs in 1992 recorded upon transfer to the
accelerated disposition portfolio.
First Chicago Corporation 31 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
Allowance for Credit Losses
Although the allowance for credit losses is available to
absorb potential losses inherent in the Corporation's total
credit portfolio, its composition reflects an internal alloca-
tion to the consumer and commercial segments.
The allowance for credit losses is tested by analyzing on-
balance-sheet credit exposure for such items as loans and
derivative financial instruments and off-balance-sheet
exposure for credit-related and derivative financial instru-
ments. The method used to test the adequacy of the allow-
ance has four elements. First, the consumer reserve is
established based on a statistical analysis of historical loss.
Second, specific reserves are allocated for commercial
credits that have identified loss potential. Third, a reserve
for potential losses not specifically identified, which are
inherent in the commercial credit portfolio, is computed
by assigning a specific reserve factor to each risk category
of the portfolio based on a statistical analysis of the
Corporation's history. Fourth, management's best judgment
is applied to determine any additional amount needed
for loss potential based largely on portfolio trends and
an assessment of the impact of the current economic
environment.
Allowance for Credit Losses
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
(Dollars in millions) 1994
- --------------------------------------------------------------------------
Commercial Consumer Total
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of period........ $488 $ 195 $ 683
Provision for credit losses......... 3 221 224
Net charge-offs..................... 9 (160) (151)
Other, transferred to other
assets, related to securitized
receivables....................... -- (49) (49)
Acquisitions and dispositions,
net............................... 16 -- 16
---- ----- -----
Balance, end of period.............. $516 $ 207 $ 723
==== ===== =====
Allowance/loans outstanding......... 3.2% 2.1% 2.8%
Allowance/nonperforming loans....... 397 -- 556
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
(Dollars in millions) 1993
- --------------------------------------------------------------------------
Commercial Consumer Total
- --------------------------------------------------------------------------
Balance, beginning of period........ $488 $ 136 $ 624
Provision for credit losses......... 78 192 270
Net charge-offs..................... (78) (104) (182)
Other, transferred to other
assets, related to securitized
receivables....................... -- (29) (29)
---- ----- -----
Balance, end of period.............. $488 $ 195 $ 683
==== ===== =====
Allowance/loans outstanding......... 3.4% 2.2% 3.0%
Allowance/nonperforming loans....... 209 -- 292
- --------------------------------------------------------------------------
</TABLE>
The allowance for credit losses is maintained at a level
considered adequate to provide for inherent losses in the
credit portfolio. The Corporation evaluates the adequacy
of the allowance each quarter and reports the findings to
a committee of the Board of Directors. After reviewing the
adequacy of the allowance, the committee approves the
provision for credit losses.
- -------------------------------------------------------------------------------
BAR CHART:
Allowance for Credit Losses as % of Nonperforming Loans*
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
105% 90% 160% 292% 556%
*At year-end
- -------------------------------------------------------------------------------
The Corporation's provision for credit losses decreased to
$224 million in 1994 from $270 million in 1993. A $29 mil-
lion increase in the consumer provision in 1994 was offset
by a $75 million reduction in the commercial provision.
The increase in the consumer provision was primarily the
result of growth in credit card receivables. The decline
in the commercial provision to only $3 million reflects
the Corporation's judgment as to the portfolio's improved
overall credit quality.
At year-end 1993, the Corporation reclassified its reserve
for securitized credit card receivables from the allowance
for credit losses to other assets. This reclassification was
made to conform to prevalent industry practice and had
no impact on reserves available for losses or on reported
earnings. The reserve totaled $255 million at December
31, 1994, compared with $196 million at year-end 1993.
Effective January 1, 1995, the Corporation adopted new
Financial Accounting Standards addressing "impaired
loans," which include loans where it is probable that all
principal and interest amounts due will not be collected
in accordance with contractual terms. The Corporation
does not expect the adoption of these standards to have
a material effect on its earnings or its allowance for
credit losses.
First Chicago Corporation 32 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
Nonperforming Assets
Nonperforming assets, which consist of nonperforming
loans and other real estate, decreased from $277 million
at December 31, 1993, to $158 million at December 31,
1994. Although quarterly fluctuations may occur, the
Corporation does not expect nonperforming assets to
increase significantly in 1995.
Nonperforming Assets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
December 31 (Dollars in millions) 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Commercial real estate.................... $ 68 $108 $ 93 $ 309 $ 274
Troubled-country debtor................... 1 50 76 150 210
Other..................................... 61 76 222 384 370
---- ---- ---- ------ ------
Total nonperforming loans............... 130 234 391 843 854
Other real estate, net
Owned assets.............................. 14 29 10 283 433
In-substance foreclosed assets............ 14 14 13 174 96
---- ---- ---- ------ ------
Total other real estate, net............ 28 43 23 457 529
---- ---- ---- ------ ------
Total nonperforming assets.............. $158 $277 $414 $1,300 $1,383
==== ==== ==== ====== ======
- -------------------------------------------------------------------------------------------
Nonperforming loans/loans outstanding....... 0.5% 1.0% 1.7% 3.3% 3.1%
Nonperforming assets/loans outstanding and
other real estate......................... 0.6 1.2 1.8 5.0 4.9
- -------------------------------------------------------------------------------------------
</TABLE>
Nonperforming Loans
Nonperforming loans include loans on which the Corpo-
ration does not accrue interest (nonaccrual loans) and
loans that bear a rate of interest that has been reduced
below market rates due to the deteriorating financial con-
dition of the borrower (accrual renegotiated loans).
Other Real Estate
Other real estate includes assets that either have been
acquired in satisfaction of debt or have been classified as
in-substance foreclosures. The Corporation had $28 mil-
lion of other real estate at year-end 1994, compared with
$43 million at year-end 1993. The provision for other real
estate was $2 million in 1994, compared with $4 million
in 1993.
Consumer Risk Management
Consumer loans consist of credit card receivables as well
as home mortgage loans, home equity loans and other
forms of installment credit. The consumer loan portfolio
increased $1.2 billion during the year to $9.9 billion at
year-end 1994. Including securitized credit card receiv-
ables, the consumer portfolio increased $2.4 billion, or
18%, to $16.0 billion at year-end 1994.
The consumer risk management process focuses on the
credit card segment separately from other parts of the
portfolio. For both the on-balance-sheet and the securi-
tized credit card portfolios, loss potential is tested using
statistically expected levels of losses based on the source,
age and other risk characteristics of each portfolio.
For the other segments of the consumer portfolio, reserve
factors are based on historical loss rates by loan type and
vintage that are adjusted to reflect changes in the credit
risk of new accounts and forecasted regional delinquency
levels and trends.
- ---------------------------------------------------------------
BAR CHART:
Nonperforming Assets as % of Loans and Other Real Estate*
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
4.9% 5.0% 1.8% 1.2% 0.6%
* At year-end
- ---------------------------------------------------------------
Total credit card receivables (held in the portfolio plus
sold to investors through securitization transactions) were
$12.5 billion at December 31, 1994, a 16% increase from
$10.7 billion at December 31, 1993. Average credit card
receivables rose to $10.9 billion in 1994, up 21% from 1993.
Net charge-offs in 1994 for the total owned and securitized
credit card portfolio were $394 million, or 3.6% of aver-
age receivables, compared with net charge-offs of $332 mil-
lion, or 3.7% of receivables, in 1993. In 1994, the increase
in net charge-offs primarily reflects continued portfolio
growth; the Corporation expects the net charge-off rate
in 1995 to be similar.
At year-end 1994, the allowance for credit losses related to
the consumer portfolio was $207 million, or 2.1% of loans.
Comparable figures for 1993 were $195 million, or 2.2%.
Net charge-offs were $160 million in 1994, compared with
$104 million in 1993.
First Chicago Corporation 33 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Consumer Loans
- ---------------------------------------------------------------------------------------------------------
December 31 (In millions) 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit card loans................................... $ 6,337 $ 5,778 $ 4,135 $3,843 $3,930
Securitized credit card receivables................. 6,117 4,958 4,500 3,573 3,130
------- ------- ------- ------ ------
Total managed credit card receivables........... 12,454 10,736 8,635 7,416 7,060
Other consumer loans................................ 3,580 2,896 2,737 2,482 2,494
------- ------- ------- ------ ------
Total....................................... $16,034 $13,632 $11,372 $9,898 $9,554
======= ======= ======= ====== ======
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Average Credit Card Receivables
- ---------------------------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit card loans outstanding....................... $ 5,320 $ 4,170 $ 3,537 $3,516 $4,497
Securitized credit card receivables................. 5,538 4,839 3,918 3,320 2,063
------- ------- ------- ------ ------
Total credit card receivables....................... $10,858 $ 9,009 $ 7,455 $6,836 $6,560
======= ======= ======= ====== ======
Total net charge-offs (including securitizations)... $ 394 $ 332 $ 316 $ 309 $ 245
======= ======= ======= ====== ======
Net charge-offs/average total receivables........... 3.6% 3.7% 4.2% 4.5% 3.7%
=== === === === ===
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Commercial Risk Management
Commercial credit quality continued to improve as recov-
eries exceeded charge-offs in 1994. This compares with
commercial net charge-offs totaling $78 million in 1993.
In addition, the provision for commercial credit losses
decreased to $3 million in 1994 from $78 million in 1993;
this represents 2 basis points of related loans, a significant
improvement from 54 basis points in 1993. The year-end
commercial reserve of $516 million represented 3.2% of
total commercial loans and 397% of related nonperform-
ing loans.
Commercial loans increased 11% from $14.4 billion at
December 31, 1993, to $16.0 billion at December 31, 1994.
The increase primarily reflects growth in the middle mar-
ket portfolio.
The commercial risk portfolio includes all domestic com-
mercial credit exposure and all foreign exposure. Credit
exposure includes the credit risks associated with both on-
and off-balance-sheet financial instruments. Credit risks
from off-balance-sheet instruments arise from credit-
related and derivative financial instruments. See Note 15,
on page 58, for information on the credit exposure associ-
ated with these off-balance-sheet instruments.
In the commercial portfolio, credit quality is rated accord-
ing to nine defined levels of credit risk. The lower five
categories of credit risk are equivalent to the four bank
regulatory classifications: Special Mention, Substandard,
Doubtful and Loss. These categories define levels of credit
deterioration where it may be increasingly difficult for the
Corporation to be fully repaid without restructuring the
credit. Credits that are Doubtful are likely to result in some
principal loss. Credits classified as Loss are charged off.
Each quarter, the Corporation conducts an asset-by-asset
review of significant lower-rated credit or country expo-
sure. Potential losses are identified during this review, and
reserves are established accordingly.
Commercial Real Estate
Commercial real estate consists primarily of loans secured
by real estate as well as certain loans that are real estate-
related. A loan is categorized as real estate-related when
80% or more of the borrower's revenues are derived from
real estate activities and the loan is not collateralized by
cash or marketable securities.
At December 31, 1994, commercial real estate loans totaled
$2.5 billion. During 1994, net charge-offs in the commer-
cial real estate portfolio segment were $19 million. Non-
performing commercial real estate assets, including other
real estate, totaled $96 million, or 3.7% of related assets, at
December 31, 1994.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Commercial Real Estate Assets
- -------------------------------------------------------------------------------------------------
December 31 (Dollars in millions) 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial real estate loans.............. $2,544 $2,474 $2,795 $4,403 $4,927
Nonperforming loans....................... 68 108 93 309 274
Other real estate, net.................... 28 43 23 457 529
Nonperforming assets...................... 96 151 116 766 803
Net loan charge-offs...................... 19 51 127 183 79
Nonperforming assets/loans outstanding
and other real estate, net.............. 3.7% 6.0% 4.1% 15.8% 14.7%
- -------------------------------------------------------------------------------------------------
</TABLE>
First Chicago Corporation 34 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation enters into a variety of derivative finan-
cial instruments in its trading, asset and liability manage-
ment, and venture capital activities. These instruments
include interest rate, currency, commodity and equity
swaps, forwards, futures, options, caps, floors, forward rate
agreements, and other conditional or exchange contracts,
and include both exchange-traded and over-the-counter
contracts. See Note 15, on page 58, for a discussion of the
nature and terms of derivative financial instruments.
Notional Principal or Contractual Amounts
of Derivative Financial Instruments
The following tables represent the gross notional princi-
pal or contractual amounts of outstanding derivative finan-
cial instruments used in the Corporation's trading, asset
and liability management, and venture capital activities.
They include swaps, forwards, futures, options, caps,
floors, forward rate agreements, and other conditional
or exchange contracts. These amounts do not represent
the market or credit risk associated with these instruments
but instead indicate the volume of the transactions. The
amounts greatly exceed the credit risk associated with these
instruments and do not reflect the netting of offsetting
transactions.
- ------------------------------------------------------------------------
Asset and
December 31, 1994 Liability Venture
(In billions) Trading Management Capital Total
- ------------------------------------------------------------------------
Foreign exchange
contracts.............. $291.7 $1.2 $ -- $292.9
Interest rate
contracts.............. 317.6 8.5 -- 326.1
Commodity contracts...... 0.1 -- -- 0.1
Equity contracts......... 2.7 -- 0.3 3.0
------ ---- ---- ------
Total................ $612.1 $9.7 $0.3 $622.1
====== ==== ==== ======
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Asset and
December 31, 1993 Liability Venture
(In billions) Trading Management Capital Total
- ------------------------------------------------------------------------
Foreign exchange
contracts.............. $219.4 $1.1 $ -- $220.5
Interest rate
contracts.............. 202.0 8.5 -- 210.5
Commodity contracts...... 0.2 -- -- 0.2
Equity contracts......... 0.1 -- 0.1 0.2
------ ---- ---- ------
Total................ $421.7 $9.6 $0.1 $431.4
====== ==== ==== ======
- ------------------------------------------------------------------------
Accounting for Derivative Financial Instruments
Derivative financial instruments used in trading and ven-
ture capital activities are valued at prevailing market rates
on a present value basis. Realized and unrealized gains
and losses are included in noninterest income as com-
bined trading profits and equity securities gains. Where
appropriate, compensation for credit risk and ongoing ser-
vicing is deferred and taken into income over the term of
the derivatives. Any gain or loss on the early termination
of an interest rate swap used in trading activities is recog-
nized currently in combined trading profits.
Income or expense on most derivative financial instru-
ments used to manage interest rate exposure is recorded
on an accrual basis as an adjustment to the yield of the
related interest rate exposures over the periods covered
by the contracts. If an interest rate swap that is used to
manage interest rate risk is terminated early, any resulting
gain or loss is deferred and amortized as an adjustment to
the yield of the underlying interest rate exposure position
over the remaining periods originally covered by the ter-
minated swap.
In general, purchased option, cap and floor contracts are
reported in derivative product assets, and written option,
cap and floor contracts are reported in derivative product
liabilities. For other derivative financial instruments, an
unrealized gain is reported in derivative product assets
and an unrealized loss is reported in derivative product
liabilities. Derivative financial instruments executed with
the same counterparty under a legally enforceable master
netting arrangement are reported on a net basis as deriva-
tive product assets or liabilities.
First Chicago Corporation 35 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
Income Resulting from Derivative Financial Instruments
A discussion of the Corporation's income from derivatives
used in trading and venture capital activities, is presented
on pages 20 and 30, respectively.
The Corporation uses interest rate derivative financial
instruments to reduce structural interest rate risk and the
volatility of net interest margin. The consistency of the
Corporation's net interest margin reflects the effective use
of these derivatives. Without their use, net interest income
would have been lower by $84 million in 1994, $169 mil-
lion in 1993 and $149 million in 1992.
The sale of fixed- and floating-rate credit card receivables
as securities to investors subjects the Corporation's servic-
ing revenue to interest rate risk. The Corporation uses
interest rate derivatives to reduce the volatility of the serv-
icing income on credit card securitizations. Without the
use of these instruments, credit card fee revenue would
have been reduced by $39 million in 1994, $67 million in
1993 and $57 million in 1992. The terms of these deriva-
tives match the terms of the credit card securitizations.
Deferred gains and losses on the early termination of inter-
est rate swaps used to manage interest rate risk total a net
deferred gain of $46 million as of December 31, 1994, and
a net deferred gain of $93 million as of December 31, 1993.
A significant portion of these deferred gains was related to
securitized credit card receivables. The amount at Decem-
ber 31, 1994, is scheduled to be amortized into income in
the following periods: $28 million in 1995, $19 million in
1996, $1 million in 1997 and $(2) million thereafter.
Credit Exposure Resulting from
Derivative Financial Instruments
The Corporation maintains risk management policies that
monitor and limit exposure to credit risks. For a further
discussion of credit risks, see the Credit Risk Management
section, on page 31.
The Corporation's credit exposure resulting from deriva-
tive financial instruments is represented by their fair value
amounts, increased by an estimate of maximum adverse
position exposure. The incremental amount of credit
exposure for potential adverse movement is calculated by
using a statistical model that estimates changes over time
in exchange rates, interest rates and other relevant factors.
Credit exposure amounts fluctuate as a function of matu-
rity, interest rates, foreign exchange rates, commodity
prices and equity prices. Gross credit exposure may be
overstated because it does not consider collateral and
other security or the offsetting of losses with the same
counterparties based on legally enforceable termination
and netting rights. A reconciliation between gross credit
exposure and balance sheet exposure is presented below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
December 31, 1994 (In billions)
- ------------------------------------------------------------
<S> <C>
Gross credit exposure.............................. $12.3
Less additional exposure based on estimate of
maximum adverse position exposure................ 5.4
-----
Gross fair value exposure.......................... $ 6.9
=====
Gross fair value exposure by type of contract
Interest rate contracts.......................... $ 3.6
Foreign exchange contracts....................... 3.2
Equity contracts................................. 0.1
-----
Gross fair value exposure...................... $ 6.9
Less netting adjustments due to
master netting agreements........................ 2.5
Add unrecognized net loss due to non-trading
activities....................................... --
-----
Balance sheet exposure............................. $ 4.4
=====
- ------------------------------------------------------------
</TABLE>
At December 31, 1993, the gross credit exposure and the
gross fair value exposure resulting from derivative financial
instruments were $10.6 billion and $6.5 billion, respectively.
There were no net charge-offs in 1994 related to derivative
financial instruments.
First Chicago Corporation 36 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
CAPITAL MANAGEMENT
Selected Capital Ratios
- ----------------------------------------------------------------------------------
Corporate
December 31 1994 1993 1992 1991 1990 Guideline
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common equity/total assets (1)..... 6.6% 7.2% 5.9% 5.1% 4.8% N/A
Tangible common equity ratio (1)... 6.2 6.6 5.0 4.1 3.9 N/A
Stockholders' equity/total assets.. 6.9 8.1 6.9 6.1 5.5 N/A
Risk-based capital ratios (1)(2)
Tier 1........................... 8.8 8.8 6.7 5.5 4.9 7-8%
Total............................ 13.4 13.6 10.8 9.4 8.3 11-12
Leverage ratio (1)(2).............. 7.5 8.0 6.6 5.8 5.0 N/A
Double leverage ratio.............. 117 110 114 116 119 115-125
Dividend payout ratio.............. 28 15 188 174 60 30-35
- ----------------------------------------------------------------------------------
</TABLE>
(1) Net of investment in First Chicago Capital Markets, Inc.
