<PAGE> 1
[NATIONAL CITY LOGO] 1994 ANNUAL REPORT
PROUD
OF OUR
PAST
*
PREPARED
FOR OUR
FUTURE
<PAGE> 2
<TABLE>
CONTENTS
<S> <C>
Financial Highlights 1
Letter to Stockholders 2
Financial Review 5
Statistical Data 19
Quarterly Data 22
Financial Statements 24
Notes to Financial Statements 28
Form 10-K 39
Corporate Directory 44
Board of Directors/Officers 46
</TABLE>
ANNUAL MEETING
The Annual Meeting of
Stockholders will be on Monday,
April 24, 1995, at 10:00 a.m.:
National City Corporation
1900 East Ninth Street, 4th Floor
Cleveland, Ohio 44114
<TABLE>
Although it was National City Bank in Cleveland that was officially
chartered on May 17, 1845, all of National City's member banks and companies
have contributed to the rich history of our Corporation.
<S> <C>
NATIONAL CITY FOUNDING DATES
National City Bank - Cleveland May 17, 1845
National City Bank, Columbus September 19, 1929
National City Bank, Northeast - Akron August 1, 1933
National City Bank, Dayton January 20, 1871
National City Bank, Northwest - Toledo March 28, 1932
National City Bank, Ashland January 4, 1864
National City Bank, Kentucky October 22, 1863
National City Bank, Lexington March 15, 1883
National City Bank, Indiana March 9, 1865
National City Bank, Southern Indiana - New Albany April 20, 1904
Madison Bank & Trust Company July 10, 1833
</TABLE>
The combined family of banks and financial service companies form our singular,
unified vision:
National City Corporation will be the premier diversified financial services
company in the Midwest by providing our customers with advice, information and
services to meet their financial needs. By doing so, we will achieve superior
levels of financial performance as compared to our peers and will provide
stockholders with an attractive return on their investment over time.
<PAGE> 3
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
(Dollars in Thousands Except Per Share Amounts) 1994 1993 Percent Change
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 429,434 $ 403,997 6%
Preferred Dividend Requirements . . . . . . . . . . . . . . . . 15,200 15,966 (5)
Net Income Applicable to Common Stock . . . . . . . . . . . . . 414,234 388,031 7
Net Income Per Common Share . . . . . . . . . . . . . . . . . . 2.70 2.41 12
Dividends Paid Per Common Share . . . . . . . . . . . . . . . . 1.18 1.06 11
Return on Average Common Equity . . . . . . . . . . . . . . . . 17.06% 16.12%
Return on Average Assets . . . . . . . . . . . . . . . . . . . . 1.40 1.40
Net Interest Margin . . . . . . . . . . . . . . . . . . . . . . 4.65% 4.80%
Efficiency Ratio . . . . . . . . . . . . . . . . . . . . . . . . 66.21 66.21
Overhead Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 43.46 44.34
AT YEAR END:
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,114,008 $ 31,067,709 3%
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,034,775 21,286,141 8
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,395,055 5,166,226 (15)
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,471,920 23,063,021 6
Common Stockholders' Equity . . . . . . . . . . . . . . . . . . . 2,413,514 2,564,957 (6)
Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . 2,601,054 2,763,267 (6)
Equity to Assets Ratio . . . . . . . . . . . . . . . . . . . . . 8.10% 8.89%
Tier 1 Capital Ratio . . . . . . . . . . . . . . . . . . . . . . 8.45 8.94
Total Risk-Based Capital Ratio . . . . . . . . . . . . . . . . . 11.68 11.62
Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 7.82 8.18
Book Value Per Common Share . . . . . . . . . . . . . . . . . . . $ 16.36 $ 16.15 1%
Market Value Per Common Share . . . . . . . . . . . . . . . . . . 25.88 24.50 6
Common Shares Outstanding . . . . . . . . . . . . . . . . . . . . 147,555,632 158,779,611 (7)
Common Stockholders of Record . . . . . . . . . . . . . . . . . . 21,739 20,842 4
Full-Time Equivalent Employees . . . . . . . . . . . . . . . . . 20,306 19,960 2
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
CORPORATE PROFILE
National City Corporation is a $32 billion bank holding company headquartered in Cleveland, Ohio.
The Corporation's principal banking subsidiaries are located in Cleveland, Columbus, Indianapolis, and Louisville.
The Corporation also has a major banking presence in Akron, Dayton, Lexington, Toledo and Youngstown.
National City subsidiaries and divisions offer a wide range of other financial services, such as credit card,
retail payment and airline ticket processing, brokerage services, trust and investment management, leasing, merchant banking,
mortgage banking, public finance, venture capital, small business and community investment, and credit life insurance.
</TABLE>
1
<PAGE> 4
TO OUR STOCKHOLDERS
We are pleased to report that National City once again had record
earnings in 1994. Net income was $429.4 million, or $2.70 per common share in
1994 compared with $404.0 million, or $2.41 per common share in 1993, an
increase of 12 percent per share. Return on average assets was 1.40 percent,
unchanged from 1993, and return on common equity rose to 17.06 percent, compared
with 16.12 percent a year ago. The higher earnings and returns were a direct
result of excellent asset quality, loan growth, active capital management,
proper management of interest rate risk and tight control of overhead expenses.
Pictures from left
EDWARD B. BRANDON
Chairman and Chief
Executive Officer
DAVID A. DABERKO
President and
Chief Operating Officer
WILLIAM R. ROBERTSON
Deputy Chairman
CAPITAL MANAGEMENT
National City is committed to enhancing stockholder value through
effective capital management. The efforts we have made in this regard have been
applauded by the market and have placed National City at the forefront of the
banking industry. This strategy is particularly important in an environment
where internal capital generation exceeds balance sheet growth.
The combination of a solid capital base and strong earnings has enabled
National City to conduct a number of successful stock repurchase programs in
1993 and 1994. These programs have the effect of increasing earnings per share
and returns on equity, as net income is distributed over a smaller number of
shares outstanding. In 1994 alone, 12.4 million common shares were repurchased,
representing almost 8 percent of year-end 1993 outstanding shares.
We have also increased the quarterly dividend, most recently in January
1995, to $.32 per share, following two dividend increases each in 1993 and
1994. The new quarterly dividend indicates an annual rate of $1.28 per share,
over 10 percent higher than a year ago. National City's total return, assuming
reinvestment of dividends, has significantly outperformed the Standard & Poor's
500 Index over the past 20 years - an average of 17.1% per year, versus 14.5%
for the S&P 500.
INTEREST RATE RISK MANAGEMENT
A great deal of attention has been focused recently on rising interest
rates and their impact on profitability. While an in-depth discussion of
interest rate risk management, including derivatives, can be found in the
financial review section of this report, we would like to provide you with a
brief overview of this important issue.
National City operates within conservative parameters on the amount of
interest rate risk taken, with the goal of avoiding volatility in net interest
income and net income. Interest rate risk exposure is centrally managed at
National City and takes into account the inherent interest rate risk assumed in
our customer-oriented lending and deposit-gathering businesses.
The positive results of a conservative management approach are borne out
by the consistency of the company's net interest margin over the past 10 years.
Although the margin will likely experience pressure in 1995 due to higher
funding costs and tighter loan pricing, we have consciously avoided large bets
on the direction of interest rates and will continue to do so.
2
<PAGE> 5
OUTLOOK FOR 1995 AND BEYOND
Over the last few years, National City has focused its efforts on internal
improvement, including the standardization and consolidation of back-office
operations, cost redesign, and the assimilation of acquisitions. We have
captured significant savings from streamlining operations and are now able to
fully leverage a more efficient operating base. Going forward, we will build on
and around National City's traditional banking franchise through product
enhancement and improved marketing efforts. We will focus our attention on
cross-selling more effectively across business lines.
We have a number of revenue enhancement initiatives currently underway at
National City, and we would like to discuss their impact on three major
businesses: corporate banking, trust, and retail banking.
CORPORATE BANKING: FOCUS ON ENHANCED PRODUCTS AND CROSS-SELLING
Corporate banking at National City emphasizes lending to small- and
middle-market businesses located in our three-state region. The loan mix among
these customers is diverse and historically has been of high quality. We hold a
leading market share position in this area in each of the major cities where we
operate, the result of excellent and experienced staffs serving these
customers. Corporate banking has been particularly successful at utilizing a
team approach when meeting with current and prospective customers to take full
advantage of cross-selling opportunities. Asset quality is excellent, and we
will not compromise credit standards for the sake of volume.
We expect traditional corporate lending to continue to grow at a
moderate pace, in line with the economic growth of the Midwest. However,
certain product areas within corporate banking should grow significantly faster
due to customer demand and greater marketing emphasis. They include asset-based
lending, commercial leasing, international banking services, and cash
management services. National City consistently ranks among the top five banks
in the U.S. in the quality of its cash management services.
TRUST: PRODUCT IMPROVEMENTS AND CONSISTENT INVESTMENT RETURNS
The trust division was reorganized in 1994 as part of a transition from
traditional fiduciary services to an investment management orientation. We
believe that the reorganization augurs well for future rates of growth and
profitability.
A renewed emphasis on sales, marketing and improved customer service
within the trust division includes linking the customer contact and new
business development activities more closely with the local banks. An effort is
underway to improve the investment product package by diversifying product
offerings and delivering more consistent investment returns through a
centralized group of equity and fixed income teams. The continued development
and enhancement of a more competitive 401(k) employee benefit product for our
corporate customer base is scheduled for implementation in the first half of
1995.
RETAIL BANKING: IMPROVED DISTRIBUTION
National City is well positioned in terms of deposits and branch locations in
the tri-state area of Ohio, Kentucky and Indiana. As consumer banking
preferences change, National City will develop alternatives to the traditional
branch system to meet consumer needs while maintaining the efficiency and
effectiveness of the retail banking operation. Investments in enhanced
telephone banking capabilities, supermarket branches, and marketing programs
3
<PAGE> 6
targeted to meeting specific customer needs will be priorities in 1995.
Indirect auto leases, credit cards, and residential mortgages will be marketed
aggressively, primarily to National City's existing customer base.
MANAGEMENT COMMITMENT AND MARKETPLACE STRENGTH
The progress we are making is already apparent in our financial performance.
We will continue to build on these positive results due to the inherent
strength of the markets we serve and management's commitment to the success of
our efforts.
We are fortunate to operate in one of the best regions in the U.S. Ohio,
Kentucky, and Indiana are experiencing steady economic growth, as indicated by
unemployment rates below the national average and ongoing investment in
manufacturing in all three states. A 1993 study ranked Ohio first in the U.S.
in terms of new manufacturing facilities and plant expansion; Kentucky and
Indiana ranked among the top 10.
We expect the Midwest to be a focus for competitive activity when the
interstate banking and branching legislation, enacted earlier this year, allows
banks to branch across state lines. From National City's perspective, this is
an evolutionary as opposed to a revolutionary event, since we already operate
and compete on an interstate basis. More critical to the ongoing success of the
company is the eventual expansion of banking powers that will allow us to offer
other financial services and compete more effectively with non-bank financial
service companies.
We announced in late 1994 the proposed acquisition of Raffensperger,
Hughes & Co., a full-service investment banking/brokerage firm headquartered in
Indianapolis. Once regulatory approval is received, we will merge Raffensperger
with National City Investments Capital, Inc. In addition to retail brokerage
services, the merged company will have the authority to underwrite and make
markets in corporate debt and corporate equity.
In January 1995, we completed the acquisition of Central Indiana Bancorp,
Kokomo, Indiana, and announced a definitive agreement to acquire United Bancorp
of Kentucky, Inc., Lexington. This latter acquisition will increase our share
of the fast-growing Lexington market from 10% to 15%.
Nineteen ninety-five will mark National City's 150th year in business. We
have grown from a small bank in 1845 serving the needs of Cleveland, Ohio, to a
financial services company serving companies and individuals throughout a
tri-state region. Our commitment to the region is a primary focus of our 150th
anniversary celebration. The degree of that commitment is evidenced by the fact
that each of our subsidiary banks has received the highest rating possible
under the Community Reinvestment Act.
We are confident that we can fulfill our mission of being the premier
financial services provider in the Midwest because we have the people,
programs, and policies in place to ensure success. We are especially proud of
the extraordinary efforts our employees have put forward to accomplish
ambitious long-term improvement programs. We are blessed with a management team
that has the level of experience and commitment necessary to create long-term
sustainable value for stockholders. As we celebrate our 150th year, we want to
thank you, our stockholders, for your support. We hope you share our pride in
our past and our belief that we are uniquely prepared for the challenges that
lie ahead.
JANUARY 20, 1995
/s/ EDWARD B. BRANDON
EDWARD B. BRANDON
CHAIRMAN & CHIEF EXECUTIVE OFFICER
4
<PAGE> 7
FINANCIAL REVIEW
EARNINGS SUMMARY
National City Corporation's consolidated net income was $429.4 million in
1994, compared with $404.0 million in 1993 and $346.9 million in 1992. Net
income per common share, after dividend requirements on preferred stock,
increased 12% in 1994 to $2.70, compared with $2.41 in 1993 and $2.09 in 1992.
Both net income and per share earnings were record results for the Corporation.
Return on average common equity, a key performance measure, was 17.06% in
1994, compared with 16.12% in 1993 and 15.31% in 1992 (Chart 3). Return on
average assets was 1.40% in 1994 compared with 1.40% in 1993 and 1.21% in 1992
(Chart 4).
<TABLE>
The following table reconciles the major changes in net income per share:
<CAPTION>
1994 1993
VS vs
1993 1992
- ----------------------------------------------------------------
<S> <C> <C>
Net income per common share, prior year..... $2.41 $2.09
Increase (decrease) from changes in:
Net interest income....................... .23 .30
Provision for loan losses................. .08 .23
Fee income................................ .33 .47
Noninterest expense....................... (.34) (.23)
Income taxes.............................. (.14) (.34)
After-tax security gains.................. (.01) (.06)
Average shares outstanding................ .14 (.05)
----- -----
Net income per common share................. $2.70 $2.41
===== =====
</TABLE>
UNIT PROFITABILITY
The contribution of the Corporation's major units to consolidated results
for the past two years is summarized in Tables 1 and 2.
The units shown are reflective of how management operates and monitors these
businesses internally. Cost allocations for centrally provided services are
included in the reported amounts approximating the pro-rata cost to the units
for the use of those services. Equity has been allocated among the business
units to reflect well-capitalized levels as defined by bank regulatory agencies.
Corporate and retail banking net income results include actual interest earned
and paid on transactions with customers, with adjustments for matched maturity,
internal funds transfer charges and credits for loans and deposits. Income on
investment securities and all gains and losses associated
with maturity mismatches and interest rate risk are
reported in the investment/funding unit.
The corporate and retail banking businesses' earnings improved in 1994 from
1993 due primarily to higher net interest income that resulted from loan growth
and the continuing decline in the provision for loan losses. Also contributing
to the improvement were lower expense levels.
The national credit card unit includes national Mastercard/Visa credit card
outstandings as well as private label volume. This unit earns interest income on
outstanding balances, as well as fees for servicing credit cards and for
processing monthly activity for its customers. The decline in national credit
card net income is due to the settlement of litigation in the second quarter
1994, the loss of a major private label customer in the fourth quarter 1993, and
increased marketing expenses in 1994 directed at replacing the lost business.
The interest rate risk for the Corporation is managed within, and reflected
in the profitability of, the investment/funding group. The decline in the
earnings of the investment/funding group in 1994 was due primarily to the
adverse effect of rising interest rates.
Trust net income declined slightly in 1994 compared with 1993. The
Corporation's banks administered a total of $55 billion in fiduciary assets at
year-end 1994, down from $56 billion in 1993. Assets under management totalled
$28 billion at year-end 1994 versus $29 billion in 1993. Assets in the
Corporation's mutual funds increased 20% through new sales and collective fund
conversions in 1994 to $3 billion. Increased competition from nonbanks in
investment management services and products caused a decline in new business
sales in 1994. In 1995, the Corporation plans to expand its investment products
and services through the introduction of new asset allocation products and
broaden existing products to be more competitively priced.
<TABLE>
Chart 1. Net income and dividends per common share
(as originally reported)
<CAPTION>
74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INCOME PER SHARE .55 .63 .75 .81 .84 .91 .89 .76 .84 .95 1.21 1.52 1.72 1.17 1.92 2.18 1.93 1.81 2.09 2.41 2.70
DIVIDENDS PER SHARE .23 .24 .26 .29 .33 .37 .41 .41 .41 .41 .42 .44 .50 .60 .72 .84 .94 .94 .94 1.06 1.18
</TABLE>
5
<PAGE> 8
FINANCIAL REVIEW (continued)
Item processing comprises a number of business lines including: merchant
credit card processing, airline ticket processing, check guarantee services, and
receivables and payables processing. The merchant credit card business processes
and clears bankcard deposits for retail merchants and also offers optional
bankcard authorization services to its customer base through a third party
service provider. The airline ticket processing business is responsible for
settling travel agent generated airline ticket sales. This business unit
collects the related funds from travel agents and disburses them to the
appropriate airline. The check guarantee business specializes in the collection
of bad checks for retail merchants. The lower return on equity in the item
processing business relative to the other functional units reflects the premiums
paid for recently acquired businesses which are included in the equity allocated
to this unit. The decline in return on equity in 1994 reflects one-time charges
in the check processing business.
The mortgage banking business originates mortgages through retail offices
and broker networks and services a mortgage portfolio. At December 31, 1994, the
servicing portfolio totalled $12.5 billion. The increase in mortgage banking net
income was due to the sales of mortgage servicing in the second and fourth
quarters of 1994 and lower amortization of purchased mortgage servicing rights
from the unusually high levels recorded in 1993.
The corporate unit reflects holding company expenses not allocated to the
business units, unallocated capital and interest expense on parent company debt.
The decrease in the corporate contribution is due primarily to interest expense
associated with the $250 million subordinated debt issued in the first quarter
1994 and higher interest expense on the Corporation's variable rate long-term
debt.
EARNING ASSETS
Average earning assets for 1994 were $27,261 million compared with $25,745
million in 1993 and $25,681 million in 1992 (Chart 5). Average earning assets in
1994 increased 6% due to higher loan balances and the acquisition of Ohio
Bancorp in the fourth quarter of 1993, offset somewhat by a decline in the
securities portfolio. Average earning assets in 1993 were fairly stable compared
with 1992 due to a combination of growth in loans and securities, offset by a
decline in short-term money market assets.
<TABLE>
LOANS: At year-end 1994, loans were $23,035 million, representing an
increase of 8% from year-end 1993. Average loans are shown in Chart 6. Ending
loan balances are summarized in the table below:
<CAPTION>
(Dollars
in Millions) 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and
industrial........ $ 8,414 $ 8,168 $ 7,801 $ 7,967 $ 8,138
Nontaxable......... 254 262 310 391 486
International...... 52 70 50 52 50
Real estate
construction...... 422 439 533 814 1,157
Leasing............ 216 228 225 240 298
Commercial
mortgage.......... 2,473 2,328 1,928 1,938 1,548
Residential
mortgage.......... 4,165 4,033 2,699 2,543 2,454
Consumer........... 4,782 4,241 3,727 3,733 3,896
Home equity........ 919 798 739 690 568
Credit card........ 1,338 719 726 803 992
------- -------- -------- -------- --------
Total loans........ $23,035 $ 21,286 $ 18,738 $ 19,171 $ 19,587
======= ======== ======== ======== ========
</TABLE>
The acquisition of Ohio Bancorp in 1993 added $809 million to year-end 1993
loan balances, including $254 million to commercial, $320 million to residential
mortgage and $200 million to consumer.
COMMERCIAL: More than 75% of the Corporation's commercial loan portfolio
consists of loans made to middle-market customers in the Corporation's market
area. The loan mix is diverse, covering a broad range of borrowers
characteristic of the Midwest economy. As a matter of policy, concentrations
within a particular industry or segment are continually monitored and
controlled.
The commercial loan portfolio remained fairly stable for most of 1994, the
result of growth in middle-market commercial and industrial loans offset by a
substantial decline in loans to mortgage bankers. Activity increased
<TABLE>
Table 1. Unit Profitability
<CAPTION>
1994 1993
---------------------------------------- ------------------------------------------
RETURN ON RETURN ON Return On Return On
NET INCOME ASSETS(1) EQUITY Net Income Assets(1) Equity
---------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Corporate banking .................... $186.6 1.79% 16.89% $166.6 1.64% 16.80%
Retail banking........................ 174.6 .91 18.22 139.0 .76 16.47
National credit card.................. 9.4 1.50 10.20 17.2 2.78 18.18
Investment/funding.................... 40.1 .46 9.59 55.5 .67 17.65
Trust................................. 31.0 21.32 22.36 32.4 24.22 28.21
Item processing....................... 15.0 4.76 10.96 17.2 6.33 14.81
Mortgage banking...................... 5.7 7.21 20.68 (13.4) (15.72) (34.20)
Corporate............................. (33.0) -- -- (10.5) -- --
------ ------
Consolidated total.................. $429.4 1.40% 17.06% $404.0 1.40% 16.12%
====== ======
<FN>
(1) Return on revenue in the case of the fee-based businesses.
</TABLE>
<TABLE>
Table 2. Geographic Unit Performance
<CAPTION>
1994 1993
-------------------------------------------- ---------------------------------------------------
CORPORATE BANKING RETAIL BANKING Corporate Banking Retail Banking
--------------------- --------------------- ------------------------ -------------------------
NET RETURN ON NET RETURN ON Net Return on Net Return on
(Dollars in Millions) INCOME ASSETS INCOME ASSETS Income Assets Income Assets
- -------------------------------------------------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cleveland............. $ 67.7 1.97% $ 46.3 1.12% $ 58.5 1.79% $ 34.1 .83%
Columbus.............. 34.8 1.97 30.8 .82 30.0 1.74 27.4 .73
Indiana............... 15.1 1.58 38.0 1.06 15.5 1.47 26.7 .73
Kentucky.............. 34.8 1.51 24.0 .79 35.4 1.43 21.1 .77
Akron................. 12.7 1.65 16.4 .64 9.7 1.76 11.0 .69
Dayton................ 11.9 1.73 12.7 .93 10.2 1.56 13.7 .95
Toledo................ 9.6 1.91 6.4 .82 7.3 1.61 5.0 .65
------ ------ ------ ------
Total............... $186.6 1.79% $174.6 .91% $166.6 1.64% $139.0 .76%
====== ====== ====== ======
</TABLE>
<PAGE> 9
during the fourth quarter and the growth is expected to continue in 1995.
<TABLE>
An analysis of the maturity and interest rate sensitivity of commercial
loans at the end of 1994 follows:
<CAPTION>
One One to Over
Year Five Five
(Dollars in Millions) Or Less Years Years Total
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic commercial......... $4,850 $2,663 $1,371 $8,884
Real estate construction.... 126 190 106 422
International............... 34 8 10 52
------ ------ ------ ------
Total....................... $5,010 $2,861 $1,487 $9,358
====== ====== ====== ======
Total variable rate......... $3,690 $1,630 $ 852 $6,172
Total fixed rate............ 1,320 1,231 635 3,186
</TABLE>
COMMERCIAL REAL ESTATE: Commercial mortgages included $1,912 million of
loans secured by income-producing real estate in 1994, compared with $1,777
million in 1993 and $1,643 million in 1992. The remainder consists of
owner-occupied loans.
<TABLE>
Commercial real estate lending includes real estate construction and
permanent loans secured by income-producing investment real estate. The
following table shows outstanding balances and unfunded commitments at year-end:
<CAPTION>
Total
(Dollars Commercial
in Millions) Construction Permanent Real Estate
- ---------------------------------------------------------------
<S> <C> <C> <C>
Outstanding:
1994.......... $ 422 $ 1,912 $2,334
1993.......... 439 1,777 2,216
1992.......... 533 1,643 2,176
Unfunded
commitments:
1994.......... $ 225 $ 117 $ 342
1993.......... 206 137 343
1992.......... 198 90 288
</TABLE>
The Corporation's activities in commercial real estate are based primarily
on relationships with developers who are active in local markets. More than 85%
of outstandings are in the Corporation's primary markets of Ohio, Kentucky and
Indiana. The portfolio consists predominantly of relatively small-scale office,
retail and apartment buildings.
Total commercial real estate loans made up 10% of the total loan portfolio
at December 31, 1994, compared with 10% at year-end 1993 and 12% at year-end
1992.
<TABLE>
The following table shows commercial real estate loans at year-end 1994 by
state and by project:
<CAPTION>
(Dollars in Millions)
- -------------------------------------------------------------
<S> <C> <C> <C>
By State: By Project:
Ohio........... $1,448 Retail............. $ 566
Kentucky....... 294 Apartments......... 497
Indiana........ 252 Office............. 429
Florida........ 72 Hotel/Motel........ 165
Michigan....... 38 Industrial......... 136
Other.......... 230 Other.............. 541
------ ------
Total.......... $2,334 Total.............. $2,334
====== ======
</TABLE>
At year-end, there were no concentrations of real estate loans in any
deteriorating economic areas.
RESIDENTIAL MORTGAGE: Residential mortgage loans increased in 1994 due to
new loan origination activity offset somewhat by a dramatic decline in
refinancing activity. Loan originations totalled approximately $2.4 billion in
1994, compared with $5.0 billion in 1993. Of the 1994 originations, $1.7 billion
were sold in the secondary market.
CONSUMER: During 1994, consumer spending patterns remained robust. Year-end
consumer loans increased 13% from year-end 1993. More than 75% of consumer loans
are installment loans, and of these more than 70% are indirect, with the
majority being fixed rate. The remainder of the consumer portfolio is largely
student loans.
<TABLE>
CHART 2. BOOK VALUE AND STOCK PRICE HISTORY
<CAPTION>
HIGH LOW YEAR-END
BOOK STOCK STOCK STOCK
VALUE PRICE PRICE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
74 3.93 4.41 2.45 3.28
75 4.32 4.82 3.23 4.35
76 4.80 6.76 4.26 6.76
77 5.31 6.67 6.08 6.13
78 5.81 7.19 5.71 5.95
79 6.34 6.82 5.89 6.39
80 6.83 6.41 4.41 5.08
81 7.18 5.56 4.26 4.52
82 7.69 5.41 3.45 4.78
83 8.24 6.89 4.49 6.89
84 8.65 8.61 5.78 8.47
85 9.59 11.28 8.39 10.97
86 10.40 16.46 10.95 15.29
87 10.58 19.13 11.94 14.56
88 10.92 16.82 13.88 16.44
89 12.43 20.75 15.38 19.56
90 13.39 19.94 11.32 15.63
91 14.24 21.13 14.07 18.63
92 14.54 24.82 17.94 24.81
93 16.15 28.06 23.13 24.50
94 16.36 29.00 23.75 25.88
<FN>
National City's common stock price at December 30, 1994 was $25.88. Over the
past 20 years, the total return on an annualized basis of an investment in
National City common stock, assuming reinvestment of dividends, was 17.1%,
compared with 14.5% for the S&P 500.
</TABLE>
7
<PAGE> 10
FINANCIAL REVIEW (continued)
<TABLE>
CREDIT CARD AND HOME EQUITY: Year-end credit card and home equity balances
are summarized below:
<CAPTION>
(Dollars in Millions) 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Local market credit card... $ 506 $ 331 $ 268 $ 347 $ 410
National market............ 475 258 206 266 305
Private label.............. 357 130 252 190 277
Home equity................ 919 798 739 690 568
------ ------ ------ ------ ------
Total credit card and
home equity............... $2,257 $1,517 $1,465 $1,493 $1,560
====== ====== ====== ====== ======
</TABLE>
The growth in credit card and home equity outstandings was due to purchases
of small card portfolios as well as the completion of the amortization of a $350
million credit card securitization back onto the balance sheet. At year-end,
credit card securitizations outstanding were $70 million, compared with $363
million a year ago, and these remaining securitized assets will return to the
balance sheet in 1995.
SECURITIES: On December 31, 1993, the Corporation adopted SFAS 115
"Accounting for Certain Investments in Debt and Equity Securities". The adoption
did not have a material effect on results of operations and prior year
financial statements were not restated. Under these ac-
counting rules, securities available for sale are recorded at market value. At
December 31, 1994, the net unrealized loss of $53 million, net of tax, was
included in stockholders' equity, as compared to a net unrealized gain of $35
million, net of tax, at December 31, 1993.
Securities in the held to maturity portfolio are purchased with the intent
and ability to hold them to maturity and are, therefore, carried at amortized
cost. Securities in this portfolio tend to be higher yielding and somewhat less
liquid. Securities in the available for sale category are those which may be
sold prior to their maturity for purposes of asset allocation, interest rate
sensitivity, liquidity or relative value reasons and, hence, tend to be more
liquid investments.
On a cost basis, the portfolio decreased from $5.1 billion in 1993 to $4.5
billion at December 31, 1994. The reduction in the portfolio was in response to
an anticipated rise in interest rates throughout 1994. The decline was
characterized by mortgage prepayments and maturities of $860 million and $365
million, respectively. Net purchases of securities which totalled $587 million
were about evenly split between adjustable rate mortgage-backed securities and
short-term fixed rate obligations.
<TABLE>
Summary information with respect to the securities portfolio at December 31
follows:
<CAPTION>
1994 COST
----------------------- 1993 1992
(Dollars in HELD TO AVAILABLE 1994 Carrying Carrying
Millions) MATURITY FOR SALE YIELD Value Value
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury and
Federal agency
debentures:
Under 1 year..... $ -- $ 126 3.82% $ 200 $ 154
1 to 5 years..... 34 1,183 5.66 1,047 1,043
5 to 10 years.... -- 25 5.85 53 --
Over 10 years.... -- -- -- -- 1
------ ------ ------ ------
Total............ 34 1,334 5.49 1,300 1,198
Mortgage-backed
securities:
Under 1 year..... 2 11 6.66 374 391
1 to 5 years..... 539 1,162 6.88 2,226 2,440
5 to 10 years.... 90 443 7.29 273 229
Over 10 years.... -- 84 8.08 2 3
------ ------ ------ ------
Total............ 631 1,700 7.01 2,875 3,063
States and
political
subdivisions:
Under 1 year..... 113 4 10.98 125 120
1 to 5 years..... 186 3 11.16 314 415
5 to 10 years.... 73 5 11.45 92 130
Over 10 years.... 78 19 9.88 106 130
------ ------ ------ ------
Total............ 450 31 10.89 637 795
Other securities:
Under 1 year..... 8 7 5.26 119 183
1 to 5 years..... 17 1 8.38 4 119
5 to 10 years.... -- 22 5.73 -- 1
Over 10 years.... 36 205 6.32 177 140
------ ------ ------ ------
Total............ 61 235 6.41 300 443
------ ------ ------ ------
$1,176 $3,300 6.94% $5,112 $5,499
====== ====== ====== ======
</TABLE>
<TABLE>
CHART 3. RETURN ON AVERAGE COMMON EQUITY
(net income after preferred dividends, divided by average common equity)
- -------------------------------------------------------------------------------
<S> <C>
89 17.18
90 12.97
91 11.20
92 15.31
93 16.12
94 17.06
<FN>
Return on average common equity rose to 17.06% in 1994 due both to improved net
income and the repurchase of 12.4 million shares during the year. National City
seeks to produce a return which is higher than its peers over time while
maintaining superior capital ratios.
</TABLE>
<TABLE>
CHART 4. RETURN ON AVERAGE ASSETS
(net income divided by average assets)
- --------------------------------------------------------------------------------
<S> <C>
89 1.16
90 0.87
91 0.81
92 1.21
93 1.40
94 1.40
<FN>
Return on average assets was 1.40% in 1994 and in 1993. Historically high
profitability was maintained on an asset base that grew by 6%.
</TABLE>
8
<PAGE> 11
The yield at December 31, 1994 was the combined rate for the held to
maturity and available for sale securities portfolios.
Yields on tax-exempt securities are calculated on a fully taxable equivalent
basis using the marginal Federal income tax rate of 35%. Mortgage-backed
securities are assigned to maturity categories based on their estimated average
lives.
Investments in collateralized mortgage obligations totalled $1,074 million
and $1,659 million at December 31, 1994 and 1993, respectively. These
investments are continually monitored and subjected to stress tests. At December
31, 1994, none of these investments were considered "high risk" under regulatory
definitions. The amount of mortgage-backed securities that are either variable
or adjustable rate totalled $1,417 million at December 31, 1994, or 61% of total
mortgage-backed securities.
INTEREST-BEARING LIABILITIES
Average balances in transaction accounts, which include demand deposits,
savings, and interest-bearing checking, increased by 3% in 1994, while time
deposits of individuals increased by 2%. Overall, average core deposits
increased less than earning assets.
On average, use of purchased funds increased by $934 million in 1994.
Purchased funds primarily include domestic certificates of deposit over
$100,000, Eurodollar deposits, and short-term borrowings. The increase in 1994
was due to the Corporation's efforts to obtain cost-effective funding in the
existing interest rate environment to support the growth in assets.
<TABLE>
A maturity distribution of certificates of deposit of $100,000 or more
follows:
<CAPTION>
December 31
--------------------
(Dollars in Millions) 1994 1993
- ---------------------------------------------------------------
<S> <C> <C>
Due in:
3 months or less...................... $ 453 $ 463
3 to 6 months......................... 112 83
6 to 12 months........................ 161 63
Over 1 year........................... 641 93
------ -----
$1,367 $ 702
====== =====
</TABLE>
<TABLE>
Federal funds borrowed and security repurchase agreements represent
borrowings with overnight to 30-day maturities. Information for these borrowings
follows:
<CAPTION>
(Dollars in Millions) 1994 1993 1992
- ---------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31................ $2,609 $3,083 $1,819
Maximum outstanding at any
month-end............................ 2,689 3,083 2,417
Daily average amount outstanding...... 2,539 2,518 2,178
Weighted daily average interest
rate................................. 3.99% 2.91% 3.27%
Weighted daily interest rate for
amounts outstanding at December 31... 5.18% 2.87% 2.79%
</TABLE>
<TABLE>
CHART 5. AVERAGE EARNING ASSETS
<CAPTION>
Money
market
Loans Securities instruments
- --------------------------------------------------------
<S> <C> <C> <C>
89 17,801 4,768 1,273
90 19,456 5,087 1,120
91 19,581 4,896 1,802
92 18,671 5,385 1,625
93 19,454 5,498 793
94 21,713 4,757 789
<FN>
Average earning assets grew by 6% in 1994. The loan portfolio grew by 12% and
was offset slightly by a decline in the securities portfolio. The acquisition
of Ohio Bancorp in the fourth quarter of 1993 contributed to the growth.
</TABLE>
9
<PAGE> 12
FINANCIAL REVIEW (continued)
<TABLE>
CAPITAL
The following table reflects various measures of capital at year-end:
<CAPTION>
1994 1993
--------------- ---------------
(Dollars in Millions) AMOUNT RATIO Amount Ratio
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Total equity(1)................ $2,601.1 8.10% $2,763.3 8.89%
Common equity(1)............... 2,413.5 7.52 2,565.0 8.26
Tangible common equity(2)...... 2,026.4 6.39 2,185.2 7.12
Tier 1 capital(3).............. 2,442.2 8.45 2,468.9 8.94
Total risk-based capital(4).... 3,374.8 11.68 3,206.8 11.62
Leverage(5).................... 2,442.2 7.82 2,468.9 8.18
<FN>
(1) Computed in accordance with generally accepted accounting principles,
including the unrealized market value adjustment of securities available for
sale.
(2) Common equity less all intangible assets; computed as a ratio to total
assets less intangible assets.
(3) Stockholders' equity less certain intangibles and the unrealized market
value adjustment of securities available for sale; computed as a ratio to
risk-adjusted assets, as defined.
(4) Tier 1 capital plus qualifying loan loss allowance and subordinated debt;
computed as a ratio to risk-adjusted assets.
(5) Tier 1 capital; computed as a ratio to average total assets less certain
intangibles.
</TABLE>
Total stockholders' equity at year-end 1994 included $187.5 million of 8%
Cumulative Convertible Preferred Stock, compared with $198.3 million at year-end
1993.
The Corporation's Tier 1, total risk-based capital and leverage ratios are
well above the required minimum levels of 4.00%, 8.00% and 4.00%, respectively.
At December 31, 1994, all of National City's member banks were
well-capitalized under the capital definitions prescribed in the FDIC
Improvement Act of 1991.
<TABLE>
Intangible asset totals at year-end are summarized in the following table:
<CAPTION>
(Dollars in Millions) 1994 1993 1992
- ------------------------------------------------------------------
<S> <C> <C> <C>
Goodwill............................ $246.6 $257.0 $156.6
Core deposit intangibles............ 19.2 25.9 34.8
Purchased mortgage servicing
rights............................. 67.5 63.3 79.9
Purchased credit cards.............. 52.7 31.1 34.1
Other intangibles................... 1.1 2.5 4.3
------ ------ ------
Total intangible assets......... $387.1 $379.8 $309.7
====== ====== ======
</TABLE>
National City Corporation's common stock trades on the New York Stock
Exchange under the symbol NCC. As of December 31, 1994, there were 21,739 common
stockholders of record.
<TABLE>
Quarterly dividends paid and common stock prices rounded to the nearest cent
follow:
<CAPTION>
NYSE:NCC First Second Third Fourth Year
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Dividends paid.... $ .29 $ .29 $ .30 $ .30 $ 1.18
High.............. 28.38 29.00 28.38 28.13 29.00
Low............... 24.00 25.63 26.00 23.75 23.75
Close............. 26.63 27.38 28.13 25.88 25.88
1993
Dividends paid... $ .26 $ .26 $ .27 $ .27 $ 1.06
High............. 27.44 28.06 27.25 27.00 28.06
Low.............. 24.31 23.38 24.00 23.13 23.13
Close............ 26.13 25.19 26.75 24.50 24.50
</TABLE>
Cash dividend payout is continually reviewed by management and the Board of
Directors. For the past three-and five-year periods, the dividend payout has
averaged 44.2% and 46.6%, respectively (Chart 8).
In January 1995, the Board of Directors declared a first quarter dividend of
$.32 per common share, representing a 7% increase from the next preceding
quarterly dividend of $.30 per share. The dividend is payable February 1 to
stockholders of record on January 13, 1995. This follows two dividend increases
in 1994 and two in 1993.
At December 31, 1994, the total market capitalization of the Corporation was
approximately $3.8 billion.
<TABLE>
CHART 6. AVERAGE LOANS
<CAPTION>
CORPORATE BANKING CONSUMER BANKING
COMM'L RESIDENTIAL CREDIT
COMMERCIAL REAL ESTATE INSTALLMENT REAL ESTATE CARD
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
89 8,352 2,754 89 3,592 1,736 1,367
90 8,884 2,816 90 3,872 2,514 1,370
91 8,819 2,764 91 3,738 2,721 1,539
92 8,352 2,479 92 3,675 2,723 1,412
93 8,314 2,668 93 3,893 3,131 1,448
94 9,132 2,432 94 4,441 3,914 1,794
<FN>
The Corporation's loan portfolio mix is approximately 53% corporate and 47%
consumer loans. The loan mix has become more balanced as the consumer loan
portfolio, which includes residential mortgages, has grown at a faster rate in
recent years.
</TABLE>
10
<PAGE> 13
Book value per common share at December 31, 1994 was $16.36 compared with
$16.15 at December 31, 1993 (Chart 2). The 1994 book value includes $.34 of
market depreciation in the securities available for sale portfolio compared with
$.22 of market appreciation at year-end 1993.
During the year, 12.4 million common shares were repurchased in the open
market. Of those shares, 4.3 million were purchased under a program announced in
December, 1993. The remaining 8.1 million shares were purchased under programs
announced in March and July, 1994. At December 31, 1994 the Corporation had
remaining authorization to purchase up to 6.9 million common shares.
LIQUIDITY MANAGEMENT
Effective liquidity management ensures that the cash flow requirements of
depositors and borrowers, as well as the operating cash needs of the
Corporation, are met.
Funds are available from a number of sources, including the securities
portfolio, the extensive core deposit base, the ability to acquire large
deposits in the local and national markets, and the capability to securitize or
package loans for sale.
The parent company has four major sources of funding to meet its liquidity
requirements: dividends from its subsidiaries, the commercial paper market, a
revolving credit agreement, and access to the capital markets.
The main source for parent company cash requirements has been dividends from
its subsidiaries. At January 1, 1995, $77 million was available within the bank
subsidiaries to pay the parent company in dividends without prior regulatory
approval, compared with $96 million at January 1, 1994. During 1994, subsidiary
banks declared $250 million in dividends to the parent company.
As discussed in Item 1 of Form 10-K (page 40), subsidiary banks are subject
to regulation and, among other things, may be limited in their ability to pay
dividends or transfer funds to the holding company. Accordingly, consolidated
cash flows as presented in the Consolidated Statements of Cash Flows on page 26
may not represent cash available to the Corporation's stockholders.
Funds raised in the commercial paper market through the Corporation's
subsidiary, National City Credit Corporation, are primarily used to support the
activities of National City Mortgage Co., the Corporation's mortgage banking
subsidiary, as well as other occasional short-term cash needs. Commercial paper
outstandings at December 31, 1994 were $379 million, compared with $399 million
at year-end 1993.
The Corporation has a $300 million revolving credit agreement with a group
of unaffiliated banks which serves as a back-up liquidity facility. The
agreement expires June 30, 1997, with a provision to extend the expiration date
under certain circumstances. No borrowings have occurred under this facility.
The parent company also has in place a $500 million shelf registration with
the Securities and Exchange Commission permitting ready access to the public
debt and preferred stock markets.
In March 1994, the Corporation issued $250 million principal amount of
6 5/8% Subordinated Notes due 2004. The notes qualify as Tier 2 capital for
regulatory purposes.
ASSET/LIABILITY MANAGEMENT
The primary goal of the asset/liability management function is to maximize
net interest income within the interest rate risk limits set by the Corporate
Asset/Liability Committee.
Interest rate risk is monitored and controlled through the use of three
different measures: static gap analysis, earnings simulation, and duration
modeling. The most useful of these measures is earnings simulation. The model
forecasts earnings under a variety of scenarios that incorporate changes in the
absolute level of interest rates, the shape of the yield curve, prepayments,
interest rate relationships, and changes in the volumes and rates of various
loan and deposit categories. The model also incorporates all off-balance sheet
commitments, as well as assumptions about reinvestment and the repricing
characteristics of certain non-contractual assets and liabilities.
While each of the interest rate risk measurements has limitations, taken
together they represent a reasonably
<TABLE>
CHART 7. EQUITY TO ASSETS
<CAPTION>
Tangible Total
Equity to Equity to
Assets Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
89 5.97 6.57
90 5.75 6.58
91 6.60 7.53
92 7.49 8.63
93 7.77 8.89
94 6.98 8.10
<FN>
Total equity as a percentage of total assets was 8.10% at year-end 1994
compared with 8.89% a year ago. Tangible equity to assets was 6.98% at December
31, 1994, National City ranks among the best of the top 50 U.S. banks in terms
of capital levels.
</TABLE>
11
<PAGE> 14
FINANCIAL REVIEW (continued)
comprehensive view of the magnitude of interest rate risk in the Corporation,
the distribution of risk along the yield curve, the level of risk through time
and the amount of exposure to certain interest rate relationships.
The Corporation uses a variety of financial instruments to manage its
interest rate sensitivity. These include the securities in its investment
portfolio, interest rate swaps, interest rate caps and floors, and, to a lesser
extent, exchange-traded futures and options contracts. Interest rate swaps, caps
and floors, frequently called interest rate derivatives, have similar
characteristics to securities but possess the advantages of customization of the
risk-reward profile of the instrument, minimization of balance sheet leverage
and improvement of the liquidity position of the Corporation.
<TABLE>
STATIC GAP: As illustrated in the following table, at year-end, the amount
of interest earning assets, adjusted for off-balance sheet instruments, less
interest bearing liabilities which reprice within a given period was (1.4)% of
adjusted total earning assets within six months, and (1.5)% within one year.
However, the ongoing management of the gap incorporates noninterest earning
assets, noninterest bearing liabilities and equity. These items, which include
accounts such as cash, mortgage servicing rights and noninterest bearing demand
deposits, are included in the periods in which they are likely to affect the
Corporation's interest rate sensitivity. At year-end, the amount of total
assets, adjusted for off-balance sheet instruments, less total liabilities which
reprice within a given period was (4.2)% of adjusted total earning assets within
six months, and (7.4)% within one year. The policy limit for the one-year gap is
plus or minus 12% of adjusted total earning assets, including the effect of
noninterest earning assets, noninterest bearing liabilities and equity.
<CAPTION>
Within Six to One to Three Over
Six Twelve Three to Five Five
(Dollars in Millions) Months Months Years Years Years
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans.................. $13,873 $ 2,085 $ 4,031 $ 1,578 $ 1,467
Securities............. 1,621 526 1,490 362 396
Money market assets.... 627 66 84 -- --
------- ------- ------- ------- -------
Total interest
earning assets.... 16,121 2,677 5,605 1,940 1,863
Interest bearing
liabilities........... 14,419 3,654 4,032 739 754
------- ------- ------- ------- -------
Gap between interest
earning assets and
interest bearing
liabilities before
swaps and options..... 1,702 (977) 1,573 1,201 1,109
Net swaps and options.. (2,173) 929 375 529 341
------- ------- ------- ------- -------
Gap between interest
earning assets and
interest bearing
liabilities, adjusted
for swaps and
options............... $ (471) $ (48) $ 1,948 $ 1,730 $ 1,450
======= ======= ======= ======= =======
Cumulative gap between
interest earning
assets and interest
bearing liabilities,
adjusted for swaps and
options............... $ (471) $ (519) $ 1,429 $ 3,159 $ 4,609
======= ======= ======= ======= =======
Gap between interest
earning assets and
interest bearing
liabilities, adjusted
for swaps and
options............... (471) (48) 1,948 1,730 1,450
Nonearning assets...... 3,129 216 158 100 304
Noninterest bearing
liabilities, demand
deposits and equity... 4,066 1,251 501 232 2,466
------- ------- ------- ------- -------
Gap adjusted for swaps,
options, nonearning
assets, noninterest
bearing liabilities,
demand deposits and
equity................ $(1,408) $(1,083) $ 1,605 $ 1,598 $ (712)
======= ======= ======= ======= =======
Cumulative gap adjusted
for swaps, options,
nonearning assets,
noninterest bearing
liabilities, demand
deposits and equity... $(1,408) $(2,491) $ (886) $ 712 $ --
======= ======= ======= ======= =======
</TABLE>
Core deposits and loans with non-contractual maturities are distributed or
spread among the various repricing
<TABLE>
CHART 8. CASH DIVIDEND PAYOUT
(dividends per share dividend by orginally reported earnings per share)
<CAPTION>
Dividend 3 yr 5yr
Payout Avg Avg
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
89 38.6 42.5 37.0
90 48.7 41.6 41.0
91 51.9 46.4 45.6
92 44.9 48.5 44.3
93 44.0 46.9 45.6
94 43.7 44.2 46.6
<FN>
The Corporation's dividend policy is to pay out approximately 40% of earnings
over time. Despite a somewhat higher payout ratio in recent years, internal
capital generation continues to exceed asset growth.
</TABLE>
12
<PAGE> 15
categories based upon historical patterns of repricing which are reviewed at
least annually. Management constructs rolling portfolios of fixed rate
certificates of deposit whose interest cash flows over historical time periods
most closely replicate the current portfolio of non-contractual assets and
liabilities. It is the maturity or repricing distribution of this replicating
portfolio which appears in the gap table as a surrogate for the particular
non-contractual asset or liability. The gap table presented includes the
following loans and core deposits that reprice on average in the noted time
frames: fixed rate credit card loans (13 months), demand deposits (7 months),
savings accounts (15 months), and money market and NOW accounts (5 months). The
assumptions regarding these repricing characteristics greatly influence
conclusions regarding interest sensitivity. Management believes its assumptions
regarding these assets and liabilities are conservative.
EARNINGS SIMULATION: Management evaluates the effects on income of
alternative interest rate scenarios against earnings in a stable interest rate
environment. The most recent earnings simulation model projects net income would
increase by approximately 1.0% if rates fell gradually by two percentage points
over the next year. It projects an increase of approximately .8% if rates rose
gradually by two percentage points, well within the (5.0)% policy limit.
Management believes this reflects an essentially neutral interest rate
sensitivity position.
The Corporation's earnings are also affected by changes in spread
relationships. For example, a 50 basis point contraction in the relationship
between the prime rate and Federal funds rate is currently estimated to cause a
3.7% reduction in net income over a 12-month period.
DURATION: The Corporation's duration model analyzes the impacts of changes
in interest rates on expected asset and liability cash flows, including those
maturing in time periods greater than one year. At year-end, a two percentage
point immediate increase in rates was estimated to cause a reduction in the
present value of these cash flows by an amount equal to 1.0% of total assets.
Policy limits restrict this amount to 1.5% of total assets. The value of these
cash flows was projected to increase by 1.2% of total assets for an immediate
decrease in rates of two percentage points.
Due to borrowers' preferences for floating-rate loans and depositors'
preferences for fixed-rate deposits, the Corporation's balance sheet moves
toward higher levels of asset sensitivity with the passage of time. In fact, if
all prepayments, calls and maturities of the securities and derivative
portfolios were to remain uninvested, then the Corporation's asset sensitivity
in a 200 basis point rising interest rate environment would result in an
increase in net income of 2.5% compared with a stable rate environment.
Purchases of fixed-rate securities or interest rate derivative instruments
were required in 1994 to offset the natural asset-sensitive interest rate risk
position. Using a one-year static gap measure, the Corporation would be 3.1%
asset sensitive without securities and interest rate derivatives.
Management expects interest rates to rise next year with short-term rates
rising significantly more than long-term rates. Management believes the
Corporation's neutral interest sensitivity position is appropriate given the
current level of market interest rates. Management does not at this time expect
to alter, to any significant degree, its interest rate sensitivity position
during 1995.
NET INTEREST INCOME
On a fully taxable equivalent basis, net interest income was $1,266.3
million in 1994 compared with $1,235.8 million in 1993 and $1,195.3 million in
1992 (Chart 10).
<TABLE>
CHART 9. AVERAGE FUNDING SOURCES
<CAPTION>
CORE OTHER PURCHASED
DEPOSITS DEPOSITS FUNDS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
89 16,510 3,634 4,005
90 18,839 2,918 4,396
91 20,190 2,284 4,221
92 20,780 1,187 3,866
93 20,831 815 4,164
94 21,327 1,506 4,666
<FN>
Core deposits grew at a slower pace than loans. As a result, purchased funds
and other deposit balances increased from a year ago.
</TABLE>
13
<PAGE> 16
FINANCIAL REVIEW (continued)
<TABLE>
The following table reconciles net interest income as shown in the financial
statements to tax equivalent net interest income:
<CAPTION>
(Dollars in Millions) 1994 1993 1992
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net interest income - per
financial statements........... $1,236.8 $1,200.0 $1,152.7
Tax equivalent adjustment........ 29.5 35.8 42.6
-------- -------- --------
Net interest income - tax
equivalent..................... $1,266.3 $1,235.8 $1,195.3
======== ======== ========
Average earning assets........... $ 27,261 $ 25,745 $ 25,681
======== ======== ========
Net interest margin - tax
equivalent..................... 4.65% 4.80% 4.65%
======== ======== ========
</TABLE>
To compare non-taxable asset yields to taxable yields on a similar basis,
amounts are adjusted to their pre-tax equivalents, based on the marginal
corporate tax rate of 35% in 1994 and 1993 and 34% in 1992.
<TABLE>
The margin decline in 1994 was due mainly to the loss of a large credit card
customer in the fourth quarter 1993. The following table summarizes the
contributions of derivatives to net interest income (Note: Amounts in brackets
represent reductions of the related interest income or expense line, as
applicable):
<CAPTION>
(Dollars in Millions) 1994 1993 1992
- ----------------------------------------------------------------
<S> <C> <C> <C>
INTEREST ADJUSTMENT TO:
Loans.............................. $36.4 $72.1 $43.3
Securities......................... (16.3) (27.2) (26.7)
----- ----- -----
Assets............................. 20.1 44.9 16.6
Deposits........................... (9.6) (21.1) (22.9)
----- ----- -----
Effect on net interest income...... $29.7 $66.0 $39.5
===== ====== =====
</TABLE>
The future net interest income contribution of the derivative portfolio is
not significant relative to the Corporation's net earnings at current interest
rates. The effects of changing interest rates on the Corporation are more fully
discussed in the Asset/Liability Management discussion on pages 11 to 13.
<TABLE>
The following table shows changes in interest income, expense and net
interest income due to volume and rate variances for major categories of assets
and liabilities:
<CAPTION>
1994 VS. 1993 1993 vs. 1992
-------------------------- --------------------------
DUE TO Due to
CHANGE IN Change in
(Dollars in ----------------- NET ---------------- Net
Millions) VOLUME RATE* CHANGE Volume Rate* Change
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease)
in tax equivalent
interest income --
Loans............... $ 183.8 $ -- $183.8 $68.6 $(111.6) $ (43.0)
Securities.......... (40.8) 2.8 (38.0) 7.8 (78.4) (70.6)
Money market
assets............ (.2) (.2) (.4) (34.3 ) (1.0) (35.3)
------- ------- ------ ----- ------- -------
Total............... $ 142.8 $ 2.6 $145.4 $42.1 $(191.0) $(148.9)
======= ======= ====== ===== ======= =======
(Increase) decrease
in interest expense--
Savings and NOW
accounts.......... $ (11.4) $ 5.4 $ (6.0) $(18.1) $ 23.6 $ 5.5
Insured money market
accounts.......... 4.7 (5.4) (.7) (4.6 ) 34.6 30.0
Time deposits....... (5.0) (2.5) (7.5) 53.3 69.9 123.2
Purchased funds..... (30.0) (49.9) (79.9) 7.5 26.8 34.3
Corporate debt...... (16.3) (4.5) (20.8) (9.3 ) 5.7 (3.6)
------- ------- ------ ------ ------- -------
Total............... $ (58.0) $ (56.9) $(114.9) $28.8 $ 160.6 $ 189.4
======= ======= ======= ====== ======= =======
Increase in tax
equivalent net
interest income..... $ 30.5 $ 40.5
======= =======
<FN>
* Changes in interest income and interest expense not arising solely from rate
or volume variances are included in rate variances.
</TABLE>
<TABLE>
CHART 10. NET INTEREST INCOME AND NET INTEREST MARGIN
<CAPTION>
NET INTEREST NET INTEREST
INCOME MARGIN
- --------------------------------------------------------------------------------
<S> <C> <C>
89 1,118 4.69
90 1,156 4.50
91 1,185 4.51
92 1,195 4.65
93 1,236 4.80
94 1,266 4.65
<FN>
Tax equivalent net interest income increased in 1994 due to a larger earning
asset base offset somewhat by a narrower net interest margin.
</TABLE>
14
<PAGE> 17
<TABLE>
FEES AND OTHER INCOME
An analysis of fees and other income for the last three years follows:
<CAPTION>
(Dollars in Thousands) 1994 1993 1992
- -------------------------------------------------------------------
<S> <C> <C> <C>
Item processing revenues......... $312,358 $ 267,962 $ 194,166
Deposit service charges.......... 153,870 152,609 143,909
Trust fees....................... 125,668 122,597 118,350
Credit card fees................. 85,308 92,966 101,898
Mortgage banking revenues........ 67,406 58,678 59,958
Service fees -- other............ 37,897 38,153 38,001
Brokerage revenues............... 18,790 9,013 --
Other real estate owned income... 13,696 12,332 9,820
Trading account profits
(losses)....................... (861) 9,161 6,546
Other............................ 38,706 36,344 53,012
-------- --------- ---------
$852,838 $ 799,815 $ 725,660
======== ========= =========
</TABLE>
Fees and other income increased 7% in 1994 from 1993 due primarily to growth
in item processing, mortgage banking and brokerage revenues.
Item processing revenues grew in both 1994 and 1993 due to growth in the
existing airline and bankcard processing businesses, as well as acquisitions.
Credit card fees declined in 1994 due mainly to the loss of a large customer
in the fourth quarter 1993 and the unwinding of a credit card securitization.
The fees associated with the credit card securitization were replaced with net
interest income as the related loan balances were returned to the balance sheet.
Mortgage banking revenues increased due to $14 million of gains on the sale
of mortgage servicing rights. Also contributing to the improved mortgage banking
revenue was lower amortization of capitalized excess service fees, which is
recorded as an adjustment to revenue. The 1994 amortization was lower by $11
million as compared to 1993. Offsetting these increases were reduced loan
origination fees that resulted mainly from the decline in refinancing activity
in 1994.
There was no other significant nonrecurring income in 1994 or 1993.
Nonrecurring pre-tax gains in 1992 included a $5.7 million gain on the sale of
Mexican debt, a
$4.2 million gain on the sale of mortgage loans and student loans, and a $1.2
million gain on miscellaneous asset sales.
<TABLE>
NONINTEREST EXPENSE
The following table shows noninterest expenses for the last three years:
<CAPTION>
(Dollars in Thousands) 1994 1993 1992
- ------------------------------------------------------------------
<S> <C> <C> <C>
Salaries.................... $ 517,981 $ 499,879 $ 495,232
Benefits.................... 135,909 123,593 121,783
Equipment................... 93,345 89,005 90,768
Net occupancy............... 89,994 89,729 85,620
Third party services........ 80,604 77,368 87,438
Processing assessments...... 91,598 81,822 68,651
Postage and supplies........ 68,218 67,842 65,859
FDIC assessments............ 48,709 50,157 50,169
Other real estate owned
expense................... 10,403 26,177 46,847
Amortization of
intangibles............... 44,903 61,721 37,459
State and local taxes....... 30,160 30,297 26,610
Marketing and public
relations................. 35,677 28,581 21,319
Transportation.............. 23,200 21,978 18,477
Telephone................... 24,057 21,862 17,562
Other....................... 108,375 77,729 76,654
---------- ---------- ----------
$1,403,133 $1,347,740 $1,310,448
========== ========== ==========
</TABLE>
Noninterest expense rose 4% in 1994 compared with 1993. Excluding the impact
of acquired companies, total expenses were unchanged from 1993 levels.
Nonrecurring expenses recorded in 1994 included $8.7 million related to the
settlement of litigation and a $4.5 million write-off in the item processing
subsidiary. Amortization of intangibles included the amortization of purchased
mortgage servicing rights, which totalled $14.5 million in 1994 and $34.5
million in 1993. The increase in processing assessments in 1994 and 1993 was due
to increased volume in the item processing subsidiary.
There were no significant nonrecurring expenses in 1993. Nonrecurring
expenses in 1992 included $16.8 million in severance costs related to both the
Indiana acquisition and the Corporation's cost redesign program. In addition,
<TABLE>
CHART 11. FEE INCOME AS A PERCENTAGE OF TOTAL REVENUE
<CAPTION>
FEE INCOME AS % OF
TOTAL REVENUE
- --------------------------------------------------------------------------------
<S> <C>
84 28%
85 29%
86 29%
87 30%
88 31%
89 31%
90 33%
91 35%
92 38%
93 39%
94 40%
<FN>
Fee income as a percentage of total revenue increased to 40% in 1994.
Contributing to the growth in fee income were increased item processing revenue
and service charges on deposits. Management's goal is to increase the fee income
contribution to total revenue over time.
</TABLE>
15
<PAGE> 18
FINANCIAL REVIEW (continued)
there were $12.6 million in one-time merger-related costs and $9.3 million of
costs in the settlement of litigation.
The full-time equivalent (FTE) staff for the Corporation, shown in Table 3,
increased in 1994 due to increases at the item processing subsidiary which were
volume related.
The overhead ratio (noninterest expense less fee income as a percentage of
fully taxable net interest income) was 43.46% in 1994 compared with 44.34% in
1993 and 48.93% in 1992 (Chart 12).
The efficiency ratio (noninterest expense as a percentage of fee income plus
fully taxable net interest income) was 66.21% in 1994 and 1993, down from 68.22%
in 1992. The fee-based businesses have lower gross margins than traditional
banking, and, therefore, growth in these businesses penalizes the efficiency
ratio as shown in Table 3. By contrast, strong fee income benefits the overhead
ratio.
<TABLE>
SECURITY GAINS AND LOSSES
Net realized security gains and losses are summarized as follows:
<CAPTION>
(Dollars in Thousands) 1994 1993 1992
- -------------------------------------------------------------------
<S> <C> <C> <C>
Net gain (loss) on sales of debt
securities.......................... $ (287) $8,462 $ 12,345
Tax expense (benefit)............... (100) 2,962 4,256
------- ------ --------
After tax.......................... $ (187) $5,500 $ 8,089
======= ====== ========
Net gains on sales of equity
securities.......................... $10,817 $3,460 $ 13,352
Tax expense......................... 3,848 1,211 4,541
------- ------ --------
After tax.......................... $ 6,969 $2,249 $ 8,811
======= ====== ========
Effect on net income................. $ 6,782 $7,749 $ 16,900
======= ====== ========
Effect on earnings per share......... $ .04 $ .05 $ .11
======= ====== ========
</TABLE>
INCOME TAXES The consolidated income tax provision was $188.3 million in 1994
compared with $167.0 million in 1993 and $117.4 million in 1992. The effective
tax rate of the Corporation was 30.5% in 1994, 29.2% in 1993, and 25.3% in
1992. The increasing effective rate over the past three years reflects the
higher Federal statutory rate, the declining levels of tax-exempt income, and a
greater portion of income subject to state income taxation.
<TABLE>
ASSET QUALITY
NONPERFORMING ASSETS: A summary of nonaccrual, reduced rate and renegotiated
loans and other nonperforming assets at December 31 follows:
<CAPTION>
(Dollars in Millions) 1994 1993 1992 1991 1990
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial:
Nonaccrual............. $ 58.8 $ 79.4 $135.4 $191.8 $100.7
Restructured........... -- 1.1 2.5 5.3 3.2
------ ------ ------ ------ ------
Total commercial...... 58.8 80.5 137.9 197.1 103.9
Real estate related:
Nonaccrual............. 48.8 64.4 81.5 129.7 205.3
Restructured........... 4.4 6.5 4.3 15.7 14.2
------ ------ ------ ------ ------
Total real estate
related............. 53.2 70.9 85.8 145.4 219.5
------ ------ ------ ------ ------
Total nonperforming
loans............... 112.0 151.4 223.7 342.5 323.4
Other real estate owned
(OREO)................. 16.5 57.8 143.7 196.8 158.8
------ ------ ------ ------ ------
Nonperforming
assets.............. $128.5 $209.2 $367.4 $539.3 $482.2
====== ====== ====== ====== ======
Loans 90 days past due
accruing interest...... $ 27.9 $ 42.2 $ 41.5 $ 65.9 $ 98.7
====== ====== ====== ====== ======
Nonperforming loans and
OREO as a percent of:
Loans and OREO........ .6% 1.0% 1.9% 2.8% 2.4%
Assets................ .4 .7 1.3 1.8 1.6
Equity................ 4.9 7.6 14.7 23.9 24.8
Loan loss allowance to
nonperforming loans.... 418.8% 292.9% 171.6% 112.7% 101.2%
</TABLE>
<TABLE>
TABLE 3. FULL-TIME EQUIVALENT STAFF AND OVERHEAD PERFORMANCE MEASURES
<CAPTION>
1994 1993
------------------------------------ ---------------------------------------
FULL-TIME Full-Time
EQUIVALENT OVERHEAD EFFICIENCY Equivalent Overhead Efficiency
STAFF RATIO RATIO Staff Ratio Ratio
<S> <C> <C> <C> <C> <C> <C>
Corporate and retail banking . . 11,576 48.06% 58.61% 11,943 50.33% 60.67%
National credit card . . . . . . 577 57.25 63.48 516 51.40 43.97
Investment/funding . . . . . . . 277 (31.47) 46.28 254 (23.66) 31.51
Trust . . . . . . . . . . . . . 975 -- 65.72 951 -- 62.86
Item processing . . . . . . . . 5,549 -- 91.93 4,598 -- 90.52
Mortgage banking . . . . . . . . 731 -- 83.37 889 -- 127.00
Corporate . . . . . . . . . . . 621 -- -- 809 -- --
------ ------
Total . . . . . . . . . . . 20,306 43.46% 66.21% 19,960 44.34% 66.21%
====== ======
</TABLE>
<TABLE>
<CAPTION>
CHART 12. OVERHEAD RATIO
(non-interest expenses less fee income divided by net interest income)
<S> <C>
- --------------------------------------------------------------------------------
89 43.68
90 46.33
91 49.93
92 48.93
93 44.34
94 43.46
<FN>
The overhead ratio improved in 1994 for the third consecutive year. The
improvement was due to the benefits of the Corporation's cost redesign program,
the successful integration of acquisitions and reduced expenses related to
foreclosed property.
</TABLE>
16
<PAGE> 19
Commercial and residential real estate loans and securities are designated
as nonperforming when payments are 90 or more days past due, when credit terms
are renegotiated below market levels, or when individual analysis of a
borrower's creditworthiness indicates that a credit should be placed on
nonaccrual status, unless the loan is adequately collateralized and in the
process of collection. Consumer loans are reported as "90 days past due accruing
interest" once the 90 day criterion has been met, and are charged off when they
become 119 days past due. Generally, when loans are classified as nonperforming,
unpaid accrued interest is written off, and future income may be recorded only
as cash payments are received.
Nonperforming assets declined in 1994 due to payoffs and recoveries in
nonaccrual commercial and real estate loans, as well as the liquidation of
foreclosed real estate.
<TABLE>
Although loans may be classified as nonperforming, many continue to pay
interest irregularly or at less than original contractual rates. A summary of
actual income booked on nonperforming loans versus their full contractual yields
for each of the past five years follows:
<CAPTION>
(Dollars in Millions) 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income potential based on
original contract....... $16.5 $16.0 $21.4 $36.3 $32.2
Actual income............ 8.2 5.5 4.6 5.7 6.6
</TABLE>
<TABLE>
ALLOWANCE FOR LOAN LOSSES: The following table presents the reconciliation
of the allowance for loan losses:
<CAPTION>
(Dollars in Millions) 1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at beginning of
year.................... $443.4 $383.9 $385.9 $327.3 $311.2
Provision................ 79.4 93.1 129.4 251.1 231.4
Net acquired allowance... 9.7 50.7 2.5 17.7 9.6
Loans charged off:
Commercial.............. 34.6 55.0 78.4 124.8 111.9
International........... -- 1.9 -- .1 46.1
Real estate mortgage.... 11.5 14.9 18.7 21.0 14.6
Consumer................ 33.0 35.0 45.6 57.5 60.6
Revolving credit........ 41.1 37.7 43.8 56.5 46.2
------ ------ ------ ------ ------
Total charge-offs.... 120.2 144.5 186.5 259.9 279.4
Recoveries:
Commercial.............. 18.6 26.1 14.9 12.5 15.5
International........... -- -- .2 2.0 8.1
Real estate mortgage.... 4.3 2.3 3.8 2.7 .9
Consumer................ 22.8 21.6 23.0 21.3 18.1
Revolving credit........ 11.0 10.2 10.7 11.2 11.9
------ ------ ------ ------ ------
Total recoveries..... 56.7 60.2 52.6 49.7 54.5
------ ------ ------ ------ ------
Net charged-off loans.... 63.5 84.3 133.9 210.2 224.9
------ ------ ------ ------ ------
Balance at end of year... $469.0 $443.4 $383.9 $385.9 $327.3
====== ====== ====== ====== ======
Ratio of ending allowance
to ending loans......... 2.04% 2.08% 2.05% 2.01% 1.67%
</TABLE>
<TABLE>
CHART 13. NONPERFORMING ASSETS AND THE ALLOWANCE FOR LOAN LOSSES
<CAPTION>
NONPERFORMING ALLOWANCE FOR
ASSETS LOAN LOSSES
- --------------------------------------------------------------------------------
<S> <C> <C>
89 303 311
90 482 327
91 539 386
92 367 384
93 209 443
94 129 469
<FN>
Nonperforming assets at December 31, 1994 totalled $129 million and represented
a decline of 38% from a year ago. At December 31, 1994, the allowance for loan
losses represented 2.04% of total loans and 364% of nonperforming assets.
</TABLE>
17
<PAGE> 20
FINANCIAL REVIEW (continued)
The commercial category included real estate construction net
charge-offs/(recoveries) of $(1.8) million in 1994, $4.9 million in 1993, and
$12.3 million in 1992. Real estate mortgage loans included commercial real
estate net charge-offs of $5.3 million in 1994, $10.3 million in 1993, and $11.7
million in 1992.
<TABLE>
Net charge-offs (recoveries) as a percentage of average loans by portfolio
type are shown in the following table:
<CAPTION>
1994 1993 1992 1991 1990
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial.............. .18% .33% .71% 1.14% .95%
International........... -- 3.78 (.52) (3.96) 41.20
Real estate mortgage.... .11 .24 .32 .41 .34
Consumer................ .23 .34 .61 .97 1.10
Revolving credit........ 1.68 1.90 2.34 2.94 2.50
Total net charge-offs to
average loans.......... .29% .43% .72% 1.07% 1.16%
</TABLE>
Net charge-offs as a percentage of loans declined 14 basis points in 1994
following a 29 basis point decline in 1993 (Chart 14).
<TABLE>
Both the provision and the allowance are based on an analysis of individual
credits, prior and current loss experience, overall growth in the portfolio,
current economic conditions, and other factors. Consumer and credit card loans
are charged off within industry norms, while commercial loans are evaluated
individually. An allocation of the ending allowance for loan losses by major
loan type follows:
<CAPTION>
(Dollars in Millions) 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and
commercial mortgage.... $ 161.2 $174.5 $192.6 $210.9 $179.6
International........... .3 .4 .6 .5 1.4
Consumer and residential
mortgage............... 32.2 29.7 30.6 53.3 50.2
Revolving credit........ 42.8 22.1 30.1 28.7 31.2
Unallocated............. 232.5 216.7 130.0 92.5 64.9
------- ------ ------ ------ ------
$ 469.0 $443.4 $383.9 $385.9 $327.3
======= ====== ====== ====== ======
</TABLE>
This allocation is made for analytical purposes. The total allowance is
available to absorb losses from any segment of the portfolio. The changes in the
allocated and unallocated categories reflect credit quality that has improved at
a rapid rate. The 1994 provision for loan losses exceeded net charge-offs for
the year by $15.9 million.
<TABLE>
The following table shows the percentage of loans in each category to total
loans at year-end:
<CAPTION>
1994 1993 1992 1991 1990
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and
commercial mortgage.... 51.2 % 53.7% 57.6 % 59.2 % 59.3 %
International........... .2 .3 .3 .3 .3
Consumer and residential
mortgage............... 38.8 38.9 34.3 32.7 32.4
Revolving credit........ 9.8 7.1 7.8 7.8 8.0
------ ------ ------ ------ ------
100.0 % 100.0% 100.0 % 100.0 % 100.0 %
===== ====== ====== ====== ======
</TABLE>
The adoption of SFAS 114 "Accounting By Creditors For Impairment of a Loan"
in 1995 will not have a material impact on financial position or results of
operations.
<TABLE>
CHART 14. NET CHARGE-OFFS AS A PERCENTAGE OF AVERAGE LOANS
<CAPTION>
Net C/O Ratio
- -------------------------------------------------------------------------------
<S> <C>
89 .96%
90 1.16%
91 1.07%
92 .72%
93 .43%
94 .29%
<FN>
Net charge-offs as a percentage of average loans was .29% in 1994 compared with
.43% in 1993 and .72% in 1992. The improvement was due to lower charge-off
rates in both the commercial and consumer loan portfolios.
</TABLE>
18
<PAGE> 21
<TABLE>
STATISTICAL DATA
CONSOLIDATED SUMMARY OF OPERATIONS AND SELECTED FINANCIAL DATA
<CAPTION>
(In Millions
Except
Per Share FOR THE CALENDAR YEAR
Amounts and ---------------------------------------------------------------------------------------------------------------------
Ratios) 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans...................... $ 1,766 $ 1,582 $ 1,624 $ 1,974 $ 2,162 $ 2,094 $ 1,750 $ 1,521 $ 1,410 $ 1,349 $ 957
Securities................. 246 276 341 389 442 407 373 345 318 288 240
Other interest income...... 30 32 67 112 91 111 77 76 99 175 200
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total interest income.... 2,042 1,890 2,032 2,475 2,695 2,612 2,200 1,942 1,827 1,812 1,397
INTEREST EXPENSE
Deposits.................... 593 542 723 1,093 1,252 1,206 957 806 821 878 689
Other interest expense..... 212 148 157 251 349 353 276 268 224 252 250
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total interest expense... 805 690 880 1,344 1,601 1,559 1,233 1,074 1,045 1,130 939
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net interest income...... 1,237 1,200 1,152 1,131 1,094 1,053 967 868 782 682 458
PROVISION FOR LOAN LOSSES.... 79 93 129 251 231 157 168 279 108 67 43
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net interest income after
provision for loan losses.. 1,158 1,107 1,023 880 863 896 799 589 674 615 415
Fees and other income....... 853 800 726 650 580 493 471 419 364 318 206
Security gains (losses)..... 10 12 26 26 3 3 11 11 21 9 (2)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total noninterest income.. 863 812 752 676 583 496 482 430 385 327 204
Noninterest expense......... 1,403 1,348 1,311 1,242 1,115 981 913 857 797 709 467
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes.. 618 571 464 314 331 411 368 162 262 233 152
Income taxes................ 188 167 117 77 82 106 91 18 44 52 28
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
NET INCOME................... $ 430 $ 404 $ 347 $ 237 $ 249 $ 305 $ 277 $ 144 $ 218 $ 181 $ 124
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
NET INCOME PER COMMON SHARE:
Primary..................... $ 2.70 $ 2.41 $ 2.09 $ 1.46 $ 1.62 $ 1.98 $ 1.80 $ .93 $ 1.47 $ 1.39 $ 1.05
Assuming full dilution...... 2.64 2.37 2.06 1.45 1.61 1.98 1.80 .92 1.40 1.21 1.01
Dividends paid per common
share...................... 1.18 1.06 .94 .94 .94 .84 .72 .60 .50 .44 .42
Average shares outstanding.. 153.35 161.16 158.01 154.43 153.84 154.04 153.85 154.38 148.00 130.49 117.76
FINANCIAL RATIOS:
Return on average common
equity..................... 17.06% 16.12% 15.31% 11.20% 12.97% 17.18% 17.47% 9.51% 15.97% 15.87% 13.87%
Return on average assets.... 1.40 1.40 1.21 .81 .87 1.16 1.14 .63 1.05 .95 .90
Average equity to average
assets..................... 8.55 9.04 8.25 7.35 6.73 6.73 6.55 6.67 6.68 6.18 6.54
Dividends paid to net
income....................... 43.70 43.98 44.98 64.38 58.02 42.42 40.00 64.52 34.01 31.65 40.00
Net interest margin......... 4.65 4.80 4.65 4.51 4.50 4.69 4.73 4.93 4.68 4.43 4.13
Overhead ratio.............. 43.46 44.34 48.93 49.93 46.33 43.68 42.66 45.63 47.95 50.12 49.45
Efficiency ratio............ 66.21 66.21 68.22 67.67 64.27 60.90 60.61 62.14 62.92 64.56 63.60
AT YEAR-END:
Assets...................... $32,114 $31,068 $28,963 $29,976 $29,561 $28,549 $26,879 $24,242 $23,495 $20,637 $19,560
Loans....................... 23,035 21,286 18,738 19,171 19,587 18,741 17,314 15,525 14,362 12,462 11,181
Securities.................. 4,395 5,166 5,499 5,370 5,020 5,045 5,126 4,620 4,305 3,319 3,018
Deposits.................... 24,472 23,063 22,585 22,758 22,730 21,386 20,676 18,368 17,350 15,532 14,626
Corporate long-term debt.... 744 510 328 330 308 310 264 294 277 254 198
Common equity............... 2,414 2,565 2,300 2,058 1,946 1,877 1,664 1,502 1,468 1,142 985
Total equity................ 2,601 2,763 2,500 2,258 1,946 1,877 1,664 1,507 1,498 1,265 1,109
Common shares outstanding... 147.56 158.78 158.17 154.63 153.11 154.20 153.87 154.19 154.04 133.39 127.65
</TABLE>
19
<PAGE> 22
<TABLE>
STATISTICAL DATA (continued)
DAILY AVERAGE BALANCE SHEETS/NET INTEREST INCOME/RATES
<CAPTION>
DAILY AVERAGE BALANCE
-------------------------------------------------------------------
(Dollars in Millions) 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Loans:
Commercial................................ $ 9,133 $ 8,816 $ 8,977 $ 9,885 $10,227 $ 9,788
Real estate mortgage...................... 6,346 5,297 4,607 4,419 3,987 3,054
Consumer.................................. 4,441 3,893 3,675 3,738 3,872 3,592
Revolving credit.......................... 1,795 1,448 1,412 1,539 1,370 1,367
------- ------- ------- ------- ------- -------
Total loans............................ 21,715 19,454 18,671 19,581 19,456 17,801
Securities:
Taxable................................... 3,999 4,637 4,361 3,722 3,813 3,437
Tax-exempt................................ 758 861 1,024 1,174 1,274 1,329
------- ------- ------- ------- ------- -------
Total securities....................... 4,757 5,498 5,385 4,896 5,087 4,766
Federal funds sold.......................... 65 77 315 296 247 121
Security resale agreements.................. 470 274 706 870 275 127
Eurodollar time deposits in banks........... 107 278 417 417 298 655
Other short-term money market
investments............................... 147 164 187 219 300 372
------- ------- ------- ------- ------- -------
Total earning assets/
Total interest income/Rates............ 27,261 25,745 25,681 26,279 25,663 23,842
Allowance for loan losses..................... (462) (409) (393) (367) (315) (339)
Market value (depreciation) of securities
available for sale.......................... (5) -- -- -- -- --
Cash and demand balances due from banks....... 2,052 1,959 1,827 1,855 1,789 1,675
Properties and equipment...................... 390 367 383 410 414 385
Customers' acceptance liability............... 69 51 78 75 96 62
Accrued income and other assets............... 1,309 1,121 1,059 1,091 917 732
------- ------- ------- ------- ------- -------
Total assets........................... $30,614 $28,834 $28,635 $29,343 $28,564 $26,357
======= ======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Savings and NOW accounts.................... $ 4,966 $ 4,543 $ 3,981 $ 3,371 $ 3,138 $ 2,796
Insured money market accounts............... 5,184 5,401 5,236 4,519 3,767 3,238
Time deposits of individuals................ 6,380 6,268 7,230 8,430 8,112 6,736
Other time deposits......................... 481 552 936 1,777 2,495 3,000
Deposits in overseas offices................ 1,026 263 251 367 315 629
Federal funds borrowed...................... 1,358 1,439 995 1,056 1,289 1,395
Security repurchase agreements.............. 1,181 1,080 1,183 1,141 1,374 1,383
Borrowed funds.............................. 1,415 1,193 1,359 1,706 1,424 954
Corporate long-term debt.................... 712 452 329 318 309 273
------- ------- ------- ------- ------- -------
Total interest bearing liabilities/
Total interest expense/Rates........... 22,703 21,191 21,500 22,685 22,223 20,404
Noninterest bearing deposits................ 4,798 4,619 4,333 4,010 3,930 3,745
Acceptances outstanding..................... 69 51 78 75 96 62
Accrued expenses and other liabilities...... 425 367 362 417 393 372
------- ------- ------- ------- ------- -------
Total liabilities...................... 27,995 26,228 26,273 27,187 26,642 24,583
Preferred stock............................... 191 200 200 141 -- --
Common stock.................................. 2,428 2,406 2,162 2,015 1,922 1,774
------- ------- ------- ------- ------- -------
Total stockholders' equity............. 2,619 2,606 2,362 2,156 1,922 1,774
------- ------- ------- ------- ------- -------
Total liabilities and stockholders'
equity............................... $30,614 $28,834 $28,635 $29,343 $28,564 $26,357
======= ======= ======= ======= ======= =======
Net interest income.........................................................................................
Interest spread.............................................................................................
Contribution of noninterest bearing sources of funds........................................................
Net interest margin.........................................................................................
<FN>
Fully taxable equivalent basis computed at 35% in 1994 and 1993, and 34% in 1992
through 1989.
Average loan balances include nonperforming loans.
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
INTEREST DAILY AVERAGE RATE
- ------------------------------------------------------------------------- -----------------------------------------------------
1994 1993 1992 1991 1990 1989 1994 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 708.5 $ 648.7 $ 679.7 $ 904.8 $1,073.6 $1,102.9 7.76% 7.36% 7.57% 9.15% 10.50% 11.27%
490.5 421.4 409.8 448.0 424.8 331.2 7.73 7.96 8.90 10.14 10.65 10.84
356.8 338.8 358.9 408.7 453.3 436.4 8.03 8.70 9.77 10.93 11.71 12.15
219.8 182.9 186.4 227.5 229.7 241.5 12.25 12.63 13.20 14.78 16.77 17.67
- -------- -------- -------- -------- -------- --------
1,775.6 1,591.8 1,634.8 1,989.0 2,181.4 2,112.0 8.18 8.18 8.76 10.16 11.21 11.86
204.5 229.0 277.6 308.7 347.7 305.3 5.11 4.94 6.37 8.29 9.12 8.88
59.8 73.3 95.3 119.4 135.8 147.6 7.89 8.51 9.31 10.17 10.66 11.11
- -------- -------- -------- -------- -------- --------
264.3 302.3 372.9 428.1 483.5 452.9 5.56 5.50 6.92 8.74 9.50 9.50
2.9 4.5 11.1 17.3 20.3 10.9 4.46 5.84 3.52 5.84 8.22 9.01
20.0 8.8 26.9 49.7 22.1 11.7 4.25 3.21 3.81 5.71 8.04 9.21
3.0 9.6 16.4 27.3 25.8 60.2 2.80 3.45 3.93 6.55 8.66 9.19
5.5 8.9 12.7 17.4 23.5 29.7 3.74 5.43 6.74 7.95 7.83 7.98
- -------- -------- -------- -------- -------- --------
$2,071.3 $1,925.9 $2,074.8 $2,528.8 $2,756.6 $2,677.4 7.60% 7.48% 8.08% 9.62% 10.74% 11.23%
$ 128.8 $ 122.8 $ 128.3 $ 155.0 $ 157.0 $ 136.9 2.59% 2.70% 3.22% 4.60% 5.00% 4.90%
117.0 116.3 146.3 211.3 216.2 180.7 2.26 2.15 2.79 4.68 5.74 5.58
284.6 277.1 400.3 592.2 654.9 557.8 4.46 4.42 5.54 7.02 8.07 8.28
18.4 19.1 39.5 112.2 200.3 273.8 3.83 3.46 4.22 6.31 8.03 9.13
44.1 6.9 8.3 21.6 23.7 56.8 4.30 2.62 3.31 5.89 7.52 9.03
57.5 45.5 34.4 60.2 104.0 127.9 4.23 3.16 3.46 5.70 8.07 9.17
43.7 27.6 36.7 58.5 103.9 118.0 3.70 2.56 3.09 5.13 7.56 8.53
61.7 46.4 60.9 106.8 112.9 80.3 4.36 3.89 4.49 6.26 7.93 8.42
49.2 28.4 24.8 26.0 28.1 26.8 6.92 6.28 7.54 8.18 9.09 9.82
- -------- -------- -------- -------- -------- --------
$ 805.0 $ 690.1 $ 879.5 $1,343.8 $1,601.0 $1,559.0 3.55% 3.26% 4.09% 5.92% 7.20% 7.64%
- -------- -------- -------- -------- -------- --------
$1,266.3 $1,235.8 $1,195.3 $1,185.0 $1,155.6 $1,118.4
======== ======== ======== ======== ======== ========
.................................................................... 4.05% 4.22% 3.99% 3.70% 3.54% 3.59%
.................................................................... .60 .58 .66 .81 .96 1.10
----- ----- ----- ----- ----- -----
.................................................................... 4.65% 4.80% 4.65% 4.51% 4.50% 4.69%
===== ===== ===== ===== ===== =====
</TABLE>
21
<PAGE> 24
QUARTERLY DATA
FOURTH QUARTER RESULTS
Net income for the fourth quarter of 1994 was $111.4 million, or $.71 per
common share, compared with $103.5 million, or $.62 per share, for the same
period last year.
The increase in earnings was due predominantly to higher net interest income
that resulted from loan growth.
Annualized return on average common equity for the fourth quarter was
17.64%, compared with 15.74% for the fourth quarter 1993. Annualized return on
average assets was 1.40% in 1994 versus 1.35% in 1993.
Average earning assets and average deposits for the quarter increased 3.0%
and 2.7%, respectively, from the fourth quarter last year, primarily due to
growth in business.
Net interest income on a fully taxable equivalent basis for the quarter was
$325.5 million, which reflects a 3.1% increase over $315.7 million for the same
period last year.
Fees and other income increased 7.4% to $230.1 million over the prior year
fourth quarter due mainly to higher item processing revenue that was the result
of business growth and acquisitions, gains on the sale of mortgage servicing,
and a final income adjustment related to the unwinding of a credit card
securitization.
Noninterest expenses increased to $370.5 million, compared with $359.5
million a year ago. The increase was due to litigation settlements and higher
expenses related to increased volume and acquisitions in the item processing
subsidiary.
- --------------------------------------------------------------------------------
<TABLE>
QUARTERLY FINANCIAL INFORMATION
The following is a summary of unaudited quarterly results of operations for the
years 1994, 1993, and 1992:
<CAPTION>
(Dollars in Thousands
Except Per Share Amounts) First Second Third Fourth Full Year
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Interest income................................. $473,873 $494,462 $517,754 $555,775 $2,041,864
Interest expense................................ 171,728 188,275 207,607 237,445 805,055
Net interest income............................. 302,145 306,187 310,147 318,330 1,236,809
Provision for loan losses....................... 20,442 20,071 19,235 19,608 79,356
Security gains.................................. 5,893 799 2,772 1,066 10,530
Net overhead.................................... 137,130 135,208 137,632 140,325 550,295
Income before income taxes...................... 150,466 151,707 156,052 159,463 617,688
Net income...................................... 103,807 105,841 108,411 111,375 429,434
Net income applicable to common stock........... 99,930 102,055 104,625 107,624 414,234
Net income per common share..................... .63 .67 .69 .71 2.70
Fully diluted net income per common share....... .62 .66 .67 .69 2.64
Dividends paid per common share................. .29 .29 .30 .30 1.18
1993
Interest income................................. $467,716 $467,138 $469,156 $486,154 $1,890,164
Interest expense................................ 173,716 170,095 167,652 178,647 690,110
Net interest income............................. 294,000 297,043 301,504 307,507 1,200,054
Provision for loan losses....................... 25,382 23,896 23,861 19,950 93,089
Security gains.................................. 2,509 3,195 2,851 3,367 11,922
Net overhead.................................... 136,841 131,905 133,925 145,254 547,925
Income before income taxes...................... 134,286 144,437 146,569 145,670 570,962
Net income...................................... 95,322 102,454 102,676 103,545 403,997
Net income applicable to common stock........... 91,322 98,454 98,676 99,579 388,031
Net income per common share..................... .57 .61 .61 .62 2.41
Fully diluted net income per common share....... .56 .60 .60 .61 2.37
Dividends paid per common share................. .26 .26 .27 .27 1.06
1992
Net income...................................... $ 82,105 $ 85,145 $ 89,623 $ 90,050 $ 346,923
Net income per common share..................... .50 .51 .54 .54 2.09
Fully diluted net income per common share....... .50 .50 .53 .53 2.06
Dividends paid per common share................. .235 .235 .235 .235 .94
</TABLE>
22
<PAGE> 25
REPORT OF MANAGEMENT
The management of National City Corporation has prepared the accompanying
financial statements and is responsible for their integrity and objectivity. The
statements have been prepared in conformity with generally accepted accounting
principles and necessarily include amounts that are based on management's best
estimates and judgments. Management also prepared the other information in the
annual report and is responsible for its accuracy and consistency with the
financial statements.
National City Corporation maintains a system of internal control over
financial reporting designed to produce reliable financial statements. The
system contains self-monitoring mechanisms, and compliance is tested and
evaluated through an extensive program of internal audits. Actions are taken to
correct potential deficiencies as they are identified. Any internal control
system has inherent limitations, including the possibility that controls can be
circumvented or overridden. Further, because of changes in conditions, internal
control system effectiveness may vary over time.
The Audit Committee, consisting entirely of outside directors, meets
regularly with management, internal auditors and independent auditors, and
reviews audit plans and results as well as management's actions taken in
discharging responsibilities for accounting, financial reporting and internal
controls. Ernst & Young LLP, independent auditors, and the internal auditors
have direct and confidential access to the Audit Committee at all times to
discuss the results of their examinations.
National City Corporation assessed its internal control system as of
December 31, 1994 in relation to criteria for effective internal control over
financial reporting described in "Internal Control -- Integrated Framework"
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, management believes that, as of December 31, 1994, its
system of internal control met those criteria.
Cleveland, Ohio
January 20, 1995
/s/ EDWARD B. BRANDON /s/ ROBERT G. SIEFERS
EDWARD B. BRANDON ROBERT G. SIEFERS
Chairman and Chief Executive Officer Executive Vice President and
Chief Financial Officer
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Stockholders
National City Corporation
Cleveland, Ohio
We have audited the accompanying consolidated balance sheets of National
City Corporation 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 assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of National City
Corporation and subsidiaries at December 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Cleveland, Ohio
January 20, 1995
23
<PAGE> 26
<TABLE>
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
FOR THE CALENDAR YEAR
--------------------------------------------
(Dollars in Thousands Except Per Share Amounts) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans:
Taxable............................................................ $1,749,726 $1,565,636 $1,602,508
Exempt from Federal income taxes................................... 16,172 16,470 21,593
Securities:
Taxable............................................................ 204,463 229,007 277,635
Exempt from Federal income taxes................................... 40,085 47,279 63,442
Federal funds sold and security resale agreements.................... 22,897 13,254 37,981
Eurodollar time deposits in banks.................................... 3,044 9,630 16,360
Other short-term investments......................................... 5,477 8,888 12,807
---------- ---------- ----------
Total interest income......................................... 2,041,864 1,890,164 2,032,326
INTEREST EXPENSE
Deposits............................................................. 592,870 542,165 722,657
Federal funds borrowed and security repurchase agreements............ 101,249 73,151 71,146
Borrowed funds....................................................... 61,698 46,417 60,988
Corporate long-term debt............................................. 49,238 28,377 24,790
---------- ---------- ----------
Total interest expense........................................ 805,055 690,110 879,581
---------- ---------- ----------
Net interest income........................................... 1,236,809 1,200,054 1,152,745
PROVISION FOR LOAN LOSSES.............................................. 79,356 93,089 129,361
---------- ---------- ----------
Net interest income after provision for loan losses........... 1,157,453 1,106,965 1,023,384
NONINTEREST INCOME
Item processing revenues............................................. 312,358 267,962 194,166
Service charges on deposit accounts.................................. 153,870 152,609 143,909
Trust fees........................................................... 125,668 122,597 118,350
Credit card fees..................................................... 85,308 92,966 101,898
Mortgage banking revenues............................................ 67,406 58,678 59,958
Other................................................................ 108,228 105,003 107,379
---------- ---------- ----------
Total fees and other income................................... 852,838 799,815 725,660
Security gains....................................................... 10,530 11,922 25,697
---------- ---------- ----------
Total noninterest income...................................... 863,368 811,737 751,357
NONINTEREST EXPENSE
Salaries and employee benefits....................................... 653,890 623,472 617,015
Equipment............................................................ 93,345 89,005 90,768
Net occupancy........................................................ 89,994 89,729 85,620
Assessments and taxes................................................ 78,869 80,454 76,779
Other................................................................ 487,035 465,080 440,266
---------- ---------- ----------
Total noninterest expense..................................... 1,403,133 1,347,740 1,310,448
---------- ---------- ----------
Income before income taxes............................................. 617,688 570,962 464,293
Income tax expense..................................................... 188,254 166,965 117,370
---------- ---------- ----------
NET INCOME............................................................. $ 429,434 $ 403,997 $ 346,923
========= =========== ===========
NET INCOME APPLICABLE TO COMMON STOCK.................................. $ 414,234 $ 388,031 $ 330,923
========= =========== ===========
NET INCOME PER COMMON SHARE............................................ $2.70 $2.41 $2.09
Average Common Shares Outstanding...................................... 153,353,555 161,163,816 158,011,980
</TABLE>
See notes to financial statements.
24
<PAGE> 27
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
DECEMBER 31
----------------------------
(Dollars in Thousands) 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Loans:
Commercial........................................................................... $ 8,667,539 $ 8,429,119
International........................................................................ 52,356 69,776
Real estate construction............................................................. 421,505 439,406
Lease financing...................................................................... 216,499 228,352
Real estate mortgage - nonresidential................................................ 2,473,329 2,328,228
Real estate mortgage - residential................................................... 4,123,084 3,523,836
Mortgage loans held for sale......................................................... 42,064 509,187
Consumer............................................................................. 4,781,759 4,241,461
Revolving credit..................................................................... 2,256,640 1,516,776
----------- ------------
Total loans........................................................................ 23,034,775 21,286,141
Allowance for loan losses.......................................................... 469,019 443,412
----------- ------------
Net loans.......................................................................... 22,565,756 20,842,729
Securities held to maturity (market value $1,156,811 and $1,824,855, respectively)..... 1,176,115 1,763,025
Securities available for sale.......................................................... 3,218,940 3,403,201
Federal funds sold and security resale agreements...................................... 672,945 611,743
Trading account assets................................................................. 7,940 150,296
Eurodollar time deposits in banks...................................................... -- 457,000
Other short-term money market investments.............................................. 96,615 85,677
Cash and demand balances due from banks................................................ 2,401,728 1,933,888
Properties and equipment............................................................... 389,980 386,219
Customers' acceptance liability........................................................ 102,005 68,148
Accrued income and other assets........................................................ 1,481,984 1,365,783
----------- -----------
TOTAL ASSETS.................................................................... $32,114,008 $31,067,709
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits (noninterest bearing)................................................ $ 5,331,789 $ 5,214,560
Savings and NOW accounts............................................................. 4,599,988 5,161,593
Insured money market accounts........................................................ 4,964,741 5,489,785
Time deposits of individuals......................................................... 7,298,056 6,224,231
Other time deposits.................................................................. 472,023 500,421
Deposits in overseas offices......................................................... 1,805,323 472,431
----------- ------------
Total deposits.................................................................. 24,471,920 23,063,021
Federal funds borrowed and security repurchase agreements............................ 2,608,801 3,082,821
Borrowed funds....................................................................... 1,104,989 1,201,011
Acceptances outstanding.............................................................. 102,005 68,148
Accrued expenses and other liabilities............................................... 481,570 379,268
Corporate long-term debt............................................................. 743,669 510,173
----------- ------------
TOTAL LIABILITIES............................................................... 29,512,954 28,304,442
Stockholders' Equity:
Preferred stock, without par value, authorized 5,000,000 shares, outstanding 750,160
and 793,240 shares (3,750,800 and 3,966,200 depositary shares) of 8% Cumulative
Convertible Preferred Stock ($250 liquidation preference per share) in 1994 and
1993................................................................................ 187,540 198,310
Common stock, par value $4 per share, authorized 350,000,000 shares,
outstanding 147,555,632 shares in 1994 and 158,779,611 shares in 1993.............. 590,223 635,119
Capital surplus...................................................................... 100,051 105,140
Retained earnings.................................................................... 1,732,258 1,841,144
Unallocated shares held by Employee Stock Ownership Plan (ESOP) trust................ (9,018) (16,446)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY...................................................... 2,601,054 2,763,267
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................... $32,114,008 $31,067,709
=========== ============
</TABLE>
See notes to financial statements.