(2) Under 1992 risk-based capital rules.
N/A--Not applicable.
Introduction
Capital represents the stockholders' investment on which
the Corporation strives to generate attractive returns.
It supports business growth and provides protection to
depositors and creditors. Banking is a risk-taking activity,
and management believes that capital is the foundation of
a cohesive risk management framework in which the Cor-
poration's risks and returns come together. Capital ade-
quacy objectives have been developed for the Corporation
and its principal banking subsidiaries to meet these needs
and also maintain a well-capitalized regulatory position.
Management believes that a strong capital base coupled
with attractive earnings are instrumental in enhancing long-
term stockholder value. To that end, the Corporation's key
capital management objectives are to:
o maintain a capital base commensurate with its overall
risk profile;
o maintain strong capital ratios relative to its peers;
o meet or exceed all regulatory guidelines; and
o generate attractive returns.
To achieve these objectives, the Finance Committee, which
oversees the Corporation's capital goals, annually estab-
lishes a capital plan. This plan is intended to ensure that
the Corporation and each of its subsidiaries have capital
structures consistent with prudent management principles
and regulatory requirements.
Economic Capital
In the normal course of business, the Corporation takes
on several types of risk: credit, liquidity, structural interest
rate, market and operating/fiduciary. As discussed in the
Risk Management section, frameworks have been devel-
oped to independently monitor and control many of these
exposures. To integrate these processes, an economic cap-
ital framework has been constructed to allocate capital to
business segments, products and customers based on the
amount and type of risk inherent in the activity. Once eco-
nomic capital is allotted, returns can be computed to deter-
mine if the activity earns an adequate return on risk. This
process forms a key decision-making tool for managing
risk-taking activities as well as ensuring that capital is
profitably employed.
A financial instrument or business activity attracts economic
capital based on its potential for loss of value over a par-
ticular time period. Losses result from adverse price move-
ments for market and interest rate risk, failure of a counter-
party to perform according to the terms of an agreement
for credit risk, and operating errors and negligence for
operating/fiduciary risk. Generally, statistical analysis of
historical data provides the volatility estimates using a
three-standard-deviation confidence interval in determin-
ing the appropriate levels of economic capital. Capital is
designed to cover most loss occurrences, but not the max-
imum loss possible. Credit and operating loss experiences
form the basis for assessing the volatility of these risks.
Volatility of interest and exchange rates and commodity
and equity prices is used to determine the capital for
market risk.
Although capital is allocated to specific activities and
instruments, a diverse portfolio of activities requires less
capital than the sum of the individual components because
it is unlikely that all activities will experience large value
declines at the same time. Consequently, the Corporation's
total capital level will be less than the sum of the individual
requirements.
Total economic capital will vary proportionately with the
level and riskiness of the Corporation's businesses and
products. The Corporation's primary exposure is to credit
risk, which during 1994 consumed the largest amount of
economic capital. The Corporation intends to maintain
capital commensurate with its risk profile and intermedi-
ary requirements, and to deploy its capital resources in
activities that earn attractive returns for stockholders.
Because of dissimilar measurement techniques, book cap-
ital, economic capital and intermediary capital differ, and
the management of these differences is another task of
the capital planning process.
The Corporation has established a capital level that it
believes is necessary to provide flexibility while maintain-
ing an adequate base for its risk profile and in relation to
its peers. This target, or intermediary capital, is expressed
in terms of Tier 1 capital and ranges from 7% to 8%.
First Chicago Corporation 37 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
As the following chart shows, the Corporation's average
common equity during 1994 exceeded its economic
capital--that needed for current business risks--and was
more than sufficient to meet its intermediary capital goals.
Excess capital above the intermediary capital target is
available for investments and acquisitions; it averaged
about $450 million during 1994. If attractive long-term
opportunities are not available over time in the Corpora-
tion's core businesses, any excess capital will be returned
to stockholders, typically via stock repurchase programs
and/or dividend increases.
Inherent in capital management is the ability of the Cor-
poration to generate acceptable returns on stockholders'
capital. Even with excess capital, the Corporation has been
able to earn attractive returns on equity. Over the past two
years, the return on average common stockholders' equity
has been greater than the Corporation's goal of consis-
tently earning at least 15%.
- ------------------------------------------------------------------------------
BAR CHART:
Average Economic Capital
(In billions)
1992* 1993 1994
----- ----- -----
2.9 3.1 3.8
*Economic capital and targeted intermediary capital exceeded actual common
equity due largely to the effect of the accelerated asset disposition program
- ------------------------------------------------------------------------------
Regulatory Capital
The Corporation endeavors to maintain regulatory capital
ratios, including those of its principal banking subsidiaries,
in excess of the well-capitalized guidelines. To assure meet-
ing this goal, the Corporation has established target ranges
of 7% to 8% for Tier 1 capital and 11% to 12% for total
risk-based capital. Both targets exceed the respective well-
capitalized guidelines of 6% and 10%. As shown in the
following chart, these ratios have improved over the past
three years, with the 1993 and 1994 figures exceeding the
upper end of the Corporation's target ranges.
- ---------------------------------------------------------------
BAR CHART:
Tier 1 and Total Capital Ratios*
1992 1993 1994
---- ---- ----
Tier 1 6.7% 8.8% 8.8%
Total 10.8% 13.6% 13.4%
*At year-end
- ---------------------------------------------------------------
The Corporation's principal banking subsidiaries--The First
National Bank of Chicago (FNBC), FCC National Bank
(FCCNB), and American National Bank and Trust Com-
pany of Chicago (ANB)--have exceeded the regulatory
well-capitalized guidelines for the past two years, as shown
in the following table.
It is important to note that by maintaining regulatory well-
capitalized status, the subsidiary banks benefit from lower
Federal Deposit Insurance Corporation deposit premiums.
Principal Banking Subsidiaries
Regulatory Capital Ratios
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
December 31, 1994 December 31, 1993 December 31, 1992
---------------------- ---------------------- ----------------------
FNBC FCCNB ANB FNBC FCCNB ANB FNBC FCCNB ANB
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Risk-based capital ratios
Tier 1 capital............ 8.1% 12.1% 9.5% 7.7% 10.0% 10.1% 5.5% 6.4% 9.4%
Total capital............. 12.5 15.0 12.0 11.8 12.9 11.8 9.3 10.1 11.4
Leverage ratio................ 6.3 14.4 9.1 6.7 12.3 8.7 5.3 7.4 8.0
- --------------------------------------------------------------------------------------------------------------
</TABLE>
First Chicago Corporation 38 Annual Report 1994
<PAGE>
- ---------------------------------------------------------------
Tier 1 capital expanded in 1994 due largely to earnings
retained in common stockholders' equity, while Tier 2 cap-
ital increased because of the issuance of qualifying long-
term debt. The following tables show the components of
the Corporation's regulatory risk-based capital and risk-
weighted assets.
Regulatory Capital
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
December 31 (In millions) 1994 1993 1992
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Tier 1 capital
Common stockholders' equity............ $3,922 $3,503 $2,732
Preferred stock........................ 611 761 669
Less 50% of investment in First
Chicago Capital Markets, Inc......... (128) (69) (59)
Less disallowed intangibles and
other adjustments.................... (80) (97) (119)
------ ------ ------
Tier 1 capital....................... $4,325 $4,098 $3,223
Tier 2 capital
Allowance for credit losses (1)........ 616 581 605
Qualifying long-term debt.............. 1,753 1,682 1,452
Less 50% of investment in First
Chicago Capital Markets, Inc. ....... (128) (69) (59)
------ ------ ------
Tier 2 capital....................... 2,241 2,194 1,998
------ ------ ------
Total capital...................... $6,566 $6,292 $5,221
====== ====== ======
- -------------------------------------------------------------------------
(1) Limited to 1.25% of risk-weighted assets.
Regulatory Risk-Weighted Assets*
- -------------------------------------------------------------------------
December 31 (In billions) 1994 1993 1992
- -------------------------------------------------------------------------
Balance-sheet risk-weighted assets..... $33.0 $30.5 $30.1
Off-balance-sheet risk-weighted
assets............................... 16.2 15.8 18.3
----- ----- -----
Total risk-weighted assets............. $49.2 $46.3 $48.4
===== ===== =====
- -------------------------------------------------------------------------
*Based on Federal Reserve Board definitions.
</TABLE>
Dividends
Dividends are an integral part of the capital management
and stockholder value program. The Corporation's com-
mon dividend policy reflects its earnings outlook, dividend
payout ratios, peer comparisons, the need to maintain an
adequate capital level and alternative investment oppor-
tunities. Given these factors, the Corporation presently
intends to maintain a common dividend payout ratio over
time in the range of 30% to 35% of operating earnings.
During 1994, the Corporation declared two increases in
its quarterly common dividend. The $0.55 per share com-
mon dividend declared on November 11, 1994, and paid
on January 1, 1995, represents a 38% increase from the
$0.40 per share common dividend paid on January 1, 1994,
and an 83% increase from the $0.30 per share paid on
October 1, 1993.
Stock Repurchase Program and Other Capital Activities
The repurchase of shares is another technique used to
manage capital and enhance stockholder value. During
1994, the Corporation repurchased 4.6 million shares of
common stock at an average price of $47.94 per share.
This brings the total number of shares repurchased under
the 7 million share buyback program to 4.8 million, and
represents approximately 70% of the shares authorized
under the program. The program is designed to meet pro-
jected requirements of the Corporation's employee benefit
plans and to manage the Corporation's overall capital
position.
On July 1, 1994, the Corporation redeemed its $150 mil-
lion issue of Preferred Stock, Series D, reducing annual
dividend requirements by $15 million. Regulatory total
capital was increased in January 1994 through the issuance
of $200 million of subordinated debt.
Double Leverage
Double leverage is the extent to which holding company
debt is used to finance equity investments in subsidiaries.
Presently, the Corporation intends to limit its double lev-
erage ratio to no more than 125% at any time and 115%
on average. On December 31, 1994, the Corporation's
double leverage was 117%, compared with 110% at year-
end 1993.
First Chicago Corporation 39 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
First Chicago Corporation and Subsidiaries
- ---------------------------------------------------------------------------------------------------------------
December 31 (Dollars in millions) 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and due from banks--noninterest-bearing.................................... $ 4,265 $ 3,916
Due from banks--interest-bearing................................................ 8,066 6,037
Federal funds sold and securities under resale agreements....................... 13,302 8,783
Trading account assets.......................................................... 4,967 4,536
Investment securities (fair values--$2,589 in 1994 and $2,264 in 1993).......... 2,592 2,256
Loans (net of unearned income--$297 in 1994 and $282 in 1993)................... 25,947 23,103
Less allowance for credit losses.............................................. 723 683
------- -------
Total loans, net.............................................................. 25,224 22,420
Premises and equipment.......................................................... 665 635
Accrued income receivable....................................................... 485 407
Customers' acceptance liability................................................. 526 517
Derivative product assets....................................................... 4,389 --
Other assets.................................................................... 1,419 3,053
------- -------
Total assets.......................................................... $65,900 $52,560
======= =======
- ---------------------------------------------------------------------------------------------------------------
Liabilities
Deposits
Demand........................................................................ $ 7,647 $ 8,184
Savings....................................................................... 7,448 7,541
Time.......................................................................... 5,149 4,925
Foreign offices............................................................... 11,422 7,536
------- -------
Total deposits........................................................ 31,666 28,186
Federal funds purchased and securities under repurchase agreements.............. 13,026 8,255
Other funds borrowed............................................................ 7,665 6,007
Long-term debt.................................................................. 2,271 2,065
Acceptances outstanding......................................................... 526 517
Derivative product liabilities.................................................. 4,097 --
Other liabilities............................................................... 2,116 3,266
------- -------
Total liabilities..................................................... 61,367 48,296
- ---------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred stock--without par value, authorized 15,000,000 shares
Outstanding:
- ----------------------------------------------------------------------------------
1994 1993
- ----------------------------------------------------------------------------------
Series A ($ 50 stated value)....................... 2,410,000 2,410,000 121 121
Series B ($100 stated value)....................... 1,191,000 1,191,000 119 119
Series C ($100 stated value)....................... 713,800 713,800 71 71
Series D ($ 25 stated value)....................... -- 6,000,000 -- 150
Series E ($625 stated value)....................... 160,000 160,000 100 100
Convertible Series B ($5,000 stated value)......... 40,000 40,000 200 200
Common stock--$5 par value........................................................ 466 434
- ----------------------------------------------------------------------------------
1994 1993
- ----------------------------------------------------------------------------------
Number of shares authorized.......................... 150,000,000 150,000,000
Number of shares issued.............................. 93,148,134 86,715,812
Number of shares outstanding......................... 89,859,798 86,398,605
Surplus........................................................................... 1,712 1,724
Retained earnings................................................................. 1,905 1,358
Other adjustments................................................................. (4) --
------- -------
Total................................................................... 4,690 4,277
Less treasury stock at cost, 3,288,336 shares in 1994 and 317,207 shares in 1993.. 157 13
- ---------------------------------------------------------------------------------------------------------------
Stockholders' equity.................................................... 4,533 4,264
------- -------
Total liabilities and stockholders' equity.............................. $65,900 $52,560
======= =======
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this balance sheet.
First Chicago Corporation 40 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
Consolidated Income Statement
First Chicago Corporation and Subsidiaries
- ---------------------------------------------------------------------------------------------------------------------------
For the Year (In millions, except per share data) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Interest and fees on loans.......................................................... $1,897.2 $1,687.4 $1,894.4
Interest on bank balances........................................................... 361.7 298.0 358.0
Interest on federal funds sold and securities under resale agreements............... 615.2 344.8 284.8
Interest on trading account assets.................................................. 277.7 221.9 259.0
Interest on investment securities (including dividends)............................. 68.2 72.0 73.4
-------- -------- --------
Total..................................................................... 3,220.0 2,624.1 2,869.6
- ---------------------------------------------------------------------------------------------------------------------------
Interest Expense
Interest on deposits................................................................ 779.5 644.1 973.7
Interest on federal funds purchased and securities under repurchase agreements...... 526.2 308.1 345.3
Interest on other funds borrowed.................................................... 413.2 295.8 240.7
Interest on long-term debt.......................................................... 170.1 150.3 126.9
-------- -------- --------
Total..................................................................... 1,889.0 1,398.3 1,686.6
- ---------------------------------------------------------------------------------------------------------------------------
Net Interest Income................................................................. 1,331.0 1,225.8 1,183.0
Provision for credit losses......................................................... 224.0 270.0 425.0
Provision for loans held for accelerated disposition................................ -- -- 491.0
-------- -------- --------
Net Interest Income After Provision for Credit Losses and
Provision for Loans Held for Accelerated Disposition.............................. 1,107.0 955.8 267.0
- ---------------------------------------------------------------------------------------------------------------------------
Noninterest Income
Combined trading profits............................................................ 65.7 284.6 177.3
Equity securities gains............................................................. 228.6 480.2 204.6
Investment securities gains......................................................... 1.2 0.3 8.6
-------- -------- --------
Market-driven revenue............................................................. 295.5 765.1 390.5
Credit card fee revenue............................................................. 832.1 694.2 516.1
Service charges and commissions..................................................... 421.9 432.5 381.0
Fiduciary and investment management fees............................................ 199.2 200.7 189.8
Net gains from accelerated disposition portfolio activities......................... 45.9 60.0 --
Other income........................................................................ 80.0 49.9 10.8
-------- -------- --------
Total..................................................................... 1,874.6 2,202.4 1,488.2
- ---------------------------------------------------------------------------------------------------------------------------
Noninterest Expense
Salaries and employee benefits...................................................... 868.9 853.9 748.0
Occupancy expense of premises, net.................................................. 137.3 147.7 186.0
Equipment rentals, depreciation and maintenance..................................... 157.4 110.3 111.2
Other expense....................................................................... 753.3 742.0 719.2
-------- -------- --------
Subtotal.................................................................... 1,916.9 1,853.9 1,764.4
Provision for other real estate held for accelerated disposition.................... -- -- 134.0
Provision for other real estate..................................................... 1.7 4.2 56.9
-------- -------- --------
Total..................................................................... 1,918.6 1,858.1 1,955.3
- ---------------------------------------------------------------------------------------------------------------------------
Income (Loss) Before Income Taxes................................................... 1,063.0 1,300.1 (200.1)
Applicable income taxes (benefit)................................................... 373.3 495.6 (85.6)
-------- -------- --------
Income (Loss) Before Cumulative Effect of Changes in Accounting Principles.......... 689.7 804.5 (114.5)
Cumulative Effect of Changes in Accounting Principles--
Valuation of Venture Capital Investment Securities................................ -- -- 220.7
Recognition of Credit Card Solicitation Costs..................................... -- -- (12.7)
-------- -------- --------
Net Income.......................................................................... $ 689.7 $ 804.5 $ 93.5
======== ======== ========
Net Income Attributable to Common Stockholders' Equity.............................. $ 637.5 $ 747.5 $ 48.9
======== ======== ========
- ---------------------------------------------------------------------------------------------------------------------------
Common Share Data
Primary
Income (loss) before cumulative effect of changes in accounting principles........ $7.04 $8.78 $(2.08)
Cumulative effect of changes in accounting principles--
Valuation of venture capital investment securities.............................. -- -- 2.89
Recognition of credit card solicitation costs................................... -- -- (0.17)
----- ----- ------
Net income.......................................................................... $7.04 $8.78 $ 0.64
===== ===== ======
Fully Diluted
Income (loss) before cumulative effect of changes in accounting principles........ $6.88 $8.43 $(2.08)
Cumulative effect of changes in accounting principles--
Valuation of venture capital investment securities.............................. -- -- 2.89
Recognition of credit card solicitation costs................................... -- -- (0.17)
----- ----- ------
Net income.......................................................................... $6.88 $8.43 $ 0.64
===== ===== ======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
First Chicago Corporation 41 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Changes in Stockholders' Equity
First Chicago Corporation and Subsidiaries
- --------------------------------------------------------------------------------------------------------------------------------
For the Three Years Ended Treasury
December 31, 1994 Preferred Common Retained Other Stock
(In millions) Stock Stock Surplus Earnings Adjustments (at Cost) Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991................ $ 569 $345 $1,297 $ 760 $ 3 $ (4) $2,970
Net income.............................. -- -- -- 94 -- -- 94
Issuance of common stock................ -- 67 306 -- -- -- 373
Issuance of preferred stock............. 100 -- (4) -- -- -- 96
Cash dividends declared
Preferred stock....................... -- -- -- (44) -- -- (44)
Common stock.......................... -- -- -- (89) -- -- (89)
Other................................... -- -- -- -- (2) 3 1
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992................ $ 669 $412 $1,599 $721 $ 1 $ (1) $3,401
Net income.............................. -- -- -- 804 -- -- 804
Issuance of common stock................ -- 7 37 -- -- -- 44
Issuance of preferred stock............. 200 -- (4) -- -- -- 196
Redemption of preferred stock........... (108) 15 92 -- -- -- (1)
Cash dividends declared
Preferred stock....................... -- -- -- (57) -- -- (57)
Common stock.......................... -- -- -- (110) -- -- (110)
Treasury stock purchases................ -- -- -- -- -- (12) (12)
Other................................... -- -- -- -- (1) -- (1)
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993................ $ 761 $434 1,724 $1,358 $-- $ (13) $4,264
Net income.............................. -- -- -- 690 -- -- 690
Issuance of common stock................ -- 1 12 -- -- -- 13
Issuance of treasury stock.............. -- -- (38) -- -- 87 49
Redemption of preferred stock........... (150) -- -- -- -- -- (150)
Acquisition of
Lake Shore Bancorp. .................... -- 31 18 78 (4) -- 123
Cash dividends declared
Preferred stock....................... -- -- (4) (48) -- -- (52)
Common stock.......................... -- -- -- (173) -- -- (173)
Treasury stock purchases................ -- -- -- -- -- (231) (231)
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994................ $ 611 $466 $1,712 $1,905 $(4) $(157) $4,533
===== ==== ====== ====== === ===== ======
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
First Chicago Corporation 42 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
First Chicago Corporation and Subsidiaries
- --------------------------------------------------------------------------------------------------------------------------------
For the Year (In millions) 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income.......................................................................... $ 690 $ 804 $ 94
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization..................................................... 175 188 173
Combined credit provisions (including accelerated disposition provision).......... 226 274 1,107
Equity securities gains........................................................... (229) (480) (205)
Net (increase) in net derivative product balances................................. (57) -- --
Net gains from accelerated disposition portfolio activities....................... (46) (60) --
Cumulative effect of changes in accounting principles............................. -- -- (208)
Net (increase) in trading account assets.......................................... (416) (1,224) (1,346)
Net (increase) decrease in accrued income receivable.............................. (78) (51) 174
Net decrease in other assets...................................................... 51 76 678
Interest income from Brazilian debt restructuring................................. (17) -- --
Other noncash adjustments......................................................... 69 6 (87)
--------- -------- ---------
Total adjustments................................................................. (322) (1,271) 286
Net cash provided by (used in) operating activities................................. 368 (467) 380
- --------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Net (increase) in federal funds sold and securities under resale agreements......... (4,506) (1,891) (1,684)
Purchase of investment securities................................................... -- (3,068) (1,202)
Purchase of investment securities--available for sale............................... (1,287) -- --
Purchase of debt investment securities--held to maturity............................ (289) -- --
Purchase of venture capital investments............................................. (181) -- --
Proceeds from maturities of debt securities......................................... -- 3,047 703
Proceeds from maturities of debt securities--available for sale..................... 982 -- --
Proceeds from maturities of debt securities--held to maturity....................... 299 -- --
Proceeds from sales of debt securities.............................................. -- -- 366
Proceeds from sales of debt securities--available for sale.......................... 191 -- --
Proceeds from sales of equity securities............................................ -- 598 244
Proceeds from sales of equity securities--available for sale........................ 54 -- --
Proceeds from sales of venture capital investments.................................. 333 -- --
Net (increase) in credit card receivables........................................... (2,880) (3,493) (1,515)
Credit card receivables securitized................................................. 2,000 1,700 1,000
Net (increase) decrease in loans of bank subsidiaries............................... (1,480) 973 1,186
Loans made to customers and purchased from others by nonbank subsidiaries........... (499) (142) (181)
Principal collected on and proceeds from sale of loans by nonbank subsidiaries...... 506 302 377
Loan recoveries..................................................................... 74 97 88
Net proceeds from sales of assets held for accelerated disposition.................. 112 829 174
Purchases of premises and equipment................................................. (170) (213) (151)
Proceeds from sales of premises and equipment....................................... 38 71 63
Net cash and cash equivalents due to mergers and acquisitions....................... 44 -- --
--------- -------- ---------
Net cash (used in) investing activities............................................. (6,659) (1,190) (532)
- --------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net increase (decrease) in demand and savings deposits.............................. (934) 525 1,934
Net (decrease) in time deposits..................................................... (470) (1,342) (3,269)
Deposits acquired................................................................... -- 12 --
Net increase (decrease) in deposits in foreign offices.............................. 3,799 (687) (978)
Net increase in federal funds purchased and securities
under repurchase agreements....................................................... 4,722 1,293 1,817
Net (decrease) in commercial paper.................................................. (17) (8) (54)
Proceeds from other funds borrowed.................................................. 249,952 80,869 110,418
Repayment of other funds borrowed................................................... (248,139) (79,024) (109,134)
Proceeds from issuance of long-term debt............................................ 204 826 234
Repayment of long-term debt......................................................... (10) (471) (257)
Net increase (decrease) in other liabilities........................................ 2 285 (1,102)
Dividends paid...................................................................... (211) (158) (145)
Proceeds from issuance of common stock.............................................. 12 41 375
Proceeds from reissuance of treasury stock.......................................... 39 4 6
Purchase of treasury stock.......................................................... (231) (13) (1)
Proceeds from issuance of preferred stock........................................... -- 196 96
Payment for redemption of preferred stock........................................... (150) (1) --
--------- -------- ---------
Net cash provided by (used in) financing activities................................. 8,568 2,347 (60)
- --------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents........................ 101 (75) (45)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents................................ 2,378 615 (257)
Cash and cash equivalents at beginning of year...................................... 9,953 9,338 9,595
--------- -------- ---------
Cash and cash equivalents at end of year............................................ $ 12,331 $ 9,953 $ 9,338
========= ======== =========
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest paid in cash by the Corporation totaled $1.8 billion in 1994, $1.4
billion in 1993 and $1.9 billion in 1992. Income taxes paid in cash by the
Corporation totaled $355 million in 1994, $175 million in 1993 and $50 million
in 1992.