25
<PAGE> 28
<TABLE>
FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
FOR THE CALENDAR YEAR
-------------------------------------------
(Dollars in Thousands) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................................. $ 429,434 $ 403,997 $ 346,923
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses............................................. 79,356 93,089 129,361
Depreciation and amortization......................................... 57,390 56,610 59,314
Amortization of goodwill and intangibles.............................. 44,903 61,721 37,459
Amortization of securities discount and premium....................... 8,833 6,488 (4,643)
Security gains........................................................ (10,530) (11,922) (25,697)
Other gains, net...................................................... (22,712) -- (4,352)
Net decrease (increase) in trading account securities................. 142,356 (137,252) 19,978
Originations and purchases of mortgage loans held for sale............ (1,117,702) (3,635,705) (2,967,585)
Proceeds from sales of mortgage loans held for sale................... 1,587,421 3,496,154 2,756,320
Deferred income taxes (benefit)....................................... 3,104 21,563 (22,089)
(Increase) decrease in interest receivable............................ (51,305) (22,698) 87,037
Increase (decrease) in interest payable............................... 41,187 24,319 (97,418)
(Increase) decrease in other assets................................... (41,943) (279,286) 40,999
Increase (decrease) in other liabilities.............................. 61,115 46,041 (22,416)
---------- ---------- ----------
Net cash provided (used) by operating activities................. 1,210,907 123,119 333,191
LENDING AND INVESTING ACTIVITIES
Net change in short-term investments.................................... 384,860 633,588 375,201
Purchases of securities................................................. (2,185,267) (4,036,281) (3,391,162)
Proceeds from sales of securities....................................... 1,598,514 2,594,509 1,253,787
Proceeds from maturities and prepayments of securities.................. 1,225,333 2,368,065 2,041,828
Net change in loans..................................................... (2,272,102) (1,870,528) 357,484
Proceeds from sales of loans............................................ -- 207,156 160,214
Net increase in properties and equipment................................ (61,151) (55,348) (38,337)
Acquisitions............................................................ -- (43,490) (17,000)
---------- ---------- ----------
Net cash provided (used) by lending and investing activities........ (1,309,813) (202,329) 742,015
DEPOSIT AND FINANCING ACTIVITIES
Net change in Federal funds borrowed and security repurchase
agreements............................................................ (474,020) 1,179,308 (585,919)
Net change in borrowed funds............................................ (96,022) (217,410) (322,283)
Net change in demand, savings, NOW, insured money market accounts, and
deposits in overseas offices.......................................... 363,472 212,946 1,843,412
Net change in time deposits............................................. 1,045,427 (1,093,817) (2,015,913)
Repayment of long-term debt............................................. (15,362) (20,660) (2,812)
Proceeds from issuance of long-term debt................................ 247,080 197,950 --
Dividends paid, net of tax benefit of ESOP shares....................... (194,425) (184,516) (155,718)
Issuance of common stock................................................ 23,221 28,469 47,378
Repurchase of common and preferred stock................................ (340,053) (168,920) (1,118)
ESOP trust repayment.................................................... 7,428 8,816 4,759
---------- ---------- ----------
Net cash provided (used) by deposit and financing activities........ 566,746 (57,834) (1,188,214)
---------- ---------- ----------
Net increase (decrease) in cash and demand balances due from banks...... 467,840 (137,044) (113,008)
Cash and demand balances due from banks, January 1...................... 1,933,888 2,070,932 2,183,940
---------- ---------- ----------
Cash and demand balances due from banks, December 31.................... $2,401,728 $1,933,888 $2,070,932
========== =========== ===========
SUPPLEMENTAL DISCLOSURES
Interest paid........................................................... $ 764,000 $ 662,000 $ 977,000
Income taxes paid....................................................... 199,000 147,000 140,000
Common stock issued in purchase acquisitions............................ -- 140,568 --
</TABLE>
See notes to financial statements.
26
<PAGE> 29
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Unallocated
Shares
(Dollars in Thousands Preferred Common Capital Retained Held by
Except Per Share Amounts) Stock Stock Surplus Earnings ESOP Trust Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1992..................... $200,000 $309,253 $261,129 $1,517,301 $ (30,021) $2,257,662
Net income................................ 346,923 346,923
Common dividends, $.94 per share.......... (130,881) (130,881)
Common dividends of pooled company........ (9,155) (9,155)
Preferred dividends, $4.00 per depositary
share................................... (16,000) (16,000)
Issuance of 3,621,216 common shares under
corporate stock and dividend
reinvestment plans...................... 7,243 40,135 47,378
Purchase of 80,400 common shares.......... (161 ) (957) (1,118)
Shares distributed by ESOP trust and tax
benefit on dividends.................... 318 4,759 5,077
--------- -------- -------- ---------- ----------- ----------
Balance December 31, 1992................... 200,000 316,335 300,307 1,708,506 (25,262) 2,499,886
Net income................................ 403,997 403,997
Common dividends, $1.06 per share......... (169,391) (169,391)
Preferred dividends, $4.00 per depositary
share................................... (16,000) (16,000)
Issuance of 1,530,479 common shares under
corporate stock and dividend
reinvestment plans...................... 3,972 24,497 28,469
Purchase of 6,724,600 common shares and
33,800 depositary shares of preferred
stock................................... (1,690 ) (21,469 ) (23,951) (121,810) (168,920)
Issuance of 5,806,552 common shares
pursuant to acquisitions................ 20,174 120,394 140,568
Two-for-one stock split................... 316,107 (316,107) --
Shares distributed by ESOP trust and tax
benefit on dividends.................... 875 8,816 9,691
Accounting change adjustment for
unrealized gains on securities available
for sale................................ 34,967 34,967
--------- -------- -------- ---------- ----------- ----------
Balance December 31, 1993................... 198,310 635,119 105,140 1,841,144 (16,446) 2,763,267
Net Income................................ 429,434 429,434
Common dividends paid, $1.18 per share.... (179,675) (179,675)
Preferred dividends paid, $4.00 per
depositary share........................ (15,415) (15,415)
Issuance of 1,190,121 common shares under
corporate stock and dividend
reinvestment plans...................... 4,760 18,461 23,221
Purchase of 12,414,100 common shares and
215,400 depositary shares of preferred
stock................................... (10,770 ) (49,656 ) (23,550) (256,077) (340,053)
Shares distributed by ESOP trust and tax
benefit on dividends.................... 665 7,428 8,093
Change in unrealized market value
adjustment on securities available for
sale, net of tax........................ (87,818) (87,818)
--------- -------- -------- ---------- ----------- ----------
Balance December 31, 1994................... $187,540 $590,223 $100,051 $1,732,258 $ (9,018) $2,601,054
========== ========= ========= =========== ============ ===========
</TABLE>
See notes to financial statements.
27
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
CONSOLIDATION: The consolidated financial statements include the accounts of
National City Corporation (the "Corporation") and all of its subsidiaries. The
Corporation's primary business is banking.
ACQUISITIONS AND AMORTIZATION OF INTANGIBLES: Operations of companies
acquired in purchase transactions are included in the statements of income from
the respective dates of acquisition. The excess of the purchase price over net
identifiable assets acquired (goodwill) is included in other assets and is being
amortized over varying remaining lives not exceeding 24 years. Core deposit
intangibles are amortized on a straight-line basis over varying remaining lives
not exceeding 4 years.
CASH FLOWS: The Corporation has defined cash and cash equivalents as those
amounts included in the balance sheet caption "Cash and demand balances due from
banks."
MORTGAGE LOANS HELD FOR SALE: Mortgage loans held for sale are valued at the
lower of cost or market, as calculated on an aggregate loan basis.
ALLOWANCE FOR LOAN LOSSES: The provision for loan losses and the adequacy of
the allowance for loan losses are based upon a continuing evaluation of the loan
portfolio, current economic conditions, prior loss experience, and other
pertinent factors.
SECURITIES AND TRADING ACCOUNT: As further discussed in Note 4, the
Corporation adopted SFAS 115 "Accounting For Certain Investments in Debt and
Equity Securities" on December 31, 1993. As required by SFAS 115, management
determines the appropriate classification of debt securities at the time of
purchase.
Trading account assets are held for resale in anticipation of short-term
market movements and are carried at market value. Gains and losses, both
realized and unrealized, are included in other income.
Debt securities are classified as held to maturity when the Corporation has
the positive intent and ability to hold the securities to maturity. Securities
held to maturity are carried at amortized cost.
Debt securities not classified as held to maturity or trading account and
marketable equity securities not classified as trading are classified as
available for sale. Securities available for sale are carried at fair value with
unrealized gains and losses reported separately through retained earnings, net
of tax.
Amortization of premiums and accretion of discounts are recorded as interest
income from investments. Realized gains and losses are recorded as net security
gains (losses). The adjusted cost of specific securities sold is used to compute
gain or loss on sales.
Other income also includes gains and losses and adjustments to market on
interest rate futures and forward contracts related to trading account assets
and liabilities.
OTHER TIME DEPOSITS: Other time deposits include time certificates of
deposit of $100,000 or more and totalled approximately $1,367,000,000 and
$702,000,000, respectively, at December 31, 1994 and 1993.
OFF-BALANCE SHEET FINANCIAL AGREEMENTS: The Corporation utilizes a variety
of off-balance sheet financial instruments to manage various financial risks.
These instruments include interest rate swaps, interest rate caps and floors,
futures, forwards, and option contracts. Interest rate swaps are used to
synthetically alter the price risk or cash flow characteristics of various
on-balance sheet assets and liabilities. The net interest income or expense on
interest rate swaps is accrued and recognized as an adjustment to the interest
income or expense of the associated on-balance-sheet asset or liability. The
Corporation purchases interest rate caps and floors to reduce the cash flow risk
of various on-balance sheet variable rate assets and liabilities. The cost or
premium paid for purchased interest rate caps and floors is capitalized and
charged to income based on the economic value at the time of purchase. The
unamortized cost of caps or floors purchased is carried in other assets.
Interest payments received on interest rate caps and floors are recorded as an
interest income or expense adjustment to the related assets and liabilities.
Futures, forwards and options are also utilized to manage exposures to changes
in interest rates. Futures, forwards and options that are used for risk
management are carried at cost and realized gains and losses are amortized into
interest income or interest expense over the life of the instrument. Realized
gains and losses on all off-balance sheet transactions used to manage risk that
are terminated prior to maturity are deferred and amortized as a yield
adjustment over the remaining original life of the agreement. Unrealized gains
or losses on interest rate swaps or purchased interest rate caps and floors are
deferred. Deferred gains and losses are recorded in other assets and other
liabilities, as applicable.
Unrealized gains or losses on any interest rate caps or floors sold and
foreign exchange positions are marked to market and included in other income.
PURCHASED MORTGAGE SERVICING RIGHTS: Purchased mortgage servicing rights are
initially recorded at the lower of cost or estimated present value of the future
net servicing income. The capitalized amount is amortized in proportion to, and
over the period of, estimated net positive cash flows. The Corporation evaluates
the recoverability of purchased mortgage servicing rights in relation to the
impact of actual and anticipated loan portfolio prepayment, foreclosure and
delinquency experience.
DEPRECIABLE ASSETS: Properties and equipment are stated at cost less
accumulated depreciation and amortization. Buildings and equipment are
depreciated on a straight-line basis over their useful lives. Leasehold
improvements are amortized over the lives of the leases. Maintenance and repairs
are charged to expense as incurred, while improvements which extend the useful
life are capitalized and depreciated over the remaining life. Upon the sale or
disposal of property, the cost and accumulated depreciation are removed from the
accounts and the resulting gain or loss is included in current income.
INCOME: Interest and other income are recorded as earned. Loans are
classified as nonaccrual, reduced rate or renegotiated based on management's
judgment and requirements established by bank regulatory agencies. Subsequent
receipts on nonaccrual loans are recorded as a
28
<PAGE> 31
reduction of principal, and interest income is only recorded once principal
recovery is reasonably assured. Loan origination fees and other direct costs are
amortized into interest or other income using a method which approximates the
interest method over the estimated life of the related loan.
INCOME TAXES: Deferred income taxes reflect the temporary tax consequences
in future years of differences between the tax and financial statement basis of
assets and liabilities.
TREASURY STOCK: Acquisitions of treasury stock are recorded on the par value
method, which requires the cash paid to be allocated to common or preferred
stock, surplus and retained earnings.
RECLASSIFICATION: Certain prior year amounts have been reclassified to
conform with the current year presentation.
2. ACQUISITIONS
In October 1993, the Corporation acquired Ohio Bancorp, a $1.6 billion
assets bank holding company headquartered in Youngstown, Ohio. Ohio Bancorp
shareholders received approximately $104 million in cash and were issued
approximately 4.3 million shares of the Corporation's common stock, for a total
transaction value of approximately $215 million. The transaction was accounted
for as a purchase. Total goodwill recorded was $67 million and is being
amortized over 20 years.
In February 1993, the Corporation acquired JBS Associates, Inc. (JBS), a
check authorization business, and accounted for the acquisition as a purchase.
JBS stockholders received cash of $24.3 million and were issued approximately
1.5 million shares of the Corporation's common stock. A provision in the
purchase agreement guarantees the total value of the consideration received by
the JBS stockholders to be not less than $56.6 million as of February 1, 1998.
Total goodwill recorded was $51.5 million and is being amortized over 20 years.
In May 1992, Merchants National Corporation (MCHN), a $5.4 billion assets
bank holding company located in Indianapolis, Indiana, was merged into and
became a wholly-owned subsidiary of the Corporation. Each share of MCHN common
stock outstanding on May 2, 1992, was converted into 2.24 shares of the
Corporation's common stock. The Corporation issued approximately 34.2 million
shares of common stock and cash in lieu of fractional shares for all of the
outstanding shares of MCHN. The acquisition was accounted for as a
pooling-of-interests.
3. LOANS
Total loans outstanding were recorded net of unearned income of $99,887,000
in 1994 and $85,685,000 in 1993.
<TABLE>
Activity in the allowance for loan losses follows:
<CAPTION>
FOR THE CALENDAR YEAR
--------------------------------
(In Thousands) 1994 1993 1992
- ------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning
of year....................... $443,412 $383,849 $385,866
Acquired allowance............ 9,729 50,756 2,479
Provision..................... 79,356 93,089 129,361
Loans charged-off............. (120,234) (144,490) (186,528)
Recoveries.................... 56,756 60,208 52,671
-------- -------- --------
Net charge-offs............. (63,478) (84,282) (133,857)
-------- -------- --------
Balance at end of year.......... $469,019 $443,412 $383,849
======== ======== ========
</TABLE>
At December 31, 1994, nonaccrual, reduced-rate, and renegotiated loans were
$111,981,000, and other real estate owned was $16,547,000. At December 31, 1993,
the corresponding amounts were $151,343,000 and $57,807,000, respectively.
The Corporation plans to adopt SFAS No. 114 "Accounting By Creditors For
Impairment of a Loan," and SFAS No. 118 "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures," on January 1, 1995, and does
not expect the adoption to have a material impact on financial position or
results of operations.
4. SECURITIES
On December 31, 1993, the Corporation adopted the requirements of SFAS 115.
The adoption did not have a material effect on financial position or results of
operations.
<TABLE>
The following is a summary of securities held to maturity and available for
sale:
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------
UNREALIZED UNREALIZED MARKET
(In Thousands) COST GAINS LOSSES VALUE
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to maturity:
U.S. Treas. and
Fed. agency
debentures...... $ 34,258 $ -- $ (1,474) $ 32,784
Mortgage-backed
securities...... 630,610 749 (37,218) 594,141
States and
political
subdivisions.... 450,461 23,562 (4,736) 469,287
Other............. 60,786 36 (223) 60,599
--------- -------- --------- ----------
Total held to
maturity....... 1,176,115 24,347 (43,651) 1,156,811
Available for sale:
U.S. Treas. and
Fed. agency
debentures...... 1,333,809 18,438 (53,463) 1,298,784
Mortgage-backed
securities...... 1,700,228 584 (58,252) 1,642,560
States and
political
subdivisions.... 30,944 163 (152) 30,955
Other............. 235,268 26,232 (14,859) 246,641
--------- -------- --------- ----------
Total available
for sale....... 3,300,249 45,417 (126,726) 3,218,940
--------- -------- --------- ----------
Total
securities..... $4,476,364 $69,764 $(170,377) $4,375,751
========== ======= ========= ==========
</TABLE>
29
<PAGE> 32
<TABLE>
NOTES TO FINANCIAL STATEMENTS (continued)
<CAPTION>
DECEMBER 31, 1993
------------------------------------------------
Unrealized Unrealized Market
(In Thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to maturity:
U.S. Treas. and
Fed. agency
debentures..... $ 205,411 $ 1,682 $ -- $ 207,093
Mortgage-backed
securities..... 804,830 8,260 (4,214) 808,876
States and
political
subdivisions... 604,916 58,770 (3,735) 659,951
Other............ 147,868 1,092 (25) 148,935
---------- -------- -------- ----------
Total held to
maturity..... 1,763,025 69,804 (7,974) 1,824,855
Available for sale:
U.S. Treas. and
Fed. agency
debentures..... 1,094,907 24,699 (3,771) 1,115,835
Mortgage-backed
securities..... 2,070,502 11,667 (2,789) 2,079,380
States and
political
subdivisions... 31,973 854 -- 32,827
Other............ 152,015 27,693 (4,549) 175,159
---------- -------- -------- ----------
Total available
for sale..... 3,349,397 64,913 (11,109) 3,403,201
---------- -------- -------- ----------
Total
securities... $5,112,422 $134,717 $(19,083) $5,228,056
========== ======== ======== ==========
</TABLE>
At December 31, 1994, the unrealized losses in securities available for sale
included in retained earnings totalled $53 million, net of tax. The
Corporation's securities portfolio consists mainly of financial instruments that
pay back par value upon maturity. Market value fluctuations occur over the lives
of the instruments due to changes in market interest rates. Management has
concluded that current declines in value are temporary and accordingly, no
valuation adjustments have been included as a charge to income.
<TABLE>
The following table shows the carrying value and market value of securities
at December 31, 1994 by maturity:
<CAPTION>
Available
Held to Maturity for Sale
----------------------- -----------------------
Market Market
(In Thousands) Cost value Cost Value
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in 1 year or
less.......... $ 122,852 $ 123,657 $ 148,422 $ 145,457
Due in 1 to 5
years......... 775,620 756,197 2,349,056 2,272,225
Due in 5 to 10
years......... 163,064 158,680 493,723 480,954
Due after 10
years......... 114,579 118,277 309,048 320,304
---------- ---------- ---------- ----------
$1,176,115 $1,156,811 $3,300,249 $3,218,940
========== ========== ========== ==========
</TABLE>
Mortgage-backed securities and other securities which may have prepayment
provisions are assigned to a maturity category based on estimated average lives.
At December 31, 1994, the carrying value of securities pledged to secure
public and trust deposits, trading account liabilities, U.S. Treasury demand
notes, and security repurchase agreements totalled $3,044,058,000.
At December 31, 1994, there were no securities of a single issuer, other
than U.S. Treasury securities and other U.S. government agencies, which exceeded
10% of stockholders' equity.
<TABLE>
For the year ended December 31, 1994, the following represents the
segregation of cash flows between securities available for sale and securities
held to maturity:
<CAPTION>
Available Held to
(In Thousands) for Sale Maturity Total
- ------------------------------------------------------------------
<S> <C> <C> <C>
Purchases of securities...... $2,068,654 $116,613 $2,185,267
Proceeds from sales of
securities................. 1,598,514 -- 1,598,514
Proceeds from maturities and
prepayments of
securities................. 509,779 715,554 1,225,333
</TABLE>
In 1994, 1993, and 1992, gross gains of $16.6 million, $16.3 million, and
$28.6 million and gross losses of $6.1 million, $4.4 million, and $2.9 million
were realized, respectively.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value disclosures of financial instruments are made to comply with the
requirements of SFAS 107 "Disclosures About Fair Value of Financial
Instruments". The market value of securities is based primarily upon quoted
market prices. For substantially all other financial instruments, the fair
values are management's estimates of the values at which the instruments could
be exchanged in a transaction between willing parties. Fair values are based on
estimates using present value and other valuation techniques in instances where
quoted market prices are not available. These techniques are significantly
affected by the assumptions used, including discount rates and estimates of
future cash flows. As such, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, further, may not be
realizable in an immediate settlement of the instruments.
SFAS 107 also excludes certain items from its disclosure requirements. These
items include non-financial assets, intangibles and future business growth, as
well as certain liabilities such as pension and other post-retirement benefits,
deferred compensation arrangements and leases. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the
Corporation.
Portions of the unrealized gains and losses inherent in the valuation are a
result of management's program to manage overall interest rate risk and
represent a point in time valuation. It is not management's intention to
immediately dispose of a significant portion of its financial instruments and,
thus, the unrealized gains or losses should not be interpreted as a forecast of
future earnings and cash flows.
The following table presents the estimates of fair value of financial
instruments at December 31, 1994 and 1993. Bracketed amounts in the carrying
value columns represent either reduction of asset accounts, liabilities, or
commitments representing potential cash outflows. Bracketed amounts in the fair
value columns represent estimated cash outflows required to currently settle the
obligations at current market rates.
30
<PAGE> 33
<TABLE>
<CAPTION>
1994 1993
---------------- ----------------
CARRYING FAIR Carrying Fair
(In Millions) VALUE VALUE Value Value
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash
equivalents.............. $ 3,559 $ 3,559 $ 3,391 $ 3,391
Loans held for sale........ 42 42 509 509
Loans receivable........... 22,993 22,822 20,777 20,990
Allowance for loan
losses................... (469) -- (443) --
Securities................. 4,395 4,376 5,112 5,228
Trading account assets..... 8 8 150 150
Liabilities:
Demand deposits............ $(5,332) $(5,332) $(5,215) $(5,215)
Time deposits.............. (19,140) (19,157) (17,848) (17,916)
Short-term borrowings...... (3,816) (3,816) (4,352) (4,352)
Long-term debt............. (744) (720) (510) (538)
Other liabilities.......... (161) (161) (119) (119)
Off-Balance Sheet
Instruments:
Interest rate swaps:
Receive fixed rates...... $ -- $(212) $ -- $ 34
Pay fixed rates.......... -- 16 -- (23)
Basis swaps.............. -- (1) -- --
Interest rate caps
and floors............... 23 22 13 46
Futures, forwards and
options.................. -- -- 1 1
Commitments to extend
credit................... (10) (10) (9) (9)
Standby letters of
credit................... (1) (1) (1) (1)
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
CASH AND CASH EQUIVALENTS: The carrying amounts reported in the balance
sheet for cash and cash equivalents approximate those assets' fair values. For
purposes of this disclosure only, cash equivalents include Federal funds sold,
security resale agreements, Eurodollar time deposits, customers' acceptance
liability, accrued interest receivable, and other short-term money market
investments.
LOANS RECEIVABLE AND LOANS HELD FOR SALE: For performing variable rate loans
that reprice frequently and loans held for sale, estimated fair values are based
on carrying values. The fair values for loans are estimated using a discounted
cash flow calculation that applies interest rates used to price new, similar
loans to a schedule of aggregated expected monthly maturities, adjusted for
market and credit risks.
SECURITIES: The market values of securities are based upon quoted market
prices, where available, and on quoted market prices of comparable instruments
when specific quoted prices are not available.
DEPOSIT LIABILITIES: The fair values disclosed for demand deposits (e.g.,
interest and noninterest checking, passbook savings, and certain types of money
market accounts) are, by definition, equal to the amounts payable on demand at
the reporting date (i.e., their carrying amounts). The carrying amounts for
variable-rate, fixed-term money market accounts and certificates of deposit
approximate their fair values at the reporting date. Fair values for fixed rate
certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered on certificates to a
schedule of aggregated expected monthly maturities on time deposits.
SHORT-TERM BORROWINGS: The carrying amounts of Federal funds purchased,
borrowings under repurchase agreements, commercial paper, and other short-term
borrowings approximate their fair values.
LONG-TERM DEBT: The fair values of the Corporation's long-term borrowings
(other than deposits) and certain other borrowings are estimated using
discounted cash flow analyses based on the Corporation's current incremental
borrowing rates for similar types of borrowing arrangements.
OFF-BALANCE SHEET INSTRUMENTS: The amounts shown under carrying value
represent accruals or deferred income (fees) arising from the related
unrecognized financial instruments. Fair values for the Corporation's
off-balance sheet instruments (futures, swaps, forwards, options, guarantees,
and lending commitments) are based on quoted market prices (futures); current
settlement values (financial forwards); quoted market prices of comparable
instruments; fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the counterparties'
credit standing (guarantees, loan commitments); or, if there are no relevant
comparables, on pricing models or formulas using current assumptions (interest
rate swaps and options).
6. CASH AND DEMAND BALANCES DUE FROM BANKS
The Corporation's subsidiary banks are required to maintain noninterest
bearing reserve balances with the Federal Reserve Bank. The consolidated average
reserve balance was $339 million for 1994.
7. PROPERTIES AND EQUIPMENT
<TABLE>
A summary of properties and equipment follows:
<CAPTION>
DECEMBER 31
-------------------------
(In Thousands) 1994 1993
- -------------------------------------------------------------------
<S> <C> <C>
Land................................... $ 64,036 $ 66,424
Buildings and leasehold improvements... 383,906 370,591
Equipment.............................. 428,685 402,749
--------- ---------
876,627 839,764
Less accumulated depreciation and
amortization......................... 486,647 453,545
--------- ---------
Net properties and equipment........... $389,980 $ 386,219
======= ========
</TABLE>
The Corporation and certain of its subsidiary banks occupy their respective
headquarters offices under long-term operating leases and, in addition, lease
certain data processing equipment. The aggregate minimum annual rental
commitments under these leases is approximately $39.1 million in 1995, $38.1
million in 1996, $34.5 million in 1997, $33.1 million in 1998, $30.8 million in
1999, and $209.8 million thereafter.
Total expense recorded under all operating leases in 1994, 1993 and 1992 was
$61,757,000, $59,960,000, and $57,356,000, respectively.
31
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (continued)
8. BORROWED FUNDS
<TABLE>
The composition of borrowed funds follows:
<CAPTION>
DECEMBER 31
--------------------------
(In Thousands) 1994 1993
- -----------------------------------------------------------------
<S> <C> <C>
U.S. Treasury demand notes and
Federal funds borrowed-term....... $ 159,949 $ 309,832
Notes payable to Student Loan
Marketing Association............. 300,000 243,400
Military banking liabilities........ 215,951 185,493
Other............................... 49,754 63,437
---------- ----------
Bank subsidiaries............... 725,654 802,162
Commercial paper.................... 379,276 398,790
Other............................... 59 59
---------- ----------
Other subsidiaries.............. 379,335 398,849
---------- ----------
Total........................... $1,104,989 $1,201,011
========== ==========
</TABLE>
The $300,000,000 floating rate notes payable to Student Loan Marketing
Association are due in June 1996. The notes are secured by and provide funding
for student loan receivables.
Pursuant to the terms of a contract with the U.S. Department of Defense,
National City Bank, Indiana, a principal banking subsidiary of the Corporation,
manages a military banking network which provides retail banking services to
U.S. military personnel and certain related parties. Total assets under
fiduciary management approximated $832 million at year-end. In conjunction with
the contract, certain funds relating to the military banking network are placed
with National City Bank, Indiana and are included in borrowed funds as military
banking liabilities. The current contract extends through March 31, 1995.
9. CORPORATE LONG-TERM DEBT
<TABLE>
The composition of corporate long-term debt follows:
<CAPTION>
DECEMBER 31
------------------------
(In Thousands) 1994 1993
- -------------------------------------------------------------------
<S> <C> <C>
6 5/8% Subordinated Notes due 2004...... $250,000 $ --
Less discount......................... (1,187) --
8 3/8% Notes due 1996................... 100,000 100,000
Less discount......................... (94) (174)
Floating Rate Subordinated Notes
due 1997.............................. 75,000 75,000
Less discount......................... (39) (58)
9 7/8% Subordinated Notes due 1999...... 65,000 65,000
Less discount......................... (222) (268)
Floating Rate Notes due 1997............ 50,000 50,000
Less discount......................... (59) (80)
Floating Rate Notes due 1994............ -- 5,000
Medium-Term Notes....................... -- 6,000
Less discount......................... -- (9)
Other................................... 3,377 7,609
--------- ---------
Total parent company................ 541,776 308,020
6 1/2% Subordinated Notes due 2003...... 200,000 200,000
Less discount......................... (624) (699)
Other................................... 2,517 2,852
--------- ---------
Total subsidiaries.................. 201,893 202,153
--------- ---------
Total............................... $743,669 $ 510,173
========= =========
</TABLE>
In March 1994, the Corporation issued $250 million principal amount of
6 5/8% Subordinated Notes due 2004. Interest on the notes is payable
semiannually. The notes are not redeemable prior to their maturity and qualify
as Tier 2 capital for regulatory purposes.
The 8 3/8% Notes pay interest semiannually and may not be redeemed prior to
maturity.
The $75 million Floating Rate Subordinated Notes bear quarterly interest
payments at a rate of 12.5 basis points over the three-month Eurodollar deposit
rate, subject to a floor of 5.25%. The actual borrowing rate at December 31,
1994, was 5.81%. The interest rate on the $50 million Floating Rate Notes is
12.5 basis points over the three-month Eurodollar deposit rate (5.75% at
December 31, 1994), adjusted quarterly. Both floating rate note issues may be
redeemed at the option of the Corporation, in whole or in part, at their
principal amount.
The 9 7/8% Subordinated Notes pay interest semiannually and may not be
redeemed prior to maturity.
The 6 1/2% Subordinated Notes pay interest semiannually and may not be
redeemed prior to maturity.
A credit agreement with a group of banks allows the Corporation to borrow up
to $300 million until June 30, 1997, with a provision to extend the expiration
date under certain circumstances. The Corporation pays an annual facility fee of
1/8 percent on the amount of the line. There were no borrowings outstanding
under this agreement at December 31, 1994.
Corporate long-term debt maturities for the next five years are as follows:
$227,000 in 1995; $100,228,000 in 1996; $125,245,000 in 1997; $2,255,000 in
1998; and $65,260,000 in 1999.
10. PREFERRED STOCK
At December 31, 1994 and 1993, the Corporation had outstanding 750,160 and
793,240 shares, respectively, of 8% Cumulative Convertible Preferred Stock in
the form of 3,750,800 and 3,966,200 depositary shares, respectively, at a stated
value of $50.00 per depositary share. Each depositary share represents a
one-fifth interest in a preferred share. The preferred stock is convertible at
the option of the holder into 2.384 common shares per depositary share.
Accordingly, 8,941,907 shares of common stock were reserved at December 31, 1994
for conversion of the preferred stock. The preferred stock is redeemable at the
option of the Corporation, in whole or in part, on or after May 1, 1996 and for
each 12-month period thereafter through the year 2000, at redemption prices of
$52.00, $51.60, $51.20, $50.80 and $50.40, respectively, and thereafter, at
$50.00 per depositary share plus, in each case, dividends accrued and unpaid to
the redemption date. The shares have a liquidation value of $250.00 per share
($50.00 per depositary share), or $187,540,000 in aggregate, plus accrued and
unpaid dividends to date of liquidation.
32
<PAGE> 35
11. EMPLOYEE STOCK OWNERSHIP PLAN
As a result of a past merger, the Corporation assumed the obligations and
benefits of an Employee Stock Ownership Plan (ESOP). On July 1, 1992, the ESOP
was merged into the National City Savings and Investment Plan (a contributory
benefit plan offered to substantially all employees). The original ESOP was
established through the purchase of stock on the open market. The Corporation
provided a loan to the ESOP Trust for the purpose of acquiring the shares. The
shares presently held by the ESOP (totalling 1,504,560 of the Corporation's
common shares) will be used to fulfill the Corporation's future commitment to
participants in the Corporation's benefit plans. During 1994, the Corporation
allocated 688,811 shares to the benefit plan participants. Company contributions
plus dividends earned on the unallocated shares are used to service the loan and
acquire additional shares, which are allocated to benefit plan participants.
Company contributions totaled $8,529,977 and $8,181,022 in 1994 and 1993,
respectively. Dividends earned by the ESOP in 1994 and 1993 were $2,219,654 and
$2,737,768, respectively. The tax benefit for dividends paid on shares held by
the ESOP is recorded directly to retained earnings.
12. NET INCOME PER COMMON SHARE
Net income per common share is based upon net income after preferred
dividend requirements and the average number of common shares outstanding,
adjusted for the dilutive effect of outstanding stock options. Fully diluted
earnings per share is based upon net income and the average number of shares
outstanding, adjusted for the dilutive effect of outstanding stock options and
the assumed conversion of preferred stock.
<TABLE>
The calculation of net income per common share follows:
<CAPTION>
FOR THE CALENDAR YEAR
(In Thousands Except ---------------------------------------
Per Share Amounts) 1994 1993 1992
- -----------------------------------------------------------------
<S> <C> <C> <C>
PRIMARY:
Net income............ $429,434 $403,997 $346,923
Less preferred
dividends........... 15,200 15,966 16,000
----------- ----------- -----------
Net income applicable
to common stock..... $414,234 $388,031 $330,923
=========== =========== ===========
Average common shares
outstanding......... 153,353,555 161,163,816 158,011,980
=========== =========== ===========
Net income per common
share............... $2.70 $2.41 $2.09
=========== =========== ===========
ASSUMING FULL DILUTION:
Net income............ $429,434 $403,997 $346,923
=========== =========== ===========
Pro forma fully
diluted average
common shares
outstanding......... 162,375,500 170,683,512 168,065,372
=========== =========== ===========
Pro forma fully
diluted net income
per share........... $2.64 $2.37 $2.06
=========== =========== ===========
</TABLE>
13. PARENT COMPANY AND REGULATORY RESTRICTIONS
At December 31, 1994, retained earnings of the parent company included
$1,548 million of equity in undistributed earnings of subsidiaries.
Dividends paid by the parent company's subsidiary banks are subject to
various legal and regulatory restrictions. In 1994, subsidiary banks declared
$250 million in dividends to the parent company. In 1995, bank subsidiaries may
pay the parent company, without prior regulatory approval, approximately $77
million of dividends.
Under Section 23A of the Federal Reserve Act, as amended, loans from
subsidiary banks to nonbank affiliates, including the parent company, are
required to be collateralized.
Commercial paper of $379 million outstanding at December 31, 1994 is
guaranteed by the parent company.
<TABLE>
Condensed parent company financial statements, which include transactions
with subsidiaries, follow:
BALANCE SHEETS
<CAPTION>
DECEMBER 31
-------------------------
(In Thousands) 1994 1993
- ----------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and demand balances due from
banks.............................. $ 8,229 $ 2,733
Loans to and accounts receivable from
subsidiaries....................... 356,420 301,211
Securities........................... 154,127 116,404
Investments in:
Subsidiary banks................... 2,355,857 2,407,320
Nonbank subsidiaries............... 237,797 206,902
Goodwill, net of accumulated
amortization of $29,857 and
$27,559, respectively.............. 52,420 52,116
Other assets......................... 54,629 56,465
---------- ----------
Total assets....................... $3,219,479 $3,143,151
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Corporate long-term debt............. $ 541,776 $ 308,020
Accrued expenses and other
liabilities........................ 76,649 71,864
---------- ----------
Total liabilities.................. 618,425 379,884
Stockholders' equity................. 2,601,054 2,763,267
---------- ----------
Total liabilities and stockholders'
equity........................... $3,219,479 $3,143,151
========== ==========
</TABLE>
33
<PAGE> 36
<TABLE>
NOTES TO FINANCIAL STATEMENTS (continued)
STATEMENTS OF INCOME
<CAPTION>
FOR THE CALENDAR YEAR
------------------------------------
(In Thousands) 1994 1993 1992
- ---------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends from:
Subsidiary banks............ $230,378 $ 715,869 $ 100,000
Nonbank subsidiaries........ 14,129 4,448 1,000
Interest on loans to
subsidiaries............... 5,250 4,431 2,788
Interest and dividends on
securities.................. 3,774 2,396 2,986
Security gains............... 1,995 970 5,657
Other income................. 3,462 7,969 --
--------- --------- ---------
Total income............... 258,988 736,083 112,431
EXPENSE
Interest on corporate long-
term debt................... 37,217 23,821 13,241
Goodwill amortization........ 2,298 2,138 2,081
Other expense................ 52,381 43,197 52,434
--------- --------- ---------
Total expense.............. 91,896 69,156 67,756
--------- --------- ---------
Income before taxes and
equity in undistributed
income of subsidiaries...... 167,092 666,927 44,675
Income tax (benefit)......... (44,513) (32,148) (20,207)
--------- --------- ---------
Income before equity in
undistributed net income of
subsidiaries................ 211,605 699,075 64,882
Equity in undistributed
(distributed) net income of
subsidiaries................ 217,829 (295,078) 282,041
--------- --------- ---------
Net income................. $429,434 $ 403,997 $ 346,923
========= ========= =========
</TABLE>
<TABLE>
STATEMENTS OF CASH FLOWS
<CAPTION>
FOR THE CALENDAR YEAR
------------------------------------
(In Thousands) 1994 1993 1992
- ---------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................... $ 429,434 $ 403,997 $ 346,923
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in undistributed net
income of subsidiaries...... (217,829) 295,078 (282,041)
Amortization of goodwill..... 2,298 2,138 2,081
Decrease (increase) in
dividends receivable from
subsidiaries................ 55,669 (126,169) 45,500
Security gains............... (1,995) (970) (5,657)
Other, net................... (117,529) (13,294) 19,709
--------- --------- ---------
Net cash provided (used) by
operating activities...... 150,048 560,780 126,515
INVESTING ACTIVITIES
Net change in short-term
money market investments.... (26,750) (27,900) 70,000
Purchases of securities...... (65,508) (126,641) (41,983)
Sales and maturities of
securities.................. 39,518 69,833 41,164
Principal collected on loans
to subsidiaries............. 50,850 283,107 16,275
Loans to subsidiaries........ (25,805) (306,507) (21,925)
Investment in subsidiaries... (14,784) (119,006) (78,836)
Return of investment from
subsidiaries................ 168,000 -- --
--------- --------- ---------
Net cash provided (used) by
investing activities...... 125,521 (227,114) (15,305)
FINANCING ACTIVITIES
Repayment of corporate long-
term debt................... (13,324) (19,236) (513)
Proceeds from issuance of
long-term debt.............. 247,080 -- --
Common and preferred
dividends................... (195,090) (185,391) (146,881)
Issuance of common stock..... 23,221 28,469 36,211
Repurchase of stock.......... (340,053) (168,920) (1,118)
Shares distributed by ESOP... 8,093 9,691 4,835
--------- --------- ---------
Net cash provided (used) by
financing activities...... (270,073) (335,387) (107,466)
--------- --------- ---------
Increase (decrease) in cash
and demand balances due from
banks....................... 5,496 (1,721) 3,744
Cash and demand balances due
from banks, January 1....... 2,733 4,454 710
--------- --------- ---------
Cash and demand
balances due from banks,
December 31................. $ 8,229 $ 2,733 $ 4,454
========= ========= =========
SUPPLEMENTAL CASH FLOW
INFORMATION
Interest paid................. $ 30,000 $ 24,000 $ 13,000
Long-term debt assumed in
merger of subsidiaries...... -- 151,000 --
Shares issued in purchase
acquisitions and additional
investment in
subsidiaries................ -- 141,000 --
</TABLE>
34
<PAGE> 37
14. STOCK OPTIONS AND AWARDS
The Corporation was authorized in 1993 to grant options up to 10,000,000
shares of common stock under an employee stock option plan. The Corporation's
stock option plans authorize the issuance of options to purchase common stock to
officers and key employees at the market price of the shares at the date of
grant. Options generally become exercisable to the extent of either 25% or 50%
annually beginning one year from the date of grant.
The Corporation was authorized in 1991 to grant 1,000,000 shares of common
stock under a Restricted Stock Plan. These shares are issued to key employees
and directors of the Corporation. In general, the restrictions on directors'
shares granted after 1992 expire after nine months and restrictions on grants to
key employees expire over a four-year period. The Corporation generally
recognizes additional compensation expense over the restricted period.
<TABLE>
A summary of the stock options and award activity follows:
<CAPTION>
Shares
--------------------------------------
Available
for Grant
---------- Outstanding Range of
Awards & ----------------------- Option Price
Options Awards Options per Share
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 1, 1992.... 3,644,656 168,900 8,438,732 $3.69 - $18.06
Cancelled........ 41,200 (2,800) (41,174)
MCHN shares
expired (282,240)
Exercised........ (4,600) (3,036,954) 3.69 - 18.06
Granted.......... (1,479,500) 8,900 1,470,600 22.00
---------- -------- ----------
December 31, 1992.. 1,924,116 170,400 6,831,204 6.08 - 22.00
Authorized....... 10,000,000
Cancelled........ 75,642 (4,008) (71,634)
Exercised........ (25,992) (1,017,321) 6.08 - 22.00
Granted.......... (1,685,950) 103,350 1,582,600 24.88
---------- -------- ----------
December 31, 1993.. 10,313,808 243,750 7,324,849 6.31 - 24.88
Cancelled........ 97,800 (4,350) (93,450)
Exercised........ (4,400) (846,648) 6.31 - 24.88
Granted.......... (1,791,600) 92,800 1,698,800 26.50 - 26.88
---------- -------- ----------
December 31, 1994.. 8,620,008 327,800 8,083,551 $7.55 - $26.88
========== ======= ==========
</TABLE>
At December 31, 1994 and 1993, options for 5,669,645 and 5,033,577 shares,
respectively, were exercisable at a price range of $7.55 to $24.88 and $6.31 to
$24.88 per share, respectively.
15. PENSION PLANS
The Corporation has a noncontributory, defined benefit retirement plan
covering substantially all employees. Retirement benefits are based upon the
employees' length of service and salary levels. Actuarially determined pension
costs are charged to current operations. The funding policy is to pay at least
the minimum amount required by the Employee Retirement Income Security Act of
1974. The Corporation also sponsors supplemental retirement plans for certain
key employees.
<TABLE>
The defined benefit pension plan's funded status (at its year-end September
30) and the status of the supplemental retirement plans follow:
<CAPTION>
(In Thousands) 1994 1993
- ------------------------------------------------------------------
<S> <C> <C>
Projected benefit obligation:
Vested benefits.................... $ 263,515 $260,779
Nonvested benefits................. 10,983 14,237
---------- ---------
Accumulated benefit obligation..... 274,498 275,016
Effect of projected future
compensation levels.............. 68,910 73,199
---------- ---------
Projected benefit obligation......... 343,408 348,215
Plan's assets at fair value,
primarily stocks and bonds,
including $15.2 million and $14.4
million in the common stock of the
Corporation for 1994 and 1993,
respectively....................... 302,071 305,216
---------- ---------
Funded status - plan assets (less
than) projected benefit
obligation......................... $ (41,337) $(42,999)
========== ========
Comprised of:
Unrecognized net (losses).......... $ (24,803) $(28,327)
Unrecognized net assets being
recognized over 15 years......... 20,180 25,792
Less accrued pension liability on
balance sheet.................... 36,714 40,464
---------- ---------
$ (41,337) $(42,999)
========== =========
</TABLE>
<TABLE>
Assumptions used in the valuation of the defined benefit pension plan at its
year end (September 30) and the supplemental retirement plans follow:
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average discount rate...... 8.25% 7.25% 8.25%
Average assumed rate of compensation
increase.......................... 5.50 5.00 5.25
Long-term rate of return on
assets............................ 9.50 10.00 9.50
</TABLE>
<TABLE>
Net defined benefit pension plan costs include the following components:
<CAPTION>
FOR THE CALENDAR YEAR
--------------------------------
(In Thousands) 1994 1993 1992
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during year...................... $ 17,681 $ 15,066 $ 14,344
Interest cost on projected benefit
obligation....................... 27,457 23,966 20,656
Actual (return) on plan assets..... (7,746) (25,072) (33,950)
Net amortization and deferral...... (23,209) (2,128) 9,417
-------- -------- --------
Net periodic pension cost.......... $ 14,183 $ 11,832 $ 10,467
======== ======== ========
</TABLE>
The Corporation also sponsors a defined contribution plan for substantially
all employees. The Corporation may make contributions to the plan in varying
amounts depending on the level of employee contributions. For the years ended
1994, 1993, and 1992, the expenses related to this plan were $8,613,000,
$8,347,000, and $3,275,000, respectively.
35
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS (continued)
16. OTHER POSTRETIREMENT BENEFIT PLANS
The Corporation has a benefit plan which offers postretirement medical and
life insurance benefits to all employees who have attained the age of 55 and
have at least 10 years of service (five years of service if age 65 or older.)
The medical portion is contributory and the life insurance coverage is
noncontributory to the participants. For any employee who retired on or after
April 1, 1989, the Corporation's medical contribution is fixed, based on years
of service and age at retirement. The accounting for the medical portion
anticipates contributions for retirees prior to April 1, 1989, to continue to
increase as a proportion of the total costs of the plan. The Corporation
reserves the right to terminate or make plan changes at any time.
<TABLE>
The Corporation has no plan assets attributable to the postretirement
benefit plan. The following table presents the plan's status at December 31,
reconciled with amounts recognized in the Corporation's balance sheet:
<CAPTION>
(In Thousands) 1994 1993
- -------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees............................... $ 29,406 $ 31,221
Fully eligible active plan
participants......................... 6,938 8,401
Other active plan participants......... 10,153 12,873
-------- --------
Accumulated postretirement benefit
obligation............................. 46,497 52,495
Unrecognized net gain (loss)............. 1,018 (7,072)
Unrecognized transition obligation....... (31,057) (32,980)
-------- --------
Accrued postretirement benefit cost...... $ 16,458 $ 12,443
======== ========
</TABLE>
<TABLE>
Net periodic postretirement benefit costs include the following components:
<CAPTION>
FOR THE CALENDAR YEAR
--------------------------------
(In Thousands) 1994 1993 1992
- --------------------------------------------------------------------
<S> <C> <C> <C>
Service cost..................... $ 1,194 $1,067 $ 969
Interest cost.................... 3,933 3,622 3,534
Net amortization and deferral.... 2,172 1,981 1,923
------- ------ ------
Net periodic postretirement
benefit cost................... $ 7,299 $6,670 $6,426
======= ====== ======
</TABLE>
<TABLE>
Assumptions used in the valuation of the accumulated postretirement benefit
obligation at December 31 follow:
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average discount rate..... 8.50% 7.50% 8.50%
Average salary scale............... 5.50 5.00 5.25
</TABLE>
The health care trend rate assumption only affects those participants
retired under the plan prior to April 1, 1989. The 1995 health care trend rate
is projected to be 12.0 percent for participants under 65 and 9.5 percent for
participants over 65. These rates are assumed to decrease incrementally by .5
percent per year until they reach 6 percent and remain at that level thereafter.
The health care trend rate assumption does not have a significant effect on the
medical plan, therefore, a 1 percent change in the trend rate is not material in
the determination of the accumulated postretirement benefit obligation or the
ongoing expense.
17. INCOME TAXES
In 1992, the Corporation adopted SFAS 109 "Accounting for Income Taxes". The
cumulative effect of adopting SFAS 109 did not have a significant effect on net
income.
<TABLE>
The composition of income tax expense (benefit) follows:
<CAPTION>
FOR THE CALENDAR YEAR
-------------------------------------
(In Thousands) 1994 1993 1992
- -------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal.............. $ 172,394 $ 135,598 $ 137,603
State................ 12,756 9,804 1,856
--------- --------- ---------
Total current....... 185,150 145,402 139,459
--------- --------- ---------
Deferred:
Federal.............. 1,343 23,140 (13,571)
State................ 1,761 (1,577) (8,518)
--------- --------- ---------
Total deferred...... 3,104 21,563 (22,089)
--------- --------- ---------
Tax expense........... $ 188,254 $ 166,965 $ 117,370
========= ========= =========
Tax expense applicable
to security
transactions......... $ 3,748 $ 4,173 $ 8,797
========= ========= =========
</TABLE>
<TABLE>
The effective tax rate differs from the statutory rate applicable to
corporations as a result of permanent differences between accounting and taxable
income as shown below:
<CAPTION>
FOR THE CALENDAR YEAR
-----------------------
1994 1993 1992
- ------------------------------------------------------
<S> <C> <C> <C>
Statutory rate.............. 35.0% 35.0% 34.0%
Life insurance.............. (3.0) (2.6) (2.1)
Tax-exempt income........... (2.9) (3.8) (5.5)
Other....................... 1.4 .6 (1.1)
----- ---- ----
Effective tax rate......... 30.5% 29.2% 25.3%
===== ==== =====
</TABLE>
<TABLE>
Significant components of the Corporation's deferred tax liabilities and
assets as of December 31 are as follows:
<CAPTION>
(In Thousands) 1994 1993
- ---------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Lease accounting.................... $ 74,232 $ 68,984
Depreciation........................ 18,145 17,109
Other - net......................... 50,071 35,649
--------- --------
Total deferred tax liabilities..... 142,448 121,742
Deferred tax assets (liabilities):
Provision for losses................ 164,157 155,697
Mark to market adjustments.......... 28,458 (27,054)
Pension............................. 12,708 23,520
Other - net......................... 46,002 34,273
--------- --------
Total deferred tax assets.......... 251,325 186,436
--------- --------
Net deferred tax assets.............. $ 108,877 $ 64,694
========= ========
</TABLE>
36
<PAGE> 39
18. OFF-BALANCE SHEET FINANCIAL AGREEMENTS
The Corporation uses a variety of off-balance sheet financial instruments
such as interest rate swaps, futures, options, forwards, and cap and floor
contracts. These financial agreements, frequently called interest rate
derivatives, enable the Corporation to efficiently manage its exposure to
changes in interest rates. The Corporation also enters into derivative contracts
on behalf of customers, however, such activity was not significant in 1994 and
1993.
As with any financial instrument, derivatives have inherent risks. Market
risk represents the risk of gains and losses that result from changes in
interest rates. These gains and losses may be offset by other on- or off-balance
sheet transactions. Credit risk is the risk that a counterparty to a derivative
contract with an unrealized gain fails to perform according to the terms of the
agreement. Credit risk can be measured as the cost of acquiring a new
derivative agreement with cash flows identical to those of a defaulted
agreement in the current interest rate environment. The Corporation manages the
credit exposure to counterparties by limiting the amount of net unrealized
gains in agreements outstanding, monitoring the size and the maturity structure
of the derivative portfolio, applying uniform credit standards maintained for
all activities with credit risk and by collateralizing unrealized gains. The
Corporation has established bilateral collateral agreements with its major
off-balance sheet counterparties that provide for exchanges of marketable
securities to collateralize either party's unrealized gains. On December 31,
1994, these collateral agreements covered 93% of the notional amount of the
derivative portfolio and the Corporation had delivered U.S. government and
agency securities with market value of $141 million to various counterparties
to collateralize unrealized losses. The Corporation has never experienced, nor
does it have any reason to expect, a credit loss associated with any interest
rate derivative.
On December 31, 1994 the total notional amount of the Corporation's interest
rate swap portfolio used to manage its interest rate sensitivity was $6.2
billion, which is an increase of $406.5 million from December 31, 1993. The
Corporation uses receive fixed interest rate swaps to convert variable rate
loans and securities into synthetic fixed rate instruments and to convert fixed
rate funding sources into synthetic variable rate funding instruments. The
Corporation decreased its use of receive fixed rate interest rate swaps during
the year in anticipation of higher interest rates across the entire yield curve.
During 1994, the Corporation entered into $1.5 billion of receive fixed interest
rate swaps with a weighted initial expected maturity of 2.1 years. During 1994,
$2.3 billion of receive fixed interest rate swaps matured or amortized.
The Corporation uses pay fixed interest rate swaps to convert fixed rate
loans and securities into synthetic variable rate instruments and to convert
variable rate funding sources into synthetic fixed rate funding instruments. The
Corporation increased its use of these swaps during the year in anticipation of
higher interest rates across the entire yield curve. During 1994, the
Corporation entered into $873 million of pay fixed interest rate swaps, with
weighted initial expected maturity of 2.5 years. During 1994, $201 million of
pay fixed interest rate swaps matured and $250 million of pay fixed interest
rate swaps were terminated prior to maturity. These terminations generated
pre-tax gains of $2.2 million which have been deferred and will be amortized
into income over the next 26 months.
The Corporation uses interest rate floors to help protect its interest
margin in periods of low interest rates and a flattening yield curve. The
Corporation's interest rate floor portfolio on December 31, 1994 was $1.3
billion in notional amount with an average maturity of 5.4 years and $3.3
million of net unrealized losses.
During 1994, the Corporation purchased $2 billion of interest rate cap
corridors to help protect its net interest margin in the event of an increase in
short term interest rates. These cap contracts will pay the Corporation 1.0% per
annum over their life when three month Eurodollar rates are between 6.13% and
7.50%. As of December 31, 1994, these interest rate cap corridors had an average
maturity of 1.6 years and $1.9 million in net unrealized gains.
As of December 31, 1994 the Corporation had no derivative contracts
outstanding that were hedging anticipated transactions.
Summary information with respect to the Corporation's interest rate
derivative portfolio used for risk management purposes follows:
37
<PAGE> 40
<TABLE>
NOTES TO FINANCIAL STATEMENTS (continued)
<CAPTION>
DECEMBER 31, 1994
------------------------------------------------------------------------------------------------ DECEMBER 31,
WEIGHTED AVERAGE 1993
---------------------------------------------------- -------------
NOTIONAL UNREALIZED UNREALIZED RECEIVE PAY STRIKE LIFE NOTIONAL
(In Thousands) AMOUNT GROSS GAINS GROSS LOSSES RATE RATE RATE (YEARS) AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE
SWAPS:
Receive fixed
indexed
amortizing
swaps......... $2,879,798 $ -- $(172,435) 5.23% 5.75% N/A 2.1 $ 4,304,800
Receive fixed
swaps......... 1,515,000 2,409 (42,309) 7.06 6.25 N/A 2.7 905,027
Pay fixed
swaps......... 787,200 18,430 (2,236) 6.15 7.00 N/A 1.8 365,700
Basis swaps..... 1,000,000 215 (1,669) 6.35 5.76 N/A 1.3 200,000
---------- ------------ ------------- -------------
Total interest
rate
swaps....... 6,181,998 21,054 (218,649) 5.98 6.03 5,775,527
INTEREST RATE CAPS
AND FLOORS:
Interest rate
floors
purchased..... 1,281,253 60 (3,323) N/A N/A 5.68% 5.4 850,000
Interest rate
cap corridors
purchased..... 2,000,000 2,127 (256) N/A N/A 6.13% to 7.50% 1.6 --
Forward interest
rate cap
corridors
purchased..... 300,000 -- (62) N/A N/A 8.50% to 9.75% 1.3 --
Interest rate
caps sold..... 171,000 -- (43) N/A N/A 12.00% 2.3 190,000
---------- ------------ ------------- -------------
Total interest
rate caps &
floors...... 3,752,253 2,187 (3,684) 1,040,000
---------- ------------ ------------- -------------
Total interest
rate swaps,
caps &
floors...... $9,934,251 $ 23,241 $(222,333) $ 6,815,527
========== ============ ============= ===============
</TABLE>
The variable rates in the Corporation's interest rate swap contracts are
primarily based on the three month Eurodollar rate. The average variable rates
included in the table above are those in effect in the specific contracts at
December 31, 1994.
<TABLE>
The following table details the expected notional maturities of the
Corporation's portfolio of off-balance sheet instruments at December 31, 1994:
<CAPTION>
GREATER
LESS THAN 1 TO 3 3 TO 5 THAN 5
(In Thousands) 1 YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Receive fixed indexed amortizing swaps.............................. $ 411,311 $1,269,222 $1,199,265 $ --
Receive fixed swaps................................................. 590,000 540,000 145,000 240,000
Pay fixed swaps..................................................... 82,200 682,000 23,000 --
Basis swaps......................................................... -- 1,000,000 -- --
Interest rate floors purchased...................................... -- 250,000 231,253 800,000
Interest rate cap corridors purchased............................... -- 2,000,000 -- --
Forward interest rate cap corridors purchased....................... -- 300,000 -- --
Interest rate caps sold............................................. -- 171,000 -- --
---------- ---------- ---------- ----------
Total............................................................. $1,083,511 $6,212,222 $1,598,518 $1,040,000
=========== ========== ========== ==========
</TABLE>
The Corporation also enters into forward contracts related to its mortgage
banking business. At December 31, 1994 and 1993, the Corporation had commitments
to sell mortgages totalling $42.4 million and $836.8 million, respectively.
These contracts mature in less than one year.
<TABLE>
In the normal course of business, the Corporation makes various commitments
to extend credit which are not reflected in the balance sheet. A summary of
these commitments follows:
<CAPTION>
DECEMBER 31
--------------------
(In Millions) 1994 1993
<S> <C> <C>
- ---------------------------------------------------------
Commitments to extend credit..... $ 7,411 $ 6,567
Standby letters of credit........ 861 1,242
</TABLE>
The credit risk associated with loan commitments and standby letters of
credit is essentially the same as that involved in extending loans to customers
and is subject to the Corporation's normal credit policies. Collateral is
obtained based on management's credit assessment of the customer.
19. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information is contained on page 22.
38
<PAGE> 41
FORM 10-K
The Annual Report includes the materials required in Form 10-K filed with the
Securities and Exchange Commission. The integration of the two documents gives
stockholders and other interested parties timely, efficient and comprehensive
information on 1994 results. Portions of the Annual Report are not required by
the Form 10-K report and are not filed as part of the Corporation's Form 10-K.
Only those portions of the Annual Report referenced in the cross-reference index
are incorporated in the Form 10-K. The report has not been approved or
disapproved by the Securities and Exchange Commission, nor has the Commission
passed upon its accuracy or adequacy.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1994 Commission file number 1-10074
NATIONAL CITY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware (State or Other Jurisdiction of Incorporation or Organization)
34-1111088 (I.R.S. Employer Identification No.)
1900 East Ninth Street, Cleveland, Ohio
(Address of principal executive offices)
44114-3484 (Zip Code)
Registrant's telephone number, including area code, 216-575-2000
Securities registered pursuant to Section 12(b) of the Act:
Depositary Shares each representing a one-fifth interest in a share of
National City Corporation 8% Cumulative Convertible Preferred Stock, without par
value,
registered on New York Stock Exchange
(Title of Class and name of Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
National City Corporation Common Stock, $4.00 Per Share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
---
State the aggregate market value of the voting stocks held by nonaffiliates
of the registrant as of December 31, 1994-$3,750,882,000
Indicate the number of shares outstanding of each of the registrant's classes of
common stock,
as of December 31, 1994.
Common Stock, $4.00 Per Share -- 147,555,632
Documents Incorporated By Reference:
Portions of the registrant's Proxy Statement (to be dated approximately March 6,
1995) are
incorporated by reference into Item 10. Directors and Executive Officers
of the Registrant; Item 11. Executive Compensation;
Item 12. Security Ownership of Certain Beneficial Owners and Management;
and Item 13. Certain Relationships and Related Transactions, of Part III.
39
<PAGE> 42
FORM 10-K (continued)
<TABLE>
FORM 10-K CROSS REFERENCE INDEX
<CAPTION>
Pages
---------
<S> <C>
PART I
Item 1 -- Business
Description of Business................... 40
Average Balance Sheets/Interest/Rates..... 20-21
Volume and Rate Variance Analysis......... 14
Securities................................ 8-9
Loans..................................... 6-8
Risk Elements of Loan Portfolio........... 16-18
Loan Loss Experience...................... 16-18
Allocation of Allowance for Loan Losses... 16-18
Deposits.................................. 9, 20-21
Financial Ratios.......................... 19
Short-Term Borrowings..................... 9, 32
Item 2 -- Properties....................... 41
Item 3 -- Legal Proceedings................ 41
Item 4 -- Submission of Matters to a Vote
of Security Holders - None
PART II
Item 5 -- Market for the Registrant's
Common Equity and Related
Stockholder Matters............ 10
Item 6 -- Selected Financial Data.......... 19
Item 7 -- Management's Discussion and
Analysis of Financial Condition
and Results of Operations...... 5-18
Item 8 -- Financial Statements and
Supplementary Data............. 24-38
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 - Note (1)
Executive Officers............... 41
Compliance with Section 16(a) of
the Securities Exchange Act -
Note (1)
Item 11 -- Executive Compensation - Note (1)
Item 12 -- Security Ownership of Certain
Beneficial Owners and
Management - Note (1)
Item 13 -- Certain Relationships and Related
Transactions - Note (1)
PART IV
Item 14 -- Exhibits, Financial Statement
Schedules and Reports on Form
8-K
Report of Ernst & Young LLP,
Independent Auditors........... 23
Financial Statements:
Consolidated Statements of Income
- Calendar Years 1994, 1993 and
1992........................... 24
Consolidated Balance Sheets -
December 31, 1994 and 1993..... 25
Consolidated Statements of Cash
Flows - Calendar Years 1994,
1993 and 1992.................. 26
Consolidated Statements of
Changes in Stockholders' Equity
- Calendar Years 1994, 1993,
and 1992....................... 27
Notes to Financial Statements................. 28-38
Signatures.................................... 42
</TABLE>
Reports on Form 8-K filed in the fourth quarter of 1994: Form 8-K dated December
29, 1994 announcing the acquisition of Central Indiana Bancorp effective
January 1, 1995.
Exhibits -- The index of exhibits has been filed as separate pages of the 1994
Form 10-K and is available to stockholders on request from the Secretary of
the Corporation at the principal executive offices. Copies of exhibits may be
obtained at a cost of 30 cents per page.
Financial Statement Schedules -- Omitted due to inapplicability or because
required information is shown in the Financial Statements or the Notes
thereto.
- -------------------------------------------------------------------------------
Note (1) -- Incorporated by reference from the Corporation's Proxy Statement to
be dated approximately March 6, 1995.
- -------------------------------------------------------------------------------
BUSINESS
At December 31, 1994, National City Corporation ("National City" or "the
Corporation") was the third largest bank holding company headquartered in the
State of Ohio and approximately the 28th largest in the United States on the
basis of total assets. National City owns and operates 10 commercial banks
having a total of 614 banking offices in Ohio, Kentucky and Indiana. The four
largest such subsidiary banks (and only significant subsidiaries) are National
City Bank (Cleveland), National City Bank, Columbus; National City Bank,
Indiana; and National City Bank, Kentucky. The banks and other subsidiaries and
divisions (listed on pages 44 and 45) conduct a variety of financial services
businesses. In addition to a general commercial banking business, National City
or its subsidiaries are engaged in trust, mortgage banking, merchant banking,
leasing, item processing, venture capital, insurance, and other financially
related businesses. National City and its subsidiaries had 20,306 full-time
equivalent employees at December 31, 1994.
COMPETITION
The banking business is highly competitive. The banking subsidiaries of
National City compete actively with national and state banks, savings and loan
associations, securities dealers, mortgage bankers, finance companies, insurance
companies and other financial service entities.
SUPERVISION AND REGULATION
National City is subject to regulation under the Bank Holding Company Act of
1956, as amended (the "Act"). The Act requires the prior approval of the Federal
Reserve Board for a bank holding company to acquire or hold more than a 5%
voting interest in any bank, and restricts interstate banking activities. On
September 29, 1994, the Act was amended by The Interstate Banking and Branch
Efficiency Act of 1994 which authorizes interstate bank acquisitions anywhere in
the country, effective one year after the date of enactment and interstate
branching by acquisition and consolidation, effective June 1, 1997 in those
states that have not opted out by that date. The impact of this amendment on the
Corporation cannot be measured at this time.
The Act restricts National City's nonbanking activities to those which are
determined by the Federal Reserve
40
<PAGE> 43
Board to be closely related to banking. The Act does not place territorial
restrictions on the activities of nonbank subsidiaries of bank holding
companies. National City's banking subsidiaries are subject to limitations with
respect to intercompany loans and investments.
A substantial portion of National City's cash revenues is derived from
dividends paid by its subsidiary banks. These dividends are subject to various
legal and regulatory restrictions as summarized in Note 13 on page 33.
The subsidiary banks are subject to the provisions of the National Bank Act
or the banking laws of their respective states, are under the supervision of,
and are subject to periodic examination by, the Comptroller of the Currency or
the respective state banking department, and are subject to the rules and
regulations of the Board of Governors of the Federal Reserve System and the
Federal Deposit Insurance Corporation (FDIC).
National City's subsidiary banks are also subject to certain state laws of
each state in which such a bank is located. Such state laws may restrict
branching of banks within the state and acquisition or merger involving banks
and bank holding companies located in other states. Ohio, Kentucky and Indiana
have all adopted nationwide reciprocal interstate banking.
The Financial Reform, Recovery and Enforcement Act of 1989 (FIRREA) provides
that a holding company's controlled insured depository institutions are liable
for any loss incurred by the Federal Deposit Insurance Corporation in connection
with the default of or any FDIC-assisted transaction involving an affiliated
insured bank or savings association.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDIC
Improvement Act") covers a wide expanse of banking regulatory issues. The FDIC
Improvement Act deals with the recapitalization of the Bank Insurance Fund, with
deposit insurance reform, including requiring the FDIC to establish a risk-based
premium assessment system, and with a number of other regulatory and supervisory
matters. Regulations have been proposed to implement this Act, but the full
effects of the FDIC Improvement Act generally on the financial services
industry, and specifically on the Corporation, cannot now be measured.
The monetary policies of regulatory authorities, including the Federal
Reserve Board, have a significant effect on the operating results of banks and
bank holding companies. The nature of future monetary policies and the effect of
such policies on the future business and earnings of National City and its
subsidiary banks cannot be predicted.
PROPERTIES
National City and its significant subsidiaries occupy their headquarters'
offices under long-term leases, and also own freestanding operations centers in
Columbus and Cleveland. Branch office locations are variously owned or leased.
LEGAL PROCEEDINGS
National City and its subsidiaries are parties (either as plaintiff or
defendant) to a number of lawsuits incidental to their businesses and, in
certain lawsuits, claims or counterclaims have been asserted. Although
litigation is subject to many uncertainties and the ultimate exposure with
respect to many of these matters cannot be ascertained, management does not
believe the ultimate outcome of these matters will have a material adverse
effect on the financial condition or results of operations of the Corporation.
<TABLE>
EXECUTIVE OFFICERS
The Executive Officers of National City (as of January 20, 1995) are as
follows:
<CAPTION>
Name Age Position
- ----------------------------------------------------------
<S> <C> <C>
Edward B. Brandon 63 Chairman and Chief
Executive Officer
David A. Daberko 49 President and Chief
Operating Officer
William R. Robertson 53 Deputy Chairman
Morton Boyd 58 Executive Vice President
Vincent A. DiGirolamo 57 Executive Vice President
Gary A. Glaser 50 Executive Vice President
Jon L. Gorney 44 Executive Vice President
Charles W. Hall 50 Executive Vice President
Jeffrey D. Kelly 41 Executive Vice President
William E. MacDonald III 48 Executive Vice President
Robert J. Ondercik 48 Executive Vice President
Robert G. Siefers 49 Executive Vice President
and Chief Financial
Officer
Harold B. Todd, Jr. 53 Executive Vice President
Thomas W. Owen 63 Senior Vice President
and General Auditor
Thomas A. Richlovsky 43 Senior Vice President
and Treasurer
David L. Zoeller 45 Senior Vice President,
General Counsel and
Secretary
</TABLE>
The term of office for executive officers is one year.
There is no family relationship between any of the above executive officers.
Mr. Kelly was appointed an executive vice president of the Corporation in
1994. Prior to that time he was a senior vice president of the Corporation since
1990 and a senior vice president of National City Bank in Cleveland from 1987 to
1990.
Mr. Ondercik was appointed an executive vice president of the Corporation in
1994. Prior to that time he was a senior vice president of the Corporation since
1991 and a senior vice president of National City Bank in Cleveland from
1989-1991.
Mr. Gorney was appointed an executive vice president of the Corporation in
1993. Prior to that time he was a senior vice president of the Corporation since
1991 and senior vice president of National City Bank in Cleveland from 1988 to
1991.
Each of the remaining officers listed above has been an executive officer of
the Corporation or one of its subsidiaries during the past five years.
41
<PAGE> 44
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on January 20, 1995.
NATIONAL CITY CORPORATION
/S/ Edward B. Brandon
- ---------------------------------------
Edward B. Brandon
Chairman 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
registrant and in the capacities indicated, on January 20, 1995.
/S/ Edward B. Brandon
- ---------------------------------------
Edward B. Brandon
Chairman and Chief Executive Officer
/S/ David A. Daberko /S/ William R. Robertson
- -------------------------- --------------------------
David A. Daberko William R. Robertson
President and Chief Deputy Chairman
Operating Officer
/S/ Robert G. Siefers /S/ Thomas A. Richlovsky
- -------------------------- --------------------------
Robert G. Siefers Thomas A. Richlovsky
Executive Vice President Senior Vice President
and Chief Financial and Treasurer
Officer
The Directors of National City Corporation (listed below) executed a power
of attorney appointing David L. Zoeller their attorney-in-fact, empowering him
to sign this report on their behalf.
Sandra H. Austin Otto N. Frenzel III
Charles H. Bowman Joseph H. Lemieux
Edward B. Brandon A. Stevens Miles
John G. Breen Burnell R. Roberts
David A. Daberko William R. Robertson
Daniel E. Evans Morry Weiss
/S/ David L. Zoeller
--------------------------------------
By David L. Zoeller
Attorney-in-fact
42
<PAGE> 45
MAJOR BANKING MARKETS
[MAP]
TOLEDO
CLEVELAND
AKRON
YOUNGSTOWN
INDIANAPOLIS
COLUMBUS
DAYTON
LOUISVILLE
LEXINGTON
43
<PAGE> 46
CORPORATE DIRECTORY
MEMBER BANKS
(Number of Banking Offices)
OHIO
National City Banks
CLEVELAND (97)
National City Bank
William E. MacDonald, III
President & CEO
1900 East Ninth Street
Cleveland, Ohio 44114-3484
(216) 575-2000
COLUMBUS (125)
National City Bank, Columbus
Gary A. Glaser
President & CEO
155 East Broad Street
Columbus, Ohio 43251
(614) 463-7100
AKRON/YOUNGSTOWN (82)
National City Bank, Northeast
J. Christopher Graffeo
President & CEO
One Cascade Plaza
Akron, Ohio 44308-1198
(216) 375-8450
DAYTON (38)
National City Bank, Dayton
Frederick W. Schantz
President & CEO
6 North Main Street
Dayton, Ohio 45412-2790
(513) 226-2000
TOLEDO (30)
National City Bank, Northwest
Robert E. Showalter
President & CEO
405 Madison Avenue
Toledo, Ohio 43603-1263
(419) 259-7700
ASHLAND (8)
National City Bank, Ashland
Harvey N. Young
Chairman & CEO
10 West Second Street
Ashland, Ohio 44805-0218
(419) 289-2112
KENTUCKY
National City Bank, Kentucky
LOUISVILLE (76)
Morton Boyd
Chairman & CEO
Leonard V. Hardin
President
101 South Fifth Street
Louisville, Kentucky 40202-3101
(502) 581-4200
LEXINGTON (14)
Roger M. Dalton
President
301 East Main Street
Lexington, Kentucky 40507-4400
(606) 281-5100
INDIANA
National City Bank, Indiana
INDIANAPOLIS (125)
Vincent A. DiGirolamo
President & CEO
101 West Washington Street, Suite 400E
Indianapolis, Indiana 46255
(317) 267-7000
NATIONAL CITY BANK, SOUTHERN INDIANA
NEW ALBANY (14)
David W. Fennell
Chairman, President & CEO
320 Pearl Street
P.O. Box 1247
New Albany, Indiana 47150-1247
(812) 948-4400
MADISON BANK AND TRUST COMPANY
MADISON (5)
Madison Bank and Trust Company
Raymond J. Bartnick
President & CEO
213-215 East Main Street
Madison, Indiana 47250
(812) 265-5121
OTHER UNITS
BROKERAGE AND INVESTMENT SERVICES
NATIONAL CITY
INVESTMENTS CAPITAL, INC.
William H. Schecter
Chairman
1965 East Sixth Street
Cleveland, Ohio 44114
(216) 575-9590
OFFICES: Cleveland, Columbus,
Indianapolis,
Louisville
NATIONAL CITY CAPITAL CORPORATION
NATIONAL CITY VENTURE CORPORATION
William H. Schecter
President
1965 East Sixth Street
Cleveland, Ohio 44114
(216) 575-3340
NATIONAL CITY
INVESTMENTS CORPORATION
David W. Dunning
Managing Director
1900 East Ninth Street
Cleveland, Ohio 44114
(216) 575-3495
1-800-624-6450
OFFICES: Akron, Cleveland,
Columbus, Dayton,
Indianapolis,
Louisville, Toledo
44
<PAGE> 47
OTHER UNITS
(Continued)
NATIONAL ASSET MANAGEMENT CORPORATION
Irvin W. Quesenberry, Jr.
Managing Director & Principal
WILLIAM F. CHANDLER, JR.
Managing Director & Principal
P.O. Box 36010
Louisville, Kentucky 40233
(502) 581-7668
MERCHANTS CAPITAL MANAGEMENT INCORPORATED
William H. Olds
Chairman
101 West Washington Street, Suite 635E
Indianapolis, Indiana 46255
(317) 267-3880
COMMUNITY DEVELOPMENT
NATIONAL CITY COMMUNITY DEVELOPMENT CORPORATION
Danny H. Cameron
President
1900 East Ninth Street
Cleveland, Ohio 44114-3484
(216) 575-2293
OFFICES: Akron, Cleveland,
Columbus, Dayton,
Indianapolis,
Lexington, Louisville,
Toledo, Youngstown
CREDIT CARD SERVICES
NATIONAL CITY CARD SERVICES
G. Brent Bostick
President
4661 East Main Street
Columbus, Ohio 43213
(614) 863-8046
FUNDING
NATIONAL CITY CREDIT CORPORATION
Jeffrey D. Kelly
Executive Vice President
1900 East Ninth Street
Cleveland, Ohio 44114-3484
(216) 575-2268
INSURANCE
NATIONAL CITY LIFE INSURANCE COMPANY
Anthony N. McEwen
President
1900 East Ninth Street
Cleveland, Ohio 44114-3484
(216) 575-2946
NATIONAL CITY INSURANCE AGENCY, INC.
Anne E. Lazarz
President
101 West Washington,
Suite 305E
Indianapolis, Indiana 46255
(317) 267-7033
ITEM PROCESSING
NATIONAL CITY PROCESSING COMPANY
Delroy R. Hayunga
Chairman & CEO
Tony G. Holcombe
President
1231 Durrett Lane
Louisville, Kentucky
40285-0001
(502) 364-2000
LEASING
NATIONAL CITY LEASING CORPORATION
J. Edward Vittitow
Senior Vice President
101 South Fifth Street
Louisville, Kentucky
40202-3101
(502) 581-7679
MORTGAGE BANKING
NATIONAL CITY
MORTGAGE CO.
Leo E. Knight, Jr.
President & CEO
3232 Newmark Drive
Miamisburg, Ohio 45342
(513) 436-3025
OFFICES: Agawam (MA),
Akron, Annapolis,
Atlanta, Birmingham,
Cary (NC), Charlotte,
Cincinnati, Columbia
(SC), Columbus,
Dayton, Detroit,
Falls Church (MD),
Frederick (MD),
Greensboro (NC),
Greenville (SC),
Greenwood (IN),
Indianapolis,
Knoxville (TN),
Lexington, Raleigh,
Richmond, Roanoke,
Springfield (OH),
Toledo, Towson (MD),
Troy (OH), Virginia
Beach, Wethersfield
(CT), Wheaton (MD),
Wilmington (NC),
York (PA)
MERCHANTS MORTGAGE CORPORATION
David H. Mills
President
201 South Capitol, Suite 800
Indianapolis, Indiana 46255
(317) 237-5415
MORTGAGE COMPANY
OF INDIANA
R. Thomas Gracey
President
201 South Capitol, Suite 900
Indianapolis, Indiana 46225
(317) 237-5378
TRUST SERVICES
Charles W. Hall
Senior Trust Executive
1900 East Ninth Street
Cleveland, Ohio 44114
(216) 575-2262
Offices: All National City
Banks
NATIONAL CITY TRUST COMPANY (FLORIDA)
Ellen J. Abrams
President & CEO
1401 Forum Way, Suite 503
West Palm Beach, Florida 33401-2324
(407) 697-2424
1-800-826-9095
Offices: Naples, Vero Beach,
West Palm Beach
45
<PAGE> 48
BOARD OF DIRECTORS/OFFICERS
BOARD OF DIRECTORS
EDWARD B. BRANDON (2, 3, 4)
Chairman & CEO
National City Corporation
DAVID A. DABERKO
President & COO
National City Corporation
WILLIAM R. ROBERTSON
Deputy Chairman
National City Corporation
SANDRA H. AUSTIN (4, 6)
President
Healthcare Services Division
Caremark Inc.
JAMES M. BIGGAR (1, 2, 3)
Chairman & CEO
Glencairn Corporation
CHARLES H. BOWMAN (6)
Chief Executive Officer
BP America Inc.
JOHN G. BREEN (3, 4, 5)
Chairman & CEO
The Sherwin-Williams Company
RICHARD E. DISBROW (1, 3, 6)
Retired Chairman & CEO
American Electric Power
Service Corporation
DANIEL E. EVANS (1, 6)
Chairman & CEO
Bob Evans Farms, Inc.
OTTO N. FRENZEL III
Chairman
National City Bank, Indiana
COMMITTEES
(1) Audit Committee
(2) Dividend Committee
(3) Executive Committee
(4) Nominating Committee
(5) Organization & Compensation Committee
(6) Public Policy Committee
46
<PAGE> 49
JOSEPH H. LEMIEUX (3,5)
Chairman & CEO
Owens-Illinois, Inc.
A. STEVENS MILES (4)
Retired President
National City Corporation
BURNELL R. ROBERTS (2,3,5)
Retired Chairman & CEO
The Mead Corporation
STEPHEN A. STITLE (3,4,5)
Vice President
Eli Lilly and Company
MORRY WEISS (1,4)
Chairman & CEO
American Greetings Corporation
HONORARY DIRECTORS
CLAUDE M. BLAIR
Retired Chairman
National City Corporation
JULIEN L. MCCALL
Retired Chairman
National City Corporation
OFFICERS
OFFICE OF THE CHAIRMAN
EDWARD B. BRANDON
Chairman & CEO
DAVID A. DABERKO
President & COO
WILLIAM R. ROBERTSON
Deputy Chairman
EXECUTIVE VICE PRESIDENTS
MORTON BOYD
Kentucky Banking
VINCENT A. DIGIROLAMO
Indiana Banking
GARY A. GLASER
Columbus Banking
JOHN L. GORNEY
Information Services
& Operations
CHARLES W. HALL
Trust
JEFFREY D. KELLY
Investments
WILLIAM E. MACDONALD III
Cleveland Banking
ROBERT J. ONDERCIK
Credit Administration
ROBERT G. SIEFERS
Chief Financial Officer
HAROLD B. TODD, JR.
Administration
SENIOR VICE PRESIDENTS
W. DOUGLAS BANNERMAN
Corporate Banking
MARY H. GRIFFITH
Marketing Communications
JOSEPH J. HERR
Loan Review
ANTHONY N. MCEWEN
Retail Product Management
GARY P. OBERS
Corporate Services
THOMAS W. OWEN
General Auditor
DONNA M. PACCHIONI
Corporate Accounting
A. JOSEPH PARKER
Retail Business Line
Management
J. ARMANDO RAMIREZ
Mergers & Acquisitions
PHILIP L. RICE
Strategic Planning
THOMAS A. RICHLOVSKY
Treasurer
WILLIAM H. SCHECTER
Investment Banking
SHELLEY J. SEIFERT
Human Resources
THEODORE H. TUNG
Economist
ALLEN C. WADDLE
Public Affairs
PATRICK D. WALSH
Information Systems
DAVID L. ZOELLER
General Counsel & Secretary
47
<PAGE> 50
INVESTOR INFORMATION
CORPORATE HEADQUARTERS
NATIONAL CITY CENTER
1900 EAST NINTH STREET
CLEVELAND, OHIO 44114-3484
(216) 575-2000
TRANSFER AGENT AND REGISTRAR
NATIONAL CITY BANK
CORPORATE TRUST OPERATIONS
DEPARTMENT 5352
4100 WEST 150TH STREET
CLEVELAND, OHIO 44135-1385
1-800-622-6757
INVESTOR INFORMATION
JANIS E. LYONS, VICE PRESIDENT
INVESTOR RELATIONS
DEPARTMENT 2145
P.O. BOX 5756
CLEVELAND, OHIO 44101-0756
1-800-622-4204
COMMON STOCK LISTING
National City Corporation common stock is traded on the New York Stock
Exchange under the symbol NCC. The stock is abbreviated in financial
publications as NTLCITY.
PREFERRRED STOCK LISTING
National City Corporation 8% Cumulative Convertible Preferred Stock
Depositary shares are traded on the New York Stock Exchange under the symbol
NCC PR. The preferred stock is abbreviated as NTLCITY PF in financial
publications.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Common stockholders participating in the Plan receive a three percent
discount from market price when they reinvest their National City dividends in
additional shares. Participants may also make optional cash purchases of common
stock at a three percent discount from market price and pay no brokerage
commissions. To obtain our Plan prospectus and authorization card, call
1-800-622-6757.
DIRECT DEPOSIT OF DIVIDENDS
A program for direct deposit of dividends is available to stockholders of
the Corporation. This program which is offered at no charge, provides for the
deposit of quarterly dividends directly to a checking or savings account. For
information regarding this program, call 1-800-622-6757.
<TABLE>
<CAPTION>
DEBT RATINGS
MOODY'S STANDARD & POOR'S DUFF & PHELPS THOMSON BANKWATCH
<S> <C> <C> <C> <C>
National City Corporation A/B
Commercial paper (short-term debt) P-1 A-1 D-1+ TBW1
Senior debt A1 A AA-
Subordinated debt A2 A- A+
Preferred stock "a1" BBB+ A
Certificates of Deposit:
National City Bank - Cleveland Aa3 A+ AA
National City Bank, Columbus Aa3 A+ AA
National City Bank, Kentucky Aa3 A+ AA
National City Bank, Indiana Aa3 A+ AA
Subordinated Bank Notes:
National City Bank - Cleveland A1 A AA-
National City Bank, Columbus A1 A AA-
</TABLE>
<PAGE> 51
[Back Cover Blank]
<PAGE> 52
NATIONAL CITY Corporation First Class
1900 East Ninth Street U.S. Postage
Cleveland, Ohio 44114-3484 P A I D
National City
Corporation
<PAGE> 53
NATIONAL CITY CORPORATION
PART IV, ITEM 14: EXHIBIT INDEX
(2.1) Agreement and Plan of Merger dated as of July 25, 1994 by and
between Registrant and Central Indiana Bancorp (filed as Appendix
A to the Prospectus and Proxy Statement filed as a part of
Registration Statement No. 33-56539 dated November 18, 1994 and
incorporated herein by reference).
(3.1) The Restated Certificate of Incorporation of the Registrant as
amended (filed as Exhibit 3.1 to Registration Statement No.
33-49823 and incorporated herein by reference).
(3.2) Registrant's First Restatement of By-laws adopted April 27, 1987
As Amended through October 24, 1994 (filed as Exhibit 3.2 to
Registrant's Form S-4 Registration Statement #33-56539 dated
November 18, 1994 and incorporated herein by reference).
(4.1) Credit Agreement, dated as of December 31, 1988, between
Registrant and the banks named therein (filed as Exhibit 4.1 to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988, and incorporated herein by reference).
(4.2) Instruments defining the rights of holders of certain long-term
debt of the Registrant and its consolidated subsidiaries are not
filed as exhibits because the amount of debt under such
instruments is less than 10% of the consolidated total assets of
the Registrant. Registrant undertakes to file these instruments
with the Commission upon request.
(4.3) Certificate of Stock Designation, dated April 18, 1991,
designating the Corporation's 8% Cumulative Convertible Preferred
Stock, without par value, and fixing the powers, preferences,
rights, qualifications, limitations and restrictions thereof in
addition to those set forth in the Corporation's Restated
Certificate of Incorporation, as amended, (filed as Exhibit 4.4
to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991 and incorporated herein by reference).
(10.1) National City Corporation Short-Term Incentive Compensation Plan
for Senior Officers, As Amended and Restated Effective January 1,
1995.
(10.2) National City Corporation Long-Term Incentive Compensation Plan
for Senior Officers, As Amended and Restated Effective January 1,
1995.
(10.3) National City Corporation's Amended and Restated 1973 Stock
Option Plan, as amended (filed as Exhibit 10.4 to Registration
Statement No. 2-91434) and amended 1984 Stock Option Plan (filed
as Exhibit 10.2 to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987; both incorporated herein
by reference).
<PAGE> 54
(10.4) National City Corporation Plan for Deferred Payment of Directors'
Fees, as amended (filed as Exhibit 10.5 to Registration Statement
No. 2-914334 and incorporated herein by reference).
(10.5) National City Corporation Supplemental Executive Retirement Plan,
As Amended and Restated Effective January 1, 1995.
(10.6) National City Corporation 1989 Stock Option Plan (filed as
Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, and incorporated herein by
reference).
(10.7) National City Corporation 1993 Stock Option Plan (filed as
Exhibit 10.5 to Registration Statement No. 33-49823 and
incorporated herein by reference).
(10.8) First Kentucky National Corporation 1985 Stock Option Plan (filed
as Exhibit 10.2 to First Kentucky National Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987,
and incorporated herein by reference).
(10.9) National City Corporation Executive Savings Plan, As Amended and
Restated Effective January 1, 1995.
(10.10) First Kentucky National Corporation 1982 Stock Option Plan (filed
as Exhibit 10.3 to First Kentucky National Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987,
and incorporated herein by reference).
(10.11) National City Corporation Amended and Restated 1991 Restricted
Stock Plan (filed as Exhibit 10.5 to Registration Statement No.
33-49823 and incorporated herein by reference).
(10.12) Form of grant made under National City Corporation 1991
Restricted Stock Plan made in connection with National City
Corporation Supplemental Executive Retirement Plan as amended
(filed as Exhibit 10.10 to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1992, and
incorporated herein by reference).
(10.13) Amended Employment Agreement dated July 21, 1989 by and between
Merchants National Corporation or a subsidiary and Otto N.
Frenzel, III (filed as Exhibit 10(21) to Merchants National
Corporation Annual Report of Form 10-K for the fiscal year ended
December 31, 1987 and incorporated herein by reference).
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<PAGE> 55
(10.14) Split Dollar Insurance Agreement dated January 4, 1988 between
Merchants National Corporation and Otto N. Frenzel, III
Irrevocable Trust II (filed as Exhibit 10(26) to Merchants
National Corporation Annual Report on Form 10-K the fiscal year
ended December 31, 1989 and incorporated herein by reference).
(10.15) Merchants National Corporation Director's Deferred Compensation
Plan, as amended and restated August 16, 1983 (filed as Exhibit
10(3) to Merchants National Corporation Registration Statement as
Form S-2 filed June 28, 1985 and incorporated herein by
reference).
(10.16) Merchants National Corporation Supplemental Pension Plan dated
November 20, 1984; First Amendment to the Supplemental Pension
Plans dated January 21, 1986; Second Amendment to the
Supplemental Pension Plans dated July 3, 1989; and Third
Amendment to the Supplemental Pension Plans dated November 21,
1990 (filed respectively as Exhibit 10(n) to Merchants National
Corporation Annual Report on Form 10-K for the year ended
December 31, 1984; as Exhibit 10(q) to the Merchants National
Corporation Annual Report on Form 10-K for the year ended
December 31, 1985; as Exhibit 10(49) to Merchants National
Corporation Annual Report on Form 10-K for the year ended
December 31, 1990; and as Exhibit 10(50) to the Merchants
National Corporation Annual Report on Form 10-K for the year
ended December 31, 1990; all incorporated herein by reference).
(10.17) Merchants National Corporation Employee Benefit Trust Agreement,
effective July 1, 1987 (filed as Exhibit 10(27) to Merchants
National Corporation Annual Report on Form 10-K for the year
ended December 31, 1987 and incorporated herein by reference).
(10.18) Merchants National Corporation Non-qualified Stock Option Plan
effective January 20, 1987, and the first Amendment to that
Merchants National Non-qualified Stock Option Plan, effective
October 16, 1990 (filed respectively as Exhibit 10(23) to
Merchants National Corporation Annual Report on Form 10-K for the
year ended December 31, 1986, and as Exhibit 10(55) to Merchants
National Corporation Annual Report on Form 10-K for the year
ended December 31, 1990, both of which are incorporated herein by
reference).
(10.19) Merchants National Corporation 1987 Non-qualified Stock Option
Plan, effective November 17, 1987, and the First Amendment to
Merchants National Corporation 1987 Non-qualified Stock Option
Plan, effective October 16, 1990, (filed respectively as Exhibit
10(30) to Merchants National Corporation Annual Report on Form
10-K for the year ended December 31, 1987 and as Exhibit 10(61)
to Merchants National Corporation Annual
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<PAGE> 56
Report on Form 10-K for the year ended December 31, 1990, both of
which are incorporated herein by reference).
(10.20) Merchants National Corporation Directors Non-qualified Stock
Option Plan and the First Amendment to Merchants National
Corporation Directors Non-qualified Stock Option Plan effective
October 16, 1990 (filed respectively as Exhibit 10(44) to
Merchants National Corporation Annual Report on Form 10-K for the
year ended December 31, 1988 and as Exhibit 10(68) to Merchants
National Corporation Annual Report on Form 10-K for the year
ended December 31, 1990, both of which are incorporated herein by
reference).
(10.21) National City Corporation Annual Corporate Performance Incentive
Plan, Effective January 1, 1995.
(10.22) Contracts with Edward B. Brandon, David A. Daberko, William R.
Robertson, William E. MacDonald III, Charles W. Hall, Jon L.
Gorney, Harold B. Todd, Jr., Robert G. Siefers, Robert J.
Ondercik, Jeffrey D. Kelly, David L. Zoeller, Thomas A.
Richlovsky, Thomas W. Owen, Gary A. Glaser, Vincent A. DiGirolamo
and Morton Boyd in the form set forth in Exhibit 10.22.
(10.23) Contracts with 31 key employees in the form set forth in
Exhibit 10.23.
(10.24) The National City Savings and Investment Plan, As Amended and
Restated Effective July 1, 1992.
(10.25) The National City Savings and Investment Plan No. 2, As Amended
and Restated Effective January 1, 1992.
(10.26) Central Indiana Bancorp Stock Option Plan effective March 15,
1991.
(10.27) Central Indian Bancorp 1993 Stock Option Plan effective October
12, 1993.
(10.28) Split Dollar Insurance Agreement effective January 1, 1994
between National City Corporation and those individuals listed
in Exhibit 10.22 and other key employees.
(11) Computation of Earnings Per Share.
(21) Subsidiaries
(23) Consent of Ernst & Young LLP Independent Auditors
(24) Powers of Attorney
(27.1) Financial Data Schedule
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EXHIBIT 10.1
NATIONAL CITY CORPORATION
SHORT-TERM INCENTIVE COMPENSATION PLAN
FOR SENIOR OFFICERS
As Amended and Restated Effective January 1, 1995
ARTICLE 1. THE PLAN AND ITS PURPOSE
1.1 Amendment and Restatement of the Predecessor Plan. This
National City Corporation Short-Term Incentive Compensation Plan for Senior
Officers, effective January 1, 1995 (herein referred as the "Plan") is an
amendment, restatement and continuation of the "National City Corporation
Short-Term Incentive Compensation Plan for Senior Officers" in effect January
1, 1994 (herein referred to as the "Predecessor Plan"); the Predecessor Plan
was, in turn, an amendment, restatement and continuation of prior plans
entitled the "National City Corporation Incentive Compensation Plan for Senior
Executive Officers" in effect prior to January 1, 1994 ("Prior Plans").
1.2 Effectiveness. This Plan is effective on and after January 1,
1995, to provide for the operation of the Plan on and after such date and to
govern the treatment, on and after such date, of all deferrals made under this
Plan, the Predecessor Plan, and the Prior Plan.
1.3 Purpose. The purpose of the Plan is to maximize the
Corporation's profitability and operating success by providing an incentive to
Senior Officers to achieve superior results. The Plan is designed to promote
teamwork to achieve overall corporate success and to motivate individual
excellence.
1.4 Operation of the Plan. The Plan shall be administered by the
Compensation and Organization Committee of the Board of Directors of the
Corporation. The Plan operates on a calendar year basis and is subject to the
review, interpretation, and alteration by such Committee.
<PAGE> 2
The Plan is intended to serve only as a guide to the Corporation in determining
eligibility for and amounts of incentive compensation to be awarded under the
Plan. With respect to any award made under the Plan, however, the Plan shall
serve as a non- qualified plan providing for and governing the treatment of
deferred compensation at the election of the Participant and/or the Committee,
or as required by the Plan, as provided herein.
ARTICLE 2. DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall
have the meanings set forth below, unless otherwise expressly provided. When
the defined meaning is intended, the term is capitalized.
(a) "Award" shall mean the payment earned by a Participant
based on an evaluation of the individual's achievements. As such, the amount
of any Award under this Plan is determined by decision of and in the discretion
of the Corporation acting through the Committee as hereinafter provided.
(b) "Base Salary" shall mean the annual salary as of the
close of the Plan Cycle, exclusive of any bonuses, incentive pay, special
awards, or stock options.