The Corporation financed the sale of other real estate in the amount of $2
million, $2 million and $135 million in 1994, 1993 and 1992, respectively. Loans
transferred to other real estate were $20 million, $51 million and $192 million
in 1994, 1993 and 1992, respectively.
The accompanying notes to consolidated financial statements are an integral part
of this statement.
First Chicago Corporation 43 Annual Report 1994
<PAGE>
Notes to Consolidated Financial Statements
First Chicago Corporation and Subsidiaries
- -------------------------------------------------------------------------------
N O T E 1--Summary of Significant Accounting Policies
The consolidated financial statements for First Chicago
Corporation (the Corporation) and subsidiaries have been
prepared in conformity with generally accepted account-
ing principles. A description of those accounting policies
of particular significance follows.
(a) Principles of Consolidation
The Corporation's consolidated financial statements in-
clude the accounts of all subsidiaries more than 50%
owned. All significant intercompany accounts and trans-
actions have been eliminated in consolidation.
(b) Intangible Assets
Goodwill, representing the cost of investments in subsid-
iaries and affiliated companies in excess of the fair value
of net assets acquired, is amortized on a straight-line basis
over periods ranging from 10 to 25 years.
Other intangible assets, such as the value of acquired cus-
tomer lists, core deposits and credit card relationships, are
amortized using various methods over the periods bene-
fited, ranging from 5 to 17 years.
(c) Investment Securities
In 1993, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities, for debt
and equity securities except those held by its venture
capital subsidiaries. This adoption did not have a material
impact on the Corporation's financial statements.
Under SFAS No. 115, debt investment securities are desig-
nated as either held to maturity or available for sale at
the time of acquisition and are reevaluated to determine
appropriate classification in subsequent reporting periods.
Debt securities that the Corporation has the positive intent
and ability to hold to maturity are carried at historical
cost, adjusted for amortization of premiums and accretion
of discounts. Previously, such accounting treatment was
applied to debt securities that were intended to be held
as long-term investments. All other debt and equity invest-
ment securities covered by SFAS No. 115 are classified
as available for sale and are carried at fair value, with
unrealized gains and losses and applicable income taxes
reported in other adjustments in stockholders' equity.
Previously, these securities were carried at the lower of
cost or fair value.
Realized gains and losses and other than temporary im-
pairments related to debt and equity securities, are deter-
mined using the specific identification method and are
reported in noninterest income as investment securities
gains for debt securities and as equity securities gains for
equity securities.
The Corporation adopted fair value accounting for invest-
ments of its venture capital subsidiaries on January 1, 1992.
Changes in the fair value of such investments are recog-
nized in noninterest income as equity securities gains.
Previously, such investments were carried at the lower of
aggregate cost or fair value.
The fair value of publicly traded investments takes into
account their quoted market prices with adjustments made
for market liquidity or sale restrictions. For investments
that are not publicly traded, estimates of fair value have
been made by management that consider the investees'
financial results, conditions and prospects, and the values
of comparable public companies.
Because of the nature of these investments, the equity
method of accounting is not used in situations where the
Corporation has a greater than 20% ownership interest.
(d) Trading Account Activities
Trading account assets are stated at fair value. Realized
and unrealized gains and losses on trading account activ-
ities are reflected in noninterest income as combined trad-
ing profits.
Combined trading profits include interest rate, exchange
rate, commodity price, and equity price trading results
from both cash and derivative financial instruments, ex-
cluding equity securities and related hedges. Cash financial
instruments include U.S. government and agency obliga-
tions, municipal obligations, asset-backed securities, and
other types of securities, loans and deposits. Derivative
financial instruments include swaps, forwards, futures,
options, caps, floors, forward rate agreements, and other
conditional or exchange contracts. The table on page 20
reports the Corporation's net trading revenue by activity,
including both combined trading profits and related net
interest income.
(e) Derivative Financial Instruments
For a discussion of the Corporation's accounting policies
for derivative financial instruments, see the Derivative
Financial Instruments section, on page 35.
(f) Nonperforming Loans
Loans, including lease-financing receivables, are consid-
ered nonperforming when placed on nonaccrual status,
or when a loan is renegotiated and the renegotiated terms
represent an economic concession to the borrower.
A loan, excluding a credit card loan, is placed on non-
accrual status when the collection of contractual principal
or interest is deemed doubtful by management or becomes
90 days or more past due, and the loan is not well secured
or in the process of collection. Accrued but uncollected
interest on a loan is reversed and charged against interest
income when the loan is placed on nonaccrual status.
Accrued but uncollected interest on a credit card loan is
charged against interest income when the loan becomes
180 days past due.
Interest payments received on nonaccrual loans are re-
corded as reductions of principal if the collection of the
remaining carrying amount is doubtful; otherwise, such
payments are recorded as interest income.
An economic concession on a renegotiated loan is made
when the yield under the renegotiated terms is reduced
below current market rates by an agreement with the bor-
rower. Generally, this occurs when the borrower's cash flow
First Chicago Corporation 44 Annual Report 1994
<PAGE>
- ------------------------------------------------------------------------------
is insufficient to service the loan under its original terms.
Subject to the above nonaccrual policy, interest on these
loans is accrued at the reduced rates.
(g) Credit Card Securitization
The Corporation actively packages and sells credit card
receivables as securities to investors. Since the receivables
are sold at par value, no gains or losses are recorded at
the time of sale.
The amount of credit card interest income and fee rev-
enue in excess of interest paid to certificate holders, credit
losses and other trust expenses is recognized monthly as
servicing fees in credit card fee revenue over the term of
the transaction. Other transaction costs are deferred and
amortized ratably as a reduction of servicing fees over the
terms of the related securitizations.
(h) Other Real Estate
Other real estate includes assets that have been either
acquired in satisfaction of debt (assets owned) or substan-
tively repossessed (in-substance foreclosures). In-substance
foreclosures occur when the market value of the collateral
is less than the legal obligation of the borrower and the
Corporation expects repayment of the loan to come only
from collateral. Other real estate is recorded at fair value
at the date of transfer. Any valuation adjustments required
at the date of transfer are charged to the allowance for
credit losses. Subsequent to acquisition, other real estate
is carried at the lower of cost or fair value, based on
periodic evaluations that consider changes in market con-
ditions, development and disposition costs, and estimated
holding periods. Operating results from assets acquired
in satisfaction of debt, including rental income less oper-
ating costs and depreciation, are recorded in other non-
interest income.
(i) Allowance for Credit Losses
The allowance for credit losses is maintained at a level
that in management's judgment is adequate to provide for
estimated probable credit losses resulting from on-balance-
sheet credit exposure for items such as loans and deriv-
ative financial instruments, and off-balance-sheet credit
exposure for credit-related and derivative financial instru-
ments. The amount of the allowance is based on manage-
ment's formal review and analysis of potential credit losses,
as well as prevailing economic conditions. The allowance is
increased by provisions for credit losses, which are charged
to earnings, and is reduced by charge-offs net of recoveries.
(j) Assets Held for Accelerated Disposition
In 1992, the Corporation segregated certain commercial
real estate assets and related commitments in an acceler-
ated disposition portfolio. The Corporation transferred
assets to this portfolio at their estimated disposition val-
ues. The assets in this portfolio are carried at the lower of
the initially established carrying values or newly estimated
disposition values. The credit and valuation process related
to this portfolio is performed quarterly to assess the on-
going condition of each individual credit, to determine any
change in credit risk classification, and to determine the
need, if any, for additional valuation adjustments. Income
recognition is based on the credit characteristics of the
individual assets in the disposition portfolio. Net gains as
a result of transaction activity related to disposition port-
folio assets are included in noninterest income.
(k) Premises and Equipment
Premises and equipment are stated at cost less accumu-
lated depreciation and amortization, which are computed
principally on the straight-line method over the estimated
useful lives of the related assets. Gains and losses on dis-
positions are reflected in other noninterest income. Main-
tenance and repairs are charged to noninterest expense as
incurred.
(l) Foreign Currency Translation
The Corporation's translation policies are based on a
determination of the primary operating currency (func-
tional currency) for each foreign installation. If a foreign
installation's functional currency is the U.S. dollar, assets
and liabilities carried in local currency are translated to
U.S. dollars at current exchange rates except for premises
and equipment, which are translated at historic rates.
Translation effects and results of related hedging trans-
actions, neither of which is material, are included in other
noninterest income.
If the foreign installation's functional currency is its local
currency, all assets and liabilities are translated at current
exchange rates. Translation adjustments, related hedging
results and applicable income taxes are included in other
adjustments within stockholders' equity. If a foreign instal-
lation is to be sold or liquidated, the related accumulated
other adjustments balance is reversed and recognized as
part of the gain or loss on disposition.
Operating results of foreign installations are translated at
averages of exchange rates prevailing during the year. The
interest element of hedging transactions is included in
interest expense.
(m) Income Taxes
The Corporation's accounting for income taxes is based
on an asset and liability approach. The Corporation rec-
ognizes the amount of taxes payable or refundable for the
current year, and deferred tax assets and liabilities for the
future tax consequences that have been recognized in its
financial statements or tax returns. The measurement of
tax assets and liabilities is based on the provisions of en-
acted tax laws.
(n) Fees Related to Lending Activities
Lending origination fees, net of costs, and loan commit-
ment fees, in general, are deferred and amortized as inter-
est income over the life of the related loan. The deferred
fees and costs are netted against outstanding loan balances.
Certain credit-related fees, such as syndication manage-
ment fees, commercial letters of credit fees, and fees on
unused, available lines of credit, are recorded as service
charges and commissions in noninterest income when
earned. Fees on standby letters of credit and guarantees
are recorded as service charges and commissions on a
straight-line basis over the term of the related agreements.
(o) Pension, Other Postretirement
and Postemployment Plans
The Corporation maintains a noncontributory defined
benefit plan covering all eligible, salaried domestic em-
ployees. Retirement benefits are primarily a function of
both an employee's years of service and final levels of com-
pensation. The Corporation's funding policy is to contrib-
ute an amount equal to the net periodic pension cost for
First Chicago Corporation 45 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
the year, but not less than the minimum required by ERISA
or more than the maximum tax deductible amount based
on IRS limits. For 1994, no contribution was required.
Net experience gains and losses are amortized over three
years. Settlement gains, which occur when vested former
employees elect to receive lump sum cash payments, are
recorded as net periodic pension credits. Such gains repre-
sent the accelerated recognition of the transition asset and
net experience gains and losses.
Employees in foreign offices participate to varying degrees
in local pension plans, the forms of which are often pre-
scribed by local laws and customs. These plans in the
aggregate are not significant.
The Corporation has no material other postretirement or
postemployment obligations.
(p) Offsetting of Amounts Related to Certain Contracts
In 1994, the Corporation prospectively adopted Financial
Accounting Standards Board (FASB) Interpretation No. 39,
Offsetting of Amounts Related to Certain Contracts. This
interpretation is applicable to the balance sheet presenta-
tion of derivative financial instruments. These derivatives
include interest rate, currency, commodity and equity
swaps, forwards, options, caps, floors, forward rate agree-
ments, and other conditional or exchange contracts, and
include both exchange-traded and over-the-counter
contracts.
In general, purchased option, cap and floor contracts are
reported in derivative product assets, and written option,
cap and floor contracts are reported in derivative product
liabilities. For other derivative financial instruments,
an unrealized gain is reported in derivative product assets
and an unrealized loss is reported in derivative product
liabilities. Previously, the Corporation reported certain
unrealized gains and unrealized losses on a net basis.
Derivative financial instruments executed with the same
counterparty under a legally enforceable master netting
arrangement are reported on a net basis as derivative prod-
uct assets or liabilities.
At December 31, 1993, the fair value of currency options
purchased totaled $536 million, while the fair value of
currency options written totaled $501 million. These
amounts are recorded in other assets and other liabilities,
respectively.
FASB Interpretation No. 41, Offsetting of Amounts Related
to Certain Repurchase and Reverse Repurchase Agree-
ments, was issued in December 1994. This interpretation
is effective for 1994 financial statements. It modifies FASB
Interpretation No. 39 to permit but not require offsetting
in the balance sheet of securities under repurchase agree-
ments and securities under resale agreements that meet
certain conditions. Net receivable positions may not be
offset against net payable positions. The Corporation has
not adopted this interpretation in 1994; however, it may
be adopted in a subsequent reporting period pending a
review of its potential effect on the Corporation.
(q) Accounting for Credit Card Solicitation Costs
The Corporation changed its accounting policy in 1992 to
expense certain credit card solicitation costs. Previously,
these costs were deferred and amortized over the esti-
mated life of the account. The Corporation made this
change to reflect the more prevalent industry practice.
(r) Cash Flow Reporting
The Corporation uses the indirect method to report cash
flows from operating activities. Under this method, net
income is adjusted to reconcile it to net cash flow from
operating activities. Net reporting of cash transactions has
been used when the balance sheet items consist predom-
inantly of maturities of three months or less, or where
otherwise permitted. Other items are reported on a gross
basis. Cash flows related to sales of debt investment secu-
rities within three months of the maturity date are classi-
fied as maturities in the consolidated statement of cash
flows. Cash and cash equivalents consist of cash and due
from banks, whether interest-bearing or not.
Cash flows from derivative financial instruments are
reported net as operating activities. Upon adopting FASB
Interpretation No. 39 on January 1, 1994, a noncash trans-
fer of balances attributable to derivative financial instru-
ments on December 31, 1993, was made from other assets
($573 million), accrued income receivable ($941 million)
and other liabilities ($1.3 billion) to net derivative product
balances for purposes of reporting the Consolidated State-
ment of Cash Flows.
(s) Accounting for Loan Impairment
In May 1993, the FASB issued SFAS No. 114, Accounting
by Creditors for Impairment of a Loan. This standard was
recently amended by SFAS No. 118, Accounting by Credi-
tors for Impairment of a Loan--Income Recognition and
Disclosure. SFAS No. 114 addresses the accounting for
loans when it is probable that all principal and interest
amounts due will not be collected in accordance with its
contractual terms (i.e. ``impaired loans''). Pursuant to SFAS
No. 114, to the extent the recorded investment of an im-
paired loan exceeds the present value of the loan's ex-
pected future cash flows or other measures of value,
a valuation allowance is established for the difference.
The corresponding allocation or charge will be to either
the allowance for credit losses or to the provision for credit
losses, respectively, depending on the adequacy of the
overall allowance for credit losses. SFAS No. 114 also
changes the definition of In-Substance Foreclosures (ISFs),
which will result in currently reported ISFs being reclas-
sified as nonaccrual loans. SFAS No. 118 allows for existing
income recognition practices to continue.
The Corporation has adopted SFAS No. 114 and SFAS
No. 118 as of January 1, 1995. It is expected that the adop-
tion of these standards will not have a material effect on the
Corporation's net income. The allowance for credit losses
allocated to impaired loans is estimated at $26 million.
The January 1, 1995, aggregate recorded investment of
loans that will be reclassified from ISFs to nonaccrual loans
is approximately $15 million. In general, the Corporation
will retain its existing income recognition practices as
described in Note 1(f), on page 44.
First Chicago Corporation 46 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
N O T E 2--Earnings per Share
The Corporation presents earnings per share on both a
primary and a fully diluted basis. Primary earnings per
share were computed by dividing net income, after deduct-
ing dividends on preferred stock, by the average number
of common and common-equivalent shares outstanding
during the period.
Common-equivalent shares consist of shares issuable
under the Employee Stock Purchase and Savings Plan and
outstanding stock options. Fully diluted shares also include
the common shares that would result from the conversion
of convertible preferred stock.
To compute fully diluted earnings per share, net income
was reduced by preferred stock dividend requirements,
except those related to convertible stock.
The net income, preferred stock dividends and shares
used to compute primary and fully diluted earnings per
share are presented in the following table.
- -------------------------------------------------------------------------
(In millions) 1994 1993 1992
- -------------------------------------------------------------------------
Primary
Net income.......................... $689.7 $804.5 $93.5
Preferred stock dividends (1)....... 52.2 57.0 44.6
------ ------ -----
Net income attributable to
common stockholders' equity....... $637.5 $747.5 $48.9
====== ====== =====
Average number of common and
common-equivalent shares.......... 90.5 85.2 76.5
Fully Diluted
Net income.......................... $689.7 $804.5 N/M
Preferred stock dividends,
excluding convertible Series A
and B, where applicable (1)..... 40.7 43.7 N/M
------ ------ -----
Fully diluted net income............ $649.0 $760.8 N/M
====== ====== =====
Average number of shares,
assuming full dilution............ 94.2 90.3 N/M
- -------------------------------------------------------------------------
(1) 1994 preferred dividends include a 3% premium, totaling $4.5 mil-
lion, paid on the redemption of the Corporation's Cumulative
Preferred Stock, Series D, par value $150 million.
N/M--Not meaningful.
For 1992, the calculation of fully diluted earnings per share
would have produced an anti-dilutive result and, there-
fore, is not shown in the preceding table.
- ------------------------------------------------------------
N O T E 3--Business Acquisitions
In November 1993, the Corporation and Lake Shore
Bancorp., Inc. (Lake Shore) signed a definitive agreement
providing for the merger of Lake Shore into the Corpora-
tion. Lake Shore, with approximately $1.2 billion in assets
and capital of approximately $123 million as of July 8,
1994, had seven locations in the Chicago metropolitan
area. It was the holding company for Lake Shore National
Bank, Chicago, Illinois, and Bank of Hinsdale, Hinsdale,
Illinois.
The combination was consummated on July 8, 1994. Con-
sideration tendered for Lake Shore shares and stock
options was approximately $323 million, which consisted
of approximately 6.4 million common shares and share
equivalents of the Corporation. The agreement provided
that each share or share equivalent of Lake Shore com-
mon stock be exchanged for the Corporation's common
stock valued at $31.08. The exchange ratio was based on
the average closing price of the Corporation's common
stock during a 20-day trading period beginning on June 7,
1994, and ending on July 5, 1994, with a minimum price
of $37 and a maximum of $53 per share. The average
closing price of the Corporation's common stock during
the 20-day trading period was $50.406 per share.
The combination was accounted for on a pooling-of-
interest basis; however, because the transaction was not
considered significant from an accounting perspective, the
Corporation did not restate either 1994 or prior-year finan-
cial data.
- ------------------------------------------------------------
N O T E 4--Business Segments
An analysis of the Corporation's results on a line-of-business
basis is shown in the table on page 19. The following table
further details results for other corporate activities that are
not specifically allocated to a business segment.
- ------------------------------------------------------------------
Venture Capital Other
Activities Activities (1)
(Dollars in millions, ------------------ -----------------
except where noted) 1994 1993 1992 1994 1993 1992
- ------------------------------------------------------------------
Net interest income--
tax-equivalent basis.... $(37) $(30) $(37) $ 24 $ 20 $ 11
Combined credit
provisions.............. -- -- (1) -- -- 625
Noninterest income........ 189 371 179 89 58 --
Noninterest expense....... 1 4 12 46 18 92
Net income (loss)......... 95 204 80 56 51 (235)
Return on equity.......... 26% 37% 14% N/M N/M N/M
Average assets
(in billions)........... $1.3 $1.3 $1.3 $0.1 $0.5 $ 0.3
Average loans
(in billions)........... -- -- -- -- $0.5 $ 0.4
Average common equity
(in billions)........... $0.3 $0.5 $0.5 $0.5 $0.2 $ 0.3
- ------------------------------------------------------------------
(1) Includes disposition portfolio activities since initiated in Septem-
ber 1992, other special corporate items, and the cumulative effect
of changes in accounting principles.
N/M--Not meaningful.
The Corporation is primarily engaged in the banking busi-
ness, and with the continuing globalization of financial
markets, the distinction between international and domes-
tic activities has become less important. The following table
shows approximate consolidated financial data for the three
years ended December 31, 1994, attributable to domestic
and foreign operations by geographic area in accordance
with current regulatory reporting requirements.
First Chicago Corporation 47 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Income
(Loss)
Before Net
Income Income Total
(In millions) Revenues(1) Expenses(2) Taxes (Loss) Assets
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Domestic operations........................ $4,445 $3,411 $1,034 $676 $52,815
Foreign operations
Europe-Middle East-Africa................ 387 376 11 6 8,084
Asia-Pacific............................. 122 135 (13) (12) 3,826
Other.................................... 141 110 31 20 1,175
------ ------ ------ ---- -------
Total foreign operations................. 650 621 29 14 13,085
------ ------ ------ ---- -------
Consolidated............................... $5,095 $4,032 $1,063 $690 $65,900
====== ====== ====== ==== =======
- -----------------------------------------------------------------------------------------------------------
1993
Domestic operations........................ $4,130 $2,966 $1,164 $712 $44,301
Foreign operations
Europe-Middle East-Africa................ 399 348 51 32 3,937
Asia-Pacific............................. 149 156 (7) (5) 2,921
Other.................................... 148 56 92 65 1,401
------ ------ ------ ---- -------
Total foreign operations................. 696 560 136 92 8,259
------ ------ ------ ---- -------
Consolidated............................... $4,826 $3,526 $1,300 $804 $52,560
====== ====== ====== ==== =======
- -----------------------------------------------------------------------------------------------------------
1992
Domestic operations........................ $3,620 $3,963 $ (343) $(12) $40,163
Foreign operations
Europe-Middle East-Africa................ 439 387 52 41 4,496
Asia-Pacific............................. 160 149 11 7 2,887
Other.................................... 139 59 80 58 1,735
------ ------ ------ ---- -------
Total foreign operations................. 738 595 143 106 9,118
------ ------ ------ ---- -------
Consolidated............................... $4,358 $4,558 $ (200) $ 94 $49,281
====== ====== ====== ==== =======
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes interest income and noninterest income.
(2) Includes interest expense, provision for credit losses and
noninterest expense.
The 1992 results from domestic operations include
$611.3 million of provisions for assets held for accelerated
disposition and $208.0 million related to the cumulative
effect of changes in accounting principles.
Results from foreign operations include provisions for
credit losses of $(52) million in 1994, $13 million in 1993
and $(3) million in 1992. Brazilian bonds received as part
of a debt restructuring, which were treated as loan loss
recoveries, and other recoveries related to foreign loans
were the primary reasons for the negative provision in 1994.
Because many of the resources employed by the Corpora-
tion are common to both its foreign and domestic activ-
ities, it is difficult to segregate assets, related revenues and
expenses into their foreign and domestic components. The
amounts in the preceding table are estimated on the basis
of internally developed assignment and allocation proce-
dures, which to some extent are subjective. The principal
internal allocations used to prepare this information are
described in the following text.
The allocation of corporate overhead expense is based on
allocations appropriate to individual activities. Expenses
incurred for the benefit of another geographic area, in-
cluding certain domestic administrative expenses, are allo-
cated to the area benefited.
Total assets and revenues reflect the allocation of loans
and related interest income among geographic areas based
on the domicile of the customer. Deposit placements and
related revenues are allocated geographically based on the
domicile of the depository institution.
Differences between contractual spreads and actual funding
results are reflected in the earnings of the areas providing
the funding. Distribution of certain fee income among geo-
graphic areas is reflected on the basis of services rendered.
Capital, with the exception of capital at foreign subsidiar-
ies, has been allocated to domestic operations.
First Chicago Corporation 48 Annual Report 1994
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
N O T E 5--Investment Securities
Investment securities in the consolidated balance sheet at December 31, 1994 and 1993, are summarized as follows.
- ------------------------------------------------------------------------------------------------------------------------------------
Book Cost Unrealized Unrealized Fair
December 31, 1994 (In millions) Value Basis Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. government and federal agency
Held to maturity............................ $ 276 $ 276 $ -- $ 8 $ 268
Available for sale.......................... 465 472 -- 7 465
------ ------ ---- ---- ------
Total................................. 741 748 -- 15 733
States and political subdivisions
Held to maturity............................ 176 176 7 2 181
Available for sale.......................... -- -- -- -- --
------ ------ ---- ---- ------
Total................................. 176 176 7 2 181
Other bonds, notes and debentures
Held to maturity............................ 4 4 -- -- 4
Available for sale.......................... 51 51 -- -- 51
------ ------ ---- ---- ------
Total................................. 55 55 -- -- 55
Equity securities (1)
Venture capital............................. 1,406 974 525 93 1,406
Available for sale (2)...................... 214 213 1 -- 214
------ ------ ---- ---- ------
Total................................. 1,620 1,187 526 93 1,620
Total investment securities........... $2,592 $2,166 $533 $110 $2,589
====== ====== ==== ==== ======
- ------------------------------------------------------------------------------------------------------------------------------------
Book Cost Unrealized Unrealized Fair
December 31, 1993 (In millions) Value Basis Gains Losses Value
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. government and federal agency
Held to maturity........................... $ 245 $ 245 $ 2 $ 1 $ 246
Available for sale......................... 243 243 -- -- 243
------ ------ ---- ---- ------
Total................................ 488 488 2 1 489
States and political subdivisions
Held to maturity........................... 162 162 7 -- 169
Available for sale......................... -- -- -- -- --
------ ------ ---- ---- ------
Total................................ 162 162 7 -- 169
Other bonds, notes and debentures
Held to maturity........................... 4 4 -- -- 4
Available for sale......................... 15 15 -- -- 15
------ ------ ---- ---- ------
Total................................ 19 19 -- -- 19
Equity securities (1)
Venture capital............................ 1,465 955 627 117 1,465
Available for sale (2)..................... 122 121 1 -- 122
------ ------ ---- ---- ------
Total................................ 1,587 1,076 628 117 1,587
Total investment securities.......... $2,256 $1,745 $637 $118 $2,264
====== ====== ==== ==== ======
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The fair values of certain securities for which market quotations were not
available were estimated. In addition, the fair values reflect liquidity and
other market-related factors.
(2) Includes Federal Reserve stock.
Gross proceeds from the sale of available for sale invest-
ment securities were $245 million for the year ended
December 31, 1994, reflecting gross realized gains of
$6.5 million and gross realized losses of $5.3 million.
Gross proceeds from the sale of debt investment securities
were $0.2 million and $366 million for the two years ended
December 31, 1993 and 1992, respectively.
For 1993 and 1992, gross debt investment securities gains
were $1.5 million and $8.6 million, respectively, and gross
debt investment securities losses were $1.2 million and
$17 thousand, respectively. The applicable income taxes
were $0.1 million and $3.2 million, respectively.
The pretax change in net unrealized gain (loss) on avail-
able for sale securities included in other adjustments in
stockholders' equity was $(7.5) million in 1994.
First Chicago Corporation 49 Annual Report 1994
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1994, debt investment securities--held to maturity and available for sale--had the following maturity
characteristics.
- -------------------------------------------------------------------------------------------------------------------------------
Held to Maturity Available for Sale
------------------------ ------------------------
Cost Fair Cost Fair
(In millions) Basis Value Basis Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and Federal Agency
Maturing within one year............................ $ 84 $ 83 $369 $368
Maturing after one but within five years............ 191 184 97 92
Maturing after five but within ten years............ -- -- 4 3
Maturing after ten years............................ 1 1 2 2
---- ---- ---- ----
$276 $268 $472 $465
==== ==== ==== ====
- -------------------------------------------------------------------------------------------------------------------------------
States and Political Subdivisions
Maturing within one year............................ $ 20 $ 21 $ -- $ --
Maturing after one but within five years............ 74 78 -- --
Maturing after five but within ten years............ 51 52 -- --
Maturing after ten years............................ 31 30 -- --
---- ---- ---- ----
$176 $181 $ -- $ --
==== ==== ==== ====
- -------------------------------------------------------------------------------------------------------------------------------
Other Bonds, Notes and Debentures
Maturing within one year............................ $ 1 $ 1 $ 2 $ 2
Maturing after one but within five years............ 1 1 2 2
Maturing after five but within ten years............ 1 1 -- --
Maturing after ten years............................ 1 1 47 47
---- ---- ---- ----
$ 4 $ 4 $ 51 $ 51
==== ==== ==== ====
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------
N O T E 6--Loans
Following is a breakdown of loans included in the consol-
idated balance sheet as of December 31, 1994 and 1993.
- ---------------------------------------------------------------
<TABLE>
(In millions) 1994 1993
- ---------------------------------------------------------------
<S> <C> <C>
Commercial Risk
Domestic
Commercial........................ $ 7,806 $ 6,007
Real estate
Construction.................... 256 315
Other........................... 2,240 2,094
Financial institutions............ 1,027 1,292
Other............................. 2,869 2,746
Foreign............................. 1,832 1,975
------- -------
Subtotal...................... 16,030 14,429
- ---------------------------------------------------------------
Consumer Risk
Credit cards........................ 6,337 5,778
Secured by real estate
Mortgage.......................... 1,581 1,469
Home equity lines................. 832 780
Other............................... 1,167 647
------- -------
Subtotal...................... 9,917 8,674
------- -------
Total......................... $25,947 $23,103
======= =======
- ---------------------------------------------------------------
</TABLE>
The amount of interest shortfall (the difference between
contractual interest due and interest actually recorded)
related to nonperforming loans at year-end was $6 million
in 1994 and $14 million in 1993.
Credit card receivables are available for sale through the
Corporation's credit card securitization program. Since
these receivables are sold at face value, their sale would
have no impact on the Corporation's financial results.
The Corporation has loans outstanding to certain of its
directors and executive officers and to partnerships or
companies in which a director or executive officer has at
least a 10% beneficial interest. At December 31, 1994 and
1993, $180 million and $295 million, respectively, of such
loans to related parties were outstanding. An analysis of
the activity during 1994 with respect to such loans includes
additions of $123 million and reductions of $238 million.
First Chicago Corporation 50 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NOTE 7--Allowance for Credit Losses
Changes in the allowance for credit losses for the three
years ended December 31, 1994, were as follows.
- ---------------------------------------------------------------------------
(In millions) 1994 1993 1992
- ---------------------------------------------------------------------------
Balance, beginning of year................ $ 683 $ 624 $ 759
Additions (deductions)
Charge-offs............................. (242) (279) (461)
Recoveries.............................. 91 97 88
----- ----- -----
Net charge-offs......................... (151) (182) (373)
Provision for credit losses............. 224 270 425
Provision for loans held for
accelerated disposition............... -- -- 491
Charge-offs of loans upon
transfer to accelerated
disposition portfolio............... -- -- (636)
Other:
Mergers and acquisitions................ 16 -- --
Transfers related to
securitized receivables............... (49) (29) (42)
----- ----- -----
Balance, end of year...................... $ 723 $ 683 $ 624
----- ----- -----
----- ----- -----
- ---------------------------------------------------------------------------
- ------------------------------------------------------------
NOTE 8--Pledged and Restricted Assets
Assets carried at $16.5 billion in the consolidated balance
sheet at December 31, 1994, were pledged as collateral for
borrowings, to secure government and trust deposits, and
for other purposes as required by law.
Based on the types and amounts of deposits received,
banks must maintain noninterest-bearing cash balances in
accordance with Federal Reserve Bank reserve require-
ments. The average noninterest-bearing cash balance
maintained to meet reserve requirements was $598 million
in 1994 and $574 million in 1993.
- ------------------------------------------------------------
NOTE 9--Lease Commitments
The Corporation has entered into a number of operating
and capitalized lease agreements for premises and equip-
ment. The minimum annual rental commitments under
these leases are shown below.
- ------------------------------------------------------------
(In millions)
- ------------------------------------------------------------
1995............................................ $ 61
1996............................................ 57
1997............................................ 55
1998............................................ 50
1999............................................ 49
2000 and beyond................................. 304
----
Total................................... $576
----
----
- ------------------------------------------------------------
Occupancy expense has been reduced by rental income
from premises leased to others in the amount of $27.1 mil-
lion in 1994, $28.1 million in 1993 and $25.0 million in
1992.
- ------------------------------------------------------------
NOTE 10--Long-Term Debt
Long-term debt consists of borrowings having an original
maturity of seven years or more. Long-term debt at Decem-
ber 31, 1994 and 1993, was as follows.