(c) "Board" shall mean the Board of Directors of the
Corporation.
(d) "Change in Control" see Section 11.3.
(e) "Committee" shall mean the Compensation and Organization
Committee of the Board, or another committee appointed by the Board to serve as
the administering committee of the Plan.
(f) "Corporation" shall mean National City Corporation, a
Delaware corporation.
(g) "Disability" shall mean permanent disability as defined
in the provisions of the National City Corporation Long Term Disability Plan.
(h) "Early Retirement" shall mean early retirement as defined
in the provisions of the National City Corporation Non-Contributory Retirement
Plan.
(i) "Effective Date" see Section 11.4.
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<PAGE> 3
(j) "Eligible Employee" shall mean an Employee who is
employed in a position meeting the defined eligibility criteria for
participation in the Plan, as set forth in Article 3.
(k) "Employee" shall mean an individual employed by an
Employer on a regular active and full-time salaried basis.
(l) "Employer" shall mean the Corporation or any corporation,
organization or entity controlled by the Corporation.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Funds" shall mean the Funds provided for in Section 9.4
hereof.
(o) "Implementation Date" see Section 11.5.
(p) "Mandatory Deferrals" shall mean those deferrals required
to be deferred pursuant to Section 9.3 of the Predecessor Plan.
(q) "Normal Retirement" shall have the same meaning as in the
National City Non-Contributory Retirement Plan.
(r) "Parallel Funds" see Section 9.6.
(s) "Participant" shall mean an Eligible Employee who is
approved by the Committee for participation in the Plan. Such approval shall
be on a Plan Cycle basis and shall be reviewed with respect to each new Plan
Cycle.
(t) "Plan" see Section 1.1.
(u) "Plan Cycle" shall mean a period of a calendar year.
(v) "Predecessor Plan" see Section 1.1.
(w) "Prior Plan" see Section 1.1.
(x) "SIP" shall mean the National City Savings and Investment
Plan.
(y) "Subsidiary" see Paragraph 11.3(e).
(z) "Vesting Event" shall mean the earliest to occur of the
following dates:
(1) the date any benefit is payable under the Plan,
(2) the Effective Date of a Change in Control,
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<PAGE> 4
(3) the date a Participant is eligible to retire on
a Normal Retirement
(4) the date a Participant has a Disability,
(5) the date of a Participant's death, or
Each Participant and beneficiary with respect to whom a
Vesting Event has occurred shall be 100% vested in his or her benefits or
Awards earned or accrued hereunder as of the date of said Vesting Event,
subject to the forfeiture provisions of Article 10.
(aa) "Voting Stock" see Paragraph 11.3(c).
2.2 Gender and Number. Except when otherwise indicated by the
context, any masculine terminology used herein also shall include the feminine,
and the definition of any term in the singular shall include the plural.
ARTICLE 3. ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Eligibility for participation in the Plan will
be limited to those officers of the Corporation and its subsidiaries who, by
the nature and scope of their position, play a key role in the management,
growth and success of the Corporation, as determined by the Committee.
3.2 Participation. Participation in the Plan (including a
Participant's Category) shall be determined by the Committee with respect to
each Plan Cycle prior to the commencement of the Plan Cycle, except as
otherwise provided herein. The Committee may base its approval upon the
recommendation of the Chief Executive Officer of National City Corporation.
The Committee may classify Senior Officers for the purposes of the Plan into
the following categories:
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<PAGE> 5
Category Persons Included
-------- ----------------
Category I Chief executive officer of the Corporation
Category II President and deputy chairmen of the Corporation, and
similar officers
Category III Executive vice presidents of the Corporation and the
chief executive officers of major subsidiaries of the
Corporation, and similar officers
Category IV Senior officers of the corporation and executive
officers of major subsidiaries, and similar officers
Categories V & VI All other officers of the Corporation or its
subsidiaries who are approved for participation in
the Plan by the Committee
Each Eligible Employee approved for participation shall be
notified of the selection as soon after approval as is practicable and shall
become a Participant upon acceptance by him or her of such selection.
3.3 Participation for part of a Plan Cycle. In the event an
Employee is an Eligible Employee for only a portion of a Plan Cycle
(Participation Portion) such Eligible Employee may, in the Committee's
discretion, be a Participant for such portion of the Plan Cycle but his or her
Award will be based upon his or her Base Salary at the end of such
Participation Portion and such Award will normally be prorated to reflect the
number of months in the Participation Portion of the Plan Cycle compared to the
number of months in the total Plan Cycle.
3.4 Category Changes During a Plan Cycle. In the event a
Participant is promoted or demoted from one Category to another during a Plan
Cycle, the Committee may, in its discretion, (a) continue such Participant in
the Category he or she was in prior to such promotion or demotion, (b) provide
for participation from and after the promotion or demotion to the new Category,
or (c) provide for a combination of (a) and (b).
In the event of a Plan Cycle for which the Participant's
participation is thus split between two Categories, the Award for such Plan
Cycle will normally be prorated to reflect the
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<PAGE> 6
portions of the Plan Cycle spent in each Category and each part of the Award
will be based upon the Participant's Base Salary at the end of the appropriate
portions of the Plan Cycle.
3.5 Portions of Plan Cycles-Setting of Individual Objectives.
Notwithstanding Sections 3.3 and 3.4, except with respect to Category I
employees, no portion of a Plan Cycle with respect to a Participant shall be
considered to be a separate portion of participation for a Participant unless,
prior thereto, individual achievement objectives are set for such Participant
for such portion of a Plan Cycle pursuant to Article 4, or are waived by the
Committee, in its discretion.
3.6 No Right to Participate. No Participant or Employee shall
have a right at any time to be selected for current or future participation in
the Plan.
ARTICLE 4. PERFORMANCE MEASUREMENT
4.1 Performance Criteria. Performance, for purposes of this Plan,
will be measured in terms of the participant's individual contribution.
Individual contribution will be measured by comparing actual
individual achievements during the Plan Cycle to established objectives for the
Plan Cycle. Prior to the beginning of the Plan Cycle each Participant shall
establish objectives for the Plan Cycle. Such objectives shall be broad in
nature, may be quantitative or qualitative and will typically be five in
number. The objectives for Senior Officers other than those in Category I
shall be subject to the review, revision and approval of their superiors up to
and including the Chief Executive Officer of National City Corporation.
4.2 Award Potential. The amount of incentive compensation that
may be awarded to a Senior Officer under this Plan shall be expressed as a
percentage of Base Salary. Such percentage shall normally fall within the
range set forth in the following table:
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<PAGE> 7
<TABLE>
<CAPTION>
Percent of Base Compensation
----------------------------
Category Threshold Target Maximum
-------- --------- ------ -------
<S> <C> <C> <C>
I 0% 5.5% 8.5%
II 0% 10% 15%
III 0% 18% 28%
IV 0% 21% 33%
V 0% 20% 32%
VI 0% 10% 20%
</TABLE>
4.3 Award Calculation and Approval. An evaluation for each
Participant for each Plan Cycle will be determined as of the December 31 on
which the Plan Cycle ends by applying the foregoing provisions of this Article
4 to the Participant's Individual Contribution for such Plan Cycle. Based on
the evaluation, the Chief Executive Officer of National City Corporation shall
recommend to the Committee for approval an appropriate incentive compensation
Award for each of the Senior Officers in Categories II and III. The Chief
Executive Officer shall also determine the incentive compensation Award of each
Senior Officer in Categories IV, V and VI which shall be deemed approved by the
Committee upon (1) the completion by the Chief Executive Officer of a list of
such Awards, and (2) the Committee's approval of the aggregate dollar amount of
such Awards. The Committee shall determine an appropriate incentive
compensation Award for the Chief Executive Officer of the Corporation.
All such Awards may, for convenience purposes, be normally
expressed as a percentage of Base Salary. Upon the approval of the Committee
the amounts of Awards hereunder for a Plan Cycle shall be final.
ARTICLE 5. PAYMENT OF AWARDS
5.1 Form and Timing of Payment of Awards. Within 90 days after
the end of the Plan Cycle, the Participant shall be entitled to receive a cash
payment equal to the entire amount of the Participant's Award. Except as
otherwise provided for in Section 5.2, to receive an Award a
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<PAGE> 8
Participant must be an Employee on the date on which the Plan Cycle ends. The
Committee may terminate a Participant's Award prior to any Vesting Event if
such Participant fails to continue to be an Employee.
5.2 Termination of Employment Due to Retirement, Disability or
Death. In the event a Participant's employment is terminated during a Plan
Cycle by reason of Normal Retirement, Disability or Death, the Participant
shall be eligible to receive a prorated Award based on individual contribution
during the Participant's participation in the Plan Cycle, provided however,
that the Participant must have been a Participant in the Plan for at least
three months of the Plan Cycle to be eligible to receive any Award hereunder.
Such Awards will be paid within ninety (90) days following the end of the Plan
Cycle. In the event of death, the Award will be paid to the Participant's
estate.
5.3 Termination of Employment Due to Early Retirement. The
Committee may elect, in its discretion, to pay a prorated Award to a
Participant who terminates employment by means of an Early Retirement; in the
absence of such favorable discretionary action by the Committee, no such
pro-rated Award shall be paid.
5.4 Other Terminations of Employment. In the event a
Participant's employment is terminated during a Plan Cycle prior to a Vesting
Event, the Participant's participation in such Plan Cycle shall end and the
Participant shall not be entitled to any Award for such Plan Cycle.
5.5 Request to Defer Payment; Deferred Payments. The Committee
may determine that one or more Participants should be eligible to elect to
request to have a portion or all of his or her Award for a Plan Cycle deferred
and paid out at a future date. Such request by an eligible Participant shall
be considered by the Committee. The Committee may determine that some, all, or
none of the Awards, or parts thereof, shall be deferred, in its discretion.
Deferred amounts are subject to the provisions of Article 9.
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<PAGE> 9
ARTICLE 6. RIGHTS OF PARTICIPANTS
6.1 Employment. Nothing in this Plan shall interfere with or
limit in any way the right of the Corporation to terminate a Participant's
employment at any time, nor confer upon any Participant any right to continue
in the employ of the Employer.
6.2 Restrictions on Assignments. The interest of a Participant or
his or her beneficiary under this Plan may not be sold, transferred, assigned,
or encumbered in any manner, either voluntarily or involuntarily, and any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
or charge the same shall be null and void; neither shall the benefits hereunder
be liable for or subject to the debts, contracts, liabilities, engagements, or
torts of any person to whom such benefits or funds are payable, nor shall they
be subject to garnishment, attachment, or other legal or equitable process, nor
shall they be an asset in bankruptcy.
ARTICLE 7. ADMINISTRATION
7.1 Administration. The Plan shall be administered by the
Committee in accordance with any administrative guidelines and any rules that
may be established from time to time by the Committee. The procedures,
standards and provisions of this Plan for determining eligibility for and
amounts of Awards are intended only as a guide and in themselves confer no
rights, duties or privileges upon Participants nor place any obligation upon
the Committee, the Board or the Corporation. Accordingly, the Committee may,
in making its determinations hereunder, deviate from such procedures and
standards in whatever manner that it, in its judgment, deems appropriate.
The Committee shall have full power and authority to
interpret, construe and administer the Plan and its interpretations and
construction hereof, and actions hereunder, including the timing, form, amount
or recipient of any payment to be made hereunder, and its decisions shall be
binding and conclusive on all persons for all purposes.
The Committee may name assistants who may be, but need not be,
members of the Committee. Such assistants shall serve at the pleasure of the
Committee, and shall perform such functions as may be assigned by the
Committee.
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<PAGE> 10
No member of the Committee or any assistant shall be liable to
any person for any action taken or omitted in connection with the
interpretation and administration of this Plan unless attributable to his or
her own willful misconduct or lack of good faith.
ARTICLE 8. REQUIREMENTS OF LAW
8.1 Laws Governing. This Plan shall be construed in accordance
with and governed by the laws of the State of Ohio.
8.2 Withholding Taxes. The Corporation shall have the right to
deduct from all payments under this Plan any federal or state taxes required by
the law to be withheld with respect to such payments.
8.3 Plan Binding on Corporation, Employees and Their Successors.
This Plan shall be binding upon and inure to the benefit of the Corporation,
its successors and assigns and each Participant and his or her beneficiaries,
heirs, executors, administrators and legal representatives.
ARTICLE 9. DEFERRAL OF AWARDS
9.1 Election to Request Deferral of Award; Deferral Percentage.
Prior to each Plan Cycle, the Committee shall determine which Participants, if
any, shall be eligible to make deferral elections under this Plan. Each
Participant who is therefore eligible to elect to request deferral of a portion
or all of his or her Award for such Plan Cycle, shall be given the opportunity
prior to such Plan Cycle, to make such request. Such election and the
percentage of Award requested to be deferred shall be irrevocable and fixed
with respect to such Participant and such Plan Cycle from and after the
December 31 of the year prior to the Plan Cycle.
The request and determination of the portion of the Award to
be deferred shall be made in terms of 10% increments of the Award.
Participants becoming Participants during a Plan Cycle shall,
if determined to be eligible to do so, make any such deferral request to defer
prior to the commencement of their participation and the same shall become
irrevocable and fixed as of the day prior to the commencement of their
participation.
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Promotion or demotion during a Plan Cycle shall not affect the
fixed and irrevocable nature of a deferral request made prior to such Plan
Cycle for such Plan Cycle.
9.2 Deferral of Awards; Committee's Decision. Notwithstanding any
request to defer none, a portion, or all of an Award hereunder submitted by a
Participant pursuant to Section 9.1 above, and not withstanding the Committee's
prior determination as to the eligibility of any Participant to defer a portion
or all of any Award hereunder, the Committee shall make the decision, in the
case of each Participant, whether or not to defer any portion or all of any
Participant's Award with respect to any Plan Cycle. Such decision shall be
made in the discretion of the Committee, which extends to the percentage of any
Award to be deferred, except as otherwise provided in Section 9.3.
The Committee's decision shall be final and binding on all
parties. Any amount to be deferred shall not be paid to the Participant but
shall be deferred as provided in this Article 9.
9.3 Required Deferral. If any Mandatory Deferrals were made, the
amount deferred shall yield such return as the Funds to which the deferral is
credited in accordance with this Section 9. Any Mandatory Deferrals as
adjusted pursuant to Section 9.6 of this Plan shall be paid at the earliest
possible time and to the maximum extent possible such that a deduction for such
payment would not be disallowed pursuant to the Internal Revenue Code Section
162(m)(1).
9.4 Accounts. An account shall be established and maintained by
the Corporation in the name of each Participant who has deferred compensation
hereunder. Such accounts shall remain a part of the general liabilities of the
Corporation and nothing in this Plan shall be deemed to create a trust or fund
of any kind or any fiduciary relationship. Each Account shall be comprised of
ten sub-accounts: (a) the "Savings Account Fund"; (b) the "NCC Stock Fund"; (c)
the "Equity Fund"; (d) the "Fixed Income Fund"; (e) the "Money Market Fund";
(f) the "Capital Preservation Fund"; (g) the "Mid Cap Regional Equity Fund";
(h) the "Equity Income Fund"; (i) the "Equity Index Fund"; (j) the "Foreign
Equity Fund"; such sub-accounts jointly are herein called the "Funds"."
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<PAGE> 12
9.5 Crediting to Accounts. As of the dates of payment of cash
Awards made under this Plan the amount of the Award to be deferred for each
Participant under this Section 9 shall be credited to such Participant's
Account, and shall correspondingly be credited to the Fund or Funds selected by
the Participant.
9.6 Funds. The nine Funds hereunder other than the Savings
Account Fund (such nine Funds being herein called "Parallel Funds") are
designed to reflect investment funds maintained in the SIP. Accordingly, each
such Parallel Fund and each Participant's Account therein shall be adjusted
hereunder as of the end of each month to reflect the income, gain or loss of
the corresponding SIP investment fund for such month, as calculated and
published on a monthly basis by the Trustee of the SIP.
In the event the SIP no longer offers a fund corresponding to
one of the Parallel Funds, the amounts which would have been deemed invested
in such Parallel Fund except for this provision shall be deemed to be invested
in the Savings Account Fund.
9.7 Savings Account Fund. Amounts deferred to the Savings Account
Fund shall be credited to the Participant's Account in such Fund as of the date
that other Awards for such Plan Cycle are paid or would be paid, and interest
shall be credited on amounts in the Participant's Account in such Fund at the
end of each calendar quarter in amount equal to interest on the average credit
balance in such Account during such calendar quarter, at the highest published
rate being paid by National City Bank on savings or time deposits of less than
$100,000 on the last day of such quarter, regardless of maturity.
9.8 Selection of Funds. Each Participant (and each Beneficiary of
a deceased Participant) may select the Investment Fund or Funds he or she
wishes to be used hereunder for his or her account. The selection of Funds
shall be made in portions of the amount deferred equal to 5% of the total of
such amounts. In the event no election is made by a Participant (or
Beneficiary) his or her account shall be deemed invested in and credited to the
Savings Account Fund.
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<PAGE> 13
Selection of Funds by Participants shall be made no later than
the December 1 of the Plan Cycle for which the Award is to be made in advance
of the deferral or payment of the Award; provided however, that in the event a
Participant who has not requested a deferral of any part of his or her Award
nevertheless has a portion thereof deferred by decision of the Committee, or
otherwise, then in such event, such Participant shall immediately be given an
election period of 10 days to determine appropriate investments, such period
running from the date of his or her notification of his or her right to make
such selection.
9.9 No Change of Investment Fund Selection Permitted Except with
Committee Approval. Each selection of a Fund hereunder shall be final and
shall not thereafter be revised or changed, provided, however, that each
Participant (or Beneficiary if the Participant is deceased) may request a
change in his or her Investment Fund choice by filing such request with the
Committee. Notwithstanding the foregoing, the consent of the Committee shall
be necessary for any such change in investment fund choices; such consent is
discretionary in the Committee and the Committee shall act upon such requests
as are filed with it at the Committee's next regularly scheduled meeting.
9.10 Vesting of Deferred Amounts. Amounts of Awards made and
deferred under the Plan, and earnings and gains thereon, are always 100%
vested.
9.11 Manner of Distribution. Except as otherwise provided herein,
distributions hereunder shall take place over a period of ten years commencing
on the retirement, death or other termination of employment of the Participant.
The first distribution shall take place on the February 1 of the calendar year
following the calendar year in which such retirement, death or other
termination occurs. Succeeding payments shall be made on succeeding
February 1sts.
The amount to be distributed shall be determined by
multiplying (i) the dollar value of the Participant's entire interest hereunder
on the date of such installment, by (ii) a fraction, the numerator of which is
one, and the denominator of which is the number of distributions remaining
unpaid at such time, or by such other method as may be adopted by the
Committee.
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The balances of each Account and each Investment Fund shall be
appropriately reduced to reflect the distribution payments made. Amounts held
pending distribution pursuant to this Paragraph 9.11 shall continue to be
credited with appropriate income, gains and losses as herein otherwise provided
and shall be subject to investment changes as herein provided. Balances in
more than one Fund shall be reduced pro-rata to reflect distributions on a
pro-rata basis from each Fund.
9.12 Accelerated Payments; Revised Distributions. Notwithstanding
the foregoing, the Committee may determine that a Participant's interest
hereunder which equals $100,000 or less shall be paid out in a lump sum.
Furthermore, the Committee may determine that a lump sum distribution should be
made to a Participant who has terminated employment by means other than death,
disability or retirement.
In the event such determination is made, such lump sum
distribution shall be made as of the next succeeding February 1, or at such
other time as may be determined by the Committee.
In the case of the first distribution after the death of a
Participant, the Committee may, in its discretion, provide for payment of a
portion or all of the distribution prior to the February 1 after such death.
Notwithstanding any other provision hereof, the Committee, in
its discretion, may provide that distributions may be made in a lesser number
of installments, but not less than 5.
9.13 Beneficiary Designations. Each Participant, and each
Beneficiary of a deceased Participant or Beneficiary hereunder, may designate,
on a Beneficiary Designation form supplied by the Committee, any person or
persons to whom payments are to be made if the Participant (or Beneficiary)
dies before receiving payment of all amounts due hereunder. A beneficiary
designation will be effective only after the signed Beneficiary Designation
form is filed with an officer of the Corporation designated by the Committee
for such purpose while the Participant (or Beneficiary) is alive, and will
cancel all beneficiary designations signed and filed earlier. If the
Participant (or Beneficiary) fails to designate a beneficiary as provided
above, or if all
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<PAGE> 15
designated beneficiaries die before the Participant or before complete payment
of all amounts due hereunder, remaining unpaid distribution amounts shall be
paid to the then surviving spouse of the Participant, if any, or, if there be
none, in one lump sum to the estate of the last to die of the Participant or
his or her designated beneficiaries, if any.
In the event a Participant (or a Beneficiary of a deceased
Participant) designates as a Beneficiary any so called "marital deduction
trust" or any so called "qualified income trust", the Participant (or
Beneficiary) may additionally indicate whether the dollar equivalent of the
current income, during the distribution of an interest hereunder, should be
distributed yearly to such Beneficiary. In the event of such an indication,
such income shall be distributed at least annually.
9.14 Participants Rights; Beneficiaries Rights. Except as
otherwise specifically provided, neither a Participant nor any of his or her
Beneficiaries has rights under this Plan. The payment of deferred compensation
shall be a general, unsecured obligation of the Corporation to be paid by the
Corporation from its own funds, and such payments shall not impose any
obligation upon any trust fund for any tax qualified plan, be paid from any
such trust fund, or have any effect whatsoever upon the SIP or the payment of
benefits from the Trust Fund under the SIP. No Participant or beneficiary
shall have any title to or beneficial ownership in any assets which the
Corporation may earmark to pay benefits hereunder.
9.15 Nature of deferred compensation. The election of deferred
compensation under this Plan and any setting aside by the Corporation of
amounts with which to discharge its deferred obligations hereunder in a trust
fund, an insurance policy, or otherwise, shall not be deemed to create a right
in any person; equitable title to any funds so set aside in a trust, an
insurance policy, or otherwise shall remain in the Corporation, and any
recipient of benefits hereunder shall have no security or other interest in
such trust, policies or funds. Any and all funds so set aside in a trust, an
insurance policy or otherwise shall remain subject to the claims of the general
creditors of the Corporation, present and future. This provision shall not
require the Corporation to set aside any funds, but the Corporation may set
aside such funds if it chooses to
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<PAGE> 16
do so. Any amount so set aside for th+6is Plan shall be accounted for
separately and apart from any other plan of the Corporation. This Plan is
intended to constitute an unfunded plan of deferred compensation described in
Section 201(2) of the Employee Retirement Income Security Act of 1974.
9.16 Distributions in Cash. Notwithstanding any other provision of
this Plan, distributions hereunder shall be made only in cash and shall be
subject to withholding of applicable taxes.
9.17 Nature of Deferred Compensation Plan. The provisions of the
Plan relating to deferred compensation are fixed and final unless and until
amended, revised or terminated as herein provided.
ARTICLE 10. FORFEITURES
Notwithstanding any provision in this Plan to the contrary excepting
only the provisions of Article 11, in the event the Committee finds
(a) that an Employee or former Employee who has an
interest under this Plan has been discharged by his or her Employer in the
reasonable belief (and such reasonable belief is the reason or one of the
reasons for such discharge) that the Employee or former Employee did engage in
fraud against the Employer or anyone else, or
(b) that an Employee or former Employee who has an
interest under this Plan has been convicted of a crime as a result of which it
becomes illegal for his or her Employer to employ him or her,
then any amounts held under this Plan for the benefit of such Employee or
former Employee or his or her beneficiaries shall be forfeited and no longer
payable to such Employee or former Employee or to any person claiming by or
through such Employee or former Employee.
ARTICLE 11 CHANGE IN CONTROL
11.1 Treatment of Awards. In the event of a Change in Control, the
Corporation shall pay to each Participant who is participating in a Plan Cycle
on the Effective Date of such Change in Control, a lump sum cash payment equal
to the amount hereinafter determined. Such payment
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<PAGE> 17
shall be paid in cash to the Participant within five business days after the
Implementation Date of such Change in Control and shall be payment in full to
each Participant for the Plan Cycle, and such Plan Cycle shall be deemed
terminated by operation of this Article 11. No further Plan Cycles shall
commence thereafter under this Plan.
Such cash payment shall be made without regard to any request
to defer made with respect to any such Plan Cycle (which shall be inoperative)
and without regard to any deferral action by the Committee.
Amounts deferred under this Plan prior to the Effective Date
(by request, as required, or as decided by the Committee) shall continue to be
payable from time to time under this Plan as deferred payments hereunder.
11.2 Amount of Payment. The amount of the payment to be made as a
consequence of a Change in Control shall, with respect to each Plan Cycle, be
equal to the maximum Award which could be paid hereunder to each Participant
pro-rated, however, to reflect late commencement of participation in a Plan
Cycle and/or promotions or Category changes in a Plan Cycle, consistent with
Sections 3.4 and 3.5 of the Plan.
11.3 Definition of Change in Control. "Change in Control" shall
mean the occurrence of any of the following events:
(a) The Corporation is merged, consolidated or reorganized
into or with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than sixty-five percent of the
combined voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the aggregate by the
holders of Voting Stock immediately prior to such transaction;
(b) The Corporation sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal person,
and as a result of such sale or transfer less than sixty-five percent of the
combined voting power of the then- outstanding securities of such corporation
or person immediately after such sale or transfer is held in the aggregate by
the holders of Voting Stock immediately prior to such sale or transfer;
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<PAGE> 18
(c) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant to
the Exchange Act disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of
securities representing 15% or more of the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors of the Corporation ("Voting Stock");
(d) The Corporation files a report or proxy statement with
the Securities and Exchange Commission pursuant to the Exchange Act disclosing
in response to Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Corporation has
occurred or will occur in the future pursuant to any then-existing contract or
transaction; or
(e) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the Directors of
the Corporation cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this clause (e) each Director who is
first elected, or first nominated for election by the Corporation's
stockholders, by a vote of at least two-thirds of the Directors of the
Corporation (or a committee thereof) then still in office who were Directors of
the Corporation at the beginning of any such period will be deemed to have been
a Director of the Corporation at the beginning of such period.
Notwithstanding the foregoing provisions of (c) or (d) above,
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" shall not be deemed to have occurred for purposes of
paragraphs (c) or (d) above, solely because (1) the Corporation, (2) an entity
in which the Corporation directly or indirectly beneficially owns 50% or more
of the voting equity securities (a "Subsidiary"), or (3) any employee stock
ownership plan or any other employee benefit plan of the Corporation or any
Subsidiary either files or becomes obligated to file a report or proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item
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<PAGE> 19
therein) under the Exchange Act disclosing beneficial ownership by it of shares
of Voting Stock, whether in excess of 15% or otherwise, or because the
Corporation reports that a change in control of the Corporation has occurred or
will occur in the future by reason of such beneficial ownership.
11.4 Effective Date of Change in Control. Notwithstanding the
foregoing, in the event a Change in Control ultimately results from discussions
or negotiations involving the Corporation or any of its officers or directors,
the "Effective Date" of such Change in Control shall be the date such
discussions or negotiations commenced; otherwise, such Effective Date of a
Change in Control shall be the Implementation Date of such Change in Control.
11.5 Implementation Date of Change in Control. The "Implementation
Date" shall be the earliest to occur of the events specified in subsections
(a), (b), (c), (d) or (e) of Section 11.3. As used herein, the Implementation
Date of Change in Control shall be the last date of the then current Plan
Cycle.
11.6 Effect of Change in Control. In addition to other vesting
under the Plan, the opportunity of a Participant to participate to the end of
the current Plan Cycle is vested in such Participant in the event of a Change
in Control, as of the Effective Date of such Change in Control.
ARTICLE 12. MISCELLANEOUS
In the event of the liquidation of the Corporation the Committee may
make any provisions for holding, handling and distributing the amounts standing
to the credit of the Participants or beneficiaries hereunder which, in the
discretion of the Committee which in the discretion of the Committee, are
appropriate and equitable under all circumstances and which are consistent with
the spirit and purposes of these provisions.
ARTICLE 13. AMENDMENT AND DISCONTINUANCE
The Corporation expects to continue this Plan indefinitely, but
reserves the right, by action of the Committee, to amend it from time to time,
or to discontinue it if such a change is deemed necessary or desirable.
However, if the Committee should amend or discontinue this
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<PAGE> 20
Plan, the Corporation shall remain obligated under the Plan with respect to (1)
Awards made final (and thus payable) by decision by the Committee prior to the
date of such amendment or discontinuance (2) Awards and rights of any
Participant or beneficiary with respect to whom a Vesting Event has occurred,
and (3) with respect to amounts deferred prior to date of such amendment or
discontinuance.
Executed this ____ day of _____________, 1994 at Cleveland, Ohio.
NATIONAL CITY CORPORATION
By:
-----------------------------
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<PAGE> 1
EXHIBIT 10.2
NATIONAL CITY CORPORATION
LONG-TERM INCENTIVE COMPENSATION PLAN
FOR SENIOR OFFICERS
As Amended and Restated Effective January 1, 1995
ARTICLE 1. ESTABLISHMENT AND PURPOSE OF PLAN
1.1 Establishment of the Plan. The following are the provisions of
the National City Corporation Long-Term Incentive Compensation Plan for Senior
Officers (herein referred to as the "Plan"), effective as of January 1, 1995,
which is an amendment and restatement of the National City Corporation
Long-Term Incentive Compensation Plan for Senior Officers effective January 1,
1994 ("Predecessor Plan"). The Predecessor Plan was, in turn, an amendment,
restatement and continuation of prior plans entitled "National City Corporation
Long-Term Incentive Compensation Plan for Senior Officers" in effect prior to
January 1, 1994 ("Prior Plans").
The Plan shall be effective for all purposes with respect to Play
Cycles commencing on or after January 1, 1995, and with respect to all
determinations to be made (without regard to the date a Plan Cycle commenced)
on or after such date (including but not limited to determinations of
eligibility to participate, amounts of Awards, and entitlement to Awards).
1.2 Purpose. The purpose of the Plan is to maximize the returns to
stockholders and to promote the long-term profitability and success of the
Corporation by providing an incentive to those key executives of the
Corporation who are primarily responsible for such profitability and success.
1.3 Operation of the Plan. The Plan shall be administered by the
Compensation and Organization Committee of the Board of Directors of the
Corporation. A Plan Cycle of three years will be established each year that the
Plan is in operation. Once an Award is made under
<PAGE> 2
the Plan the Plan shall serve as a non-qualified plan providing for deferred
compensation at the election of the Participant and/or the Committee, as
provided hereunder.
ARTICLE 2. DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall
have the meanings set forth below, unless otherwise expressly provided. When
the defined meaning is intended, the term is capitalized.
(a) "Active Participant" shall mean an Eligible Employee who is
approved by the Committee for participation in a Plan Cycle of
the Plan. Such approval shall be determined with respect to
each Plan Cycle prior to March 31 of the first year of that
Plan Cycle, and shall be redetermined with respect to each new
Plan Cycle.
(b) "Average Stock Price" shall be determined with respect to each
Plan Cycle for the month of December prior to such Plan Cycle
(the Average Stock Price at the beginning of the Plan Cycle)
and for the last full calendar month of the Plan Cycle (the
Average Stock Price at the end of the Plan Cycle) and shall
mean the arithmetic mean (the average) of the closing prices
of a share of common stock of a company as reported on any
national securities exchange (or by any national quotation
system accepted by the Committee for this purpose) for each of
the trading days (on which such shares were traded) in such
calendar month. If the shares of common stock are not then so
traded or regularly reported, the stock price shall be
determined by such means as the Committee shall determine.
Notwithstanding the foregoing, the Committee may determine
prior to the start of a Plan Cycle that a different set of
time periods are appropriate for measuring performance under
the Plan, and such different time periods may be used to
determine Average Stock Prices at the beginning and the end of
such Plan Cycle.
(c) "Award" shall mean the payment earned by a Participant based
on comparison of the Corporation's actual results with the
performance of a peer group of companies.
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<PAGE> 3
(d) "Base Salary" shall mean the average annual salary of an
employee during that portion, or all of the Plan Cycle for
which he or she is an Active Participant, exclusive of any
bonuses, incentive pay, special awards, or stock options.
(e) "Board" shall mean the Board of Directors of the Corporation.
(f) "Committee" shall mean the Compensation and Organization
Committee of the Board, or another committee appointed by the
Board to serve as the administering committee of the Plan.
(g) "Corporation" shall mean National City Corporation, a Delaware
corporation.
(h) "Disability" shall have the same meaning as the term "Long
Term Disability" has in the National City Corporation
Long-Term Disability Plan as in existence at the commencement
of the Plan Cycle with respect to which such definition is
relevant.
(i) "Early Retirement" shall have the same meaning as in the
National City Corporation Non-Contributory Retirement Plan as
in existence at the commencement of the Plan Cycle with
respect to which such definition is relevant.
(j) "Effective Date" see Section 12.4.
(k) "Eligible Employee" shall mean an Employee who is employed in
a position meeting the defined eligibility criteria for
participation in the Plan, as set forth in Article 3.
(l) "Employee" shall mean an individual employed by an Employer on
a regular active and full-time salaried basis.
(m) "Employer" shall mean the Corporation or any corporation,
or ganization or entity controlled by the Corporation.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(o) "Funds" shall mean the Funds provided for in Article 10 hereof.
(p) "Implementation Date" see Section 12.4.
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<PAGE> 4
(q) "Inactive Participant" shall mean an individual who was an
Active Participant in the Plan for a Plan Cycle who is not
currently an Active Participant for a Plan Cycle but who
continues to have an interest under the Plan.
(r) "Mandatory Deferrals" shall mean those deferrals required to
be deferred pursuant to Section 10.3 of the Predecessor Plan.
(s) "Normal Retirement" shall have the same meaning as in the
National City Corporation Non-Contributory Retirement Plan as
in existence at the commencement of the Plan Cycle with
respect to which such definition is relevant.
(t) "Parallel Funds" see Section 10.5.
(u) "Participant" shall mean and include all Active Participants
and all Inactive Participants.
(v) "Peer Group" shall mean a group of comparable corporations
used to measure relative performance. Such Peer Group shall be
established by the Committee for each Plan Cycle prior to the
commencement of the Plan Cycle, and shall not thereafter be
changed with respect to such Plan Cycle, provided, however,
that one or more members of a Peer Group shall be dropped
therefrom in the event of the acquisition of the Peer Group
Member, the acquisition of sixty-five percent or more of the
gross assets of the Peer Group Member or the merger of the
Peer Group Member with another company(ies) where the Peer
Group Member is not the surviving corporation.
(w) "Plan" shall mean this National City Corporation Long-Term
Incentive Compensation Plan for Senior Officers Effective
January 1, 1995, which is an amendment and restatement of the
Predecessor Plan.
(x) "Plan Cycle" shall mean a period of three consecutive fiscal
years of the Corporation and shall be referred to by the
fiscal year in which a particular Plan Cycle commences.
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<PAGE> 5
(y) "Predecessor Plan" see Section 1.1.
(z) "Prior Plan" see Section 1.1.
(aa) "SIP" shall mean the National City Savings and Investment Plan.
(bb) "Subsidiary" see paragraph 12.3(e)
(cc) "Total Stockholder Return" with respect to a stock shall be
calculated in the following manner:
(i) Add the Average Stock Price at the end of the Plan
Cycle for such stock to the dividends paid on the
stock during the Plan Cycle, and then subtract the
Average Stock Price at the beginning of the Plan
Cycle for such stock.
(ii) Divide the resulting sum of (i) above by the Average
Stock Price at the beginning of the Plan Cycle for
such stock.
(iii) The result equals Total Stockholder Return with
respect to such stock for the Plan Cycle.
(dd) "Vesting Event" shall mean the earliest to occur of the
following events:
(1) the date any Award is payable hereunder,
(2) the Effective Date of a Change in Control,
(3) the date a Participant is eligible to retire on a
Normal Retirement,
(4) the date a Participant incurs a Disability,
(5) the date of a Participant's death.
Each Participant and Beneficiary with respect to whom a Vesting Event has
occurred shall be 100% vested in his or her benefits or Awards earned or
accrued hereunder as of the date of such Vesting Event, subject to the
forfeiture provisions of Article 12.
(dd) "Voting Stock" see paragraph 12.3(e).
2.2 Gender and Number. Except when otherwise indicated by the
context, any masculine terminology used herein also shall include the feminine,
and the definition of any term in the singular shall include the plural.
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<PAGE> 6
ARTICLE 3. ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Eligibility for participation in the Plan will
be limited to those senior officers of the Corporation and its subsidiaries
who, by the nature and scope of their positions, are materially responsible for
the management, growth, and overall success of the Corporation, as determined
by the Committee.
3.2 Participation. Participation in the Plan shall be determined
by the Committee with respect to each Plan Cycle prior to the commencement of
the Plan Cycle. The Committee may base its approval upon the recommendation of
the Chief Executive Officer of National City Corporation. The Committee shall
classify senior officers for the purposes of the Plan into the following
categories:
Category Persons Included
-------- ----------------
Category I Chief executive officer of the corporation
Category II President and deputy chairmen of the
Corporation and similar officers
Category III Executive officers of the Corporation and
Executive officers of major subsidiaries of the
Corporation and similar officers
Category IV Senior officers of the Corporation and senior
officers of subsidiaries of the Corporation
and similar officers
Each Eligible Employee approved for participation shall be notified of
the selection as soon after approval as is practicable and shall become a
Participant upon acceptance by him or her of such selection; provided however,
that after December 31, 1994, no Eligible Employee shall become a Participant
in the Plan with respect to any Plan Cycle after the commencement of such Plan
Cycle.
3.3 Partial Plan Cycle Participation; Category Changes During a
Plan Cycle. After December 31, 1994 there shall be no participation in partial
Plan Cycles and a Participant's
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<PAGE> 7
change in Categories during a Plan Cycle shall not result in any change in
participation in the Plan with respect to such Plan Cycle.
3.4 No Right to Participate. No Participant or Employee shall
have a right at any time to be selected for current or future participation in
the Plan.
ARTICLE 4. AWARD DETERMINATION
4.1 Peer Group and Threshold, Target and Maximum Awards for Each
Plan Cycle. Prior to the beginning of the Plan Cycle the Committee shall
establish Threshold Award, Target Award and Maximum Award performance levels
for the Plan Cycle, against which the Total Stockholder Return of the
Corporation for the Plan Cycle shall be compared to other members of the Peer
Group based on ranking of Plan Cycle results of the Corporation and members of
the Peer Group. The Committee shall also determine the membership of the Peer
Group for the Plan Cycle at such time.
4.2 Award. The amount of incentive compensation that shall be
awarded to a Participant under this Plan shall be expressed as a percentage of
Base Salary. Such percentage shall be determined on the basis of the
attainment, or lack of attainment, by the Corporation of the Threshold, Target
or Maximum performance, as follows:
Percent of Base Compensation
<TABLE>
<CAPTION>
Below
Category Threshold Threshold Target Maximum
-------- --------- --------- ------ -------
<S> <C> <C> <C> <C>
I 0% 30% 50% 100%
II 0% 24% 40% 80%
III 0% 18% 30% 60%
IV 0% 12% 20% 40%
</TABLE>
4.3 Limitation. Notwithstanding any provision in this Plan to the
contrary, no Award for any one Plan Cycle shall exceed $1,000,000.00.
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<PAGE> 8
ARTICLE 5. PAYMENT OF AWARDS
5.1 Form and Timing of Payment of Awards. Within 90 days after
the end of the Plan Cycle, the Participant's shall be entitled to receive a
cash payment equal to the entire amount of the Participant's Award. Except as
otherwise provided for in Section 6.1, to receive an Award a Participant must
be an Employee on the date on which the Plan Cycle ends. The Committee may
terminate a Participant's Award prior to any Vesting Event.
5.2 Request to Defer Payment; Deferred Payments. A Participant
may elect to request to have a portion or all of his or her Award for a Plan
Cycle deferred and paid out at a future date. Such request shall be considered
by the Committee. The Committee may determine that some, all, or none of the
Awards, or parts thereof, shall be deferred in its discretion. Deferred
amounts are subject to the provisions of Article 10.
ARTICLE 6. TERMINATION OF EMPLOYMENT
6.1 Termination of Employment due to Death, Disability or Normal
Retirement. In the event a Participant's employment is terminated during a
Plan Cycle at or after the occurrence of a Vesting Event other than a Change of
Control the Participant shall be eligible to receive a pro-rated Award
reflecting his or her partial participation. This pro-ration shall be
determined by multiplying the Award by a fraction the numerator of which is the
number of full months of participation to the date participation ends, and the
denominator of which is 36. The Award thus determined shall be payable as soon
as practicable following the end of the Plan Cycle.
6.2 Other Terminations of Employment. In the event a
Participant's employment is terminated during a Plan Cycle prior to a Vesting
Event, the Participant's participation in such Plan Cycle shall end and the
Participant shall not be entitled to any Award for such Plan Cycle.
ARTICLE 7. RIGHTS OF PARTICIPANTS
7.1 Employment. Nothing in this Plan shall interfere with or
limit in any way the right of the Corporation to terminate a Participant's
employment at any time, nor confer upon any Participant any right to continue
in the employ of the Corporation.
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<PAGE> 9
7.2 Restrictions on Assignments. The interest of a Participant or
his or her beneficiary under this Plan may not be sold, transferred, assigned,
or encumbered in any manner, either voluntarily or involuntarily, and any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
or charge the same shall be null and void; neither shall the benefits hereunder
be liable for or subject to the debts, contracts, liabilities, engagements, or
torts of any person to whom such benefits or funds are payable, nor shall they
be subject to garnishment, attachment, or other legal or equitable process, nor
shall they be an asset in bankruptcy.
ARTICLE 8. ADMINISTRATION
Administration . The Plan shall be administered by the Committee in
accordance with any administrative guidelines and any rules that may be
established from time to time by the Committee. The procedures, standards and
provisions of this Plan for determining eligibility for and amounts of Awards
in themselves confer no rights, duties or privileges upon Participants nor
place obligations upon either the Board or the Corporation. Accordingly, the
Committee may, in making such determinations hereunder, deviate from such
procedures and standards in whatever manner that it, in its judgment, deems
appropriate.
The Committee shall have full power and authority to
interpret, construe and administer the Plan and its interpretations and
construction hereof, and actions hereunder, including the timing, form, amount
or recipient of any payment to be made hereunder, and its decisions shall be
binding and conclusive on all persons for all purposes.
The Committee may name assistants who may be, but need not be,
members of the Committee. Such assistants shall serve at the pleasure of the
Committee, and shall perform such functions as are provided for herein and such
other functions as may be assigned by the Committee.
No member of the Committee or any assistant shall be liable to
any person for any action taken or omitted in connection with the
interpretation and administration of this Plan unless attributable to his or
her own willful misconduct or lack of good faith.
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<PAGE> 10
ARTICLE 9. REQUIREMENTS OF LAW
9.1 Laws Governing. This Plan shall be construed in accordance
with and governed by the laws of the State of Ohio.
9.2 Withholding Taxes. The Corporation shall have the right to
deduct from all payments under this Plan any federal or state taxes required by
the law to be withheld with respect to such payments.
9.3 Plan Binding on Corporation, Employees and Their Successors.
This Plan shall be binding upon and inure to the benefit of the Corporation,
its successors and assigns and each Participant and his or her beneficiaries,
heirs, executors, administrators and legal representatives.
ARTICLE 10. DEFERRAL OF AWARDS
10.1 Election to Request Deferral of Award; Deferral Percentage.
Each Active Participant shall be given the opportunity, prior to the final year
of each Plan Cycle, to elect to request deferral of a portion or all of his or
her Award for each Plan Cycle. The Participant may not change his election
with respect to a Plan Cycle from and after the December 31 of the year prior
to the final year of the Plan Cycle.
10.2 Deferral of Awards; Committee's Decision. Notwithstanding any
request to defer none, a portion, or all of an Award hereunder submitted by a
Participant pursuant to Section 10.1 above, the Committee shall make the
decision, in each case, whether or not to defer any portion or all of any
Participant's Award with respect to any Plan Cycle. Such decision shall be made
in the discretion of the Committee. The Committee's discretion extends to the
percentage of any Award to be deferred.
The Committee's decision shall be final and binding on all
parties. Any amount to be deferred shall not be paid to the Participant but
shall be deferred as provided in this Article 10.
10.3 Required Deferral. If any Mandatory Deferrals were made, the
amount deferred shall yield such return as the Funds to which the deferral is
credited in accordance with this Section 10. Any Mandatory Deferrals as
adjusted pursuant to Section 9.6 of this Plan shall be paid at the earliest
possible time and to the maximum extent possible such that a deduction for
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<PAGE> 11
such payment would not be disallowed pursuant to the Internal Revenue Code
Section 162(m)(1).
10.4 Accounts. An account shall be established and maintained by
the Corporation in the name of each Participant who has deferred compensation
hereunder. Such accounts shall remain a part of the general liabilities of the
Corporation and nothing in this Plan shall be deemed to create a trust or fund
of any kind or any fiduciary relationship. Each Account shall be comprised of
ten sub-accounts: (a) the "Savings Account Fund"; (b) the "NCC Stock Fund"; (c)
the "Equity Fund"; (d) the "Fixed Income Fund"; (e) the "Money Market Fund";
(f) the "Capital Preservation Fund"; (g) the "Mid Cap Regional Equity Fund";
(h) the "Equity Income Fund"; (i) the "Equity Index Fund;" and (j) the "Foreign
Equity Fund"; such sub-accounts jointly are herein called the "Funds".
10.5 Crediting to Accounts. As of the dates of payment of cash
Awards made under this Plan the amount of the Award to be deferred for each
Participant under this Section 10 shall be credited to such Participant's
Account, and shall correspondingly be credited to the Fund or Funds selected by
the Participant.
10.6 Funds . The nine Funds hereunder other than the Savings
Account Fund (such nine Funds being herein called "Parallel Funds") are
designed to reflect investment funds maintained in the SIP. Accordingly, each
such Parallel Fund and each Participant's Account therein shall be adjusted
hereunder as of the end of each month to reflect the income, gain or loss of
the corresponding SIP investment fund for such month, as calculated and
published on a monthly basis by the Trustee of the SIP.
In the event the SIP no longer offers a fund corresponding to
one of the Parallel Funds, the amounts which would have been deemed invested in
such Parallel Fund except for this provision shall be deemed to be invested in
the Savings Account Fund.
10.7 Savings Account Fund. Amounts deferred to the Savings Account
Fund shall be credited to the Participant's Account in such Fund as of the date
that other Awards for such Plan Cycle are paid or would be paid, and interest
shall be credited on amounts in the Participant's
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Account in such Fund at the end of each calendar quarter in amount equal to
interest on the average credit balance in such Account during such calendar
quarter, at the highest published rate being paid by National City Bank on
savings or time deposits of less than $100,000 on the last day of such quarter,
regardless of maturity.
10.8 Selection of Funds. Each Participant (and each Beneficiary of
a deceased Participant) may select the Investment Fund or Funds he or she
wishes to be used hereunder for his or her account. The selection of Funds
shall be made in portions of the amount deferred equal to 5% of the total of
such amounts. In the event no election is made by a Participant (or
Beneficiary) his or her account shall be deemed invested in and credited to the
Savings Account Fund.
Selection of Funds by Participants shall be made no later than
the earlier of December 1 of the final year of a Plan Cycle or the deferral or
payment of the Award; provided however, that in the event a Participant who has
not requested a deferral of any part of his or her Award nevertheless has a
portion thereof deferred by decision of the Committee, then in such event, such
Participant shall be given an election period of 10 days to determine
appropriate investments, such period running from the date of his or her
notification of the Committee's action.
10.9 No Change of Investment Fund Selection Permitted Except with
Committee Approval. Each selection of a Fund hereunder shall be final and
shall not thereafter be revised or changed, provided, however, that each
Participant (or Beneficiary if the Participant is deceased) may request a
change in his or her Investment Fund choice by filing such request with the
Committee. Notwithstanding the foregoing, the consent of the Committee shall
be necessary for any such change in investment fund choices; such consent is
discretionary in the Committee and the Committee shall act upon such requests
as are filed with it at the Committee's next regularly scheduled meeting.
10.10 Vesting of Deferred Amounts. Amounts of Awards made and
deferred under the Plan, and earnings and gains thereon, are always 100%
vested.
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10.11 Manner of Distribution. Except as otherwise provided herein,
distributions hereunder shall take place over a period of ten years commencing
on the retirement, death or other termination of employment of the Participant.
The first distribution shall take place on the February 1 of the calendar year
following the calendar year in which such retirement, death or other
termination occurs. Succeeding payments shall be made on succeeding
February 1sts.
The amount to be distributed shall be determined by
multiplying (i) the dollar value of the Participant's entire interest hereunder
on the date of such installment, by (ii) a fraction, the numerator of which is
one, and the denominator of which is the number of distributions remaining
unpaid at such time, or by such other method as may be adopted by the
Committee.
The balances of each Account and each Investment Fund shall be
appropriately reduced to reflect the distribution payments made. Amounts held
pending distribution pursuant to this Paragraph 10.10 shall continue to be
credited with appropriate income, gains and losses as herein otherwise provided
and shall be subject to investment changes as herein provided. Balances in more
than one Fund shall be reduced pro-rata to reflect distributions on a pro-rata
basis from each Fund.
10.12 Accelerated Payments; Revised Distributions. Notwithstanding
the foregoing, the Committee may determine that a Participant's interest
hereunder which equals $100,000 or less shall be paid out in a lump sum.
Furthermore, the Committee may determine that a lump sum distribution should be
made to a Participant who has terminated employment by means other than death,
Disability or retirement.
In the event such determination is made, the lump sum
distribution shall be made as of the next succeeding February 1, or at such
other time as may be determined by the Committee.
In the case of the first distribution after the death of a
Participant, the Committee may, in its discretion, provide for payment of a
portion or all of the distribution prior to the
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February 1 of the calendar year following the calendar year of such death, or
at such other time as may be determined by the Committee.
Notwithstanding any other provision hereof, the Committee, in
its discretion, may provide that distributions may be made in a lesser number
of installments, but not less than 5.
10.13 Beneficiary Designations. Each Participant, and each
Beneficiary of a deceased Participant or Beneficiary hereunder, may designate,
on a Beneficiary Designation form supplied by the Committee, any person or
persons to whom payments are to be made if the Participant (or Beneficiary)
dies before receiving payment of all amounts due hereunder. A beneficiary
designation will be effective only after the signed Beneficiary Designation
form is filed with an officer of the Corporation designated by the Committee
for such purpose while the Participant (or Beneficiary) is alive, and will
cancel all beneficiary designations signed and filed earlier. If the
Participant (or Beneficiary) fails to designate a beneficiary as provided
above, or if all designated beneficiaries die before the Participant or before
complete payment of all amounts due hereunder, remaining unpaid distribution
amounts shall be paid to the then surviving spouse of the Participant, if any,
or, if there be none, in one lump sum to the estate of the last to die of the
Participant or his or her designated beneficiaries, if any.
In the event a Participant (or a Beneficiary of a deceased
Participant) designates as a Beneficiary any so called "marital deduction
trust" or any so called "qualified income trust", the Participant (or
Beneficiary) may additionally indicate whether the dollar equivalent of the
current income, during the distribution of an interest hereunder, should be
distributed yearly to such Beneficiary. In the event of such an indication,
such income shall be distributed at least annually.
10.14 Participants Rights; Beneficiaries Rights. Except as otherwise
specifically provided, neither a Participant nor any of his or her
Beneficiaries has rights under this Plan. The payment of deferred compensation
shall be a general, unsecured obligation of the Corporation to be paid by the
Corporation from its own funds, and such payments shall not impose any
obligation upon any trust fund for any tax qualified plan, be paid from any
such trust fund, or
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have any effect whatsoever upon the SIP or the payment of benefits from the
Trust Fund under the SIP. No Participant or beneficiary shall have any title to
or beneficial ownership in any assets which the Corporation may earmark to pay
benefits hereunder.
10.15 Nature of deferred compensation. The election of deferred
compensation under this Plan and any setting aside by the Corporation of
amounts with which to discharge its deferred obligations hereunder in a trust
fund, an insurance policy, or otherwise, shall not be deemed to create a right
in any person; equitable title to any funds so set aside in a trust, an
insurance policy, or otherwise shall remain in the Corporation, and any
recipient of benefits hereunder shall have no security or other interest in
such trust, policies or funds. Any and all funds so set aside in a trust, an
insurance policy or otherwise shall remain subject to the claims of the general
creditors of the Corporation, present and future. This provision shall not
require the Corporation to set aside any funds, but the Corporation may set
aside such funds if it chooses to do so. Any amount so set aside for this Plan
shall be accounted for separately and apart from any other plan of the
Corporation. This Plan is intended to constitute an unfunded plan of deferred
compensation described in Section 201(2) of the Employee Retirement Income
Security Act of 1974.
10.16 Distributions in Cash. Notwithstanding any other provision of
this Plan, distributions hereunder shall be made only in cash and shall be
subject to withholding of applicable taxes.
10.17 Nature of Deferred Compensation Plan. The provisions of the
Plan relating to deferred compensation are fixed and final unless and until
amended, revised or terminated as herein provided.
ARTICLE 11. FORFEITURES
Notwithstanding any provision in this Plan to the contrary excepting
only the provisions of Article 12, in the event the Committee finds
(a) that an Employee or former Employee who has an
interest under this Plan has been discharged by his or her
Employer in the reasonable belief (and such
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reasonable belief is the reason or one of the reasons for such
discharge) that the Employee or former Employee did engage in
fraud against the Employer or anyone else, or
(b) that an Employee or former Employee who has an
interest under this Plan has been convicted of a crime as a
result of which it becomes illegal for his Employer to employ
him or her,
then any amounts held under this Plan for the benefit of such Employee or
former Employee or his or her beneficiaries shall be forfeited and no longer
payable to such Employee or former Employee or to any person claiming by or
through such Employee or former Employee.
ARTICLE 12. CHANGE IN CONTROL
12.1 Treatment of Awards. In the event of a Change in Control the
Corporation shall pay to each Active Participant on the Implementation Date of
such Change in Control a lump sum cash payment equal to the amount hereinafter
determined. Such payment shall be payable in cash to the Participant within
five business days after the Implementation Date of such Change in Control and
shall be payment in full to each such Participant for such Plan Cycle, each of
which shall be deemed terminated by operation of this Article 12. No further
Plan Cycles shall commence thereafter under this Plan.
Such cash payment shall be made without regard to any request
to defer made with respect to any such Plan Cycle (which shall be inoperative)
and without regard to any deferral action by the Committee.
Amounts deferred under this Plan prior to the Effective Date
(by request, as required, or as decided by the Committee) shall continue to be
payable from time to time under this Plan as deferred payments hereunder.
12.2 Amount of Payment. The amount of the payment to be made as a
consequence of a Change in Control shall, with respect to each Plan Cycle, be
equal to the Maximum Award level (without regard to stockholder return during
such abbreviated Plan Cycle) for the Participant for such Plan Cycle multiplied
by a fraction the numerator of which is the number of
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full months completed from the commencement of the Plan Cycle to the
Implementation Date of the Change in Control, and the denominator of which
is 36.
12.3 Definition of Change in Control. Change in Control shall mean
the occurrence of any of the following events:
(a) The Corporation is merged, consolidated or reorganized
into or with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than sixty-five percent of the
combined voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the aggregate by the
holders of Voting Stock immediately prior to such transaction;
(b) The Corporation sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal person,
and as a result of such sale or transfer less than sixty-five percent of the
combined voting power of the then- outstanding securities of such corporation
or person immediately after such sale or transfer is held in the aggregate by
the holders of Voting Stock immediately prior to such sale or transfer;
(c) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant to
the Exchange Act disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of
securities representing 15% or more of the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors of the Corporation ("Voting Stock");
(d) The Corporation files a report or proxy statement with
the Securities and Exchange Commission pursuant to the Exchange Act disclosing
in response to Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Corporation has
occurred or will occur in the future pursuant to any then-existing contract or
transaction; or
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(e) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the Directors of
the Corporation cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this clause (e) each Director who is
first elected, or first nominated for election by the Corporation's
stockholders, by a vote of at least two-thirds of the Directors of the
Corporation (or a committee thereof) then still in office who were Directors of
the Corporation at the beginning of any such period will be deemed to have been
a Director of the Corporation at the beginning of such period.
Notwithstanding the foregoing provision of paragraphs (c) or (d)
above unless otherwise determined in a specific case by majority vote of the
Board, a "Change in Control" shall not be deemed to have occurred for purposes
of paragraphs (c) or (d) above, solely because (1) the Corporation, (2) an
entity in which the Corporation directly or indirectly beneficially owns 50% or
more of the voting equity securities (a "Subsidiary"), or (3) any employee
stock ownership plan or any other employee benefit plan of the Corporation or
any Subsidiary either files or becomes obligated to file a report or proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of shares of Voting
Stock, whether in excess of 15% or otherwise, or because the Corporation
reports that a change in control of the Corporation has occurred or will occur
in the future by reason of such beneficial ownership.
12.4 Effective Date of Change in Control. Notwithstanding the
foregoing, in the event a Change in Control ultimately results from discussions
or negotiations involving the Corporation or any of its officers or directors,
the "Effective Date" of such Change in Control shall be the date such
discussions or negotiations commenced; otherwise, such Effective Date or Change
in Control shall be the Implementation Date of such Change in Control.
12.5 Implementation Date of Change in Control. The "Implementation
Date" shall be the earliest to occur of the events specified in subsections
(a), (b), (c), (d) or (e) of Section 12.3.
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As used herein, the Implementation Date of Change in Control shall be the last
date of all current Plan Cycles.
12.6 Effect of Change in Control, In addition to other vesting
under the Plan, the opportunity of a Participant to participate to the end of
all current Plan Cycles is vested in such Participant in the event of a Change
in Control, as of the Effective Date of and such Change in Control.
ARTICLE 13. MISCELLANEOUS
In the event of the liquidation of the Corporation the Committee may
make any provisions for holding, handling and distributing the amounts standing
to the credit of the Participants or beneficiaries hereunder which in the
discretion of the Committee are appropriate and equitable under all
circumstances and which are consistent with the spirit and purposes of these
provisions.
ARTICLE 14. AMENDMENT AND DISCONTINUANCE
The Corporation expects to continue this Plan indefinitely, but
reserves the right, by action of its shareholders, to amend it from time to
time or to discontinue it. However, if the Corporation should amend or
discontinue this Plan, the Corporation shall remain obligated under the Plan
with respect to (1) Awards made final (and thus payable) by decision by the
Committee prior to the date of such amendment or discontinuance, (2) Awards and
rights of any Participant or beneficiary with respect to whom a Vesting Event
has occurred, and (3) with respect to amounts deferred prior to the date of
such amendment or discontinuation.
Executed as of this ____ day of _________________, 1994 at Cleveland,
Ohio.
NATIONAL CITY CORPORATION
By:
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EXHIBIT 10.5
NATIONAL CITY CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as Amended and Restated January 1, 1995)
ARTICLE 1. THE PLAN AND ITS PURPOSE
1.1 Amendment and Restatement of the Plan. The following are the
provisions of the National City Corporation Supplemental Executive Retirement
Plan (herein referred to as the "SERP") effective as of January 1, 1995 (herein
referred to as the "Effective Date"), which is an amendment and restatement of
the SERP which was in effect prior thereto. The SERP as amended and restated
herein is effective as of the Effective Date with respect to certain employees
who retire, become disabled, die or otherwise terminate employment on or after
the Effective Date. Benefits with respect to Employees who retired, became
disabled, died or otherwise terminated employment prior to the Effective Date
shall be governed by the provisions of relevant plans in effect on the date of
such death, disability, retirement or other termination, and not by the
provisions of the SERP.
1.2 Purpose. The purpose of the SERP is to provide for the
payment of certain pension, disability and survivor benefits in addition to
benefits which may be payable under other plans of the Corporation. The
Corporation intends and desires by the provisions of the SERP to recognize the
value to the Corporation of the past and present service of employees covered
by the SERP and to encourage and assure their continued service to the
Corporation by making more adequate provision for their future security than
other plans of the Corporation provide.
1.3 Operation of the SERP. The SERP shall be administered by the
Compensation and Organization Committee of the Board of Directors of the
Corporation.
<PAGE> 2
ARTICLE 2. DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall
have the meanings set forth below, unless otherwise expressly provided. When
the defined meaning is intended, the term is capitalized.
(a) "Accrued Benefit" as of any time means the benefit to
be provided an Participant pursuant to the SERP which has accrued to such time
under the SERP, determined in the same manner as an individual's accrued
benefit pursuant to the NC Retirement Plan is determined at such time. In
addition, "Accrued Benefit" shall include the right to receive, where
applicable, any Additional Payment which would otherwise be payable to a SERP
Retiree pursuant to Section 4.5 of the SERP. Accrued Benefits are to be
determined by the Actuary.
(b) "Actuarially Equivalent Benefit" means the
actuarially equivalent benefit determined under the SERP using (i) the UP-1984
Mortality Table (with a one-year set-forward for employees and a one-year
setback for beneficiaries) and (ii) the lower of (a) the interest rates
utilized by the Pension Benefit Guaranty Corporation in effect on the date as
of which a lump sum determination is made hereunder, or (b) the average of the
interest rates utilized by the Pension Benefit Guaranty Corporation for the 12
month period ending 6 calendar months prior to the date as of which a lump sum
determination is made hereunder, or (iii) an interest rate of 7% for all other
purposes.
(c) "Actuary" means the independent actuary or firm of
actuaries engaged by the Corporation to perform actuarial services with respect
to the NC Retirement Plan.
(d) "Additional Payment" see Section 4.5.
(e) "Award" means a Participant's award(s), if any, under
either or both of (1) the NC Short Term Incentive Compensation Plan as in
effect from time to time, and (2) the NC Annual Corporate Performance Incentive
Plan as in effect from time to time.
(f) "Base Pay" means a Participant's Base Pay as
determined under the NC Retirement Plan as in effect from time to time.
(g) "Change in Control" see Section 12.2.
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(h) "Committee" means the Compensation and Organization
Committee of the Board of Directors of the Corporation or any successor
committee of the board operating as the Committee under the SERP.
(i) "Corporation" means National City Corporation, a
Delaware corporation, and any successor corporation.
(j) "Deemed Taxable Amount" see Paragraph 4.5(a).
(k) "Disability" shall mean permanent disability as
defined by the provisions of the NC Long Term Disability Plan.
(l) "Earnings" means a Participant's Earnings as
determined under the NC Retirement Plan as in effect from time to time.
(m) "Effective Date" see Section 1.1.
(n) "Employee" shall mean an individual employed with an
Employer on a regular, active and full-time salaried basis
(o) "Employer" shall mean the Corporation or any
corporation, organization or entity controlled by the Corporation.
(p) "FICA" means the Federal Insurance Contributions Act.
(q) "Final Average Earnings" means Final Average Earnings
as determined under the NC Retirement Plan as in effect from time to time.
(r) "Final Average Total Earnings" means a Participant's
Final Average Earnings as determined under the NC Retirement Plan as in effect
from time to time, provided however, that there shall be added into the
Participant's Earnings the average amount of the Participant's five (5) largest
(not necessarily consecutive) Total Awards for any of the ten (10) calendar
years completed immediately prior to the date of the determination. Final
Average Total Earnings shall be used in the calculation of the SERP Retirement
Benefit and the SERP Surviving Spouse Benefit.
(s) "Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended and in effect from time to time.
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(t) "NC Annual Corporate Performance Incentive Plan"
means the National City Corporation Annual Corporate Performance Incentive Plan
as in effect from time to time and any successor short term incentive
compensation plan, with any amendment(s) thereto effective as of the effective
date(s) of such amendment(s), and the same is hereby specifically referred to
and shall form a part of the SERP as fully as if set forth in an exhibit to the
SERP.
(u) "NC Long Term Disability Plan" means the National
City Long-Term Disability Plan as in effect from time to time and any successor
disability plan, with any amendment(s) thereto from time to time, effective as
of the effective date(s) of such amendment(s), and the same is hereby
specifically referred to and shall form a part of the SERP as fully as if set
forth in an exhibit to the SERP.
(v) "NC Retirement Plan" means the National City
Non-Contributory Retirement Plan as in effect from time to time and any
successor retirement plan, with any amendment(s) thereto from time to time,
effective as of the effective date(s) of such amendment(s), and the same is
hereby specifically referred to and shall form a part of the SERP as fully as
if set forth in an exhibit to the SERP.
(w) "NC Short Term Incentive Compensation Plan" means the
National City Corporation Short-Term Incentive Compensation Plan for Senior
Officers as in effect from time to time and any successor retirement plan, with
any amendment(s) thereto from time to time, effective as of the effective
date(s) of such amendment(s), and the same is hereby specifically referred to
and shall form a part of the SERP as fully as if set forth in an exhibit to the
SERP.
(x) "Normal Retirement Age" means the earlier of age 65,
or age 62 with 20 or more years of Vesting Service under the NC Retirement
Plan.
(y) "Participant" means an Employee who is selected from
time to time by the Committee pursuant to Article 3 of the SERP for
participation in one or more of the benefits under the SERP (or a portion of
the SERP).
(z) "Plans" means the NC Retirement Plan and the NC Long
Term Disability Plan as in effect from time to time.
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(aa) "Payments" see Section 4.5.
(bb) "Regulation" or "Regulations" means any federal
statute or rule or regulation of the Internal Revenue Service, the United
States Department of Labor or any other division, department or agency of the
United States Government.
(cc) "SERP" means the Supplemental Executive Retirement
Plan as effective on and after the Effective Date.
(dd) "SERP Base Pay" means the Participant's Base Pay as
determined under the NC Retirement Plan as in effect from time to time,
determined as of the date of Long Term Disability, provided however, that the
limitations of Sections 18.6, 18.7, 18.8 and 18.8A of the NC Retirement Plan
and similar limitations upon retirement benefits resulting from restrictions
imposed by the Internal Revenue Code or Regulations thereunder shall not apply.
SERP Base Pay shall be used in the calculation of the SERP Long Term Disability
Benefit.
(ee) "SERP Disability Benefit" means the benefit provided
for by Article 6 of the SERP.
(ff) "SERP Early Retirement Benefit" means the early
retirement benefit provided for by Section 4.3 of the SERP.
(gg) "SERP Later Retirement Benefit" means the later
retirement benefit provided for by Section 4.3 of the SERP.
(hh) "SERP Normal Retirement Benefit" means the benefit
provided for by Section 4.2 of the SERP.
(ii) "SERP Offset Program" means a program or combination
of programs designated by the Committee to be a SERP Offset Program with
respect to one or more benefits otherwise provided by the SERP, as determined
by the Committee.
(jj) "SERP Retiree" means a Participant who has become
eligible for a SERP Retirement Benefit or who would become eligible for such a
benefit except for the existence of a SERP Offset Program.
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(kk) "SERP Retirement Benefit" means the benefit provided
for by Section 4.1 of the SERP.
(ll) "SERP Surviving Spouse Benefit" means the benefit
provided for by Article 5 of the SERP.
(mm) "Social Security Disability Benefits" means the
amount which a Participant would be entitled to receive from the United States
Social Security System upon proper application therefor, as disability benefits
under such System, and in the event the Participant declines or fails to apply
for any such benefit, such term shall also include all such amounts which would
be payable if application were made.
(nn) "Social Security Retirement Benefits" means the
estimated United States Social Security old age retirement benefit which the
Participant would be entitled to under the United States Social Security laws
upon proper application therefor as of the first of the following two dates:
(A) the date the Participant retires under the NC Retirement Plan, provided he
is entitled to receive such a Social Security Retirement Benefit commencing at
such time, and if not so entitled at such time, the earliest date thereafter
when he becomes so entitled, or (B) the Participant's age 65.
(oo) "Social Security Surviving Spouse Benefits" means the
amount which a surviving spouse would be entitled to receive from the United
States Social Security System upon proper application therefor, based upon the
earnings of the Participant survived by the surviving spouse, unreduced as a
consequence of any earnings received by the surviving spouse, and not increased
by any payment made on account of or with respect to any minor or other
dependent, and in the event the surviving spouse declines or fails to apply for
any such benefit, such term shall also include all such amounts which would be
payable if application were made.
(pp) "Total Awards" for any calendar year shall mean the
total of the Participant's Awards for such year, if any, under the NC Short
Term Incentive Compensation Plan and the NC Annual Corporate Performance
Incentive Plan.
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(qq) "Vesting Event" means the earliest of the following
dates with respect to a Participant or surviving spouse:
(1) the date the Participant has attained age
fifty-five (55) and has executed a confidentiality and
non-competition agreement substantially in form as Exhibit A
attached to the SERP,
(2) the date any benefit is in payment status
hereunder, and
(3) the Effective Date of a Change in Control.
(rr) "Vesting Service" means Vesting Service as determined
under the NC Retirement Plan as in effect from time to time.
ARTICLE 3. ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. The eligibility for benefits under the SERP
shall be limited to management and highly-compensated Employees. The
Committee may, from time to time and in its discretion designate certain
Employees of the Corporation or its subsidiaries to be eligible for one or more
of the benefits under the SERP, but not eligible for the remainder of such
benefits.
3.2 Removal from Participation. The Committee may, from time to
time and in its discretion, remove any employee from the list of Participants,
provided such removal shall be effective only upon communication thereof in
writing to the Participant prior to the earlier to occur of the following
dates: (1) the date of the Participant's death, disability, or retirement,
whichever first occurs, and (2) the date of the Committee's approval of the
Participant's Early Retirement as provided for in Article 4 hereof, and
provided further that in the event such removal takes place after a Vesting
Event, such removal shall not serve to reduce any Participant's Accrued
Benefit. Upon a removal of a Participant prior to the occurrence of a Vesting
Event he or she shall no longer be a Participant in the SERP.
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ARTICLE 4. SERP RETIREMENT BENEFIT
4.1 SERP Retirement Benefits. "SERP Retirement Benefits"
constitute the SERP Normal Retirement Benefit, the SERP Early Retirement
Benefit and the SERP Later Retirement Benefit provided for by this Article 4.
4.2 Eligibility for SERP Normal Retirement Benefit. Each
Participant becomes eligible for a SERP Normal Retirement Benefit upon
attaining the Normal Retirement Age.
4.3 Eligibility for Early or Later Retirement Benefit.
(a) Eligibility. A Participant may become eligible for a
SERP Early Retirement Benefit prior to attainment of age 62, or may continue in
employment after age 65 and thus become eligible for a SERP Later Retirement
Benefit, but only upon the approval of the Committee, acting in its discretion.
(b) Amount of Benefit. The amount of the SERP Early
Retirement Benefit and the SERP Later Retirement Benefit shall be determined
pursuant to Section 4.4 below, provided; however, that the Committee, acting in
its discretion, may approve, as the SERP Early Retirement Benefit for a
Participant, an immediate benefit which is unreduced as a consequence of its
early commencement, notwithstanding the provisions of the NC Retirement Plan.
4.4 SERP Retirement Benefit. The annual SERP Retirement Benefit
shall be equal to
(a) the annual retirement benefit determined for the
Participant at the time under the provisions of the NC Retirement
Plan, provided, however, that (1) the limitations of Sections
18.6, 18.7, 18.8 and 18.8A of the NC Retirement Plan and similar
limitations upon retirement benefits resulting from restrictions
imposed by the Internal Revenue Code or Regulations thereunder
shall not apply, and (2) there shall be substituted for the
Participant's Final Average Earnings the Participant's Final
Average Total Earnings,
LESS
(b) the total of
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<PAGE> 9
(1) the annual retirement benefit payable with
respect to the Participant pursuant to the NC Retirement
Plan,
(2) the annual retirement benefit (or Actuarially
Equivalent Benefit, as determined by the Actuary) payable
with respect to the Participant pursuant to any program
designated by the Committee to serve as a SERP Offset
Program, and
(3) during the first five years of payment of any
SERP benefits, the amount of the payments, if any, made
from time to time by the Employer of the Participant's
portion of FICA taxes pursuant to Section 7.3 of the SERP
("FICA Payment") divided by five (with the consequent loss
to the Employer in the event the benefits cease before the
end of the five year period), and provided further, that to
the extent the Participant's benefit under the SERP is
distributed in whole or in part by lump sum payment, the
FICA Payment shall be deducted from such lump sum payment
(to zero, if such be the case) and any FICA Payment not so
reimbursed shall be divided equally among the benefit
payments scheduled over the next five years.
4.5 Payment of SERP Retirement Benefit. The SERP Retirement
Benefit shall be payable pursuant to the same optional forms as are permitted
to be elected under the NC Retirement Plan, provided however, that (1) the form
and method of payment is subject to the approval of the Committee, acting in
its discretion, (2) there shall be no requirement for consent of Participant's
spouse for any election to be effective under the SERP, (3) a lump sum payment
of an Actuarially Equivalent Benefit (or a portion thereof), as determined by
the Actuary, may be made at the election of the Committee acting in its
discretion, and (4) the Committee in its discretion may select a combination of
methods of payment of the SERP Retirement Benefit.
In the event a lump sum payment of an Actuarially Equivalent Benefit
(or a portion thereof) is made either (1) pursuant to the preceding paragraph
of this Section 4.5 or (2) pursuant to a SERP Offset Program, or both (the
total of such payments being herein called "Payments"),
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<PAGE> 10
the SERP shall pay an additional payment ("Additional Payment") to the SERP
Retiree determined as follows:
(a) Subtract (x) from (y) where (x) equals an amount determined by
multiplying an amount ("Deemed Taxable Amount") equal to the amount of the
Payments less the threshold amount applicable to the maximum marginal federal
income tax rate in effect for the tax year of the Payments, by the average of
the maximum marginal federal income tax rates in effect for the five (5) tax
years immediately preceding the tax year of the Payments, and (y) equals an
amount determined by multiplying the Deemed Taxable Amount by the maximum
marginal federal income tax rate in effect for the tax year of the Payments,
and then
(b) Divide the difference obtained pursuant to (a) above by 1
minus the maximum marginal federal income tax rate in effect for the tax year
of the Payments.
In determining the Additional Payment the marital status of the SERP
Retiree at the time of the Payments shall be deemed to have been his or her
marital status at all relevant times.
ARTICLE 5. SERP SURVIVING SPOUSE BENEFIT
5.1 Eligibility for SERP Surviving Spouse Benefit. In the event a
SERP Participant dies prior to retirement, there shall be annual amount payable
to the Participant's surviving spouse, if any, a SERP Surviving Spouse Benefit
which is equal to:
(a) 35% of the Participant's Final Average Total Earnings
at the time of the Participant's death, provided, however, that
the limitations of Sections 18.6, 18.7, 18.8 and 18.8A of the NC
Retirement Plan and similar limitations upon retirement benefits
resulting from restrictions imposed by the Internal Revenue Code
or Regulations thereunder shall not apply,
LESS
(b) the total of
(1) the annual amount payable as a surviving
spouse benefit (or Actuarially Equivalent Benefit, as determined
by the Actuary) with respect to the Participant pursuant to the NC
Retirement Plan,
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<PAGE> 11
(2) the annual amount payable with respect to the
Participant as a Social Security Surviving Spouse Benefit,
(3) the annual amount payable as a surviving
spouse benefit (or Actuarially Equivalent Benefit, as
determined by the Actuary) with respect to the Participant
pursuant to any program designated by the Committee to serve
as a SERP Offset Program, and
(4) during the first five years of payment of any
SERP benefits, the amount of the payments, if any, made from
time to time by the Employer of the Participant's portion of
FICA taxes pursuant to Section 7.3 of the SERP ("FICA
Payment") divided by five (with the consequent loss to the
Employer in the event the benefits cease before the end of the
five year period), and provided further, that to the extent
the Participant's benefit under the SERP is distributed in
whole or in part by lump sum payment, the FICA Payment shall
be deducted from such lump sum payment (to zero, if such be
the case) and any FICA Payment not so reimbursed shall be
divided equally among the benefit payments scheduled over
the next five years.
5.2 Beneficiary of SERP Surviving Spouse Benefit. The beneficiary
of the SERP Surviving Spouse Benefit shall be limited to the surviving spouse
of the deceased Participant at the time of such Participant's death and the
estate of such surviving spouse in the event of the surviving spouse's death
prior to receipt of a lump sum payment thereof if such method of payment was
previously elected by the Committee, acting in its discretion, prior to the
death of such surviving spouse.
5.3 Retirement by Participant Eliminates SERP Surviving Spouse
Benefit. In all cases a retirement under the SERP by the Participant shall
eliminate the SERP Surviving Spouse Benefit.
5.4 Method of Payment of SERP Surviving Spouse Benefit. The SERP
Surviving Spouse Benefit shall be payable in the same manner as the Surviving
Spouse Benefit under the
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<PAGE> 12
NC Retirement Plan is paid, provided however, that in the discretion of the
Committee (1) such benefit (or a portion thereof) may be paid in a lump sum
payment of an Actuarially Equivalent Benefit, as determined by the Actuary,
and (2) the Committee in its discretion may select a combination of methods
of payment of the SERP Surviving Spouse Benefit.
ARTICLE 6. SERP DISABILITY BENEFIT
6.1 Eligibility for SERP Disability Benefit. In the event a SERP
Participant suffers a Disability prior to retirement a SERP Disability Benefit
shall be payable.
6.2 Amount of SERP Disability Benefit. The annual SERP Disability
Benefit shall be equal to
(a) the greater of
(1) 60% of the Participant's SERP Base Pay at the
time of the Disability, or
(2) 50% of the sum of the Participant's
(A) SERP Base Pay at the time of
Disability, plus
(B) the average of the amounts of the
Total Awards, if any, for the calendar year ended
prior to the Disability and the year prior thereto,
determined at the time of the Disability,
LESS
(b) the sum of
(1) the annual amount of the benefit (or
Actuarially Equivalent Benefit, as determined by the Actuary)
payable to the Participant under the NC Long Term Disability
Plan,
(2) the annual amount of benefit payable to the
Participant as Social Security Disability Benefit,
(3) the annual amount of disability benefit (or
Actuarially Equivalent Benefit, as determined by the Actuary)
payable to the Participant pursuant to any program designated
by the Committee to serve as a SERP Offset Program, and
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<PAGE> 13
(4) during the first five years of payment of any
SERP benefits, the amount of the payments, if any, made from
time to time by the Employer of the Participant's portion of
FICA taxes pursuant to Section 7.3 of the SERP ("FICA
Payment") divided by five (with the consequent loss to the
Employer in the event the benefits cease before the end of the
five year period), and provided further, that to the extent
the Participant's benefit under the SERP is distributed in
whole or in part by lump sum payment, the FICA Payment shall
be deducted from such lump sum payment (to zero, if such be
the case) and any FICA Payment not so reimbursed shall be
divided equally among the benefit payments scheduled over the
next five years.
6.3 Form of Payment of SERP Disability Benefit. The SERP
Disability Benefit shall be payable monthly, quarterly or annually as
determined by the Committee, acting in its discretion, provided however, that
the Committee may determine (1) that the same (or a portion thereof) shall be
payable in a lump sum payment of an Actuarially Equivalent Benefit, as
determined by the Actuary, and (2) the Committee in its discretion may select a
combination of methods of payment of the SERP Disability Benefit.
ARTICLE 7. MISCELLANEOUS
7.1 Payment of Benefits. Benefits hereunder shall be paid by the
Corporation from its general assets, and shall not be paid from any trust fund
established pursuant to any one or more of the Corporation's qualified
retirement plans or the NC Long Term Disability Plan. All other provisions of
the Plans relating to the payment of benefits, including but not limited to the
dates of first and last payment of any benefits and the normal and optional
forms of benefit payment, shall apply to the payment of benefits hereunder,
except as otherwise specifically provided herein.
7.2 Administration. Except as herein provided, the SERP shall be
administered by the Committee which shall administer it in a manner consistent
with the administration of the Plans, except that the SERP shall be
administered as an unfunded plan which is not intended to
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<PAGE> 14
meet the qualification requirements of Section 401 of the Internal Revenue Code.
The Committee shall have full power and authority to interpret, construe and
administer the SERP and the Committee's interpretations and construction
hereof, and actions hereunder, including the timing, form, amount or recipient
of any payment to be made hereunder, shall be binding and conclusive on all
persons for all purposes. No member of the Committee shall be liable to any
person for any action taken or omitted in connection with the interpretation
and administration of the SERP unless attributable to his or her own willful
misconduct or lack of good faith.
7.3 Corporation's Potential Payment of FICA Tax. The Corporation
may, in its discretion, pay, for and on behalf of a Participant, the amount, if
any, of such Participant's portion of any FICA taxes which may accrue and
become payable during the Participant's employment which results from such
Participant's Accrued Benefit, and the amount of any such payments(s) by the
Employer (without interest) shall serve to reduce such Participant's benefits
under this SERP, to the extent as is otherwise provided in the SERP.
7.4 Participants' Rights; Surviving Spouses' Rights. Except as
otherwise specifically provided, neither a Participant nor a surviving spouse
has rights under the SERP. It is specifically intended that no benefits shall
be payable under the SERP to a Participant or his or her surviving spouse or
beneficiary prior to the Participant's retirement either after attainment of
Normal Retirement Age or, upon Committee approval in accordance with the
provisions of Section 4 hereof, at an earlier age, excepting only (a)
disability benefits, if applicable, (b) Surviving Spouse Benefits in the event
of the death of the Participant prior to retirement, and (c) the payment of
benefits after the occurrence of a Vesting Event with respect to the
Participant. No Participant or his or her surviving spouse or beneficiary
shall have any title to or beneficial ownership in any assets of the
Corporation as a result of the SERP or its benefits.
7.5 Timing of Payments Hereunder. Notwithstanding any other
provision of the SERP, the Committee may, in its discretion, determine that
benefits under the SERP may be made at any time prior to Normal Retirement Age
or retirement, whichever first occurs.
-14-
<PAGE> 15
ARTICLE 8. AMENDMENT; TERMINATION
The Corporation expects to continue the SERP indefinitely, but
reserves the right, by action of the Committee, to amend it from time to time,
or to discontinue it if such a change or discontinuance is deemed necessary or
desirable. However, if the SERP should be amended or discontinued, the
Corporation shall remain obligated for benefits under the SERP with respect to
Participants and surviving spouses whose benefits are in payment status at the
time of such action, with respect to any other Participants who have attained
Normal Retirement Age as of the date of such action, and, with respect to
Accrued Benefits, with respect to any other Participant as to whom a Vesting
Event has occurred.
ARTICLE 9. UNFUNDED PLAN
Plan not Funded. The SERP is an unfunded plan and its benefits are
payable solely from the general assets of the Corporation.
ARTICLE 10. FORFEITURES
Notwithstanding any provision in the SERP to the contrary excepting
only the provisions of Article 12, in the event the Committee finds
(a) that an Employee or former Employee who has an interest
under the SERP has been discharged by his or her Employer in the reasonable
belief (and such reasonable belief is the reason or one of the reasons for such
discharge) that the Employee or former Employee did engage in fraud against the
Employer or anyone else, or
(b) that an Employee or former Employee who has an interest
under the SERP has been convicted of a crime as a result of which it becomes
illegal for his Employer to employ him or her;
then any amounts held under the SERP for the benefit of such Employee or former
Employee or his or her beneficiaries shall be forfeited and no longer payable
to such Employee or former Employee or to any person claiming by or through
such Employee or former Employee.
Each Participant agrees to the foregoing forfeiture provisions by his
or her acceptance of his or her invitation to participate in the SERP and by
his or her continued participation.
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<PAGE> 16
ARTICLE 11. RESTRICTIONS ON ASSIGNMENTS
The interest of a Participant or his or her surviving spouse or
beneficiary may not be sold, transferred, assigned, or encumbered in any
manner, either voluntarily or involuntarily, and any attempt so to anticipate,
alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be
null and void; neither shall the benefits hereunder be liable for or subject to
the debts, contracts, liabilities, engagements, or torts of any person to whom
such benefits or funds are payable, nor shall they be subject to garnishment,
attachment, or other legal or equitable process nor shall they be an asset in
bankruptcy.
ARTICLE 12. CHANGE IN CONTROL
12.1 Treatment of Awards.
In the event of a Change in Control:
(i) the Effective Date of such Change in
Control shall be deemed a Vesting Event with respect to all
Participants and surviving spouses, and
(ii) the rights of all Participants in
their Accrued Benefits hereunder as of the Effective Date of
such Change in Control shall be 100% vested and
nonforfeitable, notwithstanding any other provision hereof.
12.2 Definition of Change in Control. "Change in Control" means
the occurrence of any of the following events:
(i) The Corporation is merged, consolidated
or reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than sixty-five percent of the combined
voting power of the then-outstanding securities of such
corporation or person immediately after such transaction are
held in the aggregate by the holders of Voting Stock (as that
term is hereafter defined) immediately prior to such
transaction;
(ii) The Corporation sells or otherwise
transfers all or substantially all of its assets to another
corporation or other legal person,
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<PAGE> 17
and as a result of such sale or transfer less than
sixty-five percent of the combined voting power of
the then-outstanding securities of such corporation
or person immediately after such sale or transfer is
held in the aggregate by the holders of Voting Stock
immediately prior to such sale or transfer;
(iii) There is a report filed on
Schedule 13D or Schedule 14D-1 (or any successor
schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), disclosing that any
person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor
rule or regulation promulgated under the Exchange
Act) of securities representing 15% or more of the
combined voting power of the then-outstanding
securities entitled to vote generally in the election
of directors of the Corporation ("Voting Stock");
(iv) The Corporation files a report or
proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein)
that a change in control of the Corporation has
occurred or will occur in the future pursuant to any
then-existing contract or transaction; or
(v) If, during any period of two
consecutive years, individuals who at the beginning
of any such period constitute the Directors of the
Corporation cease for any reason to constitute at
least a majority thereof; provided, however, that for
purposes of this clause (v) each Director who is
first elected, or first nominated for election by the
Corporation's stockholders, by a vote of at least
two-thirds of the
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<PAGE> 18
Directors of the Corporation (or a committee thereof)
then still in office who were Directors of the
Corporation at the beginning of any such period will
be deemed to have been a Director of the Corporation
at the beginning of such period.
Notwithstanding the foregoing provisions of (iii) or
(iv) above, unless otherwise determined in a specific
case by majority vote of the Board, a "Change in
Control" shall not be deemed to have occurred for
purposes of (iii) or (iv) above solely because (1)
the Corporation, (2) an entity in which the
Corporation directly or indirectly beneficially owns
50% or more of the voting equity securities (a
"Subsidiary"), or (3) any employee stock ownership
plan or any other employee benefit plan of the
Corporation or any Subsidiary either files or becomes
obligated to file a report or proxy statement under
or in response to Schedule 13D, Schedule 14D-1, Form
8-K or Schedule 14A (or any successor schedule, form
or report or item therein) under the Exchange Act
disclosing beneficial ownership by it of shares of
Voting Stock, whether in excess of 15% or otherwise,
or because the Corporation reports that a change in
control of the Corporation has occurred or will occur
in the future by reason of such beneficial ownership.
12.3 Effective Date of Change in Control. Notwithstanding the
foregoing, in the event a Change in Control ultimately results from discussions
or negotiations involving the Corporation or any of its officers or directors
the Effective Date of such Change in Control shall be the date such discussions
or negotiations commenced.
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<PAGE> 19
ARTICLE 13. BINDING ON CORPORATION, EMPLOYEES
AND THEIR SUCCESSORS
The SERP shall be binding upon and inure to the benefit of the
Corporation, its successors and assigns and each Participant and his or her
surviving spouse, beneficiaries, heirs, executors, administrators and legal
representatives.
ARTICLE 14. LAWS GOVERNING
The SERP shall be construed in accordance with and governed by the
laws of the State of Ohio.
Executed this _____ day of ________________, 1994 at Cleveland, Ohio,
but effective as of January 1, 1995.
NATIONAL CITY CORPORATION
By:
--------------------------
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<PAGE> 20
EXHIBIT A
AGREEMENT NOT TO COMPETE
This Agreement, made and dated as of_______________,_____, by and between
National City Corporation, a Delaware corporation, and______________________,
("Employee").
W I T N E S S E T H:
WHEREAS, National City Corporation is engaged in the business of providing
banking and related financial services through a network of banking and
non-banking subsidiary corporations and associations (National City Corporation
and its subsidiaries hereinafter being referred to collectively as "NCC"); and
WHEREAS, the identity of NCC's customers and NCC's business practices are
confidential and proprietary to NCC; and
WHEREAS, NCC has employed and may in the future employ the Employee in
various capacities in which the Employee has access to confidential and
proprietary information relating to NCC, its customers, its methods of doing
business, and its other business secrets: and
WHEREAS, NCC will, under certain circumstances on condition of this
Agreement Not to Compete, vest the Employee in benefits accrued under the
National City Corporation Supplemental Executive Retirement Plan;
NOW, THEREFORE, in consideration of these premises, the mutual covenants
and undertakings herein contained, the parties mutually agree as follows:
1. Confidentiality and Non-Competition. The Employee acknowledges that, by
virtue of his position with NCC, he has access to certain ideas, methods,
developments,
<PAGE> 21
inventions, improvements, licenses, trade secrets (including, but not limited
to, customer lists), business plans and other information of NCC which are the
confidential information and property of NCC. Accordingly, the Employee agrees
that while he is employed by NCC and for a period of one (1) year immediately
following termination of his employment with NCC for any reason other than
termination of the Employee's employment by NCC without cause:
a. Competitive Employment. The Employee shall not accept personal
employment by any enterprise, firm, business or organization which solicits
the customers of NCC to purchase products or services competitive with
products or services offered by NCC within any state served by NCC (a
"Competitive Business") where the principal situs of such employment is
within a state which NCC maintains an office open to the public and
providing services which constitutes Competitive Business.
b. Investment in Competitor. The Employee shall not, for himself, or
on behalf of any other person, persons, firm, partnership, company or
corporation acquire or hold any financial interest in any Competitive
Business except as a shareholder who owns less than one percent (1%) of the
capital stock of any Competitive Business whose securities are traded on a
recognized stock exchange or in the over-the-counter market.
c. Solicitation of Customers. The Employee shall not, for himself, or
on behalf or in conjunction with any other person, persons, firm
partnership, company or corporation, for the purpose of diverting or
taking away any business of NCC, solicits customers of NCC.
d. Solicitation of Employees. The Employee shall not solicit or
entice any employee of NCC to leave the employment of NCC.
2
<PAGE> 22
For purposes of this Agreement "cause" shall be defined as (i) the willful and
continued failure of the Employee to substantially perform the duties assigned
to him by NCC, (ii) action by the Employee involving willful misfeasance or
gross negligence, (iii) the order of a federal or state court or administrative
agency having jurisdiction over NCC where such order involves or relates to the
Employee's fitness for continued employment by NCC, (iv) conviction of a crime
as a result of which it becomes illegal for NCC to employ the Employee, (v) the
reasonable belief (and such reasonable belief is the reason or one of the
reasons for his or her discharge) that the Employee did engage in fraud against
NCC or anyone else, or (vi) any intentional breach by the Employee of a material
term, condition or covenant of this agreement.
2. Confidential Business Information. The Employee recognizes and
acknowledges that he will have access to certain confidential information to NCC
which is a valuable, special and unique asset of NCC's business. The Employee
therefore covenants and agrees that during and after his employment with NCC he
shall not reveal to anyone any business information or business methods of NCC
which are not known or ascertainable by proper means (including, but not limited
to, customer lists). Upon termination of the Employee's employment by NCC, the
Employee shall, upon NCC's written request therefor, deliver all customer lists,
procedure manuals, other records and all other property belonging to NCC without
retaining any copies thereof.
3. Reasonable Terms and Mutual Benefit. The Employee acknowledges and
agrees that the constraints imposed upon him pursuant to this agreement are
reasonable and necessary for NCC to compete successfully in its businesses. The
Employee further acknowledges and agrees that he is in a position to benefit
directly from the success of NCC's businesses through
3
<PAGE> 23
salary, incentive compensation and other arrangements mutually agreed to from
time to time by the Employee and NCC.
4. Right to Injunctive Relief. The Employee acknowledges and agrees that
monetary damages will not be adequate or sufficient to protect NCC from any
threatened or actual breach or violation of any of the provisions of paragraphs
1 and 2 of this agreement and accordingly acknowledges and agrees that NCC is
entitled, in addition to any other remedies which it may have, to injunctive
relief to enforce its rights hereunder.
5. Severability. The Employee and NCC agree that if any of the provisions
of paragraph 1 of this agreement or any other provision of this agreement is
determined by a court of competent jurisdiction to be unenforceable, the
remainder of the provisions of paragraphs 1 and 2 of this agreement and the
remainder of this agreement shall remain valid, binding and enforceable with
respect to the parties.
6. Assignment and Obligations of Assigns. This agreement and the
obligations of the Employee shall be binding upon the Employee's heirs and
personal representatives. This agreement may be assigned or otherwise shall
inure to the benefit of NCC's successor as a result of any disposition or
combination of NCC's businesses and the restrictions and limitations imposed
upon the Employee pursuant hereto shall continue for the benefit of NCC's
assignee or successor, provided, however, notwithstanding anything herein to the
contrary, paragraph 1 of this agreement shall not apply to Employee if Employee
leaves the employ of NCC or any of its successors for any reason other than the
Employee's termination for cause as defined herein, within one year after a
Change in Control of NCC. A "Change of Control" shall be the same
4
<PAGE> 24
meaning as in the National City Corporation Supplemental Executive Retirement
Plan as of the Effective Date of such Change of Control.
7. Term. The term of this agreement shall be for a period commencing as of
the date hereof and continuing indefinitely as provided herein as a condition of
the Employee's continued employment by NCC or as otherwise mutually agreed in
writing by the Employee and NCC.
8. Governing Law. This agreement is executed under and shall be construed
in accordance with the laws of the state of Ohio.
9. Headings. The headings of the paragraphs of this agreement are for
convenience only and shall not affect in any way the meaning or interpretation
of this agreement.
NATIONAL CITY CORPORATION
("NCC")
Attest: By:
--------------------------- ---------------------------------
Secretary
---------------------------------
("Employee")
---------------------
5
<PAGE> 1
EXHIBIT 10.9
NATIONAL CITY CORPORATION
EXECUTIVE SAVINGS PLAN
As Amended and Restated Effective January 1, 1995
1. Amendment and Restatement of the Plan.
The following are the provisions of the NATIONAL CITY CORPORATION
EXECUTIVE SAVINGS PLAN effective January 1, 1995 ("Plan") which is an amendment
and restatement of the Plan in effect prior thereto, which is maintained by
National City Corporation ("Corporation") to offer the payment of deferred
compensation to certain of the management and highly compensated employees of
the Corporation and its subsidiaries and is designed to supplement benefits
such employees may receive under the National City Savings and Investment Plan
("SIP") or Companion Savings Plans (as hereinafter defined). The Corporation
intends and desires by the maintenance of this Plan to recognize the value to
the Corporation of the past and present services of employees covered by this
Plan and to encourage and assure their continued service to the Corporation by
making more adequate provision for their future security by means of deferred
compensation.