- --------------------------------------------------------------------
(In millions) 1994 1993
- --------------------------------------------------------------------
8-1/2% notes due 1998......................... $ 100 $ 99
Subordinated 9% notes due 1999................ 199 199
Subordinated 9-7/8% notes due 2000............ 99 99
Subordinated 9-1/5% notes due 2001............ 5 5
Subordinated 9-1/4% notes due 2001............ 100 100
Subordinated 10-1/4% notes due 2001........... 100 100
Subordinated 11-1/4% notes due 2001........... 96 96
Subordinated 8-7/8% notes due 2002............ 100 100
Subordinated 8-1/4% notes due 2002............ 100 100
Subordinated 7-5/8% notes due 2003............ 199 199
Subordinated 6-7/8% notes due 2003............ 200 200
Subordinated floating rate notes due 2003..... 149 149
Subordinated 6-3/8% notes due 2009............ 198 --
Equity commitment notes
Subordinated 9-7/8% notes due 1999.......... 200 200
Equity contract notes
Subordinated floating rate capital
notes due 1996............................ 125 125
Other long-term debt.......................... 301 294
------ ------
Total................................. $2,271 $2,065
------ ------
------ ------
- --------------------------------------------------------------------
8-1/2% Notes
These notes are direct, unsecured obligations of the Cor-
poration and are not subordinated to any other indebted-
ness of the Corporation. They may not be redeemed prior
to their stated maturity.
Subordinated Notes
These notes are direct obligations of the Corporation and
are subordinated to other indebtedness of the Corpora-
tion. They may not be redeemed prior to their stated
maturity. They have fixed interest rates that range from
6-3/8% to 11-1/4% and maturities that range from 1999 to
2009. The floating rate notes due in 2003 have an interest
rate priced at the greater of 4-1/4% or the three-month
London interbank offered rate plus 1/8%. During 1993,
$3.4 million of the 11-1/4% subordinated notes were
repurchased at a premium in open market transactions.
A charge of $419,000 related to these transactions was
included in other noninterest income.
Equity Commitment Notes
The subordinated notes maturing in 1999 are direct obli-
gations of the Corporation and may not be redeemed prior
to their stated maturity. Such notes are subordinated to
other indebtedness of the Corporation.
The agreements under which these notes were issued
require the Corporation, prior to maturity, to issue com-
mon stock, perpetual preferred stock or other forms of
equity approved by the Federal Reserve Board in an
amount equal to the original aggregate principal amount
of the notes. As of December 31, 1994, the Corporation
had issued all of the equity securities required by the
agreements.
First Chicago Corporation 51 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
Equity Contract Notes
The subordinated floating rate capital notes maturing in
1996 are a direct obligation of the Corporation and are
subordinated to other indebtedness of the Corporation.
The interest rate on these notes is reset quarterly at 3/16%
over the average offered rate quoted in the London inter-
bank market for three-month Eurodollar deposits. The
effective interest rate on this issue as of December 31, 1994,
was 6.625%.
Other Long-Term Debt
Other long-term debt of $301 million includes various
notes with maturities ranging from 1995 to 2026 and inter-
est rates at December 31, 1994, ranging from 5.5% to 13%.
Of this amount, $276 million relates to the sale and lease-
back of certain bank properties. The effective interest rate
related to this transaction is 8.7%, with expected maturity
in 2018.
Original issue discount and deferred issuance costs are
amortized over the terms of the related notes.
- ------------------------------------------------------------
N O T E 11--Preferred Stock
The Corporation currently is authorized to issue 15,000,000
shares of preferred stock, without par value. The Board
of Directors is authorized to fix the particular designa-
tions, preferences, rights, qualifications and restrictions for
each series of preferred stock issued. All preferred shares
rank prior to common shares both as to dividends and
liquidation, but have no general voting rights. The divi-
dend rate on each of the cumulative adjustable rate series
is based on stated value and adjusted quarterly, based on
a formula that considers the interest rates for selected
short- and long-term U.S. Treasury securities prevailing at
the time the rate is set. The minimum, maximum and cur-
rent dividend rates as of December 31, 1994, are presented
in the following table.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Annual Dividend Rate
Preferred Shares Stated Value --------------------------- Earliest Redemption
Stock Series Outstanding Per Share Maximum Minimum Current Redemption Date Price (1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cumulative Adjustable Rate:
Series A......................... 2,410,000 $ 50.00 15.00% 7.00% 7.00% (2) $ 50.00
Series B......................... 1,191,000 100.00 12.00 6.00 6.00 (2) 100.00
Series C......................... 713,800 100.00 12.50 6.50 6.50 (2) 100.00
Cumulative Fixed Rate:
Series E (3)..................... 160,000 625.00 8.45 8.45 8.45 11/16/97 (4) 625.00
Cumulative Convertible Fixed Rate:
Series B (5)..................... 40,000 5,000.00 5.75 5.75 5.75 04/01/97 (6) 5,172.50
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued and unpaid dividends.
(2) Currently redeemable.
(3) Represented by 4,000,000 depositary shares, with a corresponding annual
dividend rate of $2.11 each and a $25 stated value.
(4) The preferred shares are redeemable on or after November 16, 1997, at $625
per share (equivalent to $25 per depositary share).
(5) Represented by 4,000,000 depositary shares, with a corresponding annual
dividend rate of $2.875 each and a $50 stated value.
(6) The preferred shares may be converted into shares of the Corporation's
common stock at the option of the stockholders at any time at the
conversion price of $53.625 per common share, subject to adjustment under
certain conditions. Shares are redeemable beginning April 1, 1997, at the
option of the Corporation, at a price of $5,172.50 ($51.725 per depositary
share), with the redemption price decreasing annually until the shares are
redeemable on or after April 1, 2003, at their stated value of $5,000 per
share ($50 per depositary share).
All shares of the Corporation's 10% Cumulative Preferred
Stock, Series D, were called for redemption on July 1, 1994.
The redemption price of $25.75 per share plus accrued
and unpaid dividends incorporates a 3% premium, total-
ing $4.5 million.
All shares of the Corporation's Cumulative Convertible
Preferred Stock, Series A, were called for redemption on
September 2, 1993. Each Series A share was convertible
into 1.391 shares of the Corporation's common stock at
the option of the stockholder, and approximately 2,100,000
shares of the stock were converted into approximately
3,000,000 shares of common stock. Resultant fractional
shares were paid in cash. On September 2, 1993, the Corpo-
ration redeemed the remaining shares of the Cumulative
Convertible Preferred, Series A, at the redemption price
of $51.50 per share plus accrued and unpaid dividends.
In December 1988, the Corporation paid a dividend of one
Preferred Share Purchase Right (a Right) for each outstand-
ing share of common stock of the Corporation. Similar
Rights are issued by the Corporation with each share of
the Corporation's common stock issued after December 2,
1988, subject to adjustment. Until a person or group
acquires beneficial ownership of, or begins a tender or
exchange offer for, 20% or more of the Corporation's com-
mon stock, the Rights will not be exercisable and will be
transferred upon the transfer of shares of the Corporation's
common stock. Upon the occurrence of certain events, each
Right entitles the holder to purchase one one-hundredth
of a share of the Corporation's Series A Junior Participating
Preferred Stock, without par value, at a price of $130.
Under certain other circumstances, the holder of a Right
may have the right to receive upon payment of the Right's
$130 exercise price: 1) common stock of a company acquir-
ing control of the Corporation that has a market value of
two times the exercise price of the Right, or 2) common
stock of the Corporation having a market value of two
times the exercise price of the Right.
The Rights, which expire December 2, 1998, are redeem-
able in whole, but not in part, at the Corporation's option
prior to the time they are exercisable, for a price of $.01
per Right.
First Chicago Corporation 52 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
NOTE 12--Income Taxes
The components of total applicable income taxes (bene-
fits) reported in the consolidated income statement for
the years ended December 31, 1994, 1993 and 1992, are
as follows.
- ---------------------------------------------------------------------
(In millions) 1994 1993 1992
- ---------------------------------------------------------------------
Current tax expense (benefit)
Federal........................... $202.1 $177.3 $ (1.9)
Foreign........................... 7.4 29.1 20.5
State............................. 45.8 42.6 4.9
------ ------ -------
Total....................... 255.3 249.0 23.5
Deferred tax expense (benefit)
Federal........................... 115.8 230.0 (101.3)
State............................. 2.2 16.6 (7.8)
------ ------ -------
Total....................... 118.0 246.6 (109.1)
------ ------ -------
Applicable income taxes (benefit)... $373.3 $495.6 $ (85.6)
------ ------ -------
------ ------ -------
- ---------------------------------------------------------------------
The preceding table excludes the tax expense (benefit)
recorded directly in stockholders' equity of $0.7 million,
$(4.7) million and $(0.4) million in 1994, 1993 and 1992,
respectively. The table also excludes $122.6 million of
1992 taxes related to the cumulative effect of changes in
accounting principles.
A net deferred tax liability is included in other liabilities
in the consolidated balance sheet as a result of temporary
differences between the carrying amounts of assets and lia-
bilities in the financial statements and their related tax
bases. The components of the net deferred tax liability as
of December 31, 1994 and 1993, are as follows.
- ---------------------------------------------------------------------
(In millions) 1994 1993
- ---------------------------------------------------------------------
Deferred Tax Liabilities
Deferred income on lease financing........... $ 762.9 $ 745.3
Appreciation of venture capital
investments................................ 219.0 181.9
Prepaid pension asset........................ 135.1 133.1
Other........................................ 145.2 145.6
-------- --------
Gross deferred tax liabilities............... 1,262.2 1,205.9
-------- --------
Deferred Tax Assets
Allowance for credit losses.................. 286.9 292.5
Securitization of credit card receivables.... 86.0 65.5
Alternative minimum tax credit
carryforward............................... -- 115.9
Other........................................ 250.2 255.9
-------- --------
Gross deferred tax assets.................... 623.1 729.8
Valuation allowance.......................... -- --
-------- --------
Gross deferred tax assets,
net of valuation allowance................. 623.1 729.8
-------- --------
Net deferred tax liability................... $ 639.1 $ 476.1
-------- --------
-------- --------
- ---------------------------------------------------------------------
The reasons for the differences between applicable income
taxes and the amounts computed at the applicable regular
federal tax rates of 35% in 1994, 35% in 1993 and 34% in
1992 were as follows.
- ---------------------------------------------------------------------
(In millions) 1994 1993 1992
- ---------------------------------------------------------------------
Taxes at statutory federal income
tax rate........................... $372.1 $455.0 $(68.0)
Increase (decrease) in taxes
resulting from
Tax-exempt income (net)............ (10.3) (12.0) (13.8)
State income taxes, net of
federal income taxes............. 31.6 31.8 (1.9)
Goodwill........................... 2.8 7.5 3.4
Other.............................. (22.9) 13.3 (5.3)
------ ------ ------
Applicable income taxes (benefit).... $373.3 $495.6 $(85.6)
------ ------ ------
------ ------ ------
- ---------------------------------------------------------------------
The Corporation had no alternative minimum tax credit
carryforward for tax purposes at December 31, 1994. The
Corporation had an alternative minimum tax credit carry-
forward for tax purposes of $109.2 million at December 31,
1993, and $41.3 million at December 31, 1992.
The Corporation had a foreign tax credit carryforward of
$42.9 million at December 31, 1992, that was fully utilized
in 1993. The Corporation also had a federal tax return net-
operating loss carryforward of $644.4 million at Decem-
ber 31, 1992, which was also fully utilized in 1993.
First Chicago Corporation 53 Annual Report 1994
<PAGE>
- ------------------------------------------------------------------------------
N O T E 13--Employee Benefit and Incentive Plans
(a) Pension Plans
Net periodic pension credit was $7.3 million in 1994,
$18 million in 1993 and $31.5 million in 1992.
The assumptions used in determining the projected bene-
fit obligation and the net periodic pension credit, as appro-
priate, are shown below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1994 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate................................ 9.0% 7.5% 8.5%
Rate of increase in future salary levels..... 5.0 4.5 5.0
Expected long-term rate of return............ 9.5 9.5 9.5
- ------------------------------------------------------------------------
</TABLE>
The following table reconciles the plans' funded status with
the amounts recorded in the Corporation's consolidated
balance sheet.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
December 31 (In millions) 1994 1993
- --------------------------------------------------------------------
<S> <C> <C>
Projected benefit obligation:
Vested benefits.......................... $(419.0) $(430.6)
Nonvested benefits....................... (54.1) (60.9)
------- -------
Accumulated benefit obligation........... (473.1) (491.5)
Effect of projected future compensation
levels................................. (91.1) (99.3)
------- -------
Projected benefit obligation............... (564.2) (590.8)
Plans' assets at fair value (1)............ 931.0 968.4
------- -------
Plans' assets in excess of projected
benefit obligation....................... 366.8 377.6
Unrecognized net gain due to experience
different from assumptions............... (31.1) (37.4)
Unrecognized net transition asset (2)...... (32.5) (37.2)
Unrecognized prior service cost............ 87.0 74.6
------- -------
Prepaid pension cost....................... $ 390.2 $ 377.6
======= =======
- --------------------------------------------------------------------
</TABLE>
(1) Includes shares of the Corporation's common stock with a market
value of $20.1 million in 1994 and $17.9 million in 1993.
(2) The unrecognized net transition asset will be amortized over
approximately 6.5 years.
The components of the net periodic pension credit for
each of the last three years are as follows.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
(In millions) 1994 1993 1992
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Service costs--benefits earned
during period........................ $ 29.2 $ 22.3 $ 20.9
Interest cost on projected benefit
obligation........................... 49.6 43.8 41.5
Return on plan assets.................. (0.6) (109.6) (80.1)
Net amortization, deferral
and other............................ (85.5) 25.5 (13.8)
------ ------- ------
Net periodic pension credit............ $ (7.3) $ (18.0) $(31.5)
====== ======= ======
- ----------------------------------------------------------------------
</TABLE>
(b) Savings Incentive Plan
The Corporation and its subsidiaries maintain the Savings
Incentive Plan, a qualified 401(k) program. The plan is
available to all U.S.-based salaried employees of The First
National Bank of Chicago and certain other subsidiaries
of the Corporation. Participation is completely voluntary,
and participants may contribute from 1% to 6% of their
salary on a pretax basis, and an additional 1% to 10% of
salary on an after-tax basis. Beginning in 1994, the Corpo-
ration's contribution to the plan was determined as 100%
of the first $750 of pretax contributions made by partici-
pants and 50% of any pretax contributions in excess of
$750. The plan was amended in 1993 to allow the Board
of Directors to make a supplemental profit-based contri-
bution to the plan. For 1994, that contribution was $250
for each eligible salaried employee and $125 for each eli-
gible hourly employee. All participants are 100% vested in
their account balances and are able to direct the invest-
ment of their savings into several investment options.
Expense under this plan, included in noninterest expense
as employee benefits expense, was $21.4 million in 1994,
$19.6 million in 1993 and $13.0 million in 1992.
(c) Employee Stock Purchase and Savings Plan
The Employee Stock Purchase and Savings Plan allows
eligible employees to authorize payroll deductions for
deposit in interest-bearing savings accounts for up to two
years. Employees then have the option to either withdraw
their savings balance in cash or purchase shares of the
Corporation's common stock at a price fixed under the
plan. The Corporation recognizes no expense in connec-
tion with such stock purchases. The plan authorizes a max-
imum of 6,000,000 shares, of which 4,407,130 shares have
been issued.
During 1994, 743,885 shares of common stock were pur-
chased by 4,143 employees under the 1992 offering and
subsequent quarterly offerings for newly eligible employ-
ees, at prices ranging from $32.54 to $45.84 per share.
Eligible employees also were offered an opportunity to
enroll in a new offering in August 1994 at a stock pur-
chase price of $47.98. Employees participating in the plan
numbered 7,539 as of December 31, 1994. Projected con-
tributions and interest represent a potential future pur-
chase of approximately 887,829 shares of common stock.
(d) Other Incentive Plans
The Corporation maintains various cash incentive, stock
incentive and stock option plans.
Cash incentive plans, including certain specialized busi-
ness unit incentives, are based on attainment of certain
financial goals and a combination of business unit and
corporate objectives.
First Chicago Corporation 54 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
The 1983 Strategic Stock Option Plan and the Strategic
Stock Incentive Plan were both terminated in 1991;
however, options and shares from those programs are still
outstanding and are included, where appropriate, in the
discussion below.
The Stock Incentive Plan allows the Corporation to grant
stock options, restricted shares or other stock-based awards
to eligible employees. Restricted shares granted to key offi-
cers require them to continue employment from one to
seven years beginning on the original grant date before
they can sell those shares. The market value of the re-
stricted shares as of the date of grant is amortized to sala-
ries expense over the restriction period. In 1994, the Board
approved a performance-based restricted stock program
under the terms of the Stock Incentive Plan. The shares
issued under this program become unrestricted only if
performance criteria are met. The ultimate expense attrib-
utable to this program will be based on the market value
of the shares on the date they become unrestricted. As of
December 31, 1994, the Stock Incentive Plan had 1,224,781
restricted shares outstanding. The maximum number of
shares of the Corporation's common stock that may be
granted annually pursuant to the Stock Incentive Plan is
2% of the shares outstanding; however, any portion of the
2% limit not granted in a previous year may be awarded
prospectively.
In 1994, the Board approved a new ``restorative'' stock
option program under the terms of the Stock Incentive
Plan. Under the program, optionees are granted a ``restor-
ative'' stock option when: 1) they exercise an option by
exchanging shares owned for at least six months to pay
both the purchase price and related tax withholding obli-
gation, and 2) the current market price of First Chicago
common stock is at least 25% higher than the original stock
option exercise price. The restorative stock option pro-
vides optionees with a replacement stock option for the
number of shares exchanged, has a purchase price set at
the market price on date of grant, becomes exercisable six
months from date of grant, and expires at the end of the
term set for the original stock option.
The following table summarizes 1994 activity and the
December 31, 1994, status of the Stock Incentive Plan and
the 1983 Stock Option Plan, inclusive of restorative stock
options granted.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Outstanding Options Exercisable Options
-------------------------------- -----------------------------
Option Option
(Shares in thousands) Shares Price Shares Price
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993.............. 4,739 $18-1/2 - $49-1/8 3,228 $18-1/2 - $43-5/8
Granted................................. 2,361 $41-3/4 - $49-7/16 -- --
Became exercisable...................... -- -- 979 $24 - $49-1/8
Exercised............................... 1,464 $18-1/2 - $36-13/16 1,464 $18-1/2 - $36-13/16
Expired or canceled..................... 9 $24 - $31-7/8 9 $24 - $31-7/8
Forfeited (unvested).................... 51 $27-11/16 - $47-7/16 -- --
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994............ 5,576 $18-7/8 - $49-7/16 2,734 $18-7/8 - $49-7/16
- -------------------------------------------------------------------------------------------------------------
</TABLE>
First Chicago Corporation 55 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
NOTE 14--First Chicago Corporation (Parent Company Only) Condensed Financial Statements
Condensed Balance Sheet
- -------------------------------------------------------------------------------------------------------------------------------
December 31 (In millions) 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks
Bank subsidiaries--noninterest-bearing.................................................... $ 2 $ 21
Bank subsidiaries--interest-bearing....................................................... 161 156
Other interest-bearing.................................................................... 396 348
Investment securities....................................................................... 75 14
Loans....................................................................................... -- 1
Investment in and advances to subsidiaries
Bank subsidiaries......................................................................... 5,829 5,278
Nonbank subsidiaries...................................................................... 1,857 1,728
Other assets................................................................................ 106 124
------ ------
Total assets........................................................................ $8,426 $7,670
------ ------
------ ------
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities
Commercial paper and other notes payable
Nonbank subsidiaries...................................................................... $ 83 $ 29
Other..................................................................................... 1,492 1,378
Long-term debt.............................................................................. 1,993 1,796
Other liabilities........................................................................... 325 203
------ ------
Total liabilities................................................................... 3,893 3,406
- -------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity........................................................................ 4,533 4,264
------ ------
Total liabilities and stockholders' equity.......................................... $8,426 $7,670
------ ------
------ ------
- -------------------------------------------------------------------------------------------------------------------------------
Condensed Income Statement
- -------------------------------------------------------------------------------------------------------------------------------
For the Year (In millions) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
Operating Income
Dividends
Bank subsidiaries............................................................... $259.5 $129.0 $ 89.7
Nonbank subsidiaries............................................................ 106.7 68.9 197.2
Interest income
Bank subsidiaries............................................................... 113.3 110.8 104.2
Nonbank subsidiaries............................................................ 59.1 76.7 96.4
Other........................................................................... 28.1 13.9 15.8
Other income (loss)............................................................... 37.9 (2.4) 1.9
------ ------ ------
Total..................................................................... 604.6 396.9 505.2
- -------------------------------------------------------------------------------------------------------------------------------
Operating Expense
Interest expense
Nonbank subsidiaries............................................................ 1.3 3.8 5.6
Other........................................................................... 246.9 233.7 250.0
Other expense..................................................................... 6.9 6.4 23.7
------ ------ ------
Total..................................................................... 255.1 243.9 279.3
- -------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes and Equity in Undistributed
Net Income of Subsidiaries........................................................ 349.5 153.0 225.9
Applicable income tax benefit................................................... (11.4) (18.6) (22.8)
- -------------------------------------------------------------------------------------------------------------------------------
Income Before Equity in Undistributed
Net Income of Subsidiaries........................................................ 360.9 171.6 248.7
Equity in undistributed net income (loss) of subsidiaries before
cumulative effect of changes in accounting principles
Bank subsidiaries............................................................. 311.0 471.7 (230.0)
Nonbank subsidiaries.......................................................... 17.8 161.2 (133.2)
------ ------ ------
Income (loss) before cumulative effect of changes in accounting principles........ 689.7 804.5 (114.5)
Equity in cumulative effect of changes in accounting principles................... -- -- 208.0
------ ------ ------
Net Income........................................................................ $689.7 $804.5 $ 93.5
------ ------ ------
------ ------ ------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Parent Company Only Statement of Changes in Stockholders' Equity is the same
as the Consolidated Statement of Changes in Stockholders' Equity (see page 42).
First Chicago Corporation 56 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Condensed Statement of Cash Flows
- --------------------------------------------------------------------------------------------------------------------------
For the Year (In millions) 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income......................................................................... $ 690 $ 804 $ 94
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in net income (loss) of subsidiaries before cumulative
effect of changes in accounting principles..................................... (695) (831) 76
Equity in cumulative effect of changes in accounting principles.................. -- -- (208)
Net decrease in net derivative product balances.................................. 3 -- --
(Increase) decrease in accrued income receivable................................. (3) 7 (1)
(Decrease) in accrued interest payable........................................... (2) (3) (4)
Dividends received from subsidiaries............................................. 366 195 288
Net decrease in other assets..................................................... 14 31 15
Other noncash adjustments........................................................ 7 (26) (5)
------- ------- -------
Total adjustments................................................................ (310) (627) 161
------- ------- -------
Net cash provided by operating activities.......................................... 380 177 255
- --------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Principal collected on loans to subsidiaries....................................... 1,262 2,410 4,179
Loans made to subsidiaries......................................................... (1,355) (2,172) (4,443)
Capital investments in subsidiaries................................................ (141) (161) (571)
Purchase of investment securities--available for sale.............................. (214) (13) (24)
Proceeds from maturities of investment securities--available for sale.............. 42 8 22
Proceeds from sales of investment securities--available for sale................... 107 2 2
------- ------- -------
Net cash provided by (used in) investing activities................................ (299) 74 (835)
- --------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net increase (decrease) in commercial paper........................................ (34) 5 (67)
Proceeds from other funds borrowed................................................. 785 20 533
Repayment of other funds borrowed.................................................. (422) (374) (560)
Proceeds from issuance of long-term debt........................................... 204 557 234
Repayment of long-term debt........................................................ (10) (344) (248)
Net increase (decrease) in other liabilities....................................... (29) 48 (23)
Dividends paid..................................................................... (211) (158) (145)
Proceeds from issuance of common stock............................................. 12 41 375
Proceeds from reissuance of treasury stock......................................... 39 4 6
Purchase of treasury stock......................................................... (231) (13) (1)
Proceeds from issuance of preferred stock.......................................... -- 196 96
Payment for redemption of preferred stock.......................................... (150) (1) --
------- ------- -------
Net cash provided by (used in) financing activities................................ (47) (19) 200
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents............................... 34 232 (380)
Cash and cash equivalents at beginning of year..................................... 525 293 673
------- ------- -------
Cash and cash equivalents at end of year........................................... $ 559 $ 525 $ 293
======= ======= =======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Dividends that may be paid by national bank subsidiaries
are subject to two statutory limitations. Under the first,
dividends cannot exceed the level of "undivided profits
then on hand" less the amount of bad debts, as defined,
in excess of the allowance for credit losses. In addition, a
national bank cannot declare a dividend, without regula-
tory approval, in an amount in excess of its net profits, as
defined, for the current year combined with the retained
net profits for the preceding two years.
Based on these statutory requirements, the Corporation's
bank subsidiaries could, in the aggregate, have declared
additional dividends of up to approximately $664 million
without regulatory approval at December 31, 1994. The
payment of dividends by any bank may also be affected by
other factors, such as the maintenance of adequate capi-
tal. As of December 31, 1994, all of the Corporation's
banking subsidiaries significantly exceeded the regulatory
guidelines for "well-capitalized" status.
Federal banking law also restricts each bank subsidiary
from extending credit to First Chicago Corporation as the
parent bank holding company (the Parent Company) in
excess of 10% of the subsidiary's capital stock and surplus,
as defined. Any such extensions of credit are subject to
strict collateral requirements.
First Chicago Corporation 57 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
In connection with issuances of commercial paper, the
Corporation has agreements providing future credit
availability (back-up lines of credit) with various banks.
The agreements with nonaffiliated banks aggregated
$100 million at December 31, 1994 and 1993. The Cor-
poration also had agreements for back-up lines of credit
with The First National Bank of Chicago aggregating
$100 million at December 31, 1994, and $150 million at
December 31, 1993. In 1994, the Corporation had agree-
ments to pay between 0.125% and 0.150% in annual com-
mitment fees on any unused lines. The back-up lines of
credit, together with overnight money market loans, short-
term investments and other sources of liquid assets,
exceeded the amount of commercial paper issued at
December 31, 1994.
The Parent Company paid interest of $267 million in 1994,
$262 million in 1993 and $272 million in 1992. The Parent
Company made income tax payments to its subsidiaries
that exceeded its total income tax payments by $19 mil-
lion in 1994 and $20 million in 1992. The Parent Company
received income tax payments from its subsidiaries that
exceeded its total income tax payments by $82 million
in 1993.
- ------------------------------------------------------------
N O T E 15--Financial Instruments With
Off-Balance-Sheet Risk
In the normal course of business, the Corporation is a
party to financial instruments containing credit and/or
market risks that are not required to be reflected in a bal-
ance sheet. These financial instruments include credit-
related as well as certain derivative and cash instruments.
The Corporation maintains risk management policies that
monitor and limit exposure to credit, liquidity and market
risks.
(a) Credit Risk
The following disclosures represent the Corporation's
credit exposure, assuming that every counterparty to finan-
cial instruments with off-balance-sheet credit risk fails to
perform completely according to the terms of the con-
tracts, and that the collateral and other security, if any,
proves to be of no value to the Corporation.
(b) Market Risk
This note does not address the amount of market losses
the Corporation would incur if future changes in market
prices make financial instruments with off-balance-sheet
market risk less valuable or more onerous. The measure-
ment of market risk associated with financial instruments
is meaningful only when all related and offsetting on- and
off-balance-sheet transactions are aggregated, and the
resulting net positions are identified.
(c) Collateral and Other Security Arrangements
The credit risk of both on- and off-balance-sheet financial
instruments varies based on many factors, including the
value of collateral held and other security arrangements.
To mitigate credit risk, the Corporation generally deter-
mines the need for specific covenant, guarantee and col-
lateral requirements on a case-by-case basis, depending
on the nature of the financial instrument and the custom-
er's creditworthiness. The Corporation may also receive
comfort letters and oral assurances. The amount and type
of collateral held to reduce credit risk varies but may
include real estate, machinery, equipment, inventory and
accounts receivable, as well as cash on deposit, stocks,
bonds and other marketable securities that are generally
held in the Corporation's possession or at another appro-
priate custodian or depository. This collateral is valued
and inspected on a regular basis to ensure both its exist-
ence and adequacy. The Corporation requests additional
collateral when appropriate.
(d) Credit-Related Financial Instruments
The table below summarizes the Corporation's credit-
related financial instruments, including both commitments
to extend credit and letters of credit.
- ------------------------------------------------------------
Commitments and Letters of Credit
December 31 (In billions) 1994 1993
- ------------------------------------------------------------
Unused loan commitments............... $31.3 $28.4
Unused credit card lines.............. 61.4 46.3
Unused home equity lines.............. 0.8 0.7
Commercial letters of credit.......... 0.8 0.7
Standby letters of credit and
foreign office guarantees........... 4.1 4.7
- ------------------------------------------------------------
Since many of the Corporation's unused commitments are expected
to expire unused or be only partially used, the total amount of unused
commitments in the preceding table does not necessarily represent
future cash requirements.
Loan commitments are agreements to make or acquire a
loan or lease as long as the agreed-upon terms (e.g., expiry,
covenants or notice) are met. The Corporation's commit-
ments to purchase or extend loans help its customers meet
their liquidity needs. Credit card lines allow customers to
use a credit card to buy goods or services and to obtain
cash advances. However, the Corporation has the right to
change or terminate any terms or conditions of the credit
card account. Extensions of credit under home equity
lines are secured by residential real estate.
Commercial letters of credit are issued or confirmed by the
Corporation to ensure payment of its customers' payables
or receivables in short-term international trade transac-
tions. Generally, drafts will be drawn when the underlying
transaction is consummated as intended. However, the
short-term nature of this instrument serves to mitigate the
Corporation's risk associated with these contracts.
First Chicago Corporation 58 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
Standby letters of credit and foreign office guarantees are
issued in connection with agreements made by the Cor-
poration's customers to counterparties. If the customer fails
to comply with the agreement, the counterparty may
enforce the standby letter of credit or foreign office guar-
antee as a remedy. Credit risk arises from the possibility
that the customer may not be able to repay the Corpora-
tion for standby letters of credit or foreign office guaran-
tees drawn upon. At December 31, 1994 and 1993, the
Corporation had issued standby letters of credit and for-
eign office guarantees for the following purposes.
- ------------------------------------------------------------
Standby Letters of Credit and
Foreign Office Guarantees
December 31 (In millions) 1994 1993
- ------------------------------------------------------------
Commercial paper.................... $ 360 $ 815
Tax-exempt securities............... 1,108 1,130
Bid or performance guarantees....... 663 534
Commodity/margin support............ 504 570
Insurance-related................... 796 765
Other............................... 681 857
------ ------
Total............................... 4,112 4,671
Less: Cash collateral deposits...... 108 109
Participations to other
financial institutions........ 400 359
------ ------
Total, net.......................... $3,604 $4,203
====== ======
- ------------------------------------------------------------
At December 31, 1994, standby letters of credit and guar-
antees issued to back commercial paper and tax-exempt
securities had a weighted-average original maturity of
approximately six years and a weighted-average remain-
ing maturity of approximately two years. All other standby
letters of credit generally expire within three years.
(e) Derivative Financial Instruments
The Corporation enters into a variety of derivative finan-
cial instruments in its trading, asset and liability manage-
ment, and venture capital activities. These instruments
offer customers protection from rising or falling interest
rates, exchange rates, commodity prices and equity prices.
They can either reduce or increase the Corporation's
exposure to such changing rates or prices.
The Corporation's objectives and strategies for using deriv-
ative financial instruments for structural interest rate risk
management, foreign exchange risk management, and
venture capital activities are discussed on pages 27 to 30,
along with various numerical analyses, which are not
included as part of these audited financial statements.
The Corporation's balance sheet exposure for derivative
financial instruments includes the amount of recognized
gains in the market valuation of those contracts. Those
amounts fluctuate as a function of maturity, interest rates,
foreign exchange rates, commodity prices and equity prices.
The credit risk associated with exchange-traded derivative
financial instruments is limited to the relevant clearing-
house. Options written do not expose the Corporation to
credit risk, except to the extent of the underlying risk in a
financial instrument that the Corporation may be obligated
to acquire under certain written put options. Caps and
floors written do not expose the Corporation to credit risk.
The table on page 36, which is not included as part of
these audited financial statements, presents a reconcilia-
tion between the Corporation's gross credit exposure and
its balance sheet exposure for derivative financial instru-
ments as of December 31, 1994. Gross balance sheet expo-
sure as of December 31, 1993, was $3.6 billion for interest
rate contracts and $2.6 billion for foreign exchange con-
tracts. These amounts are overstated because they do not
reflect the offsetting of losses with the same counterparties
based on legally enforceable termination and netting rights.
On some derivative financial instruments, the Corpora-
tion may have additional risk. This is due to the underly-
ing risk in the financial instruments that the Corporation
is or may be obligated to acquire, and/or is due to settle-
ment exposure, i.e. the risk that the Corporation will
deliver under a contract but the customer will fail to
deliver the countervailing amount. The Corporation
believes its credit and settlement procedures minimize
these risks.
Not all derivative financial instruments have off-balance-
sheet market risk. Market risk associated with options pur-
chased and caps and floors purchased is recorded in the
balance sheet.
The tables on page 35 report the Corporation's gross no-
tional principal or contractual amounts of derivative finan-
cial instruments as of December 31, 1994, and December 31,
1993. These instruments include swaps, forwards, futures,
options, caps, floors, forward rate agreements and other
conditional or exchange contracts. The amounts do not
represent the market or credit risk associated with these
contracts but rather give an indication of the volume of
the transactions. The amounts exceed the credit risk asso-
ciated with these contracts and do not reflect the netting
of offsetting transactions.
Interest rate forward and futures contracts represent com-
mitments to either purchase or sell a financial instrument
at a specified future date for a specified price, and may be
settled in cash or through delivery.
An interest rate swap is an agreement in which two parties
agree to exchange, at specified intervals, interest payment
streams calculated on an agreed-upon notional principal
amount with at least one stream based on a specified float-
ing rate index. Certain agreements are combined interest
rate and foreign currency swap transactions.
First Chicago Corporation 59 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
Interest rate options are contracts that grant the purchaser,
for a premium payment, the right to either purchase or
sell a financial instrument at a specified price within a
specified period of time or on a specified date from the
writer of the option.
Interest rate caps and floors are contracts with notional
principal amounts that require the seller, in exchange for
a fee, to make payments to the purchaser if a specified
market interest rate exceeds the fixed cap rate or falls
below the fixed floor rate on specified future dates.
Forward rate agreements are contracts with notional prin-
cipal amounts that settle in cash at a specified future date
based on the differential between a specified market inter-
est rate and a fixed interest rate.
Foreign exchange contracts represent spot, forward, futures
and option contracts to exchange currencies.
Commodity price contracts represent swap, futures, cap,
floor and option contracts that derive their value from
underlying commodity prices.
Equity price contracts represent futures, cap, floor and
option contracts that derive their value from underlying
equity prices.
(f) Cash Financial Instruments
Securities sold not yet purchased are obligations to deliver
securities sold but not yet purchased. The face amount of
such securities totaled $1.036 billion at December 31, 1994,
and $776 million at December 31, 1993. The fair value of
these obligations is reflected in the balance sheet in other
funds borrowed. The fair value of such securities totaled
$972 million at December 31, 1994, and $757 million at
December 31, 1993.
- -------------------------------------------------------------
N O T E 16--Concentrations of Credit Risk
The Corporation's credit policies and processes empha-
size diversification of risk among industries, geographic
areas and borrowers. The following table shows the credit
risk associated with products described elsewhere in the
financial statements and footnotes, broken out by concen-
trations across all financial instruments. The amounts do
not consider the value of collateral held. Concentrations
of credit risk in excess of the Corporation's stockholders'
equity for each year-end are presented below.
- ------------------------------------------------------------
December 31 (In billions) 1994 1993
- ------------------------------------------------------------
Consumer................................ $73.4 $56.8
U.S. government......................... 14.0 9.6
Japanese banks.......................... 6.0 5.8
- ------------------------------------------------------------
Consumer risk results principally from credit cards. Other
major components include home mortgage, home equity
and other installment credit. U.S. government risk consists
primarily of U.S. government securities and balances due
from the Federal Reserve. Credit exposure to Japanese
banks is primarily short-term deposit placements. Geo-
graphic concentrations of credit risk are presented below.
- ------------------------------------------------------------
December 31 (Dollars in billions) 1994 1993
- ------------------------------------------------------------
U.S. .......................... $138 87% $118 87%
Foreign........................ 21 13 17 13
- ------------------------------------------------------------
First Chicago Corporation 60 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
N O T E 17--Estimated Fair Value of
Financial Instruments
This disclosure focuses primarily on the estimated fair
values of the Corporation's financial instruments. It does
not attempt to estimate or represent an estimate of the
Corporation's fair value as a whole. The only fair value
disclosure provided in addition to those made for the Cor-
poration's financial instruments pertains to credit card
securitizations; this disclosure is provided because the
interest rate risk exposure related to such securitizations is
reduced by financial instruments. The Corporation does
not plan to dispose of, either through sale or settlement,
the majority of its financial instruments at these estimated
fair values. The fair values disclosed represent point-in-
time estimates that may change in subsequent reporting
periods due to market conditions or other factors.
In general, a financial instrument's fair value is the amount
at which it could be exchanged in a current transaction
between willing parties, other than in a forced or liquida-
tion sale. Specific fair value measurement methodologies
used for each financial instrument category are discussed
beginning on page 62.