2. The SIP and Companion Savings Plans.
The term "Companion Savings Plan" shall include those savings and
investment plans, if any, of National City Corporation which are modeled after
the SIP, but which cover a different group(s) of eligible employees. At the
time of this Restatement such Companion Savings Plans include (a) the National
City Savings and Investment Plan No. 2, and (b) the Military Banking Division
Savings and Investment Plan.
The SIP, whenever referred to in this Plan, shall mean the SIP and
such Companion Savings Plans, as amended, as they exist as of the date any
determination is made of benefits payable under this Plan, provided however
that provisions of Section 10 hereof refer solely to the investment funds of
the SIP and not to investment funds of any Companion Plan.
<PAGE> 2
To the extent necessary to carry out the terms of this Plan, the SIP
is hereby specifically referred to and shall form a part of this Plan as fully
as if set forth in exhibits hereto. Where any matter is not covered by this
Plan but is set forth in the SIP, the terms of the SIP shall control unless
such terms are determined by the Committee to be adverse to the purposes of
this Plan. In the event any express item or provision of this Plan conflicts
with any term or provision of the SIP or any Companion Savings Plan, the terms
and provisions of this Plan shall control to the extent necessary to carry out
the purposes hereof.
3.1 Definitions. Whenever used herein, the following terms shall have the
meanings set forth below, unless otherwise expressly provided. When the
defined meaning is intended, the term is capitalized.
(a) "Annual Enrollment Period" - the period prior to the
December 1 immediately preceding a Plan Year.
(b) "Base Compensation" shall have the same meanings as
in the SIP.
(c) "Board" shall mean the Board of Directors of the
Corporation.
(d) "Committee" shall mean the Compensation and
Organization Committee of the Board, or another committee appointed by the
Board to serve as the administering committee of the Plan.
(e) "Corporation" shall mean National City Corporation, a
Delaware corporation.
(f) "Deferral Amount" see Section 5.
(g) "Disability" shall mean permanent disability as
defined in the provisions of the National City Corporation Long-Term Disability
Plan.
(h) "Eligible Employee" shall mean an Employee who is
employed in a position meeting the defined eligibility criteria for
participation in the Plan, as set forth in Section 4.
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<PAGE> 3
(i) "Eligible Participant" shall mean an Eligible
Employee who has been approved by the Committee to participate in the Plan for
a particular Plan Year. Such approval shall be on a Plan Year basis and shall
be reviewed annually.
(j) "Employee" shall mean an individual employed by an
Employer on a regular active and full-time salaried basis.
(k) "Employer" shall mean the Corporation or any
corporation, organization or entity controlled by the Corporation.
(l) "Employer Matching Deferrals" see Section 7.
(m) "Employer Contributions" shall have the same meaning
as in the SIP.
(n) "Funds" shall mean the Funds provided for in Section
8 hereof.
(o) "Participant" shall mean an Eligible Participant who
has elected to participate in the Plan for a given Plan Year.
(p) "Plan" see Section 1.
(q) "Plan Year" shall mean a period of a calendar year.
(r) "Retirement" shall mean normal or early retirement as
defined in the National City Corporation Non-Contributory Retirement Plan.
(s) "SIP" shall mean the National City Savings and
Investment Plan.
3.2 Gender and Number. Except when otherwise indicated by the
context, any masculine terminology used herein also shall include the feminine,
and the definition of any term in the singular shall include the plural.
4. Eligibility.
Eligibility for benefits under this Plan shall be limited to
management and highly-compensated employees of the Corporation or its
subsidiaries.
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<PAGE> 4
5. Election to Participate; Deferral of Compensation; Deferral
Percentage.
Each Eligible Participant shall be given the opportunity during the
Annual Enrollment Period to elect to participate in this Plan and to elect the
amount of compensation to be deferred hereunder during such Plan Year. Such
election and amount to be deferred hereunder shall be irrevocable and fixed
from and after the end of the Annual Enrollment Period with respect to such
Plan Year.
The determination of the amount to be deferred shall be made in terms
of a percentage (1% through 10%) of Base Compensation to be deferred both under
this Plan and under the SIP and shall assume that the maximum SIP salary
contribution permitted the Participant is both elected and made to the SIP
during the succeeding Plan Year. The amount to be deferred under this Plan is
the difference between such percentage and such maximum permissible SIP
contribution (so long as that difference results in a positive number) (called
the "Deferral Amount") for such Plan Year shall not be paid to the Participant
during such Plan Year but shall be deferred as provided in the Plan.
Notwithstanding the foregoing, to be eligible to participate in the
Plan in the succeeding Plan Year, an employee must, as of the December 1 prior
to such Plan Year if he is employed on such date, effectively elect to
contribute the maximum dollar amount of salary reduction contributions
permitted him or her under the SIP. In the event such SIP election is revoked
or the SIP contribution amount reduced by the Participant for any part of such
Plan Year, the Deferral Amount for such Plan Year shall nevertheless continue
unchanged for such Plan Year.
6. Employees Hired between Enrollment Periods. Notwithstanding the
provisions of Paragraph 5 of the Plan, an employee hired by an Employer after
the end of an Annual Enrollment Period may, nevertheless, become eligible to
participate for a portion or all of such Plan Year if the following conditions
have been met:
(1) such employee is selected for participation in the Plan for such
Plan Year (or part thereof) by the chief executive officer of the Corporation
and
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<PAGE> 5
(2) such employee completes enrollment in the Plan for such time
period by making the elections and decisions provided for herein (including an
election to contribute the maximum permissible SIP contribution). Such
enrollment and participation in the Plan (including the deferral election)
shall apply only with respect to compensation for future services to be
rendered by such employee, namely, compensation for services rendered after the
deferral election of such employee becomes final by acceptance on behalf of the
Corporation.
7. Employer Matching Deferrals.
(a) Eligibility. Employer Matching Deferrals under the Plan shall
be made only with respect to Participants who throughout the Plan Year make the
maximum permissible salary reduction contributions under the provisions of the
SIP, as determined from time to time under the SIP.
(b) Amount. Employer Matching Deferrals under the Plan for
Participants shall equal the amount of Employer Matching Contributions for such
Plan Year not allocated to the account of such Participant under the SIP for
such Plan Year because of applicable limitations on contributions under the
SIP. The Employer Matching Deferrals for the Deferral Amounts hereunder will
be provided in the same fashion as Employer Matching Contributions match salary
reduction contributions under the SIP.
(c) Deferral. The amount of any Employer Matching Deferral for any
Plan Year shall be deferred and added to the Participant's Deferral Amount in
the account of such Participant for such Plan Year, and shall not be currently
paid to such Participant.
(d) Timing of Deferrals and Matches. Participant Deferral Amounts
and Employer Matching Deferrals shall be made at the same times as Employer
Matching Contributions are made under the SIP.
8. Accounts.
An account shall be established and maintained by the Corporation in
the name of each Participant. Such accounts shall remain a part of the general
liabilities of the Corporation and nothing in this Plan shall be deemed to
create a trust or fund of any kind or any fiduciary
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<PAGE> 6
relationship. Each Participant's account shall be comprised of five sub-
accounts: (a) the "Money Market Fund"; (b) the "Fixed Income Fund"; (c) the
"Equity Fund"; (d) the "NCC Stock Fund"; and (e) the "Capital Preservation
Fund"; such sub-accounts jointly are herein called the "Funds."
9. Crediting to Accounts and Funds.
When the Deferral Amounts and the Employer Matching Deferrals are
deemed to be made they shall be credited to each Participant's account, and
shall correspondingly be credited to the Fund or Funds selected by the
Participant.
10. Funds.
The Funds hereunder are designed to reflect the five respective
Investment Funds maintained in the SIP. Accordingly, each such Fund and each
Participant's Account therein shall be adjusted hereunder as of the end of each
month to reflect the income, gain or loss of the corresponding SIP investment
fund for such month, as calculated and published on a monthly basis by the
trustee of the SIP.
In the event during a Plan Year a Fund selected hereunder is no longer
offered by the SIP, the amounts which would have been deemed invested in such
Fund except for this provision shall be deemed to be invested for the remainder
of such Plan Year in a savings or time deposit of National City Bank of less
than $100,000 which earns the highest rate of interest then being paid by the
Bank on such deposits. Participants will be offered a new selection of
investment with respect to later Plan Years (subject to Committee consent) and
amounts not made subject to an effective investment selection at such time
shall be deemed to be invested in the Money Market Fund of the SIP.
11. Selection of Funds.
Each Participant and each beneficiary of a deceased Participant may
select the Fund(s) he or she wishes to be used hereunder for his or her
account. The selection of Funds shall be made in 5% increments of the Deferral
Amounts and Employer Matching Deferrals and a single election shall govern both
Deferral Amounts and Employer Matching Deferrals. In the event no
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<PAGE> 7
election is made by a Participant his or her account shall be deemed invested
in and credited to the Money Market Fund.
12. No Change of Investment Fund Selection Permitted Except by Death
Beneficiary or as of a December 1 for following Plan Year, with Committee
approval.
Each selection of a Fund hereunder shall be final and shall not
thereafter be revised or changed, provided, however, that upon the death of a
Participant (or a beneficiary of a deceased Participant or beneficiary), any
beneficiary hereunder, upon becoming such, may change such selection once at
such time, and provided further that each Participant (or beneficiary if the
Participant is deceased) may change his or her Funds choice on or before any
December 1 for the next and later Plan Years. Notwithstanding the foregoing,
the consent of the Committee shall be necessary for any such change in Funds
choices; such consent is discretionary in the Committee.
13. Vesting of Deferrals.
(a) Employer Matching Deferrals Require Maximum SIP Contribution.
Employer Matching Deferrals are specifically conditioned upon the Participant
making the maximum salary reduction contributions during the Plan Year
permitted to him or her under the SIP. In the event such maximum salary
reduction contributions are not made during the Plan Year, such Plan Year's
Employer Matching Deferrals for such Participant, if any, shall be forfeited,
with all earnings or gains thereon.
(b) Vesting of Employer Matching Deferrals. (1) In the event of a
voluntary termination of employment by a Participant on or before January 1,
1995 for a reason other than death, Disability or Retirement, Employer Matching
Deferrals and the earnings and gains thereon credited to such Participant's
account shall be vested or forfeited as follows:
(A) Employer Matching Deferrals (and income and gain
thereon) credited to the Participant for the Plan Year in which the employment
termination occurred plus an amount equal to the Employer Matching Deferrals
credited to the Participant for the Plan Year preceding the Plan Year of
employment termination shall be forfeited.
(B) All other Employer Matching Deferrals shall be vested.
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<PAGE> 8
(2) In the event the Participant's employment termination occurs
after January 1, 1995 or is by reason of death, Disability or Retirement, the
Participant's Employer Matching Deferrals, plus earnings, gains and losses
thereon, will be 100% vested in the Participant.
(c) Deferral Amounts. Deferral Amounts contributed under the Plan
by Participants and earnings and gains thereon are always 100% vested.
14. Manner of Distribution.
Except as otherwise provided herein, distributions of vested
Participant account balances shall take place over the period of ten years
commencing on the death, Retirement or other termination of employment of the
Participant and amounts deferred hereunder shall not be subject to any
withdrawal in advance of such time. Further, this Plan shall not permit any
Participant to borrow any portion of the Deferral Amount or Employer Matching
Deferrals.
The first distribution shall take place on the February 1 of the Plan
Year following the Plan Year in which such death, Retirement or termination
occurs. Succeeding payments shall be made on succeeding February 1sts.
The amount to be distributed shall be determined by multiplying (i)
the dollar value of the Participant's account on the date of such installment,
by (ii) a fraction, the numerator of which is one, and the denominator of which
is the number of remaining unpaid distributions.
The balances of each Participant's account and each of the Funds shall
be appropriately reduced to reflect the distribution payments made. Amounts
held pending distribution pursuant to this Paragraph 14 shall continue to be
credited with appropriate income, gains and losses as herein provided and shall
be subject to investment changes as herein provided. Balances in more than one
Fund shall be reduced pro-rata to reflect distributions on a pro-rata basis
from the Account.
In the case of the first distribution after the death of a
Participant, the Committee may, in its discretion, provide for payment of a
portion or all of the first distribution prior to the February 1 after such
death.
All distributions under this Plan shall be made only in cash.
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<PAGE> 9
15. Accelerated Payments; Revised Distributions.
Without regard to the provisions of Paragraph 14 above, the Committee
may determine that a Participant's account which has a balance of $100,000 or
less shall be paid out in a lump sum. Furthermore, the Committee may determine
that a lump sum distribution should be made to a Participant who has terminated
employment voluntarily by means other than death, Disability or Retirement.
In the event such determination is made, such lump sum distribution
shall be made as of the next succeeding February 1.
In addition, the Committee, in its discretion, may provide that
distributions may be made in a lesser number of annual installments, but not
less than 5.
16. Beneficiary Designations.
Each Participant and each beneficiary of a deceased Participant or
beneficiary may designate, on a beneficiary designation form supplied by the
Committee, any person or persons to whom payments are to be made if the
Participant (or beneficiary) dies before receiving payment of all amounts due
hereunder. A beneficiary designation will be effective only after the signed
beneficiary designation form is filed with the Committee while the Participant
(or beneficiary) is alive, and will cancel all beneficiary designations signed
and filed earlier. If the Participant (or beneficiary) fails to designate a
beneficiary as provided above, or if all designated beneficiaries die before
the Participant (or beneficiary) or before complete payment of all amounts due
hereunder, the remaining Participant's account balance shall be paid in one
lump sum to the Surviving Spouse of the Participant, if any, or, if there be
none, to the estate of the last to die of the Participant or his or her
designated beneficiaries, if any.
17. Administration
Except as herein provided, this Plan shall be administered by the
Committee, which shall administer it in a manner consistent with the
administration of the SIP, except that this Plan shall be administered as an
unfunded plan which is not intended to meet the qualification requirements of
Section 401 of the Internal Revenue Code. The Committee shall have full power
and authority
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<PAGE> 10
to interpret, construe and administer this Plan and its interpretations and
construction hereof, and actions hereunder, including the timing, form, amount
or recipient of any payment to be made hereunder, shall be binding and
conclusive on all persons for all purposes.
The Committee may name assistants who may be, but need not be, members
of the Committee. Such assistants shall serve at the pleasure of the Committee,
and shall perform such functions as may be assigned by the Committee.
No member of the Committee or any assistant shall be liable to any
person for any action taken or omitted in connection with the interpretation
and administration of this Plan unless attributable to his or her own willful
misconduct or lack of good faith.
18. Participants Rights; Beneficiaries Rights.
Except as otherwise specifically provided, neither a Participant nor
any of his or her beneficiaries has rights under this Plan. The payment of
deferred compensation shall be a general, unsecured obligation of the
Corporation to be paid by the Corporation from its own funds, and such payments
shall not (i) impose any obligation upon the trust fund under the SIP;(ii) be
paid from the trust fund under the SIP; or (iii) have any effect whatsoever
upon the SIP or the payment of benefits from the trust fund under the SIP. No
Participant or beneficiary shall have any title to or beneficial ownership in
any assets which the Corporation may earmark to pay benefits hereunder.
19. Amendment and Discontinuance.
The Corporation expects to continue this Plan indefinitely, but
reserves the right, by action of the Committee, to amend it from time to time,
or to discontinue it if such a change is deemed necessary or desirable.
However, if the Committee should amend this Plan, the Corporation shall remain
obligated under the Plan with respect to Deferral Amounts and Employer Matching
Deferrals (and the earnings, gains and losses thereon, if any) for which, as of
the date of such action, deferral elections have been made hereunder and have
become final by acceptance by the Corporation.
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<PAGE> 11
20. Nature of Agreement.
The adoption of this Plan and any setting aside by the Corporation of
amounts with which to discharge its obligations hereunder in a trust fund, an
insurance policy, or otherwise, shall not be deemed to create a right in any
person; equitable title to any funds so set aside in a trust, an insurance
policy, or otherwise shall remain in the Corporation, and any recipient of
benefits hereunder shall have no security or other interest in such trust,
policies or funds. Any and all funds so set aside in a trust, an insurance
policy or otherwise shall remain subject to the claims of the general creditors
of the Corporation, present and future. This provision shall not require the
Corporation to set aside any funds, but the Corporation may set aside such
funds if it chooses to do so. This Plan is intended to constitute an unfunded
plan described in Section 201(2) of the Employee Retirement Income Security Act
of 1974.
21. Restrictions on Assignments.
The interest of a Participant or his or her beneficiary may not be
sold, transferred, assigned, or encumbered in any manner, either voluntarily or
involuntarily, and any attempt so to anticipate, alienate, sell, transfer,
assign, pledge, encumber, or charge the same shall be null and void; neither
shall the benefits hereunder be liable for or subject to the debts, contracts,
liabilities, engagements, or torts of any person to whom such benefits or funds
are payable, nor shall they be subject to garnishment, attachment, or other
legal or equitable process nor shall they be an asset in bankruptcy, except
that no amount shall be payable hereunder until and unless any and all amounts
representing debts or other obligations owed to the Employer by the Participant
with respect to whom such amount would otherwise be payable shall have been
fully paid and satisfied.
22. Binding on Corporation, Employees and Their Successors.
This Plan shall be binding upon and inure to the benefit of the
Corporation, its successors and assigns and each Participant and his or her
beneficiaries, heirs, executors, administrators and legal representatives.
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<PAGE> 12
23. Laws Governing.
This Plan shall be construed in accordance with and governed by the
laws of the State of Ohio.
Executed as of this _____ day of ______________, 1994 at Cleveland,
Ohio.
NATIONAL CITY CORPORATION
By:
---------------------
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<PAGE> 1
EXHIBIT 10.21
NATIONAL CITY CORPORATION
ANNUAL CORPORATE PERFORMANCE INCENTIVE PLAN
Effective January 1, 1995
ARTICLE 1. THE PLAN AND ITS PURPOSE
1.1 Adoption of Plan. This National City Corporation Annual
Corporate Performance Incentive Plan (herein referred to as the "Plan) is
hereby adopted, effective January 1, 1995. to provide for the operation of the
Plan on and after such date and to govern the treatment of deferrals made under
this Plan.
1.2 Purpose. The purpose of the Plan is to maximize the
Corporation's profitability and operating success by providing an incentive to
Senior Officers to achieve superior results. The Plan is designed to promote
teamwork to achieve overall corporate success and to motivate individual
excellence.
1.3 Operation of the Plan. The Plan shall be administered by the
Compensation and Organization Committee of the Board of Directors of the
Corporation. The Plan operates on a calendar year basis and is subject to the
review, interpretation, and administration by such Committee. The Plan governs
the eligibility for and amounts of incentive compensation to be awarded under
the Plan. With respect to any award made under the Plan, the Plan shall serve
as a non-qualified plan providing for and governing the treatment of deferred
compensation at the election of the Participant and/or the Committee, as
provided herein.
ARTICLE 2. DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall
have the meanings set forth below, unless otherwise expressly provided. When
the defined meaning is intended, the term is capitalized.
<PAGE> 2
(a) "Award" shall mean the payment earned by a Participant
based on the Corporation's actual results measured against the performance of a
peer group of companies as set forth in Article 4.
(b) "Base Salary" shall mean the annual salary of each Active
Participant at the close of the Plan Cycle, exclusive of any bonuses, incentive
pay, special awards, or stock options.
(c) "Board" shall mean the Board of Directors of the
Corporation.
(d) "Change in Control" see Section 11.3.
(e) "Committee" shall mean the Compensation and Organization
Committee of the Board, or another committee appointed by the Board to serve as
the administering committee of the Plan.
(f) "Corporation" shall mean National City Corporation, a
Delaware corporation.
(g) "Disability" shall mean permanent disability as defined
in the provisions of the National City Corporation Long Term Disability Plan at
the commencement of the Plan Cycle with respect to which such definition is
relevant.
(h) "Early Retirement" shall have the same meaning as in the
National City Corporation Non-Contributory Retirement Plan.
(i) "Effective Date" see Section 11.4.
(j) "Eligible Employee" shall mean an Employee who is
employed in a position meeting the defined eligibility criteria for
participation in the Plan, as set forth in Article 3.
(k) "Employee" shall mean an individual employed by an
Employer on a regular, active and full-time salaried basis.
(l) "Employer" shall mean the Corporation or any corporation,
organization or entity controlled by the Corporation.
(m) "Exchange Act" shall mean the Securiites Exchange Act of
1934, as amended.
(n) "Funds" see Section 9.3.
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<PAGE> 3
(o) "Implementation Date" see Section 11.5.
(p) "Key Financial Indices" shall mean those indices
frequently used by financial corporations to measure profitability and overall
operating performance. These indices are: return on common equity; return on
assets; overhead ratio; efficiency ratio; net interest margin; total annual
return on common stock; earnings per share; and percent of change in earnings
per share, as determined in accordance with generally accepted accounting
principles, and as appropriately adjusted to take into account the use by
different corporations of different accounting principles. With respect to any
Plan Cycle the Committee shall determine, prior to the Plan Cycle, which
indices are the Key Financial Indices to be used and the weighting to be given
each index; thereafter, such Key Financial Indices and such weightings for such
Plan Cycle shall not be changed.
(q) "Normal Retirement" shall have the same meaning as in the
National City Non-Contributory Retirement Plan at the commencement of the Plan
Cycle with respect to which such definition is relevant.
(r) "Parallel Funds" see Section 9.5.
(s) "Participant" shall mean an Eligible Employee who is
approved by the Committee for participation in the Plan. Such approval shall
be on a Plan Cycle basis and shall be reviewed with respect to each new Plan
Cycle.
(t) "Peer Group" shall mean a group of comparable
corporations used to measure relative performance. Such Peer Group shall be
established by the Committee prior to the commencement of each Plan Cycle;
thereafter, such Peer Group for such Plan Cycle shall not be changed, provided
however, that one or more members of a Peer Group shall be dropped therefrom in
the event of the acquisition of the Peer Group member, the acquisition of
sixty-five percent or more of the gross assets of the Peer Group member or the
merger of the Peer Group member with another company(ies) where the Peer Group
member is not the surviving corporation.
(u) "Plan" see Section 1.1.
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<PAGE> 4
(v) "Plan Cycle" shall mean a period of a calendar year.
(w) "SIP" shall mean the National City Savings and Investment
Plan.
(x) "Subsidiary" see paragraph 11.3(e).
(y) "Vesting Event" means the earliest to occur of the
following dates:
(1) the date any Award is payable hereunder;
(2) the Effective Date of a Change in Control;
(3) the date a Participant is eligible to retire on
a Normal Retirement;
(4) the date a Participant has a Disability; or
(5) the date of a Participant's death.
(z) "Voting Stock" see paragraph 11.3(e).
Each Participant and Beneficiary with respect to whom a
Vesting Event has occurred shall be 100% vested in his or her benefits or
Awards earned or accrued hereunder as of the date of such Vesting Event,
subject to the forfeiture provisions of Article 10.
2.2 Gender and Number. Except when otherwise indicated by the
context, any masculine terminology used herein also shall include the feminine,
and the definition of any term in the singular shall include the plural.
ARTICLE 3. ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Eligibility for participation in the Plan will
be limited to those officers of the Corporation and its subsidiaries who, by
the nature and scope of their position, play a key role in the management,
growth and success of the Corporation, as determined by the Committee.
3.2 Participation. Participation in the Plan (including a
Participant's Category) shall be determined by the Committee with respect to
each Plan Cycle prior to the commencement of the Plan Cycle, and shall not
thereafter be changed with respect to such Plan Cycle. The Committee may base
its decision upon the recommendation of the Chief Executive Officer of National
City Corporation. The Committee shall classify Senior Officers for the
purposes of the Plan into the following categories:
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Category Persons Included
-------- ----------------
Category I Chief executive officer of the Corporation
Category II President and deputy chairmen of the
Corporation, and similar officers
Category III Executive vice presidents of the Corporation
and the chief executive officers of major
subsidiaries of the Corporation, and similar
officers
Category IV Senior officers of the Corporation and
executive officers of major subsidiaries, and
similar officers
Categories V & VI All other officers of the Corporation or its
subsidiaries who are approved for
participation in the Plan by the Committee
Each Eligible Employee approved for participation shall be
notified of the selection as soon after approval as is practicable and shall
become a Participant upon acceptance by him or her of such selection.
3.3 Participation for part of a Plan Cycle; Category Changes
During a Plan Cycle. No Participant shall participate in this Plan for a
portion of a Plan Cycle and changes in a Participant's Category in mid-Plan
Cycle shall not serve to change his or her Category of participation in the
Plan for any Plan Cycle which shall have commenced.
3.4 No Right to Participate. No Participant or Employee shall
have a right at any time to be selected for current or future participation in
the Plan.
ARTICLE 4. PERFORMANCE MEASUREMENT
4.1 Performance Criteria. Performance, for purposes of this Plan,
will be measured by corporate results. Corporate results will be measured by
comparing corporate performance with respect to Key Financial Indices to that
of the Peer Group. Prior to the beginning of each Plan Cycle, the Committee
shall establish the Peer Group, the Key Financial Indices, the weighting of the
Key Financial Indices chosen, and the levels of comparative performance at
which the presumed Threshhold, Target and Maximum Awards will be provided under
the Plan.
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<PAGE> 6
4.2 Award Potential. The amount of incentive compensation that
shall be awarded to a Participant under this Plan shall be expressed as a
percentage of Base Salary. Such percentage shall equal the percentage set
forth below depending upon the attainment of Target or Maximum results:
<TABLE>
<CAPTION>
Percent of Base Compensation
----------------------------
Category Threshold Target Maximum
-------- --------- ------ -------
<S> <C> <C> <C>
I 0% 50% 76.5%
II 0% 40% 60%
III 0% 27% 42%
IV 0% 14% 22%
V 0% 5% 8%
VI 0% 2.5% 5%
</TABLE>
4.3 Award Calculation and Approval. The amount of the Award for
each Participant for each Plan Cycle will be calculated as of the December 31
on which the Plan Cycle ends by applying the foregoing provisions of this
Article 4 to the Corporate Results for such Plan Cycle.
All such Awards may, for convenience purposes, be normally
expressed as a percentage of Base Salary. Upon the close of the Plan Cycle the
amounts of Awards hereunder for such Plan Cycle shall be final.
4.4 Limitation. Notwithstanding any provision in this Plan to the
contrary, no Award for any one Plan Cycle shall exceed $1,000,000.00.
ARTICLE 5. PAYMENT OF AWARDS
5.1 Form and Timing of Payment of Awards. Within 90 days after
the end of the Plan Cycle, the Participant shall be entitled to receive a cash
payment equal to the entire amount of the Participant's Award. Except as
otherwise provided for in Section 5.2, to receive an Award a Participant must
be an Employee on the date on which the Plan Cycle ends. The Committee may
terminate a Participant's Award prior to any Vesting Event.
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<PAGE> 7
5.2 Termination of Employment Due to Retirement, Disability or
Death. In the event a Participant's employment is terminated during a Plan
Cycle by reason of Normal Retirement, Early Retirement, Disability or Death,
the Participant shall be eligible to receive a prorated Award based on
Corporate Results during the Participant's employment, provided however, that
the Participant must have been a Participant in the Plan for at least three
months of the Plan Cycle to be eligible to receive any Award hereunder. Such
Awards will be paid within ninety (90) days following the end of the Plan
Cycle. In the event of death, the Award will be paid to the Participant's
estate.
5.3 Other Terminations of Employment. In the event a
Participant's employment is terminated during a Plan Cycle prior to a Vesting
Event, the Participant's participation in a Plan Cycle shall end and the
Participant shall not be entitled to any Award for such Plan Cycle.
5.4 Request to Defer Payment; Deferred Payments. A Participant
may elect to request to have a portion or all of his or her Award for such Plan
Cycle deferred and paid out at a future date. Such request shall be considered
by the Committee. The Committee may determine that some, all, or none of the
Awards, or parts thereof, shall be deferred, in its discretion. Deferred
amounts are subject to the provisions of Article 9.
ARTICLE 6. RIGHTS OF PARTICIPANTS
6.1 Employment. Nothing in this Plan shall interfere with or
limit in any way the right of the Corporation to terminate a Participant's
employment at any time, nor confer upon any Participant any right to continue
in the employ of the Employer.
6.2 Restrictions on Assignments. The interest of a Participant or
his or her beneficiary under this Plan may not be sold, transferred, assigned,
or encumbered in any manner, either voluntarily or involuntarily, and any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
or charge the same shall be null and void; neither shall the benefits hereunder
be liable for or subject to the debts, contracts, liabilities, engagements, or
torts of any person to whom such benefits or funds are payable, nor shall they
be subject to garnishment, attachment, or other legal or equitable process, nor
shall they be an asset in bankruptcy.
-7-
<PAGE> 8
ARTICLE 7. ADMINISTRATION
Administration. The Plan shall be administered by the Committee in
accordance with any administrative guidelines and any rules that may be
established from time to time by the Committee.
The Committee shall have full power and authority to
interpret, construe and administer the Plan and its interpretations and
construction hereof, and actions hereunder, including the timing, form, amount
or recipient of any payment to be made hereunder, and its decisions shall be
binding and conclusive on all persons for all purposes.
The Committee may name assistants who may be, but need not be,
members of the Committee. Such assistants shall serve at the pleasure of the
Committee, and shall perform such functions as may be assigned by the
Committee.
No member of the Committee or any assistant shall be liable to
any person for any action taken or omitted in connection with the
interpretation and administration of this Plan unless attributable to his or
her own willful misconduct or lack of good faith.
ARTICLE 8. REQUIREMENTS OF LAW
8.1 Laws Governing. This Plan shall be construed in accordance
with and governed by the laws of the State of Ohio.
8.2 Withholding Taxes. The Corporation shall have the right to
deduct from all payments under this Plan any federal or state taxes required by
the law to be withheld with respect to such payments.
8.3 Plan Binding on Corporation, Employees and Their Successors.
This Plan shall be binding upon and inure to the benefit of the Corporation,
its successors and assigns and each Participant and his or her beneficiaries,
heirs, executors, administrators and legal representatives.
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<PAGE> 9
ARTICLE 9. DEFERRAL OF AWARDS
9.1 Election to Request Deferral of Award; Deferral Percentage.
Prior to each Plan Cycle, the Committee shall determine which Participants, if
any, shall be eligible to make deferral elections under this Plan. Each
Participant who is therefore eligible to elect to request deferral of a portion
or all of his or her Award for such Plan Cycle shall be given the opportunity
prior to such Plan Cycle to make such request. Such election and the
percentage of Award requested to be deferred shall be irrevocable and fixed
with respect to such Participant and such Plan Cycle from and after the
December 31 of the year prior to the Plan Cycle.
The request and determination of the portion of the Award to
be deferred shall be made in terms of 10% increments of the Award.
Promotion or demotion during a Plan Cycle shall not affect the
fixed and irrevocable nature of a deferral request made prior to such Plan
Cycle for such Plan Cycle.
9.2 Deferral of Awards; Committee's Decision. Notwithstanding any
request to defer none, a portion, or all of an Award hereunder submitted by a
Participant pursuant to Section 9.1 above, and notwithstanding the Committee's
prior determination as to the eligibility of any Participant to defer a portion
or all of any Award hereunder, the Committee shall make the decision, in the
case of each Participant, whether or not to defer any portion or all of any
Participant's Award with respect to any Plan Cycle. Such decision shall be
made in the discretion of the Committee. The Committee's discretion extends to
the percentage of any Award to be deferred.
The Committee's decision shall be final and binding on all
parties. Any amount to be deferred shall not be paid to the Participant but
shall be deferred as provided in this Article 9.
9.3 Accounts. An account shall be established and maintained by
the Corporation in the name of each Participant who has deferred compensation
hereunder. Such accounts shall remain a part of the general liabilities of the
Corporation and nothing in this Plan shall be deemed to create a trust or fund
of any kind or any fiduciary relationship. Each Account shall be comprised of
ten sub-accounts: (a) the "Savings Account Fund"; (b) the "NCC Stock Fund"; (c)
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the "Equity Fund"; (d) the "Fixed Income Fund"; (e) the "Money Market Fund";
(f) the "Capital Preservation Fund"; (g) the "Mid Cap Regional Equity Fund";
(h) the "Equity Income Fund"; (i) the "Equity Index Fund"; and (j) the "Foreign
Equity Fund"; such sub-accounts jointly are herein called the "Funds".
9.4 Crediting to Accounts. As of the dates of payment of cash
Awards made under this Plan the amount of the Award to be deferred for each
Participant under this Section 9 shall be credited to such Participant's
Account, and shall correspondingly be credited to the Fund or Funds selected by
the Participant.
9.5 Funds. The nine Funds hereunder other than the Savings
Account Fund (such nine Funds being herein called "Parallel Funds") are
designed to reflect investment funds maintained in the SIP. Accordingly, each
such Parallel Fund and each Participant's Account therein shall be adjusted
hereunder as of the end of each month to reflect the income, gain or loss of
the corresponding SIP investment fund for such month, as calculated and
published on a monthly basis by the Trustee of the SIP.
In the event the SIP no longer offers a fund corresponding to one of
the Parallel Funds, the amounts which would have been deemed invested in such
Parallel Fund except for this provision shall be deemed to be invested in the
Savings Account Fund.
9.6 Savings Account Fund. Amounts deferred to the Savings Account
Fund shall be credited to the Participant's Account in such Fund as of the date
that other Awards for such Plan Cycle are paid or would be paid, and interest
shall be credited on amounts in the Participant's Account in such Fund at the
end of each calendar quarter in amount equal to interest on the average credit
balance in such Account during such calendar quarter, at the highest published
rate being paid by National City Bank on savings or time deposits of less than
$100,000 on the last day of such quarter, regardless of maturity.
9.7 Selection of Funds. Each Participant (and each Beneficiary of
a deceased Participant) may select the Investment Fund or Funds he or she
wishes to be used hereunder for his or her account. The selection of Funds
shall be made in portions of the amount deferred
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equal to 5% of the total of such amounts. In the event no election is made by a
Participant (or Beneficiary) his or her account shall be deemed invested in and
credited to the Savings Account Fund.
Selection of Funds by Participants shall be made no later than
the December 1 of the Plan Cycle for which the Award is to be made in advance
of the deferral or payment of the Award; provided however, that in the event a
Participant who has not requested a deferral of any part of his or her Award
nevertheless has a portion thereof deferred by decision of the Committee, or
otherwise, then in such event, such Participant shall immediately be given an
election period of 10 days to determine appropriate investments, such period
running from the date of his or her notification of his or her right to make
such selection.
9.8 No Change of Investment Fund Selection Permitted Except with
Committee Approval. Each selection of a Fund hereunder shall be final and
shall not thereafter be revised or changed, provided, however, that each
Participant (or Beneficiary if the Participant is deceased) may request a
change in his or her Investment Fund choice by filing such request with the
Committee. Notwithstanding the foregoing, the consent of the Committee shall
be necessary for any such change in investment fund choices; such consent is
discretionary in the Committee and the Committee shall act upon such requests
as are filed with it at the Committee's next regularly scheduled meeting.
9.9 Vesting of Deferred Amounts. Amounts of Awards made and
deferred under the Plan, and earnings and gains thereon, are always 100%
vested.
9.10 Manner of Distribution. Except as otherwise provided herein,
distributions hereunder shall take place over a period of ten years commencing
on the retirement, death or other termination of employment of the Participant.
The first distribution shall take place on the February 1 of the calendar year
following the calendar year in which such retirement, death or other
termination occurs. Succeeding payments shall be made on succeeding
February 1sts.
The amount to be distributed shall be determined by
multiplying (i) the dollar value of the Participant's entire interest hereunder
on the date of such installment, by (ii) a
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fraction, the numerator of which is one, and the denominator of which is the
number of distributions remaining unpaid at such time, or by such other method
as may be adopted by the Committee.
The balances of each Account and each Investment Fund shall be
appropriately reduced to reflect the distribution payments made. Amounts held
pending distribution pursuant to this Section 9.10 shall continue to be
credited with appropriate income, gains and losses as herein otherwise provided
and shall be subject to investment changes as herein provided. Balances in
more than one Fund shall be reduced pro-rata to reflect distributions on a
pro-rata basis from each Fund.
9.11 Accelerated Payments; Revised Distributions. Notwithstanding
the foregoing, the Committee may determine that a Participant's interest
hereunder which equals $100,000 or less shall be paid out in a lump sum.
Furthermore, the Committee may determine that a lump sum distribution should be
made to a Participant who has terminated employment by means other than death,
disability or retirement.
In the event such determination is made, such lump sum
distribution shall be made as of the next succeeding February 1, or at such
other time as may be determined by the Committee.
In the case of the first distribution after the death of a
Participant, the Committee may, in its discretion, provide for payment of a
portion or all of the distribution prior to the February 1 after such death.
Notwithstanding any other provision hereof, the Committee, in
its discretion, may provide that distributions may be made in a lesser number
of installments, but not less than 5.
9.12 Beneficiary Designations. Each Participant, and each
Beneficiary of a deceased Participant or Beneficiary hereunder, may designate,
on a Beneficiary Designation form supplied by the Committee, any person or
persons to whom payments are to be made if the Participant (or Beneficiary)
dies before receiving payment of all amounts due hereunder. A beneficiary
designation will be effective only after the signed Beneficiary Designation
form is filed with an
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officer of the Corporation designated by the Committee for such purpose while
the Participant (or Beneficiary) is alive, and will cancel all beneficiary
designations signed and filed earlier. If the Participant (or Beneficiary)
fails to designate a beneficiary as provided above, or if all designated
beneficiaries die before the Participant or before complete payment of all
amounts due hereunder, remaining unpaid distribution amounts shall be paid to
the then surviving spouse of the Participant, if any, or, if there be none, in
one lump sum to the estate of the last to die of the Participant or his or her
designated beneficiaries, if any.
In the event a Participant (or a Beneficiary of a deceased
Participant) designates as a Beneficiary any so called "marital deduction
trust" or any so called "qualified income trust", the Participant (or
Beneficiary) may additionally indicate whether the dollar equivalent of the
current income, during the distribution of an interest hereunder, should be
distributed yearly to such Beneficiary. In the event of such an indication,
such income shall be distributed at least annually.
9.13 Participants Rights; Beneficiaries Rights. Except as
otherwise specifically provided, neither a Participant nor any of his or her
Beneficiaries has rights under this Plan. The payment of deferred compensation
shall be a general, unsecured obligation of the Corporation to be paid by the
Corporation from its own funds, and such payments shall not impose any
obligation upon any trust fund for any tax qualified plan, be paid from any
such trust fund, or have any effect whatsoever upon the SIP or the payment of
benefits from the Trust Fund under the SIP. No Participant or beneficiary
shall have any title to or beneficial ownership in any assets which the
Corporation may earmark to pay benefits hereunder.
9.14 Nature of deferred compensation. The election of deferred
compensation under this Plan and any setting aside by the Corporation of
amounts with which to discharge its deferred obligations hereunder in a trust
fund, an insurance policy, or otherwise, shall not be deemed to create a right
in any person; equitable title to any funds so set aside in a trust, an
insurance policy, or otherwise shall remain in the Corporation, and any
recipient of benefits hereunder shall have no security or other interest in
such trust, policies or funds. Any and all
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funds so set aside in a trust, an insurance policy or otherwise shall remain
subject to the claims of the general creditors of the Corporation, present and
future. This provision shall not require the Corporation to set aside any
funds, but the Corporation may set aside such funds if it chooses to do so.
Any amount so set aside for this Plan shall be accounted for separately and
apart from any other plan of the Corporation. This Plan is intended to
constitute an unfunded plan of deferred compensation described in Section
201(2) of the Employee Retirement Income Security Act of 1974.
9.15 Distributions in Cash. Notwithstanding any other provision of
this Plan, distributions hereunder shall be made only in cash and shall be
subject to withholding of applicable taxes.
9.16 Nature of Deferred Compensation Plan. The provisions of the
Plan relating to deferred compensation are fixed and final unless and until
amended, revised or terminated as herein provided.
ARTICLE 10. FORFEITURES
Notwithstanding any provision in this Plan to the contrary, excepting
only the provisions of Article 11, in the event the Committee finds
(a) that an Employee or former Employee who has
an interest under this Plan has been discharged by his or her Employer
in the reasonable belief (and such reasonable belief is the reason or
one of the reasons for such discharge) that the Employee or former
Employee did engage in fraud against the Employer or anyone else, or
(b) that an Employee or former Employee who has
an interest under this Plan has been convicted of a crime as a result
of which it becomes illegal for his Employer to employ him or her,
then any amounts held under this Plan for the benefit of such Employee
or former Employee or his or her beneficiaries shall be forfeited and
no longer payable to such Employee or former Employee or to any person
claiming by or through such Employee or former Employee.
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ARTICLE 11. CHANGE IN CONTROL
11.1 Treatment of Awards. In the event of a Change in Control the
Corporation shall pay to each Participant who is participating in a Plan Cycle
on the Effective Date of such Change in Control, a lump sum cash payment equal
to the amount hereinafter determined. Such payment shall be paid in cash to
the Participant within five business days after the Implementation Date of such
Change in Control and shall be payment in full to each Participant for the Plan
Cycle, and such Plan Cycle shall be deemed terminated by operation of this
Article 11. No further Plan Cycles shall commence thereafter under this Plan.
Such cash payment shall be made without regard to any request
to defer made with respect to any such Plan Cycle (which shall be inoperative)
and without regard to any deferral action by the Committee.
Amounts deferred under this Plan prior to the Effective Date
(by request, as required, or as decided by the Committee) shall continue to be
payable from time to time under this Plan as deferred payments hereunder.
11.2 Amount of Payment. The Amount of the payment to be made as a
consequence of a Change in Control shall, with respect to each Plan Cycle, be
equal to the maximum Award which could be paid hereunder to each Participant.
11.3 Definition of Change in Control. "Change in Control" shall
mean the occurrence of any of the following events:
(a) The Corporation is merged, consolidated or reorganized
into or with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than sixty-five percent of the
combined voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the aggregate by the
holders of Voting Stock immediately prior to such transaction;
(b) The Corporation sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal person,
and as a result of such sale or transfer less than sixty-five percent of the
combined voting power of the then-outstanding securities of such
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<PAGE> 16
corporation or person immediately after such sale or transfer is held in the
aggregate by the holders of Voting Stock immediately prior to such sale or
transfer;
(c) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant to
the Exchange Act, disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of
securities representing 15% or more of the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors of the Corporation ("Voting Stock");
(d) The Corporation files a report or proxy statement with
the Securities and Exchange Commission pursuant to the Exchange Act disclosing
in response to Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Corporation has
occurred or will occur in the future pursuant to any then-existing contract or
transaction; or
(e) If, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the Directors of
the Corporation cease for any reason to constitute at least a majority thereof;
provided, however, that for purposes of this clause (e) each Director who is
first elected, or first nominated for election by the Corporation's
stockholders, by a vote of at least two-thirds of the Directors of the
Corporation (or a committee thereof) then still in office who were Directors of
the Corporation at the beginning of any such period will be deemed to have been
a Director of the Corporation at the beginning of such period.
Notwithstanding the foregoing provision of paragraphs (c) or (d) above
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" shall not be deemed to have occurred for purposes of
paragraphs (c) or (d) above, solely because (1) the Corporation, (2) an entity
in which the Corporation directly or indirectly beneficially owns 50% or more
of the voting equity securities (a "Subsidiary"), or (3) any employee stock
ownership plan or any other employee benefit plan of the Corporation or any
Subsidiary either files or
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<PAGE> 17
becomes obligated to file a report or proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange Act disclosing
beneficial ownership by it of shares of Voting Stock, whether in excess of 15%
or otherwise, or because the Corporation reports that a change in control of
the Corporation has occurred or will occur in the future by reason of such
beneficial ownership.
11.4 Effective Date of Change in Control. Notwithstanding the
foregoing, in the event a Change in Control ultimately results from discussions
or negotiations involving the Corporation or any of its officers or directors,
the "Effective Date" of such Change in Control shall be the date such
discussions or negotiations commenced; otherwise, such Effective Date of a
Change in Control shall be the Implementation Date of such Change in Control.
11.5 Implementation Date of Change in Control. The "Implementation
Date" shall be the earliest to occur of the events specified in paragraphs (a),
(b), (c), (d) or (e) of Section 11.3. As used herein, the Implementation Date
of Change in Control shall be the last date of the then current Plan Cycle.
11.6 Effect of Change in Control. In addition to other vesting
under the Plan, the opportunity of a Participant to participate to the end of
the current Plan Cycle is vested in such Participant in the event of a Change
in Control, as of the Effective Date of such Change in Control.
ARTICLE 12. MISCELLANEOUS
In the event of the liquidation of the Corporation the Committee may
make any provisions for holding, handling and distributing the amounts standing
to the credit of the Participants or beneficiaries hereunder which, in the
discretion of the Committee, are appropriate and equitable under all
circumstances and which are consistent with the spirit and purposes of these
provisions.
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ARTICLE 13. AMENDMENT AND DISCONTINUANCE
The Corporation expects to continue this Plan indefinitely, but
reserves the right, by action of its shareholders, to amend it from time to
time, or to discontinue it. However, if the Corporation should amend or
discontinue this Plan, the Corporation shall remain obligated under the Plan
with respect to (1) Awards made final (and thus payable) by decision by the
Committee prior to the date of such amendment or discontinuance, (2) Awards and
rights of any Participant or beneficiary with respect to whom a Vesting Event
has occurred, and (3) with respect to amounts deferred prior to the date of
such amendment or discontinuance.
Executed this ____ day of _____________, 1994 at Cleveland, Ohio.
NATIONAL CITY CORPORATION
By:
---------------------
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SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of
December 19, 1994, by and between National City Corporation, a Delaware
corporation (the "Company"), and (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company,
is employed by the Company and/or a Subsidiary (as defined below) and has made
and is expected to continue to make major contributions to the profitability,
growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case of most
companies, the possibility of a Change in Control exists;
WHEREAS, the Company desires to assure itself of both present
and future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executive officers and other key
employees, including the Executive, applicable in the event of a Change in
Control;
WHEREAS, the Company wishes to ensure that its senior
executives and other key employees are not practically disabled from
discharging their duties in respect of a proposed or actual transaction
involving a Change in Control; and
WHEREAS, the Company desires to provide additional inducement
for the Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms: In addition to terms defined
elsewhere herein, the following terms have the following meanings when used in
this Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary
at a rate not less than the Executive's annual fixed or base
compensation as in effect for Executive immediately prior to the
occurrence of a Change in Control or such higher rate as may be in
effect from time to time.
(b) "Cause" means that, prior to any termination pursuant
to Section 3(a) hereof, the Executive shall have committed:
<PAGE> 2
(i) an intentional act of fraud, embezzlement or
theft in connection with his duties or in the course of his employment
with the Company or any Subsidiary;
(ii) intentional wrongful damage to property of
the Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or any
Subsidiary; or
(iv) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been materially harmful to the Company.
For purposes of this Agreement, no act or failure to act on the part
of the Executive shall be deemed "intentional" if it was due primarily
to an error in judgment or negligence, but shall be deemed
"intentional" only if done or omitted to be done by the Executive not
in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated
for "Cause" hereunder unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the Directors of
the Company then in office at a meeting of the Board of Directors of
the Company ("Board") called and held for such purpose, after
reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel (if the Executive chooses to have
counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, the Executive
had committed an act constituting "Cause" as herein defined and
specifying the particulars thereof in detail. Nothing herein will
limit the right of the Executive or his beneficiaries to contest the
validity or propriety of any such determination.
(c) "Change in Control" means the occurrence during the
Term of any of the following events:
(i) The Company is merged, consolidated or
reorganized into or with another corporation or other legal person,
and as a result of such merger, consolidation or reorganization less
than sixty-five percent of the combined voting power of the then-
outstanding securities of such resulting corporation or person
immediately after such transaction are held in the aggregate by the
holders of Voting Stock (as that term is hereafter defined) of the
Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all
or substantially all of its assets to another corporation or other
legal person, and as a result of such sale or transfer less than
sixty-five percent of the combined voting power of the then-
outstanding Voting Stock of such corporation or person immediately
after such sale or transfer is held in the aggregate by the holders of
Voting Stock of the Company immediately prior to such sale or
transfer;
2
<PAGE> 3
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 15% or
more of the combined voting power of the then- outstanding securities
entitled to vote generally in the election of directors ("Voting
Stock") of the Company;
(iv) The Company files a report or proxy statement
with the Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) that a change in
control of the Company has occurred or will occur in the future
pursuant to any then-existing contract or transaction; or
(v) If, during any period of two consecutive
years, individuals who at the beginning of any such period constitute
the Directors of the Company cease for any reason to constitute at
least a majority thereof; provided, however, that for purposes of this
clause (v) each Director who is first elected, or first nominated for
election by the Company's stockholders, by a vote of at least
two-thirds of the Directors of the Company (or a committee thereof)
then still in office who were Directors of the Company at the
beginning of any such period will be deemed to have been a Director of
the Company at the beginning of such period.
Notwithstanding the foregoing provisions of Sections 1(b)(iii) or
1(b)(iv), unless otherwise determined in a specific case by majority
vote of the Board, a "Change in Control" shall not be deemed to have
occurred for purposes of Sections 1(b)(iii) or 1(b)(iv) solely because
(1) the Company, (2) an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting
Stock (a "Subsidiary"), or (3) any employee stock ownership plan or
any other employee benefit plan of the Company or any Subsidiary
either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form
8-K or Schedule 14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing beneficial ownership
by it of shares of Voting Stock of the Company, whether in excess of
15% or otherwise, or because the Company reports that a change in
control of the Company has occurred or will occur in the future by
reason of such beneficial ownership.
(d) "Competitive Activity" means the Executive's
participation, without the written consent of an officer of the
Company, in the management of any business enterprise if such
enterprise engages in substantial and direct competition with the
Company and such enterprise's revenues derived from any product or
service competitive with any product or service of the Company
amounted to 10% or more of such enterprise's revenues for its most
recently completely fiscal year and if the Company's
3
<PAGE> 4
revenues of said product or service amounted to 10% of the Company's
revenues for its most recently completed fiscal year. "Competitive
Activity" will not include (i) the mere ownership of securities in any
such enterprise and the exercise of rights appurtenant thereto and
(ii) participation in the management of any such enterprise other than
in connection with the competitive operations of such enterprise.
(e) "Employee Benefits" means the perquisites, benefits
and service credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which Executive is entitled to participate, including
without limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement, or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital
or other insurance (whether funded by actual insurance or self-insured
by the Company), disability, salary continuation, expense
reimbursement and other employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies,
plans, programs or arrangements that may be adopted hereafter,
providing perquisites, benefits and service credit for benefits at
least as great in the aggregate as are payable thereunder prior to a
Change in Control.
(f) "Incentive Pay" means an annual amount equal to not
less than the highest aggregate annual bonus, incentive or other
payments of cash compensation (including, without limitation, payments
made pursuant to the Company's Long-Term Incentive Plan and Short-Term
Incentive Plan), in addition to Base Pay, made or to be made in regard
to services rendered in any calendar year during the three calendar
years immediately preceding the year in which the Change in Control
occurred pursuant to any bonus, incentive, profit-sharing,
performance, discretionary pay or similar agreement, policy, plan,
program or arrangement (whether or not funded), or any successor
thereto providing benefits at least as great as the benefits payable
thereunder prior to a Change in Control.
(g) "Severance Period" means the period of time
commencing on the date of an occurrence of a Change in Control and
continuing until the earliest of (i) the third anniversary of the
occurrence of the Change in Control, (ii) the Executive's death, or
(iii) the Executive's attainment of age 65; provided, however, that on
each anniversary of the Change in Control, the Severance Period will
automatically be extended for an additional year unless, not later
than 90 calendar days prior to such date, either the Company or the
Executive shall have given written notice to the other that the
Severance Period is not to be so extended.
(h) "Term" means the period commencing as of the date
hereof and expiring as of the later of (i) the close of business on
December 31, 1997, or (ii) the expiration of the Severance Period;
provided, however, that (A) commencing on January 1, 1996 and each
January 1 thereafter, the term of this Agreement will automatically be
extended for an additional year unless, not later than September 30 of
the immediately preceding year, the Company or the Executive shall
have given notice that it or the Executive, as the case may be, does
not wish to have the Term extended and (B) except as otherwise
provided in
4
<PAGE> 5
the last sentence of Section 8, if, prior to a Change in Control, the
Executive ceases for any reason to be an employee of the Company and
any Subsidiary, thereupon without further action the Term shall be
deemed to have expired and this Agreement will immediately terminate
and be of no further effect. For purposes of this Section 1(h), the
Executive shall not be deemed to have ceased to be an employee of the
Company or any Subsidiary by reason of the transfer of Executive's
employment between the Company and any Subsidiary, or among any
Subsidiaries.
2. Operation of Agreement: This Agreement will be
effective and binding immediately upon its execution, but, anything in this
Agreement to the contrary notwithstanding, this Agreement will not be operative
unless and until a Change in Control occurs, whereupon without further action
this Agreement shall become immediately operative.
3. Termination Following a Change in Control: (a) In
the event the Company, a Subsidiary or a successor of the Company (direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise)
terminates the Executive's employment during the Severance Period, the Executive
will be entitled to the severance compensation provided by Section 4; provided,
however, that the Executive shall not be entitled to the severance compensation
provided by Section 4 hereof only upon the occurrence of one or more of the
following events:
(i) The Executive's death occurring prior to
termination of his/her employment;
(ii) Prior to the termination of his/her
employment, the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits
pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in Control; or
(iii) Cause.
(b) In the event of the occurrence of a Change in
Control, the Executive may terminate employment with the Company and
any Subsidiary during the Severance Period with the right to severance
compensation as provided in Section 4 upon the occurrence of one or
more of the following events (regardless of whether any other reason
for such termination exists or has occurred, including without
limitation other employment):
(i) Failure to elect or reelect or otherwise to
maintain the Executive in the office or the position, or a
substantially equivalent office or position, of or with the Company
and/or a Subsidiary, as the case may be, which the Executive held
immediately prior to a Change in Control, or the removal of the
Executive as a Director of the Company (or any successor thereto) if
the Executive shall have been a Director of the Company immediately
prior to the Change in Control;
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(ii) (I) A significant adverse change in the nature or
scope of the authorities, powers, functions, responsibilities or
duties attached to the position with the Company and any Subsidiary
which the Executive held immediately prior to the Change in Control;
(II) a reduction in the aggregate of the Executive's Base Pay and
Incentive Pay received from the Company and any Subsidiary; or (III)
the termination or denial of the Executive's rights to Employee
Benefits or a reduction in the scope or value thereof, which situation
is not remedied within 10 calendar days after written notice to the
Company from the Executive;
(iii) A determination by the Executive (which
determination will be conclusive and binding upon the parties hereto
provided it has been made in good faith and in all events will be
presumed to have been made in good faith unless otherwise shown by the
Company by clear and convincing evidence) that a change in
circumstances has occurred following a Change in Control, including,
without limitation, a change in the scope of the business or other
activities for which the Executive was responsible immediately prior
to the Change in Control, which has rendered the Executive
substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer a
substantial reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to the position held by the
Executive immediately prior to the Change in Control, which situation
is not remedied within 10 calendar days after written notice to the
Company from the Executive of such determination;
(iv) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or any Subsidiary by
which Executive is employed or transfer of all or substantially all of
its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or
otherwise) to which all or substantially all of its business and/or
assets have been transferred (directly or by operation of law) assumed
all duties and obligations of the Company under this Agreement
pursuant to Section 10(a);
(v) The Company or any Subsidiary by which Executive
is employed relocates its principal executive offices, or requires the
Executive to have his principal location of work changed, to any
location which is in excess of 25 miles from the location thereof
immediately prior to the Change of Control, or requires the Executive
to travel away from his office in the course of discharging his
responsibilities or duties hereunder at least 20% more (in terms of
aggregate days in any calendar year or in any calendar quarter when
annualized for purposes of comparison to any prior year) than was
required of Executive in any of the three full years immediately prior
to the Change of Control without, in either case, his prior written
consent; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company or any
successor thereto.
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<PAGE> 7
(c) Notwithstanding anything contained in this Agreement
to the contrary, in the event of a Change in Control, the Executive
may terminate employment with the Company and any Subsidiary for any
reason, or without reason, during the 30-day period immediately
following the first anniversary of the first occurrence of a Change in
Control with the right to severance compensation as provided in
Section 4.
(d) A termination by the Company pursuant to Section 3(a)
or by the Executive pursuant to Section 3(b)or 3(c) will not affect
any rights which the Executive may have pursuant to any agreement,
policy, plan, program or arrangement of the Company providing Employee
Benefits, which rights shall be governed by the terms thereof.
4. Severance Compensation: (a) If, following the
occurrence of a Change in Control, the Company or any Subsidiary by which
Executive is employed terminates the Executive's employment during the
Severance Period other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii),
or if the Executive terminates his employment pursuant to Section 3(b) or 3(c),
the Company will pay to the Executive the following amounts within five
business days after the date (the "Termination Date") that the Executive's
employment is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive if the
termination is pursuant to Section 3(b) or 3(c)) and continue to provide to the
Executive the following benefits:
(i) A lump sum payment (the "Severance Payment")
in an amount equal to three times the sum of (A) Base Pay (at the
highest rate in effect for any period prior to the Termination Date),
plus (B) Incentive Pay (determined in accordance with the standards
set forth in Section 1(f)).
(ii) (A) for thirty-six months (the "Continuation
Period") following the Termination Date, the Company will arrange to
provide the Executive with Employee Benefits that are welfare benefits
(but not stock option, stock purchase, stock appreciation or similar
compensatory benefits) substantially similar to those which the
Executive was receiving or entitled to receive immediately prior to
the Termination Date, and (B) such Continuation Period will be
considered service with the Company, assuming the amount of Base Pay
and Incentive Pay payable to the Executive during the calendar year
immediately preceding the year in which the Change in Control occurs,
for the purpose of determining service credits and benefits due and
payable to the Executive under the Company's retirement income,
supplemental executive retirement and other benefit plans of the
Company applicable to the Executive, his dependents or his
beneficiaries immediately prior to the Termination Date. If and to
the extent that any benefit described in subsections (A) and (B) of
this Section 4(a)(ii) is not or cannot be paid or provided under any
policy, plan, program or arrangement of the Company or any Subsidiary,
as the case may be, then the Company will itself pay or provide for
the payment to the Executive, his dependents and beneficiaries, of
such Employee Benefits. Without otherwise limiting the purposes or
effect of Section 5, Employee Benefits otherwise receivable by the
Executive pursuant to the subsection (A) of this Section 4(a)(ii) will
be
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<PAGE> 8
reduced to the extent comparable welfare benefits are actually
received by the Executive from another employer during the
Continuation Period, and any such benefits received by the Executive
shall be reported by the Executive to the Company.
(b) There will be no right of set-off or counterclaim in
respect of any claim, debt or obligation against any payment to or
benefit for the Executive provided for in this Agreement, except as
expressly provided in the last sentence of Section 4(a)(ii).
(c) Without limiting the rights of the Executive at law
or in equity, if the Company fails to make any payment or provide any
benefit required to be made or provided hereunder on a timely basis,
the Company will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime
rate" as quoted from time to time during the relevant period in the
Midwest Edition of The Wall Street Journal. Such interest will be
payable as it accrues on demand. Any change in such prime rate will
be effective on and as of the date of such change.
(d) Notwithstanding any other provision hereof, the
parties' respective rights and obligations under this Section 4 and
under Section 7 will survive any termination or expiration of this
Agreement following a Change in Control or the termination of the
Executive's employment following a Change in Control for any reason
whatsoever.
5. No Mitigation Obligation: The Company hereby
acknowledges that it will be difficult and may be impossible (a) for the
Executive to find reasonably comparable employment following the Termination
Date, and (b) to measure the amount of damages which Executive may suffer as a
result of termination of employment hereunder. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable and will
be liquidated damages, and the Executive will not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise, nor will any profits, income, earnings or other
benefits from any source whatsoever create any mitigation, offset, reduction or
any other obligation on the part of the Executive hereunder or otherwise,
except as expressly provided in the last sentence of Section 4(a)(ii).
6. Certain Additional Payments by the Company: (a)
Anything in this Agreement to the contrary notwithstanding, in the event that
this Agreement shall become operative and it shall be determined (as hereafter
provided) that any payment or distribution by the Company or any of its
affiliates to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue
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<PAGE> 9
Code (or any successor provision thereto) by reason of being considered
"contingent on a change in ownership or control" of the Company, within the
meaning of Section 280G of the Internal Revenue Code (or any successor
provision thereto) or to any similar tax imposed by state or local law, or any
interest or penalties with respect to such tax (such tax or taxes, together
with any such interest and penalties, being hereafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment or payments (collectively, a "Gross-Up Payment"); provided,
however, that no Gross-Up Payment shall be made with respect to the Excise Tax,
if any, attributable to (A) any incentive stock option, as defined by Section
422 of the Internal Revenue Code ("ISO"), granted prior to the execution of
this Agreement, or (B) any stock appreciation or similar right, whether or not
limited, granted in tandem with any ISO described in clause (A). The Gross-Up
Payment shall be in an amount such that, after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payment.
(b) Subject to the provisions of Section 6(f) hereof, all
determinations required to be made under this Section 6, including
whether an Excise Tax is payable by the Executive and the amount of
such Excise Tax and whether a Gross-Up Payment is required to be paid
by the Company to the Executive and the amount of such Gross-Up
Payment, if any, shall be made by a nationally recognized accounting
firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive shall direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the
Termination Date, if applicable, and any such other time or times as
may be requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the Executive, the
Company shall pay the required Gross-Up Payment to the Executive
within five business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall, at the same time as it makes such determination,
furnish the Company and the Executive an opinion that the Executive
has substantial authority not to report any Excise Tax on his federal,
state or local income or other tax return. As a result of the
uncertainty in the application of Section 4999 of the Internal Revenue
Code (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the
time of any determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts or fails to pursue its remedies pursuant to Section
6(f) hereof and the Executive thereafter is required to make a payment
of any Excise Tax, the Executive shall direct the Accounting Firm to
determine the amount of the Underpayment that has occurred and to
submit its determination and detailed supporting calculations to both
the Company and the Executive as promptly as possible. Any such
Underpayment shall be promptly paid by the Company to, or for the
benefit of, the Executive within five business days after receipt of
such determination and calculations.
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(c) The Company and the Executive shall each provide the
Accounting Firm access to and copies of any books, records and
documents in the possession of the Company or the Executive, as the
case may be, reasonably requested by the Accounting Firm, and
otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determinations and calculations
contemplated by Section 6(b) hereof. Any determination by the
Accounting Firm as to the amount of the Gross-Up Payment shall be
binding upon the Company and the Executive.
(d) The federal, state and local income or other tax
returns filed by the Executive shall be prepared and filed on a
consistent basis with the determination of the Accounting Firm with
respect to the Excise Tax payable by the Executive. The Executive
shall make proper payment of the amount of any Excise Payment, and at
the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local
tax returns, if relevant, as filed with the applicable taxing
authority, and such other documents reasonably requested by the
Company, evidencing such payment. If prior to the filing of the
Executive's federal income tax return, or corresponding state or local
tax return, if relevant, the Accounting Firm determines that the
amount of the Gross-Up Payment should be reduced, the Executive shall
within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations
contemplated by Section 6(b) hereof shall be borne by the Company. If
such fees and expenses are initially paid by the Executive, the
Company shall reimburse the Executive the full amount of such fees and
expenses within five business days after receipt from the Executive of
a statement therefor and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service or any other taxing
authority that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as
promptly as practicable but no later than 10 business days after the
Executive actually receives notice of such claim and the Executive
shall further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the
extent known by the Executive). The Executive shall not pay such
claim prior to the earlier of (i) the expiration of the
30-calendar-day period following the date on which he gives such
notice to the Company and (ii) the date that any payment of such
amount with respect to such claim is due. If the Company notifies the
Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(i) provide the Company with any written records
or documents in his possession relating to such claim reasonably
requested by the Company;
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(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including without limitation accepting
legal representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably selected by
the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 6(f), the Company shall control all proceedings taken in
connection with the contest of any claim contemplated by this Section 6(f) and,
at its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim (provided, however, that the Executive may participate therein at
his own cost and expense) and may, at its option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
the tax claimed and sue for a refund, the Company shall advance the amount of
such payment to the Executive on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income or other tax, including interest or penalties with respect thereto,
imposed with respect to such advance; and provided further, however, that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which the contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of any such contested claim shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(g) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6(f) hereof, the Executive receives
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 6(f) hereof) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section 6(f)
hereof, a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the Executive
in writing of its intent to contest such denial or refund prior to the
expiration of 30 calendar days after such determination, then such advance
shall be forgiven and
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<PAGE> 12
shall not be required to be repaid and the amount of any such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid by the Company to the Executive pursuant to this Section 6.
7. Legal Fees and Expenses. It is the intent of the
Company that the Executive not be required to incur legal fees and the related
expenses associated with the interpretation, enforcement or defense of
Executive's rights under this Agreement by litigation or otherwise because the
cost and expense thereof would substantially detract from the benefits intended
to be extended to the Executive hereunder. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits provided or
intended to be provided to the Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain counsel of Executive's
choice, at the expense of the Company as hereafter provided, to advise and
represent the Executive in connection with any such interpretation, enforcement
or defense, including without limitation the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
Director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship with
such counsel, and in that connection the Company and the Executive agree that a
confidential relationship shall exist between the Executive and such counsel.
Without respect to whether the Executive prevails, in whole or in part, in
connection with any of the foregoing, the Company will pay and be solely
financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing.
8. Employment Rights; Termination Prior to Change in
Control: Nothing expressed or implied in this Agreement will create any right
or duty on the part of the Company or the Executive to have the Executive
remain in the employment of the Company or any Subsidiary prior to or following
any Change in Control. Any termination of employment of the Executive or the
removal of the Executive from the office or position in the Company following
the commencement of any discussion with a third person that ultimately results
in a Change in Control shall be deemed to be a termination or removal of the
Executive after a Change in Control for purposes of this Agreement.
9. Withholding of Taxes: The Company may withhold from
any amounts payable under this Agreement all federal, state, city or other
taxes as the Company is required to withhold pursuant to any law or government
regulation or ruling.
10. Successors and Binding Agreement: (a) The Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
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Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This Agreement will
be binding upon and inure to the benefit of the Company and any successor to
the Company, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business or assets of the Company
whether by purchase, merger, consolidation, reorganization or otherwise (and
such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or
delegable by the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and
legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 10(a) and 10(b)
hereof. Without limiting the generality or effect of the foregoing,
the Executive's right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of
a security interest, or otherwise, other than by a transfer by
Executive's will or by the laws of descent and distribution and, in
the event of any attempted assignment or transfer contrary to this
Section 10(c), the Company shall have no liability to pay any amount
so attempted to be assigned, transferred or delegated.
11. Notices: For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
five business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three business
days after having been sent by a nationally recognized overnight courier
service such as Federal Express, UPS, or Purolator, addressed to the Company
(to the attention of the Secretary of the Company) at its principal executive
office and to the Executive at his principal residence, or to such other
address as any party may have furnished to the other in writing and in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
12. Governing Law: The validity, interpretation,
construction and performance of this Agreement will be governed by and
construed in accordance with the substantive laws of the State of Delaware,
without giving effect to the principles of conflict of laws of such State.
13. Validity: If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement
and the application of such provision to any other person or circumstances
will not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal.
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14. Miscellaneous: No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
15. Counterparts: This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
NATIONAL CITY CORPORATION
By
---------------------
Edward B. Brandon
Chairman and CEO
---------------------
<<Name>>
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Rec_Num NAME
1 Edward B. Brandon
2 David A. Daberko
3 William R. Robertson
4 William E. MacDonald III
5 Charles W. Hall
6 Jon L. Gorney
7 Harold B. Todd, Jr.
8 Robert G. Siefers
9 Robert J. Ondercik
10 Jeffrey D. Kelly
11 David L. Zoeller
12 Thomas A. Richlovsky
13 Thomas W. Owen
14 Gary A. Glaser
15 Vincent A. DiGirolamo
16 Morton Boyd
<PAGE> 1
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of
December 19, 1994, by and between National City Corporation, a Delaware
corporation (the "Company"), and (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company,
is employed by the Company and/or a Subsidiary (as defined below) and has made
and is expected to continue to make major contributions to the profitability,
growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case of most
companies, the possibility of a Change in Control exists;
WHEREAS, the Company desires to assure itself of both present
and future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executive officers and other key
employees, including the Executive, applicable in the event of a Change in
Control;
WHEREAS, the Company wishes to ensure that its senior
executives and other key employees are not practically disabled from
discharging their duties in respect of a proposed or actual transaction
involving a Change in Control; and
WHEREAS, the Company desires to provide additional inducement
for the Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms: In addition to terms defined
elsewhere herein, the following terms have the following meanings when used in
this Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary
at a rate not less than the Executive's annual fixed or base
compensation as in effect for Executive immediately prior to the
occurrence of a Change in Control or such higher rate as may be in
effect from time to time.
(b) "Cause" means that, prior to any termination pursuant
to Section 3(a) hereof, the Executive shall have committed:
<PAGE> 2
(i) an intentional act of fraud, embezzlement or
theft in connection with his duties or in the course of his employment
with the Company or any Subsidiary;
(ii) intentional wrongful damage to property of
the Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or any
Subsidiary; or
(iv) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been materially harmful to the Company.
For purposes of this Agreement, no act or failure to act on the part
of the Executive shall be deemed "intentional" if it was due primarily
to an error in judgment or negligence, but shall be deemed
"intentional" only if done or omitted to be done by the Executive not
in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated
for "Cause" hereunder unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the Directors of
the Company then in office at a meeting of the Board of Directors of
the Company ("Board") called and held for such purpose, after
reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel (if the Executive chooses to have
counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, the Executive
had committed an act constituting "Cause" as herein defined and
specifying the particulars thereof in detail. Nothing herein will
limit the right of the Executive or his beneficiaries to contest the
validity or propriety of any such determination.
(c) "Change in Control" means the occurrence during the
Term of any of the following events:
(i) The Company is merged, consolidated or
reorganized into or with another corporation or other legal person,
and as a result of such merger, consolidation or reorganization less
than sixty-five percent of the combined voting power of the then-
outstanding securities of such resulting corporation or person
immediately after such transaction are held in the aggregate by the
holders of Voting Stock (as that term is hereafter defined) of the
Company immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all
or substantially all of its assets to another corporation or other
legal person, and as a result of such sale or transfer less than
sixty-five percent of the combined voting power of the then-
outstanding Voting Stock of such corporation or person immediately
after such sale or transfer is held
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in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 15% or
more of the combined voting power of the then-outstanding securities
entitled to vote generally in the election of directors ("Voting
Stock") of the Company;
(iv) The Company files a report or proxy statement
with the Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) that a change in
control of the Company has occurred or will occur in the future
pursuant to any then-existing contract or transaction; or
(v) If, during any period of two consecutive
years, individuals who at the beginning of any such period constitute
the Directors of the Company cease for any reason to constitute at
least a majority thereof; provided, however, that for purposes of
this clause (v) each Director who is first elected, or first nominated
for election by the Company's stockholders, by a vote of at least
two-thirds of the Directors of the Company (or a committee thereof)
then still in office who were Directors of the Company at the
beginning of any such period will be deemed to have been a Director of
the Company at the beginning of such period.
Notwithstanding the foregoing provisions of Sections 1(b)(iii) or
1(b)(iv), unless otherwise determined in a specific case by majority
vote of the Board, a "Change in Control" shall not be deemed to have
occurred for purposes of Sections 1(b)(iii) or 1(b)(iv) solely because
(1) the Company, (2) an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting
Stock (a "Subsidiary"), or (3) any employee stock ownership plan or
any other employee benefit plan of the Company or any Subsidiary
either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form
8-K or Schedule 14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing beneficial ownership
by it of shares of Voting Stock of the Company, whether in excess of
15% or otherwise, or because the Company reports that a change in
control of the Company has occurred or will occur in the future by
reason of such beneficial ownership.
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(d) "Competitive Activity" means the Executive's
participation, without the written consent of an officer of the
Company, in the management of any business enterprise if such
enterprise engages in substantial and direct competition with the
Company and such enterprise's revenues derived from any product or
service competitive with any product or service of the Company
amounted to 10% or more of such enterprise's revenues for its most
recently completely fiscal year and if the Company's revenues of said
product or service amounted to 10% of the Company's revenues for its
most recently completed fiscal year. "Competitive Activity" will not
include (i) the mere ownership of securities in any such enterprise
and the exercise of rights appurtenant thereto and (ii) participation
in the management of any such enterprise other than in connection with
the competitive operations of such enterprise.
(e) "Employee Benefits" means the perquisites, benefits
and service credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which Executive is entitled to participate, including
without limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement, or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital
or other insurance (whether funded by actual insurance or self-insured
by the Company), disability, salary continuation, expense
reimbursement and other employee benefit policies, plans, programs or
arrangements that may now exist or any equivalent successor policies,
plans, programs or arrangements that may be adopted hereafter,
providing perquisites, benefits and service credit for benefits at
least as great in the aggregate as are payable thereunder prior to a
Change in Control.
(f) "Incentive Pay" means an annual amount equal to not
less than the highest aggregate annual bonus, incentive or other
payments of cash compensation (including, without limitation, payments
made pursuant to the Company's Long-Term Incentive Plan and Short-Term
Incentive Plan), in addition to Base Pay, made or to be made in regard
to services rendered in any calendar year during the three calendar
years immediately preceding the year in which the Change in Control
occurred pursuant to any bonus, incentive, profit-sharing,
performance, discretionary pay or similar agreement, policy, plan,
program or arrangement (whether or not funded), or any successor
thereto providing benefits at least as great as the benefits payable
thereunder prior to a Change in Control.
(g) "Severance Period" means the period of time
commencing on the date of an occurrence of a Change in Control and
continuing until the earliest of (i) the third anniversary of the
occurrence of the Change in Control, (ii) the Executive's death, or
(iii) the Executive's attainment of age 65; provided, however, that on
each anniversary of the Change in Control, the Severance Period will
automatically be extended for an additional year unless, not later
than 90 calendar days prior to such date, either the Company or the
Executive shall have given written notice to the other that the
Severance Period is not to be so extended.
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(h) "Term" means the period commencing as of the date
hereof and expiring as of the later of (i) the close of business on
December 31, 1997, or (ii) the expiration of the Severance Period;
provided, however, that (A) commencing on January 1, 1996 and each
January 1 thereafter, the term of this Agreement will automatically be
extended for an additional year unless, not later than September 30 of
the immediately preceding year, the Company or the Executive shall
have given notice that it or the Executive, as the case may be, does
not wish to have the Term extended and (B) except as otherwise
provided in the last sentence of Section 8, if, prior to a Change in
Control, the Executive ceases for any reason to be an employee of the
Company and any Subsidiary, thereupon without further action the Term
shall be deemed to have expired and this Agreement will immediately
terminate and be of no further effect. For purposes of this Section
1(h), the Executive shall not be deemed to have ceased to be an
employee of the Company or any Subsidiary by reason of the transfer of
Executive's employment between the Company and any Subsidiary, or
among any Subsidiaries.
2. Operation of Agreement: This Agreement will be
effective and binding immediately upon its execution, but, anything in this
Agreement to the contrary notwithstanding, this Agreement will not be operative
unless and until a Change in Control occurs, whereupon without further action
this Agreement shall become immediately operative.
3. Termination Following a Change in Control: (a) In the
event the Company, a Subsidiary or a successor of the Company (direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise)
terminates the Executive's employment during the Severance Period, the
Executive will be entitled to the severance compensation provided by
Section 4; provided, however, that the Executive shall not be entitled to
the severance compensation provided by Section 4 hereof only upon the
occurrence of one or more of the following events:
(i) The Executive's death occurring prior to
termination of his/her employment;
(ii) Prior to the termination of his/her
employment, the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits
pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in Control;
or
(iii) Cause.
(b) In the event of the occurrence of a Change in Control,
the Executive may terminate employment with the Company and any
Subsidiary during the Severance Period with the right to severance
compensation as provided in Section 4 upon the occurrence of one or
more of the following events (regardless of whether any other reason.
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for such termination exists or has occurred, including without
limitation other employment):
(i) Failure to elect or reelect or otherwise to
maintain the Executive in the office or the position, or a
substantially equivalent office or position, of or with the Company
and/or a Subsidiary, as the case may be, which the Executive held
immediately prior to a Change in Control, or the removal of the
Executive as a Director of the Company (or any successor thereto) if
the Executive shall have been a Director of the Company immediately
prior to the Change in Control;
(ii) (I) A significant adverse change in the nature
or scope of the authorities, powers, functions, responsibilities or
duties attached to the position with the Company and any Subsidiary
which the Executive held immediately prior to the Change in Control;
(II) a reduction in the aggregate of the Executive's Base Pay and
Incentive Pay received from the Company and any Subsidiary; or (III)
the termination or denial of the Executive's rights to Employee
Benefits or a reduction in the scope or value thereof, which situation
is not remedied within 10 calendar days after written notice to the
Company from the Executive;
(iii) A determination by the Executive (which
determination will be conclusive and binding upon the parties hereto
provided it has been made in good faith and in all events will be
presumed to have been made in good faith unless otherwise shown by the
Company by clear and convincing evidence) that a change in
circumstances has occurred following a Change in Control, including,
without limitation, a change in the scope of the business or other
activities for which the Executive was responsible immediately prior
to the Change in Control, which has rendered the Executive
substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer a
substantial reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to the position held by the
Executive immediately prior to the Change in Control, which situation
is not remedied within 10 calendar days after written notice to the
Company from the Executive of such determination;
(iv) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or any Subsidiary by
which Executive is employed or transfer of all or substantially all of
its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or
otherwise) to which all or substantially all of its business and/or
assets have been transferred (directly or by operation of law) assumed
all duties and obligations of the Company under this Agreement
pursuant to Section 10(a);
(v) The Company or any Subsidiary by which
Executive is employed relocates its principal executive offices, or
requires the Executive to have his principal
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location of work changed, to any location which is in excess of 25
miles from the location thereof immediately prior to the Change of
Control, or requires the Executive to travel away from his office in
the course of discharging his responsibilities or duties hereunder at
least 20% more (in terms of aggregate days in any calendar year or in
any calendar quarter when annualized for purposes of comparison to any
prior year) than was required of Executive in any of the three full
years immediately prior to the Change of Control without, in either
case, his prior written consent; or
(vi) Without limiting the generality or effect of
the foregoing, any material breach of this Agreement by the Company or
any successor thereto.
(c) A termination by the Company pursuant to Section 3(a)
or by the Executive pursuant to Section 3(b) will not affect any
rights which the Executive may have pursuant to any agreement, policy,
plan, program or arrangement of the Company providing Employee
Benefits, which rights shall be governed by the terms thereof.
4. Severance Compensation: (a) If, following the
occurrence of a Change in Control, the Company or any Subsidiary by which
Executive is employed terminates the Executive's employment during the
Severance Period other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii),
or if the Executive terminates his employment pursuant to Section 3(b), the
Company will pay to the Executive the following amounts within five business
days after the date (the "Termination Date") that the Executive's employment is
terminated (the effective date of which shall be the date of termination, or
such other date that may be specified by the Executive if the termination is
pursuant to Section 3(b)) and continue to provide to the Executive the
following benefits:
(i) A lump sum payment (the "Severance Payment")
in an amount equal to three times the sum of (A) Base Pay (at the
highest rate in effect for any period prior to the Termination Date),
plus (B) Incentive Pay (determined in accordance with the standards
set forth in Section 1(f)).
(ii) (A) for thirty-six months (the "Continuation
Period") following the Termination Date, the Company will arrange to
provide the Executive with Employee Benefits that are welfare benefits
(but not stock option, stock purchase, stock appreciation or similar
compensatory benefits) substantially similar to those which the
Executive was receiving or entitled to receive immediately prior to
the Termination Date, and (B) such Continuation Period will be
considered service with the Company, assuming the amount of Base Pay
and Incentive Pay payable to the Executive during the calendar year
immediately preceding the year in which the Change in Control occurs,
for the purpose of determining service credits and benefits due and
payable to the Executive under the Company's retirement income,
supplemental executive retirement and other benefit plans of the
Company applicable to the Executive, his dependents or his
beneficiaries immediately prior to the Termination Date. If and to
the extent that any benefit described
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in subsections (A) and (B) of this Section 4(a)(ii) is not or cannot
be paid or provided under any policy, plan, program or arrangement of
the Company or any Subsidiary, as the case may be, then the Company
will itself pay or provide for the payment to the Executive, his
dependents and beneficiaries, of such Employee Benefits. Without
otherwise limiting the purposes or effect of Section 5, Employee
Benefits otherwise receivable by the Executive pursuant to the
subsection (A) of this Section 4(a)(ii) will be reduced to the extent
comparable welfare benefits are actually received by the Executive
from another employer during the Continuation Period, and any such
benefits received by the Executive shall be reported by the Executive
to the Company.
(b) There will be no right of set-off or counterclaim in
respect of any claim, debt or obligation against any payment to or
benefit for the Executive provided for in this Agreement, except as
expressly provided in the last sentence of Section 4(a)(ii).
(c) Without limiting the rights of the Executive at law
or in equity, if the Company fails to make any payment or provide any
benefit required to be made or provided hereunder on a timely basis,
the Company will pay interest on the amount or value thereof at an
annualized rate of interest equal to the so-called composite "prime
rate" as quoted from time to time during the relevant period in the
Midwest Edition of The Wall Street Journal. Such interest will be
payable as it accrues on demand. Any change in such prime rate will
be effective on and as of the date of such change.
(d) Notwithstanding any other provision hereof, the
parties' respective rights and obligations under this Section 4 and
under Section 7 will survive any termination or expiration of this
Agreement following a Change in Control or the termination of the
Executive's employment following a Change in Control for any reason
whatsoever.
5. No Mitigation Obligation: The Company hereby
acknowledges that it will be difficult and may be impossible (a) for the
Executive to find reasonably comparable employment following the Termination
Date, and (b) to measure the amount of damages which Executive may suffer as a
result of termination of employment hereunder. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable and will
be liquidated damages, and the Executive will not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other
employment or otherwise, nor will any profits, income, earnings or other
benefits from any source whatsoever create any mitigation, offset, reduction or
any other obligation on the part of the Executive hereunder or otherwise,
except as expressly provided in the last sentence of Section 4(a)(ii).
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6. Certain Additional Payments by the Company: (a)
Anything in this Agreement to the contrary notwithstanding, in the event that
this Agreement shall become operative and it shall be determined (as hereafter
provided) that any payment or distribution by the Company or any of its
affiliates to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code (or any successor provision thereto) by reason of being
considered "contingent on a change in ownership or control" of the Company,
within the meaning of Section 280G of the Internal Revenue Code (or any
successor provision thereto) or to any similar tax imposed by state or local
law, or any interest or penalties with respect to such tax (such tax or taxes,
together with any such interest and penalties, being hereafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment or payments (collectively, a "Gross-Up Payment");
provided, however, that no Gross-Up Payment shall be made with respect to the
Excise Tax, if any, attributable to (A) any incentive stock option, as defined
by Section 422 of the Internal Revenue Code ("ISO"), granted prior to the
execution of this Agreement, or (B) any stock appreciation or similar right,
whether or not limited, granted in tandem with any ISO described in clause (A).
The Gross-Up Payment shall be in an amount such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed upon the Gross- Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 6(f)
hereof, all determinations required to be made under this Section 6,
including whether an Excise Tax is payable by the Executive and the
amount of such Excise Tax and whether a Gross-Up Payment is required
to be paid by the Company to the Executive and the amount of such
Gross-Up Payment, if any, shall be made by a nationally recognized
accounting firm (the "Accounting Firm") selected by the Executive in
his sole discretion. The Executive shall direct the Accounting Firm
to submit its determination and detailed supporting calculations to
both the Company and the Executive within 30 calendar days after the
Termination Date, if applicable, and any such other time or times as
may be requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the Executive, the
Company shall pay the required Gross-Up Payment to the Executive
within five business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall, at the same time as it makes such determination,
furnish the Company and the Executive an opinion that the Executive
has substantial authority not to report any Excise Tax on his federal,
state or local income or other tax return. As a result of the
uncertainty in the application of Section 4999 of the Internal Revenue
Code (or any successor provision thereto) and the possibility of
similar
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uncertainty regarding applicable state or local tax law at the time of
any determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts or fails to pursue its remedies pursuant to Section
6(f) hereof and the Executive thereafter is required to make a payment
of any Excise Tax, the Executive shall direct the Accounting Firm to
determine the amount of the Underpayment that has occurred and to
submit its determination and detailed supporting calculations to both
the Company and the Executive as promptly as possible. Any such
Underpayment shall be promptly paid by the Company to, or for the
benefit of, the Executive within five business days after receipt of
such determination and calculations.
(c) The Company and the Executive shall each
provide the Accounting Firm access to and copies of any books, records
and documents in the possession of the Company or the Executive, as
the case may be, reasonably requested by the Accounting Firm, and
otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determinations and calculations
contemplated by Section 6(b) hereof. Any determination by the
Accounting Firm as to the amount of the Gross-Up Payment shall be
binding upon the Company and the Executive.
(d) The federal, state and local income or other
tax returns filed by the Executive shall be prepared and filed on a
consistent basis with the determination of the Accounting Firm with
respect to the Excise Tax payable by the Executive. The Executive
shall make proper payment of the amount of any Excise Payment, and at
the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local
tax returns, if relevant, as filed with the applicable taxing
authority, and such other documents reasonably requested by the
Company, evidencing such payment. If prior to the filing of the
Executive's federal income tax return, or corresponding state or local
tax return, if relevant, the Accounting Firm determines that the
amount of the Gross-Up Payment should be reduced, the Executive shall
within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm
for its services in connection with the determinations and
calculations contemplated by Section 6(b) hereof shall be borne by the
Company. If such fees and expenses are initially paid by the
Executive, the Company shall reimburse the Executive the full amount
of such fees and expenses within five business days after receipt from
the Executive of a statement therefor and reasonable evidence of his
payment thereof.
(f) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service or any other
taxing authority that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be
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given as promptly as practicable but no later than 10 business days
after the Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid (in
each case, to the extent known by the Executive). The Executive shall
not pay such claim prior to the earlier of (i) the expiration of the
30-calendar-day period following the date on which he gives such
notice to the Company and (ii) the date that any payment of such
amount with respect to such claim is due. If the Company notifies the
Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(i) provide the Company with any written records
or documents in his possession relating to such claim reasonably
requested by the Company;
(ii) take such action in connection with
contesting such claim as the Company shall reasonably request in
writing from time to time, including without limitation accepting
legal representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably selected by
the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 6(f), the Company shall control all proceedings taken in
connection with the contest of any claim contemplated by this Section 6(f) and,
at its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim (provided, however, that the Executive may participate therein at
his own cost and expense) and may, at its option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
the tax claimed and sue for a refund, the Company shall advance the amount of
such payment to the Executive on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income or other tax, including interest or penalties with respect thereto,
imposed with respect to such advance; and provided further, however, that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to
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which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested
claim shall be limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(g) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6(f) hereof, the Executive
receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
6(f) hereof) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 6(f) hereof, a
determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial or refund
prior to the expiration of 30 calendar days after such determination,
then such advance shall be forgiven and shall not be required to be
repaid and the amount of any such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid by the
Company to the Executive pursuant to this Section 6.
7. Legal Fees and Expenses. It is the intent of the
Company that the Executive not be required to incur legal fees and the related
expenses associated with the interpretation, enforcement or defense of
Executive's rights under this Agreement by litigation or otherwise because the
cost and expense thereof would substantially detract from the benefits intended
to be extended to the Executive hereunder. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits provided or
intended to be provided to the Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain counsel of Executive's
choice, at the expense of the Company as hereafter provided, to advise and
represent the Executive in connection with any such interpretation, enforcement
or defense, including without limitation the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
Director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship with
such counsel, and in that connection the Company and the Executive agree that a
confidential relationship shall exist between the Executive and such counsel.
Without respect to whether the Executive prevails, in whole or in part, in
connection with any of the foregoing, the Company will pay and be solely
financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing.
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8. Employment Rights; Termination Prior to Change in
Control: Nothing expressed or implied in this Agreement will create any right
or duty on the part of the Company or the Executive to have the Executive
remain in the employment of the Company or any Subsidiary prior to or following
any Change in Control. Any termination of employment of the Executive or the
removal of the Executive from the office or position in the Company following
the commencement of any discussion with a third person that ultimately results
in a Change in Control shall be deemed to be a termination or removal of the
Executive after a Change in Control for purposes of this Agreement.
9. Withholding of Taxes: The Company may withhold from
any amounts payable under this Agreement all federal, state, city or other
taxes as the Company is required to withhold pursuant to any law or government
regulation or ruling.
10. Successors and Binding Agreement: (a) The Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the
business or assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This Agreement will
be binding upon and inure to the benefit of the Company and any successor to
the Company, including without limitation any persons acquiring directly or
indirectly all or substantially all of the business or assets of the Company
whether by purchase, merger, consolidation, reorganization or otherwise (and
such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or
delegable by the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and
legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 10(a) and 10(b)
hereof. Without limiting the generality or effect of the foregoing,
the Executive's right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of
a security interest, or otherwise, other than by a transfer by
Executive's will or by the laws of descent and distribution and, in
the event of any attempted assignment or transfer contrary to this
Section 10(c), the Company shall have no liability to pay any amount
so attempted to be assigned, transferred or delegated.
11. Notices: For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand
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delivered or dispatched by electronic facsimile transmission (with receipt
thereof orally confirmed), or five business days after having been mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive office and to the Executive at his
principal residence, or to such other address as any party may have furnished
to the other in writing and in accordance herewith, except that notices of
changes of address shall be effective only upon receipt.
12. Governing Law: The validity, interpretation,
construction and performance of this Agreement will be governed by and
construed in accordance with the substantive laws of the State of Delaware,
without giving effect to the principles of conflict of laws of such State.
13. Validity: If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement
and the application of such provision to any other person or circumstances
will not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal.
14. Miscellaneous: No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
15. Counterparts: This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same agreement.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered as of the date first above written.
NATIONAL CITY CORPORATION
By -------------------------
Edward B. Brandon
Chairman and CEO
-------------------------
<<Name>>
15
<PAGE> 16
Rec_Num NAME
1 W. Douglas Bannerman
2 William Cornett, Jr.
3 Thomas H. Schroth
4 Robert J. Rupp
5 Timothy J. Driscoll
6 Shelley J. Seifert
7 James R. Bell III
8 Jeffrey M. Biggar
9 John A. Dunham
10 James H. Gilmour
11 Gregory L. Tunis
12 Stephen McLane
13 Dorothy M. Horvath
14 A. Joseph Parker
15 Frederick W. Schantz
16 John V. White
17 Glenn R. Knific
18 W. Glenn Smith
19 William H. Olds, Jr.
20 Leonard V. Hardin
21 Barbara K. Pence
22 Bruce T. Muddell
23 Robert E. Hawkins
24 John W. Woods III
25 William H. Schecter
26 J. Christopher Graffeo
27 Robert E. Showalter
28 Delroy R. Hayunga
29 Leo E. Knight, Jr.
30 Tony G. Holcombe
31 Paul G. Clark
<PAGE> 1
Exhibit 10.24
THE NATIONAL CITY SAVINGS AND INVESTMENT PLAN
(As Amended and Restated Effective July 1, 1992)
<PAGE> 2
THE NATIONAL CITY SAVINGS AND INVESTMENT PLAN
National City Corporation, a Delaware corporation, hereby
adopts this amendment and restatement of its profit sharing plan known as The
National City Savings and Investment Plan (known prior to this amendment and
restatement as The National City Savings and Investment Plan and Trust) (the
"Plan"), effective as of July 1, 1992.
ARTICLE I. - DEFINITIONS AND CONSTRUCTION
1.1 Definitions. The following terms when used in the Plan
and the Trust Agreement with initial capital letters, unless the context
clearly indicates otherwise, shall have the following respective meanings:
(1) Account and Sub-Account: As defined in Section 5.2.
(2) Administrator or Plan Administrator: The Administrator
of the Plan, as defined in ERISA Section 3(16)(A) and Code Section 414(g),
shall be the Company, which may delegate all or any part of its powers, duties
and authorities in such capacity (without ceasing to be the Administrator of
the Plan) as hereinafter provided.
(3) After-Tax Contributions: After-Tax Contributions, if
any, made to the Plan prior to January 1, 1987.
(4) Before-Tax Contributions: Before-Tax Contributions
provided for in Section 3.1.
(5) Beneficiary: A Participant's Death Beneficiary or any
other person who, after the death of a Participant, is
<PAGE> 3
entitled to receive any benefit payable with respect to such Participant.
(6) Break in Service and 1-Year Break in Service: An
Employee or former Employee incurs a Break in Service or a 1-Year Break in
Service if he terminates employment with the Controlled Group in an Employment
Year and completes not more than 500 Hours of Service in such Employment Year
or in any succeeding Employment Year.
(7) Business Day: Each day during which both the Trust
Department of the Trustee and the New York Stock Exchange are open for regular
conduct of business.
<PAGE> 4
(8) Capital Preservation Fund: (a) One of the Investment
Funds provided for under the Plan. The Capital Preservation Fund shall be
invested and reinvested principally in "Guaranteed Investment Contracts" and
"Bank Investment Contracts", as defined below, but shall not be invested in any
security or obligations of any Controlled Group Member. Obligations or
instruments which are appropriate investments for the Money Market Fund may be
purchased and held in the Capital Preservation Fund pending the selection and
purchase of suitable investments under the preceding sentence or for the
purpose of maintaining sufficient liquidity to provide for the payment of
withdrawals, or for transfers, from the Capital Preservation Fund and for
expenses incurred in connection with the investment and management of the
Capital Preservation Fund. Investments of the Capital Preservation Fund shall
be held to maturity under usual circumstances. The Trustee shall at all times
have the responsibility of maintaining in cash and readily marketable
investments such part of the investments of the Capital Preservation Fund as
shall be deemed by the Trustee to be necessary to provide adequately for the
needs of Participants who have amounts invested in the Capital Preservation
Fund and to prevent inequities between such Participants.
(b) The term "Guaranteed Investment Contract" shall mean an
insurance contract or annuity approved by applicable state authority or which
will upon appropriate submission be so approved and which meets the following
requirements: (i) the contract
<PAGE> 5
agreement is for a stated period of time; (ii) interest is guaranteed by the
insurer at a fixed or predetermined rate for that period of time; (iii)
principal amounts may be distributed upon maturity of the contract or during
the contract period as provided in the contract; and (iv) withdrawal of some
or all of the principal before maturity is permitted, but
subject to such restrictions as are stated in the contract.
(c) The term "Bank Investment Contract" shall mean an
agreement with a federally insured bank or savings and loan association ("Bank
or S/L") pursuant to which the Trustee agrees to deposit funds of the Capital
Preservation Fund with such Bank or S/L under the following general terms and
conditions: (i) the deposit shall be a time deposit (a deposit which shall not
be payable until the passage of a stated period of time); (ii) interest shall
be payable at a fixed or predetermined rate for that period of time; (iii)
principal amounts may be distributed at the end of the stated period of time or
prior thereto as provided in the agreement; and (iv) withdrawal of some or all
of the principal before the end of the stated period of time is permitted, but
subject to such restrictions as are stated in the agreement.
(9) Code: The Internal Revenue Code of 1986, as it has been
and may be amended from time to time.
(10) Committee: The committee established by the Company,
certain powers, duties and authorities of which are
<PAGE> 6
provided for in Article X. The Committee shall be a Named Fiduciary hereunder.
(11) Company: National City Corporation (a Delaware
corporation) a bank holding company located in Cleveland, Ohio. The Company
shall be the Plan Administrator and a Named Fiduciary hereunder.
(12) Controlled Group: The Employers and any and all other
corporations, trades and/or businesses, the employees of which, together with
Employees of an Employer, are required by Code Section 414 to be treated as if
they were employed by a single employer.
(13) Controlled Group Member: Each corporation or
unincorporated trade or business that is or was a member of the Controlled
Group, but only during such period as it is or was such a member of the
Controlled Group.
(14) Conversion Date: The date in 1993 determined by the
Trustee, as of which the Plan and Trust will have been converted to provide
Participants with daily telephonic access to make changes in their
participation and investments in the Plan and Trust.
(15) Covered Employee: (a) An Employee of an Employer,
including a salaried executive officer but not a director as such, but
excluding: (i) any person employed as a student intern, (ii) any person who is
a law enforcement officer employed by a local, county or state government and
who is hired by an Employer to perform off-duty security services, (iii) any
<PAGE> 7
person who is an Employee of an Employer who is included by such Employer in
its Special Project Employee employment classification, (iv) any person
employed by National Processing Company, Inc. or its successor who is treated
as a non-exempt employee under the Fair Labor Standards Act, (v) any person
employed by the Military Banking Division of Merchants National Bank & Trust
Company of Indianapolis or its successor, except for individuals employed in
the Military Banking Administration Department of such Division, and except for
individuals of such Division serving on an expatriate rotational basis
assignment outside the United States of from two to five years, which
assignment has been approved as such by the Board of Directors of Merchants
National Bank & Trust Company of Indianapolis, or or its successor, (vi)
effective as of January 1, 1987 any person who is a leased employee (within the
meaning of Section 1.1(19)).
(b) Notwithstanding the foregoing provisions of this
Subsection, in the event of acquisition by an Employer of all or part of the
operating assets of another business organization (which is not an Employer) or
a merger of such another business organization with an Employer, the Company
shall determine whether or not individuals who are employed in the business
operation(s) thus acquired or resulting and who would otherwise satisfy the
definition of the term Covered Employee hereunder should be considered Covered
Employees under the Plan; provided, however, that to the extent any individual
employed in such a business operation is not considered a Covered Employee
pursuant to this
<PAGE> 8
sentence, his employment in such business operation shall be deemed employment
in the employ of a Controlled Group Member; and, provided further, that no
action shall be taken pursuant to this sentence which would discriminate in
favor of Highly Compensated Employees.
(16) Credited Compensation: (a) Regular salary and regular
straight-time hourly wages paid by an Employer to an Employee. Unless
otherwise provided in the Plan, an Employee's Credited Compensation shall be
calculated prior to any reduction thereof made pursuant to a Salary Reduction
Agreement under the Plan or pursuant to any agreement under Code Section 125.
Except as otherwise provided in the following sentence, "Credited Compensation"
shall not include overtime pay, bonuses, suggestion awards, commissions,
incentive compensation payments or other forms of special compensation.
Notwithstanding the foregoing sentence, with respect to periods while an
Employee is classified by an Employer as being in one of the employment
classifications listed below, effective for the times specified below
applicable to each such classification, "Credited Compensation" shall include
commissions paid by the Employer for work performed in that employment
classification, provided that the total Credited Compensation taken into
account under the Plan for any Year for such an Employee shall be limited to
the dollar amount set forth below opposite the employment classification
applicable to the Employee.
<PAGE> 9
<TABLE>
<CAPTION>
Maximum Amount of Credited
Effective Employment Compensation Taken into
times Classification Account Per Year
- ---------- -------------- --------------------------
<S> <C> <C>
Jan. 1, 1990 - 12/31/93 Residential Mortgage Loan Originator $40,000
Jan. 1, 1994 & after Residential Mortgage Loan Originator $50,000
10119130
Jan. 1, 1990 -12/31/93 Residential Mortgage Loan Originator
Branch Manager $50,000
Jan. 1, 1994 & after Branch Mgr I - Originations 10119050 $70,000
Jan. 1, 1994 & after Branch Mgr II - Originations 10119060 $70,000
Jan. 1, 1994 & after Branch Mgr III - Originations 10119070 $70,000
Jan. 1, 1994 & after Sales Manager/NCMC 10119140 $70,000
Jan. 1, 1992 - 12/31/93 NC Investments Investment Broker $40,000
March 1, 1992 - 12/31/93 Investment Sales Representative $40,000
Jan. 1, 1994 & after Investment Sales Rep I 10613320 $50,000
March 1, 1992 -12/31/93 Investment Sales Representative II $40,000
Jan. 1, 1994 & after Investment Sales Rep II 10809280 $50,000
March 1, 1992 -12/31/93 Investment Sales Representative III $40,000
Jan. 1, 1994 -12/31 94 Investment Sales Rep III 11005880 $50,000
Jan. 1, 1995 & after Investment Sales Rep III 11005880 $100,000
Jan. 1, 1995 & after Investment Sales Rep IV 11104440 $100,000
Jan. 1. 1992 - 12/31/93 NC Investments Investment Sales Manager $50,000
Jan. 1, 1994 & after Sales Manager/NC Investments 11006660 $50,000
Jan. 1, 1994 & after Investment Consultant 10119100 $50,000
Jan. 1, 1995 & after Investment Consultant-Sr 10119105 $100,000
Jan. 1, 1994 - 12/31/94 Investment Trader III 11005885 $50,000
Jan. 1. 1995 & after NCI Trader 11005885 $50,000
Jan.. 1, 1995 & after NCI Trader-Sr 11005884 $100,000
Nov. 1, 1994 & after CS Collector $50,000
</TABLE>
(b) Notwithstanding the foregoing provisions of this
Subsection, effective as of January 1, 1989, Credited Compensation of an
Employee taken into account for any purpose for any Plan Year shall not exceed
the limitation in effect for such Year under
<PAGE> 10
Code Section 401(a)(17). For purposes of the preceding sentence, in the case
of a Highly Compensated Employee who is a 5-percent owner (as such term is
defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated
Employees, (i) such Highly Compensated Employee and his family members (which
for this purpose shall mean an Employee's Spouse and lineal descendants who
have not attained age 19 before the close of the Year in question) shall be
treated as a single Employee and the Compensation of such family members shall
be aggregated with the Credited Compensation of such Highly Compensated
Employee, and (ii) the limitation on Credited Compensation shall be allocated
among such Highly Compensated Employee and his family members in proportion to
each individual's Credited Compensation.
(c) Notwithstanding the foregoing provisions of this
Subsection, effective as of January 1, 1994 the following shall apply:
(1) In addition to other applicable limitations set forth in
the Plan, and notwithstanding any other provision of the Plan to the contrary
for Plan Years beginning on or after January 1, 1994, the annual compensation
of each person taken into account under the Plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is $150,000,
as adjusted by the Commissioner of Internal Revenue for increases in the cost
of living in accordance with section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies to
any period, not exceeding 12
<PAGE> 11
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the determination
period, and the denominator of which is 12.
(2) For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under section 401(a)(17) of the Code
shall mean the OBRA '93 annual compensation limit set forth in this provision.
(3) If compensation for any prior determination period is
taken into account in determining any person's benefits accruing in the current
Plan Year, the compensation for that prior determination period is subject to
the OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination period beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
(17) Death Beneficiary: A Participant's Spouse or, if he has
no Spouse or if his Spouse consents (in the manner hereinafter described in
this Subsection) to the designation hereinafter provided for in this
Subsection, such person or persons (natural or legal) other than, or in
addition to, his Spouse as may be designated by a Participant as his Death
Beneficiary under the Plan. Such a designation may be made, revoked or changed
(without the consent of any previously
<PAGE> 12
designated Death Beneficiary, except as otherwise provided herein) only by an
instrument (in form provided by the Committee) which is signed by the
Participant, which, if he has a Spouse, includes his Spouse's written consent
to the action to be taken pursuant to such instrument (unless such action
results in the Spouse being named as the Participant's sole Death Beneficiary),
and which is filed with the Committee before the Participant's death. A
Spouse's consent required by this Subsection shall be signed by the Spouse,
shall acknowledge the effect of such consent, shall be witnessed by any person
designated by the Committee as a Plan representative or by a notary public and
shall be effective only with respect to such Spouse. A Spouse's consent is not
required if it is established to the satisfaction of a Plan representative that
the consent cannot be obtained because there is no Spouse, because the Spouse
cannot be located, or because of such other circumstances as the Secretary of
the Treasury may prescribe by regulations. In default of such a designation
and at any other time when there is no existing Death Beneficiary designated by
the Participant, his Death Beneficiary shall be, in the following order of
priority: his surviving Spouse, his surviving children (both natural and
adopted), his surviving parents or his estate. If, under the preceding
sentence, the Death Beneficiary consists of a class of two or more persons,
such persons shall share equally in benefits under the Plan. A person
designated by a Participant as his Death Beneficiary who ceases to exist prior
to or on the date of the Participant's death shall cease to be a Death
<PAGE> 13
Beneficiary. If a Death Beneficiary is a natural person who dies after the
Participant's death, the Death Beneficiary shall be the estate of such deceased
Death Beneficiary. In any case in which the Committee concludes it cannot
determine whether a Death Beneficiary designated by a Participant survived the
Participant, it shall be conclusively presumed that such Death Beneficiary
died before the Participant.
(18) Disability: The physical or mental impairment of a
presumably permanent and continuous nature which renders a Participant
incapable of performing the duties the Participant is employed to perform for
his Employer when such impairment commences, all as determined by the Committee
upon the basis of evidence submitted to it by the Participant or the
Participant's physician within a reasonable time after the Committee requests
such evidence.
(19) Early Retirement Age and Early Retirement Date: A
Participant shall attain Early Retirement Age upon his attainment of age 55 and
completion of 10 Employment Years and a Participant's Early Retirement Date
shall be the first day of the calendar month following the Participant's
attainment of Early Retirement Age.
(20) Eligible Employee: An Employee who is eligible for
participation in the Plan in accordance with the provisions of Article II.
(21) Employee: An employee of a Controlled Group Member and,
to the extent required by Code Section 414(n), any
<PAGE> 14
person who is a "leased employee" of a Controlled Group Member. For purposes
of this Subsection, effective as of January 1, 1987, a "leased employee" means
any person who, pursuant to an agreement between a Controlled Group Member and
any other person ("leasing organization"), has performed services for the
Controlled Group Member 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 Controlled Group Member. Contributions
or benefits provided a leased employee by the leasing organization which are
attributable to services performed for a Controlled Group Member will be
treated as provided by the Controlled Group Member. A leased employee will not
be considered an Employee of a Controlled Group Member, however, if (a) leased
employees do not constitute more than 20 percent of the Controlled Group
Member's nonhighly compensated work force (within the meaning of Code Section
414(n)(5)(C)(ii)) and (b) such leased employee is covered by a money purchase
pension plan maintained by the leasing organization that provides (i) a
nonintegrated employer contribution rate of at least 10 percent of Credited
Compensation, (ii) immediate participation and (iii) full and immediate
vesting.
(22) Employer: The Company and any other corporation or business
organization adopting the Plan pursuant to Article XII. However, in the case of
any person which adopts or has adopted the Plan and which ceases or has ceased
to exist,
<PAGE> 15
ceases to be a member of the Controlled Group or withdraws or is eliminated
from the Plan, it shall not thereafter be an Employer.
(23) Employer Contributions: Matching Employer Contributions
provided for in Section 3.5, Profit Sharing Matching Contributions provided for
in Section 3.7, Qualified Nonelective Contributions provided for in Section
3.10 and ESOP Contributions and Supplemental ESOP Contributions provided for in
Section 16.5.
(24) Employment Year: The 12-month period beginning on the
first day an Employee performs an Hour of Service for a Controlled Group Member
after initially becoming an Employee (or after again becoming an Employee
following a Break in Service) and each subsequent 12-month period.
(25) Enrollment Date: The first day of any calendar month
following an Employee's completion of the eligibility requirements of Article
II.
(26) Equity Fund: One of the Investment Funds provided under
the Plan. The Equity Fund shall be invested and reinvested only in common or
capital stocks, or in bonds, debentures or preferred stocks convertible into
common or capital stocks, or in any partnership or limited partnership the
purposes of which are to invest or reinvest the partnership assets in any such
securities, but the Equity Fund shall not be invested in any security of a
Controlled Group Member. However, obligations or instruments which are
appropriate investments for the Money Market Fund may be purchased and held in
the Equity Fund pending the
<PAGE> 16
selection and purchase of suitable investments under the preceding sentence.
(27) ERISA: The Employee Retirement Income Security Act of
1974, as amended.
(28) ESOP Contributions: Employer Contributions to the Plan
to be applied to payment of principal and/or interest under an ESOP Loan
pursuant to Section 16.5(2)(a).
(29) ESOP Feature: The portion of the Plan described in
Article XVI.
(30) ESOP Loan: A loan described in Section 16.3.
(31) Fiduciary: Any person who (a) exercises any
discretionary authority or discretionary control respecting management of the
Plan or exercises any authority or control respecting management or disposition
of the Trust Fund, (b) renders investment advice for a fee or other
compensation, direct or indirect, with respect to the Trust Fund, or has
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan or the Trust
Fund. The term "Fiduciary" shall also include any person to whom a Named
Fiduciary delegates any of its or his fiduciary responsibilities hereunder in
accordance with the provisions of the Plan or Trust Agreement as long as such
designation is in effect.
(32) Fixed Income Fund: One of the Investment Funds provided
under the Plan. The Fixed Income Fund shall be invested and reinvested only in
those bonds, obligations, notes,
<PAGE> 17
debentures, mortgages, preferred stocks, or other tangible or intangible
property or interest in property, either real or personal, the income or return
from which is fixed, limited or determinable in advance by the terms of the
contract, document or instrument creating or evidencing such property or
interest in property, or by the terms of acquisition thereof but shall not be
invested in any security of a Controlled Group Member. However, obligations or
instruments which are appropriate investments for the Money Market Fund may be
purchased and held in the Fixed Income Fund pending the selection and purchase
of suitable investments under the preceding sentence.
(33) Hardship: Effective as of January 1, 1989, immediate and heavy
financial need on the part of a Participant for:
(a) expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, the Participant's Spouse, or any
dependents of the Participant (as defined in Code Section 152), or expenses
necessary for these persons to obtain such medical care;
(b) costs directly related to the purchase (excluding mortgage
payments) of a principal residence for the Participant;
(c) the payment of tuition and related educational fees for the next
twelve months of post-secondary education for the Participant, the
Participant's Spouse, the Participant's
<PAGE> 18
children or the Participant's dependents (as defined in Code
Section 152);
(d) payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence;
(e) repayment when due of any indebtedness incurred by the
Participant or any dependents of the Participant (as defined in Code
Section 152) to avoid insolvency; or
(f) any other financial need which the Commissioner of
Internal Revenue, through the publication of revenue rulings, notices
and other documents of general applicability, may from time to time
designate as a deemed immediate and heavy financial need as provided
in Treasury Regulations Section 1.401(k)-1(d)(2)(iv)(C).
(34) Highly Compensated Employee: (a) For a particular Plan
Year, effective January 1, 1987, any Employee who, (i) during the preceding
Plan Year, (A) was at any time a 5-percent owner (as such term is defined in
Code Section 416(i)(1)), (B) received compensation from the Controlled Group in
excess of the amount in effect for such Plan Year under Code Section
414(q)(1)(B), (C) received compensation from the Controlled Group in excess of
the amount in effect for such Plan Year under Code Section 414(q)(1)(C), and
was in the top-paid group of Employees for such Plan Year, or (D) was at any
time an officer (limited to no more than 50 Employees or, if lesser, the
greater of 3 Employees or 10 percent (10%) of the Employees) and received
<PAGE> 19
compensation greater than 50 percent (50%) of the amount in effect under Code
Section 415(b)(1)(A) for such Year, or (ii) who during the particular Plan Year
(but not the prior Plan Year) (I) was at any time a 5-percent owner (as such
term is defined in Code Section 416(i)(1)) or (II) was included in the
foregoing Clauses (B), (C) or (D) of Subparagraph (i) and was in the group
consisting of the 100 Employees paid the greatest compensation by the
Controlled Group during such Plan Year.
(b) "Highly Compensated Employee" shall include a former
Employee whose Termination of Employment occurred prior to the Plan Year and
who was a Highly Compensated Employee for the Plan Year in which his
Termination of Employment occurred or for any Plan Year ending on or after his
55th birthday.
(c) For the purposes of this Subsection, the term
"compensation" shall mean the sum of an Employee's compensation under Section
4.9(3) and the Employee's Before-Tax Contributions (subject to the limitations
described in Section 1.1(14)(b)) and the term "top-paid group of Employees"
shall mean that group of Employees of the Controlled Group consisting of the
top 20 percent (20%) of such Employees when ranked on the basis of compensation
paid by the Controlled Group during the Plan Year.
(35) Hour of Service: (a) An Employee shall be credited
with one Hour of Service for each hour for which he is paid or entitled to
payment by a Controlled Group Member: (i) for the performance of duties as an
Employee; (ii) for other than the performance of duties (for reasons such as
vacation, sickness or
<PAGE> 20
disability); or (iii) for back pay, irrespective of mitigation of damages,
awarded or agreed to by a Controlled Group Member. With respect to each
Employee whose compensation is not determined on the basis of certain amounts
for each hour worked during a given period and for whom hours of work are not
required to be counted and recorded by any federal law (other than ERISA),
Hours of Service shall be credited on the basis of 190 Hours of Service per
month if he is paid on a monthly basis, 45 Hours of Service per week if he is
paid on a weekly basis, or 10 Hours of Service per day if he is paid on a daily
basis, for each month, week or day (as the case may be) for which he receives
compensation from any Controlled Group Member. Employees shall be credited
with Hours of Service at the rates described in the preceding sentence for
leaves of absence of up to 12 months or such longer period as may be required
by law to be counted for this purpose. No hour shall be counted more than once
or be counted as more than one Hour of Service, even though more than
straight-time pay may be paid for it.
(b) If an Employee is absent from work for any period in
accordance with an Employer's approved maternity or paternity leave policy (i)
by reason of the pregnancy of such Employee, (ii) by reason of the birth of a
child of such Employee, (iii) by reason of the placement of a child with such
Employee, (iv) for purposes of caring for a child for a period beginning
immediately following the birth or placement of such child, of (v) by reason of
any absence granted or taken in partial or complete compliance
<PAGE> 21
with The Family and Medical Leave Act of 1993 or required to be provided in
accordance with the Americans With Disabilities Act, such Employee shall be
credited with Hours of Service (solely for the purposes of determining whether
he or she has incurred a Break in Service) equal to the number of Hours of
Service which otherwise would normally have been credited to him but for such
absence, or if the number of such Hours of Service is not determinable, 8 Hours
of Service per normal workday of such absence, provided, however, that the
total number of Hours of Service credited to an Employee under this paragraph
by reason of any pregnancy, birth or placement shall not exceed 501 Hours of
Service. Hours of Service credited to an Employee pursuant to this paragraph
shall be treated as Hours of Service (A) only in the Employment Year in which
an absence from work described in this paragraph begins, if the Employee would
be prevented from incurring a Break in Service in such Employment Year solely
because he is credited with Hours of Service during such absence pursuant to
this paragraph, or (B) in any other case, in the immediately following
Employment Year. Hours of Service shall not be credited to an Employee under
this paragraph unless the Employee furnishes to the Committee such timely
information as the Committee may reasonably require to establish that the
Employee's absence from work is for a reason specified in this paragraph and
the number of days for which there was such an absence.
(36) Investment Fund or Funds: The Capital Preservation
Fund, Equity Fund, Fixed Income Fund, NCC Stock Fund,
<PAGE> 22
Money Market Fund and any other fund established by the Committee under Section
5.1.
(37) Investment Manager: The person who, with respect to an
Investment Fund, has the discretion to determine which assets in such Fund
shall be sold (or exchanged) and what investments shall be acquired for such
Fund. Such person must (a) be either registered as an investment advisor under
the Investment Advisors Act of 1940, a bank as defined thereunder or an
insurance company qualified to manage, acquire or dispose of Plan assets under
the laws of more than one state, and (b) acknowledge in writing that he or it
is a Fiduciary with respect to the Plan.
(38) Loan Account: The separate recordkeeping account within
a Participant's Account established by the Administrator pursuant to Section
6.13.
(39) Matching Allocation: Any allocation made to a
Participant's Account on account of the Participant's Before-Tax
Contributions.
(40) Matching Employer Contributions: Employer Contributions
provided for in Section 3.5.
(41) Money Market Fund: One of the Investment Funds provided
for under the Plan. The Money Market Fund shall be invested and reinvested
principally in bonds, notes or other evidence of indebtedness which are payable
on demand (including variable amount notes) or which have a maturity date not
exceeding one day after the date of purchase by such Fund or, in case of an
<PAGE> 23
investment (pursuant to Section 5.1(2)(a)) in an NCB Investment Trust Fund,
which are payable by such NCB Investment Trust Fund.
(42) Named Fiduciaries: The Committee, the Company, the
Investment Manager, the Trustee, the Participants to the 5 extent provided in
Article XV, and each other person designated as a Named Fiduciary by the
Committee pursuant to the power of delegation reserved to the Committee in
Article X.
(43) NCB Investment Trust Fund: Any fund now or hereafter
established under the trust instrument executed by National City Bank on
December 4, 1956, and now entitled Declaration of Trust Establishing NCC
Investment Fund for Retirement Trusts, as such trust instrument has been or may
be amended and/or restated.
(44) NCC Stock: Common stock of National City Corporation, a
Delaware corporation.
(45) NCC Stock Fund: One of the Investment Funds provided
for under the Plan. The NCC Stock Fund shall be invested and reinvested only
in shares of common stock issued by the Company. However, obligations or
instruments which are appropriate investments for the Money Market Fund may be
purchased and held in the NCC Stock Fund pending the purchase of shares of such
common stock.
(46) Normal Retirement Age and Normal Retirement Date: A
Participant shall attain Normal Retirement Age upon his attainment of age 65
and a Participant's Normal Retirement Date
<PAGE> 24
shall be the first day of the calendar month following the Participant's
attainment of Normal Retirement Age.
(47) Participant: An Employee or former Employee who has
become and continues to be a Participant of the Plan in accordance with the
provisions of Article II, a Covered Employee who has made a Transfer
Contribution, or any other person designated as a Participant by the terms of
any Appendix.
(48) Plan: The National City Savings and Investment Plan
(known prior to this restatement as the National City Savings and Investment
Plan and Trust), the terms and provisions of which are herein set forth, as the
same may be amended, supplemented or restated from time to time. The Plan
consists of a Profit Sharing Feature and an ESOP Feature.
(49) Plan Year: A calendar year.
(50) Prior Plan: Any qualified defined contribution plan
which is merged into this Plan or the assets of which are transferred to this
Plan, as described in any Appendix to the Plan.
(51) Profit Sharing Feature: The portion of the Plan (a)
which is not included within the ESOP Feature, (b) which is intended to qualify
as a profit sharing plan under Code Section 401(a) and (c) which includes a
qualified cash or deferred arrangement within the meaning of Code Section
401(k).
(52) Profit Sharing Matching Contributions: Employer
Contributions provided for in Section 3.7.
<PAGE> 25
(53) Qualified Nonelective Contributions: A contribution
made by an Employer pursuant to Section 3.9 that (a) Participants eligible to
share therein may not elect to receive in cash until distribution from the
Plan, (b) are nonforfeitable when made, (c) are distributable only in
accordance with the distribution rules applicable to Before-Tax Contributions
and (d) are paid to the Trust Fund during the Plan Year for which made or
within the time following the close of such Plan Year which is prescribed by
law for the filing by an Employer of its federal income tax return (including
extensions thereof).
(54) Return on Equity: For a particular Plan Year, "Return
on Equity" means the percentage determined by dividing the Consolidated Net
Income of the Company for the Year by the Daily Average Consolidated
Stockholders' Equity of the Company for the Year (calculated without regard to
any preferred stock of the Company), in accordance with generally accepted
accounting principles and applicable Securities and Exchange Commission
Regulations, all as determined by the principal accounting officer of the
Company for the purpose of reporting such figures to stockholders of the
Company and others.
(55) Salary Reduction Agreement: An arrangement pursuant to
which an Employee agrees to reduce, or to forego an increase in, his Credited
Compensation and his Employer agrees to contribute to the Trust the amount so
reduced or foregone as a Before-Tax Contribution.
<PAGE> 26
(56) Spouse: The person to whom an Employee is legally
married at the specified time; provided, however, that a former Spouse may be
treated as a Spouse or surviving Spouse to the extent required under the terms
of a "qualified domestic relations order" (as such term is defined in Code
Section 414(p)).
(57) Supplemental ESOP Contributions: Employer Contributions
provided for in Section 16.5(2)(b).
(58) Transfer Contributions: The Contributions provided for
in Section 3.4.
(59) Trust and Trust Fund: The trust estate held by the
Trustee under the provisions of the Plan and the Trust Agreement, without
distinction as to principal or income.
(60) Trust Agreement: The Trust Agreement or Agreements
between the Company and the Trustee or Trustees, as such Trust Agreement or
Agreements may be amended or restated from time to time, or any trust agreement
or agreements superseding the same. Each Trust Agreement is hereby
incorporated in the Plan by reference.
(61) Trustee: The trustee or trustees under the Trust
Agreement or its or their successor or successors in trust under such Trust
Agreement.
(62) Valuation Date: The last Business Day of each calendar
month and any other Business Day(s) on which the Committee determines that the
Investment Funds shall be valued.
(63) Vested Interest: The entire amount of a Participant's
Account which has not previously been withdrawn by
<PAGE> 27
him or distributed to or for him and which is nonforfeitable. All amounts
credited to a Participant's Account shall be 100% nonforfeitable at all times
unless otherwise provided in an Appendix hereto.
1.2 Construction. (1) Unless the context otherwise
indicates, the masculine wherever used in the Plan or Trust Agreement shall
include the feminine and neuter, the singular shall include the plural and
words such as "herein", "hereof", "hereby", "hereunder" and words of similar
import refer to the Plan as a whole and not to any particular part thereof.
(2) Where headings have been supplied to portions of the Plan
and the Trust Agreement (other than the headings to the Subsections in Section
1.1), they have been supplied for convenience only and are not to be taken as
limiting or extending the meaning of any of such portions of such documents.
(3) Wherever the word "person" appears in the Plan, it shall
refer to both natural and legal persons.
(4) A number of the provisions hereof and of the Trust
Agreement are designed to contain provisions required or contemplated by
certain federal laws and/or regulations thereunder. All such provisions herein
and in the Trust Agreement are intended to have the meaning required or
contemplated by such provisions of such law or regulations and shall be
construed in accordance with valid regulations and valid published governmental
rulings and interpretations of such provisions. In applying such provisions
hereof or of the Trust Agreement, each Fiduciary may
<PAGE> 28
rely (and shall be protected in relying) on any determination or ruling made
by any agency of the United States Government that has authority to issue
regulations, rulings or determinations with respect to the federal law thus
involved.
(5) Except to the extent federal law controls, the Plan and
Trust Agreement shall be governed, construed and administered according to the
laws of the State of Ohio. All persons accepting or claiming benefits under
the Plan or Trust Agreement shall be bound by and deemed to consent to their
provisions.
(6) This amendment and restatement of the Plan is a
continuation and complete restatement of the Plan, which was originally
effective as of July 1, 1984 and subsequently amended and restated as of
January 1, 1985. Effective as of July 1, 1992, the Merchants National
Corporation Thrift Plan, which consisted of a profit sharing plan feature and
an employee stock ownership plan feature, was merged into this Plan. This
amendment and restatement shall constitute a continuation and complete
restatement of the Merchants National Corporation Thrift Plan. Effective as of
July 1, 1992, the Plan shall consist of the Profit Sharing Feature and the ESOP
Feature.
(7) This amendment and restatement is generally effective
July 1, 1992. However, certain provisions of this amendment and restatement of
the Plan are effective as of some other date. The provisions of this amendment
and restatement of the Plan which are effective prior to July 1, 1992 shall be
deemed to amend the corresponding provisions of the Plan (or to the
<PAGE> 29
extent required by law, the corresponding provisions of any Prior Plan) as in
effect before this amendment and restatement and all amendments thereto. Events
occurring before the applicable effective date of any provision of this
amendment and restatement Plan shall be governed by the applicable provision of
the Plan (or Prior Plan) in effect on the date of the event.
(8) The benefits payable with respect to an Employee or
former Employee whose employment with the Controlled Group terminated before
July 1, 1992 (and who is not rehired by a Controlled Group Member thereafter)
shall be determined by and paid in accordance with the terms and provisions of
the Plan as in effect at the date of such termination, except to the extent
that certain provisions of the Plan, as amended and restated as of July 1,
1992, apply to such individual as a result of applicable law or the context
clearly requires the application of such provision to such individual.
<PAGE> 30
ARTICLE II. - ELIGIBILITY AND PARTICIPATION
2.1 Eligible Employees. Each Employee who was a Participant
in the Plan on June 30, 1992 shall continue to be a Participant in the Plan on
July 1, 1992. Each other Employee shall become an Eligible Employee under the
Plan on the first Enrollment Date on which he meets the following requirements:
(1) he is a Covered Employee (including such an Employee who
is on a leave of absence),
(2) he has attained age 21, or he has not attained age 21 but
was eligible to have Before-Tax Contributions made for him under the
provisions of the Plan in effect on December 31, 1988, and
(3) he (a) has completed a period of at least one Employment
Year, and (b) has been credited with at least 1,000 Hours of Service.
2.2 Commencement of Participation. Any Eligible Employee
described in Section 2.1 may enroll as a Participant in the Plan on the
Enrollment Date on which he is initially eligible or on any subsequent
Enrollment Date by either (A) filing with an Employer or the Committee in the
month preceding such Date (in accordance with rules established by the
Committee) an enrollment form prescribed by the Committee which form shall
include (1) the effective date on which the Eligible Employee is to become a
Participant, (2) his election, commencing on or after such effective date, to
have Before-Tax Contributions made by or for him to the Trust, (3), (a) his
authorization, if any, to his
<PAGE> 31
Employer to withhold from his unreduced Credited Compensation for each pay
period, commencing on or after such effective date, any designated Before-Tax
Contributions and to pay the same to the Trust Fund and/or (b) his agreement,
if any, commencing on or after such effective date, to reduce, or to forego an
increase in, his unreduced Credited Compensation and to have his Employer
contribute the same as Before-Tax Contributions to the Trust Fund, and (4) his
direction that the Before-Tax Contributions made by or for him be invested in
any one of the investment options permitted by Section 5.5, or (B) if available
to the Participant, enrolling as a Participant in the Plan by means of a voice
response telephonic system, established and supervised by the Committee, which
provides for the making of decisions (1) through (4) above by telephonic
communication, confirmed in a writing mailed to the Participant within three
days.
2.3 Duration of Participation. (1) Once an Eligible Employee becomes
a Participant, he shall remain a Participant so long as he continues to be an
Employee whether or not he continues to be an Eligible Employee, provided,
however, that if a Participant ceases to be an Eligible Employee (while
remaining an Employee), Before-Tax Contributions may not be made by or for him
pursuant to Section 3.1 until he again becomes an Eligible Employee and he
again enrolls as a Participant pursuant to Sections 2.2 and 3.1.
(2) If an Account continues to be maintained for a former Employee
after his termination of employment with the
<PAGE> 32
Controlled Group, such former Employee shall remain a Participant for all
purposes of the Plan, other than for the purposes of making, or having his
Employer make, Participant or Employer Contributions hereunder.
2.4 Eligibility after Reemployment. (1) If an Employee
incurs a Break in Service before satisfying the age and service requirements of
Subsections (2) and (3) of Section 2.1 and is later reemployed before incurring
five consecutive 1-Year Breaks in Service, periods of employment before the
Break in Service shall not be taken into account in computing eligibility to
participate until he has completed one Employment Year following his
reemployment.
(2) If an Employee incurs a Break in Service before
satisfying the age and service requirements of Subsections (1) and (2) of
Section 2.1 and is later reemployed after incurring five consecutive 1-Year
Breaks in Service, periods of employment before the Break in Service shall not
be taken into account in computing eligibility to participate.
(3) If an Employee whose employment with the Controlled Group
terminates after completing the age and service requirements of Subsections (2)
and (3) of Section 2.1 is later reemployed as a Covered Employee, such Employee
shall become a Participant on the first day of the calendar month after the
month in which he enrolls as a Participant pursuant to Sections 2.2 and 3.1.
2.5 Special Rules for Transferred Participants. (1) In the
event that a Participant ceases to be an Eligible Employee
<PAGE> 33
hereunder due to a transfer of employment to a classification of Employees that
is eligible to participate in another profit sharing retirement plan maintained
by a Controlled Group Member which is qualified under Code Sections 401(a) and
401(k) (a "Comparable Savings Plan"), such Participant's Account shall be
transferred to the Comparable Savings Plan and such Participant shall no longer
be considered a Participant hereunder. Such transfer shall occur as of the day
of such transfer of employment.
(2) In the event that an individual who is a participant in a
Comparable Savings Plan shall become an Eligible Employee hereunder, (a) any
elections made by the individual on his enrollment form under the Comparable
Savings Plan shall continue in effect under this Plan as of the date he becomes
an Eligible Employee, until changed or modified in accordance with the terms
hereof, (b) such individual's account from the Comparable Savings Plan shall be
transferred to his Account hereunder as of the day such transfer of employment,
(c) the assets of such account shall be allocated to comparable Sub-Accounts
under this Plan and such transfer shall not be considered a Transfer
Contribution hereunder, (d) the provisions of any Appendix to such Comparable
Savings Plan which apply to any asset transferred to this Plan shall continue
to apply to such asset, and (e) to the extent required by applicable law, the
provisions of such Comparable Savings Plan shall continue to apply to the
assets transferred to this Plan.
<PAGE> 34
ARTICLE III - CONTRIBUTIONS
3.1 Before-Tax Contributions. Upon enrollment pursuant to
Section 2.2, a Participant shall agree pursuant to a Salary Reduction Agreement
to have his Employer make Before-Tax Contributions to the Trust of up to 10% of
his unreduced Credited Compensation (in 1% increments) by means of pay period
payments of the elected percentage. If a Participant's Before-Tax
Contributions must be reduced to comply with the requirements of Section 4.1 or
4.2 or the requirements of applicable law, his Before-Tax Contributions shall
be reduced to the next highest 1% increment of his unreduced Credited
Compensation permitted by such Section or law.
3.2 Payments to Trustee. Before-Tax Contributions made for a
Participant shall be transmitted by his Employer to the Trustee as soon as
practicable, but in any event not later than 30 days after the end of the
calendar month in which such Contributions are withheld or would otherwise have
been paid to the Participant.
3.3 Changes in, and Suspensions of, Before-Tax Contributions.
(1) The percentage or percentages designated by a Participant pursuant to
Section 3.1 shall continue in effect, notwithstanding any changes in the
Participant's Credited Compensation. A Participant may, however, in accordance
with the percentages permitted by Section 3.1, change the percentage of his
Before-Tax Contributions as often as may be permitted by the Committee by
(either (A) the completion and proper filing
<PAGE> 35
(pursuant to Committee rules) of election change forms, or (B) if available
to the Participant, effecting such change by means of a voice response
telephonic system, established and supervised by the Committee, confirmed in
a writing mailed to the Participant within three days.
(2) A Participant may at any time suspend his Before-Tax
Contributions by notifying the Committee or his Employer, pursuant to Committee
rules, of his desire to suspend such contributions. The eligibility for, and
entitlement to, future Before-Tax Contributions of a Participant who has
suspended such Contributions shall be limited as provided in rules established
by the Committee.
(3) The rules established by the Committee under this Section
shall be established and administered in a uniform and nondiscriminatory
fashion and may be amended from time to time in the sole and absolute
discretion of the Committee.
3.4 Transfer Contributions. (1) The Trustee shall, at the
direction of the Committee, receive and thereafter hold and administer as a
part of the Trust Fund for a Covered Employee (whether or not he has met the
eligibility requirements of Article II) all cash and other property which may
be transferred to the Trustee from a trust held under another plan in which the
Covered Employee was a participant, which meets the requirements of Code
Sections 401(a) and 501(a) (each such trust and plan being hereinafter in this
Section called a "Comparable Plan"). For purposes of this Subsection but not
the following Subsection (2),
<PAGE> 36
either the Comparable Plan must not be subject to the survivor annuity
requirements of Code Section 401(a)(11) or the transfer must comply with the
"elective transfer" requirements of Treasury Regulation Section 1.411(d)-4.
(2) The Trustee shall also, at the direction of the
Committee, receive and thereafter hold and administer as part of the Trust Fund
for a Participant all cash and property which shall have been distributed to
the Participant from a Comparable Plan in a distribution which constitutes a
"qualified total distribution" as such term is defined in Code Section
402(a)(5)(E)(i) and which cash and other property, or any part thereof (other
than amounts contributed by him to such Comparable Plan as employee
contributions) is transferred by him to the Trustee on or before the 60th day
after which he received such cash and other property and which transfer
otherwise meets the requirements of Code Section 402(a)(5) or 402(a)(6).
(3) Contributions made to the Trust Fund pursuant to
Subsections (1) and (2) hereof shall be referred to herein as "Transfer
Contributions." Whether or not Transfer Contributions may be made by an
Employee or group of Employees shall be determined by the Committee in its sole
and absolute discretion. Transfer Contributions will be permitted only in
amounts in excess of $1,000 and shall be in cash unless the Committee approves
a Transfer Contribution of other property. Such Transfer Contributions shall
be allocated to such existing or new Sub-Account(s) as the Trustee shall
determine and shall be invested as
<PAGE> 37
specified in Section 5.5. Subject to other provisions of the Plan and Trust
Agreement, the Trustee shall have authority to sell or otherwise convert to
cash any property transferred to it pursuant to this Section.
3.5 Amount of Matching Employer Contributions. Subject to
the provisions of the Plan and Trust Agreement, each Employer shall, as and to
the extent it lawfully may, contribute to the Trust Fund on account of each
month, Matching Employer Contributions in an amount equal to (1) 100% of the
Before-Tax Contributions for such month for each Participant with respect to
the first 3% of each such Participant's Credited Compensation and (2) 50% of
the Before-Tax Contributions for such month for each Participant with respect
to the next 4% of each such Participant's Credited Compensation. The Employer
shall deliver its Matching Employer Contributions to the Trust Fund at the same
time as the Before-Tax Contributions to which such Matching Employer
Contributions relate are delivered. Notwithstanding the foregoing provisions
of this Section, for any month during which an ESOP Loan is outstanding, ESOP
Contributions and Supplemental ESOP Contributions shall be used to fund the
Employers' obligation to make Matching Employer Contributions pursuant to this
Section and shall be applied as provided in Section 16.5.
3.6 Allocation of Matching Employer Contributions. Each
Employer's Matching Employer Contributions made for a month shall be allocated
and credited to the Account of each Participant for whom Before-Tax
Contributions were made during such month,
<PAGE> 38
with each such Participant being credited with a portion of the Employer's
Matching Employer Contribution equal to the applicable percentage (determined
under Section 3.5) of his Before-Tax Contributions for the preceding calendar
month. Notwithstanding the foregoing provisions of this Section, for any month
during which an ESOP Loan is outstanding, Participants for whom Before-Tax
Contributions were made during such month will not be credited with a Matching
Allocation pursuant to this Section, but will be allocated and credited with a
Matching Allocation in accordance with the provisions of Section 16.5.
3.7 Amount of Profit Sharing Matching Contributions.
(1) Subject to the provisions of the Plan and Trust
Agreement, each Employer shall, as and to the extent it lawfully may,
contribute to the Trust Fund on account of each Plan Year, in addition to the
Matching Employer Contributions described in Section 3.5, Profit Sharing
Matching Contributions in the amount described in Subsection (2) of this
Section. The Profit Sharing Matching Contribution of each Employer shall be
made within the time, following the close of the Plan Year for which such
Contribution is made, which is prescribed by law for the filing by each such
Employer of its federal income tax return (including extensions thereof).
(2) If the Company's Return on Equity equals or exceeds 12%
for the Plan Year, the Employers shall contribute to the Trust Fund on account
of such Year Profit Sharing Matching Contributions in an amount equal to that
determined by applying the table below
<PAGE> 39
to the Before-Tax Contributions made for such Year for each eligible
Participant as described in Section 3.8:
<TABLE>
<CAPTION>
Profit Sharing Matching
Contributions (Per $1.00
Return on Equity for Year of Before-Tax Contributions)
------------------------- ----------------------------
<S> <C>
less than 12% -0-
12% but less than 12.5% $0.02
12.5% but less than 13.0% $0.03
13.0% but less than 13.5% $0.04
13.5% but less than 14.0% $0.05
14.0% but less than 14.5% $0.06
14.5% but less than 15.0% $0.07
15.0% but less than 15.5% $0.08
15.5% but less than 16.0% $0.09
16.0% but less than 16.5% $0.10
16.5% but less than 17.0% $0.15
17.0% but less than 17.5% $0.20
17.5% but less than 18.0% $0.25
18.0% but less than 18.5% $0.30
18.5% but less than 19.0% $0.35
19.0% but less than 19.5% $0.40
19.5% but less than 20.0% $0.45
20.0% or more $0.50
</TABLE>
provided however, that with respect to the Plan Year ending December 31, 1993
and later plan Years, the table below shall apply:
<TABLE>
<CAPTION>
Profit Sharing Matching
Contributions (Per $1.00
Return on Equity for Year of Before-Tax Contributions)
------------------------- ----------------------------
<S> <C>
less than 12% -0-
12% but less than 13.5% $0.05
13.5% but less than 15.0% $0.10
15.0% but less than 15.5% $0.15
15.5% but less than 16.0% $0.20
16.0% but less than 16.5% $0.25
16.5% but less than 17.0% $0.30
17.0% but less than 17.5% $0.35
17.5% but less than 18.0% $0.40
</TABLE>
<PAGE> 40
<TABLE>
<S> <C>
18.0% but less than 18.5% $0.45
18.5% or more $0.50
</TABLE>
(3) The Company shall determine the amount of the Employer
Profit Sharing Matching Contribution, if any, to be made hereunder for each
Plan Year pursuant to the Tables set forth in Subsection (2) hereof, based upon
the Return on Equity and Net Income for the Year. Such determination shall be
effected in accordance with generally accepted accounting principles and
applicable Securities and Exchange Commission regulations in the same manner as
for the Company's reports to stockholders, by the 8 principal accounting
officer of the Company, and, upon approval by the Auditor of the Company, shall
be final and conclusive as to all interested persons for all purposes of the
Plan.
(4) Notwithstanding the foregoing provisions of this Section,
for any Plan Year during which an ESOP Loan is outstanding, ESOP Contributions
and Supplemental ESOP Contributions shall be used to fund the Employers'
obligations to make Profit Sharing Matching Contributions pursuant to this
Section and shall be applied as provided in Section 16.5.
3.8 Allocation of Profit Sharing Matching Contributions. To
be eligible to share in a Profit Sharing Matching Contribution for a Plan Year,
an individual must (1) have made Before-Tax Contributions to the Trust during
such Year, and (2) be an Employee of an Employer (including such an Employee
who is on a leave of absence) as of December 31 of such Year, provided,
however, that each individual who made such Before-Tax
<PAGE> 41
Contributions during the Year but who does not meet such Employee test on such
date because of his termination of employment during the Year on or after his
Normal or Early Retirement Date or because of his incurring a Disability during
the Year, shall, nevertheless, be eligible to share in such Profit Sharing
Matching Contribution, and provided further, that the Accounts of Employees who
made such Before-Tax Contributions during the Year but who died during the Year
shall also share in such Profit Sharing Matching Contribution. Sharing in such
Profit Sharing Matching Contribution for such Year shall be on the basis of the
respective total amounts of Before-Tax Contributions made to the Trust during
such Year, without regard to any withdrawals or distributions thereof made
after such contributions. Profit Sharing Matching Contributions shall be
allocated and credited as a Matching Allocation to eligible Participants'
Accounts as of the December 31 of the Plan Year for which they are made.
Notwithstanding the foregoing provisions of this Section, for any Plan Year
during which an ESOP Loan is outstanding, Participants who would be eligible
for a Matching Allocation pursuant to this Section shall, in lieu thereof, be
allocated and credited with a Matching Allocation in accordance with the
provisions of Section 16.5.
3.9 Reduction of Employer Contributions. The amount of
Employer Contributions determined to be payable to the Trust Fund shall be
reduced by amounts which have been forfeited or held in a suspense account in
accordance with the terms of the Plan.
<PAGE> 42
3.10 Qualified Nonelective Contributions. For any Plan Year,
the Employers may make a Qualified Nonelective Contribution (1) in such amount,
(2) for such Participants who are not Highly Compensated Employees for such
Plan Year and (3) in such proportions among such Participants as such Employer
shall deem necessary to cause Section 4.2 or 4.4 to be satisfied for such Plan
Year. Qualified Nonelective Contributions may be made irrespective of whether
the Employer has net earnings or retained earnings, and may be made in cash or
other property. Each Employer shall designate to the Trustee the Plan Year for
which and the Participants for whom any Qualified Nonelective Contribution is
made.
3.11 Allocation of Qualified Nonelective Contributions.
Qualified Nonelective Contributions shall be allocated to the Accounts of
Participants who are designated by an Employer as eligible to share therein in
such amounts as such Employer directs.
3.12 Contributions in NCC Stock. Contributions made by the
Employers hereunder shall be made in cash or in shares of NCC Stock, provided
that ESOP Contributions shall be made in cash. If a Contribution is made in
the form of NCC Stock, such contribution shall be equal to the fair market
value of such NCC Stock. Fair market value of NCC Stock shall be equal to the
last quoted price of such Stock on the date of contribution.
<PAGE> 43
ARTICLE IV. - LIMITATIONS ON CONTRIBUTIONS
4.1 Excess Deferrals. (1) Notwithstanding the provisions of
Article III, a Participant's Before-Tax Contributions for any taxable year of
such Participant commencing on or after January 1, 1987 shall not exceed the
limitation in effect under Code Section 402(g). Except as otherwise provided
in this Section, a Participant's Before-Tax Contributions for purposes of this
Section shall include (a) any employer contribution made under any qualified
cash or deferred arrangement as defined in Code Section 401(k) to the extent
not includible in gross income for the taxable year under Code Section
402(a)(8) (determined without regard to Code Section 402(g)), (b) any employer
contribution to the extent not includible in gross income for the taxable year
under Code Section 402(h)(1)(B) (determined without regard to Code Section
402(g)) and (c) any employer contribution to purchase an annuity contract under
Code Section 403(b) under a salary reduction agreement within the meaning of
Code Section 3121(a)(5)(D).
(2) In the event that a Participant's Before-Tax
Contributions exceed the amount described in Subsection (1) of this Section
(hereinafter called the "excess deferrals"), such excess deferrals (and any
income allocable thereto) shall be distributed to the Participant by April 15
following the close of the taxable year in which such excess deferrals occurred
if (and only if), by April 15 of such taxable year the Participant (a)
allocates the amount of such excess deferrals among the plans
<PAGE> 44
under which the excess deferrals were made and (b) notifies the Committee of
the portion allocated to this Plan.
(3) In the event that a Participant's Before-Tax
Contributions under this Plan exceed the amount described in Subsection (1) of
this Section, or in the event that a Participant's Before-Tax Contributions
made under this Plan do not exceed such amount but he allocates a portion of
his excess deferrals to his Before-Tax Contributions made to this Plan,
Matching Employer Contributions and Profit Sharing Matching Contributions, if
any, made with respect to such Before-Tax Contributions (and any income
allocable thereto) shall be forfeited and applied to reduce subsequent Matching
Employer Contributions and Profit Sharing Matching Contributions required under
the Plan.
4.2 Excess Before-Tax Contributions.
(1) Notwithstanding the provisions of Article III, for any
Plan Year commencing on or after January 1, 1987,
(a) the actual deferral percentage (as defined in
Subsection (2) of this Section) for the group of Highly Compensated
Eligible Employees (as defined in Subsection (3) of this Section) for
such Plan Year shall not exceed the actual deferral percentage for all
other Eligible Employees for such Plan Year multiplied by 1.25, or
(b) the excess of the actual deferral percentage for the
group of Highly Compensated Eligible Employees for such Plan Year over
the actual deferral percentage for all other
<PAGE> 45
Eligible Employees for such Plan Year shall not exceed 2 percentage
points, and the actual deferral percentage for the group of Highly
Compensated Eligible Employees for such Plan Year shall not exceed
the actual deferral percentage for all other Eligible Employees for
such Plan Year multiplied by 2.
If two or more plans which include cash or deferred arrangements are considered
as one plan for purposes of Code Sections 401(a)(4) or 410(b), such
arrangements included in such plans shall be treated as one arrangement for the
purposes of this Subsection; and if any Highly Compensated Eligible Employee is
a participant under two or more cash or deferred arrangements of the Controlled
Group, all such arrangements shall be treated as one cash or deferred
arrangement for purposes of determining the deferral percentage with respect to
such Highly Compensated Eligible Employee.
(2) For the purposes of this Section, the actual deferral
percentage for a specified group of Eligible Employees for a Plan Year shall be
the average of the ratios (calculated separately for each Eligible Employee in
such group) of (a) the amount of Before-Tax Contributions and, at the election
of an Employer, any Qualified Nonelective Contributions actually paid to the
Trust for each such Eligible Employee for such Plan Year (including any "excess
deferrals" described in Section 4.1) to (b) the Eligible Employee's
compensation for such Plan Year. For Plan Years commencing prior to January 1,
1992, any qualified matching contributions (as defined in Treasury Regulations
issued
<PAGE> 46
under Code Sections 401(k) and 401(m) may be taken into account for
purposes of the preceding sentence, at the election of an Employer. For the
purposes of this Section and Section 4.3, the term "compensation" shall mean
the sum of an Eligible Employee's compensation under Section 4.9(3) and his
Before-Tax Contributions (subject to the limitations described in Section
1.1(14)(b)). In the case of a Highly Compensated Eligible Employee who is
either a 5-percent owner (as defined in Code Section 416(i)(1)) or one of the
ten most Highly Compensated Employees, the combined actual deferral ratio for
the family group (as such term is hereinafter defined), which shall be treated
as one Highly Compensated Eligible Employee, shall be determined by combining
the Before-Tax Contributions (and, at the election of an Employer, Qualified
Nonelective Contributions) and compensation of all members of the family group
who are Eligible Employees. For the purposes of this Section and Section 4.3,
the term "family group" shall mean any Highly Compensated Eligible Employee
described in the preceding sentence and such Employee's Spouse and lineal
ascendants or descendants and the spouses of such lineal ascendants or
descendants. For the purposes of determining "the actual deferral percentage
for all other Eligible Employees" as referred to in Subsection (1) of this
Section, the Before-Tax Contributions and compensation of all members of the
family group shall be disregarded.
<PAGE> 47
(3) For the purposes of this Section, the term "Highly
Compensated Eligible Employee" for a particular Plan Year shall mean any Highly
Compensated Employee who is an Eligible Employee.
(4) In the event that excess contributions (as such term is
hereinafter defined) are made to the Trust for any Plan Year, then, prior to
March 15 of the following Plan Year, such excess contributions (and any income
allocable thereto) shall be distributed to the Highly Compensated Eligible
Employees on the basis of the respective portions of the excess contributions
attributable to each such Eligible Employee. For the purposes of this
Subsection, the term "excess contributions" shall mean, for any Plan Year, the
excess of (a) the aggregate amount of Before-Tax Contributions actually paid to
the Trust on behalf of Highly Compensated Eligible Employees for such Plan Year
over (b) the maximum amount of such Before-Tax Contributions permitted for such
Plan Year under Subsection (1) of this Section, determined by reducing
Before-Tax Contributions made on behalf of Highly Compensated Eligible
Employees in order of the actual deferral percentages (as defined in Subsection
(2) of this Section) beginning with the highest of such percentages.
Notwithstanding the foregoing provisions of this Subsection, in the case of a
Highly Compensated Eligible Employee whose actual deferral ratio is determined
under the family aggregation rules set forth in Subsection (2) of this Section,
the determination and correction of the amount of excess contributions shall be
made by reducing the actual deferral ratio in accordance with the "leveling"
method
<PAGE> 48
described in Treasury Regulations Section 1.401(k)-1(f)(2) and allocating the
excess contributions for the family group among its members in proportion to
the Before-Tax Contributions of each member of the family group that is
combined to determine the actual deferral ratio.
(5) Matching Allocations made with respect to a Participant's
excess contributions (and any income allocable thereto) shall be forfeited and
applied to reduce subsequent Matching Employer Contributions, Profit Sharing
Matching Contributions and ESOP Contributions required under the Plan.
4.3 Excess Matching Allocations. (1) Notwithstanding the
provisions of Article III, effective January 1, 1987, for any Plan Year the
contribution percentage (as defined in Subsection (2) of this Section) for the
group of Highly Compensated Eligible Employees (as defined in Section 4.2(3))
for such Plan Year shall not exceed the greater of (a) 125 percent of the
contribution percentage for all other Eligible Employees or (b) the lesser of
200 percent of the contribution percentage for all other Eligible Employees, or
the contribution percentage for all other Eligible Employees plus 2 percentage
points. If two or more plans of the Controlled Group to which matching
contributions, employee after-tax contributions or before-tax contributions (as
defined in Section 4.1(1)) are made are treated as one plan for purposes of
Code Section 410(b), such plans shall be treated as one plan for purposes of
this Subsection; and if a Highly Compensated Eligible Employee participates in
two or more plans of the Controlled Group
<PAGE> 49
to which such contributions are made, all such contributions shall be
aggregated for purposes of this Subsection.
(2) For the purposes of this Section, the contribution
percentage for a specified group of Eligible Employees for a Plan Year shall be
the average of the ratios (calculated separately for each Eligible Employee in
such group) of (a) the Matching Allocations made under the Plan for each such
Eligible Employee for such Plan Year to (b) the Eligible Employee's
compensation (as defined in Section 4.2(2)) for such Plan Year. In the case of
a Highly Compensated Eligible Employee who is either a 5-percent owner (as
defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated
Employees, the combined contribution ratio for the family group (as such term
is defined in Section 4.2(2)), which shall be treated as one Highly Compensated
Employee, shall be determined by combining the Matching Allocations and
compensation of all members of the family group who are Eligible Employees.
For the purposes of determining "the contribution percentage for all other
Eligible Employees" as referred to in Subsection (1) of this Section, the
Matching Allocations for, and the compensation of, all members of the family
group shall be disregarded.
(3) In the event that excess aggregate contributions (as such
term is hereinafter defined) are made to the Trust for any Plan Year, then,
prior to March 15 of the following Plan Year, such excess contributions (and
any income allocable thereto) shall be forfeited (if forfeitable) and applied
as provided in
<PAGE> 50
Section 3.9 or (if not forfeitable) shall be distributed to the Highly
Compensated Eligible Employees on the basis of the respective portions of the
excess contributions attributable to each such Eligible Employee. For the
purposes of this Subsection, the term "excess aggregate contributions" shall
mean, for any Plan Year, the excess of (a) the aggregate amount of the Matching
Allocations made for Highly Compensated Eligible Employees for such Plan Year
over (b) the maximum amount of such Matching Allocations permitted for such
Plan Year under Subsection (1) of this Section, determined by reducing Matching
Allocations made for Highly Compensated Eligible Employees in order of their
contribution percentages (as defined in Subsection (2) of this Section)
beginning with the highest of such percentages. Notwithstanding the foregoing
provisions of this Subsection, in the case of a Highly Compensated Eligible
Employee whose contribution percentage is determined under the family
aggregation rules set forth in Subsection (2) of this Section, the
determination and correction of the amount of excess aggregate contributions
shall be made by reducing the contribution ratio in accordance with the
"leveling" method described in Treasury Regulation Section 1.401(m)-1(c)(2) and
allocating the excess aggregate contributions for the family group among its
members in proportion to the Matching Allocations of each member of the family
group that is combined to determine the contribution ratio.
(4) The determination of excess aggregate contributions under
this Section shall be made after (a) first determining the
<PAGE> 51
excess deferrals under Section 4.1 and (b) then determining the excess
contributions under Section 4.2.
4.4 Multiple Use of the Alternative Limitation.
(1) Notwithstanding the provisions of Article III or the
foregoing provisions of this Article IV, effective January 1, 1989, if, after
the application of Sections 4.1, 4.2 and 4.3, the sum of the actual deferral
percentage and the contribution percentage for the group of Highly Compensated
Eligible Employees (as defined in Section 4.2(3)) exceeds the aggregate limit
(as defined in Subsection (2) of this Section), then the contributions made for
such Plan Year for Highly Compensated Eligible Employees will be reduced so
that the aggregate limit is not exceeded. Such reductions shall be made first
in Before-Tax Contributions (but only to the extent that they are not matched
by Matching Allocations) and then in Matching Allocations. Reductions in
contributions shall be made in the manner provided in Section 4.2 or 4.3, as
applicable. The amount by which each such Highly Compensated Eligible
Employee's contribution percentage amount is reduced shall be treated as an
excess contribution or an excess aggregate contribution under Section 4.2 or
4.3, as applicable. For the purposes of this Section, the actual deferral
percentage and contribution percentage of the Highly Compensated Eligible
Employees are determined after any reductions required to meet those tests
under Sections 4.2 and 4.3. Notwithstanding the foregoing provisions of this
Section, no reduction shall be required by this Subsection if either (a) the
actual deferral
<PAGE> 52
percentage of the Highly Compensated Eligible Employees does not exceed 1.25
multiplied by the actual deferral percentage of the non-Highly Compensated
Eligible Employees, or (b) the contribution percentage of the Highly
Compensated Eligible Employees does not exceed 1.25 multiplied by the
contribution percentage of the non-Highly Compensated Eligible Employees.
(2) For purposes of this Section, the term "aggregate limit"
means the sum of (a) 125% of the greater of (i) the actual deferral percentage
of the non-Highly Compensated Eligible Employees for the Plan Year, or (ii) the
contribution percentage of the non-Highly Compensated Eligible Employees for
the Plan Year, and (b)4 the lesser of (A) 200% of, or (B) two (2) plus, the
lesser of such actual deferral percentage or contribution percentage. If it
would result in a larger aggregate limit, the word "lesser" is substituted for
the word "greater" in part (a) of this Subsection, and the word "greater" is
substituted for the word "lesser" the second place such word appears in part
(b) of this Subsection.
4.5 Monitoring Procedures. (1) In order to ensure that at
least one of the actual deferral percentages specified in Section 4.2(1) and at
least one of the contribution percentages specified in Section 4.3(1) and the
aggregate limit specified in Section 4.4(2) are satisfied for each Plan Year,
the Company shall monitor (or cause to be monitored) the amount of Before-Tax
Contributions and Matching Allocations being made to the Plan by or for each
Eligible Employee during each Plan Year. In the event
<PAGE> 53
that the Company determines that neither of such actual deferral percentages,
neither of such contribution percentages or such aggregate limit will be
satisfied for a Plan Year, and if the Committee in its sole discretion
determines that it is necessary or desirable, the Before-Tax Contributions
and/or the Matching Allocations made thereafter by or for each Highly
Compensated Eligible Employee (as defined in Section 4.2(3)) may be reduced
(pursuant to non-discriminatory rules adopted by the Company) to the extent
necessary to decrease the actual deferral percentage and/or the contribution
percentage for Highly Compensated Eligible Employees for such Plan Year to a
level which satisfies either of the actual deferral percentages, either of the
contribution percentages and/or the aggregate limit.
(2) In order to ensure that excess deferrals (as such term is
defined in Section 4.1(2)) shall not be made to the Plan for any taxable year
for any Participant, the Company shall monitor (or cause to be monitored) the
amount of Before-Tax Contributions being made to the Plan for each Participant
during each taxable year and may take such action (pursuant to non-
discriminatory rules adopted by the Company) to prevent Before-Tax
Contributions made for any Participant under the Plan for any taxable year from
exceeding the maximum amount applicable under Section 4.1(1).
(3) The actions permitted by this Section are in addition to,
and not in lieu of, any other actions that may be taken pursuant to other
Sections of the Plan or that may be
<PAGE> 54
permitted by applicable law or regulation in order to ensure that the
limitations described in Sections 4.1, 4.2, 4.3 and 4.4 are met.
4.6 Testing Procedures. (1) In applying the limitations set
forth in Sections 4.2, 4.3 and 4.4, the Company may, at its option, utilize
such testing procedures as may be permitted under Code Sections 401(a)(4),
401(k), 401(m) or 410(b), including, without limitation, (a) aggregation of the
Plan with one or more other qualified plans of the Controlled Group, (b)
inclusion of qualified matching contributions, qualified nonelective
contributions or elective deferrals described in, and meeting the requirements
of, Treasury Regulations under Code Sections 401(k) and 401(m) to any other
qualified plan of the Controlled Group in applying the limitations set forth in
Sections 4.2, 4.3 and 4.4, or (c) any permissible combination thereof.
(2) Notwithstanding the foregoing provisions of this Article,
to the extent required by the Code and Treasury Regulations the limitations of
Sections 4.2, 4.3 and 4.4 shall be applied separately to each of the Profit
Sharing Feature and the ESOP Feature.
4.7 Limitations on Employer and Before-Tax Contributions.
Notwithstanding any provision of the Plan to the contrary, any Before-Tax
Contributions or Employer Contributions hereunder for any Plan Year shall in no
event exceed the amount that would be deductible by an Employer for such Plan
Year for
<PAGE> 55
federal income tax purposes and each Before-Tax Contribution and Employer
Contribution to the Trust Fund made by any Employer is hereby specifically
conditioned upon such deductibility.
4.8 Return of Contributions to Employers. (1) Except as
specifically provided in this Section or in the other Sections of the Plan, the
Trust Fund shall never inure to the benefit of the Employers and shall be held
for the exclusive purposes of providing benefits to Employees, Participants and
their Beneficiaries and defraying reasonable expenses of administering the
Plan.
(2) If an Employer Contribution to the Trust Fund is made by
an Employer by a mistake of fact, the excess of the amount contributed over the
amount that would have been contributed had there not occurred a mistake of
fact shall be returned to such Employer within one year after the payment of
such Contribution. If an Employer Contribution to the Trust Fund made by an
Employer which is conditioned upon the deductibility of the Contribution under
Code Section 404 (or any successor thereto) is not fully deductible under such
Code Section (or any successor thereto), such Contribution, to the extent the
deduction therefor is disallowed, shall be returned to the Employer within one
year after the disallowance of the deduction. Earnings attributable to
Employer Contributions returned to an Employer pursuant to this Subsection may
not be returned, but losses attributable thereto shall reduce the amount to be
returned; provided, however, that if the withdrawal of the amount attributable
to the mistaken or non-
<PAGE> 56
deductible contribution would cause the balance of the individual Account of
any Participant to be reduced to less than the balance which would have been in
such Account had the mistaken or non-deductible amount not have been
contributed, the amount to be returned to the Employer pursuant to this Section
shall be limited so as to avoid such reduction.
4.9 Maximum Additions. (1) Notwithstanding the provisions
of Article III or the foregoing provision of this Article IV, effective as of
January 1, 1987, the maximum annual addition (as defined in Subsection (2) of
this Section) to a Participant's Account for any Plan Year (which shall be the
limitation year) shall in no event exceed the lesser of (a) $30,000 (or, if
greater, one-fourth of the dollar limitation in effect under Code Section
415(b)(1)(A)) or (b) 25% of his compensation for such Plan Year.
(2) For the purpose of this Section, the term "annual
additions" means the sum for any Plan Year of:
(a) all contributions (including, without limitation,
Before-Tax Contributions made pursuant to Section 3.1) made by the
Controlled Group which are allocated to the Participant's account
pursuant to a defined contribution plan maintained by a Controlled
Group Member,
(b) all employee contributions made by the Participant to a
defined contribution plan maintained by a Controlled Group Member,
<PAGE> 57
(c) all forfeitures allocated to the Participant's account
pursuant to a defined contribution plan maintained by a Controlled
Group Member,
(d) any amount allocated to an individual medical benefit
account (as defined in section 415(1)(2) of the Code) of the
Participant which is part of a pension or annuity plan, and
(e) any amount attributable to medical benefits allocated to
the Participant's account established under Code Section 419A(d)(1) if
the Participant is or was a key-employee (as such term is defined in
Code Section 416(i)) during such Plan Year or any preceding Plan Year.
(3) For the purposes of this Section, the term "compensation"
shall mean Compensation within the meaning of Code Section 415(c)(3) and
regulations thereunder.
(4) If a Participant's annual additions would exceed the
limitations of Subsection (1) of this Section for a Plan Year as a result of
the allocation of forfeitures, a reasonable error in estimating the
Participant's compensation, or a reasonable error in determining the amount of
Before-Tax Contributions that may be made with respect to the Participant under
the limitations of this Section (or other facts and circumstances which the
Commissioner of Internal Revenue finds justify application of the following
rules of this Subsection), Employer Contributions allocable to such
Participant's Account for such Plan Year shall, to the extent necessary to
cause the limitations of Subsection (1)
<PAGE> 58
of this Section not to be exceeded for such Plan Year, be held by the Trustee
in a suspense account and shall be used to reduce Employer Contributions for
the next Plan Year (and succeeding Plan Years, as necessary) for such
Participant if such Participant is covered by the Plan at the end of any such
Plan Year; and if he is not covered by the Plan at the end of any such Plan
Year, such Employer Contributions held by the Trustee in such suspense account
shall be allocated and reallocated to the accounts of other Participants,
except that no such allocation or reallocation shall cause the limitations of
Subsection (1) of this Section to be exceeded for any such other Participant
for such Plan Year. Investment gains and losses shall not be allocated to the
suspense account during the period such suspense account is required to be
maintained pursuant to this Subsection. In the event of a termination of the
Plan, any then remaining balance of the suspense account, to the extent it may
not then be allocated to Participants, shall revert to the Employers. If the
allocation of such Employer Contributions to the suspense account described in
this Subsection is not sufficient to cause the limitations of Subsection (1) of
this Section not to be exceeded for such Plan Year, Before-Tax Contributions
made for such Participant for such Plan Year which constitute part of the
annual additions (together with any gains attributable thereto) shall be
returned to him to the extent necessary to effectuate such reduction.
<PAGE> 59
(5) Notwithstanding the foregoing provisions of this Section,
in the event that an ESOP Loan is made to the Plan pursuant to the ESOP Feature
the following rules shall apply:
(a) If some or all of any Plan contribution is designated to
repay the ESOP Loan, a portion of the amount of the contribution
(exclusive of dividends) used to repay the ESOP Loan shall be
attributed to each Participant who is eligible for an allocation
pursuant to Sections 3.6, 3.8 or 3.11 in proportion to his share of
the total amount allocated to all Participants pursuant to Sections
3.6, 3.8 and 3.11. Such attributable portion shall be treated as an
annual addition for purposes of this Section. Assets released from
the ESOP Suspense Account (as defined in Section 16.1) shall not
constitute an annual addition for purposes of this Section. Any
earnings allocated under Section 16.13(3) as a result of gains from
the sale of unallocated NCC Stock held under the ESOP Feature shall
not constitute an annual addition; and
(b) If in a Plan Year no more than one-third of the
deductible Employer contributions to the Plan are allocated to Highly
Compensated Employees, forfeitures of NCC Stock shall not constitute
an annual addition as long as such forfeited shares were acquired with
the proceeds of an ESOP Loan, and Employer contributions used to make
interest payments on an ESOP Loan shall not constitute an annual
addition.
<PAGE> 60
4.10 Maximum Benefits. (1) Except as otherwise provided in
Code Section 415(e), in any case in which an individual is a participant in
both a defined benefit plan and a defined contribution plan maintained by the
Controlled Group, the sum of the defined benefit plan fraction and the defined
contribution plan fraction for any Plan Year shall not exceed 1. In the event
a reduction is necessary to avoid exceeding the limitation set forth in this
Section, the affected Participant's benefits under the defined benefit plan
shall be reduced to the extent necessary to avoid exceeding such limitation.
For purposes hereof,
(a) the defined benefit plan fraction for any Plan Year is a
fraction, (i) the numerator of which is the projected annual benefit
of the participant under the plan (determined as of the close of the
Year), and (ii) the denominator of which is the lesser of (A) the
product of 1.25, multiplied by the dollar limitation in effect under
Code Section 415(b)(1)(A) for such Year or (B) the product of 1.4,
multiplied by the amount which may be taken into account under Code
Section 415(b)(1)(B) with respect to such participant under the plan
for such Year; and
(b) the defined contribution plan fraction for any Plan Year
is a fraction, (i) the numerator of which is the sum of the annual
additions to the participant's account as of the close of the Year and
for all prior Years, and (ii) the denominator of which is the sum of
the lesser of the
<PAGE> 61
following amounts determined for such Year and for each prior year of
service with the Controlled Group (regardless of whether a plan was in
existence during such Year):
(A) the product of 1.25, multiplied by the dollar
limitation in effect under Code Section 415(c)(1)(A) for such
Year and each such prior year of service, or
(B) the product of 1.4, multiplied by the amount
which may be taken into account under Code Section 415(c)(1)(B)
with respect to such participant under such plan for such Year
and each such prior year of service.
(2) A Participant's projected annual benefit for purposes of
Subsection (1) of this Section is equal to the annual benefit to which he would
be entitled under the terms of the defined benefit plan, assuming he will
continue employment until reaching normal retirement age as determined under
the terms of such plan (or current age, if later), his compensation for the
Plan Year under consideration will remain the same until the date he attains
such age, and all other relevant factors used to determine benefits under the
plan for the Plan Year under consideration will remain constant for all future
Plan Years.
4.11 Definitions. (1) For purposes of applying the
limitations set forth in Sections 4.9 and 4.10, all qualified defined benefit
plans (whether or not terminated) ever maintained by one or more
<PAGE> 62
Controlled Group Members shall be treated as one defined benefit plan, and all
qualified defined contribution plans (whether or not terminated) ever
maintained by one or more Controlled Group Members shall be treated as one
defined contribution plan.
(2) For purposes of this Section and Sections 4.9 and 4.10,
the term "Controlled Group Member" shall be construed in the light of Code
Section 415(h).
4.12 Funding Policy. To the extent such has not already been
done, the Committee shall (1) determine, establish and carry out a funding
policy and method consistent with the objectives of the Plan and the
requirements of applicable law, and (2) furnish from time to time to the person
responsible for the investment of the assets held in the Trust Fund information
such Committee may have relative to the Plan's probable short-term and
long-term financial needs, including any probable need for short-term
liquidity, and such Committee's opinion (if any) with respect thereto.
<PAGE> 63
ARTICLE V. - INVESTMENTS
5.1 Investment Funds. (1) The Trust Fund (other than the
portion of the Trust Fund consisting of the Loan Accounts) shall be divided
into the following Investment Funds: the Equity Fund, the Fixed Income Fund,
the Money Market Fund, the NCC Stock Fund, and the Capital Preservation Fund
and such other Investment Funds as the Committee may in its discretion select
or establish. Before-Tax Contributions, Transfer Contributions and Employer
Contributions shall be invested therein as provided in Section 5.5. Subject to
the provisions of the Plan and Trust Agreement relating to the appointment of
an Investment Manager and to other applicable provisions of the Plan and Trust
Agreement, the Trustee shall hold, manage, administer, value, invest, reinvest,
account for and otherwise deal with each Investment Fund separately.
Dividends, interest and other distributions received by the Trustee in respect
of each Investment Fund shall be reinvested in the same Investment Fund.
(2) The Trustee shall invest and reinvest the principal and
income of each such Investment Fund and shall keep each such Investment Fund
invested, without distinction between principal and income, in such property,
investments and securities as the Trustee may deem suitable without regard to
any percentage or other limitation in any laws or rules of court applying to
investments by trust companies or trustees; but subject, however, to the terms
of the Plan and Trust Agreement and to the following provisions:
<PAGE> 64
(a) All or any part of the Equity Fund, the Fixed Income
Fund, the Capital Preservation Fund or the Money Market Fund may, in
the discretion of the Trustee, be invested in any NCB Investment Trust
Fund. Funds in the Fixed Income Fund, the Equity Fund and the Capital
Preservation Fund may not be invested in an NCB Investment Trust Fund,
unless such NCB Investment Trust Fund consists of the same general
types of investments as are permitted under such Funds. Funds in the
Money Market Fund may not be invested in an NCB Investment Trust Fund
unless such NCB Investment Trust Fund consists generally of
investments principally in bonds, notes or other evidences of
indebtedness which are payable on demand (including variable amount
notes) or which have a maturity date not exceeding 91 days after the
date of purchase.
(b) The Trustee may make deposits or investments of funds in
time or savings deposits or instruments of a Controlled Group Member,
provided such funds are awaiting investment or distribution, and
nothing contained in this Section shall serve to preclude or prohibit
such deposits or investment of such funds.
(c) The determination of the Trustee as to whether an
investment is within the category of investments which may be made for
the Fixed Income Fund, the Equity Fund, the NCC Stock Fund, the
Capital Preservation Fund or the Money Market Fund shall be
conclusive.
<PAGE> 65
(d) The Trustee in its discretion may keep such portion of
the Investment Funds in cash as the Trustee may from time to time deem
to be advisable and shall not be liable for interest on uninvested
funds.
5.2 Account; Sub-Account. The Trustee shall establish and
maintain, or cause to be maintained, an Account for each Participant, which
Account shall reflect, pursuant to Sub-Accounts established and maintained
thereunder, the amount, if any, of the Participant's (a) Before-Tax
Contributions, (b) After-Tax Contributions, (c) Matching Allocations, (d)
Qualified Nonelective Contributions and (e) Transfer Contributions (unless the
Trustee determines to maintain the cash or property transferred to the Trust
Fund as a Transfer Contribution pursuant to one or more of the foregoing
Sub-Accounts). The Trustee shall establish any Sub-Account required by any
Appendix to the Plan. The Trustee shall also maintain, or cause to be
maintained, separate records which shall show (i) the portion of each such
Sub-Account invested in each Investment Fund and (ii) the amount of
contributions thereto, payments and withdrawals and loans therefrom and the
amount of income, expenses, gains and losses attributable thereto. The
interest of each Participant in the Trust Fund at any time shall consist of his
Account balance (as determined pursuant to Section 5.4) as of the last
preceding Valuation Date plus credits and minus debits to such Account since
that Date plus the value of the Participant's Loan Account on the last
preceding Valuation Date on which the Administrator valued such Loan Account
pursuant to
<PAGE> 66
Section 6.13 plus any amounts credited to such Loan Account and not invested in
any Investment Fund.
5.3 Reports. The Committee shall cause reports to be made at
least annually to each Participant and to the Beneficiary of each deceased
Participant as to the value of his Account and the amount of his Vested
Interest. In addition, the Committee shall cause such a report to be made to
each Participant who (a) requests such a report in writing (provided that only
one report shall be furnished a Participant upon such a request in any 12-month
period), (b) has terminated employment with the Controlled Group, or (c) incurs
a Break in Service.
5.4 Valuation of Investment Funds. (1) As of each Valuation
Date, the Trustee shall determine the value of each Investment Fund in
accordance with the terms of this Section and the Trust Agreement. The Trustee
shall determine, from the change in value of each Investment Fund between the
current Valuation Date and the then last preceding Valuation Date, the net gain
or loss of such Investment Fund during such period resulting from expenses paid
(including the fees and expenses of the Trustee and Investment Manager, if any,
which are to be charged to such Investment Fund in accordance with the terms of
the Plan and the Trust Agreement) and realized and unrealized earnings, profits
and losses of such Investment Fund during such period. The transfer of funds
to or from an Investment Fund pursuant to Section 5.6, Participant or Employer
Contributions allocated to an Investment Fund, and payments, distributions and
withdrawals from an
<PAGE> 67
Investment Fund to provide benefits under the Plan for Participants or Death
Beneficiaries shall not be deemed to be earnings, profits, expenses or losses
of the Investment Fund.
(2) After each Valuation Date, the net gain or loss of each
Investment Fund determined pursuant to Subsection (1) of this Section shall be
allocated as of such Valuation Date by the Trustee to the Accounts of
Participants and Beneficiaries in such Investment Fund in proportion to the
amounts of such Accounts invested in such Investment Fund on such Valuation
Date, exclusive of amounts to be credited but including amounts (other than the
net loss, if any, determined pursuant to Subsection (1) of this Section) to be
debited to such Accounts as of such Valuation Date.
(3) Except as may otherwise be provided by the Committee,
Before-Tax Contributions, Matching Allocations, Qualified Nonelective
Contributions and Transfer Contributions shall be credited to each
Participant's Account and allocated to the appropriate Investment Fund as of
the first business day following the Valuation Date coincident with or next
following the date the Trustee has received such amounts and appropriate
instructions as to the allocation of such amounts among the Investment Funds.
(4) The reasonable and equitable decision of the Trustee as
to the value of each Investment Fund as of each Valuation Date shall be
conclusive and binding upon all persons having any interest, direct or
indirect, in such Investment Fund.
<PAGE> 68
5.5 Investment of Before-Tax, Transfer and Employer
Contributions. (1) Each Participant may, pursuant to rules and procedures
adopted by the Committee, direct that Before-Tax and Transfer Contributions
made by or for him and repayments of a loan made pursuant to Section 6.13,
shall be invested in any or all of the Investment Funds. An investment option
selected by a Participant shall remain in effect and be applicable to all
subsequent Before-Tax and Transfer Contributions and loan repayments made by or
for him unless and until an investment change is made by him.
(2) An investment direction described in this Section may
only be made either (A) on a form supplied or approved by the Committee, signed
by the Participant and filed with the Committee or an Employer or (B) if
available to the Participant, by effecting such direction by means of a voice
response telephonic system established and supervised by the Committee, with
confirmation by means of a writing mailed to the Participant with-in three
days. In the absence of an effective investment direction, Before-Tax and
Transfer Contributions and loan repayments shall be invested in the Money
Market Fund. Any cash received by the Trust between Valuation Dates may be
temporarily invested until the Valuation Date next following the date such cash
is received, at which time it shall be allocated among the Investment Funds in
accordance with the foregoing provisions of this Section.
<PAGE> 69
(3) A Participant may change his investment direction with
respect to all subsequent Before-Tax and Transfer Contributions made by or for
him either (A) by filing with the Committee or his Employer, on a form supplied
or approved by the Committee or his Employer, a signed investment direction
revision, or (B) if available to the Participant, by effecting such change by
means of a voice response telephonic system, established by and supervised by
the Committee, with written confirmation mailed to the Participant within three
days. Only one such investment direction revision may be made by a Participant
in any calendar quarter except that after the Conversion Date, only one such
investment direction revision may be made by a Participant in any calendar
month. Such investment direction revision shall affect only amounts
contributed after the direction and prior to a subsequent revision.
(4) All Employer Contributions shall be invested in the NCC
Stock Fund.
5.6 Transfers of Investments. (1) Each Participant shall
have the right from time to time to elect that all or a part of his interest in
one or more of the Investment Funds (including amounts attributable to Employer
Contributions) be liquidated and the proceeds thereof reinvested in any other
Investment Fund(s). Such an investment-mix adjustment shall not affect
investment of amounts received in the Trust as contributions, which shall
continue to be invested pursuant to Section 5.5. Notwithstanding the
foregoing provisions of this Section, a Participant may not
<PAGE> 70
elect that any part of his interest in the Capital Preservation Fund be
liquidated and the proceeds thereof reinvested in the Money Market Fund or the
Fixed Income Fund.
(2) An investment-mix adjustment described in this Section
may only be made on either (a) a form supplied or approved by the Committee or
an Employer, signed by the Participant and filed with the Committee or his
Employer or (B) if available to the Participant, by effecting such adjustment
by means of a voice response telephonic system, established by and supervised
by the Committee, with written confirmation mailed to the Participant within
three days. Only one such adjustment may be made by a Participant in any
calendar quarter, except that after the Conversion Date only one such
adjustment may be made by a Participant in any calendar month.
(3) Notwithstanding any other provision of this Section to
the contrary, a Participant (a) whose employment with the Controlled Group
terminates for reasons other than the attainment of Normal or Early Retirement
Age or the occurrence of a Disability, and (b) who does not receive a
distribution of his entire Vested Interest in the Trust Fund before the
expiration of six full calendar months following the date on which his
employment terminates, shall be deemed to have made an investment-mix
adjustment election pursuant to this Section to have all of his interest in the
Trust Fund reinvested in the Money Market Fund (to the extent not already
invested therein) effective as of the Valuation Date immediately following the
expiration of such six-
<PAGE> 71
month period. Thereafter, no investment-mix adjustment election may be made by
such a Participant. An investment-mix adjustment made pursuant to this Section
shall be made with respect to the Participant's interest in the Capital
Preservation Fund, if any, notwithstanding the provisions of Subsection (1)
which would otherwise prohibit such an investment-mix adjustment election.
(4) A Beneficiary of a deceased Participant shall have the
same rights as a Participant has under Subsections (1) and (2) of this Section.
With respect to any other non-Participant who becomes eligible to receive a
distribution under the Plan and who does not receive a distribution of the
entire interest in the Trust Fund to which he is entitled before the expiration
of six full calendar months following the date on which he would have been
eligible to commence receiving a distribution, his interest in the Trust Fund
shall be reinvested in the Money Market Fund (to the extent not already
invested therein) effective as of the Valuation Date immediately following the
expiration of such six-month period. Thereafter, no investment-mix adjustment
election may be made by such a non-Participant.
5.7 Committee Rules and Directions to Trustee. (1) The
Committee shall adopt, and may amend from time to time, general rules of
uniform application which shall provide for the administration of each
Investment Fund, including, but not limited to, rules providing (a) for the
time or times that an investment direction or transfer pursuant to Sections 5.5
and 5.6 may be filed and be effective; (b) for minimum limits (not in excess of
<PAGE> 72
$50) on the amount that may be invested for one Participant at any one time in
an Investment Fund and on the amount that may be transferred from Investment
Funds if such amount is less than all of the Participant's interest in any such
Fund; (c) for procedures pursuant to which a Participant may designate the
portion of his Before-Tax and Transfer Contributions to be invested in such
Investment Funds as he elects in terms of a percentage (in even multiples of
5%) of the amount to be so invested; and (d) for any other matters which the
Committee deems necessary or advisable in the administration of any Investment
Fund.
(2) The Committee shall give appropriate and timely
directions to the Trustee in order to permit the Trustee to give effect to the
investment choice and investment change elections made under Sections 5.5 and
5.6 and to provide funds for distributions and withdrawals pursuant to Article
VI. Investments in and withdrawals from each Investment Fund shall be made
only as of a Valuation Date.
<PAGE> 73
ARTICLE VI - DISTRIBUTIONS, WITHDRAWALS AND LOANS
6.1 Distributions In General. A Participant's interest in
the Trust Fund shall only be distributable as provided in this and the
following Sections of this Article. A Participant or Beneficiary who is
eligible to receive a distribution under applicable Sections of this Article
shall obtain a blank application for that purpose from the Committee and file
with such Committee his application in writing on such form, furnishing such
information as such Committee may reasonably require, including satisfactory
proof of his age and that of his Spouse (if applicable) and any authority in
writing that the Committee may request authorizing it to obtain pertinent
information, certificates, transcripts and/or other records from any public
office.
6.2 Distributions on Death. (1) If a Participant dies
before the payment or commencement of payment of his Vested Interest to him,
his entire Account, valued as of the next Valuation Date which is at least 30
days after the date on which the Death Beneficiary files his application
pursuant to Section 6.1, shall be paid or commence to be paid to the
Participant's Death Beneficiary pursuant to Subsection (2) of this Section as
soon as practicable after such Valuation Date, but in no event shall payment be
made or commenced later than the time prescribed in Section 6.8(2) without
regard to whether an application has been filed.
<PAGE> 74
(2) In the event of the death of a Participant who dies under
the circumstances described in Subsection (1) of this Section, such
Participant's Account shall be paid to his Death Beneficiary under one of the
following methods as the Death Beneficiary shall elect:
(a) such amount shall be paid to him in a lump sum; or
(b) such amount shall be paid to him in such annual,
quarterly or monthly installments, as elected by the Death
Beneficiary, over a term certain not extending beyond the life
expectancy of the Death Beneficiary.
(3) If a Participant dies after the commencement of payments
of his Vested Interest to him in the form described in Section 6.3(1)(b), but
before all of such payments have been made, the undistributed portion of his
Vested Interest shall continue to be paid to his Death Beneficiary in the same
manner as originally elected by the Participant, provided however, that,
effective as of January 1, 1995, such Participant's Death Beneficiary shall be
permitted to elect that the payment of such portion be made in a lump sum.
6.3 Distributions on Normal or Early Retirement or
Disability. (1) If a Participant's termination of employment with the
Controlled Group occurs (other than by reason of his death) on or after his
attainment of his Normal or Early Retirement Age or by reason of his
Disability, his entire Account, valued as of the Valuation Date specified in
Subsection (2) of this Section, shall be paid or commence to be paid to him
under
<PAGE> 75
one or a combination of the following methods as the Participant shall elect
upon application filed by him with the Committee pursuant to Section 6.1:
(a) such amount shall be paid to him in a lump sum; or
(b) such amount shall be paid to him in such annual,
quarterly or monthly installments, as elected by the Participant, over
a term certain not extending beyond the life expectancy of the
Participant or the joint life expectancy of the Participant and his
Beneficiary.
(2) Distributions pursuant to this Section shall be paid or
commence to be paid to a Participant as soon as practicable after, and shall be
valued as of, the next Valuation Date which is at least 30 days after the later
of (a) the date on which the Participant files his application with the
Committee pursuant to Section 6.1 or (b) the date of the Participant's
termination of employment from the Controlled Group, but in no event shall
payment be made or commenced later than the time prescribed in Section 6.8(2)
without regard to whether an application has been filed.
(3) If a Participant described in Subsection (1) of this
Section should again become an Employee before his entire Account has been
distributed, the distribution of his Account shall cease until the Participant
again terminates his employment with the Controlled Group.
6.4 Distribution on Other Termination of Employment. If a
Participant's termination of employment with the Controlled
<PAGE> 76
Group occurs under circumstances other than those covered by Sections 6.2 and
6.3, his entire Vested Interest, valued as of the Valuation Date coinciding
with or next following the date determined pursuant to Section 6.3(2), shall
be paid to him in a lump sum at such time as provided in Section 6.3(2).
6.5 Payment of Small Benefits. Notwithstanding the foregoing
provisions of this Article, if the value of the Vested Interest of a
Participant following his termination of employment (whether by death or
otherwise) does not exceed $3,500 on the first Valuation Date next following
such termination of employment (and never exceeded $3,500 at the time of any
previous withdrawal or distribution), such Vested Interest shall be paid to the
Participant (or, if applicable, his Beneficiary) in a lump sum within 90 days
after such Valuation Date.
6.6 Distributions Pursuant to a QDRO. If a qualified
domestic relations order (as defined in Code Section 414(p)) so provides, the
portion of a Participant's Vested Interest payable to the alternate payee(s)
may be distributed to the alternate payee(s) at the time specified in such
order, regardless of whether the Participant is entitled to a distribution from
the Plan at such time. The portion of the Vested Interest so payable shall be
valued as of the Valuation Date coincident with or next following the date
specified in such order.
6.7 Distribution on Sale of Assets or Disposition of
Business. Notwithstanding the preceding provisions of this Section, in the
event that a Participant's termination of
<PAGE> 77
employment with the Controlled Group is caused by the disposition by an
Employer of substantially all of the assets of a trade or business, or its
interest in a subsidiary, and such Participant continues employment with the
corporation acquiring such assets or such subsidiary, the Participant, if he so
elects on an application filed with the Committee pursuant to Section 6.1,
shall be entitled to a distribution of his Account valued as of the Valuation
Date specified in Section 6.3(2), provided, however, that such Account may only
be distributed in the form of a lump sum or in the form of NCC Stock.
6.8 Latest Time of Distribution. (1) Distributions under
the Plan shall occur or begin as provided in the preceding Sections of this
Article, but in no event later than 60 days after the close of the Plan Year in
which the latest of the following events occur: (a) the date on which the
Participant attains age 65, (b) the 10th anniversary of the year in which the
Participant commenced participation in the Plan, or (c) the Participant's
termination of employment with the Controlled Group, provided that, except as
provided in Subsection (2) of this Section and Section 6.5, no distribution
shall be required to be made or commence until the Participant files his
application with the Committee pursuant to Section 6.1.
(2)(a) Notwithstanding any other provision of the Plan,
effective as of January 1, 1989, the entire Account of each
Participant under the Plan (i) shall be distributed to him in a lump
sum in cash not later than April 1 of the calendar
<PAGE> 78
year following the calendar year in which he attains age 70-1/2 and,
with respect to Participants who are Employees, on December 31 of such
year and each succeeding year, or (ii) shall commence to be
distributed not later than the time specified in Clause (i) of this
Paragraph (a) in the form specified in Section 6.3(1)(b) if such form
is elected by the Participant in accordance with Section 6.3.
(b) If distribution of a Participant's Account under the Plan
has begun and such Participant dies before his entire interest has
been distributed to him, the remaining portion of such Account shall
be distributed to his Death Beneficiary at least as rapidly as under
the method of distribution being used as of the date of his death.
(c) If a Participant dies before the distribution of his
Account under the Plan has begun, the entire Account of the
Participant shall be distributed to his Death Beneficiary by the
December 31 of the year in which occurs the fifth anniversary of such
Participant's death; provided, however, that such five-year rule shall
not be applicable to any portion of the Participant's Account under
the Plan which is payable to the Participant's Death Beneficiary if
such portion is distributed in the form specified in Section
6.2(2)(b), and such distributions begin not later than the December 31
of the calendar year immediately following the calendar year in which
the Participant died or, in the case of a Death Beneficiary who is the
Participant's surviving
<PAGE> 79
Spouse, the December 31 of the calendar year in which the Participant
would have attained age 70-1/2.
(d) Distributions under this Subsection shall be made in
accordance with the provisions of Code Section 401(a)(9) and Treasury
Regulations issued thereunder, which provisions are hereby
incorporated herein by reference, provided that such provisions shall
override the other distribution provisions of the Plan only to the
extent that such other Plan provisions provide for distribution that
is less rapid than required under such provisions of the Code and
Regulations. Nothing contained in this Section shall be construed as
providing any optional form of payment that is not available under the
other distribution provisions of the Plan.
6.9 Withdrawal of Contributions Upon Attainment of Age
59-1/2. A Participant who is an Employee and who is at least age 59-1/2 may
elect to withdraw all or any portion of his Vested Interest in his Account in
the form of a single sum payment or a distribution of NCC Stock. A Participant
who makes two such withdrawals in the same calendar year while he is an
Employee shall not be permitted to have any further Before-Tax Contributions
made for him for the remainder of such calendar year. Withdrawals pursuant to
this Section shall be paid to the Participant as soon as practicable after, and
shall be valued as of, the next Valuation Date which is at least 30 days after
the
<PAGE> 80
date on which the Participant files an application for withdrawal with the
Committee.
6.10 Withdrawal of After-Tax and Transfer Contributions. (1)
A Participant, whether or not he is an Employee, may elect to withdraw all or
any portion of his After-Tax Contributions Sub-Account. A Participant who
makes such a withdrawal shall not be permitted to make any further withdrawals
of After-Tax Contributions during the 12-month period following such
withdrawal.
(2) A Participant, whether or not he is an Employee, may
elect to withdraw all or any portion of his Transfer Contributions Sub-Account
which is attributable to Transfer Contributions described in Section 3.4(2).
(3) Withdrawals pursuant to this Section shall be paid to the
Participant as soon as practicable after, and shall be valued as of, the next
Valuation Date, which is at least 30 days after the date on which the
Participant files an application for a withdrawal with the Committee.
6.11 Hardship Withdrawals. A Participant who is an Employee
and who has obtained all distributions and withdrawals (other than for
Hardship) and all nontaxable loans then available under all plans maintained by
the Controlled Group may request, on a form provided by and filed with the
Committee, a withdrawal on account of Hardship of all or a part of his
Before-Tax Contributions Sub-Account (excluding any earnings allocated thereto
on or after January 1, 1989). Upon making a determination
<PAGE> 81
that the Participant is entitled to a withdrawal on account of Hardship, the
Committee shall direct the Trustee to distribute to such Participant all or a
portion of his Before-Tax Contributions Sub-Account (excluding any earnings
allocated thereto on or after January 1, 1989), provided that the amount of the
withdrawal shall not be in excess of the amount necessary to alleviate such
Hardship. If a withdrawal on account of Hardship is made by a Participant
pursuant to this Subsection, the following rules shall apply notwithstanding
any other provision of the Plan (or any other plan maintained by the Controlled
Group) to the contrary:
(a) the Participant is prohibited from making elective
contributions and employee contributions to the Plan (or to any other
qualified or nonqualified plan maintained by the Controlled Group) for
a period of 12 months following receipt of the Hardship withdrawal;
and
(b) the amount of the Participant's Before-Tax Contributions
(and any comparable contributions to any other plan maintained by the
Controlled Group) for the Participant's taxable year immediately
following the taxable year of the Hardship withdrawal shall not be in
excess of the applicable limit under Code Section 402(g) for such next
taxable year less the amount of such Participant's Before-Tax
Contributions (and any comparable contributions to any other plan
maintained by the Controlled Group) for the taxable year of the
Hardship withdrawal.