The following table summarizes the carrying amounts and
estimated fair values of financial instruments as of Decem-
ber 31, 1994 and 1993.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1994 1993
------------------------- -------------------------
Carrying Estimated Carrying Estimated
(In millions) Amount Fair Value Amount Fair Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and short-term financial instruments......................... $25,633 $25,633 $18,736 $18,736
Trading account assets............................................ 4,967 4,967 4,536 4,536
Investment securities............................................. 2,592 2,589 2,256 2,264
Total loans, net.................................................. 25,224 25,275 22,420 22,673
Other financial instruments....................................... 1,024 1,024 960 960
Currency options purchased........................................ -- -- 536 536
Derivative product assets:
Trading purposes (1)............................................ 4,351 4,351 -- --
Other than trading purposes..................................... 38 29 -- --
Total derivative product assets............................... 4,389 4,380 -- --
Off-balance-sheet derivative financial instruments, net........... -- -- 380 586
Liabilities
Deposits:
No stated maturity and foreign time............................. 26,517 26,517 23,261 23,261
Stated maturity--domestic time only............................. 5,149 5,065 4,925 4,984
Total deposits................................................ 31,666 31,582 28,186 28,245
Securities sold not yet purchased................................. 972 972 757 757
Other short-term financial instruments............................ 13,699 13,699 8,936 8,936
Other funds borrowed.............................................. 6,546 6,532 5,086 5,129
Long-term debt.................................................... 2,271 2,232 2,065 2,296
Currency options written.......................................... -- -- 501 501
Derivative product liabilities:
Trading purposes (1)............................................ 4,073 4,073 -- --
Other than trading purposes..................................... 24 277 -- --
Total derivative product liabilities.......................... 4,097 4,350 -- --
Off-balance-sheet exposure--nonfinancial instruments:
Credit card securitizations, net................................ 265 (60) 242 191
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The estimated average fair values of derivative financial instruments used
in trading activities during 1994 were $5.2 billion classified as assets
and $4.8 billion classified as liabilities.
First Chicago Corporation 61 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
(a) Financial Instruments Where Carrying Value
Approximates Fair Value
A financial instrument's carrying value approximates its
fair value in cases where the financial instrument is either
short-term in nature, has no stated maturity, is payable on
demand, or is carried at fair value. Additionally, the carry-
ing value of financial instruments that reprice frequently,
such as floating rate loans or debt, represents fair value
provided there has been no significant change in credit
quality or there is no embedded financial instrument with
significant value. The following financial instruments use
their carrying value to approximate fair value:
. Cash and short-term investments--includes cash and
due from banks--noninterest-bearing, due from banks--
interest-bearing, and federal funds sold and securities
under resale agreements
. Trading account assets
. Other financial instruments--includes assets held for
accelerated disposition, accrued interest receivable, and
customers' acceptance liability
. Currency options purchased
. Derivative product assets and liabilities--held for trad-
ing purposes
. Demand, savings and foreign office deposits
. Securities sold not yet purchased
. Other short-term financial instruments--includes federal
funds purchased and securities under repurchase agree-
ments, commercial paper and acceptances outstanding
. Currency options written
. Commitments to extend credit and letters of credit
The estimated fair values of trading account securities and
securities sold not yet purchased were generally based on
quoted market prices or dealer quotes. The estimated fair
values of derivative product assets and liabilities were
based on quoted market prices or pricing and valuation
models on a present value basis using current market
information.
The carrying amount of commitments to extend credit and
letters of credit is equal to their related fee receivable
and/or fees collected but not yet earned. The carrying
value of commercial real estate loans held for accelerated
disposition is based on their estimated liquidation value.
(b) Investment Securities
The estimated fair values of debt investment securities
were generally based on quoted market prices or dealer
quotes. See Notes 1 and 5 for information on methods for
estimating the fair value of equity investment securities,
including those held by venture capital subsidiaries.
(c) Loans
The discounted cash flow method was used to estimate
the fair value of commercial and consumer loans, except
for consumer mortgage loans that had fixed rates, medium-
or long-term maturity, and good credit quality. Discount
rates were selected corresponding to the nature of the loan
from either the commercial or consumer interest rates
offered or estimated market interest rates that reflect the
credit rate and interest rate risk inherent in the loans. Con-
tractual cash flows were used as the estimate of cash flows.
Commercial loans that have significantly deteriorated in
credit quality were separately valued. Estimated fair values
were based on a combination of quoted market prices for
distressed debt and troubled-country debtor loans, a dis-
counted cash flow method based on anticipated cash flows
and risk-adjusted interest rates, and estimated fair values
of loans with similar credit quality characteristics.
The estimated fair value of credit card receivables is face
value since the receivables are sold at their face amount.
The estimated fair values of consumer mortgage loans were
based on committed sales prices and a valuation model
using current market information.
The estimated fair value of leases, which are classified as
loans, is their carrying amount since a fair value estimate
is not a required disclosure.
(d) Deposits with Stated Maturities
The discounted cash flow method was used to estimate
the fair value of domestic medium- and long-term fixed
rate time deposits. Cash flows were estimated based on
underlying terms. The Corporation's current applicable
retail or wholesale interest rates that would be offered for
similar deposits with the same remaining maturities were
used as discount rates. The carrying value of foreign
medium- and long-term fixed rate time deposits was used
to approximate fair value, and is included in deposits
with no stated maturity since amounts involved were not
material.
First Chicago Corporation 62 Annual Report 1994
<PAGE>
- --------------------------------------------------------------------------------
(e) Other Funds Borrowed and Long-Term Debt
Commercial paper is included in other short-term finan-
cial instruments while securities sold not yet purchased
is separately reported since it is a trading activity (see
(a) above for fair value measurement methodology).
The discounted cash flow method was used to estimate
the fair value of fixed rate medium-term other funds bor-
rowed and long-term debt. Cash flows were based on the
contractual terms. The current applicable bank or corpo-
rate senior or subordinated interest rates that would be
offered for similar debt instruments with the same remain-
ing maturities were used as the discount rates.
The discounted cash flow method also was used to esti-
mate the fair value of floating rate long-term debt. Esti-
mated fair value was calculated by adjusting the carrying
value for the change in value attributable to the differ-
ence between the current market and contractual fixed
spreads to be added to the floating base rate upon each
rate setting and adding the value of an embedded interest
rate floor, if any. The current interest rates that would be
offered on the Corporation's subordinated fixed rate debt
were used as discount rates. An option pricing model,
using current market information, was used to calculate
the value of any embedded interest rate floors.
(f) Derivative Product Assets and Liabilities--
Other Than Trading Purposes
The estimated fair values of derivative product assets and
liabilities used for risk management purposes, primarily
interest rate swaps used by the Corporation to manage
its interest rate exposure, were based on quoted market
prices or pricing and valuation models on a present value
basis using current market information.
(g) Credit Card Securitizations
(Off-Balance-Sheet Exposure)
Floating and fixed rate credit card receivables sold as
securities to investors through a separate trust are not finan-
cial instruments of the Corporation. However, the Corpo-
ration uses financial instruments (see (f) above) to reduce
interest rate risk exposure attributable to these securitiza-
tions. Interest rate risk exposure exists with respect to the
amount of anticipated excess servicing fee income, which
fluctuates with interest rate movements. Accordingly, the
carrying value and the interest rate effect on estimated
servicing fee income are disclosed. The carrying value rep-
resents the reserve for credit losses related to securitized
credit card receivables and net deferred income. The inter-
est rate effect on excess servicing fee income represents
the difference between the par value and the quoted mar-
ket price of the securitized credit card receivables held by
investors.
Certain limitations are inherent to the above methodol-
ogies. As a result, disclosed fair values may not be the
amount realized in a current transaction between willing
parties. Specifically, quoted market prices may not be real-
ized because the financial instrument is traded in a mar-
ket that lacks liquidity; or a fair value derived using a
discounted cash flow approach may not be the amount
realized because of the subjectivity involved in selecting
underlying assumptions, such as projecting cash flows or
selecting a discount rate. The fair value amount also may
not be realized because it ignores transaction costs and
does not include potential tax effects. Additionally, esti-
mated fair values of certain financial instruments ignore
intangible value associated with the financial instrument;
for example, significant unrecognized value exists that is
attributable to the Corporation's credit card relationships
and core deposits.
- ------------------------------------------------------------
N O T E 18--Contingencies
The Corporation and certain of its subsidiaries are defend-
ants in various lawsuits, including certain class actions, aris-
ing out of normal corporate activities, and the Corporation
has received certain tax deficiency assessments. Since the
Corporation and certain of its subsidiaries, which are reg-
ulated by one or more federal and state regulatory author-
ities, also are the subject of numerous examinations and
reviews by such authorities, the Corporation is and will,
from time to time, normally be engaged in various dis-
agreements with regulators, related primarily to banking
matters. In the opinion of management and the Corpora-
tion's general counsel, the ultimate resolution of the mat-
ters referred to in this note will not have a material effect
on the Corporation's consolidated financial statements.
First Chicago Corporation 63 Annual Report 1994
<PAGE>
Report of Management on Responsibility
for Financial Reporting
First Chicago Corporation and Subsidiaries
- --------------------------------------------------------------------------------
To the Stockholders of First Chicago Corporation:
Financial Statements
The Management of First Chicago Corporation and its
subsidiaries is responsible for the preparation, integrity
and objectivity of the financial statements and footnotes
contained in this Annual Report. The financial statements
have been prepared in accordance with generally accepted
accounting principles and are free from material fraud or
error. The other financial information in the Annual
Report is consistent with the financial statements. Where
financial information must of necessity be based upon esti-
mates and judgments, they represent the best estimates
and judgments of Management.
The Corporation's financial statements have been audited
by Arthur Andersen LLP, independent public accountants,
whose appointment is ratified by the stockholders. The
independent public accountants' responsibility is to express
an opinion on the Corporation's financial statements.
As described further in the report that follows, their opin-
ion is based on their audit, which was conducted in accor-
dance with generally accepted auditing standards and is
believed by them to provide a reasonable basis for their
opinion. Management has made available to Arthur
Andersen LLP all of the Corporation's financial records
and related data. Furthermore, Management believes that
all representations made to Arthur Andersen LLP during
their audit were valid and appropriate.
Internal Control Structure Over Financial Reporting
Management is also responsible for establishing and main-
taining the Corporation's internal control structure that
provides reasonable, but not absolute, assurance as to the
integrity and reliability of the financial statements. Man-
agement continually monitors the internal control struc-
ture for compliance with established policies and proce-
dures. The Corporation maintains a strong internal audit-
ing program that independently assesses the effectiveness
of the internal control structure. The Audit Committee
of the Board of Directors, composed entirely of outside
Directors, oversees the Corporation's financial reporting
process on behalf of the Board of Directors and has
responsibility for recommending the independent public
accountants for the Corporation who are appointed by
the Board of Directors. The Audit Committee reviews with
the independent public accountants the scope of their
audit and audit reports and meets with them on a sched-
uled basis to review their findings and any action to be
taken thereon. In addition, the Committee meets with the
internal auditors and with Management to review the
scope and findings of the internal audit program and any
actions to be taken by Management. The independent
public accountants and the internal auditors meet peri-
odically with the Committee without Management being
present.
Management also recognizes its responsibility for fostering
a strong ethical climate so that its affairs are conducted
according to the highest standards of personal and cor-
porate conduct. This responsibility is characterized and
reflected in the Corporation's integrity policy, which is
publicized throughout the Corporation. The policy
addresses, among other things, the necessity of ensuring
open communication within the Corporation; potential
conflicts of interest; compliance with all domestic and
foreign laws, including those relating to financial disclo-
sure; and the confidentiality of proprietary information.
The Corporation maintains a systematic program to assess
compliance with these policies.
There are inherent limitations in the effectiveness of any
internal control structure, including the possibility of
human error or the circumvention or overriding of con-
trols. Accordingly, even an effective internal control struc-
ture can provide only reasonable assurance with respect to
reliability of financial statements, and safeguarding of
assets. Furthermore, because of changes in conditions,
internal control structure effectiveness may vary over time.
The Corporation assessed its internal control structure
over financial reporting as of December 31, 1994, in rela-
tion to the criteria described in the ``Internal Control--
Integrated Framework'' issued by the Committee of Spon-
soring Organizations of the Treadway Commission. Based
on this assessment, the Corporation believes that as of
December 31, 1994, in all material respects, the Corpora-
tion maintained an effective internal control structure
over financial reporting.
/s/ R. L. Thomas
Richard L. Thomas
Chairman and Chief Executive Officer
/s/ Robert A. Rosholt
Robert A. Rosholt
Executive Vice President and
Chief Financial Officer
First Chicago Corporation 64 Annual Report 1994
<PAGE>
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Stockholders and the Board of Directors
of First Chicago Corporation:
We have audited the accompanying consolidated balance
sheet of First Chicago Corporation (a Delaware corpora-
tion) and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of income,
changes in stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the
Corporation's management. Our responsibility is to
express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assur-
ance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclo-
sures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial posi-
tion of First Chicago Corporation and subsidiaries as of
December 31, 1994 and 1993, and the results of their oper-
ations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As explained in Note 1(c) and 1(q) to the consolidated
financial statements, effective January 1, 1992, the Corpo-
ration changed its methods of accounting for the valuation
of venture capital investment securities and recognition
of certain credit card solicitation costs.
Chicago, Illinois /s/ Arthur Andersen LLP
January 17, 1995
First Chicago Corporation 65 Annual Report 1994
<PAGE>
Selected Statistical Information
First Chicago Corporation and Subsidiaries
- --------------------------------------------------------------------------------
Securitization of Credit Card Receivables
Since 1987, the Corporation has actively packaged and sold
credit card assets as securities to investors. The securitiza-
tion of credit card receivables is an effective balance sheet
management tool since capital is freed for other uses. In
addition, while such securitizations affect net interest
income, the provision for credit losses and noninterest
income, the Corporation's net income is essentially
unaffected.
The Corporation's First Card unit continues to service
credit card accounts even after receivables are securitized.
The Corporation no longer recognizes net interest income
and certain fee revenue on the securitized portfolio; how-
ever, this is offset by servicing fees as well as by lower
provisions for credit losses.
At year-end 1994, $6.1 billion in credit card receivables
was securitized, compared with $5.0 billion at year-end
1993.
For analytical purposes only, the following table shows in-
come statement line items for the Corporation adjusted for
the net impact of securitization of credit card receivables.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1994 1993
Credit Card Credit Card
(In millions) Reported Securitizations Adjusted Reported Securitizations Adjusted
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net interest income--
tax-equivalent basis................. $ 1,355 $ 550 $ 1,905 $ 1,264 $ 471 $ 1,735
Provision for credit losses............ 224 253 477 270 234 504
Noninterest income..................... 1,875 (297) 1,578 2,202 (237) 1,965
Noninterest expense.................... 1,919 -- 1,919 1,858 -- 1,858
Net income............................. 690 -- 690 804 -- 804
Assets--year-end....................... $65,900 $6,117 $72,017 $52,560 $4,958 $57,518
--average........................ 64,138 5,538 69,676 56,854 4,839 61,693
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock and Stockholder Data 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Market price
High for the year................................. $55-1/2 $50-5/8 $37-3/4 $28-3/4 $38-1/4
Low for the year.................................. 41-1/8 35-1/2 22-7/8 15-5/8 13-1/8
At year-end....................................... 47-3/4 43-1/4 36-3/4 24-5/8 16-1/2
Dividend payout ratio............................... 28% 15% 188% 174% 60%
Price/earnings multiple (year-end market)........... 6.8 4.9 57.4 21.4 4.9
Book value (at year-end)............................ $43.65 $40.55 $33.19 $34.90 $36.27
Market price/book value (at year-end)............... 109% 107% 111% 71% 45%
Number of common stockholders of record............. 14,773 15,034 15,995 13,089 12,445
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------------------------------------------
Record Cents
Common Dividends Declared Date Payable Per Share
- ----------------------------------------------------------------------
2/10/95 3/3/95 4/1/95 55
11/11/94 12/2/94 1/1/95 55
7/8/94 9/2/94 10/1/94 50
5/13/94 6/3/94 7/1/94 50
2/11/94 3/4/94 4/1/94 40
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Record Cents
Common Dividends Declared Date Payable Per Share
- ----------------------------------------------------------------------
11/12/93 12/3/93 1/1/94 40
7/9/93 9/3/93 10/1/93 30
5/14/93 6/4/93 7/1/93 30
2/12/93 3/5/93 4/1/93 30
11/13/92 12/11/92 1/1/93 30
- ----------------------------------------------------------------------
First Chicago Corporation 66 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Quarterly Data
Quarterly Earnings and Market Price Summary
- ------------------------------------------------------------------------------------------------------------------------------------
Stock Market Price/Earnings
Net Income Price Range (1) Multiple Range (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Per
(In millions) Share Low High Low High
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994
First quarter............................... $ 193.8 $2.05 $41-1/8 $52-3/8 4.7 5.9
Second quarter.............................. 168.7 1.71 46-5/8 55-1/2 5.4 6.4
Third quarter............................... 153.8 1.54 45-1/2 52-1/4 6.4 7.3
Fourth quarter.............................. 173.4 1.76 42-5/8 50-1/4 6.1 7.1
Year................................ 689.7 7.04 41-1/8 55-1/2 5.8 7.9
- ------------------------------------------------------------------------------------------------------------------------------------
1993
First quarter............................... $179.1 $1.97 $36 $44-3/4 N/M N/M
Second quarter.............................. 168.5 1.81 35-1/2 45-3/8 62.3 79.6
Third quarter............................... 284.1 3.14 40-7/8 49-1/4 4.8 5.8
Fourth quarter.............................. 172.8 1.81 40-7/8 50-5/8 4.7 5.8
Year................................ 804.5 8.78 35-1/2 50-5/8 4.0 5.8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The principal market for First Chicago Corporation common stock is the New
York Stock Exchange.
(2) Computation made by dividing market prices by primary per share earnings for
the latest 12-month period ending with the current quarter.
N/M--Not meaningful.
<TABLE>
<CAPTION>
Consolidated Summary of Quarterly Financial Information
- ------------------------------------------------------------------------------------------------------------------------------------
1994 (In millions, except per share data) December 31 September 30 June 30 March 31
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income............................................. $939.4 $844.2 $757.8 $678.6
Net interest income......................................... 333.2 334.4 332.8 330.6
Combined credit provisions.................................. 76.7 56.0 42.8 50.2
Noninterest income (1)...................................... 486.5 457.3 428.2 501.4
Investment securities gains (losses)........................ 2.3 (2.2) 0.6 0.5
Noninterest expense (2)..................................... 481.4 490.4 460.8 484.3
Net income.................................................. 173.4 153.8 168.7 193.8
Earnings per share
Primary..................................................... $1.76 $1.54 $1.71 $2.05
Fully diluted............................................... 1.72 1.51 1.67 2.00
- ------------------------------------------------------------------------------------------------------------------------------------
1993 (In millions, except per share data) December 31 September 30 June 30 March 31
- ------------------------------------------------------------------------------------------------------------------------------------
Interest income............................................. $647.7 $668.7 $648.5 $659.2
Net interest income......................................... 300.7 323.1 303.2 298.8
Combined credit provisions.................................. 71.2 66.5 71.0 65.5
Noninterest income (1)...................................... 522.1 686.2 503.3 490.5
Investment securities gains (losses)........................ 0.9 (0.8) 0.2 --
Noninterest expense (2)..................................... 480.7 474.0 465.6 433.6
Net income.................................................. 172.8 284.1 168.5 179.1
Earnings per share
Primary..................................................... $1.81 $3.14 $1.81 $1.97
Fully diluted............................................... 1.77 2.97 1.72 1.91
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes investment securities gains (losses).
(2) Excludes provision for other real estate.