<PAGE> 82
6.12 Mechanics of Making Distributions. (1) Where a
distribution, withdrawal or loan is to be made from the Trust Fund of only a
portion of a Participant's Vested Interest in the Trust Fund and such Interest
is invested in more than one of the Investment Funds, the Participant shall
designate (on a form approved by the Committee, signed by him and filed with
the Committee) which of the Funds should be liquidated in order to make such
distribution. Such a designation shall not be considered an investment
direction or investment transfer for the purpose of the limitations described
in Sections 5.5, 5.6 and 5.7.
(2) All distributions, withdrawals and loans shall be made in
cash, provided that if the Participant or Beneficiary so elects on a form
provided by the Committee, a distribution or withdrawal (but not a loan) may be
made in the form of full shares of NCC Stock, based on the fair market value of
such Stock (as determined by the Trustee in accordance with the provisions of
the Trust Agreement) on the Valuation Date as of which such distribution is
made.
6.13 Loans to Participants. (1) A Participant who is a
"party in interest" within the meaning of ERISA Section 3(14) may apply on a
form provided by the Committee for a loan from his Account. If the Committee
determines that the Participant is not in bankruptcy or similar proceedings and
is entitled to a loan in accordance with the following provisions of this
Section, the Committee shall direct the Trustee to make a loan to the
Participant from his Account. Each loan shall be charged against
<PAGE> 83
the Participant's Account as follows: first, against the Participant's
Before-Tax Contributions Sub-Account; second, to the extent necessary, against
the Participant's Matching Allocations Sub-Account; third, to the extent
necessary, against the Participant's Transfer Contributions Sub-Account;
fourth, to the extent necessary against the Participant's After-Tax
Contributions Sub-Account; fifth, to the extent necessary against the
Participant's Qualified Non-Elective Contributions Sub-Account; sixth, to the
extent necessary, against the Participant's Prior Plan Employer Contributions
described in any Appendix to the Plan.
(2) A Participant shall not be entitled to a loan under this
Section unless the Participant and, if he is married at the time the loan is
made, his Spouse (determined at the time the loan is made), consent to (a) the
use of the Participant's Account as security as provided in Subsection (5)(c)
of this Section and (b) the possible reduction of the Participant's Account as
provided in Subsection (6) of this Section. A Spouse's consent required by the
preceding sentence shall be signed by the Spouse, shall acknowledge the effect
of such consent, and shall be witnessed by any person designated by the
Committee as a plan representative or by a notary public. Any consent required
by the preceding sentences must be given within the ninety day period preceding
the disbursement of the loan proceeds. Notwithstanding the foregoing, the
consent of the spouse of a Participant shall not be required
<PAGE> 84
with respect to any loan made under this Section after the Conversion Date.
(3) Each loan shall be in an amount which is not less than
$500. The maximum loan to any Participant (when added to the outstanding
balance of all other loans to the Participant from all qualified employer plans
(as defined in Code Section 72(p)(4)) of the Controlled Group) shall be an
amount which does not exceed the lesser of
(a) $50,000, reduced by the excess (if any) of (i) the
highest outstanding balance of such other loans during the one-year
period ending on the day before the date on which such loan is made,
over (ii) the outstanding balance of such other loans on the date on
which such loan is made, or
(b) 50% of the value of such Participant's Account on the
date on which such loan is made.
(4) For each Participant for whom a loan is authorized
pursuant to this Section, the Administrator shall (a) direct the Trustee to
liquidate the Participant's interest in the Investment Funds as directed by the
Participant or, in the absence of such direction, on a pro-rata basis, to the
extent necessary to provide funds for the loan, (b) direct the Trustee to
disburse such funds to the Participant upon the Participant's execution of the
promissory note and security agreement referred to in Subsection (5)(d) of this
Section, (c) transmit to the Trustee the executed promissory note and security
agreement referred to in Subsection (5)(d) of this Section, and (d) establish
and maintain a separate
<PAGE> 85
recordkeeping account within the Participant's Account (the "Loan Account") (i)
which initially shall be in the amount of the loan, (ii) to which the funds for
the loan shall be deemed to have been allocated and then disbursed to the
Participant, (iii) to which the promissory note shall be allocated and (iv)
which shall show the unpaid principal of and interest on the promissory note
from time to time. All payments of principal and interest by a Participant
shall be credited initially to his Loan Account and applied against the
Participant's promissory note, and then invested in the Investment Funds
pursuant to the Participant's direction under Section 5.5. The Administrator
shall value each Participant's Loan Account for purposes of Section 5.2 at such
times as the Administrator shall deem appropriate, but not less frequently than
quarterly.
(5) Loans made pursuant to this Section:
(a) shall be made available to all Participants on a
reasonably equivalent basis;
(b) shall not be made available to Highly Compensated
Employees in a percentage amount greater than the percentage amount
made available to other Participants;
(c) shall be secured by the Participant's Loan Account; and
(d) shall be evidenced by a promissory note and security
agreement executed by the Participant which provides for:
<PAGE> 86
(i) the security referred to in paragraph (c) of this
Subsection;
(ii) a rate of interest determined by the Committee in
accordance with applicable law;
(iii) repayment within a specified period of time, which
shall not extend beyond five years;
(iv) repayment in equal payments over the term of
the loan, with payments not less frequently than quarterly; and
(v) for such other terms and conditions as the
Committee shall determine, which shall include provision that:
(A) with respect to a Participant who is an
Employee, the loan will be repaid pursuant to
authorization by the Participant of equal payroll
deductions over the repayment period sufficient to
amortize fully the loan within the repayment period,
provided, however, the Committee may waive the
requirement of equal payroll deductions if the Employer
payroll through which the Participant is paid cannot
accommodate such deductions;
(B) the loan shall be prepayable in whole at
any time without penalty; and
(C) the loan shall be in default and become
immediately due and payable upon the first to occur of
the following events:
<PAGE> 87
(I) the Participant's failure to make required
payments on the promissory note; or
(II) in the case of a Participant who is not
an Employee, distribution of his Account; or
(III) in the case of a Participant who is an
Employee, termination of his employment with the
Controlled Group; or
(IV) the Participant's death; or
(V) the filing of a petition, the entry of an
order or the appointment of a receiver, liquidator,
trustee or other person in a similar capacity, with
respect to the Participant, pursuant to any state or
federal law relating to bankruptcy, moratorium,
reorganization, insolvency or liquidation, or any
assignment by the Participant for the benefit of his
creditors.
(6) Notwithstanding any other provision of the Plan, a loan
made pursuant to this Section shall be a first lien against the Participant's
Loan Account. Any amount of principal or interest due and unpaid on the loan
at the time of any default on the loan, and any interest accruing thereafter,
shall be satisfied by deduction from the Participant's Loan Account, and shall
be deemed to have been distributed to the Participant, as follows:
<PAGE> 88
(a) in the case of a Participant who is an Employee and who
is not, at the time of the default, eligible (without regard to the
required filing of an application pursuant to Section 6.1) to receive
distribution of his Account under the provisions of Article VI, other
than Section 6.11, or by order of a court, at such time as he first
becomes eligible (without regard to the required filing of an
application pursuant to Section 6.1) to receive distribution of his
Account under the provisions of Article VI, other than Section 6.11,
or by order of a court; or
(b) in the case of any other Participant, immediately upon
such default.
If, as a result of the application of the preceding sentence, an amount of
principal or interest on a loan remains outstanding after default, interest at
the rate specified in the promissory note executed by the Participant in
respect of such loan shall continue to accrue on such outstanding amount until
fully satisfied by deduction from the Participant's Loan Account as
hereinabove provided or by payment by or on behalf of such Participant.
Notwithstanding any other provision of the Plan, a Participant shall not be
eligible to have Before-Tax Contributions made on his behalf during the period
of time of his default on a Plan loan and the time of satisfaction of the loan
by deduction as described above or by payment by or on behalf of such
Participant.
6.14 Other Optional Forms of Benefit. The provisions of any
Appendix that are applicable to a portion of a
<PAGE> 89
Participant's Account shall control (with respect to that portion of the
Account) over the preceding provisions of this Article to the extent that such
Appendix provisions provide, as required by applicable law, optional forms of
benefit (within the meaning of Code Section 411(d)(6) and Treasury Regulations
issued thereunder) which supercede, or are in addition to, the optional forms
of benefit provided by this Article. Further, provisions of any Appendix or
Prior Plan which relate to the election or waiver of any such optional forms of
benefit, or consent requirements applicable to such elections or waivers shall
control over the provisions of this Article.
6.15 Direct Rollover Provisions.
(a) This Section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Distributee's election under this Section 6.15, a
Distributee may elect, at the time and in the manner prescribed by the plan
administrator, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover, provided, however, that if such Direct Rollover is of a
portion less than 100% of such Eligible Rollover Distribution, such portion
must equal or exceed $500 for this Section 6.15 to apply.
(b) Definitions.
(1) Eligible Rollover Distribution: An Eligible Rollover
Distribution is any distribution of all or any portion of
<PAGE> 90
the balance to the credit of the Distributee which equals or exceeds $200,
except that an Eligible Rollover Distribution does not include: 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; any distribution to the extent such distribution
is required under section 401(a)(9) of the Code; and 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 employer
securities).
(2) Eligible Retirement Plan: An Eligible Retirement Plan in
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.
(3) Distributee: A Distributee includes an employee or
former employee. In addition, the employee's or former employee's surviving
spouse and the employee's or former employee's spouse or
<PAGE> 91
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.
(4) Direct Rollover: A Direct Rollover is a payment by the
Plan to the Eligible Retirement Plan specified by the Distributee.
<PAGE> 92
ARTICLE VII. - ADMINISTRATION OF THE TRUST FUND
7.1 Appointment of Trustee. The Company has appointed the
Trustee to act as such under the Plan and has executed the Trust Agreement with
the Trustee. The Company may, without the consent of any Participant or other
person, execute amendments to such Trust Agreement, execute such further
agreements as it in its sole discretion may deem necessary or desirable to
carry out the Plan, or at any time, in accordance with the terms of the Trust
Agreement, remove the Trustee and appoint a successor.
7.2 Duties of Trustee. The Trustee shall invest Before-Tax
Contributions, Transfer Contributions and Employer Contributions paid to it and
earnings thereon in accordance with the Plan and Trust Agreement. The Trustee
shall also establish and maintain separate Accounts and Sub-Accounts for each
Participant in accordance with the Plan. The Trustee in its relation to the
Plan shall be entitled to all of the rights, privileges, immunities and
benefits conferred upon it by the Plan or Trust Agreement and shall be subject
to all of the duties imposed upon it by the Plan and Trust Agreement. The
Trust Agreement is hereby incorporated in the Plan by reference, and each
Employer, by adopting the Plan, approves the Trust Agreement and authorizes the
Company to execute any amendment or supplement thereto on its behalf.
7.3 The Trust Fund. The Trust Fund shall be held by the
Trustee for the exclusive benefit of the Participants and their Beneficiaries
and shall be invested by the Trustee upon such
<PAGE> 93
terms and in such property as is provided in the Plan and in the Trust
Agreement. The Trustee shall, from time to time, make payments, distributions
and deliveries from the Trust Fund as provided in the Plan.
7.4 No Guarantee Against Loss. (1) Neither the Trustee, any
Employer, the Committee nor any Investment Manager in any manner guarantees the
Trust Fund or any part thereof against loss or depreciation. All persons
having any interest in the Trust Fund shall look solely to the Trust Fund for
payment with respect to such interest.
(2) Neither the Company, the Committee, any Employer, the
Trustee, nor any officer or employee of any of them is authorized to advise a
Participant as to the manner in which contributions to the Plan and income
thereon should be invested and reinvested. The election of the Investment Fund
or Funds in which a Participant participates is his sole responsibility, and
the fact that designated Investment Funds are available to Participants for
investment shall not be construed as a recommendation for the investment of
contributions hereunder in all or any of such Funds.
7.5 Payment of Benefits. All payments of benefits provided
for by the Plan shall be made solely out of the Trust Fund in accordance with
instructions given to the Trustee by the Committee pursuant to the terms of the
Plan, and neither any Employer, the Committee nor the Trustee shall be
otherwise liable for any benefits payable under the Plan.
<PAGE> 94
7.6 Compensation and Expenses. Any expenses paid by the
Trustee in the administration of any Investment Fund shall be charged to such
Fund. The Trustee shall be entitled to receive such reasonable compensation
for its services as may be agreed upon by it and the Company. Such
compensation and all other expenses of the Trustee and other expenses necessary
for the proper administration of the Plan and Trust Fund shall be paid by the
Trustee from the Trust Fund, unless the Company determines, in its sole
discretion, that all or any part of such compensation and expenses shall be
paid by the Employers. Notwithstanding the foregoing, any extraordinary
expenses incurred by the Trustee with respect to the interest of any person in
the Trust Fund may, in the discretion of the Trustee and with the approval of
the Committee, be charged to such person's interest in the Trust Fund. Taxes,
if any, on any property held by the Trustee shall be paid out of the Trust Fund
and taxes, if any, other than transfer taxes, on distributions to a Participant
or Beneficiary of a Participant shall be paid by the Participant or the
Beneficiary, respectively.
7.7 No Diversion of Trust Fund. Except as specifically
provided in other Sections of the Plan, it shall be and it is hereby made
impossible, at any time prior to the satisfaction of all liabilities with
respect to Employees and their Beneficiaries under the Plan, for any part of
the corpus or income of the Trust Fund to be (within the taxable year or
thereafter) used for, or
<PAGE> 95
diverted to, purposes other than the exclusive benefit of Employees or their
Beneficiaries.
<PAGE> 96
ARTICLE VIII. - INVESTMENT MANAGER
8.1 Duties and Functions. (1) The Committee shall have the
exclusive authority and responsibility at any time or from time to time to
appoint (and revoke the appointment of) an Investment Manager under the Plan
with respect to the NCC Stock Fund. The Committee shall notify the Trustee of
any such appointment (or revocation thereof) in writing, and the Trustee may
rely upon any such appointment continuing in effect until it receives a written
notice from the Committee of its revocation. Any such Investment Manager shall
acknowledge in writing to the Committee and the Trustee that he or it is a
fiduciary with respect to the Plan.
(2) Any such Investment Manager shall have the powers,
functions, duties and/or responsibilities of the Trustee relating to the
investment and reinvestment of the NCC Stock Fund (other than those described
in Article XV which shall remain with the Trustee) and shall exercise such
authority, power and discretion exclusively. Custody of the assets of the NCC
Stock Fund, however, shall remain with the Trustee who shall be responsible
therefor. In no instance shall the authority or discretion of an Investment
Manager with respect to the NCC Stock Fund exceed the authority or discretion
which the Trustee would have had with respect to such Fund if there were no
Investment Manager.
(3) If an Investment Manager is so appointed (a) the Trustee
shall not be liable for any loss which may result by reason of any action taken
by it in accordance with a direction of
<PAGE> 97
an Investment Manager or by reason of any lack of action by the Trustee upon
the failure of an Investment Manager to exercise his or its authority and
discretion, (b) the Trustee shall not be required to accept delivery of or pay
for any security or other property purchased for the NCC Stock Fund to the
extent that the assets in such Fund are insufficient to pay for such security
or other property, and (c) the Trustee shall be under no duty or obligation to
(i) invest or reinvest the NCC Stock Fund except as directed by the Investment
Manager thereof, (ii) make any investment review or examination of the NCC
Stock Fund or recommendations with respect to such Fund, or (iii) advise the
Committee of directions received by the Trustee from an Investment Manager.
8.2 Compensation. The Investment Manager shall receive such
reasonable compensation as may be agreed upon by it and the Committee, and
payment thereof shall be made by the Employers.
<PAGE> 98
ARTICLE IX. - CLAIMS PROCEDURES
9.1 Method of Filing Claim. Any Participant or Beneficiary
who believes that he is entitled to receive a benefit under the Plan which he
has not received may file with the Committee a written claim specifying the
basis for his claim and the facts upon which he relies in making such claim.
Such a claim must be signed by the claimant or his authorized representative
and shall be deemed filed when delivered to any member of the Committee or its
designee.
9.2 Notification to Claimant. Unless such claim is allowed
in full by the Committee, the Committee shall (within 90 days after such claim
was filed, plus an additional period of 90 days if required for processing and
if notice of the 90-day extension of time indicating the specific circumstances
requiring the extension and the date by which a decision shall be rendered is
given to the claimant within the first 90-day period) cause written notice to
be mailed to the claimant of the total or partial denial of such claim. Such
notice shall be written in a manner calculated to be understood by the claimant
and shall state (a) the specific reason(s) for the denial of the claim, (b)
specific reference(s) to pertinent provisions of the Plan and/or Trust
Agreement on which the denial of the claim was based, (c) a description of any
additional material or information necessary for the claimant to perfect the
claim and an explanation of why such material or information is necessary, and
(d) an explanation of the review procedure specified in Section 9.3. If a
claimant
<PAGE> 99
does not receive any notice from the Committee within 90 days after his claim
is filed with the Committee, his claim shall be deemed to have been denied.
9.3 Review Procedure. Within six months after the denial of
his claim, the claimant may appeal such denial by filing with the Company his
written request for a review of his said claim. If the claimant does not file
such a request with the Company within such six-month period, the claimant
shall be conclusively presumed to have accepted as final and binding the
initial decision of the Committee on his claim. If such an appeal is so filed
within such six months, a Named Fiduciary designated by the Company shall (a)
conduct a full and fair review of such claim and (b) mail or deliver to the
claimant a written decision on the matter based on the facts and pertinent
provisions of the Plan and/or Trust Agreement within a period of 60 days after
the receipt of the request for review unless special circumstances require an
extension of time, in which case such decision shall be rendered not later than
120 days after receipt of such request. If an extension of time for review is
required, written notice of the extension shall be furnished to the claimant
prior to the commencement of the extension. Such decision (i) shall be written
in a manner calculated to be understood by the claimant, (ii) shall state the
specific reason(s) for the decision, (iii) shall make specific reference(s) to
pertinent provisions of the Plan and/or Trust Agreement on which the decision
is based and (iv) shall, to the extent permitted by applicable law, be final
<PAGE> 100
and binding on all interested persons. During such full review, the claimant
or his duly authorized representative shall be given an opportunity to review
documents that are pertinent to the claimant's claim and to submit issues and
comments in writing. If the decision on review is not furnished within such
60-day or 120-day period, as the case may be, the claim shall be deemed denied
on review.
<PAGE> 101
ARTICLE X. - ADMINISTRATION OF THE PLAN
AND FIDUCIARY RESPONSIBILITIES
10.1 Responsibility for Administration. Except to the extent
that particular responsibilities are assigned or delegated to other Fiduciaries
pursuant to the Trust Agreement, other Articles of the Plan or Section 10.3,
the Company (as the Administrator) shall be responsible for the administration
of the Plan. Each other Fiduciary shall have only such powers, duties,
responsibilities and authorities as are specifically conferred upon him or it
pursuant to provisions of the Plan or Trust Agreement. Any person may serve in
more than one fiduciary capacity with respect to the Plan or Trust Fund, if
pursuant to the Plan and/or Trust Agreement, he or it is assigned or delegated
any multiple fiduciary capacities.
10.2 Named Fiduciaries. For the purposes of the Plan, the
Named Fiduciaries shall be the Committee, the Company, the Investment Manager,
the Trustee and to the extent provided in Article XV, the Participants. The
Company may, by written instrument, designate any other person or persons as a
Named Fiduciary or Named Fiduciaries to perform functions specified in such
instrument (or in a delegation pursuant to Section 10.3) which relate to the
administration of the Plan, provided such designee accepts such designation.
Such a designation may be terminated at any time by notice from the Company to
the designee or by notice from the designee to the Company.
<PAGE> 102
10.3 Delegation of Fiduciary Responsibilities. (1) The
Committee or the Company may delegate to any person or persons any one or more
of its powers, functions, duties and/or responsibilities with respect to the
Plan or the Trust Fund.
(2) Any delegation pursuant to Subsection (1) of this
Section, (a) shall be signed on behalf of the Committee or the Company, and be
delivered to and accepted in writing by the delegatee, (b) shall contain such
provisions and conditions relating to such delegation as the Committee or the
Company deems appropriate, (c) shall specify the powers, functions, duties
and/or responsibilities therein delegated, (d) may be amended from time to time
by written agreement signed on behalf of the Committee or the Company and by
the delegatee and (e) may be revoked (in whole or in part) at any time by
written notice from one party to the other. A fully executed copy of any
instrument relating to any delegation (or revocation of any delegation) under
the Plan shall be filed with the Committee.
10.4 Immunities. Except as otherwise provided in Section
10.5 or by applicable law, (a) no Fiduciary shall have the duty to discharge
any duty, function or responsibility which is specifically assigned exclusively
to another Fiduciary or Fiduciaries by the terms of the Plan or Trust Agreement
or is delegated exclusively to another Fiduciary or Fiduciaries pursuant to
procedures for such delegation provided for in the Plan or Trust Agreement; (b)
no Fiduciary shall be liable for any action taken or not taken with respect to
the Plan or Trust Fund except
<PAGE> 103
for his own negligence or willful misconduct; (c) no Fiduciary shall be
personally liable upon any contract or other instrument made or executed by
him or on his behalf in the administration of the Plan or Trust Fund; (d) no
Fiduciary shall be liable for the neglect, omission or wrongdoing of another
Fiduciary; and (e) any Fiduciary may rely and shall be fully protected in
acting upon the advice of counsel, who may be counsel for any Controlled Group
Member, upon the records of a Controlled Group Member, upon the opinion,
certificate, valuation, report, recommendation or determination of the certified
public accountants appointed to audit a Controlled Group Member's financial
statements, or upon any certificate, statement or other representation made
by an Employee, a Participant, a Beneficiary or the Trustee concerning any fact
required to be determined under any of the provisions of the Plan.
10.5 Limitation on Exculpatory Provisions. Notwithstanding any
other provision of the Plan or Trust Agreement, no provision of the Plan or
Trust Agreement shall be construed to relieve (or have the effect of
relieving) any Fiduciary from any responsibility or liability for any
obligation, responsibility or duty imposed on such Fiduciary by Part 4 of
Title 1 of ERISA.
10.6 Membership of the Committee. The Committee shall be appointed
by the Board of Directors of the Company, which also shall provide for the
number of the members of the Committee and the manner of appointing and
removing such members. Any member of
<PAGE> 104
the Committee may resign by filing a written resignation with the Company.
10.7 Administrative Assistance. The Committee may employ such
clerical, legal or other assistance as it deems necessary or advisable for the
proper administration of the Plan.
10.8 Compensation and Qualification. The members of the Committee
shall serve without compensation for services hereunder. Participants of the
Committee shall not be disqualified from acting because of any interest,
benefit or advantage, inasmuch as it is recognized that the members may be
Employees of the Employers and Participants in the Plan, but no member of the
Committee shall vote or act in connection with the Committee's action relating
solely to himself. No bond or other security need be required of any
Committee member in such capacity or any jurisdiction.
10.9 Revocability of Committee Action. Any action taken by the
Committee with respect to the rights or benefits under the Plan of any
Participant or Beneficiary shall be revocable by the Committee as to payments
or distributions not theretofore made pursuant to such action, and appropriate
adjustments may be made in future payments or distributions to a Participant
or his Beneficiaries to offset any excess or underpayments theretofore made to
such Participant or his Beneficiaries.
10.10 Rules and Procedures. The Committee may adopt rules for the
administration of the Plan and rules for its
<PAGE> 105
government and the conduct of its business, including a rule authorizing one
or more of its members or officers to execute instruments in its behalf
evidencing its action, and the Trustee may rely upon any instrument signed by
such person or persons so authorized as properly evidencing the action of the
Committee. Except as may otherwise be provided by rules or procedures adopted
by the Committee, the Committee may act by majority action either at a meeting
or in writing without a meeting and an action evidenced by the signatures of a
majority of the members of the Committee shall be deemed to be the action of
the Committee. Although various provisions of the Plan provide for a filing
with the Committee of various instruments, the Committee may, by general
announcement, specifically designate some other person or persons, with whom
or which such instruments may be filed.
10.11 Interpretation of the Plan and Findings of Facts. The
Committee shall have sole and absolute discretion to interpret the provisions
of the Plan (including, without limitation, by supplying omissions from,
correcting deficiencies in, or resolving inconsistencies or ambiguities in,
the language of the Plan), to determine the rights and status under the Plan
of Participants and other persons, to decide disputes arising under the Plan
and to make any determinations and findings with respect to the benefits
payable thereunder and the persons entitled thereto as may be required for the
purposes of the Plan. In furtherance of, but without limiting, the foregoing,
the Committee is hereby granted the following specific authorities, which it
shall discharge in
<PAGE> 106
its sole and absolute discretion in accordance with the terms of the Plan (as
interpreted, to the extent necessary, by the Committee):
(1) to resolve all questions arising under the provisions of the
Plan as to any individual's entitlement to become a Participant;
(2) to determine the amount of benefits, if any, payable to any
person under the Plan; and
(3) to conduct the review procedure specified in Article IX.
All decisions of the Committee as to the facts of any case, as to the
interpretation of any provision of the Plan or its application to any case,
and as to any other interpretative matter or other determination or question
under the Plan shall be final and binding on all parties affected thereby,
subject to the provisions of Section 10.9 and Article IX. The Committee shall
direct the Trustee relative to benefits to be paid under the Plan and shall
furnish the Trustee with any information reasonably required by it for the
purpose of paying benefits under the Plan.
10.12 Directions to Trustee. The Committee shall direct the
Trustee as to the method of payment of, and the time at which, any benefit is
to be paid to a Participant or a Beneficiary from the Trust Fund and the
particular Investment Fund and Sub-Account from which each such payment is to
be made. The Trustee shall be entitled to rely conclusively on any such
direction given to it by the Committee in accordance with the provisions
hereof.
<PAGE> 107
ARTICLE XI. - MISCELLANEOUS
11.1 Spendthrift Provisions. No right or interest of any kind of a
Participant or Beneficiary in the Trust Fund shall be anticipated, assigned
(either in law or equity), alienated or be subject to encumbrance,
garnishment, attachment, execution or levy of any kind, voluntary or
involuntary, or any other legal or equitable process, except in accordance
with a qualified domestic relations order as defined in Code Section 414(p).
The Committee shall establish procedures to determine the qualified status of
domestic relations orders and to administer distributions under such qualified
orders in accordance with Code Section 414(p).
11.2 Facility of Payment. In the event the Committee finds that
any Participant or Beneficiary to whom a benefit is payable under the Plan is
(at the time such benefit is payable) unable to care for his affairs because
of physical, mental or legal incompetence, the Committee, in its sole
discretion, may cause any payment due to him hereunder, for which prior claim
has not been made by a duly qualified guardian or other legal representative,
to be paid to the person or institution deemed by the Committee to be
maintaining or responsible for the maintenance of such Participant or
Beneficiary; and any such payment shall be deemed a payment for the account of
such Participant or Beneficiary and shall constitute a complete discharge of
any liability therefor under the Plan.
11.3 No Enlargement of Employment Rights. Nothing herein contained
shall constitute or be construed as a contract of
<PAGE> 108
employment between any Employer and any Employee or Participant and all
Employees shall remain subject to discipline, discharge and layoff to the same
extent as if the Plan had never gone into effect. An Employer by adopting the
Plan, making contributions to the Trust Fund or taking any other action with
respect to the Plan does not obligate itself to continue the employment of any
Participant or Employee for any period or, except as expressly provided in the
Plan, to make any payments into the Trust Fund.
11.4 Merger or Transfer of Assets. There shall not be any merger
or consolidation of the Plan with, or the transfer of assets or liabilities of
the Plan to, any other plan, unless each Participant of 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 he
would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan had then terminated). The Company
reserves the right to merge or consolidate this Plan with, and to transfer the
assets of the Plan to, any other Plan, without the consent of any other
Employer.
11.5 Action by Company. Wherever the Company is authorized to act
under the Plan (including but not limited to any delegation of its fiduciary
powers and responsibilities under the Plan), such action shall be taken,
unless otherwise provided in the Plan, by written instrument executed by an
officer of the Company. The Trustee may rely on any instrument so executed as
<PAGE> 109
being validly authorized and as properly evidencing the action of the Company.
11.6 Severability Provision. If any provision of the Plan or Trust
Agreement or the application thereof to any circumstance or person is invalid,
the remainder of the Plan or Trust Agreement and the application of such
provision to other circumstances or persons shall not be affected thereby.
<PAGE> 110
ARTICLE XII. - OTHER EMPLOYERS
12.1 Adoption by Other Employers. As of July 1, 1992, and
thereafter the Employers under the Plan were the Company and those Employers
listed on Exhibit A to the Plan. Any other corporation or business
organization may, with the consent of the Committee, adopt the Plan and
thereby become an Employer hereunder by executing an instrument evidencing
such adoption and filing a copy thereof with the Committee and the Trustee.
Such adoption may be subject to such terms and conditions as the Committee
requires and approves.
12.2 Withdrawal of Employer. Any Employer (other than the Company)
which adopts the Plan may elect separately to withdraw from the Plan. Any
such withdrawal shall be expressed in an instrument executed by the
withdrawing Employer and filed with the Company and the Trustee. Such
withdrawal shall become effective when so filed unless some other effective
date is designated in the instrument and approved by the Committee. No such
withdrawal shall decrease the amount of Employer Contributions to be made by
the Employer on account of periods preceding such withdrawal. In the event of
such a withdrawal of an Employer, or in the event the Plan is terminated as to
an Employer (but not all the Employers) pursuant to Section 13.1, such
Employer (herein called "former Employer") shall cease to be an Employer, and
Employer Contributions of such former Employer and Before-Tax and Transfer
Contributions of Employees of such former Employer shall cease.
<PAGE> 111
12.3 Withdrawal of Employee Group. Any Employer may elect to
withdraw from the Plan any designated group of its Employees while continuing
to include another group or other groups of its Employees within the Plan. Any
such withdrawal of a designated group of Employees shall be expressed in an
instrument executed by the Employer and filed with the Company (if the
Employer making such withdrawal is not the Company) and the Trustee. Such
withdrawal shall become effective when so filed unless some other effective
date is designated in the instrument and approved by the Committee. No such
withdrawal of a designated group of Employees shall decrease the amount of
Employer Contributions to be made by the Employer in respect of Affected
Employees on account of periods preceding such withdrawal. In the event of
such withdrawal by an Employer or in the event the Plan is terminated by the
Company as to a group of Employees of another Employer pursuant to Section
13.1, Employer Contributions of the Employer in respect of affected Employees
and Before-Tax and Transfer Contributions of affected Employees shall cease.
<PAGE> 112
ARTICLE XIII. - AMENDMENT OR TERMINATION
13.1 Right to Amend or Terminate. Subject to the limitations of
Sections 4.8(1) and 7.7 of the Plan, the Company has reserved, and does hereby
reserve, the right at any time, by action of any Executive Vice President or
any officer of the Company who is senior to the Executive Vice Presidents of
the Company, without the consent of any other Employer or of the Participants,
Beneficiaries or any other person, (a) to terminate the Plan, in whole or in
part or as to any or all of the Employers or as to any designated group of
Employees, Participants and their Beneficiaries, or (b) to amend the Plan, in
whole or in part. No such termination or amendment shall decrease the amount
of Employer Contributions to be made by an Employer on account of any period
preceding such termination or amendment. The Plan may be amended only by the
Company.
13.2 Procedure for Termination or Amendment. Any termination or
amendment of the Plan pursuant to Section 13.1 shall be expressed in an
instrument executed by the Trustee and two officers of the Company (at least
one of whom is an Executive Vice President or an officer senior to the
Executive Vice Presidents) and shall become effective as of the date
designated in such instrument or, if no date is so designated, on the date of
its execution.
13.3 Distribution Upon Termination. If the Plan shall be
terminated by the Company as to all Employers, Before-Tax, Transfer and
Employer Contributions to the Plan shall cease and,
<PAGE> 113
as soon as practicable after such termination, the Trustee shall make
distribution (if such distribution is permitted by applicable law) to each
Employee as if the Plan had not been terminated.
13.4 Amendment Changing Vesting Schedule. (1) If any Plan
amendment changes any vesting schedule under the Plan, effective as of January
1, 1989, each Participant having not less than three years of service shall be
permitted to elect, during the election period described in Subsection (2) of
this Section, to have his nonforfeitable percentage computed under the Plan
without regard to such amendment.
(2) Such election period shall begin on the date the Plan amendment
is adopted and shall end no earlier than the latest of the following dates:
(a) the date which is 60 days after the day the Plan amendment is adopted, (b)
the date which is 60 days after the day the Plan amendment becomes effective,
or (c) the date which is 60 days after the day the Participant is issued
written notice of the Plan amendment by the Committee or the Company.
(3) For purposes of Subsection (1) of this Section, a Participant
shall be considered to have completed three years of service if such
Participant has completed three years of service, whether or not consecutive,
without regard to the exceptions of Code Section 411(a)(4), prior to the
expiration of the election period described in Subsection (2) of this Section.
13.5 Nonforfeitable Amounts. Notwithstanding any other provision
of the Plan, upon the termination or partial termination
<PAGE> 114
of the Plan or upon complete discontinuance of contributions under the Plan,
the rights of all Employees to benefits accrued to the date of such
termination or partial termination or discontinuance, to the extent then
funded, or the amounts credited to the Employees' Accounts, shall be
nonforfeitable.
13.6 Prohibition on Decreasing Accrued Benefits. No amendment to
the Plan (other than an amendment described in Code Section 412(c)(8)) shall
have the effect of decreasing the accrued benefit of any Participant. For
purposes of the preceding sentence, a Plan amendment which has the effect of
(a) eliminating or reducing an early retirement benefit or a retirement-type
subsidy (as defined in regulations of the Secretary of the Treasury) or (b)
eliminating an optional form of benefit (except as permitted by any such
regulations) with respect to benefits attributable to service before the
amendment, shall be treated as decreasing accrued benefits, provided, however,
that in the case of a retirement-type subsidy this sentence shall apply only
with respect to a Participant who satisfies (either before or after the
amendment) the preamendment conditions for the subsidy.
<PAGE> 115
ARTICLE XIV. - TOP-HEAVY PLAN REQUIREMENTS
14.1 Definitions. For the purposes of this Article, the following
terms, when used with initial capital letters, shall have the following
respective meanings:
(1) Aggregation Group: Permissive Aggregation Group or Required
Aggregation Group, as the context shall require.
(2) Compensation: Effective as of January 1, 1989, "Compensation"
as defined in Section 4.9(3) (subject to the limitations described in Section
1.1(14)(b)).
(3) Defined Benefit Plan: A qualified plan as defined in Code
Section 414(j).
(4) Defined Contribution Plan: A qualified plan as defined in Code
Section 414(i).
(5) Determination Date: For any Plan Year, the last day of the
immediately preceding Plan Year, except that in the case of the first Plan
Year of the Plan, the Determination Date shall be the last day of such first
Plan Year.
(6) Extra Top-Heavy Group: An Aggregation Group if, as of a
Determination Date, the aggregate present value of accrued benefits for Key
Employees in all plans in the Aggregation Group (whether Defined Benefit Plans
or Defined Contribution Plans) is more than ninety (90%) of the aggregate
present value of all accrued benefits for all employees in such plans.
(7) Extra Top-Heavy Plan: See Section 14.3.
(8) Former Key Employee: A Non-Key Employee with respect to a Plan
Year who was a Key Employee in a prior Plan
<PAGE> 116
Year. Such term shall also include his Beneficiary in the event of his death.
(9) Key Employee: An Employee or former Employee who is or was a
Participant and who, at any time during the current Plan Year or any of the
four preceding Plan Years, is (a) an officer of an Employer (limited to no
more than 50 Employees or, if lesser, the greater of 3 Employees or 10 percent
of the Employees) having an annual Compensation greater than, effective as of
January 1, 1988, 50% of the dollar amount in effect under Code Section
415(b)(1)(A) for any such Plan Year, (b) one of the 10 Employees owning (or
considered as owning within the meaning of Code Section 318) the largest
interests in an Employer and having annual Compensation of more than the
applicable dollar amount referred to in Section 4.9(1), (c) a 5-percent owner
(as such term is defined in Code Section 416(i)(1)(B)(i)) or (d) a 1-percent
owner (as such term is defined in Code Section 416(i)(1)(B)(ii)) having an
annual Compensation of more than $150,000. For purposes of clause (b) of this
Subsection, if two Employees have the same interest in an Employer, the
Employee having greater annual Compensation shall be treated as having a
larger interest. The term "Key Employee" shall also include such Employee's
Beneficiary in the event of his death. For purposes of this Subsection,
effective as of January 1, 1989, "Compensation" has the meaning given such
term by Code Section 414(q)(7).
<PAGE> 117
(10) Non-Key Employee: An Employee or former Employee who is or
was a Participant and who is not a Key Employee. Such term shall also include
his Beneficiary in the event of his death.
(11) Permissive Aggregation Group: The group of qualified plans of
an Employer consisting of:
(a) the plans in the Required Aggregation Group; plus
(b) one (1) or more plans designated from time to time by the
Committee that are not part of the Required Aggregation Group but that
satisfy the requirements of Code Sections 401(a)(4) and 410 when
considered with the Required Aggregation Group.
(12) Required Aggregation Group: The group of qualified plans of
an Employer consisting of:
(a) each plan in which a Key Employee participates; plus
(b) each other plan which enables a plan in which a Key Employee
participates to meet the requirements of Code Sections 401(a)(4) or 410.
(13) Top-Heavy Account Balance: A Participant's (including a
Participant who has received a total distribution from this Plan) or a
Beneficiary's aggregate balance standing to his account as of the Valuation
Date coinciding with or immediately preceding the Determination Date (as
adjusted by the amount of any Employer Contributions made or due to be made
after such Valuation Date but before the expiration of the extended payment
period in Code Section 412(c)(10)), provided, however,
<PAGE> 118
that such balance shall include the aggregate distributions made to such
Participant or Beneficiary during the five (5) consecutive Plan Years ending
with the Plan Year that includes the Determination Date (including
distributions under a terminated plan which if it had not been terminated
would have been included in a Required Aggregation Group), and provided
further that if an Employee or former Employee has not performed services for
any Employer maintaining the Plan at any time during the 5-year period ending
on the Determination Date, his account (and/or the account of his Beneficiary)
shall not be taken into account.
(14) Top-Heavy Group: An Aggregation Group if, as of a
Determination Date, the aggregate present value of accrued benefits for Key
Employees in all plans in the Aggregation Group (whether Defined Benefit Plans
or Defined Contribution Plans) is more than sixty percent (60%) of the
aggregate present value of accrued benefits for all employees in such plans.
(15) Top-Heavy Plan: See Section 14.2.
14.2 Determination of Top-Heavy Status. (1) Except as provided by
Subsections (2) and (3) of this Section, the Plan shall be a Top-Heavy Plan
if, as of a Determination Date:
(a) the aggregate of Top-Heavy Account Balances for Key Employees
is more than sixty percent (60%) of the aggregate of all Top-Heavy
Account Balances, excluding for this purpose the aggregate Top-Heavy
Account Balances of Former Key Employees; or
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(b) if the Plan is included in a Required Aggregation Group which
is a Top-Heavy Group.
(c) If the Plan is included in a Required Aggregation Group which
is not a Top-Heavy Group, the Plan shall not be a Top-Heavy Plan
notwithstanding the fact that the Plan would otherwise be a Top-Heavy Plan
under Paragraph (a) of Subsection (1) of this Section.
(2) If the Plan is included in a Permissive Aggregation Group which
is not a Top-Heavy Group, the Plan shall not be a Top-Heavy Plan
notwithstanding the fact that the Plan would otherwise be a Top-Heavy Plan
under Subsection (1) of this Section.
14.3 Determination of Extra Top-Heavy Status.
(1) Except as provided by Subsections (2) and (3) of this Section,
the Plan shall be an Extra Top-Heavy Plan if, as of the Determination Date:
(a) the aggregate of Top-Heavy Account Balances for Key Employees
is more than ninety percent (90%) of the aggregate of all Top-Heavy
Account Balances, excluding for this purpose the aggregate Top-Heavy
Account Balances of Former Key Employees; or
(b) if the Plan is included in a Required Aggregation Group which
is an Extra Top-Heavy Group.
(2) If the Plan is included in a Required Aggregation Group which
is not an Extra Top-Heavy Group, the Plan shall not be an Extra Top-Heavy Plan
notwithstanding the fact that the Plan
<PAGE> 120
would otherwise be an Extra Top-Heavy Plan under paragraph (a) of Subsection
(1) of this Section.
(3) If the Plan is included in a Permissive Aggregation Group which
is not an Extra Top-Heavy Group, the Plan shall not be an Extra Top-Heavy Plan
notwithstanding the fact that the Plan would otherwise be an Extra Top-Heavy
Plan under Subsection (1) of this Section.
14.4 Top-Heavy Plan Requirements. Notwithstanding any other
provisions of the Plan to the contrary, if the Plan is a Top-Heavy Plan for
any Plan Year, the Plan shall then satisfy the following requirements for such
Plan Year:
(1) The minimum contribution requirement as set forth in Section
14.5.
(2) The adjustment to minimum benefits and allocations as set forth
in Section 14.6.
14.5 Minimum Contribution Requirement. If the Plan is a Top-Heavy
Plan for any Plan Year:
(1) Each Non-Key Employee who is eligible to share in any Employer
Contribution for such Plan Year (or who would have been eligible to share in
any such Employer Contribution if a Before-Tax Contribution had been made for
him during such Plan Year) shall be entitled to receive an allocation of such
Employer Contribution, which is at least equal to three percent (3%) of his
Compensation for such Plan Year.
(2) The three percent (3%) minimum contribution requirement under
Subsection (1) of this Section for a Non-Key
<PAGE> 121
Employee shall be increased to four percent (4%) if the Employer maintains a
Defined Benefit Plan which does not cover such Non-Key Employee.
(3) The percentage minimum contribution requirement set forth in
Subsections (1) and (2) of this Section with respect to a Plan Year shall not
exceed the percentage at which Employer Contributions are made (or required to
be made) under the Plan for such Plan Year for the Key Employee for whom such
percentage is the highest for such Year.
(4) The percentage minimum contribution requirement set forth in
Subsections (2) and (3) of this Section may also be reduced or eliminated in
accordance with Section 14.8(2).
(5) For the purpose of Subsection (3) of this Section,
contributions taken into account shall include like contributions under all
other Defined Contribution Plans in the Required Aggregation Group, excluding
any such plan in the Required Aggregation Group if that plan enables a Defined
Benefit Plan in such Required Aggregation Group to meet the requirements of
Code Sections 401(a)(4) or 410.
(6) For the purpose of this Section, the term "Employer
Contributions" shall include Before-Tax Contributions made for an Employee.
14.6 Adjustment to Minimum Benefits and Allocations. If the Plan
is a Top-Heavy Plan for any Plan Year, and if the Employer maintains a Defined
Benefit Plan which could or does provide benefits to Participants in this
Plan:
<PAGE> 122
(a) If the Plan is not an Extra Top-Heavy Plan (but is a Top-Heavy
Plan), then the percentage minimum contribution requirement in Section
14.5(a) shall be seven and one-half percent (7-1/2%) for a Non-Key
Employee who is covered by this Plan and the Defined Benefit Plan.
(b) If the Plan is an Extra Top-Heavy Plan, then parts (a) and (b)
of Section 4.10(1) shall be calculated by substituting "1.0" for "1.25"
for each place such "1.25" figure appears, and Code Section
415(e)(6)(B)(I) shall be calculated by substituting "$41,500: for
"$51,875" for each place such "$51,875" amount appears.
14.7 Coordination With Other Plans. (1) In applying this Article,
an Employer and all Controlled Group Members shall be treated as a single
employer, and the qualified plans maintained by such single employer shall be
taken into account.
(2) In the event that another Defined Contribution Plan or Defined
Benefit Plan maintained by the Controlled Group provides contributions or
benefits on behalf of Participants in this Plan, such other plan(s) shall be
taken into account in determining whether this Plan satisfies Section 14.4;
and the minimum contribution required for a Non-Key Employee in this Plan
under Section 14.5 will be reduced or eliminated, in accordance with the
requirements of Code Section 416 and the Regulations thereunder, if a minimum
contribution or benefit is made or accrued in whole or in part in respect of
such other plan(s).
<PAGE> 123
(3) Principles similar to those specifically applicable to this
Plan under this Article, and in general as provided for in Code Section 416
and the Regulations thereunder, shall be applied to the other plan(s) required
to be taken into account under this Article in determining whether this Plan
and such other plan(s) meet the requirements of such Code Section 416 and the
Regulations thereunder.
<PAGE> 124
ARTICLE XV. - PROVISIONS RELATING TO VOTING
AND TENDER OFFERS FOR NCC STOCK
15.1 Voting of NCC Stock. All voting rights on shares of NCC Stock
held by the Trustee shall be exercised by the Trustee only as directed by the
Participants and Beneficiaries with respect to allocated shares of NCC Stock,
and acting in their capacity as Named Fiduciaries (within the meaning of
Section 402 of ERISA) with respect to unallocated and non-directed shares of
NCC Stock, in accordance with the following provisions of this Section:
(1) As soon as practicable before each annual or special
shareholders' meeting of the Company, the Trustee shall furnish to each
Participant a copy of the proxy solicitation material sent generally to
shareholders, together with a form requesting confidential instructions on how
the shares allocated to such Participant's Account and a proportionate share
(based on the amount of any shares allocated to his Account) of any
unallocated shares and non-directed shares (including fractional shares to
1/1000th of a share) are to be voted. The Company and the Committee shall
cooperate with the Trustee to ensure that Participants receive the requisite
information in a timely manner. Except as provided in Subsection (d) of this
Section, the materials furnished to the Participants shall include a notice
from the Trustee explaining each Participant's right to instruct the Trustee
with respect to the voting of allocated and unallocated shares. Upon timely
receipt of such instructions, the
<PAGE> 125
Trustee (after combining votes of fractional shares to give effect to the
greatest extent to Participants' instructions) shall vote the shares as
instructed. If voting instructions for shares of NCC Stock allocated or
unallocated to the Account of any Participant are not timely received by the
Trustee for a particular shareholders' meeting, such shares shall not be voted
in accordance with the instructions but shall be voted as provided in
Subsection (3) below. The instructions received by the Trustee from
Participants or Beneficiaries shall be held by the Trustee in strict
confidence and shall not be divulged or released to any person including
directors, officers or employees of the Company, or of any other Employer,
except as otherwise required by law.
(2) With respect to all corporate matters submitted to
Participants, all shares of NCC Stock allocated to the Accounts of
Participants shall be voted only in accordance with the directions of such
Participants as given to the Trustee. Each Participant shall be entitled to
direct the voting of shares of NCC Stock (including fractional shares to
1/1000th of a share) allocated to his Account. With respect to shares of NCC
Stock allocated to the Account of a deceased Participant, such Participant's
Beneficiary shall be entitled to direct the voting with respect to such
allocated shares as if such Beneficiary were the Participant.
(3) Each Participant who has been allocated NCC Stock in his
Account and who is entitled to vote on any manner presented for a vote by the
shareholders also shall, as a Named Fiduciary, direct the Trustee with
respect to the vote of a portion of the
<PAGE> 126
shares of NCC Stock that are unallocated to the Account of any Participant and
the Shares of NCC Stock allocated to Participants' Accounts for which no
timely instructions were received. Such direction shall be with respect to
such number of votes equal to the total number of votes attributable to NCC
Stock not allocated to the Accounts of Participants and non-directed shares
multiplied by a fraction, the numerator of which is the number of shares of
NCC Stock allocated to the Participant's Account and the denominator of which
is the total number of shares allocated to the Accounts of such Participants
who have provided directions to the Trustee with respect to unallocated shares
under this Subsection. Each Participant's voting instructions shall be
separately stated as to his allocated shares on the one hand, and as a Named
Fiduciary with respect of a portion of the unallocated and non-directed shares
on the other hand. Fractional shares shall be rounded to the nearest 1/100th
of a share.
15.2 Tender Offers. Except as otherwise expressly provided in the
Plan, the Trustee shall not sell, alienate, encumber, pledge, transfer or
otherwise dispose of or tender or withdraw, any shares of NCC Stock held by it
under the Plan. All tender or exchange decisions with respect to NCC Stock
held by the Plan shall be made only by the Participants and Beneficiaries with
respect to shares allocated to their accounts, and Participants and
Beneficiaries acting in their capacity as Named Fiduciaries (within the
meaning of Section 402 of ERISA) with respect to
<PAGE> 127
unallocated and non-directed shares in accordance with the following
provisions of this Section:
(1) In the event an offer shall be received by the Trustee
(including a tender offer for shares of NCC Stock subject to Section 14(d)(1)
of the Securities Exchange Act of 1934 or subject to Rule 13e-4 promulgated
under that Act, as those provisions may from time to time be amended) to
purchase or exchange any shares of NCC Stock held by the Plan, the Trustee
shall advise each Participant who has shares of NCC Stock credited to such
Participant's Account in writing of the terms of the offer as soon as
practicable after its commencement and shall furnish each Participant with a
form by which he may separately instruct the Trustee confidentially whether or
not to tender or exchange shares allocated to such Participant's Account and
(based on any NCC Stock allocated to such Participant's Account) a
proportionate share of any unallocated shares and non-directed shares
(including fractional shares to 1/1000th of a share). The materials furnished
to the Participants shall include:
(a) a notice from the Trustee explaining Participants' rights to
instruct the Trustee with respect to allocated and unallocated and non-
directed shares as provided herein; and
(b) such related documents as are prepared by any person and
provided to the shareholders of the Company pursuant to the Securities
Exchange Act of 1934.
The Committee and the Trustee may also provide Participants with such other
material concerning the tender or exchange offer as the
<PAGE> 128
Trustee or the Committee in its discretion determine to be appropriate;
provided, however, that prior to any distribution of materials by the
Committee, the Trustee shall be furnished with complete copies of all such
materials. The Company and the Committee shall cooperate with the Trustee to
ensure that Participants receive the requisite information in a timely manner.
(2) The Trustee shall tender or not tender shares or exchange
shares of NCC Stock allocated to the Accounts of any Participant (including
fractional shares to 1/1000th of a share), only as and to the extent
instructed by the Participant. With respect to shares of NCC Stock allocated
to the Account of a deceased Participant, such Participant's Beneficiary shall
be entitled to direct the Trustee whether or not to tender or exchange such
shares as if such Beneficiary were the Participant. The instructions received
by the Trustee from Participants or Beneficiaries shall be held by the Trustee
in strict confidence and shall not be divulged or released to any person,
including directors, officers or employees of the Company, or of any other
Employer, except as otherwise required by law.
(3) Each Participant who has been allocated NCC Stock in his
Account and who is entitled to direct the Trustee whether or not to tender or
exchange shares of NCC Stock allocated to his Accounts also shall direct the
Trustee, as a Named Fiduciary, with respect to the tender or exchange of a
portion of the shares of NCC Stock that are unallocated to the Account of any
Participant and of the shares of NCC Stock allocated to Participants' Accounts
<PAGE> 129
for which no timely instructions are received. Such direction shall apply to
such number of unallocated and non-directed shares multiplied by a fraction,
the numerator of which is the number of shares of NCC Stock allocated to the
Participant's Account and the denominator of which is the total number of
shares of NCC Stock allocated to the Accounts of such Participants who have
provided directions to the Trustee with respect to unallocated shares under
this Subsection. Each Participant's directions shall be separately stated as
to his allocated shares on the one hand and as a Named Fiduciary with respect
to a portion of the unallocated and non-directed shares on the other hand.
Fractional shares shall be rounded to the nearest 1/1000th of a share.
(4) In the event, under the terms of a tender offer or otherwise,
any shares of NCC Stock tendered for sale, exchange or transfer pursuant to
such offer may be withdrawn from such offer, the Trustee shall follow such
instructions respecting the withdrawal of such securities from such offer in
the same manner and the same proportion as shall be timely received by the
Trustee from the Participants entitled under this Section to give instructions
as to the sale, exchange or transfer of securities pursuant to such offer.
(5) In the event that an offer for fewer than all of the shares of
NCC Stock held by the Trustee shall be received by the Trustee, each
Participant who has been allocated any NCC Stock subject to such offer shall
be entitled to direct the Trustee as to the acceptance or rejection of such
offer (as provided by
<PAGE> 130
Subsections (1)-(4) of this Section) with respect to the largest portion of
such NCC Stock as may be possible given the total number or amount of shares
of Stock the Plan may sell, exchange or transfer pursuant to the offer based
upon the instructions received by the Trustee from all other Participants who
shall timely instruct the Trustee pursuant to this Section to sell, exchange
or transfer such shares pursuant to such offer, each on a pro rata basis in
accordance with the number or amount of such shares allocated to his Accounts.
(6) In the event an offer shall be received by the Trustee and
instructions shall be solicited from Participants pursuant to Subsections (1)-
(4) of this Section regarding such offer, and prior to termination of such
offer, another offer is received by the Trustee for the securities subject to
the first offer, the Trustee shall use its best efforts under the
circumstances to solicit instructions from the Participants to the Trustee:
(a) with respect to securities tendered for sale, exchange or
transfer pursuant to the first offer, whether to withdraw such tender, if
possible, and, if withdrawn, whether to tender any securities so
withdrawn for sale, exchange or transfer pursuant to the second offer and
(b) with respect to securities not tendered for sale, exchange or
transfer pursuant to the first offer, whether to tender or not to tender
such securities for sale, exchange or transfer pursuant to the second
offer.
<PAGE> 131
The Trustee shall follow all such instructions received in a timely manner
from Participants in the same manner and in the same proportion as provided in
Subsections (1)-(4) of this Section. With respect to any further offer for
any NCC Stock received by the Trustee and subject to any earlier offer
(including successive offers from one or more existing offerors), the Trustee
shall act in the same manner as described above.
(7) A Participant's instructions to the Trustee to tender or
exchange shares of NCC Stock shall not be deemed a withdrawal or suspension
from the Plan or a forfeiture of any portion of the Participant's interest in
the Plan. Funds received in exchange for tendered shares shall be credited to
the Account of the Participant whose shares were tendered and shall be used by
the Trustee to purchase NCC Stock, as soon as practicable. In the interim,
the Trustee shall invest such funds in obligations or instruments which are
appropriate investments for the Money Market Fund.
(8) Subject to any provisions of this Plan to the contrary, in the
event the Company initiates a tender or exchange offer, the Trustee may, in
its sole discretion, enter into an agreement with the Company not to tender or
exchange any shares of NCC Stock in such offer, in which event, the foregoing
provisions of this Section shall have no effect with respect to such offer and
the Trustee shall not tender or exchange any shares of NCC Stock (allocated or
unallocated) in such offer.
<PAGE> 132
ARTICLE XVI. - LEVERAGED ESOP PROVISIONS
16.1 Definitions. For purposes of this Article, the following
terms shall have the following meanings:
(1) Allocated Dividends: Cash dividends which are paid during the
Plan Year on NCC Stock held in a Participant's ESOP Sub-Account which was
acquired with the proceeds of an outstanding ESOP Loan.
(2) Disqualified Person: A disqualified person within the meaning
of Code Section 4975(e)(2).
(3) Dividend Replacement Allocations: The allocation to a
Participant's ESOP Sub-Account of NCC Stock equivalent in market value to the
amount of the Allocated Dividends paid on shares credited to such ESOP Sub-
Account on the record date of such dividend (which dividend was used during
the Valuation Period ending on such Valuation Date in making an ESOP Loan
amortization payment).
(4) ESOP Interim Account: The account in which Excess ESOP
Allocations shall be held and the operation of which is described in Section
16.5(3).
(5) ESOP Payment Account: The account described in Section
16.4(1).
(6) ESOP Sub-Account: The separate portion of a Participant's
Matching Allocation Sub-Account which is credited with the amounts described
in Section 16.5(3).
(7) ESOP Suspense Account: The account described in Section
16.3(4).
<PAGE> 133
(8) Excess ESOP Allocations: Shares of NCC Stock held in the ESOP
Interim Account which are not allocated to the ESOP Sub-Accounts as of a
Valuation Date because the fair market value of shares of NCC Stock available
to be allocated to the ESOP Sub-Accounts from the ESOP Interim Account
(including Excess ESOP Allocations from an earlier Valuation Date in such Plan
Year) at such Valuation Date are in excess of the required Matching
Allocations and Dividend Replacement Allocations for such Valuation Date.
(9) Merchants Plan: The Merchants National Corporation Thrift
Plan, as amended and restated as of October 1, 1990 and as further amended and
in effect on June 30, 1992.
(10) Supplemental ESOP Contribution: The Employer contributions
described in Section 16.5(2)(b).
(11) Unallocated Dividends: The cash dividends paid on NCC Stock
held in the ESOP Suspense Account or ESOP Interim Account.
(12) Valuation Period: The period from the last day following a
Valuation Date to and including the next succeeding Valuation Date.
16.2 In General: Effective as of July 1, 1992, as described in
Appendix M hereto, the Merchants Plan shall be merged into the Plan and the
ESOP feature of the Merchants Plan shall continue as part of this Plan in the
manner described in this Article. On and after July 1, 1992, the Plan shall
consist of two components, the ESOP Feature and the Profit Sharing Feature.
The
<PAGE> 134
ESOP Feature is described in this Article. The ESOP Feature is intended to
qualify as a stock bonus plan under Code Section 401(a) and as an employee
stock ownership plan under Code Section 4975(e)(7). The ESOP Feature is
designed to invest primarily in "qualifying employer securities," as defined
in Code Sections 4975(e)(8) and 409(l) and ERISA Section 407(d)(5). On and
after July 1, 1992, Matching Allocations under this Plan shall be funded
through the ESOP Feature. Matching Allocations made before July 1, 1992 to
this Plan and all of other Employer and Employee contributions have been and
shall continue to be funded through the Profit Sharing Feature of the Plan.
The assets of the employee stock ownership plan feature of the Merchants Plan
and all amounts credited to Participant's Accounts pursuant to the provisions
of this Article shall constitute the ESOP Feature of this Plan. For purposes
of this Article, any reference to NCC Stock acquired with the proceeds of an
ESOP Loan shall be deemed to include shares of common stock of Merchants
National Corporation that were acquired with the proceeds of the ESOP Loan
made to the Merchants Plan which shares of common stock were converted into
NCC Stock upon the merger of Merchants National Corporation and the Company.
The provisions of this Article XVI shall supercede any contrary provisions of
the Plan.
16.3 ESOP Loan.
(1) Authority. The Company may direct the Trustee to obtain an
ESOP Loan or Loans. The term "ESOP Loan" means a loan made to the Plan
(including the loan made to the Merchants Plan to
<PAGE> 135
which this Plan has succeeded by virtue of the merger of the Merchants Plan
into this Plan), including a direct loan of cash, a purchase money transaction
and an assumption of an obligation by the Plan. An ESOP Loan may be made by a
Disqualified Person or may be secured by a guarantee of a Disqualified Person.
"Guarantee" includes an unsecured guarantee and the use of the assets of a
Disqualified Person as collateral for an ESOP Loan.
(2) Conditions of Loans. An ESOP Loan must be primarily for the
benefit of the Participants and their Beneficiaries. The terms of an ESOP
Loan, whether or not between independent parties, must, at the time the ESOP
Loan is made, be at least as favorable to the Plan as the terms of a
comparable loan resulting from arm's length negotiations between independent
parties. At the time the ESOP Loan is made, the interest rate for the ESOP
Loan must not be in excess of a reasonable rate of interest, taking into
account the amount and duration of the ESOP Loan, the security and guarantee
(if any) involved, and the interest rate prevailing for comparable loans. The
term of the ESOP Loan must be definitely ascertainable.
(3) Use of Loan Proceeds. The proceeds of an ESOP Loan must be
used within a reasonable time after their receipt by the Plan and may be used
only for one or more of the following purposes:
(a) to acquire NCC Stock,
(b) to repay the ESOP Loan, or
(c) to repay a prior ESOP Loan.
<PAGE> 136
(4) ESOP Suspense Account. All assets acquired by the Plan with
the proceeds of an ESOP Loan shall be added to and maintained in the ESOP
Suspense Account. The note or any security agreements executed by the Trustee
in connection with an ESOP Loan shall provide that assets shall be released
from the ESOP Suspense Account pursuant to the provisions of Section 16.5(1)
as though all securities in the ESOP Suspense Account were encumbered.
(5) Liability and Collateral for Loan. An ESOP Loan must be
without recourse against the Plan. The only assets of the Plan which may be
used as collateral on an ESOP Loan are NCC Stock acquired with the proceeds of
the ESOP Loan and NCC Stock that was used as collateral on a prior ESOP Loan.
Except as permitted pursuant to Code Section 404(k), no person entitled to
payment under an ESOP Loan shall have any right to assets of the Plan other
than --
(a) collateral given for the ESOP Loan,
(b) Employer contributions that are made to the Plan to meet its
obligations under the ESOP Loan, and
(c) earnings attributable to such collateral and the investment of
such Employer contributions.
(6) Default. The note or any security agreements executed by the
Trustee in connection with an ESOP Loan shall provide that in the event of
default under the ESOP Loan, the value of assets of the Plan, if any,
transferred in satisfaction of the Loan must not exceed the amount of such
default and if the lender is a Disqualified Person, the ESOP Loan must provide
for
<PAGE> 137
the transfer of such assets only upon and to the extent of the failure of the
Trustee to meet the payment schedule of the ESOP Loan.
(7) Limitation on Payments. Payments made by the Trustee with
respect to an ESOP Loan during a Plan Year shall not exceed the sum of (a)
ESOP Contributions made during the Plan Year and each prior Plan Year to meet
its obligations under the ESOP Loan and the earnings attributable to the
investment of such Contributions and (b) earnings attributable to allocated
and unallocated NCC Stock acquired with the proceeds of any ESOP Loan, reduced
by (c) payments made under the ESOP Loan in prior Plan Years, and increased by
(d) the proceeds of any sale of NCC Stock held in the ESOP Suspense Account
used to make payments on such ESOP Loans. Such ESOP Contributions and
earnings shall be accounted for separately in the books of account of the ESOP
Feature until the ESOP Loan is repaid.
16.4 Repayment of Loan. (1) The Trustee shall cause the Plan to
repay the ESOP Loan to the lender as payments on the ESOP Loan are required
pursuant to the terms of the ESOP Loan agreement. If ESOP Contributions are
made prior to the date on which a payment is required under an ESOP Loan
agreement or in excess of the amount of a required payment, upon the direction
of the Company pursuant to Section 16.8, the Trustee shall cause the Plan to
apply such ESOP Contributions to the prepayment of the ESOP Loan. Payments
shall be made from the ESOP Payment Account.
<PAGE> 138
Except as otherwise provided herein, the ESOP Payment Account shall hold:
(a) proceeds (if any) arising from the sale of NCC Stock held in
the ESOP Suspense Account;
(b) Allocated Dividends and Unallocated Dividends (to the extent
provided by Section 16.13(1);
(c) Employer contributions (if any) made with respect to the ESOP
Feature; and
(d) proceeds (if any) of a subsequent ESOP Loan made to repay a
prior ESOP Loan.
(2) In the event of default upon an ESOP Loan for failure to meet
the required payment schedule, the Trustee shall transfer shares of NCC Stock
in the ESOP Suspense Account to the ESOP Payment Account that are sufficient,
when added to the other assets in the ESOP Payment Account, to make the
required ESOP Loan payment.
16.5 Contributions, Release from ESOP Suspense Account and
Allocation Among Participants' Accounts.
(1) Release. Each Valuation Date that payment is made on an ESOP
Loan (whether a regularly-scheduled payment or a prepayment, but not including
any prepayment made with the proceeds of a new ESOP Loan incurred to refinance
an existing ESOP Loan), the Trustee shall release shares of NCC Stock then
held in the ESOP Suspense Account for allocation to Participants' Accounts.
The number of shares of NCC Stock to be released for each Valuation Period
shall equal the number of encumbered shares
<PAGE> 139
held in the ESOP Suspense Account immediately before the payment multiplied by
a fraction the numerator of which is the amount of principal and interest paid
at such time and the denominator of which is the sum of the numerator and the
principal and interest to be paid under the ESOP Loan later in such Plan Year
and in all future Plan Years without regard to any possible extension or
renewal periods. The shares of NCC Stock released from the ESOP Suspense
Account pursuant to this Subsection shall be transferred to the ESOP Interim
Account, and such shares shall be allocated as specified in subsection (3)
below.
(2) Contributions. A Participant shall be entitled to an
allocation to his ESOP Sub-Account for each Valuation Period equal to his
Matching Allocations required under Section 3.6 and with respect to the last
Valuation Period of a Plan Year, under Section 3.8, if any, payable in the
form of NCC Stock. A Participant with an undistributed ESOP Sub-Account shall
also be entitled to share in any Dividend Replacement Allocations during such
Valuation Period. The required Matching Allocations and the Dividend
Replacement Allocations shall be funded by shares of NCC Stock released from
the ESOP Suspense Account (as provided in Subsection (1)) and as a result of
the ESOP Contributions made by the Employer and Supplemental ESOP
Contributions described below:
(a) ESOP Contributions. For each Valuation Period during which an
ESOP Loan is outstanding, the Employers may make ESOP Contributions to
the Trustee in such amount or under such a formula as the Company may
determine, provided
<PAGE> 140
that the aggregate ESOP Contributions made for a Plan Year are an
amount sufficient (after taking into account the use of certain
amounts lent to the Trustee, Allocated Dividends and Unallocated
Dividends in accordance with Section 16.13(1)) to enable the Trustee
to repay the amounts of principal and interest on any ESOP Loan
which become due and payable. The share of each Employer in the
aggregate ESOP Contributions for each Plan Year shall be equal to
the total amount of ESOP Contributions attributable to the
Participants who are Employees of such Employer, as determined by
the Company.
(b) Supplemental ESOP Contributions. (i) With respect to each
Valuation Period, the Employers shall make Supplemental ESOP
Contributions as of the Valuation Date in such Valuation Period if:
(A) the fair market value (as determined as of such Valuation
Date) of shares of NCC Stock released from the ESOP Suspense Account
and allocated as of the Valuation Date in such Valuation Period is
less than
(B) the sum (during such Valuation Period) of the Dividend
Replacement Allocations and required Matching Allocations for such
Valuation Period reduced by:
(I) the amount of Excess ESOP Allocations from prior
Valuation Periods in such Plan Year not previously applied to
reduce required Matching
<PAGE> 141
Allocations and Dividend Replacement Allocations, and
(II) amounts from prior Plan Years in excess of limits
prescribed in Section 4.9 and Section 4.10 which have not been
applied in prior Valuation Periods.
If (B) exceeds (A), the Employers shall make, as soon as practicable
after such Valuation Date, Supplemental ESOP Contributions to the
Trustee in the aggregate amount required to fund allocations of NCC
Stock which are equal to the excess of (B) over (A) determined above
as of such Valuation Date.
(ii) The aggregate Supplemental ESOP Contributions, if any,
for any Valuation Period shall be determined by the Company pursuant
to the first sentence of this Subsection (b). The share of each
Employer in the aggregate Supplemental ESOP Contributions (if any) for
any such Period shall be equal to the total amount of Supplemental
ESOP Contributions required to fund allocations to the ESOP Sub-
Accounts of Participants who are Employees of such Employer, as
determined by the Company. The Employers, as directed by the Company,
may make all or a portion of the Supplemental ESOP Contributions by
(A) contributing cash to the Trustee which the Trustee shall use to
prepay part of the ESOP Loan(s) to release additional shares of NCC
Stock as of
<PAGE> 142
the applicable Valuation Date, (B) contributing cash to the Trustee
which the Trustee shall use to buy NCC Stock for allocation as of
the applicable Valuation Date, (C) contributing NCC Stock for
allocation as of the applicable Valuation Date, or (D) any
combination of the foregoing.
(3) Application and Allocation. Both Supplemental ESOP
Contributions (whether in cash or in the form of NCC Stock) that are not
applied to an ESOP Loan payment and shares of NCC Stock released from the ESOP
Suspense Account by reason of ESOP Loan payments and held in the ESOP Interim
Account shall be allocated to Participants' ESOP Sub-Accounts in accordance
with the provisions of this Section 16.5(3). For each Valuation Period the
amounts of allocations shall be determined in accordance with the following,
and in the following order of priority:
(a) Dividend Replacement Allocation. To the extent that Allocated
Dividends are to be applied to repay an ESOP Loan as provided by Section
16.13(1), such dividends shall not be allocated to Participants' ESOP
Sub-Accounts, but Dividend Replacement Allocations of released shares of
NCC Stock (and, if applicable, shares of NCC Stock contributed as part of
a Supplemental ESOP Contribution or purchased by the Trustee with cash
contributed as part of a Supplemental ESOP Contribution) shall be made
with respect thereto in accordance with the following provisions:
<PAGE> 143
(i) The aggregate amount of the Allocated Dividends shall be
calculated as of the relevant record date for dividends paid on
shares of NCC Stock, based on the aggregate number of shares of NCC
Stock allocated to ESOP Sub-Accounts as of such record date.
Dividend Replacement Allocations with respect thereto shall be made
as of each Valuation Date, as soon as practicable following a release
of shares from the ESOP Suspense Account which results from an ESOP
Loan amortization payment made, partially or wholly, with Allocated
Dividends. The Dividend Replacement Allocations shall be made with
released shares of NCC Stock (and, if applicable, any NCC Stock
contributed as part of a Supplemental ESOP Contribution or purchased
by the Trustee with cash contributed as part of a Supplemental ESOP
Contribution made to fund Dividend Replacement Allocations) having an
aggregate fair market value (determined at the applicable Valuation
Date) equal to the amount of Allocated Dividends, and shall be
allocated to the ESOP Sub-Accounts of Participants to which shares
were credited as of the relevant record date for such Allocated
Dividends, such allocation to be made in proportion to the shares of
NCC Stock so credited; provided, however, that the Dividend
Replacement Allocation amounts for the Valuation Date which is the
last day of the Plan Year shall first be
<PAGE> 144
satisfied with any unused amount of Excess ESOP Allocations held in
the ESOP Interim Account from the preceding Valuation Date in such
Plan Year (valued at fair market value as of such last day of the
Plan Year).
(b) Matching Allocations. After the completion of the Dividend
Replacement Allocations, the Matching Allocations required under Sections
3.6 and 3.8 for each Participant shall be made as of the Valuation Date for
such Valuation Period. As soon as practicable following each such
determination, released shares of NCC Stock (and, if applicable, NCC Stock
contributed as a Supplemental ESOP Contribution or purchased by the Trustee
with a cash Supplemental ESOP Contribution) having an aggregate fair market
value (as of the applicable Valuation Date) equal to the Matching
Allocations required under Sections 3.6 and 3.8 with respect to each
Participant shall be allocated as of such Valuation Date to such
Participant's ESOP Sub-Account. If after the allocation of shares released
from the ESOP Suspense Account the required Matching Allocations for such
Valuation Date are not met, the Committee shall apply any unused amount of
Excess ESOP Allocations from the prior Valuation Date, if any, in such Plan
Year (valued at fair market value as of the date of an allocation thereof)
for purposes of meeting the required Matching Allocations for such
Valuation Date. For purposes of determining the amount of shares of NCC
Stock to be allocated as required Matching
<PAGE> 145
Allocations, shares of NCC Stock released from the ESOP Suspense Account
shall be valued at their fair market value as of the applicable Valuation
Date on which they are to be allocated.
(c) Excess Shares. Subject to Sections 4.9 and 4.10, if at the end
of a Plan Year after the completion of the foregoing allocations for the
Plan Year there are still Excess ESOP Allocation shares of NCC Stock held
in the ESOP Interim Account which have not been allocated, then such
shares shall be allocated to each Participant who would be eligible in
accordance with the provisions of Section 3.8 to share in a Matching
Allocation made pursuant to Section 3.8 for the Plan Year (whether or not
a Matching Allocation is in fact made pursuant to Section 3.8 for such
Plan Year). The amount of such shares to be allocated to each such
Participant shall be the amount that bears the same ratio to the total
amount of Excess ESOP Allocation shares as the Credited Compensation of
such Participant for the Plan Year bears to the aggregate Credited
Compensation of all such Participants for such Plan Year. An allocation
under this Subsection shall be allocated to the Participants' ESOP Sub-
Accounts as part of the ESOP Feature.
16.6 Investment of ESOP Feature. The Trust Fund assets held under
the ESOP Feature of the Plan (other than the ESOP Suspense Account) shall be
invested in the NCC Stock Fund. The
<PAGE> 146
proceeds of an ESOP Loan shall be invested in NCC Stock. Such NCC Stock shall
be subject to the provisions of Section 16.10.
16.7 Acquisition and Disposition of Employer Securities. (1)
General. Any purchase of NCC Stock by the Trust Fund shall be made at a price
which is not in excess of it fair market value. The Committee shall determine
fair market value of any nonpublicly traded NCC Stock based upon the value
determined by an independent appraiser having expertise in rendering such
evaluations and meeting requirements similar to those contained in Treasury
Regulations under Code Section 170(a)(1). The Committee may direct the
Trustee to buy NCC Stock from, or sell NCC Stock to, any person, subject to
Subsection (2). All sales of NCC Stock shall be charged pro rata to the ESOP
Sub-Accounts of the Participants.
(2) Transactions with Disqualified Persons. In the case of any
transaction involving NCC Stock between the Trust Fund and a Disqualified
Person or any transaction involving NCC Stock which is subject to ERISA
Section 406(b), no commission shall be charged with respect to the transaction
and the transaction shall be for adequate consideration (as defined in ERISA
Section 3(18)) or, in the case of an evidence of indebtedness of an Employer
or an affiliate of an Employer, at a price not less favorable to the Plan than
the price determined under ERISA Section 407(e)(1).
16.8 Employer Contributions to Retire Debt. Contributions made to
the Plan shall be designated by the Company so as to indicate which portion of
the contribution may be used to
<PAGE> 147
retire ESOP Loans. If the Loan may be accelerated at the election of the
borrower, the Company shall have sole discretion to direct the Trustee to
accelerate repayment of the ESOP Loan.
16.9 Stock Rights and Restrictions.
(1) Company Stock Acquired by Loan. Except as provided in Section
16.10, no NCC Stock acquired with the proceeds of an ESOP Loan shall be
subject to a put, call, or other option, or buy-sell or similar arrangement
while held by and when distributed from the Plan.
(2) Nonterminable Restrictions. The protections and rights of
Subsection (1) and Section 16.10 shall be non-terminable. If the ESOP Feature
holds or has distributed NCC Stock acquired with the proceeds of an ESOP Loan,
the foregoing protections and rights shall continue to apply to such NCC Stock
after the ESOP Loan is repaid and whether or not the Plan's ESOP Feature
continues.
16.10 Put Option on Company Stock Acquired with a Loan.
(1) When Put Required. If a Participant receives a distribution of
NCC Stock which was acquired with the proceeds of an ESOP Loan, and either:
(a) the NCC Stock is not publicly-traded stock, or
(b) the NCC Stock is subject to a trading limitation under federal
or state securities law, or regulations thereunder, or an agreement which
would make the NCC Stock not as freely tradable as stock not subject to
such limitation, then the NCC Stock distributed to the Participant
<PAGE> 148
(or his Beneficiary) must be subject to a put option as described in this
Section.
(2) Holder of Put. The put option shall be exercisable by the
Participant or, if deceased, by the Participant's Beneficiary, by the donees
of either, or by a person (including an estate or its distributee) to whom the
NCC Stock passes by reason of the death of the Participant or the Beneficiary.
(3) Responsibility for Put. The holder of the put option shall be
entitled to put the NCC Stock to the Company. The Committee shall have the
authority to have the Plan assume the rights and obligations of the Company at
the time the put option is exercised by directing the Trustee to repurchase
the NCC Stock; provided, however, that under no circumstances may the put
option bind the Plan. If it is known at the time an ESOP Loan is made that
federal or state law will be violated by the Company's honoring the put
option, the put option must permit the NCC Stock to be put, in a manner
consistent with such law, to a third party (for example, an affiliate of the
Company or a shareholder other than the Plan) that has substantial net worth
at the time the ESOP Loan is made and whose net worth is reasonably expected
to remain substantial.
(4) Duration of Put. The holder of the put option shall be
entitled to exercise the option at any time during two option periods. The
first option period shall be the 60-day period commencing on the date of the
distribution of the NCC Stock, and if the option is not exercised during that
period, a
<PAGE> 149
second 60-day period shall commence in the following Plan Year pursuant to
applicable Treasury Regulations. The period during which a put option is
exercisable does not include any time when a holder of the put option is
unable to exercise it because the party bound by the put option is prohibited
from honoring it by applicable federal or state law.
(5) Manner of Exercise. A put option is exercised by the holder
notifying the Company in writing that the option is being exercised.
(6) Price. The exercise price for a put option shall be the value
of the NCC Stock (as determined pursuant to Treasury Regulation Section
54.4975-11(d)(5)) based on all relevant factors for determining the fair
market value of the NCC Stock and shall be made in good faith. In the case of
a transaction between the Plan and a Disqualified Person, value shall be
determined as of the date of the transaction. For all other purposes, value
shall be determined as of the most recent Valuation Date under the Plan. An
independent appraisal will not in itself be a good faith determination of
value in the case of a transaction between the Plan and a Disqualified Person.
However, in other cases, a determination of fair market value based on at
least an annual appraisal independently arrived at by a person who customarily
makes such appraisals and who is independent of any party to a transaction
involving a right of first refusal or a put option with respect to NCC Stock
distributed under this Plan will be deemed to be a good faith determination of
value.
<PAGE> 150
(7) Payment Terms and Restrictions. The terms of payment for the
sale of NCC Stock pursuant to a put option shall be as provided in the put and
may be either paid in a lump sum or in installments as provided by the
Committee. An agreement to pay through installments shall be permissible only
if --
(a) the agreement is adequately secured, as determined by the
Committee,
(b) a reasonable rate of interest is charged, as determined by the
Committee,
(c) annual payments are equal,
(d) installment payments must begin not later than 30 days after
the date the put option is exercised,
(e) the term of payment does not extend beyond the greater of --
(i) five years from the date the put option is exercised, or
(ii) the earlier of --
(A) ten years from the date the put option is exercised,
or
(B) the date the ESOP Loan used by the Plan to acquire
NCC Stock subject to the put option has been entirely repaid, and
(f) in all other respects the requirements of Treasury Regulations
Section #54.4975-7(b)(12)(iv) are satisfied.
16.11 Diversification of Investment. Participants may diversify
the investment of amounts held in their ESOP Sub-
<PAGE> 151
Accounts by transferring amounts held in their ESOP Sub-Accounts from the NCC
Stock Fund to one of the other Investment Funds maintained under the Profit
Sharing Feature in accordance with the provisions of Section 5.6. Any
transfer of such amounts from the NCC Stock Fund to another Investment Fund
shall be deemed to be a transfer from the ESOP Feature to the Profit Sharing
Feature.
16.12 Stock Disposition Ordering Rule. In any case where the
Trustee is required to distribute or dispose of NCC Stock, shares of NCC Stock
acquired with the proceeds of an ESOP Loan shall not be distributed or
disposed of prior to any other shares of NCC Stock held under the ESOP
Feature.
16.13 Miscellaneous ESOP Feature Provisions.
(1) Application of Dividends. All cash dividends on NCC Stock
allocated to Participants' ESOP Sub-Accounts may, as determined by the
Company, be used, in whole or in part, consistent with Code Section 404(k) to
make principal or interest payments on an ESOP Loan, or may be retained in the
Participant's ESOP Sub-Accounts or paid out to the Participant. The Company
may determine how such dividends may be applied for any Valuation Period up to
the time when such dividends are finally allocated to the ESOP Sub-Accounts of
Participants as of the last day of such Valuation Period. Such dividends may
not be used for payment of an ESOP Loan unless the Dividend Replacement
Allocations described in Section 16.5(3)(a) are made. Except as otherwise
directed by the Company, all cash dividends on unallocated shares of NCC Stock
<PAGE> 152
held in the ESOP Suspense and Interim Accounts shall be used to repay an ESOP
Loan related to such shares of NCC Stock.
(2) Independent Appraiser. NCC Stock held in Participants' ESOP
Sub-Accounts shall be valued as of each Valuation Date, or at the discretion
of the Committee, more frequently. All valuations of NCC Stock held in
Participants' ESOP Sub-Accounts which is not readily tradeable on an
established securities market shall be made by an independent appraiser
meeting requirements similar to those contained in Treasury Regulations under
Code Section 170(a)(1).
(3) Termination of ESOP Component. Upon a complete termination of
the Plan or of the ESOP Feature but only to the extent permitted by the Code
and ERISA, any unallocated NCC Stock shall be sold either to the Company (at a
price no less than fair market value) or on the open market. To the extent
permitted by the Code and ERISA, the proceeds of such sale shall be used to
satisfy any outstanding ESOP Loan and the balance of any funds remaining shall
be allocated as income to each Participant's ESOP Sub-Account based on the
proportion that the Participant's ESOP Sub-Account balance as of the
immediately preceding Valuation Date bears to the aggregate ESOP Sub-Account
balances of all Participants as of the immediately preceding Valuation Date,
provided, however, that former Participants, if any, who transferred from this
Plan to a Comparable Savings Plan during the thirty (30) days immediately
prior to such termination shall share
<PAGE> 153
in such allocation on the basis of the balance(s) in their ESOP Sub-Account(s)
immediately prior to any such transfer(s).
<PAGE> 154
ARTICLE XVII. - APPENDICES
17.1 Rules Governing Construction of Appendices. Each Appendix
attached hereto contains terms and conditions governing the application of the
Plan to the group of Employees described therein. In the event of an
inconsistency between the other provisions of the Plan and such terms and
conditions set forth in an Appendix, the latter shall control as to the
Employees (or former Employees) covered by such Appendix; provided, however,
that if such inconsistency results from changes made in the provisions of the
Plan to comply with applicable law, then such provisions of the Plan shall
control as to the Employees (or former Employees) covered by such Appendix.
The terms and provisions of the Appendices that were adopted before the
effective date of this amendment and restatement of the Plan shall remain in
effect until changed or superceded. Any reference in any Appendix to
provisions of the Plan as in effect at the time such Appendix became effective
shall be deemed to refer to the comparable provisions of the Plan as later
amended or restated.
17.2 Appendix A -- National City Bank Deferred Profit Sharing Plan
and Trust -- Merger into this Plan and Trust. Attached hereto and made a part
of the Plan and Trust is Appendix A, relating to and providing for the merger
of the National City Bank Deferred Profit Sharing Plan and Trust, as amended,
into this Plan and Trust as of June 30, 1987 (or such later date as may be
required by applicable law).
<PAGE> 155
17.3 Appendix B -- BancOhio Corporation 1982 Qualified Employee
Stock Purchase Plan and Trust -- Merger into this Plan and Trust. Attached
hereto and made a part of the Plan and Trust is Appendix B, relating to and
providing for the merger of the BancOhio Corporation 1982 Qualified Employee
Stock Purchase Plan and Trust, as amended, into this Plan and Trust as of
December 31, 1987 (or such later date as may be required by applicable law).
17.4 Appendix C -- First Kentucky National Corporation Thrift Plan
- -- Merger into this Plan and Trust. Attached hereto and made a part of the
Plan and Trust is Appendix C, relating to and providing for the merger of the
First Kentucky National Corporation Thrift Plan, as amended, into this Plan
and Trust as of January 1, 1989.
17.5 Appendix D -- First Kentucky National Corporation Retirement
Plan -- Merger into this Plan and Trust. Attached hereto and made a part of
the Plan and Trust is Appendix D, relating to and providing for the merger of
the First Kentucky National Corporation Retirement Plan, as amended, into this
Plan and Trust as of January 1, 1989.
17.6 Appendix E -- Farmers-Citizens Bank Amended and Restated
Profit-Sharing Retirement Plan -- Merger into this Plan and Trust. Attached
hereto and made a part of the Plan and Trust is Appendix E, relating to and
providing for the merger of the Farmers-Citizens Bank Amended and Restated
Profit-Sharing Retirement Plan, as amended, into this Plan and Trust as of
January 1, 1989.
<PAGE> 156
17.7 Appendix F -- Adoption by NCC Services, Inc. Attached hereto
and made a part of the Plan and Trust is Appendix F relating to the adoption
of the Plan by NCC Services, Inc.
17.8 Appendix G -- Crestwood State Bank Savings Plan -- Merger into
this Plan and Trust. Attached hereto and made a part of the Plan and Trust is
Appendix G, relating to and providing for the merger of the Crestwood State
Bank Savings Plan into this Plan and Trust as of January 1, 1990.
17.9 Appendix H -- Gem Savings Retirement Savings Plan -- Merger
into this Plan and Trust. Attached hereto and made a part of this Plan and
Trust is Appendix H relating to and providing for the merger of the Gem
Savings Retirement Savings Plan into this Plan and Trust as of February 1,
1990.
17.10 Appendix I -- Gem Savings Retirement Security Plan -- Merger
into this Plan and Trust. Attached hereto and made a part of this Plan and
Trust is Appendix I relating to and providing for the merger of the Gem
Savings Retirement Security Plan into this Plan and Trust as of February 1,
1990.
17.11 Appendix J -- Buckeye Financial Corporation Employee Stock
Ownership Plan -- Merger into this Plan and Trust. Attached hereto and made a
part of this Plan and Trust is Appendix J relating to and providing for the
merger of the Buckeye Financial Corporation Employee Stock Ownership Plan into
this Plan and Trust as of January 24, 1991.
<PAGE> 157
17.12 Appendix K -- Buckeye Financial Corporation Section 401(k)
Plan -- Merger into this Plan and Trust. Attached hereto and made a part of
this Plan and Trust is Appendix K relating to and providing for the merger of
the Buckeye Financial Corporation Section 401(k) Plan into this Plan and Trust
as of March 1, 1991.
17.13 Appendix L -- Ohio Citizens Bank Profit-Sharing Retirement
Plan and Declaration of Trust -- Merger into this Plan and Trust. Attached
hereto and made a part of this Plan and Trust is Appendix L relating to and
providing for the merger of the Ohio Citizens Bank Profit-Sharing Retirement
Plan and Declaration of Trust into this Plan and Trust as of April 30, 1992
immediately after the spin off and transfer of certain assets of the Ohio
Citizens Bank Profit-Sharing Retirement Plan and Declaration of Trust to The
National City Savings and Investment Plan No. 2 and Trust.
17.14 Appendix M -- Merchants National Corporation Thrift Plan --
Merger into this Plan. Attached hereto and made a part of this Plan is
Appendix M relating to and providing for the merger of the Merchants National
Corporation Thrift Plan into this Plan as of July 1, 1992.
17.15 Appendix N -- Conversion to Daily Access System. Attached
hereto and made a part of this Plan is Appendix N relating to and providing
for the conversion of the Plan and Trust to a daily access system (originally
identified as "Appendix M"
<PAGE> 158
and added by "Amendment No. 16 to the National City Savings and Investment
Plan and Trust," executed October 12, 1993).
17.16 Appendix O -- Ohio Bancorp Profit Sharing and 401(k) Savings
Plan -- Merger into this Plan and Trust. Attached hereto and made a part of
this Plan and Trust is Appendix O relating to and providing for the merger of
the Ohio Bancorp Profit Sharing and 401(k) Savings Plan into this Plan and
Trust as of the Consolidation Date defined therein.
17.17 Appendix P -- Military Banking Division Savings and
Investment Plan -- Merger into this Plan and Trust. Attached hereto and made
a part of this Plan and Trust is Appendix P relating to and providing for the
merger of the Military Banking Division Savings and Investment Plan and Trust
into this Plan and Trust as of January 1, 1995 (or such later date as may be
required by applicable law).
<PAGE> 159
This amendment and restatement of the National City Savings and
Investment Plan is hereby executed at Cleveland, Ohio, this 30th day of
December, 1994 but effective as otherwise herein set forth.
NATIONAL CITY BANK, TRUSTEE NATIONAL CITY CORPORATION
By: R. KENT LUDWIG By: DAVID A. DABERKO
---------------------- --------------------
Title: Vice President Title:
And: J.M. BUCHAGEN And: SHELLEY J. SEIFERT
---------------------- --------------------
Title: Vice President Title:
<PAGE> 160
EXHIBIT A
Participating Employers
as of July 1, 1992
National City Bank, Akron
First National Bank of Ashland
National City Bank
National City Bank, Northeast
BancOhio National Bank
First National Bank, Dayton
National City Bank, Norwalk
Third National Bank of Sandusky
Ohio Citizens Bank
National City Trust Company
BancOhio Leasing Company
BancOhio Mortgage Company
W. Lyman Case & Company
First Kentucky National Corporation
First National Bank of Louisville
First Kentucky Trust Company
First National Bank, Louisville
First Kentucky Company
National Processing Company, Inc.
The American National Bank & Trust Company
Central Bank and Trust Company
CommerceNational Bank
First National Bank of Indiana
The Third National Bank of Ashland
Farmers-Citizens Bank
Crestwood State Bank
Gem Savings Association
NCC Services, Inc.
Merchants National Corporation
Madison Bank and Trust Company
Merchants National Bank & Trust Company of Indianapolis
Anderson Banking Company
Batesville State Bank
Central National Bank of Greencastle
<PAGE> 161
Citizens National Bank of Tipton
Elston Bank & Trust Company
Farmers National Bank of Shelbyville
Fayette Bank and Trust Company
First National Bank of East Chicago
First National Bank of Indiana, Logansport
First National Bank of Indiana, New Albany
Hancock Bank & Trust Company
Mid State Bank
Mid State Bank of Hendricks County
The National Bank of Greenwood
The Seymour National Bank
Union State Bank
National Asset Management Corporation
Merchants Capital Management, Inc.
Mortgage Company of Indiana
National City Mortgage Corporation
Merchants Mortgage Company
North Madison Insurance Agency, Inc.
Merchants Security Company
EMPLOYERS ADDED
AS OF JANUARY 1, 1994
Ohio Bancorp
The Dollar Savings & Trust Company
The Peoples Banking Company
The Potters Bank & Trust Company
Bank 2000
The Miners and Mechanics Savings and Trust Company
<PAGE> 1
Exhibit 10.25
THE NATIONAL CITY SAVINGS AND INVESTMENT PLAN NO. 2
(As Amended and Restated Effective January 1, 1992)
<PAGE> 2
THE NATIONAL CITY SAVINGS AND INVESTMENT PLAN NO 2
WHEREAS, National City Corporation, a Delaware corporation
(the "Corporation"), originally adopted (pursuant to the spin-off described
hereafter) this profit sharing plan known as The National City Savings and
Investment Plan No. 2 and Trust (the "Plan") effective as of January 1, 1992
(the "Effective Date"); and
WHEREAS, pursuant to the Instrument of Amendment of, and Spin
Off from, the National City Savings and Investment Plan and Trust dated
December 30, 1991 (the "Instrument"), the Plan was spun off from The National
City Savings and Investment Plan and Trust (the "Prior Plan") as of the
Effective Date; and
WHEREAS, the Plan is a continuation of the Prior Plan as to
those individuals described as "Transferred Participants" in the Instrument;
and
WHEREAS, pursuant to the Instrument, the terms of the Plan
were identical to those of the Prior Plan except as otherwise provided in the
Instrument; and
WHEREAS, the Plan was subsequently amended by Amendments Nos.
1 through 4 thereto; and
WHEREAS, the Corporation desires to amend and restate the Plan
to incorporate Amendments Nos. 1 through 4 and to make certain other changes
including the removal of the Trust provisions from the Plan to a separate Trust
Agreement;
<PAGE> 3
NOW, THEREFORE, the Corporation hereby adopts this amendment
and restatement of the Plan effective as of January 1, 1992 which incorporates
the provisions of Amendments Nos. 1 through 4 to the Plan and hereby renames
the Plan The National City Savings and Investment Plan No. 2.
<PAGE> 4
ARTICLE I. - DEFINITIONS AND CONSTRUCTION
1.1 Definitions. The following terms when used in the Plan
and the Trust Agreement with initial capital letters, unless the context
clearly indicates otherwise, shall have the following respective meanings:
(1) Account and Sub-Account: As defined in Section 5.2.
(2) Administrator or Plan Administrator: The Administrator
of the Plan, as defined in ERISA Section 3(16)(A) and Code Section 414(g),
shall be the Company, which may delegate all or any part of its powers, duties
and authorities in such capacity (without ceasing to be the Administrator of
the Plan) as hereinafter provided.
(3) After-Tax Contributions: After-Tax Contributions, if
any, made to the Plan prior to January 1, 1987.
(4) Before-Tax Contributions: Before-Tax Contributions
provided for in Section 3.1.
(5) Beneficiary: A Participant's Death Beneficiary or any
other person who, after the death of a Participant, is entitled to receive any
benefit payable with respect to such Participant.
(6) Break in Service and 1-Year Break in Service: An
Employee or former Employee incurs a Break in Service or a 1-Year Break in
Service if he terminates employment with the Controlled Group in an Employment
Year and completes not more than 500 Hours
<PAGE> 5
of Service in such Employment Year or in any succeeding Employment Year.
(7) Business Day: Each day during which both the Trust
Department of the Trustee and the New York Stock Exchange are open for regular
conduct of business.
(8) Capital Preservation Fund: (a) One of the Investment
Funds provided for under the Plan. The Capital Preservation Fund shall be
invested and reinvested principally in "Guaranteed Investment Contracts" and
"Bank Investment Contracts", as defined below, but shall not be invested in any
security or obligations of any Controlled Group Member. Obligations or
instruments which are appropriate investments for the Money Market Fund may be
purchased and held in the Capital Preservation Fund pending the selection and
purchase of suitable investments under the preceding sentence or for the
purpose of maintaining sufficient liquidity to provide for the payment of
withdrawals, or for transfers, from the Capital Preservation Fund and for
expenses incurred in connection with the investment and management of the
Capital Preservation Fund. Investments of the Capital Preservation Fund shall
be held to maturity under usual circumstances. The Trustee shall at all times
have the responsibility of maintaining in cash and readily marketable
investments such part of the investments of the Capital Preservation Fund as
shall be deemed by the Trustee to be necessary to provide adequately for the
needs of Participants who
<PAGE> 6
have amounts invested in the Capital Preservation Fund and to prevent
inequities between such Participants.
(b) The term "Guaranteed Investment Contract" shall mean an
insurance contract or annuity approved by applicable state authority or which
will upon appropriate submission be so approved and which meets the following
requirements: (i) the contract agreement is for a stated period of time; (ii)
interest is guaranteed by the insurer at a fixed or predetermined rate for that
period of time; (iii) principal amounts may be distributed upon maturity of the
contract or during the contract period as provided in the contract; and (iv)
withdrawal of some or all of the principal before maturity is permitted, but
subject to such restrictions as are stated in the contract.
(c) The term "Bank Investment Contract" shall mean an
agreement with a federally insured bank or savings and loan association ("Bank
or S/L") pursuant to which the Trustee agrees to deposit funds of the Capital
Preservation Fund with such Bank or S/L under the following general terms and
conditions: (i) the deposit shall be a time deposit (a deposit which shall not
be payable until the passage of a stated period of time); (ii) interest shall
be payable at a fixed or predetermined rate for that period of time; (iii)
principal amounts may be distributed at the end of the stated period of time or
prior thereto as provided in the agreement; and (iv) withdrawal of some or all
of the principal before the end of the stated period of
<PAGE> 7
time is permitted, but subject to such restrictions as are stated in the
agreement.
(9) Code: The Internal Revenue Code of 1986, as it has been
and may be amended from time to time.
(10) Committee: The committee established by the Company,
certain powers, duties and authorities of which are provided for in Article X.
The Committee shall be a Named Fiduciary hereunder.
(11) Company: National City Corporation (a Delaware
corporation) a bank holding company located in Cleveland, Ohio. The Company
shall be the Plan Administrator and a Named Fiduciary hereunder.
(12) Controlled Group: The Employers and any and all other
corporations, trades and/or businesses, the employees of which, together with
Employees of an Employer, are required by Code Section 414 to be treated as if
they were employed by a single employer.
(13) Controlled Group Member: Each corporation or
unincorporated trade or business that is or was a member of the Controlled
Group, but only during such period as it is or was such a member of the
Controlled Group.
(14) Conversion Date: The date in 1993 determined by the
Trustee, as of which the Plan and Trust will have been converted to provide
Participants with daily telephonic access to make changes in their
participation and investments in the Plan and Trust.
<PAGE> 8
(15) Covered Employee: (a) An Employee employed by National
Processing Company, Inc. or its successor who is treated as a non-exempt
employee under the Fair Labor Standards Act, but excluding: (i) any person
employed as a student intern, (ii) any person who is a law enforcement officer
employed by a local, county or state government and who is hired by an Employer
to perform off-duty security services, (iii) any person who is an Employee of
an Employer who is included by such Employer in its Special Project Employee
employment classification, or (iv) effective as of January 1, 1987 any person
who is a leased employee (within the meaning of Section 1.1(19)).
(b) Notwithstanding the foregoing provisions of this
Subsection, in the event of acquisition by an Employer of all or part of the
operating assets of another business organization (which is not an Employer) or
a merger of such another business organization with an Employer, the Company
shall determine whether or not individuals who are employed in the business
operation(s) thus acquired or resulting and who would otherwise satisfy the
definition of the term Covered Employee hereunder should be considered Covered
Employees under the Plan; provided, however, that to the extent any individual
employed in such a business operation is not considered a Covered Employee
pursuant to this sentence, his employment in such business operation shall be
deemed employment in the employ of a Controlled Group Member; and, provided
further, that no action shall be taken pursuant to this
<PAGE> 9
sentence which would discriminate in favor of Highly Compensated Employees.
(16) Credited Compensation: (a) Regular salary and regular
straight-time hourly wages paid by an Employer to an Employee. Unless
otherwise provided in the Plan, an Employee's Credited Compensation shall be
calculated prior to any reduction thereof made pursuant to a Salary Reduction
Agreement under the Plan or pursuant to any agreement under Code Section 125.
Except as otherwise provided in the following sentence, "Credited Compensation"
shall not include overtime pay, bonuses, suggestion awards, commissions,
incentive compensation payments or other forms of special compensation.
(b) Notwithstanding the foregoing provisions of this
Subsection, effective as of January 1, 1989, Credited Compensation of an
Employee taken into account for any purpose for any Plan Year shall not exceed
the limitation in effect for such Year under Code Section 401(a)(17). For
purposes of the preceding sentence, in the case of a Highly Compensated
Employee who is a 5-percent owner (as such term is defined in Code Section
416(i)(1)) or one of the ten most Highly Compensated Employees, (i) such Highly
Compensated Employee and his family members (which for this purpose shall mean
an Employee's Spouse and lineal descendants who have not attained age 19 before
the close of the Year in question) shall be treated as a single Employee and
the Compensation of such family members shall be aggregated with the Credited
Compensation of such Highly Compensated Employee, and (ii) the limitation on
<PAGE> 10
Credited Compensation shall be allocated among such Highly Compensated Employee
and his family members in proportion to each individual's Credited
Compensation.
(c) Notwithstanding the foregoing provisions of this
Subsection, effective as of January 1, 1994 the following shall apply:
(1) In addition to other applicable limitations set forth in
the Plan, and notwithstanding any other provision of the Plan to the contrary
for Plan Years beginning on or after January 1, 1994, the annual compensation
of each person taken into account under the Plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is $150,000,
as adjusted by the Commissioner of Internal Revenue for increases in the cost
of living in accordance with section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies to
any period, not exceeding 12 months, over which compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual compensation limit
will be multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which is 12.
(2) For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under section 401(a)(17) of the Code
shall mean the OBRA '93 annual compensation limit set forth in this provision.
<PAGE> 11
(3) If compensation for any prior determination period is
taken into account in determining any person's benefits accruing in the current
Plan Year, the compensation for that prior determination period is subject to
the OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination period beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
(17) Death Beneficiary: A Participant's Spouse or, if he has
no Spouse or if his Spouse consents (in the manner hereinafter described in
this Subsection) to the designation hereinafter provided for in this
Subsection, such person or persons (natural or legal) other than, or in
addition to, his Spouse as may be designated by a Participant as his Death
Beneficiary under the Plan. Such a designation may be made, revoked or changed
(without the consent of any previously designated Death Beneficiary, except as
otherwise provided herein) only by an instrument (in form provided by the
Committee) which is signed by the Participant, which, if he has a Spouse,
includes his Spouse's written consent to the action to be taken pursuant to
such instrument (unless such action results in the Spouse being named as the
Participant's sole Death Beneficiary), and which is filed with the Committee
before the Participant's death. A Spouse's consent required by this Subsection
shall be signed by the Spouse, shall acknowledge the effect of such consent,
shall be witnessed by any person designated by the Committee as a Plan
<PAGE> 12
representative or by a notary public and shall be effective only with respect
to such Spouse. A Spouse's consent is not required if it is established to the
satisfaction of a Plan representative that the consent cannot be obtained
because there is no Spouse, because the Spouse cannot be located, or because of
such other circumstances as the Secretary of the Treasury may prescribe by
regulations. In default of such a designation and at any other time when there
is no existing Death Beneficiary designated by the Participant, his Death
Beneficiary shall be, in the following order of priority: his surviving
Spouse, his surviving children (both natural and adopted), his surviving
parents or his estate. If, under the preceding sentence, the Death Beneficiary
consists of a class of two or more persons, such persons shall share equally in
benefits under the Plan. A person designated by a Participant as his Death
Beneficiary who ceases to exist prior to or on the date of the Participant's
death shall cease to be a Death Beneficiary. If a Death Beneficiary is a
natural person who dies after the Participant's death, the Death Beneficiary
shall be the estate of such deceased Death Beneficiary. In any case in which
the Committee concludes it cannot determine whether a Death Beneficiary
designated by a Participant survived the Participant, it shall be conclusively
presumed that such Death Beneficiary died before the Participant.
(18) Disability: The physical or mental impairment of a
presumably permanent and continuous nature which renders a Participant
incapable of performing the duties the Participant is
<PAGE> 13
employed to perform for his Employer when such impairment commences, all as
determined by the Committee upon the basis of evidence submitted to it by the
Participant or the Participant's physician within a reasonable time after the
Committee requests such evidence.
(19) Early Retirement Age and Early Retirement Date: A
Participant shall attain Early Retirement Age upon his attainment of age 55 and
completion of 10 Employment Years and a Participant's Early Retirement Date
shall be the first day of the calendar month following the Participant's
attainment of Early Retirement Age.
(20) Eligible Employee: An Employee who is eligible for
participation in the Plan in accordance with the provisions of Article II.
(21) Employee: An employee of a Controlled Group Member and,
to the extent required by Code Section 414(n), any person who is a "leased
employee" of a Controlled Group Member. For purposes of this Subsection,
effective as of January 1, 1987, a "leased employee" means any person who,
pursuant to an agreement between a Controlled Group Member and any other person
("leasing organization"), has performed services for the Controlled Group
Member 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 Controlled Group Member. Contributions or benefits
provided a leased employee by the leasing organization which are attributable
to services performed
<PAGE> 14
for a Controlled Group Member will be treated as provided by the Controlled
Group Member. A leased employee will not be considered an Employee of a
Controlled Group Member, however, if (a) leased employees do not constitute
more than 20 percent of the Controlled Group Member's nonhighly compensated
work force (within the meaning of Code Section 414(n)(5)(C)(ii)) and (b) such
leased employee is covered by a money purchase pension plan maintained by the
leasing organization that provides (i) a nonintegrated employer contribution
rate of at least 10 percent of Credited Compensation, (ii) immediate
participation and (iii) full and immediate vesting.
(22) Employer: The Company and any other corporation or
business organization adopting the Plan pursuant to Article XII. However, in
the case of any person which adopts or has adopted the Plan and which ceases or
has ceased to exist, ceases to be a member of the Controlled Group or withdraws
or is eliminated from the Plan, it shall not thereafter be an Employer.
(23) Employer Contributions: Matching Employer Contributions
provided for in Section 3.5, Profit Sharing Matching Contributions provided for
in Section 3.7, Qualified Nonelective Contributions provided for in Section
3.10.
(24) Employment Year: The 12-month period beginning on the
first day an Employee performs an Hour of Service for a Controlled Group Member
after initially becoming an Employee (or after again becoming an Employee
following a Break in Service) and each subsequent 12-month period.
<PAGE> 15
(25) Enrollment Date: The first day of any calendar month
following an Employee's completion of the eligibility requirements of
Article II.
(26) Equity Fund: One of the Investment Funds provided under
the Plan. The Equity Fund shall be invested and reinvested only in common or
capital stocks, or in bonds, debentures or preferred stocks convertible into
common or capital stocks, or in any partnership or limited partnership the
purposes of which are to invest or reinvest the partnership assets in any such
securities, but the Equity Fund shall not be invested in any security of a
Controlled Group Member. However, obligations or instruments which are
appropriate investments for the Money Market Fund may be purchased and held in
the Equity Fund pending the selection and purchase of suitable investments
under the preceding sentence.
(27) ERISA: The Employee Retirement Income Security Act of
1974, as amended.
(28) Fiduciary: Any person who (a) exercises any
discretionary authority or discretionary control respecting management of the
Plan or exercises any authority or control respecting management or disposition
of the Trust Fund, (b) renders investment advice for a fee or other
compensation, direct or indirect, with respect to the Trust Fund, or has
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan or the Trust
Fund. The term "Fiduciary" shall also
<PAGE> 16
include any person to whom a Named Fiduciary delegates any of its or his
fiduciary responsibilities hereunder in accordance with the provisions of the
Plan or Trust Agreement as long as such designation is in effect.
(29) Fixed Income Fund: One of the Investment Funds provided
under the Plan. The Fixed Income Fund shall be invested and reinvested only in
those bonds, obligations, notes, debentures, mortgages, preferred stocks, or
other tangible or intangible property or interest in property, either real or
personal, the income or return from which is fixed, limited or determinable in
advance by the terms of the contract, document or instrument creating or
evidencing such property or interest in property, or by the terms of
acquisition thereof but shall not be invested in any security of a Controlled
Group Member. However, obligations or instruments which are appropriate
investments for the Money Market Fund may be purchased and held in the Fixed
Income Fund pending the selection and purchase of suitable investments under
the preceding sentence.
(30) Hardship: Effective as of January 1, 1989, immediate
and heavy financial need on the part of a Participant for:
(a) expenses for medical care described in Code Section
213(d) previously incurred by the Participant, the Participant's
Spouse, or any dependents of the Participant (as defined in Code
Section 152), or expenses necessary for these persons to obtain such
medical care;
<PAGE> 17
(b) costs directly related to the purchase (excluding
mortgage payments) of a principal residence for the Participant;
(c) the payment of tuition and related educational fees for
the next twelve months of post-secondary education for the
Participant, the Participant's Spouse, the Participant's children or
the Participant's dependents (as defined in Code Section 152);
(d) payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence;
(e) repayment when due of any indebtedness incurred by the
Participant or any dependents of the Participant (as defined in Code
Section 152) to avoid insolvency; or
(f) any other financial need which the Commissioner of
Internal Revenue, through the publication of revenue rulings, notices
and other documents of general applicability, may from time to time
designate as a deemed immediate and heavy financial need as provided
in Treasury Regulations Section 1.401(k)-1(d)(2)(iv)(C).
(31) Highly Compensated Employee: (a) For a particular Plan
Year, effective January 1, 1987, any Employee who, (i) during the preceding
Plan Year, (A) was at any time a 5-percent owner (as such term is defined in
Code Section 416(i)(1)), (B) received compensation from the Controlled Group in
excess of the amount in effect for such Plan Year under Code Section
<PAGE> 18
414(q)(1)(B), (C) received compensation from the Controlled Group in excess of
the amount in effect for such Plan Year under Code Section 414(q)(1)(C), and
was in the top-paid group of Employees for such Plan Year, or (D) was at any
time an officer (limited to no more than 50 Employees or, if lesser, the
greater of 3 Employees or 10 percent (10%) of the Employees) and received
compensation greater than 50 percent (50%) of the amount in effect under Code
Section 415(b)(1)(A) for such Year, or (ii) who during the particular Plan Year
(but not the prior Plan Year) (I) was at any time a 5-percent owner (as such
term is defined in Code Section 416(i)(1)) or (II) was included in the
foregoing Clauses (B), (C) or (D) of Subparagraph (i) and was in the group
consisting of the 100 Employees paid the greatest compensation by the
Controlled Group during such Plan Year.
(b) "Highly Compensated Employee" shall include a former
Employee whose Termination of Employment occurred prior to the Plan Year and
who was a Highly Compensated Employee for the Plan Year in which his
Termination of Employment occurred or for any Plan Year ending on or after his
55th birthday.
(c) For the purposes of this Subsection, the term
"compensation" shall mean the sum of an Employee's compensation under Section
4.9(3) and the Employee's Before-Tax Contributions (subject to the limitations
described in Section 1.1(14)(b)) and the term "top-paid group of Employees"
shall mean that group of Employees of the Controlled Group consisting of the
top 20 percent
<PAGE> 19
(20%) of such Employees when ranked on the basis of compensation paid by the
Controlled Group during the Plan Year.
(32) Hour of Service: (a) An Employee shall be credited
with one Hour of Service for each hour for which he is paid or entitled to
payment by a Controlled Group Member: (i) for the performance of duties as an
Employee; (ii) for other than the performance of duties (for reasons such as
vacation, sickness or disability); or (iii) for back pay, irrespective of
mitigation of damages, awarded or agreed to by a Controlled Group Member. With
respect to each Employee whose compensation is not determined on the basis of
certain amounts for each hour worked during a given period and for whom hours
of work are not required to be counted and recorded by any federal law (other
than ERISA), Hours of Service shall be credited on the basis of 190 Hours of
Service per month if he is paid on a monthly basis, 45 Hours of Service per
week if he is paid on a weekly basis, or 10 Hours of Service per day if he is
paid on a daily basis, for each month, week or day (as the case may be) for
which he receives compensation from any Controlled Group Member. Employees
shall be credited with Hours of Service at the rates described in the preceding
sentence for leaves of absence of up to 12 months or such longer period as may
be required by law to be counted for this purpose. No hour shall be counted
more than once or be counted as more than one Hour of Service, even though more
than straight-time pay may be paid for it.
<PAGE> 20
(b) If an Employee is absent from work for any period in
accordance with an Employer's approved maternity or paternity leave policy (i)
by reason of the pregnancy of such Employee, (ii) by reason of the birth of a
child of such Employee, (iii) by reason of the placement of a child with such
Employee, (iv) for purposes of caring for a child for a period beginning
immediately following the birth or placement of such child, of (v) by reason of
any absence granted or taken in partial or complete compliance with The Family
and Medical Leave Act of 1993 or required to be provided in accordance with the
Americans With Disabilities Act, such Employee shall be credited with Hours of
Service (solely for the purposes of determining whether he or she has incurred
a Break in Service) equal to the number of Hours of Service which otherwise
would normally have been credited to him but for such absence, or if the number
of such Hours of Service is not determinable, 8 Hours of Service per normal
workday of such absence, provided, however, that the total number of Hours of
Service credited to an Employee under this paragraph by reason of any
pregnancy, birth or placement shall not exceed 501 Hours of Service. Hours of
Service credited to an Employee pursuant to this paragraph shall be treated as
Hours of Service (A) only in the Employment Year in which an absence from work
described in this paragraph begins, if the Employee would be prevented from
incurring a Break in Service in such Employment Year solely because he is
credited with Hours of Service during such absence pursuant to this paragraph,
or (B) in any other case, in the
<PAGE> 21
immediately following Employment Year. Hours of Service shall not be credited
to an Employee under this paragraph unless the Employee furnishes to the
Committee such timely information as the Committee may reasonably require to
establish that the Employee's absence from work is for a reason specified in
this paragraph and the number of days for which there was such an absence.
(33) Investment Fund or Funds: The Capital Preservation
Fund, Equity Fund, Fixed Income Fund, NCC Stock Fund, Money Market Fund and any
other fund established by the Committee under Section 5.1.
(34) Investment Manager: The person who, with respect to an
Investment Fund, has the discretion to determine which assets in such Fund
shall be sold (or exchanged) and what investments shall be acquired for such
Fund. Such person must (a) be either registered as an investment advisor under
the Investment Advisors Act of 1940, a bank as defined thereunder or an
insurance company qualified to manage, acquire or dispose of Plan assets under
the laws of more than one state, and (b) acknowledge in writing that he or it
is a Fiduciary with respect to the Plan.
(35) Loan Account: The separate recordkeeping account within
a Participant's Account established by the Administrator pursuant to Section
6.13.
(36) Matching Allocation: Any allocation made to a
Participant's Account on account of the Participant's Before-Tax Contributions.
<PAGE> 22
(37) Matching Employer Contributions: Employer Contributions
provided for in Section 3.5.
(38) Money Market Fund: One of the Investment Funds provided
for under the Plan. The Money Market Fund shall be invested and reinvested
principally in bonds, notes or other evidence of indebtedness which are payable
on demand (including variable amount notes) or which have a maturity date not
exceeding one day after the date of purchase by such Fund or, in case of an
investment (pursuant to Section 5.1(2)(a)) in an NCB Investment Trust Fund,
which are payable by such NCB Investment Trust Fund.
(39) Named Fiduciaries: The Committee, the Company, the
Investment Manager, the Trustee, the Participants to the extent provided in
Article XV, and each other person designated as a Named Fiduciary by the
Committee pursuant to the power of delegation reserved to the Committee in
Article X.
(40) NCB Investment Trust Fund: Any fund now or hereafter
established under the trust instrument executed by National City Bank on
December 4, 1956, and now entitled Declaration of Trust Establishing NCC
Investment Fund for Retirement Trusts, as such trust instrument has been or may
be amended and/or restated.
(41) NCC Stock: Common stock of National City Corporation, a
Delaware corporation.
(42) NCC Stock Fund: One of the Investment Funds provided
for under the Plan. The NCC Stock Fund shall be invested and reinvested only
in shares of common stock issued by the
<PAGE> 23
Company. However, obligations or instruments which are appropriate investments
for the Money Market Fund may be purchased and held in the NCC Stock Fund
pending the purchase of shares of such common stock.
(43) Normal Retirement Age and Normal Retirement Date: A
Participant shall attain Normal Retirement Age upon his attainment of age 65
and a Participant's Normal Retirement Date shall be the first day of the
calendar month following the Participant's attainment of Normal Retirement Age.
(44) Participant: An Employee or former Employee who has
become and continues to be a Participant of the Plan in accordance with the
provisions of Article II, a Covered Employee who has made a Transfer
Contribution, or any other person designated as a Participant by the terms of
any Appendix.
(45) Plan: The National City Savings and Investment Plan No.
2 (known prior to this restatement as the National City Savings and Investment
Plan No. 2 and Trust), the terms and provisions of which are herein set forth,
as the same may be amended, supplemented or restated from time to time.
(46) Plan Year: A calendar year.
(47) Predecessor Plan: Any qualified defined contribution
plan which is merged into this Plan or the assets of which are transferred to
this Plan, as described in any Appendix to the Plan.
(48) Prior Plan: The National City Savings and Investment
Plan and Trust, from which this Plan was spun off.
<PAGE> 24
(49) Profit Sharing Feature: The provisions of the Plan (a)
which are intended to qualify as a profit sharing plan under Code Section
401(a) and (b) which include a qualified cash or deferred arrangement within
the meaning of Code Section 401(k).
(50) Profit Sharing Matching Contributions: Employer
Contributions provided for in Section 3.7.
(51) Qualified Nonelective Contributions: A contribution
made by an Employer pursuant to Section 3.9 that (a) Participants eligible to
share therein may not elect to receive in cash until distribution from the
Plan, (b) are nonforfeitable when made, (c) are distributable only in
accordance with the distribution rules applicable to Before-Tax Contributions
and (d) are paid to the Trust Fund during the Plan Year for which made or
within the time following the close of such Plan Year which is prescribed by
law for the filing by an Employer of its federal income tax return (including
extensions thereof).
(52) Return on Equity: For a particular Plan Year, "Return
on Equity" means the percentage determined by dividing the Consolidated Net
Income of the Company for the Year by the Daily Average Consolidated
Stockholders' Equity of the Company for the Year (calculated without regard to
any preferred stock of the Company), in accordance with generally accepted
accounting principles and applicable Securities and Exchange Commission
Regulations, all as determined by the principal accounting officer of the
Company for the purpose of reporting such figures to stockholders of the
Company and others.
<PAGE> 25
(53) Salary Reduction Agreement: An arrangement pursuant to
which an Employee agrees to reduce, or to forego an increase in, his Credited
Compensation and his Employer agrees to contribute to the Trust the amount so
reduced or foregone as a Before-Tax Contribution.
(54) Spouse: The person to whom an Employee is legally
married at the specified time; provided, however, that a former Spouse may be
treated as a Spouse or surviving Spouse to the extent required under the terms
of a "qualified domestic relations order" (as such term is defined in Code
Section 414(p)).
(55) Transfer Contributions: The Contributions provided for
in Section 3.4.
(56) Trust and Trust Fund: The trust estate held by the
Trustee under the provisions of the Plan and the Trust Agreement, without
distinction as to principal or income.
(57) Trust Agreement: The Trust Agreement or Agreements
between the Company and the Trustee or Trustees, as such Trust Agreement or
Agreements may be amended or restated from time to time, or any trust agreement
or agreements superseding the same. Each Trust Agreement is hereby
incorporated in the Plan by reference.
(58) Trustee: The trustee or trustees under the Trust
Agreement or its or their successor or successors in trust under such Trust
Agreement.
<PAGE> 26
(59) Valuation Date: The last Business Day of each calendar
month and any other Business Day(s) on which the Committee determines that the
Investment Funds shall be valued.
(60) Vested Interest: The entire amount of a Participant's
Account which has not previously been withdrawn by him or distributed to or for
him and which is nonforfeitable. All amounts credited to a Participant's
Account shall be 100% nonforfeitable at all times unless otherwise provided in
an Appendix hereto.
1.2 Construction. (1) Unless the context otherwise
indicates, the masculine wherever used in the Plan or Trust Agreement shall
include the feminine and neuter, the singular shall include the plural and
words such as "herein", "hereof", "hereby", "hereunder" and words of similar
import refer to the Plan as a whole and not to any particular part thereof.
(2) Where headings have been supplied to portions of the Plan
and the Trust Agreement (other than the headings to the Subsections in Section
1.1), they have been supplied for convenience only and are not to be taken as
limiting or extending the meaning of any of such portions of such documents.
(3) Wherever the word "person" appears in the Plan, it shall
refer to both natural and legal persons.
(4) A number of the provisions hereof and of the Trust
Agreement are designed to contain provisions required or contemplated by
certain federal laws and/or regulations thereunder. All such provisions herein
and in the Trust Agreement
<PAGE> 27
are intended to have the meaning required or contemplated by such provisions of
such law or regulations and shall be construed in accordance with valid
regulations and valid published governmental rulings and interpretations of
such provisions. In applying such provisions hereof or of the Trust Agreement,
each Fiduciary may rely (and shall be protected in relying) on any
determination or ruling made by any agency of the United States Government that
has authority to issue regulations, rulings or determinations with respect to
the federal law thus involved.
(5) Except to the extent federal law controls, the Plan and
Trust Agreement shall be governed, construed and administered according to the
laws of the State of Ohio. All persons accepting or claiming benefits under
the Plan or Trust Agreement shall be bound by and deemed to consent to their
provisions.
(6) This Plan was originally established effective January 1,
1992 by the Instrument of Amendment of, and Spin Off from The National City
Savings and Investment Plan and Trust dated December 30, 1991 and constitutes a
continuation of the Prior Plan with respect to the "Transferred Participants"
as defined in such Instrument. Pursuant to such Instrument, the terms of the
Plan were deemed to be the terms of the Prior Plan with certain modifications
specified in the Instrument. The Plan was subsequently amended by Amendments
Nos. 1 through 4. This amendment and restatement incorporates such Amendments
and additional amendments so that it constitutes a continuation and complete
restatement of the Plan.
<PAGE> 28
(7) This amendment and restatement is generally effective as of
January 1, 1992. However, certain provisions of this amendment and restatement
of the Plan are effective as of some other date. The provisions of this
amendment and restatement of the Plan which are effective prior to January 1,
1992 shall be deemed to amend the corresponding provisions of the Plan and the
Prior Plan as in effect before this amendment and restatement and all
amendments thereto. Events occurring before the applicable effective date of
any provision of this amendment and restatement Plan shall be governed by the
application provision of the Prior Plan in effect on the date of the event.
(8) The benefits payable with respect to an Employee or former
Employee whose employment with the Controlled Group terminated before January
1, 1992 (and who is not rehired by a Controlled Group Member thereafter) shall
be determined by and paid in accordance with the terms and provisions of the
Prior Plan.
<PAGE> 29
ARTICLE II. - ELIGIBILITY AND PARTICIPATION
2.1 Eligible Employees. Each Employee who was a Participant
in the Prior Plan on December 31, 1991 shall continue to be a Participant in
the Plan on January 1, 1992. Each other Employee shall become an Eligible
Employee under the Plan on the first Enrollment Date on which he meets the
following requirements:
(1) he is a Covered Employee (including such an Employee who
is on a leave of absence),
(2) he has attained age 21, or he has not attained age 21 but
was eligible to have Before-Tax Contributions made for him under the
provisions of the Prior Plan in effect on December 31, 1988, and
(3) he (a) has completed a period of at least one Employment
Year, and (b) has been credited with at least 1,000 Hours of Service.
2.2 Commencement of Participation. Any Eligible Employee
described in Section 2.1 may enroll as a Participant in the Plan on the
Enrollment Date on which he is initially eligible or on any subsequent
Enrollment Date by either (A) filing with an Employer or the Committee in the
month preceding such Date (in accordance with rules established by the
Committee) an enrollment form prescribed by the Committee which form shall
include (1) the effective date on which the Eligible Employee is to become a
Participant, (2) his election, commencing on or after such effective date, to
have Before-Tax Contributions made by or for
<PAGE> 30
him to the Trust, (3), (a) his authorization, if any, to his Employer to
withhold from his unreduced Credited Compensation for each pay period,
commencing on or after such effective date, any designated Before-Tax
Contributions and to pay the same to the Trust Fund and/or (b) his agreement,
if any, commencing on or after such effective date, to reduce, or to forego an
increase in, his unreduced Credited Compensation and to have his Employer
contribute the same as Before-Tax Contributions to the Trust Fund, and (4) his
direction that the Before-Tax Contributions made by or for him be invested in
any one of the investment options permitted by Section 5.5, or (B) if available
to the Participant, enrolling as a Participant in the Plan by means of a voice
response telephonic system, established and supervised by the Committee, which
provides for the making of decisions (1) through (4) above by telephonic
communication, confirmed in a writing mailed to the Participant within three
days.
2.3 Duration of Participation. (1) Once an Eligible
Employee becomes a Participant, he shall remain a Participant so long as he
continues to be an Employee whether or not he continues to be an Eligible
Employee, provided, however, that if a Participant ceases to be an Eligible
Employee (while remaining an Employee), Before-Tax Contributions may not be
made by or for him pursuant to Section 3.1 until he again becomes an Eligible
Employee and he again enrolls as a Participant pursuant to Sections 2.2 and
3.1.
<PAGE> 31
(2) If an Account continues to be maintained for a former
Employee after his termination of employment with the Controlled Group, such
former Employee shall remain a Participant for all purposes of the Plan, other
than for the purposes of making, or having his Employer make, Participant or
Employer Contributions hereunder.
2.4 Eligibility after Reemployment. (1) If an Employee
incurs a Break in Service before satisfying the age and service requirements of
Subsections (2) and (3) of Section 2.1 and is later reemployed before incurring
five consecutive 1- Year Breaks in Service, periods of employment before the
Break in Service shall not be taken into account in computing eligibility to
participate until he has completed one Employment Year following his
reemployment.
(2) If an Employee incurs a Break in Service before
satisfying the age and service requirements of Subsections (1) and (2) of
Section 2.1 and is later reemployed after incurring five consecutive 1-Year
Breaks in Service, periods of employment before the Break in Service shall not
be taken into account in computing eligibility to participate.
(3) If an Employee whose employment with the Controlled Group
terminates after completing the age and service requirements of Subsections (2)
and (3) of Section 2.1 is later reemployed as a Covered Employee, such Employee
shall become a Participant on the first day of the calendar month after the
month in which he enrolls as a Participant pursuant to Sections 2.2 and 3.1.
<PAGE> 32
2.5 Special Rules for Transferred Participants. (1) In the
event that a Participant ceases to be an Eligible Employee hereunder due to a
transfer of employment to a classification of Employees that is eligible to
participate in another profit sharing retirement plan maintained by a
Controlled Group Member which is qualified under Code Sections 401(a) and
401(k) (a "Comparable Savings Plan"), such Participant's Account shall be
transferred to the Comparable Savings Plan and such Participant shall no longer
be considered a Participant hereunder. Such transfer shall occur as of the day
of such transfer of employment.
(2) In the event that an individual who is a participant in a
Comparable Savings Plan shall become an Eligible Employee hereunder, (a) any
elections made by the individual on his enrollment form under the Comparable
Savings Plan shall continue in effect under this Plan as of the date he becomes
an Eligible Employee, until changed or modified in accordance with the terms
hereof, (b) such individual's account from the Comparable Savings Plan shall be
transferred to his Account hereunder as of the day such transfer of employment,
(c) the assets of such account shall be allocated to comparable Sub-Accounts
under this Plan and such transfer shall not be considered a Transfer
Contribution hereunder, (d) the provisions of any Appendix to such Comparable
Savings Plan which apply to any asset transferred to this Plan shall continue
to apply to such asset, and (e) to the extent required by applicable law, the
provisions of such Comparable
<PAGE> 33
Savings Plan shall continue to apply to the assets transferred to this Plan.
<PAGE> 34
ARTICLE III - CONTRIBUTIONS
3.1 Before-Tax Contributions. Upon enrollment pursuant to
Section 2.2, a Participant shall agree pursuant to a Salary Reduction Agreement
to have his Employer make Before-Tax Contributions to the Trust of up to 10% of
his unreduced Credited Compensation (in 1% increments) by means of pay period
payments of the elected percentage. If a Participant's Before- Tax
Contributions must be reduced to comply with the requirements of Section 4.1 or
4.2 or the requirements of applicable law, his Before-Tax Contributions shall
be reduced to the next highest 1% increment of his unreduced Credited
Compensation permitted by such Section or law.
3.2 Payments to Trustee. Before-Tax Contributions made for a
Participant shall be transmitted by his Employer to the Trustee as soon as
practicable, but in any event not later than 30 days after the end of the
calendar month in which such Contributions are withheld or would otherwise have
been paid to the Participant.
3.3 Changes in, and Suspensions of, Before-Tax Contributions.
(1) The percentage or percentages designated by a Participant pursuant to
Section 3.1 shall continue in effect, notwithstanding any changes in the
Participant's Credited Compensation. A Participant may, however, in accordance
with the percentages permitted by Section 3.1, change the percentage of his
Before-Tax Contributions as often as may be permitted by the Committee by
(either (A) the completion and proper filing
<PAGE> 35
(pursuant to Committee rules) of election change forms, or (B) if available to
the Participant, effecting such change by means of a voice response telephonic
system, established and supervised by the Committee, confirmed in a writing
mailed to the Participant within three days.
(2) A Participant may at any time suspend his Before-Tax
Contributions by notifying the Committee or his Employer, pursuant to Committee
rules, of his desire to suspend such contributions. The eligibility for, and
entitlement to, future Before-Tax Contributions of a Participant who has
suspended such Contributions shall be limited as provided in rules established
by the Committee.
(3) The rules established by the Committee under this Section
shall be established and administered in a uniform and nondiscriminatory
fashion and may be amended from time to time in the sole and absolute
discretion of the Committee.
3.4 Transfer Contributions. (1) The Trustee shall, at the
direction of the Committee, receive and thereafter hold and administer as a
part of the Trust Fund for a Covered Employee (whether or not he has met the
eligibility requirements of Article II) all cash and other property which may
be transferred to the Trustee from a trust held under another plan in which the
Covered Employee was a participant, which meets the requirements of Code
Sections 401(a) and 501(a)(each such trust and plan being hereinafter in this
Section called a "Comparable Plan"). For purposes of this Subsection but not
the following Subsection (2),
<PAGE> 36
either the Comparable Plan must not be subject to the survivor annuity
requirements of Code Section 401(a)(11) or the transfer must comply with the
"elective transfer" requirements of Treasury Regulation Section 1.411(d)-4.
(2) The Trustee shall also, at the direction of the
Committee, receive and thereafter hold and administer as part of the Trust Fund
for a Participant all cash and property which shall have been distributed to
the Participant from a Comparable Plan in a distribution which constitutes a
"qualified total distribution" as such term is defined in Code Section
402(a)(5)(E)(i) and which cash and other property, or any part thereof (other
than amounts contributed by him to such Comparable Plan as employee
contributions) is transferred by him to the Trustee on or before the 60th day
after which he received such cash and other property and which transfer
otherwise meets the requirements of Code Section 402(a)(5) or 402(a)(6).
(3) Contributions made to the Trust Fund pursuant to
Subsections (1) and (2) hereof shall be referred to herein as "Transfer
Contributions." Whether or not Transfer Contributions may be made by an
Employee or group of Employees shall be determined by the Committee in its sole
and absolute discretion. Transfer Contributions will be permitted only in
amounts in excess of $1,000 and shall be in cash unless the Committee approves
a Transfer Contribution of other property. Such Transfer Contributions shall
be allocated to such existing or new Sub-Account(s) as the Trustee shall
determine and shall be invested as
<PAGE> 37
specified in Section 5.5. Subject to other provisions of the Plan and Trust
Agreement, the Trustee shall have authority to sell or otherwise convert to
cash any property transferred to it pursuant to this Section.
3.5 Amount of Matching Employer Contributions. Subject to
the provisions of the Plan and Trust Agreement, each Employer shall, as and to
the extent it lawfully may, contribute to the Trust Fund on account of each
month, Matching Employer Contributions in an amount equal to (1) 100% of the
Before-Tax Contributions for such month for each Participant with respect to
the first 3% of each such Participant's Credited Compensation and (2) 50% of
the Before-Tax Contributions for such month for each Participant with respect
to the next 4% of each such Participant's Credited Compensation. The Employer
shall deliver its Matching Employer Contributions to the Trust Fund at the same
time as the Before-Tax Contributions to which such Matching Employer
Contributions relate are delivered.
3.6 Allocation of Matching Employer Contributions. Each
Employer's Matching Employer Contributions made for a month shall be allocated
and credited to the Account of each Participant for whom Before-Tax
Contributions were made during such month, with each such Participant being
credited with a portion of the Employer's Matching Employer Contribution equal
to the applicable percentage (determined under Section 3.5) of his Before-Tax
Contributions for the preceding calendar month. Notwithstanding the foregoing
provisions of this Section, for any month during
<PAGE> 38
which an ESOP Loan is outstanding, Participants for whom Before-Tax
Contributions were made during such month will not be credited with a Matching
Allocation pursuant to this Section, but will be allocated and credited with a
Matching Allocation in accordance with the provisions of Section 16.5.
3.7 Amount of Profit Sharing Matching Contributions.
(1) Subject to the provisions of the Plan and Trust
Agreement, each Employer shall, as and to the extent it lawfully may,
contribute to the Trust Fund on account of each Plan Year, in addition to the
Matching Employer Contributions described in Section 3.5, Profit Sharing
Matching Contributions in the amount described in Subsection (2) of this
Section. The Profit Sharing Matching Contribution of each Employer shall be
made within the time, following the close of the Plan Year for which such
Contribution is made, which is prescribed by law for the filing by each such
Employer of its federal income tax return (including extensions thereof).
(2) If the Company's Return on Equity equals or exceeds 12%
for the Plan Year, the Employers shall contribute to the Trust Fund on account
of such Year Profit Sharing Matching Contributions in an amount equal to that
determined by applying the table below to the Before-Tax Contributions made for
such Year for each eligible Participant as described in Section 3.8:
<PAGE> 39
<TABLE>
<CAPTION>
Profit Sharing Matching
Contributions (Per $1.00
Return on Equity for Year of Before-Tax Contributions)
------------------------- ----------------------------
<S> <C>
less than 12% -0-
12% but less than 12.5% $0.02
12.5% but less than 13.0% $0.03
13.0% but less than 13.5% $0.04
13.5% but less than 14.0% $0.05
14.0% but less than 14.5% $0.06
14.5% but less than 15.0% $0.07
15.0% but less than 15.5% $0.08
15.5% but less than 16.0% $0.09
16.0% but less than 16.5% $0.10
16.5% but less than 17.0% $0.15
17.0% but less than 17.5% $0.20
17.5% but less than 18.0% $0.25
18.0% but less than 18.5% $0.30
18.5% but less than 19.0% $0.35
19.0% but less than 19.5% $0.40
19.5% but less than 20.0% $0.45
20.0% or more $0.50
</TABLE>
provided however, that with respect to the Plan Year ending December 31, 1993,
and later plan Years, the table below shall apply:
<TABLE>
<CAPTION>
Profit Sharing Matching
Contributions (Per $1.00
Return on Equity for Year of Before-Tax Contributions)
------------------------- ----------------------------
<S> <C>
less than 12% -0-
12% but less than 13.5% $0.05
13.5% but less than 15.0% $0.10
15.0% but less than 15.5% $0.15
15.5% but less than 16.0% $0.20
16.0% but less than 16.5% $0.25
16.5% but less than 17.0% $0.30
17.0% but less than 17.5% $0.35
17.5% but less than 18.0% $0.40
18.0% but less than 18.5% $0.45
18.5% or more $0.50
</TABLE>
<PAGE> 40
(3) The Company shall determine the amount of the Employer
Profit Sharing Matching Contribution, if any, to be made hereunder for each
Plan Year pursuant to the Tables set forth in Subsection (2) hereof, based upon
the Return on Equity and Net Income for the Year. Such determination shall be
effected in accordance with generally accepted accounting principles and
applicable Securities and Exchange Commission regulations in the same manner as
for the Company's reports to stockholders, by the principal accounting officer
of the Company, and, upon approval by the Auditor of the Company, shall be
final and conclusive as to all interested persons for all purposes of the Plan.
3.8 Allocation of Profit Sharing Matching Contributions. To
be eligible to share in a Profit Sharing Matching Contribution for a Plan Year,
an individual must (1) have made Before-Tax Contributions to the Trust during
such Year, and (2) be an Employee of an Employer (including such an Employee
who is on a leave of absence) as of December 31 of such Year, provided,
however, that each individual who made such Before-Tax Contributions during the
Year but who does not meet such Employee test on such date because of his
termination of employment during the Year on or after his Normal or Early
Retirement Date or because of his incurring a Disability during the Year,
shall, nevertheless, be eligible to share in such Profit Sharing Matching
Contribution, and provided further, that the Accounts of Employees who made
such Before-Tax Contributions during the Year but who died during the Year
shall also share in such Profit Sharing
<PAGE> 41
Matching Contribution. Sharing in such Profit Sharing Matching Contribution
for such Year shall be on the basis of the respective total amounts of
Before-Tax Contributions made to the Trust during such Year, without regard to
any withdrawals or distributions thereof made after such contributions. Profit
Sharing Matching Contributions shall be allocated and credited as a Matching
Allocation to eligible Participants' Accounts as of the December 31 of the Plan
Year for which they are made. Notwithstanding the foregoing provisions of this
Section, for any Plan Year during which an ESOP Loan is outstanding,
Participants who would be eligible for a Matching Allocation pursuant to this
Section shall, in lieu thereof, be allocated and credited with a Matching
Allocation in accordance with the provisions of Section 16.5.
3.9 Reduction of Employer Contributions. The amount of
Employer Contributions determined to be payable to the Trust Fund shall be
reduced by amounts which have been forfeited or held in a suspense account in
accordance with the terms of the Plan.
3.10 Qualified Nonelective Contributions. For any Plan Year,
the Employers may make a Qualified Nonelective Contribution (1) in such amount,
(2) for such Participants who are not Highly Compensated Employees for such
Plan Year and (3) in such proportions among such Participants as such Employer
shall deem necessary to cause Section 4.2 or 4.4 to be satisfied for such Plan
Year. Qualified Nonelective Contributions may be made irrespective of whether
the Employer has net earnings or retained
<PAGE> 42
earnings, and may be made in cash or other property. Each Employer shall
designate to the Trustee the Plan Year for which and the Participants for whom
any Qualified Nonelective Contribution is made.
3.11 Allocation of Qualified Nonelective Contributions.
Qualified Nonelective Contributions shall be allocated to the Accounts of
Participants who are designated by an Employer as eligible to share therein in
such amounts as such Employer directs.
3.12 Contributions in NCC Stock. Contributions made by the
Employers hereunder shall be made in cash or in shares of NCC Stock. If a
Contribution is made in the form of NCC Stock, such contribution shall be equal
to the fair market value of such NCC Stock. Fair market value of NCC Stock
shall be equal to the last quoted price of such Stock on the date of
contribution.
<PAGE> 43
ARTICLE IV. - LIMITATIONS ON CONTRIBUTIONS
4.1 Excess Deferrals. (1) Notwithstanding the provisions of
Article III, a Participant's Before-Tax Contributions for any taxable year of
such Participant commencing on or after January 1, 1987 shall not exceed the
limitation in effect under Code Section 402(g). Except as otherwise provided
in this Section, a Participant's Before-Tax Contributions for purposes of this
Section shall include (a) any employer contribution made under any qualified
cash or deferred arrangement as defined in Code Section 401(k) to the extent
not includible in gross income for the taxable year under Code Section
402(a)(8) (determined without regard to Code Section 402(g)), (b) any employer
contribution to the extent not includible in gross income for the taxable year
under Code Section 402(h)(1)(B) (determined without regard to Code Section
402(g)) and (c) any employer contribution to purchase an annuity contract under
Code Section 403(b) under a salary reduction agreement within the meaning of
Code Section 3121(a)(5)(D).
(2) In the event that a Participant's Before-Tax
Contributions exceed the amount described in Subsection (1) of this Section
(hereinafter called the "excess deferrals"), such excess deferrals (and any
income allocable thereto) shall be distributed to the Participant by April 15
following the close of the taxable year in which such excess deferrals occurred
if (and only if), by April 15 of such taxable year the Participant (a)
allocates the amount of such excess deferrals among the plans
<PAGE> 44
under which the excess deferrals were made and (b) notifies the Committee of
the portion allocated to this Plan.
(3) In the event that a Participant's Before-Tax
Contributions under this Plan exceed the amount described in Subsection (1) of
this Section, or in the event that a Participant's Before-Tax Contributions
made under this Plan do not exceed such amount but he allocates a portion of
his excess deferrals to his Before-Tax Contributions made to this Plan,
Matching Employer Contributions and Profit Sharing Matching Contributions, if
any, made with respect to such Before-Tax Contributions (and any income
allocable thereto) shall be forfeited and applied to reduce subsequent Matching
Employer Contributions and Profit Sharing Matching Contributions required under
the Plan.
4.2 Excess Before-Tax Contributions.
(1) Notwithstanding the provisions of Article III, for any
Plan Year commencing on or after January 1, 1987,
(a) the actual deferral percentage (as defined in
Subsection (2) of this Section) for the group of Highly Compensated
Eligible Employees (as defined in Subsection (3) of this Section) for
such Plan Year shall not exceed the actual deferral percentage for all
other Eligible Employees for such Plan Year multiplied by 1.25, or
(b) the excess of the actual deferral percentage for the
group of Highly Compensated Eligible Employees for such Plan Year over
the actual deferral percentage for all other
<PAGE> 45
Eligible Employees for such Plan Year shall not exceed 2 percentage
points, and the actual deferral percentage for the group of Highly
Compensated Eligible Employees for such Plan Year shall not exceed the
actual deferral percentage for all other Eligible Employees for such
Plan Year multiplied by 2.
If two or more plans which include cash or deferred arrangements are considered
as one plan for purposes of Code Sections 401(a)(4) or 410(b), such
arrangements included in such plans shall be treated as one arrangement for the
purposes of this Subsection; and if any Highly Compensated Eligible Employee is
a participant under two or more cash or deferred arrangements of the Controlled
Group, all such arrangements shall be treated as one cash or deferred
arrangement for purposes of determining the deferral percentage with respect to
such Highly Compensated Eligible Employee.
(2) For the purposes of this Section, the actual deferral
percentage for a specified group of Eligible Employees for a Plan Year shall be
the average of the ratios (calculated separately for each Eligible Employee in
such group) of (a) the amount of Before-Tax Contributions and, at the election
of an Employer, any Qualified Nonelective Contributions actually paid to the
Trust for each such Eligible Employee for such Plan Year (including any "excess
deferrals" described in Section 4.1) to (b) the Eligible Employee's
compensation for such Plan Year. For Plan Years commencing prior to January 1,
1992, any qualified matching contributions (as defined in Treasury Regulations
issued
<PAGE> 46
under Code Sections 401(k) and 401(m) may be taken into account for purposes of
the preceding sentence, at the election of an Employer. For the purposes of
this Section and Section 4.3, the term "compensation" shall mean the sum of an
Eligible Employee's compensation under Section 4.9(3) and his Before-Tax
Contributions (subject to the limitations described in Section 1.1(14)(b)). In
the case of a Highly Compensated Eligible Employee who is either a 5-percent
owner (as defined in Code Section 416(i)(1)) or one of the ten most Highly
Compensated Employees, the combined actual deferral ratio for the family group
(as such term is hereinafter defined), which shall be treated as one Highly
Compensated Eligible Employee, shall be determined by combining the Before-Tax
Contributions (and, at the election of an Employer, Qualified Nonelective
Contributions) and compensation of all members of the family group who are
Eligible Employees. For the purposes of this Section and Section 4.3, the term
"family group" shall mean any Highly Compensated Eligible Employee described in
the preceding sentence and such Employee's Spouse and lineal ascendants or
descendants and the spouses of such lineal ascendants or descendants. For the
purposes of determining "the actual deferral percentage for all other Eligible
Employees" as referred to in Subsection (1) of this Section, the Before-Tax
Contributions and compensation of all members of the family group shall be
disregarded.
<PAGE> 47
(3) For the purposes of this Section, the term "Highly
Compensated Eligible Employee" for a particular Plan Year shall mean any Highly
Compensated Employee who is an Eligible Employee.
(4) In the event that excess contributions (as such term is
hereinafter defined) are made to the Trust for any Plan Year, then, prior to
March 15 of the following Plan Year, such excess contributions (and any income
allocable thereto) shall be distributed to the Highly Compensated Eligible
Employees on the basis of the respective portions of the excess contributions
attributable to each such Eligible Employee. For the purposes of this
Subsection, the term "excess contributions" shall mean, for any Plan Year, the
excess of (a) the aggregate amount of Before-Tax Contributions actually paid to
the Trust on behalf of Highly Compensated Eligible Employees for such Plan Year
over (b) the maximum amount of such Before- Tax Contributions permitted for
such Plan Year under Subsection (1) of this Section, determined by reducing
Before-Tax Contributions made on behalf of Highly Compensated Eligible
Employees in order of the actual deferral percentages (as defined in Subsection
(2) of this Section) beginning with the highest of such percentages.
Notwithstanding the foregoing provisions of this Subsection, in the case of a
Highly Compensated Eligible Employee whose actual deferral ratio is determined
under the family aggregation rules set forth in Subsection (2) of this Section,
the determination and correction of the amount of excess contributions shall be
made by reducing the actual deferral ratio in accordance with the "leveling"
method
<PAGE> 48
described in Treasury Regulations Section 1.401(k)-1(f)(2) and allocating the
excess contributions for the family group among its members in proportion to
the Before-Tax Contributions of each member of the family group that is
combined to determine the actual deferral ratio.
(5) Matching Allocations made with respect to a Participant's
excess contributions (and any income allocable thereto) shall be forfeited and
applied to reduce subsequent Matching Employer Contributions, Profit Sharing
Matching Contributions and ESOP Contributions required under the Plan.
4.3 Excess Matching Allocations. (1) Notwithstanding the
provisions of Article III, effective January 1, 1987, for any Plan Year the
contribution percentage (as defined in Subsection (2) of this Section) for the
group of Highly Compensated Eligible Employees (as defined in Section 4.2(3))
for such Plan Year shall not exceed the greater of (a) 125 percent of the
contribution percentage for all other Eligible Employees or (b) the lesser of
200 percent of the contribution percentage for all other Eligible Employees, or
the contribution percentage for all other Eligible Employees plus 2 percentage
points. If two or more plans of the Controlled Group
<PAGE> 49
to which matching contributions, employee after-tax contributions or before-tax
contributions (as defined in Section 4.1(1)) are made are treated as one plan
for purposes of Code Section 410(b), such plans shall be treated as one plan
for purposes of this Subsection; and if a Highly Compensated Eligible Employee
participates in two or more plans of the Controlled Group to which such
contributions are made, all such contributions shall be aggregated for purposes
of this Subsection.
(2) For the purposes of this Section, the contribution
percentage for a specified group of Eligible Employees for a Plan Year shall be
the average of the ratios (calculated separately for each Eligible Employee in
such group) of (a) the Matching Allocations made under the Plan for each such
Eligible Employee for such Plan Year to (b) the Eligible Employee's
compensation (as defined in Section 4.2(2)) for such Plan Year. In the case of
a Highly Compensated Eligible Employee who is either a 5-percent owner (as
defined in Code Section 416(i)(1)) or one of the ten most Highly Compensated
Employees, the combined contribution ratio for the family group (as such term
is defined in Section 4.2(2)), which shall be treated as one Highly Compensated
Employee, shall be determined by combining the Matching Allocations and
compensation of all members of the family group who are Eligible Employees.
For the purposes of determining "the contribution percentage for all other
Eligible Employees" as referred to in Subsection (1) of this Section, the
Matching Allocations for, and the compensation of, all members of the family
group shall be disregarded.
(3) In the event that excess aggregate contributions (as such
term is hereinafter defined) are made to the Trust for any Plan Year, then,
prior to March 15 of the following Plan Year, such excess contributions (and
any income allocable thereto) shall be forfeited (if forfeitable) and applied
as provided in
<PAGE> 50
Section 3.9 or (if not forfeitable) shall be distributed to the Highly
Compensated Eligible Employees on the basis of the respective portions of the
excess contributions attributable to each such Eligible Employee. For the
purposes of this Subsection, the term "excess aggregate contributions" shall
mean, for any Plan Year, the excess of (a) the aggregate amount of the Matching
Allocations made for Highly Compensated Eligible Employees for such Plan Year
over (b) the maximum amount of such Matching Allocations permitted for such
Plan Year under Subsection (1) of this Section, determined by reducing Matching
Allocations made for Highly Compensated Eligible Employees in order of their
contribution percentages (as defined in Subsection (2) of this Section)
beginning with the highest of such percentages. Notwithstanding the foregoing
provisions of this Subsection, in the case of a Highly Compensated Eligible
Employee whose contribution percentage is determined under the family
aggregation rules set forth in Subsection (2) of this Section, the
determination and correction of the amount of excess aggregate contributions
shall be made by reducing the contribution ratio in accordance with the
"leveling" method described in Treasury Regulation Section 1.401(m)-1(c)(2) and
allocating the excess aggregate contributions for the family group among its
members in proportion to the Matching Allocations of each member of the family
group that is combined to determine the contribution ratio.
(4) The determination of excess aggregate contributions under
this Section shall be made after (a) first determining the
<PAGE> 51
excess deferrals under Section 4.1 and (b) then determining the excess
contributions under Section 4.2.
4.4 Multiple Use of the Alternative Limitation.
(1) Notwithstanding the provisions of Article III or the
foregoing provisions of this Article IV, effective January 1, 1989, if, after
the application of Sections 4.1, 4.2 and 4.3, the sum of the actual deferral
percentage and the contribution percentage for the group of Highly Compensated
Eligible Employees (as defined in Section 4.2(3)) exceeds the aggregate limit
(as defined in Subsection (2) of this Section), then the contributions made for
such Plan Year for Highly Compensated Eligible Employees will be reduced so
that the aggregate limit is not exceeded. Such reductions shall be made first
in Before-Tax Contributions (but only to the extent that they are not matched
by Matching Allocations) and then in Matching Allocations. Reductions in
contributions shall be made in the manner provided in Section 4.2 or 4.3, as
applicable. The amount by which each such Highly Compensated Eligible
Employee's contribution percentage amount is reduced shall be treated as an
excess contribution or an excess aggregate contribution under Section 4.2 or
4.3, as applicable. For the purposes of this Section, the actual deferral
percentage and contribution percentage of the Highly Compensated Eligible
Employees are determined after any reductions required to meet those tests
under Sections 4.2 and 4.3. Notwithstanding the foregoing provisions of this
Section, no reduction shall be required by this Subsection if either (a) the
actual deferral
<PAGE> 52
percentage of the Highly Compensated Eligible Employees does not exceed 1.25
multiplied by the actual deferral percentage of the non-Highly Compensated
Eligible Employees, or (b) the contribution percentage of the Highly
Compensated Eligible Employees does not exceed 1.25 multiplied by the
contribution percentage of the non-Highly Compensated Eligible Employees.
(2) For purposes of this Section, the term "aggregate limit"
means the sum of (a) 125% of the greater of (i) the actual deferral percentage
of the non-Highly Compensated Eligible Employees for the Plan Year, or (ii) the
contribution percentage of the non-Highly Compensated Eligible Employees for
the Plan Year, and (b)4 the lesser of (A) 200% of, or (B) two (2) plus, the
lesser of such actual deferral percentage or contribution percentage. If it
would result in a larger aggregate limit, the word "lesser" is substituted for
the word "greater" in part (a) of this Subsection, and the word "greater" is
substituted for the word "lesser" the second place such word appears in part
(b) of this Subsection.
4.5 Monitoring Procedures. (1) In order to ensure that at
least one of the actual deferral percentages specified in Section 4.2(1) and at
least one of the contribution percentages specified in Section 4.3(1) and the
aggregate limit specified in Section 4.4(2) are satisfied for each Plan Year,
the Company shall monitor (or cause to be monitored) the amount of Before-Tax
Contributions and Matching Allocations being made to the Plan by or for each
Eligible Employee during each Plan Year. In the event
<PAGE> 53
that the Company determines that neither of such actual deferral percentages,
neither of such contribution percentages or such aggregate limit will be
satisfied for a Plan Year, and if the Committee in its sole discretion
determines that it is necessary or desirable, the Before-Tax Contributions
and/or the Matching Allocations made thereafter by or for each Highly
Compensated Eligible Employee (as defined in Section 4.2(3)) may be reduced
(pursuant to non-discriminatory rules adopted by the Company) to the extent
necessary to decrease the actual deferral percentage and/or the contribution
percentage for Highly Compensated Eligible Employees for such Plan Year to a
level which satisfies either of the actual deferral percentages, either of the
contribution percentages and/or the aggregate limit.
(2) In order to ensure that excess deferrals (as such term is
defined in Section 4.1(2)) shall not be made to the Plan for any taxable year
for any Participant, the Company shall monitor (or cause to be monitored) the
amount of Before- Tax Contributions being made to the Plan for each Participant
during each taxable year and may take such action (pursuant to
non-discriminatory rules adopted by the Company) to prevent Before-Tax
Contributions made for any Participant under the Plan for any taxable year from
exceeding the maximum amount applicable under Section 4.1(1).
(3) The actions permitted by this Section are in addition to,
and not in lieu of, any other actions that may be taken pursuant to other
Sections of the Plan or that may be
<PAGE> 54
permitted by applicable law or regulation in order to ensure that the
limitations described in Sections 4.1, 4.2, 4.3 and 4.4 are met.
4.6 Testing Procedures. (1) In applying the limitations set
forth in Sections 4.2, 4.3 and 4.4, the Company may, at its option, utilize
such testing procedures as may be permitted under Code Sections 401(a)(4),
401(k), 401(m) or 410(b), including, without limitation, (a) aggregation of the
Plan with one or more other qualified plans of the Controlled Group, (b)
inclusion of qualified matching contributions, qualified nonelective
contributions or elective deferrals described in, and meeting the requirements
of, Treasury Regulations under Code Sections 401(k) and 401(m) to any other
qualified plan of the Controlled Group in applying the limitations set forth in
Sections 4.2, 4.3 and 4.4, or (c) any permissible combination thereof.
(2) Notwithstanding the foregoing provisions of this Article,
to the extent required by the Code and Treasury Regulations the limitations of
Sections 4.2, 4.3 and 4.4 shall be applied separately to each of the Profit
Sharing Feature and the ESOP Feature.
4.7 Limitations on Employer and Before-Tax Contributions.
Notwithstanding any provision of the Plan to the contrary, any Before-Tax
Contributions or Employer Contributions hereunder for any Plan Year shall in no
event exceed the amount that would be deductible by an Employer for such Plan
Year for
<PAGE> 55
federal income tax purposes and each Before-Tax Contribution and Employer
Contribution to the Trust Fund made by any Employer is hereby specifically
conditioned upon such deductibility.
4.8 Return of Contributions to Employers. (1) Except as
specifically provided in this Section or in the other Sections of the Plan, the
Trust Fund shall never inure to the benefit of the Employers and shall be held
for the exclusive purposes of providing benefits to Employees, Participants and
their Beneficiaries and defraying reasonable expenses of administering the
Plan.
(2) If an Employer Contribution to the Trust Fund is made by
an Employer by a mistake of fact, the excess of the amount contributed over the
amount that would have been contributed had there not occurred a mistake of
fact shall be returned to such Employer within one year after the payment of
such Contribution. If an Employer Contribution to the Trust Fund made by an
Employer which is conditioned upon the deductibility of the Contribution under
Code Section 404 (or any successor thereto) is not fully deductible under such
Code Section (or any successor thereto), such Contribution, to the extent the
deduction therefor is disallowed, shall be returned to the Employer within one
year after the disallowance of the deduction. Earnings attributable to
Employer Contributions returned to an Employer pursuant to this Subsection may
not be returned, but losses attributable thereto shall reduce the amount to be
returned; provided, however, that if the withdrawal of the amount attributable
to the mistaken or non-
<PAGE> 56
deductible contribution would cause the balance of the individual Account of
any Participant to be reduced to less than the balance which would have been in
such Account had the mistaken or non-deductible amount not have been
contributed, the amount to be returned to the Employer pursuant to this Section
shall be limited so as to avoid such reduction.
4.9 Maximum Additions. (1) Notwithstanding the provisions
of Article III or the foregoing provision of this Article IV, effective as of
January 1, 1987, the maximum annual addition (as defined in Subsection (2) of
this Section) to a Participant's Account for any Plan Year (which shall be the
limitation year) shall in no event exceed the lesser of (a) $30,000 (or, if
greater, one-fourth of the dollar limitation in effect under Code Section
415(b)(1)(A)) or (b) 25% of his compensation for such Plan Year.
(2) For the purpose of this Section, the term "annual
additions" means the sum for any Plan Year of:
(a) all contributions (including, without limitation,
Before-Tax Contributions made pursuant to Section 3.1) made by the
Controlled Group which are allocated to the Participant's account
pursuant to a defined contribution plan maintained by a Controlled
Group Member,
(b) all employee contributions made by the Participant to a
defined contribution plan maintained by a Controlled Group Member,
<PAGE> 57
(c) all forfeitures allocated to the Participant's account
pursuant to a defined contribution plan maintained by a Controlled
Group Member,
(d) any amount allocated to an individual medical benefit
account (as defined in section 415(1)(2) of the Code) of the
Participant which is part of a pension or annuity plan, and
(e) any amount attributable to medical benefits allocated to
the Participant's account established under Code Section 419A(d)(1) if
the Participant is or was a key-employee (as such term is defined in
Code Section 416(i)) during such Plan Year or any preceding Plan Year.
(3) For the purposes of this Section, the term "compensation"
shall mean Compensation within the meaning of Code Section 415(c)(3) and
regulations thereunder.
(4) If a Participant's annual additions would exceed the
limitations of Subsection (1) of this Section for a Plan Year as a result of
the allocation of forfeitures, a reasonable error in estimating the
Participant's compensation, or a reasonable error in determining the amount of
Before-Tax Contributions that may be made with respect to the Participant under
the limitations of this Section (or other facts and circumstances which the
Commissioner of Internal Revenue finds justify application of the following
rules of this Subsection), Employer Contributions allocable to such
Participant's Account for such Plan Year shall, to the extent necessary to
cause the limitations of Subsection (1)
<PAGE> 58
of this Section not to be exceeded for such Plan Year, be held by the Trustee
in a suspense account and shall be used to reduce Employer Contributions for
the next Plan Year (and succeeding Plan Years, as necessary) for such
Participant if such Participant is covered by the Plan at the end of any such
Plan Year; and if he is not covered by the Plan at the end of any such Plan
Year, such Employer Contributions held by the Trustee in such suspense account
shall be allocated and reallocated to the accounts of other Participants,
except that no such allocation or reallocation shall cause the limitations of
Subsection (1) of this Section to be exceeded for any such other Participant
for such Plan Year. Investment gains and losses shall not be allocated to the
suspense account during the period such suspense account is required to be
maintained pursuant to this Subsection. In the event of a termination of the
Plan, any then remaining balance of the suspense account, to the extent it may
not then be allocated to Participants, shall revert to the Employers. If the
allocation of such Employer Contributions to the suspense account described in
this Subsection is not sufficient to cause the limitations of Subsection (1) of
this Section not to be exceeded for such Plan Year, Before-Tax Contributions
made for such Participant for such Plan Year which constitute part of the
annual additions (together with any gains attributable thereto) shall be
returned to him to the extent necessary to effectuate such reduction.
<PAGE> 59
4.10 Maximum Benefits. (1) Except as otherwise provided in
Code Section 415(e), in any case in which an individual is a participant in
both a defined benefit plan and a defined contribution plan maintained by the
Controlled Group, the sum of the defined benefit plan fraction and the defined
contribution plan fraction for any Plan Year shall not exceed 1. In the event
a reduction is necessary to avoid exceeding the limitation set forth in this
Section, the affected Participant's benefits under the defined benefit plan
shall be reduced to the extent necessary to avoid exceeding such limitation.
For purposes hereof,
(a) the defined benefit plan fraction for any Plan Year is a
fraction, (i) the numerator of which is the projected annual benefit
of the participant under the plan (determined as of the close of the
Year), and (ii) the denominator of which is the lesser of (A) the
product of 1.25, multiplied by the dollar limitation in effect under
Code Section 415(b)(1)(A) for such Year or (B) the product of 1.4,
multiplied by the amount which may be taken into account under Code
Section 415(b)(1)(B) with respect to such participant under the plan
for such Year; and
(b) the defined contribution plan fraction for any Plan Year
is a fraction, (i) the numerator of which is the sum of the annual
additions to the participant's account as of the close of the Year and
for all prior Years, and (ii) the denominator of which is the sum of
the lesser of the
<PAGE> 60
following amounts determined for such Year and for each prior year of
service with the Controlled Group (regardless of whether a plan was in
existence during such Year):
(A) the product of 1.25, multiplied by the dollar
limitation in effect under Code Section 415(c)(1)(A) for such
Year and each such prior year of service, or
(B) the product of 1.4, multiplied by the amount which
may be taken into account under Code Section 415(c)(1)(B) with
respect to such participant under such plan for such Year and
each such prior year of service.
(2) A Participant's projected annual benefit for purposes of
Subsection (1) of this Section is equal to the annual benefit to which he would
be entitled under the terms of the defined benefit plan, assuming he will
continue employment until reaching normal retirement age as determined under
the terms of such plan (or current age, if later), his compensation for the
Plan Year under consideration will remain the same until the date he attains
such age, and all other relevant factors used to determine benefits under the
plan for the Plan Year under consideration will remain constant for all future
Plan Years.
4.11 Definitions. (1) For purposes of applying the
limitations set forth in Sections 4.9 and 4.10, all qualified defined benefit
plans (whether or not terminated) ever maintained by one or more
<PAGE> 61
Controlled Group Members shall be treated as one defined benefit plan, and all
qualified defined contribution plans (whether or not terminated) ever
maintained by one or more Controlled Group Members shall be treated as one
defined contribution plan.
(2) For purposes of this Section and Sections 4.9 and 4.10,
the term "Controlled Group Member" shall be construed in the light of Code
Section 415(h).
4.12 Funding Policy. To the extent such has not already been
done, the Committee shall (1) determine, establish and carry out a funding
policy and method consistent with the objectives of the Plan and the
requirements of applicable law, and (2) furnish from time to time to the person
responsible for the investment of the assets held in the Trust Fund information
such Committee may have relative to the Plan's probable short-term and
long-term financial needs, including any probable need for short-term
liquidity, and such Committee's opinion (if any) with respect thereto.
<PAGE> 62
ARTICLE V. - INVESTMENTS
5.1 Investment Funds. (1) The Trust Fund (other than the
portion of the Trust Fund consisting of the Loan Accounts) shall be divided
into the following Investment Funds: the Equity Fund, the Fixed Income Fund,
the Money Market Fund, the NCC Stock Fund, and the Capital Preservation Fund
and such other Investment Funds as the Committee may in its discretion select
or establish. Before-Tax Contributions, Transfer Contributions and Employer
Contributions shall be invested therein as provided in Section 5.5. Subject to
the provisions of the Plan and Trust Agreement relating to the appointment of
an Investment Manager and to other applicable provisions of the Plan and Trust
Agreement, the Trustee shall hold, manage, administer, value, invest, reinvest,
account for and otherwise deal with each Investment Fund separately.
Dividends, interest and other distributions received by the Trustee in respect
of each Investment Fund shall be reinvested in the same Investment Fund.
(2) The Trustee shall invest and reinvest the principal and
income of each such Investment Fund and shall keep each such Investment Fund
invested, without distinction between principal and income, in such property,
investments and securities as the Trustee may deem suitable without regard to
any percentage or other limitation in any laws or rules of court applying to
investments by trust companies or trustees; but subject, however, to the terms
of the Plan and Trust Agreement and to the following provisions:
<PAGE> 63
(a) All or any part of the Equity Fund, the Fixed Income
Fund, the Capital Preservation Fund or the Money Market Fund may, in
the discretion of the Trustee, be invested in any NCB Investment Trust
Fund. Funds in the Fixed Income Fund, the Equity Fund and the Capital
Preservation Fund may not be invested in an NCB Investment Trust Fund,
unless such NCB Investment Trust Fund consists of the same general
types of investments as are permitted under such Funds. Funds in the
Money Market Fund may not be invested in an NCB Investment Trust Fund
unless such NCB Investment Trust Fund consists generally of
investments principally in bonds, notes or other evidences of
indebtedness which are payable on demand (including variable amount
notes) or which have a maturity date not exceeding 91 days after the
date of purchase.
(b) The Trustee may make deposits or investments of funds in
time or savings deposits or instruments of a Controlled Group Member,
provided such funds are awaiting investment or distribution, and
nothing contained in this Section shall serve to preclude or prohibit
such deposits or investment of such funds.
(c) The determination of the Trustee as to whether an
investment is within the category of investments which may be made for
the Fixed Income Fund, the Equity Fund, the NCC Stock Fund, the
Capital Preservation Fund or the Money Market Fund shall be
conclusive.
<PAGE> 64
(d) The Trustee in its discretion may keep such portion of
the Investment Funds in cash as the Trustee may from time to time deem
to be advisable and shall not be liable for interest on uninvested
funds.
(e) The Trustee is authorized to commingle the assets of the
Trust with other trusts through the medium of the National City
Corporation Investment Trust for Retirement Trusts established by a
trust instrument executed by National City Corporation and National
City Bank (the "NCC Investment Trust"). To the extent of the
equitable share of the Trust in the National City Corporation
Investment Trust for Retirement Trusts, the NCC Investment Trust, as
such document has been or may be amended, and the trust created
thereunder, shall be deemed part of this Plan and Trust.
5.2 Account; Sub-Account. The Trustee shall establish and
maintain, or cause to be maintained, an Account for each Participant, which
Account shall reflect, pursuant to Sub-Accounts established and maintained
thereunder, the amount, if any, of the Participant's (a) Before-Tax
Contributions, (b) After-Tax Contributions, (c) Matching Allocations, (d)
Qualified Nonelective Contributions and (e) Transfer Contributions (unless the
Trustee determines to maintain the cash or property transferred to the Trust
Fund as a Transfer Contribution pursuant to one or more of the foregoing
Sub-Accounts). The Trustee shall establish any Sub-Account required by any
Appendix to the Plan. The Trustee shall also maintain, or cause to be
maintained, separate records which
<PAGE> 65
shall show (i) the portion of each such Sub-Account invested in each Investment
Fund and (ii) the amount of contributions thereto, payments and withdrawals and
loans therefrom and the amount of income, expenses, gains and losses
attributable thereto. The interest of each Participant in the Trust Fund at
any time shall consist of his Account balance (as determined pursuant to
Section 5.4) as of the last preceding Valuation Date plus credits and minus
debits to such Account since that Date plus the value of the Participant's Loan
Account on the last preceding Valuation Date on which the Administrator valued
such Loan Account pursuant to Section 6.13 plus any amounts credited to such
Loan Account and not invested in any Investment Fund.
5.3 Reports. The Committee shall cause reports to be made at
least annually to each Participant and to the Beneficiary of each deceased
Participant as to the value of his Account and the amount of his Vested
Interest. In addition, the Committee shall cause such a report to be made to
each Participant who (a) requests such a report in writing (provided that only
one report shall be furnished a Participant upon such a request in any 12-month
period), (b) has terminated employment with the Controlled Group, or (c) incurs
a Break in Service.
5.4 Valuation of Investment Funds. (1) As of each Valuation
Date, the Trustee shall determine the value of each Investment Fund in
accordance with the terms of this Section and the Trust Agreement. The Trustee
shall determine, from the change in value of each Investment Fund between the
current Valuation
<PAGE> 66
Date and the then last preceding Valuation Date, the net gain or loss of such
Investment Fund during such period resulting from expenses paid (including the
fees and expenses of the Trustee and Investment Manager, if any, which are to
be charged to such Investment Fund in accordance with the terms of the Plan and
the Trust Agreement) and realized and unrealized earnings, profits and losses
of such Investment Fund during such period. The transfer of funds to or from
an Investment Fund pursuant to Section 5.6, Participant or Employer
Contributions allocated to an Investment Fund, and payments, distributions and
withdrawals from an Investment Fund to provide benefits under the Plan for
Participants or Death Beneficiaries shall not be deemed to be earnings,
profits, expenses or losses of the Investment Fund.
(2) After each Valuation Date, the net gain or loss of each
Investment Fund determined pursuant to Subsection (1) of this Section shall be
allocated as of such Valuation Date by the Trustee to the Accounts of
Participants and Beneficiaries in such Investment Fund in proportion to the
amounts of such Accounts invested in such Investment Fund on such Valuation
Date, exclusive of amounts to be credited but including amounts (other than the
net loss, if any, determined pursuant to Subsection (1) of this Section) to be
debited to such Accounts as of such Valuation Date.
(3) Except as may otherwise be provided by the Committee,
Before-Tax Contributions, Matching Allocations, Qualified Nonelective
Contributions and Transfer Contributions shall be credited to each
Participant's Account and allocated to
<PAGE> 67
the appropriate Investment Fund as of the first business day following the
Valuation Date coincident with or next following the date the Trustee has
received such amounts and appropriate instructions as to the allocation of such
amounts among the Investment Funds.
(4) The reasonable and equitable decision of the Trustee as
to the value of each Investment Fund as of each Valuation Date shall be
conclusive and binding upon all persons having any interest, direct or
indirect, in such Investment Fund.
5.5 Investment of Before-Tax, Transfer and Employer
Contributions. (1) Each Participant may, pursuant to rules and procedures
adopted by the Committee, direct that Before-Tax and Transfer Contributions
made by or for him and repayments of a loan made pursuant to Section 6.13,
shall be invested in any or all of the Investment Funds. An investment option
selected by a Participant shall remain in effect and be applicable to all
subsequent Before-Tax and Transfer Contributions and loan repayments made by or
for him unless and until an investment change is made by him.
(2) An investment direction described in this Section may
only be made either (A) on a form supplied or approved by the Committee, signed
by the Participant and filed with the Committee or an Employer or (B) if
available to the Participant, by effecting such direction by means of a voice
response telephonic system established and supervised by the Committee, with
confirmation by means of a writing mailed to the Participant with-
<PAGE> 68
in three days. In the absence of an effective investment direction, Before-Tax
and Transfer Contributions and loan repayments shall be invested in the Money
Market Fund. Any cash received by the Trust between Valuation Dates may be
temporarily invested until the Valuation Date next following the date such cash
is received, at which time it shall be allocated among the Investment Funds in
accordance with the foregoing provisions of this Section.
(3) A Participant may change his investment direction with
respect to all subsequent Before-Tax and Transfer Contributions made by or for
him either (A) by filing with the Committee or his Employer, on a form supplied
or approved by the Committee or his Employer, a signed investment direction
revision, or (B) if available to the Participant, by effecting such change by
means of a voice response telephonic system, established by and supervised by
the Committee, with written confirmation mailed to the Participant within three
days. Only one such investment direction revision may be made by a Participant
in any calendar quarter except that after the Conversion Date, only one such
investment direction revision may be made by a Participant in any calendar
month. Such investment direction revision shall affect only amounts
contributed after the direction and prior to a subsequent revision.
(4) All Employer Contributions shall be invested in the NCC
Stock Fund.
<PAGE> 69
5.6 Transfers of Investments. (1) Each Participant
shall have the right from time to time to elect that all or a part of his
interest in one or more of the Investment Funds (including amounts attributable
to Employer Contributions) be liquidated and the proceeds thereof reinvested in
any other Investment Fund(s). Such an investment-mix adjustment shall not
affect investment of amounts received in the Trust as contributions, which
shall continue to be invested pursuant to Section 5.5. Notwithstanding the
foregoing provisions of this Section, a Participant may not elect that any part
of his interest in the Capital Preservation Fund be liquidated and the proceeds
thereof reinvested in the Money Market Fund or the Fixed Income Fund.
(2) An investment-mix adjustment described in this Section
may only be made on either (A) a form supplied or approved by the Committee or
an Employer, signed by the Participant and filed with the Committee or his
Employer or (B) if available to the Participant, by effecting such adjustment
by means of a voice response telephonic system, established by and supervised
by the Committee, with written confirmation mailed to the Participant within
three days. Only one such adjustment may be made by a Participant in any
calendar quarter, except that after the Conversion Date only one such
adjustment may be made by a Participant in any calendar month.
(3) Notwithstanding any other provision of this Section to
the contrary, a Participant (a) whose employment with the Controlled Group
terminates for reasons other than the attainment
<PAGE> 70
of Normal or Early Retirement Age or the occurrence of a Disability, and (b)
who does not receive a distribution of his entire Vested Interest in the Trust
Fund before the expiration of six full calendar months following the date on
which his employment terminates, shall be deemed to have made an investment-mix
adjustment election pursuant to this Section to have all of his interest in the
Trust Fund reinvested in the Money Market Fund (to the extent not already
invested therein) effective as of the Valuation Date immediately following the
expiration of such six-month period. Thereafter, no investment-mix adjustment
election may be made by such a Participant. An investment-mix adjustment made
pursuant to this Section shall be made with respect to the Participant's
interest in the Capital Preservation Fund, if any, notwithstanding the
provisions of Subsection (1) which would otherwise prohibit such an
investment-mix adjustment election.
(4) A Beneficiary of a deceased Participant shall have the
same rights as a Participant has under Subsections (1) and (2) of this Section.
With respect to any other non-Participant who becomes eligible to receive a
distribution under the Plan and who does not receive a distribution of the
entire interest in the Trust Fund to which he is entitled before the expiration
of six full calendar months following the date on which he would have been
eligible to commence receiving a distribution, his interest in the Trust Fund
shall be reinvested in the Money Market Fund (to the extent not already
invested therein) effective as of the Valuation Date immediately following the
expiration of such six-
<PAGE> 71
month period. Thereafter, no investment-mix adjustment election may be made by
such a non-Participant.
5.7 Committee Rules and Directions to Trustee. (1) The
Committee shall adopt, and may amend from time to time, general rules of
uniform application which shall provide for the administration of each
Investment Fund, including, but not limited to, rules providing (a) for the
time or times that an investment direction or transfer pursuant to Sections 5.5
and 5.6 may be filed and be effective; (b) for minimum limits (not in excess of
$50) on the amount that may be invested for one Participant at any one time in
an Investment Fund and on the amount that may be transferred from Investment
Funds if such amount is less than all of the Participant's interest in any such
Fund; (c) for procedures pursuant to which a Participant may designate the
portion of his Before-Tax and Transfer Contributions to be invested in such
Investment Funds as he elects in terms of a percentage (in even multiples of
5%) of the amount to be so invested; and (d) for any other matters which the
Committee deems necessary or advisable in the administration of any Investment
Fund.
(2) The Committee shall give appropriate and timely
directions to the Trustee in order to permit the Trustee to give effect to the
investment choice and investment change elections made under Sections 5.5 and
5.6 and to provide funds for distributions and withdrawals pursuant to Article
VI. Investments in and withdrawals from each Investment Fund shall be made
only as of a Valuation Date.
<PAGE> 72
ARTICLE VI - DISTRIBUTIONS, WITHDRAWALS AND LOANS
6.1 Distributions In General. A Participant's interest in
the Trust Fund shall only be distributable as provided in this and the
following Sections of this Article. A Participant or Beneficiary who is
eligible to receive a distribution under applicable Sections of this Article
shall obtain a blank application for that purpose from the Committee and file
with such Committee his application in writing on such form, furnishing such
information as such Committee may reasonably require, including satisfactory
proof of his age and that of his Spouse (if applicable) and any authority in
writing that the Committee may request authorizing it to obtain pertinent
information, certificates, transcripts and/or other records from any public
office.
6.2 Distributions on Death. (1) If a Participant dies
before the payment or commencement of payment of his Vested Interest to him,
his entire Account, valued as of the next Valuation Date which is at least 30
days after the date on which the Death Beneficiary files his application
pursuant to Section 6.1, shall be paid or commence to be paid to the
Participant's Death Beneficiary pursuant to Subsection (2) of this Section as
soon as practicable after such Valuation Date, but in no event shall payment be
made or commenced later than the time prescribed in Section 6.8(2) without
regard to whether an application has been filed.
<PAGE> 73
(2) In the event of the death of a Participant who dies under
the circumstances described in Subsection (1) of this Section, such
Participant's Account shall be paid to his Death Beneficiary under one of the
following methods as the Death Beneficiary shall elect:
(a) such amount shall be paid to him in a lump sum; or
(b) such amount shall be paid to him in such annual,
quarterly or monthly installments, as elected by the Death
Beneficiary, over a term certain not extending beyond the life
expectancy of the Death Beneficiary.
(3) If a Participant dies after the commencement of payments
of his Vested Interest to him in the form described in Section 6.3(1)(b), but
before all of such payments have been made, the undistributed portion of his
Vested Interest shall continue to be paid to his Death Beneficiary in the same
manner as originally elected by the Participant, provided however, that,
effective as of January 1, 1995, such Participant's Death Beneficiary shall be
permitted to elect that the payment of such portion be made in a lump sum.
6.3 Distributions on Normal or Early Retirement or
Disability. (1) If a Participant's termination of employment with the
Controlled Group occurs (other than by reason of his death) on or after his
attainment of his Normal or Early Retirement Age or by reason of his
Disability, his entire Account, valued as of the Valuation Date specified in
Subsection (2) of this Section, shall be paid or commence to be paid to him
under
<PAGE> 74
one or a combination of the following methods as the Participant shall elect
upon application filed by him with the Committee pursuant to Section 6.1:
(a) such amount shall be paid to him in a lump sum; or
(b) such amount shall be paid to him in such annual,
quarterly or monthly installments, as elected by the Participant, over
a term certain not extending beyond the life expectancy of the
Participant or the joint life expectancy of the Participant and his
Beneficiary.
(2) Distributions pursuant to this Section shall be paid or
commence to be paid to a Participant as soon as practicable after, and shall be
valued as of, the next Valuation Date which is at least 30 days after the later
of (a) the date on which the Participant files his application with the
Committee pursuant to Section 6.1 or (b) the date of the Participant's
termination of employment from the Controlled Group, but in no event shall
payment be made or commenced later than the time prescribed in Section 6.8(2)
without regard to whether an application has been filed.
(3) If a Participant described in Subsection (1) of this
Section should again become an Employee before his entire Account has been
distributed, the distribution of his Account shall cease until the Participant
again terminates his employment with the Controlled Group.
6.4 Distribution on Other Termination of Employment. If a
Participant's termination of employment with the Controlled
<PAGE> 75
Group occurs under circumstances other than those covered by Sections 6.2 and
6.3, his entire Vested Interest, valued as of the Valuation Date coinciding
with or next following the date determined pursuant to Section 6.3(2), shall be
paid to him in a lump sum at such time as provided in Section 6.3(2).
6.5 Payment of Small Benefits. Notwithstanding the foregoing
provisions of this Article, if the value of the Vested Interest of a
Participant following his termination of employment (whether by death or
otherwise) does not exceed $3,500 on the first Valuation Date next following
such termination of employment (and never exceeded $3,500 at the time of any
previous withdrawal or distribution), such Vested Interest shall be paid to the
Participant (or, if applicable, his Beneficiary) in a lump sum within 90 days
after such Valuation Date.
6.6 Distributions Pursuant to a QDRO. If a qualified
domestic relations order (as defined in Code Section 414(p)) so provides, the
portion of a Participant's Vested Interest payable to the alternate payee(s)
may be distributed to the alternate payee(s) at the time specified in such
order, regardless of whether the Participant is entitled to a distribution from
the Plan at such time. The portion of the Vested Interest so payable shall be
valued as of the Valuation Date coincident with or next following the date
specified in such order.
6.7 Distribution on Sale of Assets or Disposition of
Business. Notwithstanding the preceding provisions of this Section, in the
event that a Participant's termination of
<PAGE> 76
employment with the Controlled Group is caused by the disposition by an
Employer of substantially all of the assets of a trade or business, or its
interest in a subsidiary, and such Participant continues employment with the
corporation acquiring such assets or such subsidiary, the Participant, if he so
elects on an application filed with the Committee pursuant to Section 6.1,
shall be entitled to a distribution of his Account valued as of the Valuation
Date specified in Section 6.3(2), provided, however, that such Account may only
be distributed in the form of a lump sum or in the form of NCC Stock.
6.8 Latest Time of Distribution. (1) Distributions under
the Plan shall occur or begin as provided in the preceding Sections of this
Article, but in no event later than 60 days after the close of the Plan Year in
which the latest of the following events occur: (a) the date on which the
Participant attains age 65, (b) the l0th anniversary of the year in which the
Participant commenced participation in the Plan, or (c) the Participant's
termination of employment with the Controlled Group, provided that, except as
provided in Subsection (2) of this Section and Section 6.5, no distribution
shall be required to be made or commence until the Participant files his
application with the Committee pursuant to Section 6.1.
(2)(a) Notwithstanding any other provision of the Plan,
effective as of January 1, 1989, the entire Account of each
Participant under the Plan (i) shall be distributed to him in a lump
sum in cash not later than April 1 of the calendar
<PAGE> 77
year following the calendar year in which he attains age 70-1/2 and,
with respect to Participants who are Employees, on December 31 of such
year and each succeeding year, or (ii) shall commence to be
distributed not later than the time specified in Clause (i) of this
Paragraph (a) in the form specified in Section 6.3(1)(b) if such form
is elected by the Participant in accordance with Section 6.3.
(b) If distribution of a Participant's Account under the Plan
has begun and such Participant dies before his entire interest has
been distributed to him, the remaining portion of such Account shall
be distributed to his Death Beneficiary at least as rapidly as under
the method of distribution being used as of the date of his death.
(c) If a Participant dies before the distribution of his
Account under the Plan has begun, the entire Account of the
Participant shall be distributed to his Death Beneficiary by the
December 31 of the year in which occurs the fifth anniversary of such
Participant's death; provided, however, that such five-year rule shall
not be applicable to any portion of the Participant's Account under
the Plan which is payable to the Participant's Death Beneficiary if
such portion is distributed in the form specified in Section
6.2(2)(b), and such distributions begin not later than the December 31
of the calendar year immediately following the calendar year in which
the Participant died or, in the case of a Death Beneficiary who is the
Participant's surviving
<PAGE> 78
Spouse, the December 31 of the calendar year in which the Participant
would have attained age 70-1/2.
(d) Distributions under this Subsection shall be made in
accordance with the provisions of Code Section 401(a)(9) and Treasury
Regulations issued thereunder, which provisions are hereby
incorporated herein by reference, provided that such provisions shall
override the other distribution provisions of the Plan only to the
extent that such other Plan provisions provide for distribution that
is less rapid than required under such provisions of the Code and
Regulations. Nothing contained in this Section shall be construed as
providing any optional form of payment that is not available under the
other distribution provisions of the Plan.
6.9 Withdrawal of Contributions Upon Attainment of Age
59-1/2. A Participant who is an Employee and who is at least age 59-1/2 may
elect to withdraw all or any portion of his Vested Interest in his Account in
the form of a single sum payment or a distribution of NCC Stock. A Participant
who makes two such withdrawals in the same calendar year while he is an
Employee shall not be permitted to have any further Before-Tax Contributions
made for him for the remainder of such calendar year. Withdrawals pursuant to
this Section shall be paid to the Participant as soon as practicable after, and
shall be valued as of, the next Valuation Date which is at least 30 days after
the
<PAGE> 79
date on which the Participant files an application for withdrawal with the
Committee.
6.10 Withdrawal of After-Tax and Transfer Contributions. (1)
A Participant, whether or not he is an Employee, may elect to withdraw all or
any portion of his After-Tax Contributions Sub-Account. A Participant who
makes such a withdrawal shall not be permitted to make any further withdrawals
of After-Tax Contributions during the 12-month period following such
withdrawal.
(2) A Participant, whether or not he is an Employee, may
elect to withdraw all or any portion of his Transfer Contributions Sub-Account
which is attributable to Transfer Contributions described in Section 3.4(2).
(3) Withdrawals pursuant to this Section shall be paid to the
Participant as soon as practicable after, and shall be valued as of, the next
Valuation Date, which is at least 30 days after the date on which the
Participant files an application for a withdrawal with the Committee.
6.11 Hardship Withdrawals. A Participant who is an Employee
and who has obtained all distributions and withdrawals (other than for
Hardship) and all nontaxable loans then available under all plans maintained by
the Controlled Group may request, on a form provided by and filed with the
Committee, a withdrawal on account of Hardship of all or a part of his
Before-Tax Contributions Sub-Account (excluding any earnings allocated thereto
on or after January 1, 1989). Upon making a determination
<PAGE> 80
that the Participant is entitled to a withdrawal on account of Hardship, the
Committee shall direct the Trustee to distribute to such Participant all or a
portion of his Before-Tax Contributions Sub-Account (excluding any earnings
allocated thereto on or after January 1, 1989), provided that the amount of the
withdrawal shall not be in excess of the amount necessary to alleviate such
Hardship. If a withdrawal on account of Hardship is made by a Participant
pursuant to this Subsection, the following rules shall apply notwithstanding
any other provision of the Plan (or any other plan maintained by the Controlled
Group) to the contrary:
(a) the Participant is prohibited from making elective
contributions and employee contributions to the Plan (or to any other
qualified or nonqualified plan maintained by the Controlled Group) for
a period of 12 months following receipt of the Hardship withdrawal;
and
(b) the amount of the Participant's Before-Tax Contributions
(and any comparable contributions to any other plan maintained by the
Controlled Group) for the Participant's taxable year immediately
following the taxable year of the Hardship withdrawal shall not be in
excess of the applicable limit under Code Section 402(g) for such next
taxable year less the amount of such Participant's Before-Tax
Contributions (and any comparable contributions to any other plan
maintained by the Controlled Group) for the taxable year of the
Hardship withdrawal.
<PAGE> 81
6.12 Mechanics of Making Distributions. (1) Where a
distribution, withdrawal or loan is to be made from the Trust Fund of only a
portion of a Participant's Vested Interest in the Trust Fund and such Interest
is invested in more than one of the Investment Funds, the Participant shall
designate (on a form approved by the Committee, signed by him and filed with
the Committee) which of the Funds should be liquidated in order to make such
distribution. Such a designation shall not be considered an investment
direction or investment transfer for the purpose of the limitations described
in Sections 5.5, 5.6 and 5.7.
(2) All distributions, withdrawals and loans shall be made in
cash, provided that if the Participant or Beneficiary so elects on a form
provided by the Committee, a distribution or withdrawal (but not a loan) may be
made in the form of full shares of NCC Stock, based on the fair market value of
such Stock (as determined by the Trustee in accordance with the provisions of
the Trust Agreement) on the Valuation Date as of which such distribution is
made.
6.13 Loans to Participants. (1) A Participant who is a
"party in interest" within the meaning of ERISA Section 3(14) may apply on a
form provided by the Committee for a loan from his Account. If the Committee
determines that the Participant is not in bankruptcy or similar proceedings and
is entitled to a loan in accordance with the following provisions of this
Section, the Committee shall direct the Trustee to make a loan to the
Participant from his Account. Each loan shall be charged against
<PAGE> 82
the Participant's Account as follows: first, against the Participant's Before
- -Tax Contributions Sub-Account; second, to the extent necessary, against the
Participant's Matching Allocations Sub-Account; third, to the extent necessary,
against the Participant's Transfer Contributions Sub-Account; fourth, to the
extent necessary against the Participant's After-Tax Contributions Sub-Account;
fifth, to the extent necessary against the Participant's Qualified Non-Elective
Contributions Sub- Account; sixth, to the extent necessary, against the
Participant's Prior Plan Employer Contributions described in any Appendix to
the Plan.
(2) A Participant shall not be entitled to a loan under this
Section unless the Participant and, if he is married at the time the loan is
made, his Spouse (determined at the time the loan is made), consent to (a) the
use of the Participant's Account as security as provided in Subsection (5)(c)
of this Section and (b) the possible reduction of the Participant's Account as
provided in Subsection (6) of this Section. A Spouse's consent required by the
preceding sentence shall be signed by the Spouse, shall acknowledge the effect
of such consent, and shall be witnessed by any person designated by the
Committee as a plan representative or by a notary public. Any consent required
by the preceding sentences must be given within the ninety day period preceding
the disbursement of the loan proceeds. Notwithstanding the foregoing, the
consent of the spouse of a Participant shall not be required
<PAGE> 83
with respect to any loan made under this Section after the Conversion Date.
(3) Each loan shall be in an amount which is not less than
$500. The maximum loan to any Participant (when added to the outstanding
balance of all other loans to the Participant from all qualified employer plans
(as defined in Code Section 72(p)(4)) of the Controlled Group) shall be an
amount which does not exceed the lesser of
(a) $50,000, reduced by the excess (if any) of (i) the
highest outstanding balance of such other loans during the one-year
period ending on the day before the date on which such loan is made,
over (ii) the outstanding balance of such other loans on the date on
which such loan is made, or
(b) 50% of the value of such Participant's Account on the
date on which such loan is made.
(4) For each Participant for whom a loan is authorized
pursuant to this Section, the Administrator shall (a) direct the Trustee to
liquidate the Participant's interest in the Investment Funds as directed by the
Participant or, in the absence of such direction, on a pro-rata basis, to the
extent necessary to provide funds for the loan, (b) direct the Trustee to
disburse such funds to the Participant upon the Participant's execution of the
promissory note and security agreement referred to in Subsection (5)(d) of this
Section, (c) transmit to the Trustee the executed promissory note and security
agreement referred to in Subsection (5)(d) of this Section, and (d) establish
and maintain a separate
<PAGE> 84
recordkeeping account within the Participant's Account (the "Loan Account") (i)
which initially shall be in the amount of the loan, (ii) to which the funds for
the loan shall be deemed to have been allocated and then disbursed to the
Participant, (iii) to which the promissory note shall be allocated and (iv)
which shall show the unpaid principal of and interest on the promissory note
from time to time. All payments of principal and interest by a Participant
shall be credited initially to his Loan Account and applied against the
Participant's promissory note, and then invested in the Investment Funds
pursuant to the Participant's direction under Section 5.5. The Administrator
shall value each Participant's Loan Account for purposes of Section 5.2 at such
times as the Administrator shall deem appropriate, but not less frequently than
quarterly.