First Chicago Corporation 67 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Average Balances/Net Interest Margin/Rates
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
(Income and rates on tax-equivalent basis) Average Average Average Average
(Dollars in millions) Balance Interest Rate Balance Interest Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Due from banks--interest-bearing (1).............. $ 7,845 $ 361.7 4.61% $ 7,441 $ 298.0 4.00%
Federal funds sold and securities under
resale agreements............................... 14,148 615.2 4.35 11,589 344.8 2.98
Trading account assets............................ 4,785 279.5 5.84 4,729 223.7 4.73
Investment securities
U.S. government and federal agency.............. 727 32.7 4.50 725 29.7 4.10
States and political subdivisions............... 167 14.9 8.92 216 19.7 9.12
Other........................................... 1,643 29.7 1.81 1,537 33.8 2.20
------- -------- ----- ------- -------- ----
Total investment securities............... 2,537 77.3 3.05 2,478 83.2 3.36
Loans (2)(3)
Domestic offices................................ 21,545 1,785.0 8.57 19,935 1,539.5 7.95
Foreign offices................................. 1,748 123.0 7.04 2,062 145.3 7.05
------- -------- ----- ------- -------- ----
Total loans............................... 23,293 1,908.0 8.45 21,997 1,684.8 7.86
Assets held for accelerated disposition (4)....... 19 2.5 13.16 283 27.8 9.82
------- -------- ----- ------- -------- ----
Total earning assets (5).......................... 52,627 3,244.2 6.17 48,517 2,662.3 5.49
Cash and due from banks--noninterest-bearing...... 4,181 3,812
Allowance for credit losses....................... (698) (628)
Other assets...................................... 8,028 5,153
------- -------
Total assets.............................. $64,138 $56,854
======= =======
Liabilities and Stockholders' Equity
Deposits--interest-bearing
Savings......................................... $ 8,022 $ 188.6 2.35% $ 8,093 $ 162.8 2.01%
Time............................................ 4,688 167.8 3.58 5,401 143.9 2.66
Foreign offices (6)............................. 9,648 423.1 4.39 9,203 337.4 3.67
------- -------- ----- ------- -------- ----
Total deposits--interest-bearing.......... 22,358 779.5 3.49 22,697 644.1 2.84
Federal funds purchased and securities
under repurchase agreements..................... 12,290 526.2 4.28 10,112 308.1 3.05
Commercial paper.................................. 175 7.7 4.40 194 6.1 3.14
Other funds borrowed.............................. 8,321 405.5 4.87 6,849 289.7 4.23
Long-term debt.................................... 2,255 170.1 7.54 2,057 150.3 7.31
------- -------- ----- ------- -------- ----
Total interest-bearing liabilities........ 45,399 1,889.0 4.16 41,909 1,398.3 3.34
Demand deposits................................... 7,072 6,980
Other liabilities................................. 7,224 4,079
Preferred stock................................... 686 794
Common stockholders' equity....................... 3,757 3,092
------- -------
Total liabilities and
stockholders' equity.................... $64,138 $56,854
======= =======
Interest income/earning assets (5)................ $3,244.2 6.17 $2,662.3 5.49
Interest expense/earning assets................... 1,889.0 3.59 1,398.3 2.88
-------- ----- -------- ----
Net interest margin............................... $1,355.2 2.58% $1,264.0 2.61%
======== ===== ======== ====
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Principally balances in overseas offices.
(2) Rates are calculated on average lease-financing receivable balances reduced
by deferred liability for taxes.
(3) Nonperforming loans are included in average balances used to determine
rates.
First Chicago Corporation 68 Annual Report 1994
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 7,376 $ 358.0 4.85% $ 6,543 $ 476.2 7.28% $ 5,988 $ 524.4 8.76%
8,202 284.8 3.47 5,683 329.3 5.79 4,531 368.6 8.14
4,339 260.2 6.00 3,159 230.9 7.31 2,261 188.3 8.33
521 30.4 5.83 447 34.1 7.63 552 44.3 8.03
270 25.0 9.26 324 30.2 9.32 529 50.0 9.45
1,452 31.1 2.14 1,075 44.3 4.12 1,032 37.5 3.63
------- -------- ---- ------- -------- ---- ------- -------- -----
2,243 86.5 3.86 1,846 108.6 5.88 2,113 131.8 6.24
21,735 1,689.4 7.95 24,027 2,202.1 9.38 26,522 2,868.2 11.04
2,612 207.2 7.93 3,254 295.4 9.08 4,087 435.9 10.67
------- -------- ---- ------- -------- ---- ------- -------- -----
24,347 1,896.6 7.95 27,281 2,497.5 9.35 30,609 3,304.1 10.99
199 17.5 8.79 -- -- -- -- -- --
------- -------- ---- ------- -------- ---- ------- -------- -----
46,706 2,903.6 6.22 44,512 3,642.5 8.18 45,502 4,517.2 9.93
3,338 2,961 2,787
(709) (836) (962)
5,433 6,018 5,770
------- ------- -------
$54,768 $52,655 $53,097
======= ======= =======
$ 7,634 $ 202.2 2.65% $ 6,005 $ 265.3 4.42% $ 4,902 $ 277.1 5.65%
7,567 307.0 4.06 10,164 678.6 6.68 9,563 763.5 7.98
10,357 464.5 4.48 11,415 770.0 6.75 14,567 1,251.4 8.59
------- -------- ---- ------- -------- ---- ------- -------- -----
25,558 973.7 3.81 27,584 1,713.9 6.21 29,032 2,292.0 7.89
9,905 345.3 3.49 7,438 428.2 5.76 7,240 593.2 8.19
231 8.8 3.81 210 13.8 6.57 719 59.7 8.30
4,041 231.9 5.74 3,310 240.4 7.26 2,565 207.3 8.08
1,735 126.9 7.31 1,589 128.3 8.07 1,380 123.2 8.93
------- -------- ---- ------- -------- ---- ------- -------- -----
41,470 1,686.6 4.07 40,131 2,524.6 6.29 40,936 3,275.4 8.00
6,136 5,235 5,181
3,848 4,351 4,218
581 507 419
2,733 2,431 2,343
------- ------- -------
$54,768 $52,655 $53,097
======= ======= =======
$2,903.6 6.22 $3,642.5 8.18 $4,517.2 9.93
1,686.6 3.61 2,524.6 5.67 3,275.4 7.20
-------- ---- -------- ---- -------- -----
$1,217.0 2.61% $1,117.9 2.51% $1,241.8 2.73%
======== ==== ======== ==== ======== ====
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(4) Excludes other real estate held for accelerated disposition.
(5) Includes tax-equivalent adjustments based on 35% federal income tax rate of
$24.2 million for 1994, $38.2 million for 1993, and tax-equivalent
adjustments based on 34% federal income tax rate of $34.0 million for 1992,
$37.9 million for 1991, and $44.2 million for 1990.
(6) Includes International Banking Facilities' deposit balances in domestic
offices and balances of Edge Act and overseas offices.
First Chicago Corporation 69 Annual Report 1994
<PAGE>
Executive Officers of the Corporation
Richard L. Thomas
Chairman of the Board and Chief Executive Officer
Leo F. Mullin
President and Chief Operating Officer
David J. Vitale
Vice Chairman of the Board and
Senior Risk Management Officer
Marvin James Alef, Jr.
Executive Vice President
Human Resources and Administration
John W. Ballantine
Executive Vice President
Corporate and Institutional Banking
Sherman I. Goldberg
Executive Vice President, General Counsel and
Secretary
Thomas H. Hodges
Executive Vice President
Corporate and Institutional Banking
Donald R. Hollis
Executive Vice President
Corporate and Institutional Banking
W.G. Jurgensen
Executive Vice President
Community Banking
Scott P. Marks, Jr.
Executive Vice President
First Card
Robert A. Rosholt
Executive Vice President and
Chief Financial Officer
First Chicago Corporation 70 Annual Report 1994
<PAGE>
U.S. Offices and International Facilities
Community Banking Group
The First National Bank of Chicago
Locations
Antioch Glen Ellyn Oak Park
Arlington Heights Glendale Heights Orland Park
Aurora Glenview Palatine
Batavia Highland Park Park Ridge
Berwyn Hinsdale River Forest
Bloomingdale Hoffman Estates River Grove
Bolingbrook Joliet Romeoville
Carol Stream Lake Forest Schiller Park
Chicago Lake Zurich St. Charles
Deerfield Lansing Warrenville
Downers Grove Mount Prospect Wheaton
Elgin Naperville Willowbrook
Elk Grove Village Niles Wilmette
Elmhurst Northbrook Winnetka
Elmwood Park Oak Brook Woodridge
Evanston Oak Lawn Worth
Mortgage Servicing
Oakbrook Terrace, Ill.
American National Corporation
Banking Subsidiaries
American National Bank and Trust Company of
Chicago
American National Bank and Trust Company of
Wisconsin
Locations
Arlington Heights Libertyville Genoa City, Wis.
Bensenville Lisle Milwaukee, Wis.
Chicago Matteson Pell Lake, Wis.
Deerfield Melrose Park Grand Cayman
Des Plaines Skokie
Elgin Willowbrook
First Card
FCC National Bank
Operations Centers
Elgin, Ill. Uniondale, N.Y. Wilmington, Del.
- ----------------------------------------------------------------
Corporate Trust and Security Services Offices
Chicago London New York
Edison, N.J. Newport, N.J.
Debt Trading Offices
Buenos Aires London New York
Edge Act Offices
Chicago Los Angeles New York
International Banking Offices
Beijing London Sydney
Cayman Islands New York Taipei
Chicago Seoul Tokyo
Hong Kong Singapore
Leasing Office
Chicago
National Processing Centers
Charlotte, N.C. Dallas Secaucus, N.J.
Chicago Pasadena Valley Forge, Pa.
Regional Offices
Atlanta Houston Washington, D.C.
Boston Los Angeles
Cleveland New York
First Chicago Corporation 71 Annual Report 1994
<PAGE>
Corporate Information
First Chicago Corporation, a multibank holding
company, provides a broad range of banking, fidu-
ciary, financial and other services domestically and
overseas. Its principal subsidiary, The First National
Bank of Chicago, was founded in 1863 and is the
oldest, largest national bank still operating under its
original name and charter. With pride in this historic
base, First Chicago is committed to understanding
and satisfying the financial needs of its various
customers, thereby extending its position as:
. The leading bank for consumers and for small and
medium-sized businesses in the Chicago metro-
politan area.
. A leading competitor in serving consumers nation-
ally through credit cards and other direct delivery
systems.
. A leading provider of sophisticated financial
services to large corporate and institutional cus-
tomers in the United States and in selected inter-
national markets.
Headquarters
One First National Plaza, Chicago, IL 60670.
(312) 732-4000.
Annual Meeting
The Annual Meeting of Stockholders of First Chicago
Corporation will be held on Friday, April 21, 1995,
at 9:30 a.m. (Chicago time) in the First Chicago
Center, One First National Plaza.
Stock Listing
First Chicago Corporation common stock is listed
on the Chicago, New York, Pacific and London stock
exchanges. Symbol: FNB.
Stock Transfer Agent and Registrar
First Chicago Trust Company of New York, P.O. Box
2500, Jersey City, NJ 07303-2500. 1-800-446-2617.
Internet: FCTC @ Delphi.com
Stockholder Inquiries
Stockholders who have questions about stock trans-
fers, changes of address, dividend payments or lost
certificates should contact First Chicago Trust
Company of New York.
Dividend Direct Deposit
First Chicago offers common stockholders the
convenience of having dividends electronically
deposited without charge into their checking, savings
or money market account at most U.S. financial
institutions. To obtain an enrollment card, contact
First Chicago Trust Company of New York.
Dividend Reinvestment and Stock Purchase Plan
Stockholders can increase their ownership in the
Corporation without brokerage commissions or
service fees through the Dividend Reinvestment
and Stock Purchase Plan. For a prospectus and an
enrollment card, contact First Chicago Trust
Company of New York.
Form 10-K and Other Financial Reports
Single copies of this Annual Report, the Corpo-
ration's Annual Report on Form 10-K as filed with
the Securities and Exchange Commission, and
Quarterly Earnings Releases may be obtained from
Corporate Communications, First Chicago Corpora-
tion, Mail Suite 0358, Chicago, IL 60670-0358.
(312) 732-6204.
Investor Relations
Analysts and investors seeking additional financial
information should contact Investor Relations, First
Chicago Corporation, Mail Suite 0460, Chicago, IL
60670-0460. (312) 732-8013 or (312) 732-4812.
Independent Accountants
Arthur Andersen LLP, 33 W. Monroe St., Chicago,
IL 60603-5385.
(C) 1995 First Chicago Corporation
Printed in the U.S.A. on recycled paper (recycle symbol here)
First Chicago Corporation 72 Annual Report 1994
<PAGE>
[LOGO OF FIRST CHICAGO CORPORATION]
FIRST CHICAGO
CORPORATION
One First National Plaza
Chicago, Illinois 60670
<PAGE>
Appendix to First Chicago Corporation 1994 Annual Report to Stockholders
(Electronic Format)
Descriptions of Photographs
Page 5--Photograph of the Corporation's Inside Directors (left to right):
President Leo F. Mullin, Chairman Richard L. Thomas, Vice Chairman David J.
Vitale.
Page 6, lower left--Photograph of doctor checking pregnant woman's blood
pressure.
Page 6, upper right--Photograph of man standing behind computer monitor at which
woman is seated, back to camera.
Page 7--Photograph of woman working at desk.
Page 8--Photograph of three people in balloon and party goods store.
Page 9--Photograph of man and woman with three children in playroom of social
services agency.
Page 10--Photograph of man handing creditcard to store owner.
Page 13--Photograph of woman and man in book-lined office.
Page 14, lower left--Photograph of three foreign exchange traders on trading
floor.
Page 14, upper right--Photograph of man and woman looking at catalog.
Page 15--Photograph of two men on loading dock.
<PAGE>
EXHIBIT 21.
SUBSIDIARIES
As of December 31, 1994, the Corporation had the subsidiaries listed below,
all of which were wholly owned except for directors' qualifying shares or as
otherwise indicated below. The consolidated financial statements of the
Corporation include the accounts of all such subsidiaries.
<TABLE>
<CAPTION>
JURISDICTION OF
NAMES OF CORPORATION AND SUBSIDIARIES INCORPORATION
- ------------------------------------- ---------------
<S> <C>
First Chicago Corporation Delaware
Subsidiaries:
FCC National Bank United States
First Capital Corporation of Chicago Illinois
First Chicago Financial Corporation Delaware
Subsidiaries:
First Chicago Capital Markets, Inc. Delaware
First Chicago Investment Corporation Delaware
First Chicago Leasing Corporation Delaware
First Chicago Trust Company of New York New York
The First National Bank of Chicago United States
Subsidiaries:
First Chicago Building Corporation Illinois
First Chicago Futures, Inc. Delaware
First Chicago Investment Management Company Delaware
Subsidiary:
ANB Investment Management and Trust Company Illinois
First Chicago Investment Services, Inc. Delaware
First Chicago National Processing Corporation Delaware
First Chicago International United States
First Chicago International Finance Corporation United States
American National Corporation Delaware
Subsidiaries:
American National Bank and Trust Company United States
of Chicago
ANB Mezzanine Corporation Delaware
</TABLE>
The names of certain other subsidiaries of the Corporation have been omitted
because such subsidiaries, considered in the aggregate, would not constitute a
significant subsidiary.
<PAGE>
EXHIBIT 23.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Chicago Corporation:
As independent public accountants, we hereby consent to the incorporation of
our report dated January 17, 1995, incorporated by reference in the Form 10-K,
into the Corporation's previously filed Form S-8 Registration Statement No. 2-
83105, Form S-8 Registration Statement No. 2-68153, Form S-3 Registration
Statement No. 2-76715, Form S-3 Registration Statement No. 2-77079, Form S-3
Registration Statement No. 2-92143, Form S-3 Registration Statement No. 33-
4681, Form S-8 Registration Statement No. 33-15779, Form S-3 Registration
Statement No. 33-16843, Form S-8 Registration Statement No. 33-26788, Form S-8
Registration Statement No. 33-22583, Form S-3 Registration Statement No. 33-
27403, Form S-8 Registration Statement No. 33-34292, Form S-3 Registration
Statement No. 33-34988, Form S-3 Registration Statement No. 33-37717, Form S-8
Registration Statement No. 33-41272, Form S-3 Registration Statement No. 33-
42031, Form S-8 Registration Statement No. 33-50574, Form S-3 Registration
Statement No. 33-51408, Form S-3 Registration Statement No. 33-65904, Form S-8
Registration Statement No. 33-51713 and Form S-8 Registration Statement No. 33-
52259.
/s/ Arthur Andersen LLP
Chicago, Illinois,
March 17, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,265
<INT-BEARING-DEPOSITS> 8,066
<FED-FUNDS-SOLD> 13,302
<TRADING-ASSETS> 4,967
<INVESTMENTS-HELD-FOR-SALE> 730<F1>
<INVESTMENTS-CARRYING> 456<F1>
<INVESTMENTS-MARKET> 453<F1>
<LOANS> 25,947
<ALLOWANCE> (723)
<TOTAL-ASSETS> 65,900
<DEPOSITS> 31,666
<SHORT-TERM> 20,691
<LIABILITIES-OTHER> 2,116
<LONG-TERM> 2,271
<COMMON> 466
0
611
<OTHER-SE> 3,456<F2>
<TOTAL-LIABILITIES-AND-EQUITY> 65,900
<INTEREST-LOAN> 1,897
<INTEREST-INVEST> 68
<INTEREST-OTHER> 977
<INTEREST-TOTAL> 3,220
<INTEREST-DEPOSIT> 780
<INTEREST-EXPENSE> 1,889
<INTEREST-INCOME-NET> 1,331
<LOAN-LOSSES> 224
<SECURITIES-GAINS> 1<F3>
<EXPENSE-OTHER> 1,919<F4>
<INCOME-PRETAX> 1,063
<INCOME-PRE-EXTRAORDINARY> 690
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 690
<EPS-PRIMARY> 7.04
<EPS-DILUTED> 6.88
<YIELD-ACTUAL> 2.58
<LOANS-NON> 126
<LOANS-PAST> 89
<LOANS-TROUBLED> 4
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 683
<CHARGE-OFFS> 242
<RECOVERIES> 91
<ALLOWANCE-CLOSE> 723
<ALLOWANCE-DOMESTIC> 668
<ALLOWANCE-FOREIGN> 55
<ALLOWANCE-UNALLOCATED> 0<F5>
<FN>
<F1> In addition to the investment securities disclosed in this Financial Data
Schedule, the Corporation has investment securities in its venture capital
business. These securities had a carrying value of $1.4 billion as of
December 31, 1994.
<F2> Treasury stock of $157 million is included as a reduction of other
stockholders' equity.
<F3> Investment securities gains/losses do not include the Corporation's equity
securities gains which totalled $229 million.
<F4> Other expenses includes: Salaries and Employee benefit expense of $869
million, Occupancy expense of $137 million, Equipment rentals,
depreciation and maintenance expense of $157 million and other expenses
which totalled $756 million.
<F5> Allowance-Unallocated is included in Allowance-Domestic and
Allowance-Foreign.
</FN>
</TABLE>