(5) Loans made pursuant to this Section:
(a) shall be made available to all Participants on a
reasonably equivalent basis;
(b) shall not be made available to Highly Compensated
Employees in a percentage amount greater than the percentage amount
made available to other Participants;
(c) shall be secured by the Participant's Loan Account; and
(d) shall be evidenced by a promissory note and security
agreement executed by the Participant which provides for:
<PAGE> 85
(i) the security referred to in paragraph (c) of
this Subsection;
(ii) a rate of interest determined by the Committee
in accordance with applicable law;
(iii) repayment within a specified period of time,
which shall not extend beyond five years;
(iv) repayment in equal payments over the term of
the loan, with payments not less frequently than quarterly; and
(v) for such other terms and conditions as the
Committee shall determine, which shall include provision that:
(A) with respect to a Participant who is an
Employee, the loan will be repaid pursuant to
authorization by the Participant of equal payroll
deductions over the repayment period sufficient to
amortize fully the loan within the repayment period,
provided, however, the Committee may waive the
requirement of equal payroll deductions if the
Employer payroll through which the Participant is
paid cannot accommodate such deductions;
(B) the loan shall be prepayable in whole at
any time without penalty; and
(C) the loan shall be in default and become
immediately due and payable upon the first to occur
of the following events:
<PAGE> 86
(I) the Participant's failure to make
required payments on the promissory note; or
(II) in the case of a Participant who is
not an Employee, distribution of his Account; or
(III) in the case of a Participant who is
an Employee, termination of his employment with
the Controlled Group; or
(IV) the Participant's death; or
(V) the filing of a petition, the entry
of an order or the appointment of a receiver,
liquidator, trustee or other person in a similar
capacity, with respect to the Participant,
pursuant to any state or federal law relating to
bankruptcy, moratorium, reorganization,
insolvency or liquidation, or any assignment by
the Participant for the benefit of his creditors.
(6) Notwithstanding any other provision of the Plan, a loan
made pursuant to this Section shall be a first lien against the Participant's
Loan Account. Any amount of principal or interest due and unpaid on the loan
at the time of any default on the loan, and any interest accruing thereafter,
shall be satisfied by deduction from the Participant's Loan Account, and shall
be deemed to have been distributed to the Participant, as follows:
<PAGE> 87
(a) in the case of a Participant who is an Employee and who
is not, at the time of the default, eligible (without regard to the
required filing of an application pursuant to Section 6.1) to receive
distribution of his Account under the provisions of Article VI, other
than Section 6.11, or by order of a court, at such time as he first
becomes eligible (without regard to the required filing of an
application pursuant to Section 6.1) to receive distribution of his
Account under the provisions of Article VI, other than Section 6.11,
or by order of a court; or
(b) in the case of any other Participant, immediately upon
such default.
If, as a result of the application of the preceding sentence, an amount of
principal or interest on a loan remains outstanding after default, interest at
the rate specified in the promissory note executed by the Participant in
respect of such loan shall continue to accrue on such outstanding amount until
fully satisfied by deduction from the Participant's Loan Account as
hereinabove provided or by payment by or on behalf of such Participant.
Notwithstanding any other provision of the Plan, a Participant shall not be
eligible to have Before-Tax Contributions made on his behalf during the period
of time of his default on a Plan loan and the time of satisfaction of the loan
by deduction as described above or by payment by or on behalf of such
Participant.
6.14 Other Optional Forms of Benefit. The provisions of any
Appendix that are applicable to a portion of a
<PAGE> 88
Participant's Account shall control (with respect to that portion of the
Account) over the preceding provisions of this Article to the extent that such
Appendix provisions provide, as required by applicable law, optional forms of
benefit (within the meaning of Code Section 411(d)(6) and Treasury Regulations
issued thereunder) which supercede, or are in addition to, the optional forms
of benefit provided by this Article. Further, provisions of any Appendix or
Prior Plan or Predecessor Plan which relate to the election or waiver of any
such optional forms of benefit, or consent requirements applicable to such
elections or waivers shall control over the provisions of this Article.
6.15 Direct Rollover Provisions.
(a) This Section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Distributee's election under this Section 6.15, a
Distributee may elect, at the time and in the manner prescribed by the plan
administrator, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover, provided, however, that if such Direct Rollover is of a
portion less than 100% of such Eligible Rollover Distribution, such portion
must equal or exceed $500 for this Section 6.15 to apply.
(b) Definitions.
(1) Eligible Rollover Distribution: An Eligible Rollover
Distribution is any distribution of all or any portion of
<PAGE> 89
the balance to the credit of the Distributee which equals or exceeds $200,
except that an Eligible Rollover Distribution does not include: 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; any distribution to the extent such distribution
is required under section 401(a)(9) of the Code; and 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 employer
securities).
(2) Eligible Retirement Plan: An Eligible Retirement Plan in
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.
(3) Distributee: A Distributee includes an employee or
former employee. In addition, the employee's or former employee's surviving
spouse and the employee's or former employee's spouse or
<PAGE> 90
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.
(4) Direct Rollover: A Direct Rollover is a payment by the
Plan to the Eligible Retirement Plan specified by the Distributee.
<PAGE> 91
ARTICLE VII. - ADMINISTRATION OF THE TRUST FUND
7.1 Appointment of Trustee. The Company has appointed the
Trustee to act as such under the Plan and has executed the Trust Agreement with
the Trustee. The Company may, without the consent of any Participant or other
person, execute amendments to such Trust Agreement, execute such further
agreements as it in its sole discretion may deem necessary or desirable to
carry out the Plan, or at any time, in accordance with the terms of the Trust
Agreement, remove the Trustee and appoint a successor.
7.2 Duties of Trustee. The Trustee shall invest Before-Tax
Contributions, Transfer Contributions and Employer Contributions paid to it and
earnings thereon in accordance with the Plan and Trust Agreement. The Trustee
shall also establish and maintain separate Accounts and Sub-Accounts for each
Participant in accordance with the Plan. The Trustee in its relation to the
Plan shall be entitled to all of the rights, privileges, immunities and
benefits conferred upon it by the Plan or Trust Agreement and shall be subject
to all of the duties imposed upon it by the Plan and Trust Agreement. The
Trust Agreement is hereby incorporated in the Plan by reference, and each
Employer, by adopting the Plan, approves the Trust Agreement and authorizes the
Company to execute any amendment or supplement thereto on its behalf.
7.3 The Trust Fund. The Trust Fund shall be held by the
Trustee for the exclusive benefit of the Participants and their Beneficiaries
and shall be invested by the Trustee upon such
<PAGE> 92
terms and in such property as is provided in the Plan and in the Trust
Agreement. The Trustee shall, from time to time, make payments, distributions
and deliveries from the Trust Fund as provided in the Plan.
7.4 No Guarantee Against Loss. (1) Neither the Trustee, any
Employer, the Committee nor any Investment Manager in any manner guarantees the
Trust Fund or any part thereof against loss or depreciation. All persons
having any interest in the Trust Fund shall look solely to the Trust Fund for
payment with respect to such interest.
(2) Neither the Company, the Committee, any Employer, the
Trustee, nor any officer or employee of any of them is authorized to advise a
Participant as to the manner in which contributions to the Plan and income
thereon should be invested and reinvested. The election of the Investment Fund
or Funds in which a Participant participates is his sole responsibility, and
the fact that designated Investment Funds are available to Participants for
investment shall not be construed as a recommendation for the investment of
contributions hereunder in all or any of such Funds.
7.5 Payment of Benefits. All payments of benefits provided
for by the Plan shall be made solely out of the Trust Fund in accordance with
instructions given to the Trustee by the Committee pursuant to the terms of the
Plan, and neither any Employer, the Committee nor the Trustee shall be
otherwise liable for any benefits payable under the Plan.
<PAGE> 93
7.6 Compensation and Expenses. Any expenses paid by the
Trustee in the administration of any Investment Fund shall be charged to such
Fund. The Trustee shall be entitled to receive such reasonable compensation
for its services as may be agreed upon by it and the Company. Such
compensation and all other expenses of the Trustee and other expenses necessary
for the proper administration of the Plan and Trust Fund shall be paid by the
Trustee from the Trust Fund, unless the Company determines, in its sole
discretion, that all or any part of such compensation and expenses shall be
paid by the Employers. Notwithstanding the foregoing, any extraordinary
expenses incurred by the Trustee with respect to the interest of any person in
the Trust Fund may, in the discretion of the Trustee and with the approval of
the Committee, be charged to such person's interest in the Trust Fund. Taxes,
if any, on any property held by the Trustee shall be paid out of the Trust Fund
and taxes, if any, other than transfer taxes, on distributions to a Participant
or Beneficiary of a Participant shall be paid by the Participant or the
Beneficiary, respectively.
7.7 No Diversion of Trust Fund. Except as specifically
provided in other Sections of the Plan, it shall be and it is hereby made
impossible, at any time prior to the satisfaction of all liabilities with
respect to Employees and their Beneficiaries under the Plan, for any part of
the corpus or income of the Trust Fund to be (within the taxable year or
thereafter) used for, or
<PAGE> 94
diverted to, purposes other than the exclusive benefit of Employees or their
Beneficiaries.
<PAGE> 95
ARTICLE VIII. - INVESTMENT MANAGER
8.1 Duties and Functions. (1) The Committee shall have the
exclusive authority and responsibility at any time or from time to time to
appoint (and revoke the appointment of) an Investment Manager under the Plan
with respect to the NCC Stock Fund. The Committee shall notify the Trustee of
any such appointment (or revocation thereof) in writing, and the Trustee may
rely upon any such appointment continuing in effect until it receives a written
notice from the Committee of its revocation. Any such Investment Manager shall
acknowledge in writing to the Committee and the Trustee that he or it is a
fiduciary with respect to the Plan.
(2) Any such Investment Manager shall have the powers,
functions, duties and/or responsibilities of the Trustee relating to the
investment and reinvestment of the NCC Stock Fund (other than those described
in Article XV which shall remain with the Trustee) and shall exercise such
authority, power and discretion exclusively. Custody of the assets of the NCC
Stock Fund, however, shall remain with the Trustee who shall be responsible
therefor. In no instance shall the authority or discretion of an Investment
Manager with respect to the NCC Stock Fund exceed the authority or discretion
which the Trustee would have had with respect to such Fund if there were no
Investment Manager.
(3) If an Investment Manager is so appointed (a) the Trustee
shall not be liable for any loss which may result by reason of any action taken
by it in accordance with a direction of
<PAGE> 96
an Investment Manager or by reason of any lack of action by the Trustee upon
the failure of an Investment Manager to exercise his or its authority and
discretion, (b) the Trustee shall not be required to accept delivery of or pay
for any security or other property purchased for the NCC Stock Fund to the
extent that the assets in such Fund are insufficient to pay for such security
or other property, and (c) the Trustee shall be under no duty or obligation to
(i) invest or reinvest the NCC Stock Fund except as directed by the Investment
Manager thereof, (ii) make any investment review or examination of the NCC
Stock Fund or recommendations with respect to such Fund, or (iii) advise the
Committee of directions received by the Trustee from an Investment Manager.
8.2 Compensation. The Investment Manager shall receive such
reasonable compensation as may be agreed upon by it and the Committee, and
payment thereof shall be made by the Employers.
<PAGE> 97
ARTICLE IX. - CLAIMS PROCEDURES
9.1 Method of Filing Claim. Any Participant or Beneficiary
who believes that he is entitled to receive a benefit under the Plan which he
has not received may file with the Committee a written claim specifying the
basis for his claim and the facts upon which he relies in making such claim.
Such a claim must be signed by the claimant or his authorized representative
and shall be deemed filed when delivered to any member of the Committee or its
designee.
9.2 Notification to Claimant. Unless such claim is allowed
in full by the Committee, the Committee shall (within 90 days after such claim
was filed, plus an additional period of 90 days if required for processing and
if notice of the 90-day extension of time indicating the specific circumstances
requiring the extension and the date by which a decision shall be rendered is
given to the claimant within the first 90-day period) cause written notice to
be mailed to the claimant of the total or partial denial of such claim. Such
notice shall be written in a manner calculated to be understood by the claimant
and shall state (a) the specific reason(s) for the denial of the claim, (b)
specific reference(s) to pertinent provisions of the Plan and/or Trust
Agreement on which the denial of the claim was based, (c) a description of any
additional material or information necessary for the claimant to perfect the
claim and an explanation of why such material or information is necessary, and
(d) an explanation of the review procedure specified in Section 9.3. If a
claimant
<PAGE> 98
does not receive any notice from the Committee within 90 days after his claim
is filed with the Committee, his claim shall be deemed to have been denied.
9.3 Review Procedure. Within six months after the denial of
his claim, the claimant may appeal such denial by filing with the Company his
written request for a review of his said claim. If the claimant does not file
such a request with the Company within such six-month period, the claimant
shall be conclusively presumed to have accepted as final and binding the
initial decision of the Committee on his claim. If such an appeal is so filed
within such six months, a Named Fiduciary designated by the Company shall (a)
conduct a full and fair review of such claim and (b) mail or deliver to the
claimant a written decision on the matter based on the facts and pertinent
provisions of the Plan and/or Trust Agreement within a period of 60 days after
the receipt of the request for review unless special circumstances require an
extension of time, in which case such decision shall be rendered not later than
120 days after receipt of such request. If an extension of time for review is
required, written notice of the extension shall be furnished to the claimant
prior to the commencement of the extension. Such decision (i) shall be written
in a manner calculated to be understood by the claimant, (ii) shall state the
specific reason(s) for the decision, (iii) shall make specific reference(s) to
pertinent provisions of the Plan and/or Trust Agreement on which the decision
is based and (iv) shall, to the extent permitted by applicable law, be final
<PAGE> 99
and binding on all interested persons. During such full review, the claimant
or his duly authorized representative shall be given an opportunity to review
documents that are pertinent to the claimant's claim and to submit issues and
comments in writing. If the decision on review is not furnished within such
60-day or 120-day period, as the case may be, the claim shall be deemed denied
on review.
<PAGE> 100
ARTICLE X. - ADMINISTRATION OF THE PLAN
AND FIDUCIARY RESPONSIBILITIES
10.1 Responsibility for Administration. Except to the extent
that particular responsibilities are assigned or delegated to other Fiduciaries
pursuant to the Trust Agreement, other Articles of the Plan or Section 10.3,
the Company (as the Administrator) shall be responsible for the administration
of the Plan. Each other Fiduciary shall have only such powers, duties,
responsibilities and authorities as are specifically conferred upon him or it
pursuant to provisions of the Plan or Trust Agreement. Any person may serve in
more than one fiduciary capacity with respect to the Plan or Trust Fund, if
pursuant to the Plan and/or Trust Agreement, he or it is assigned or delegated
any multiple fiduciary capacities.
10.2 Named Fiduciaries. For the purposes of the Plan, the
Named Fiduciaries shall be the Committee, the Company, the Investment Manager,
the Trustee and to the extent provided in Article XV, the Participants. The
Company may, by written instrument, designate any other person or persons as a
Named Fiduciary or Named Fiduciaries to perform functions specified in such
instrument (or in a delegation pursuant to Section 10.3) which relate to the
administration of the Plan, provided such designee accepts such designation.
Such a designation may be terminated at any time by notice from the Company to
the designee or by notice from the designee to the Company.
<PAGE> 101
10.3 Delegation of Fiduciary Responsibilities. (1) The
Committee or the Company may delegate to any person or persons any one or more
of its powers, functions, duties and/or responsibilities with respect to the
Plan or the Trust Fund.
(2) Any delegation pursuant to Subsection (1) of this
Section, (a) shall be signed on behalf of the Committee or the Company, and be
delivered to and accepted in writing by the delegatee, (b) shall contain such
provisions and conditions relating to such delegation as the Committee or the
Company deems appropriate, (c) shall specify the powers, functions, duties
and/or responsibilities therein delegated, (d) may be amended from time to time
by written agreement signed on behalf of the Committee or the Company and by
the delegatee and (e) may be revoked (in whole or in part) at any time by
written notice from one party to the other. A fully executed copy of any
instrument relating to any delegation (or revocation of any delegation) under
the Plan shall be filed with the Committee.
10.4 Immunities. Except as otherwise provided in Section
10.5 or by applicable law, (a) no Fiduciary shall have the duty to discharge
any duty, function or responsibility which is specifically assigned exclusively
to another Fiduciary or Fiduciaries by the terms of the Plan or Trust Agreement
or is delegated exclusively to another Fiduciary or Fiduciaries pursuant to
procedures for such delegation provided for in the Plan or Trust Agreement; (b)
no Fiduciary shall be liable for any action taken or not taken with respect to
the Plan or Trust Fund except
<PAGE> 102
for his own negligence or willful misconduct; (c) no Fiduciary shall be
personally liable upon any contract or other instrument made or executed by him
or on his behalf in the administration of the Plan or Trust Fund; (d) no
Fiduciary shall be liable for the neglect, omission or wrongdoing of another
Fiduciary; and (e) any Fiduciary may rely and shall be fully protected in
acting upon the advice of counsel, who may be counsel for any Controlled Group
Member, upon the records of a Controlled Group Member, upon the opinion,
certificate, valuation, report, recommendation or determination of the
certified public accountants appointed to audit a Controlled Group Member's
financial statements, or upon any certificate, statement or other
representation made by an Employee, a Participant, a Beneficiary or the Trustee
concerning any fact required to be determined under any of the provisions of
the Plan.
10.5 Limitation on Exculpatory Provisions. Notwithstanding
any other provision of the Plan or Trust Agreement, no provision of the Plan or
Trust Agreement shall be construed to relieve (or have the effect of relieving)
any Fiduciary from any responsibility or liability for any obligation,
responsibility or duty imposed on such Fiduciary by Part 4 of Title 1 of ERISA.
10.6 Membership of the Committee. The Committee shall be
appointed by the Board of Directors of the Company, which also shall provide
for the number of the members of the Committee and the manner of appointing and
removing such members. Any member of
<PAGE> 103
the Committee may resign by filing a written resignation with the Company.
10.7 Administrative Assistance. The Committee may employ
such clerical, legal or other assistance as it deems necessary or advisable for
the proper administration of the Plan.
10.8 Compensation and Qualification. The members of the
Committee shall serve without compensation for services hereunder.
Participants of the Committee shall not be disqualified from acting because of
any interest, benefit or advantage, inasmuch as it is recognized that the
members may be Employees of the Employers and Participants in the Plan, but no
member of the Committee shall vote or act in connection with the Committee's
action relating solely to himself. No bond or other security need be required
of any Committee member in such capacity or any jurisdiction.
10.9 Revocability of Committee Action. Any action taken by
the Committee with respect to the rights or benefits under the Plan of any
Participant or Beneficiary shall be revocable by the Committee as to payments
or distributions not theretofore made pursuant to such action, and appropriate
adjustments may be made in future payments or distributions to a Participant or
his Beneficiaries to offset any excess or underpayments theretofore made to
such Participant or his Beneficiaries.
10.10 Rules and Procedures. The Committee may adopt rules
for the administration of the Plan and rules for its
<PAGE> 104
government and the conduct of its business, including a rule authorizing one or
more of its members or officers to execute instruments in its behalf evidencing
its action, and the Trustee may rely upon any instrument signed by such person
or persons so authorized as properly evidencing the action of the Committee.
Except as may otherwise be provided by rules or procedures adopted by the
Committee, the Committee may act by majority action either at a meeting or in
writing without a meeting and an action evidenced by the signatures of a
majority of the members of the Committee shall be deemed to be the action of
the Committee. Although various provisions of the Plan provide for a filing
with the Committee of various instruments, the Committee may, by general
announcement, specifically designate some other person or persons, with whom or
which such instruments may be filed.
10.11 Interpretation of the Plan and Findings of Facts. The
Committee shall have sole and absolute discretion to interpret the provisions
of the Plan (including, without limitation, by supplying omissions from,
correcting deficiencies in, or resolving inconsistencies or ambiguities in, the
language of the Plan), to determine the rights and status under the Plan of
Participants and other persons, to decide disputes arising under the Plan and
to make any determinations and findings with respect to the benefits payable
thereunder and the persons entitled thereto as may be required for the purposes
of the Plan. In furtherance of, but without limiting, the foregoing, the
Committee is hereby granted the following specific authorities, which it shall
discharge in
<PAGE> 105
its sole and absolute discretion in accordance with the terms of the Plan (as
interpreted, to the extent necessary, by the Committee):
(1) to resolve all questions arising under the provisions of
the Plan as to any individual's entitlement to become a Participant;
(2) to determine the amount of benefits, if any, payable to
any person under the Plan; and
(3) to conduct the review procedure specified in Article IX.
All decisions of the Committee as to the facts of any case, as to the
interpretation of any provision of the Plan or its application to any case, and
as to any other interpretative matter or other determination or question under
the Plan shall be final and binding on all parties affected thereby, subject to
the provisions of Section 10.9 and Article IX. The Committee shall direct the
Trustee relative to benefits to be paid under the Plan and shall furnish the
Trustee with any information reasonably required by it for the purpose of
paying benefits under the Plan.
10.12 Directions to Trustee. The Committee shall direct the
Trustee as to the method of payment of, and the time at which, any benefit is
to be paid to a Participant or a Beneficiary from the Trust Fund and the
particular Investment Fund and Sub-Account from which each such payment is to
be made. The Trustee shall be entitled to rely conclusively on any such
direction given to it by the Committee in accordance with the provisions
hereof.
<PAGE> 106
ARTICLE XI. - MISCELLANEOUS
11.1 Spendthrift Provisions. No right or interest of any
kind of a Participant or Beneficiary in the Trust Fund shall be anticipated,
assigned (either in law or equity), alienated or be subject to encumbrance,
garnishment, attachment, execution or levy of any kind, voluntary or
involuntary, or any other legal or equitable process, except in accordance with
a qualified domestic relations order as defined in Code Section 414(p). The
Committee shall establish procedures to determine the qualified status of
domestic relations orders and to administer distributions under such qualified
orders in accordance with Code Section 414(p).
11.2 Facility of Payment. In the event the Committee finds
that any Participant or Beneficiary to whom a benefit is payable under the Plan
is (at the time such benefit is payable) unable to care for his affairs because
of physical, mental or legal incompetence, the Committee, in its sole
discretion, may cause any payment due to him hereunder, for which prior claim
has not been made by a duly qualified guardian or other legal representative,
to be paid to the person or institution deemed by the Committee to be
maintaining or responsible for the maintenance of such Participant or
Beneficiary; and any such payment shall be deemed a payment for the account of
such Participant or Beneficiary and shall constitute a complete discharge of
any liability therefor under the Plan.
11.3 No Enlargement of Employment Rights. Nothing herein
contained shall constitute or be construed as a contract of
<PAGE> 107
employment between any Employer and any Employee or Participant and all
Employees shall remain subject to discipline, discharge and layoff to the same
extent as if the Plan had never gone into effect. An Employer by adopting the
Plan, making contributions to the Trust Fund or taking any other action with
respect to the Plan does not obligate itself to continue the employment of any
Participant or Employee for any period or, except as expressly provided in the
Plan, to make any payments into the Trust Fund.
11.4 Merger or Transfer of Assets. There shall not be any
merger or consolidation of the Plan with, or the transfer of assets or
liabilities of the Plan to, any other plan, unless each Participant of 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
he would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan had then terminated). The Company
reserves the right to merge or consolidate this Plan with, and to transfer the
assets of the Plan to, any other Plan, without the consent of any other
Employer.
11.5 Action by Company. Wherever the Company is authorized
to act under the Plan (including but not limited to any delegation of its
fiduciary powers and responsibilities under the Plan), such action shall be
taken, unless otherwise provided in the Plan, by written instrument executed by
an officer of the Company. The Trustee may rely on any instrument so executed
as
<PAGE> 108
being validly authorized and as properly evidencing the action of the Company.
11.6 Severability Provision. If any provision of the Plan or
Trust Agreement or the application thereof to any circumstance or person is
invalid, the remainder of the Plan or Trust Agreement and the application of
such provision to other circumstances or persons shall not be affected thereby.
<PAGE> 109
ARTICLE XII. - OTHER EMPLOYERS
12.1 Adoption by Other Employers. As of January 1, 1992, and
thereafter the Company was the only Employer under the Plan. Any other
corporation or business organization may, with the consent of the Committee,
adopt the Plan and thereby become an Employer hereunder by executing an
instrument evidencing such adoption and filing a copy thereof with the
Committee and the Trustee. Such adoption may be subject to such terms and
conditions as the Committee requires and approves.
12.2 Withdrawal of Employer. Any Employer (other than the
Company) which adopts the Plan may elect separately to withdraw from the Plan.
Any such withdrawal shall be expressed in an instrument executed by the
withdrawing Employer and filed with the Company and the Trustee. Such
withdrawal shall become effective when so filed unless some other effective
date is designated in the instrument and approved by the Committee. No such
withdrawal shall decrease the amount of Employer Contributions to be made by
the Employer on account of periods preceding such withdrawal. In the event of
such a withdrawal of an Employer, or in the event the Plan is terminated as to
an Employer (but not all the Employers) pursuant to Section 13.1, such Employer
(herein called "former Employer") shall cease to be an Employer, and Employer
Contributions of such former Employer and Before-Tax and Transfer Contributions
of Employees of such former Employer shall cease.
<PAGE> 110
12.3 Withdrawal of Employee Group. Any Employer may elect to
withdraw from the Plan any designated group of its Employees while continuing
to include another group or other groups of its Employees within the Plan. Any
such withdrawal of a designated group of Employees shall be expressed in an
instrument executed by the Employer and filed with the Company (if the Employer
making such withdrawal is not the Company) and the Trustee. Such withdrawal
shall become effective when so filed unless some other effective date is
designated in the instrument and approved by the Committee. No such withdrawal
of a designated group of Employees shall decrease the amount of Employer
Contributions to be made by the Employer in respect of Affected Employees on
account of periods preceding such withdrawal. In the event of such withdrawal
by an Employer or in the event the Plan is terminated by the Company as to a
group of Employees of another Employer pursuant to Section 13.1, Employer
Contributions of the Employer in respect of affected Employees and Before-Tax
and Transfer Contributions of affected Employees shall cease.
<PAGE> 111
ARTICLE XIII. - AMENDMENT OR TERMINATION
13.1 Right to Amend or Terminate. Subject to the limitations
of Sections 4.8(1) and 7.7 of the Plan, the Company has reserved, and does
hereby reserve, the right at any time, by action of any Executive Vice
President or any officer of the Company who is senior to the Executive Vice
Presidents of the Company, without the consent of any other Employer or of the
Participants, Beneficiaries or any other person, (a) to terminate the Plan, in
whole or in part or as to any or all of the Employers or as to any designated
group of Employees, Participants and their Beneficiaries, or (b) to amend the
Plan, in whole or in part. No such termination or amendment shall decrease the
amount of Employer Contributions to be made by an Employer on account of any
period preceding such termination or amendment. The Plan may be amended only
by the Company.
13.2 Procedure for Termination or Amendment. Any termination
or amendment of the Plan pursuant to Section 13.1 shall be expressed in an
instrument executed by the Trustee and two officers of the Company (at least
one of whom is an Executive Vice President or an officer senior to the
Executive Vice Presidents) and shall become effective as of the date designated
in such instrument or, if no date is so designated, on the date of its
execution.
13.3 Distribution Upon Termination. If the Plan shall be
terminated by the Company as to all Employers, Before-Tax, Transfer and
Employer Contributions to the Plan shall cease and,
<PAGE> 112
as soon as practicable after such termination, the Trustee shall make
distribution (if such distribution is permitted by applicable law) to each
Employee as if the Plan had not been terminated.
13.4 Amendment Changing Vesting Schedule. (1) If any Plan
amendment changes any vesting schedule under the Plan, effective as of January
1, 1989, each Participant having not less than three years of service shall be
permitted to elect, during the election period described in Subsection (2) of
this Section, to have his nonforfeitable percentage computed under the Plan
without regard to such amendment.
(2) Such election period shall begin on the date the Plan
amendment is adopted and shall end no earlier than the latest of the following
dates: (a) the date which is 60 days after the day the Plan amendment is
adopted, (b) the date which is 60 days after the day the Plan amendment becomes
effective, or (c) the date which is 60 days after the day the Participant is
issued written notice of the Plan amendment by the Committee or the Company.
(3) For purposes of Subsection (1) of this Section, a
Participant shall be considered to have completed three years of service if
such Participant has completed three years of service, whether or not
consecutive, without regard to the exceptions of Code Section 411(a)(4), prior
to the expiration of the election period described in Subsection (2) of this
Section.
13.5 Nonforfeitable Amounts. Notwithstanding any other
provision of the Plan, upon the termination or partial termination
<PAGE> 113
of the Plan or upon complete discontinuance of contributions under the Plan,
the rights of all Employees to benefits accrued to the date of such termination
or partial termination or discontinuance, to the extent then funded, or the
amounts credited to the Employees' Accounts, shall be nonforfeitable.
13.6 Prohibition on Decreasing Accrued Benefits. No
amendment to the Plan (other than an amendment described in Code Section
412(c)(8)) shall have the effect of decreasing the accrued benefit of any
Participant. For purposes of the preceding sentence, a Plan amendment which
has the effect of (a) eliminating or reducing an early retirement benefit or a
retirement-type subsidy (as defined in regulations of the Secretary of the
Treasury) or (b) eliminating an optional form of benefit (except as permitted
by any such regulations) with respect to benefits attributable to service
before the amendment, shall be treated as decreasing accrued benefits,
provided, however, that in the case of a retirement-type subsidy this sentence
shall apply only with respect to a Participant who satisfies (either before or
after the amendment) the preamendment conditions for the subsidy.
<PAGE> 114
ARTICLE XIV. - TOP-HEAVY PLAN REQUIREMENTS
14.1 Definitions. For the purposes of this Article, the
following terms, when used with initial capital letters, shall have the
following respective meanings:
(1) Aggregation Group: Permissive Aggregation Group or
Required Aggregation Group, as the context shall require.
(2) Compensation: Effective as of January 1, 1989,
"Compensation" as defined in Section 4.9(3) (subject to the limitations
described in Section 1.1(14)(b)).
(3) Defined Benefit Plan: A qualified plan as defined in
Code Section 414(j).
(4) Defined Contribution Plan: A qualified plan as defined
in Code Section 414(i).
(5) Determination Date: For any Plan Year, the last day of
the immediately preceding Plan Year, except that in the case of the first Plan
Year of the Plan, the Determination Date shall be the last day of such first
Plan Year.
(6) Extra Top-Heavy Group: An Aggregation Group if, as of a
Determination Date, the aggregate present value of accrued benefits for Key
Employees in all plans in the Aggregation Group (whether Defined Benefit Plans
or Defined Contribution Plans) is more than ninety (90%) of the aggregate
present value of all accrued benefits for all employees in such plans.
(7) Extra Top-Heavy Plan: See Section 14.3.
(8) Former Key Employee: A Non-Key Employee with respect to
a Plan Year who was a Key Employee in a prior Plan
<PAGE> 115
Year. Such term shall also include his Beneficiary in the event of his death.
(9) Key Employee: An Employee or former Employee who is or
was a Participant and who, at any time during the current Plan Year or any of
the four preceding Plan Years, is (a) an officer of an Employer (limited to no
more than 50 Employees or, if lesser, the greater of 3 Employees or 10 percent
of the Employees) having an annual Compensation greater than, effective as of
January 1, 1988, 50% of the dollar amount in effect under Code Section
415(b)(1)(A) for any such Plan Year, (b) one of the 10 Employees owning (or
considered as owning within the meaning of Code Section 318) the largest
interests in an Employer and having annual Compensation of more than the
applicable dollar amount referred to in Section 4.9(1), (c) a 5- percent owner
(as such term is defined in Code Section 416(i)(1)(B)(i)) or (d) a 1-percent
owner (as such term is defined in Code Section 416(i)(1)(B)(ii)) having an
annual Compensation of more than $150,000. For purposes of clause (b) of this
Subsection, if two Employees have the same interest in an Employer, the
Employee having greater annual Compensation shall be treated as having a larger
interest. The term "Key Employee" shall also include such Employee's
Beneficiary in the event of his death. For purposes of this Subsection,
effective as of January 1, 1989, "Compensation" has the meaning given such term
by Code Section 414(q)(7).
<PAGE> 116
(10) Non-Key Employee: An Employee or former Employee who is
or was a Participant and who is not a Key Employee. Such term shall also
include his Beneficiary in the event of his death.
(11) Permissive Aggregation Group: The group of qualified
plans of an Employer consisting of:
(a) the plans in the Required Aggregation Group; plus
(b) one (1) or more plans designated from time to time by the
Committee that are not part of the Required Aggregation Group but that
satisfy the requirements of Code Sections 401(a)(4) and 410 when
considered with the Required Aggregation Group.
(12) Required Aggregation Group: The group of qualified
plans of an Employer consisting of:
(a) each plan in which a Key Employee participates; plus
(b) each other plan which enables a plan in which a Key
Employee participates to meet the requirements of Code Sections
401(a)(4) or 410.
(13) Top-Heavy Account Balance: A Participant's (including a
Participant who has received a total distribution from this Plan) or a
Beneficiary's aggregate balance standing to his account as of the Valuation
Date coinciding with or immediately preceding the Determination Date (as
adjusted by the amount of any Employer Contributions made or due to be made
after such Valuation Date but before the expiration of the extended payment
period in Code Section 412(c)(10)), provided, however,
<PAGE> 117
that such balance shall include the aggregate distributions made to such
Participant or Beneficiary during the five (5) consecutive Plan Years ending
with the Plan Year that includes the Determination Date (including
distributions under a terminated plan which if it had not been terminated would
have been included in a Required Aggregation Group), and provided further that
if an Employee or former Employee has not performed services for any Employer
maintaining the Plan at any time during the 5-year period ending on the
Determination Date, his account (and/or the account of his Beneficiary) shall
not be taken into account.
(14) Top-Heavy Group: An Aggregation Group if, as of a
Determination Date, the aggregate present value of accrued benefits for Key
Employees in all plans in the Aggregation Group (whether Defined Benefit Plans
or Defined Contribution Plans) is more than sixty percent (60%) of the
aggregate present value of accrued benefits for all employees in such plans.
(15) Top-Heavy Plan: See Section 14.2.
14.2 Determination of Top-Heavy Status. (1) Except as
provided by Subsections (2) and (3) of this Section, the Plan shall be a
Top-Heavy Plan if, as of a Determination Date:
(a) the aggregate of Top-Heavy Account Balances for Key
Employees is more than sixty percent (60%) of the aggregate of all
Top-Heavy Account Balances, excluding for this purpose the aggregate
Top-Heavy Account Balances of Former Key Employees; or
<PAGE> 118
(b) if the Plan is included in a Required Aggregation Group
which is a Top-Heavy Group.
(c) If the Plan is included in a Required Aggregation Group
which is not a Top-Heavy Group, the Plan shall not be a Top-Heavy Plan
notwithstanding the fact that the Plan would otherwise be a Top-Heavy Plan
under Paragraph (a) of Subsection (1) of this Section.
(2) If the Plan is included in a Permissive Aggregation Group
which is not a Top-Heavy Group, the Plan shall not be a Top-Heavy Plan
notwithstanding the fact that the Plan would otherwise be a Top-Heavy Plan
under Subsection (1) of this Section.
14.3 Determination of Extra Top-Heavy Status.
(1) Except as provided by Subsections (2) and (3) of this
Section, the Plan shall be an Extra Top-Heavy Plan if, as of the Determination
Date:
(a) the aggregate of Top-Heavy Account Balances for Key
Employees is more than ninety percent (90%) of the aggregate of all
Top-Heavy Account Balances, excluding for this purpose the aggregate
Top-Heavy Account Balances of Former Key Employees; or
(b) if the Plan is included in a Required Aggregation Group
which is an Extra Top-Heavy Group.
(2) If the Plan is included in a Required Aggregation Group
which is not an Extra Top-Heavy Group, the Plan shall not be an Extra Top-Heavy
Plan notwithstanding the fact that the Plan
<PAGE> 119
would otherwise be an Extra Top-Heavy Plan under paragraph (a) of Subsection
(1) of this Section.
(3) If the Plan is included in a Permissive Aggregation Group
which is not an Extra Top-Heavy Group, the Plan shall not be an Extra Top-Heavy
Plan notwithstanding the fact that the Plan would otherwise be an Extra
Top-Heavy Plan under Subsection (1) of this Section.
14.4 Top-Heavy Plan Requirements. Notwithstanding any other
provisions of the Plan to the contrary, if the Plan is a Top-Heavy Plan for any
Plan Year, the Plan shall then satisfy the following requirements for such Plan
Year:
(1) The minimum contribution requirement as set forth in
Section 14.5.
(2) The adjustment to minimum benefits and allocations as set
forth in Section 14.6.
14.5 Minimum Contribution Requirement. If the Plan is a
Top-Heavy Plan for any Plan Year:
(1) Each Non-Key Employee who is eligible to share in any
Employer Contribution for such Plan Year (or who would have been eligible to
share in any such Employer Contribution if a Before-Tax Contribution had been
made for him during such Plan Year) shall be entitled to receive an allocation
of such Employer Contribution, which is at least equal to three percent (3%) of
his Compensation for such Plan Year.
(2) The three percent (3%) minimum contribution requirement
under Subsection (1) of this Section for a Non-Key
<PAGE> 120
Employee shall be increased to four percent (4%) if the Employer maintains a
Defined Benefit Plan which does not cover such Non-Key Employee.
(3) The percentage minimum contribution requirement set forth
in Subsections (1) and (2) of this Section with respect to a Plan Year shall
not exceed the percentage at which Employer Contributions are made (or required
to be made) under the Plan for such Plan Year for the Key Employee for whom
such percentage is the highest for such Year.
(4) The percentage minimum contribution requirement set forth
in Subsections (2) and (3) of this Section may also be reduced or eliminated in
accordance with Section 14.8(2).
(5) For the purpose of Subsection (3) of this Section,
contributions taken into account shall include like contributions under all
other Defined Contribution Plans in the Required Aggregation Group, excluding
any such plan in the Required Aggregation Group if that plan enables a Defined
Benefit Plan in such Required Aggregation Group to meet the requirements of
Code Sections 401(a)(4) or 410.
(6) For the purpose of this Section, the term "Employer
Contributions" shall include Before-Tax Contributions made for an Employee.
14.6 Adjustment to Minimum Benefits and Allocations. If the
Plan is a Top-Heavy Plan for any Plan Year, and if the Employer maintains a
Defined Benefit Plan which could or does provide benefits to Participants in
this Plan:
<PAGE> 121
(a) If the Plan is not an Extra Top-Heavy Plan (but is a
Top-Heavy Plan), then the percentage minimum contribution requirement
in Section 14.5(a) shall be seven and one-half percent (7-1/2%) for a
Non-Key Employee who is covered by this Plan and the Defined Benefit
Plan.
(b) If the Plan is an Extra Top-Heavy Plan, then parts (a)
and (b) of Section 4.10(1) shall be calculated by substituting "1.0"
for "1.25" for each place such "1.25" figure appears, and Code Section
415(e)(6)(B)(I) shall be calculated by substituting "$41,500: for
"$51,875" for each place such "$51,875" amount appears.
14.7 Coordination With Other Plans. (1) In applying this
Article, an Employer and all Controlled Group Members shall be treated as a
single employer, and the qualified plans maintained by such single employer
shall be taken into account.
(2) In the event that another Defined Contribution Plan or
Defined Benefit Plan maintained by the Controlled Group provides contributions
or benefits on behalf of Participants in this Plan, such other plan(s) shall be
taken into account in determining whether this Plan satisfies Section 14.4; and
the minimum contribution required for a Non-Key Employee in this Plan under
Section 14.5 will be reduced or eliminated, in accordance with the requirements
of Code Section 416 and the Regulations thereunder, if a minimum contribution
or benefit is made or accrued in whole or in part in respect of such other
plan(s).
<PAGE> 122
(3) Principles similar to those specifically applicable to
this Plan under this Article, and in general as provided for in Code Section
416 and the Regulations thereunder, shall be applied to the other plan(s)
required to be taken into account under this Article in determining whether
this Plan and such other plan(s) meet the requirements of such Code Section 416
and the Regulations thereunder.
<PAGE> 123
ARTICLE XV. - PROVISIONS RELATING TO VOTING
AND TENDER OFFERS FOR NCC STOCK
15.1 Voting of NCC Stock. All voting rights on shares of NCC
Stock held by the Trustee shall be exercised by the Trustee only as directed by
the Participants and Beneficiaries with respect to allocated shares of NCC
Stock, and acting in their capacity as Named Fiduciaries (within the meaning of
Section 402 of ERISA) with respect to non-directed shares of NCC Stock, in
accordance with the following provisions of this Section:
(1) As soon as practicable before each annual or special
shareholders' meeting of the Company, the Trustee shall furnish to each
Participant a copy of the proxy solicitation material sent generally to
shareholders, together with a form requesting confidential instructions on how
the shares allocated to such Participant's Account and a proportionate share
(based on the amount of any shares allocated to his Account) of any
non-directed shares (including fractional shares to 1/1000th of a share) are to
be voted. The Company and the Committee shall cooperate with the Trustee to
ensure that Participants receive the requisite information in a timely manner.
Except as provided in Subsection (d) of this Section, the materials furnished
to the Participants shall include a notice from the Trustee explaining each
Participant's right to instruct the Trustee with respect to the voting of
shares. Upon timely receipt of such instructions, the Trustee (after combining
votes of fractional shares to give effect to the greatest extent to
Participants' instructions) shall
<PAGE> 124
vote the shares as instructed. If voting instructions for shares of NCC Stock
allocated to the Account of any Participant are not timely received by the
Trustee for a particular shareholders' meeting, such shares shall not be voted
in accordance with the instructions but shall be voted as provided in
Subsection (3) below. The instructions received by the Trustee from
Participants or Beneficiaries shall be held by the Trustee in strict confidence
and shall not be divulged or released to any person including directors,
officers or employees of the Company, or of any other Employer, except as
otherwise required by law.
(2) With respect to all corporate matters submitted to
Participants, all shares of NCC Stock allocated to the Accounts of Participants
shall be voted only in accordance with the directions of such Participants as
given to the Trustee. Each Participant shall be entitled to direct the voting
of shares of NCC Stock (including fractional shares to 1/1000th of a share)
allocated to his Account. With respect to shares of NCC Stock allocated to the
Account of a deceased Participant, such Participant's Beneficiary shall be
entitled to direct the voting with respect to such allocated shares as if such
Beneficiary were the Participant.
(3) Each Participant who has been allocated NCC Stock in his
Account and who is entitled to vote on any manner presented for a vote by the
shareholders also shall, as a Named Fiduciary, direct the Trustee with respect
to the vote of a portion of the shares of NCC Stock for which no timely
instructions were received. Such direction shall be with respect to such
number of
<PAGE> 125
votes equal to the total number of votes attributable to non-directed shares of
NCC Stock multiplied by a fraction, the numerator of which is the number of
shares of NCC Stock allocated to the Participant's Account and the denominator
of which is the total number of shares allocated to the Accounts of such
Participants who have provided directions to the Trustee with respect to
non-directed shares under this Subsection. Each Participant's voting
instructions shall be separately stated as to his allocated shares on the one
hand, and as a Named Fiduciary with respect of a portion of the non-directed
shares on the other hand. Fractional shares shall be rounded to the nearest
1/100th of a share.
15.2 Tender Offers. Except as otherwise expressly provided
in the Plan, the Trustee shall not sell, alienate, encumber, pledge, transfer
or otherwise dispose of or tender or withdraw, any shares of NCC Stock held by
it under the Plan. All tender or exchange decisions with respect to NCC Stock
held by the Plan shall be made only by the Participants and Beneficiaries with
respect to shares allocated to their accounts, and Participants and
Beneficiaries acting in their capacity as Named Fiduciaries (within the meaning
of Section 402 of ERISA) with respect to non-directed shares in accordance with
the following provisions of this Section:
(1) In the event an offer shall be received by the Trustee
(including a tender offer for shares of NCC Stock subject to Section 14(d)(1)
of the Securities Exchange Act of 1934 or
<PAGE> 126
subject to Rule 13e-4 promulgated under that Act, as those provisions may from
time to time be amended) to purchase or exchange any shares of NCC Stock held
by the Plan, the Trustee shall advise each Participant who has shares of NCC
Stock credited to such Participant's Account in writing of the terms of the
offer as soon as practicable after its commencement and shall furnish each
Participant with a form by which he may separately instruct the Trustee
confidentially whether or not to tender or exchange shares allocated to such
Participant's Account and (based on any NCC Stock allocated to such
Participant's Account) a proportionate share of any non-directed shares
(including fractional shares to 1/1000th of a share). The materials furnished
to the Participants shall include:
(a) a notice from the Trustee explaining Participants'
rights to instruct the Trustee with respect to allocated and
non-directed shares as provided herein; and
(b) such related documents as are prepared by any person and
provided to the shareholders of the Company pursuant to the Securities
Exchange Act of 1934.
The Committee and the Trustee may also provide Participants with such other
material concerning the tender or exchange offer as the Trustee or the
Committee in its discretion determine to be appropriate; provided, however,
that prior to any distribution of materials by the Committee, the Trustee shall
be furnished with complete copies of all such materials. The Company and the
<PAGE> 127
Committee shall cooperate with the Trustee to ensure that Participants receive
the requisite information in a timely manner.
(2) The Trustee shall tender or not tender shares or exchange
shares of NCC Stock allocated to the Accounts of any Participant (including
fractional shares to 1/1000th of a share), only as and to the extent instructed
by the Participant. With respect to shares of NCC Stock allocated to the
Account of a deceased Participant, such Participant's Beneficiary shall be
entitled to direct the Trustee whether or not to tender or exchange such shares
as if such Beneficiary were the Participant. The instructions received by the
Trustee from Participants or Beneficiaries shall be held by the Trustee in
strict confidence and shall not be divulged or released to any person,
including directors, officers or employees of the Company, or of any other
Employer, except as otherwise required by law.
(3) Each Participant who has been allocated NCC Stock in his
Account and who is entitled to direct the Trustee whether or not to tender or
exchange shares of NCC Stock allocated to his Accounts also shall direct the
Trustee, as a Named Fiduciary, with respect to the tender or exchange of a
portion of the shares of NCC Stock for which no timely instructions are
received. Such direction shall apply to such number of non-directed shares
multiplied by a fraction, the numerator of which is the number of shares of NCC
Stock allocated to the Participant's Account and the denominator of which is
the total number of shares of NCC Stock allocated to the Accounts of such
Participants who have provided
<PAGE> 128
directions to the Trustee with respect to non-directed shares under this
Subsection. Each Participant's directions shall be separately stated as to his
allocated shares on the one hand and as a Named Fiduciary with respect to a
portion of the non- directed shares on the other hand. Fractional shares shall
be rounded to the nearest 1/1000th of a share.
(4) In the event, under the terms of a tender offer or
otherwise, any shares of NCC Stock tendered for sale, exchange or transfer
pursuant to such offer may be withdrawn from such offer, the Trustee shall
follow such instructions respecting the withdrawal of such securities from such
offer in the same manner and the same proportion as shall be timely received by
the Trustee from the Participants entitled under this Section to give
instructions as to the sale, exchange or transfer of securities pursuant to
such offer.
(5) In the event that an offer for fewer than all of the
shares of NCC Stock held by the Trustee shall be received by the Trustee, each
Participant who has been allocated any NCC Stock subject to such offer shall be
entitled to direct the Trustee as to the acceptance or rejection of such offer
(as provided by Subsections (1)-(4) of this Section) with respect to the
largest portion of such NCC Stock as may be possible given the total number or
amount of shares of Stock the Plan may sell, exchange or transfer pursuant to
the offer based upon the instructions received by the Trustee from all other
Participants who shall timely instruct the Trustee pursuant to this Section to
sell,
<PAGE> 129
exchange or transfer such shares pursuant to such offer, each on a pro rata
basis in accordance with the number or amount of such shares allocated to his
Accounts.
(6) In the event an offer shall be received by the Trustee
and instructions shall be solicited from Participants pursuant to Subsections
(1)-(4) of this Section regarding such offer, and prior to termination of such
offer, another offer is received by the Trustee for the securities subject to
the first offer, the Trustee shall use its best efforts under the circumstances
to solicit instructions from the Participants to the Trustee:
(a) with respect to securities tendered for sale, exchange or
transfer pursuant to the first offer, whether to withdraw such tender,
if possible, and, if withdrawn, whether to tender any securities so
withdrawn for sale, exchange or transfer pursuant to the second offer
and
(b) with respect to securities not tendered for sale,
exchange or transfer pursuant to the first offer, whether to tender or
not to tender such securities for sale, exchange or transfer pursuant
to the second offer.
The Trustee shall follow all such instructions received in a timely manner from
Participants in the same manner and in the same proportion as provided in
Subsections (1)-(4) of this Section. With respect to any further offer for
any NCC Stock received by the Trustee and subject to any earlier offer
(including successive
<PAGE> 130
offers from one or more existing offerors), the Trustee shall act in the same
manner as described above.
(7) A Participant's instructions to the Trustee to tender or
exchange shares of NCC Stock shall not be deemed a withdrawal or suspension
from the Plan or a forfeiture of any portion of the Participant's interest in
the Plan. Funds received in exchange for tendered shares shall be credited to
the Account of the Participant whose shares were tendered and shall be used by
the Trustee to purchase NCC Stock, as soon as practicable. In the interim, the
Trustee shall invest such funds in obligations or instruments which are
appropriate investments for the Money Market Fund.
(8) Subject to any provisions of this Plan to the contrary,
in the event the Company initiates a tender or exchange offer, the Trustee may,
in its sole discretion, enter into an agreement with the Company not to tender
or exchange any shares of NCC Stock in such offer, in which event, the
foregoing provisions of this Section shall have no effect with respect to such
offer and the Trustee shall not tender or exchange any shares of NCC Stock in
such offer.
<PAGE> 131
ARTICLE XVI. - APPENDICES
16.1 Rules Governing Construction of Appendices. Each
Appendix attached hereto contains terms and conditions governing the
application of the Plan to the group of Employees described therein. In the
event of an inconsistency between the other provisions of the Plan and such
terms and conditions set forth in an Appendix, the latter shall control as to
the Employees (or former Employees) covered by such Appendix; provided,
however, that if such inconsistency results from changes made in the provisions
of the Plan to comply with applicable law, then such provisions of the Plan
shall control as to the Employees (or former Employees) covered by such
Appendix. The terms and provisions of the Appendices that were adopted before
the effective date of this amendment and restatement of the Plan shall remain
in effect until changed or superceded. Any reference in any Appendix to
provisions of the Plan as in effect at the time such Appendix became effective
shall be deemed to refer to the comparable provisions of the Plan as later
amended or restated.
16.2 Appendices of Prior Plan. The provisions of Appendices
A through K of the Prior Plan shall continue to apply, as applicable, to those
amounts held under this Plan that were spun off from the Prior Plan as of
January 1, 1992 and that were immediately prior to such date subject to the
provisions of any such Appendices A through K.
16.3 Appendix A -- Ohio Citizens Bank Profit-Sharing
Retirement Plan and Declaration of Trust -- Spin Off and Transfer
<PAGE> 132
to this Plan and Trust. Attached hereto and made a part of this Plan and Trust
is Appendix A relating to and providing for the spin off and transfer of
certain assets and liabilities of the Ohio Citizens Bank Profit-Sharing
Retirement Plan and Declaration of Trust as of April 30, 1992.
16.4 Appendix B -- Conversion to Daily Access System.
Attached hereto and made a part of this Plan is Appendix B relating to and
providing for the conversion of the Plan and Trust to a daily access system
(originally identified as "Appendix M" and added by "Amendment No. 3 to the
National City Savings and Investment Plan No. 2 and Trust" executed October 12,
1993).
<PAGE> 133
This amendment and restatement of the National City Savings and
Investment Plan No. 2 is hereby executed at Cleveland, Ohio, this 30th day of
December 1994 but effective as otherwise herein set forth.
NATIONAL CITY BANK, TRUSTEE NATIONAL CITY CORPORATION
By R. KENT LUDWIG By DAVID A. DABERKO
------------------------ ----------------------
Title: Vice President Title:
And J. M. BUCHAGEN And SHELLEY J. SEIFERT
----------------------- ----------------------
Title: Vice President Title:
<PAGE> 1
Exhibit 10.26
CENTRAL INDIANA BANCORP
STOCK OPTION PLAN
1. Purpose. The purpose of the Central Indiana Bancorp Stock Option Plan
(the "Plan") is to provide to directors, officers and other key employees of
Central Indiana Bancorp (the "Holding Company") and its majority-owned and
wholly-owned subsidiaries (individually a "Subsidiary" and collectively the
"Subsidiaries"), including, but not limited to, First Federal Savings Bank of
Kokomo upon its conversion to stock form ("First Federal"), who are materially
responsible for the management or operation of the business of the Holding
Company or a Subsidiary and have provided valuable service to the Holding
Company or a Subsidiary, a favorable opportunity to acquire Common Stock,
without par value ("Common Stock"), of the Holding Company, thereby providing
them with an increasing incentive to work for the success of the Holding
Company and its Subsidiaries and better enabling each such entity to attract
and retain capable directors and executive personnel.
2. Administration of the Plan. The Plan shal be administered, construed
and interpreted by a committee (the "Committee") consisting of at least two
members of the Board of Directors of the Holding Company, each of whom is a
"disinterested person" within the meaning of the definition of that term
contained in Reg. Section 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "1934 Act"). The members of the Committee shall be
designated from time to time by the Board of Directors of the Holding Company.
The decision of a majority of the members of the Committee shall constitute the
decision of the Committee, and the Committee may act either at a meeting at
which a majority of the members of the Committee is present or by a written
consent signed by all members of the Committee. The Committee shall have the
sole, final and conclusive authority to determine, consistent with and subject
to the provisions of the Plan:
(a) the individuals (the "Optionees") to whom options or successive
options or cash awards shall be granted under the Plan;
(b) the time when options or cash awards shall be granted hereunder;
(c) the number of shares of Common Stock to be covered under each
option and the amount of any cash awards;
(d) the option price to be paid upon the exercise of each option;
(e) the period within which each such option may be exercised;
(f) the extent to which an option is an incentive stock option or a
non-qualified stock option; and
(g) the terms and conditions of the respective agreements by which
options granted or cash awards shall be evidenced.
The Committee shall also have authority to prescribe, amend, waive, and rescind
rules and regulations relating to the Plan, to accelerate the vesting of any
stock options or cash awards made hereunder, and to make all other
determinations necessary or advisable in the administration of the Plan.
3. Eligibility. The Committee may, consistent with the purposes of the
Plan, grant options and cash awards to officers and other key employees of the
Holding Company or of a Subsidiary who in the opinion of the Committee are from
time to time materially responsible for the management or operation of the
business
<PAGE> 2
of the Holding Company or of a Subsidiary and have provided valuable services
to the Holding Company or a Subsidiary; provided, however, that in no event may
any employee who owns (after application of the ownership rules in Section
425(d) of the Internal Revenue Code of 1986, as amended (the "Code")) shares of
stock possessing more than 10 percent of the total combined voting power of all
classes of stock of the Holding Company or any of its Subsidiaries be granted
an incentive stock option hereunder unless at the time such option is granted
the option price is at least 110% of the fair market value of the stock subject
to the option and such option by its terms is not exercisable after the
expiration of five (5) years from the date such option is granted. Directors of
the Holding Company who are not employees of the Holding Company or its
Subsidiaries, and the Chairman Emeritus of First Federal, an advisory director
("Outside Directors"), who are serving as such on the date First Federal
converts (the "Conversion") from mutual to stock form (the "Conversion Date")
shall each be granted on such date a non-qualified option to purchase the
number of whole shares of Common Stock of the Holding Company determined by
multiplying the total number of shares issued by the Holding Company on the
Conversion Date by .44%. Such options shall have an exercise price per share
equal to the purchase price per share paid for shares issued in such
conversion. Each person who is elected for the first time to be an Outside
Director (other than persons who were previously employees of the Holding
Company or of any of its Subsidiaries) after the Conversion Date shall be
granted at the date he or she first becomes an Outside Director a non-qualified
stock option to acquire the number of shares of Common Stock of the Holding
Company determined by multiplying the total number of shares issued by the
Holding Company on the Conversion Date by .44% (subject to adjustment pursuant
to the antidilution provisions of Section 7 hereof) at an option price per
share equal to the fair market value of a share of such Common Stock, as
determined by the Committee, consistent with Treas. Reg. Section 20.2031-2, on
the date he or she first becomes an Outside Director, or on the next preceding
trading day if such date was not a trading date. If on any date in any given
year the number of shares of Common Stock available for awards under the Plan
is insufficient to grant each such Outside Director entitled thereto such a
non-qualified stock option, the shares available for the non-qualified stock
options shall be awarded ratably (to the nearest whole share) to each such
Outside Director on such date. Outside Directors are not entitled to receive
any other awards under this Plan. Subject to the foregoing and the provisions
of Section 4 hereof, an individual who has been granted an option under the
Plan (an "Optionee"), if he is otherwise eligible, may be granted an additional
option or options if the Committee shall so determine.
4. Stock Subject to the Plan. There shall be reserved for issuance upon
the exercise of options granted under the Plan, shares of Common Stock of the
Holding Company equal to 10% of the total number of shares of Common Stock
issued by the Holding Company upon the conversion of First Federal from mutual
to stock form, which may be authorized but unissued shares or treasury shares
of the Holding Company. Subject to Section 7 hereof, the shares for which
options may be granted under the Plan shall not exceed that number. If any
option shall expire or terminate or be surrendered for any reason without
having been exercised in full, the unpurchased shares subject thereto shall
(unless the Plan shall have terminated) become available for other options
under the Plan.
5. Terms of Options. Each option granted under the Plan shall be subject
to the following terms and conditions and to such other terms and conditions
not inconsistent therewith as the Committee may deem appropriate in each case:
(a) Option Price. The price to be paid for shares of stock upon the
exercise of each option shall be determined by the Committee at the time
such option is granted, but such price in no event shall be less than the
fair market value, as determined by the Committee consistent with Treas.
Reg. Section 20.2031-2 and any requirements of Section 422A of the Code, of
such stock on the date on which such option is granted; provided, however,
that the Committee shall have discretion to award non-qualified stock
options to eligible employees of the Holding Company or a Subsidiary at a
price no less than
A-2
<PAGE> 3
75% of the fair market value of the Common Stock on the date of grant, as
determined by the Committee consistent with Treas. Reg. Section 20.2031-2.
(b) Period for Exercise of Option. An option shall not be exercisable
after the expiration of such period as shall be fixed by the Committee at
the time of the grant thereof, but such period in no event shall exceed
ten (10) years and one day from the date on which such option is granted;
provided, that incentive stock options granted hereunder shall have terms
not in excess of ten (10) years and options issued to Outside Directors
shall be for a period of ten (10) years and one day from the date of grant
thereof. Options shall be subject to earlier termination as hereinafter
provided.
(c) Exercise of Options. The option price of each share of stock
purchased upon exercise of an option shall be paid in full at the time of
such exercise. Payment may be in (i) cash, (ii) if the Optionee may do so
without violating Section 16(b) of the 1934 Act, by delivering a properly
executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Holding Company the total option price
in cash and, if desired, the amount of any taxes to be withheld from the
Optionee's compensation as a result of any withholding tax obligation of
the Holding Company or any of its Subsidiaries, as specified in such
notice, or (iii) beginning on a date which is three years following First
Federal's conversion from mutual to stock form and with the approval of
the Committee, by tendering whole shares of the Holding Company's Common
Stock owned by the Optionee and cash having a fair market value equal to
the cash exercise price of the shares with respect to which the option is
being exercised. For this purpose, any shares so tendered by an Optionee
shall be deemed to have a fair market value equal to the mean between the
highest and lowest quoted selling prices for the shares on the date of
exercise of the option (or if there were no sales on such date the
weighted average of the means between the highest and lowest quoted
selling prices on the nearest date before and the nearest date after the
date of exercise of the option as prescribed by Treas. Reg. Section
20.2031-2)), as reported in The Wall Street Journal or a similar
publication selected by the Committee. The Committee shall have the
authority to grant options exercisable in full at any time during their
term, or exercisable in such installments at such times during their term
as the Committee may determine; provided, however, that options shall not
be exercisable prior to a date which is six months after the date of
shareholder approval of the Plan or during the first six (6) months of
their term, and provided further that options granted to Outside Directors
shall be fully exercisable following the first six (6) months of their
term. Installments not purchased in earlier periods shall be cumulated and
be available for purchase in later periods. Subject to the other
provisions of this Plan, an option may be exercised at any time or from
time to time during the term of the option as to any or all whole shares
which have become subject to purchase pursuant to the terms of the option
or the Plan, but not at any time as to fewer than one hundred (100) shares
unless the remaining shares which have become subject to purchase are
fewer than one hundred (100) shares. An option may be exercised only by
written notice to the Holding Company, mailed to the attention of its
Secretary, signed by the Optionee (or such other person or persons as
shall demonstrate to the Holding Company his or their right to exercise
the option), specifying the number of shares in respect of which it is
being exercised, and accompanied by payment in full in either cash or by
check in the amount of the aggregate purchase price therefor, by delivery
of the irrevocable broker instructions referred to above, or, if the
Committee has approved the use of the stock swap feature provided for
above, followed as soon as practicable by the delivery of the option price
for such shares.
(d) Certificates. The certificate or certificates for the shares
issuable upon an exercise of an option shall be issued as promptly as
practicable after such exercise. An Optionee shall not have any rights of
a shareholder in respect to the shares of stock subject to an option until
the date of issuance of a stock certificate to him for such shares. In no
case may a fraction of a share be purchased or
A-3
<PAGE> 4
issued under the Plan, but if, upon the exercise of an option, a
fractional share would otherwise be issuable, the Holding Company shall
pay cash in lieu thereof.
(e) Termination of Option. If an Optionee (other than an Outside
Director) ceases to be an employee of the Holding Company and the
Subsidiaries for any reason other than retirement, permanent and total
disability (within the meaning of Section 22(e)(3) of the Code), or death,
any option granted to him shall forthwith terminate. Leave of absence
approved by the Committee shall not constitute cessation of employment. If
an Optionee (other than an Outside Director) ceases to be an employee of
the Holding Company and the Subsidiaries by reason of retirement, any
option granted to him may be exercised by him in whole or in part at any
time after his retirement until the expiration of the option term fixed by
the Committee in accordance with Subsection (b) above, whether or not the
option was otherwise exercisable at the date of his retirement. (The term
"retirement" as used herein means such termination of employment as shall
entitle such individual to early or normal retirement benefits under any
then existing pension plan of the Holding Company or a Subsidiary.) If an
Optionee (other than an Outside Director) ceases to be an employee of the
Holding Company and the Subsidiaries by reason of permanent and total
disability (within the meaning of Section 22(e)(3) of the Code), any
option granted to him may be exercised by him in whole or in part within
one (1) year after the date of his termination of employment by reason of
such disability whether or not the option was otherwise exercisable at the
date of such termination. Options granted to Outside Directors shall cease
to be exercisable six (6) months after the date such Outside Director is
no longer a director or advisory director of the Holding Company or of
First Federal for any reason. In the event of the death of an Optionee
while in the employ or service as a director or advisory director of the
Holding Company or a Subsidiary, or, if the Optionee is not an Outside
Director, after the date of his retirement or within one (1) year after
the termination of his employment by reason of permanent and total
disability (within the meaning of Section 22(e)(3) of the Code), or, if
the Optionee is an Outside Director, within six (6) months after he is no
longer a director or advisory director of the Holding Company or of First
Federal, any option granted to him may be exercised in whole or in part at
any time within one (1) year after the date of such death by the executor
or administrator of his estate or by the person or persons entitled to the
option by will or by applicable laws of descent and distribution until the
expiration of the option term as fixed by the Committee, whether or not
the option was otherwise exercisable at the date of his death.
Notwithstanding the foregoing provisions of this subsection (e), no option
shall in any event be exercisable after the expiration of the period fixed
by the Committee in accordance with subsection (b) above.
(f) Nontransferability of Option. No option may be transferred by the
Optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act, or the rules
thereunder, and during the lifetime of the Optionee options shall be
exercisable only by the Optionee or his guardian or legal representative.
(g) No Right to Continued Service. Nothing in this Plan or in any
agreement entered into pursuant hereto shall confer on any person any
right to continue in the employ or service of the Holding Company or its
Subsidiaries or affect any rights of the Holding Company, a Subsidiary, or
the shareholders of the Holding Company may have to terminate his
service at any time.
(h) Maximum Incentive Stock Options. The aggregate fair market value
of stock with respect to which incentive stock options (within the meaning
of Section 422A of the Code) are exercisable for the first time by an
Optionee during any calendar year under the Plan or any other plan of the
Holding Company or its Subsidiaries shall not exceed $100,000. For this
purpose, the fair market value of such shares shall be determined as of
the date the option is granted and shall be computed in such
A-4
<PAGE> 5
manner as shall be determined by the Committee, consistent with the
requirements of Section 422A of the Code.
(i) Agreement. Each option shall be evidenced by an agreement between
the Optionee and the Holding Company which shall provide, among other
things, that, with respect to incentive stock options, the Optionee will
advise the Holding Company immediately upon any sale or transfer of the
shares of Common Stock received upon exercise of the option to the extent
such sale or transfer takes place prior to the later of (a) two (2) years
from the date of grant or (b) one (1) year from the date of exercise.
6. Incentive Stock Options and Non-Qualified Stock Options. Options
granted under the Plan may be incentive stock options under Section 422A of the
Code or non-qualified stock options, provided, however, that Outside Directors
shall be granted only non-qualified stock options. All options granted
hereunder will be clearly identified as either incentive stock options or
non-qualified stock options. In no event will the exercise of an incentive
stock option affect the right to exercise any non-qualified stock option, nor
shall the exercise of any non-qualified stock option affect the right to
exercise any incentive stock option. Nothing in this Plan shall be construed to
prohibit the grant of incentive stock options and non-qualified stock options
to the same person, provided, further, that incentive stock options and
non-qualified stock options shall not be granted in a manner whereby the
exercise of one non-qualified stock option or incentive stock option affects
the exercisability of the other.
7. Adjustment of Shares. In the event of any change after the effective
date of the Plan in the outstanding stock of the Holding Company by reason of
any reorganization, recapitalization, stock split, stock dividend, combination
of shares, exchange of shares, merger or consolidation, liquidation, or any
other change after the effective date of the Plan in the nature of the shares
of stock of the Holding Company, the Committee shall determine what changes, if
any, are appropriate in the number and kind of shares reserved under the Plan,
and the Committee shall determine what changes, if any, are appropriate in the
option price under and the number and kind of shares covered by outstanding
options granted under the Plan. Any determination of the Committee hereunder
shall be conclusive.
8. Cash Awards. Except as otherwise provided in Section 3 hereof, the
Committee may, at any time and in its discretion, grant to any Optionee who is
granted a non-qualified stock option the right to receive, at such times and in
such amounts as determined by the Committee in its discretion, a cash amount
("cash award") which is intended to reimburse the Optionee for all or a portion
of the federal, state and local income taxes imposed upon such Optionee as a
consequence of the exercise of a non-qualified stock option and the receipt of
a cash award.
9. Replacement and Extension of the Terms of Options and Cash Awards. The
Committee from time to time may permit an Optionee (other than an Outside
Director) under the Plan or any other stock option plan heretofore or hereafter
adopted by the Holding Company or any Subsidiary to surrender for cancellation
any unexercised outstanding stock option and receive from his employing
corporation in exchange therefor an option for such number of shares of Common
Stock as may be designated by the Committee. Such Optionees also may be granted
related cash awards as provided in Section 8 hereof.
10. Change in Control. In the event of a Change in Control, all options
previously grnated and still outstanding under the Plan regardless of their
terms, shall become exercisable. For this purpose, "Change in Control" shall
mean a change in control of the Holding Company or First Federal, within the
meaning of 12 C.F.R. Section 574.4(a) (other than a change of control resulting
from a trustee or other fiduciary holding shares of Common Stock under an
employee benefit plan of the Holding Company or any of its Subsidiaries), not
approved in advance by the Holding Company's Board of Directors.
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11. Tax Withholding. Whenever the Holding Company proposes or is required
to issue or transfer shares of Common Stock under the Plan, the Holding Company
shall have the right to require the Optionee or his or her legal
representative to remit to the Holding Company an amount sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares, and whenever under
the Plan payments are to be made in cash, such payments shall be net of an
amount sufficient to satisfy any federal, state and/or local withholding tax
requirements. If permitted by the Committee and pursuant to procedures
established by the Committee, an Optionee who is not an Outside Director may
make a written election to have shares of Common Stock having an aggregate fair
market value, as determined by the Committee, consistent with the requirements
of Treas. Reg. Section 20.2031-2, sufficient to satisfy the applicable
withholding taxes, withheld from the shares otherwise to be received upon the
exercise of a non-qualified option. Elections by Optionees to have shares
withheld for this purpose will be subject to the following restrictions: (1)
they must be made prior to the date as of which the amount of tax withheld is
determined (the "Tax Date"), (2) they will be irrevocable, (3) they will be
subject to the disapproval of the Committee, and (4) if an Optionee is an
officer or director of the Holding Company within the meaning of Section 16 of
the 1934 Act and the Common Stock is registered under Section 12 of the 1934
Act, such elections (a) may not be made within six months of the grant of the
option, (b) must be made either more than six months prior to the Tax Date or
in the ten day "window period" beginning on the third day following the release
of the Holding Company's quarterly or annual financial statements, and (c) may
not be made until the Holding Company shall have been subject to the reporting
requirements of the 1934 Act for at least one year and shall have filed all
reports and statements required to be filed under the 1934 Act during such
year.
12. Amendment. The Board of Directors of the Holding Company may amend the
Plan from time to time and, with the consent of the Optionee, the terms and
provisions of his option or cash award, except that without the approval of the
holders of at least a majority of the shares of the Holding Company voting in
person or by proxy at a duly constituted meeting or adjournment thereof:
(a) the number of shares of stock which may be reserved for issuance
under the Plan may not be increased except as provided in Section 7 hereof;
(b) the period during which an option may be exercised may not be
extended beyond ten (10) years and one day from the date on which such
option was granted;
(c) the class of persons to whom options or cash awards may be
granted under the Plan shall not be modified materially;
(d) amendments will not be made which would cause the Plan or
transactions by officers and directors thereunder to cease to comply with
Rule 16b-3 promulgated under the 1934 Act, or any successor rule, unless
the Holding Company at the time has ceased to have its Common Stock
registered under Section 12 of the 1934 Act; and
(e) the number of shares subject to options to be granted to Outside
Directors or the date of grant or the exercise price and other terms
thereof shall not be changed except as provided in Section 7 hereof unless
the Holding Company at the time has ceased to have its Common Stock
registered under Section 12 of the 1934 Act; provided further that in any
event any such provisions in the Plan governing outside director options
may not be amended more than once every six (6) months other than to
comport with changes in the Code or the rules thereunder.
No amendment of the Plan, however, may, without the consent of the
Optionees, make any changes in any outstanding options or cash awards
theretofore granted under the Plan which would adversely affect the rights of
such Optionees.
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13. Termination. The Board of Directors of the Holding Company may
terminate the Plan at any time and no option or cash award shall be granted
thereafter. Such termination, however, shall not affect the validity of any
option or cash award theretofore granted under the Plan. In any event, no
incentive stock option may be granted under the Plan after the date which is
ten (10) years from the effective date of the Plan.
14. Successors. This Plan shall be binding upon the successors and assigns
of the Holding Company.
15. Governing Law. The terms of any options granted hereunder and the
rights and obligations hereunder of the Holding Company, the Optionees and
their successors in interest shall, except to the extent governed by federal
law, be governed by Indiana law.
16. Government and Other Regulations. The obligations of the Holding
Company to issue or transfer and deliver shares under options granted under the
Plan or make cash awards shall be subject to compliance with all applicable
laws, governmental rules and regulations, and administrative action.
17. Effective Date. The Plan shall become effective if and when First
Federal becomes a federal stock savings bank; provided, however, that any grant
of options pursuant to the Plan shall be subject to the approval of the Plan by
the holders of at least a majority of the shares of the Holding Company voting
in person or by proxy at a duly constituted meeting, or adjournment thereof,
held within 12 months after such effective date of the Plan, and any options
granted pursuant to the Plan may not be exercised until the Board of Directors
of the Holding Company has been advised by counsel that such approval has been
obtained and all other applicable legal requirements have been met.
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Exhibit 10.27
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CENTRAL INDIANA BANCORP
1993 STOCK OPTION PLAN
1. Purpose. The purpose of the Central Indiana Bancorp 1993 Stock
Option Plan (the "Plan") is to provide to directors, advisory directors,
officers and other key employees of Central Indiana Bancorp (the "Holding
Company") and its majority-owned and wholly-owned subsidiaries (individually a
"Subsidiary" and collectively the "Subsidiaries"), including, but not limited
to, First Federal Savings Bank of Kokomo ("First Federal"), who are materially
responsible for the management or operation of the business of the Holding
Company or a Subsidiary and have provided valuable service to the Holding
Company or a Subsidiary, a favorable opportunity to acquire Common Stock,
without par value ("Common Stock"), of the Holding Company, thereby providing
them with an increased incentive to work for the success of the Holding Company
and its Subsidiaries and better enabling each such entity to attract and retain
capable directors, advisory directors, and executive personnel.
2. Administration of the Plan. The Plan shall be administered,
construed and interpreted by a committee (the "Committee") consisting of at
least two members of the Board of Directors of the Holding Company, each of
whom is a "disinterested person" within the meaning of the definition of that
term contained in Reg. Section 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "1934 Act"). The members of the Committee shall be
designated from time to time by the Board of Directors of the Holding Company.
The decision of a majority of the members of the Committee shall constitute the
decision of the Committee, and the Committee may act either at a meeting at
which a majority of the members of the Committee is present or by a written
consent signed by all members of the Committee. The Commmittee shall have the
sole, final and conclusive authority to determine, consistent with and subject
to the provisions of the Plan:
(a) the individuals (the "Optionees") to whom options or successive
options or cash awards shall be granted under the Plan;
(b) the time when options or cash awards shall be granted
hereunder;
(c) the number of shares of Common Stock to be covered under each
option and the amount of any cash awards;
(d) the option price to be paid upon the exercise of each option;
(e) the period within which each such option may be exercised;
(f) the extent to which an option is an incentive stock option or a
non-qualified stock option; and
(g) the terms and conditions of the respective agreements by which
options granted or cash awards shall be evidenced.
The Committee shall also have authority to prescribe, amend, waive, and rescind
rules and regulations relating to the Plan, to accelerate the vesting of any
stock options or cash awards made hereunder, and to make all other
determinations necessary or advisable in the administration of the Plan.
3. Eligibility. The Committee may, consistent with the purpose of the
Plan, grant options and cash awards to officers and other key employees of the
Holding Company or of a Subsidiary who in the opinion of the Committee are from
time to time materially responsible for the management or operation of the
business
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of the Holding Company or of a Subsidiary and have provided valuable services
to the Holding Company or a Subsidiary; provided, however, that in no event may
any employee who owns (after application of the ownership rules in Section
425(d) of the Internal Revenue Code of 1986, as amended (the "Code")) shares of
stock possessing more than 10 percent of the total combined voting power of all
classes of stock of the Holding Company or any of its Subsidiaries be granted
an incentive stock option hereunder unless at the time such option is granted
the option price is at least 110% of the fair market value of the stock subject
to the option and such option by its terms is not exercisable after the
expiration of five (5) years from the date such option is granted. Advisory
directors of First Federal who are serving as advisors to the Peru division of
First Federal and who are not employees of the Holding Company or its
Subsidiaries ("Outside Advisory Directors"), on the date (the "Merger
Conversion Date") First Federal Savings and Loan Association of Peru merges
into First Federal and simultaneously converts (the "Merger Conversion") from
mutual to stock from shall each be granted on such date a non-qualified option
to purchase the number of whole shares of Common Stock of the Holding Company
determined by multiplying the total number of shares issued by the Holding
Company on the Merger Conversion Date by 1.275%. Such options shall have an
exercise price per share equal to the purchase price per share paid for shares
issued in such Merger Conversion. Outside Advisory Directors are not entitled
to receive any other awards under this Plan. Subject to the foregoing and the
provisions of Section 7 hereof, an individual who has been granted an option
under the Plan (an "Optionee"), if he is otherwise eligible, may be granted an
additional option or options if the Committee shall so determine.
4. Stock Subject to the Plan. There shall be reserved for issuance
upon the exercise of options granted under the Plan, shares of Common Stock of
the Holding Company equal to 10% of the total number of shares of Common Stock
issued by the Holding Company in the Merger Conversion, which may be authorized
but unissued shares or treasury shares of the Holding Company. Subject to
Section 7 hereof, the shares for which options may be granted under the Plan
shall not exceed that number. If any option shall expire or terminate or be
surrendered for any reason without having been exercised in full, the
unpurchased shares subject thereto shall (unless the Plan shall have
terminated) become available for other options under the Plan.
5. Terms of Options. Each option granted under the Plan shall be
subject to the following terms and conditions and to such other terms and
conditions not inconsistent therewith as the Committee may deem appropriate in
each case:
(a) Option Price. The price to be paid for shares of stock upon the
exercise of each option shall be determined by the Committee at the
time such option is granted, but such price int he case of an incentive
stock option shall not be less than the fair market value, as
determined by the Committee consistent with Treas. Reg. Section
20.2031-2 and any requirements of Section 422A of the Code, of such
stock on the date on which such option is granted; and provided,
further, that the Committee may in no event award non-qualified stock
options at a price less than 85% of the fair market value of the Common
Stock on the date of grant, as determined by the Committee consistent
with Treas. Reg. Section 20.2031-2.
(b) Period for Exercise of Options. An option shall not be
exercisable after the expriation of such period as shall be fixed by
the Committee at the time of the grant thereof, but such period in no
event shall exceed ten (10) years and one day from the date on which
such option is granted; provided, that incentive stock options granted
hereunder shall have terms not in excess of ten (10) years and options
issued to Outside Advisory Directors shall be for a period of ten (10)
years from the date of grant thereof. Options shall be subject to
earlier termination as hereinafter provided.
(c) Exercise of Options. The option price of each share of stock
purchased upon exercise of an option shall be paid in full at the time
of such exercise. Payment may be in (i) cash, (ii) if the Optionee may
do so in conformity with Regulation T (12 C.F.R. Section 220.3(e)(4))
without violating Section 16(b) or
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Section 16(c) of the 1934 Act, pursuant to a broker's cashless exercise
procedure, by delivering a properly executed exercise notice together
with irrevocable instructions to a broker or promptly deliver to the
Holding Company the total option price in cash and, if desired, the
amount of any taxes to be withheld from the Optionee's compensation as
a result of any withholding tax obligation of the Holding Company or
any of its Subsidiaries, as specified in such notice, or (iii)
beginning on a date which is three years following the Merger
Conversion and with the approval of the Committee, by tendering whole
shares of the Holding Company's Common Stock owned by the Optionee and
cash having a fair market value equal to the cash exercise price of the
shares with respect to which the option is being exercised. For this
purpose, any shares so tendered by an Optionee shall be deemed to have
a fair market value equal to the mean between the highest and lowest
quoted selling prices for the shares on the date of exercise of the
option (or if there were no sales on such date the weighted average of
the means between the highest and lowest quoted selling prices on the
nearest date before and the nearest date after the date of exercise of
the options as prescribed by Treas. Reg. Section 20.2031-2)), as
reported in The Wall Street Journal or a similar publication selected
by the Committee. The Committee shall have the authority to grant
options exercisable in full at any time during their term, or
exercisable in such installments at such times during their term as the
Committee may determine; provided, however, that options shall not be
exercisable prior to a date which is six months after the date of
shareholder approval of the Plan, if any, or during the first six (6)
months of their term, and provided further that options granted to
Outside Advisory Directors shall be fully exercisable following a
six-month period beginning on the date of grant of the options or, if
later, the date on which the Plan is approved by the Holding Company's
shareholders, if such approval is obtained. Installments not purchased
in earlier periods shall be cumulated and be available for purchase in
later periods. Subject to the other provisions of this Plan, an option
may be exercised at any time for from time to time during the term of
the option as to any or all whole shares which have become subject to
purchase pursuant to the terms of the options or the Plan, but not at
any time as to fewer than one hundred (100) shares unless the remaining
shares which have become subject to purchase are fewer than one hundred
(100) shares. An option may be exercised only by written notice to the
Holding Company, mailed to the attention of its Secretary, signed by
the Optionee (or such other person or persons as shall demonstrate to
the Holding Company his or their right to exercise the option),
specifying the number of shares in respect of which it is being
exercised, and accompanied by payment in full in either cash or by
check in the amount of the aggregate purchase price therefor, by
delivery of the irrevocable broker instructions referred to above, or,
if the Committee has approved the use of the stock swap feature
provided for above, followed as soon as practicable by the delivery of
the option price for such shares.
(d) Certificates. The certificate or certificates for the shares
issuable upon an exercise of an option shall be issued as promptly as
practicable after such exercise. An Optionee shall not have any rights
of a shareholder in respect to the shares of stock subject to an option
until the date of issuance of a stock certificate to him for such
shares. In no case may a fraction of a share be purchased or issued
under the Plan, but if, upon the exercise of an option, a fractional
shares would otherwise be issuable, the Holding Company shall pay cash
in lieu thereof.
(e) Termination of Option. If an Optionee (other than an Outside
Advisory Director) cease to be an employee of the Holding Company and
the Subsidiaries for any reason other than retirement, permanent and
total disability (within the meaing of Section 22(e)(3) of the Code),
or death, any option granted to him shall forthwith terminate. Leave of
absence approved by the Committee shall not constitute cessation of
employment. If an Optionee (other than an Outside Advisory Director)
ceases to be an employee of the Holding Company and the Subsidiaries by
reason of retirement, any option granted to him may be exercised by him
in whole or in part at any time after his retirement until the
expiration of the option term fixed by the Committee in accordance with
subsection (b) above,
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whether or not the option was otherwise exercisable at the date of his
retirement. (The term "retirement" as used herein means such
termination of employment as shall entitle such individual to early or
normal retirement benefits under any then existing pension plan of the
Holding Company or a Subsidiary.) If an Optionee (other than an Outside
Advisory Director) ceases to be an employee of the Holding Company and
the Subsidiaries by reason of permanent and total disability (within
the meaning of Section 22(e)(3) of the Code), any option granted to him
may be exercised by him in whole or in part within one (1) year after
the date of his termination of employment by reason of such disability
whether or not the option was otherwise exercisable at the date of such
termination. Options granted to Outside Advisory Directors shall cease
to be exercisable six (6) months after the date such Outside Advisory
Director is no longer a director or advisory director of the Holding
Company or of First Federal for any reason. In the event of the death
of an Optionee while in the employ or service as an advisory director
or director of the Holding Company or a Subsidiary, or, if the Optionee
is not an Outside Advisory Director, after the date of his retirement
or within one (1) year after the termination of his employment by
reason of permanent and total disability (within the meaning of Section
22(e)(3) of the Code), or, if the Optionee is an Outside Advisory
Director, within six (6) months after he is no longer a director or
advisory director of the Holding Company or of First Federal, any
option granted to him may be exercised in whole or in part at any time
within one (1) year after the date of such death by the executor or
administrator of his estate or by the person or persons entitled to the
option by will or by applicable laws of descent and distribution until
the expiration of the option term as fixed by the Committee, whether or
not the option was otherwise exercisable at the date of his death.
Notwithstanding the foregoing provisions of this subsection (e), no
option shall in any event be exercisable after the expiration of the
period fixed by the Committee in accordance with subsection (b) above.
(f) Nontransferability of Option. No option may be transfered by
the Optionee otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974 (as amended), or the rules and regulations
thereunder, and during the lifetime of the Optionee options shall be
exercisable only by the Optionee or his guardian or legal
representative.
(g) No Right to Continued Service. Nothing in this Plan or in any
agreement entered into pursuant hereto shall confer on any person any
right to continue in the employ or service of the Holding Company or
its Subsidiaries or affect any rights of the Holding Company, a
Subsidiary, or the shareholders of the Holding Company may have to
terminate his service at any time.
(h) Maximum Incentive Stock Options. The aggregate fair market
value of stock with respect to which incentive stock options (within
the meaning of Section 422A of the Code) are exercisable for the first
time by an Optionee during any calendar year under the Plan or any
other plan of the Holding Company or its Subsidiaries shall not exceed
$100,000. For this purpose, the fair market value of such shares shall
be determined as of the date the option is granted and shall be
computed in such manner as shall be determined by the Committee,
consistent with the requirements of Section 422A of the Code.
(i) Agreement. Each option shall be evidenced by an agreement
between the Optionee and the Holding Company which shall provide, among
other things, that, with respect to incentive stock options, the
Optionee will advise the Holding Company immediately upon any sale or
transfer of the shares of Common Stock received upon exercise of the
option to the extent such sale or transfer takes place prior to the
later of (a) two (2) years from the date of grant or (b) one (1) year
from the date of exercise.
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(j) Investment Representations. Unless the shares subject to an option
are registered under applicable federal and state securities laws, each
Optionee by accepting an option shall be deemed to agree for himself and
his legal representatives that any option granted to him and any and all
shares of Common Stock purchased upon the exercise of the option shall be
acquired for investment and not with a view to, or for the sale in
connection with, any distribution thereof, and each notice of the exercise
of any portion of an option shall be accompanied by a representation in
writing, signed by the Optionee or his legal representatives, as the case
may be, that the shares of Common stock are being acquired in good faith
for investment and not with a view to, or for sale in connection with, any
distribution thereof (except in case of the Optionee's legal
representatives for distribution, but not for sale, to his legal heirs,
legatees and other testamentary beneficiaries). Any shares issued pursuant
to an exercise of an option may bear a legend evidencing such
representations and restrictions.
6. Incentive Stock Options and Non-Qualified Stock Options. Options
granted under the Plan may be incentive stock options under Section 422A of the
Code or non-qualified stock options, provided, however, that Outside Advisory
Directors shall be granted only non-qualified stock options. All options
granted hereunder will be clearly identified as either incentive stock options
or non-qualified stock options. In no event will the exercise of an incentive
stock option affect the right to exercise any non-qualified stock option, nor
shall the exercise of any non-qualified stock option affect the right to
exercise any incentive stock option. Nothing in this Plan shall be construed to
prohibit the grant of incentive stock options and non-qualified stock options
to the same person, provided, further, that incentive stock options and
non-qualified stock optons shall not be granted in a manner whereby the
exercise of one non-qualified stock option or incentive stock option affects
the exercisability of the other.
7. Adjustment of Shares. In the event of any change after the effective
date of the Plan in the outstanding stock of the Holding Company by reason of
any reorganization, recapitalization, stock split, stock dividend, combination
of shares, exchange of shares, merger or consolidation, liquidation, or any
other change after the effective date of the Plan in the nature of the shares
of stock of the Holding Company, the Committee shall determine what changes, if
any, are appropriate in the number and kind of shares reserved under the Plan,
and the Committee shall determine what changes, if any, are appropriate in the
option price under and the number and kind of shares covered by outstanding
options granted under the Plan. Any determination of the Committee hereunder
shall be conclusive.
8. Cash Awards. Except as otherwise provided in Section 4 hereof, the
Committee may, at any time and in its discretion, grant to any Optionee who is
granted a non-qualified stock option the right to receive, at such times and in
such amounts as determined by the Committee in its discretion, a cash amount
("cash award") which is intended to reimburse the Optionee for all or a portion
of the federal, state and local income taxes imposed upon such Optionee as a
consequence of the exercise of a non-qualified stock option and the receipt of
a cash award.
9. Replacement and Extension of the Terms of Options and Cash Awards. The
Committee from time to time may permit an Optionee (other than an Outside
Advisory Director) under the Plan or any other stock option plan heretofore or
hereafter adopted by the Holding Company or any Susidiary to surrender for
cancellation any unexercised outstanding stock option and receive from his
employing corporation in exchange therefor an option for such number of shares
of Common Stock as may be designated by the Committee. Such Optionees also may
be granted related cash awards as provided in Section 8 hereof.
10. Change in Control. In the event of a Change in Control, all options
previously granted and still outstanding under the Plan regardless of their
terms, shall become exercisable. For this purpose, "Change in Control" shall
mean a change in control of the Holding Company or First Federal, within the
meaning of 12 C.F.R. Section 574.4(a) (other than a change of control resulting
from a trustee or other fiduciary holding shares
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of Common Stock under an employee benefit plan of the Holding Company or any
its Subsidiaries), not approved in advance by the Holding Company's Board of
Directors.
11. Tax Withholding. Whenever the Holding Company proposes or is required
to issue or transfer shares of Common Stock under the Plan, the Holding Company
shall have the right to require the Optionee or his or her legal representative
to remit to the Holding Company an amount sufficient to satisfy any federal,
state and/or local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares, and whenever under the Plan
payments are to be made in cash, such payments shall be net of an amount
sufficient to satisfy and federal, state and/or local withholding tax
requirements. If permitted by the Committee and pursuant to procedures
established by the Committee, an Optionee who is not an Outside Advisory
Director may make a written election to have shares of Common Stock having an
aggregate fair market value, as determined by the Committee, consistent with
requirements of Treas. Reg. Section 20.2031-2, sufficient to satisfy the
applicable withholding taxes, withheld from the shares otherwise to be received
upon the exercise of a non-qualified option. Elections by Optionees to have
shares withheld for this purpose will be subject to the following restrictions:
(1) they must be made prior to the date as of which the amount of tax withheld
is determined (the "Tax Date"), (2) they will be irrevocable, (3) they will be
subject to the disapproval of the Committee, and (4) if an Optionee is an
officer or director of the Holding Company within the meaning of Section 16 of
the 1934 Act and the Common Stock is registered under Section 12 of the 1934
Act, such elections (a) may not be made within six months of the grant of the
option, (b) must be made either more than six months prior to the Tax Date or
in the ten day "window period" beginning on the third day following the release
of the Holding Company's quarterly or annual financial statements, and (c) may
not be made until the Holding Company shall have been subject to the reporting
requirements of the 1934 Act for at least one year and shall have filed all
reports and statements required to be filed under the 1934 Act during such
year.
12. Amendment. The Board of Directors of the Holding Company may amend the
Plan from time to time and, with the consent of the Optionee, the terms and
provisions of his option or cash award, except that without the approval of the
holders of at least a majority of the shares of the Holding Company voting in
person or by proxy at a duly constituted meeting or adjournment thereof:
(a) the number of shares of stock which may reserved for issuance under
the Plan may not be increased except as provided in Section 7 thereof;
(b) the period during which an option may be exercise may not be
extended beyond ten (10) years and one day from the date on which such
option was granted;
(c) the class of persons to whom options or cash awards may be granted
under the Plan shall not be modified materially;
(d) amendments will not be made which would cause the Plan or
transactions by officers and directors thereunder to cease to comply with
Rule 16b-3 promulgated under the 1934 Act, or any successor rule, unless
the Holding Company at the time has ceased to have its Common Stock
registered under Section 12 of the 1934 Act; and
(e) the number of shares subject to options to be granted to Outside
Advisory Directors or the date of grant or the exercise price and other
terms thereof shall not be changed except as provided in Section 7 hereof
unless the Holding Company at the time has ceased to have its Common
Stock registered under Section 12 of the 1934 Act; provided further than
in any event any such provisions in the Plan governing Outside Advisory
Director options may not be amended more than once every six (6) months
other than to comport with changes in the Code or the rules thereunder.
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No amendment of the Plan, however, may, without the consent of the
Optionees, make any changes in any outstanding options or cash awards
theretofore granted under the Plan which would adversly affect the rights of
such Optionees.
13. Termination. The Board of Directors of the Holding Company may
terminate the Plan at any time and option or cash award shall be granted
thereafter. Such termination, however, shall not affect the validity of any
option or cash award theretofore granted under the Plan. In any event, no
incentive stock option may be granted under the Plan after the date which is
ten (10) years from the effective date of the Plan or, if earlier, the date the
Plan is approved by the Holding Company's shareholders.
14. Successors. This Plan shall be binding upon the successors and assigns
of the Holding Company.
15. Governing Law. The terms of any options granted hereunder and the
rights and obligations hereunder of the Holding Company, the Optionees and
their successors in interest shall, except to the extent governed by federal
law, be governed by Indiana law.
16. Government and Other Regulations. The obligations of the Holding
Company to issue to transfer and deliver shares under options granted under the
Plan or make cash awards shall be subject to compliance with all applicable
laws, governmental rules and regulations, and administrative action.
17. Effective Date. The Plan shall become effective on the effective date
of the Merger Conversion, and any options granted pursuant to the Plan may not
be exercised until the Board of Directors of the Holding Company has been
advised by counsel that such approval has been obtained and all other
applicable legal requirements have been met.
A-7
<PAGE> 1
Exhibit 10.28
29-3854-25 (8/89) CORPORATE WHOLE LIFE POLICY II WITH ADDITIONAL PROTECTION
I/R 4400.00
THIS IS A REPRESENTATIVE SAMPLE OF NORTHWESTERN MUTUAL LIFE'S NN SERIES
CORPORATE WHOLE LIFE POLICY II WITH ADDITIONAL PROTECTION. POLICY BENEFITS AND
WORDING MAY VARY TO COMPLY WITH STATE REGULATIONS.
================================================================================
The Northwestern Mutual Life Insurance
Company agrees to pay the benefits
provided in this policy, subject to its
terms and conditions. Signed at
Milwaukee, Wisconsin on the Date of
Issue.
PRESIDENT AND C.E.O. SECRETARY
SPECIMEN COPY
CORPORATE WHOLE LIFE POLICY II
WITH ADDITIONAL PROTECTION
ELIGIBLE FOR ANNUAL DIVIDENDS.
Basic Amount plus Additional Protection
payable on death of Insured. Premiums
payable for period shown on page 3.
RIGHT TO RETURN POLICY -- Please read
this policy carefully. The policy may
be returned by the Owner for any reason
within ten days after it was received.
The policy may be returned to your agent
or to the Home Office of the Company at
720 East Wisconsin Avenue, Milwaukee,
WI 53202. If returned, the policy will
be considered void from the beginning.
Any premium paid will then be returned.
NN.21
[NORTHWESTERN MUTUAL LIFE LOGO]
================================================================================
INSURED JOHN J DOE AGE AND SEX 35 MALE
POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021
PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $ 32,387
WITH ADDITIONAL PROTECTION ADDITION PROTECTION 66,514
TOTAL INSURANCE AMOUNT 98,901
NN 21
<PAGE> 2
THIS POLICY IS A LEGAL CONTRACT BETWEEN THE OWNER AND THE NORTHWESTERN MUTUAL
LIFE INSURANCE COMPANY.
READ YOUR POLICY CAREFULLY.
GUIDE TO POLICY PROVISIONS
BENEFITS AND PREMIUMS
SECTION 1. THE CONTRACT
Life Insurance Benefit payable on death of Insured. Incontestability.
Suicide. Definition of dates.
SECTION 2. OWNERSHIP
Rights of the Owner. Assignment as collateral.
SECTION 3. ADDITIONAL PROTECTION
Description of Additional Protection. Reduction of Additional
Protection.
SECTION 4. PREMIUMS AND REINSTATEMENT
Payment of premiums. Grace period of 31 days to pay premium.
Refund of unused premium at death. How to reinstate the policy.
SECTION 5. DIVIDENDS
Annual dividends. Use of dividends. Dividend at death.
SECTION 6. CASH VALUES AND PAID-UP INSURANCE
Cash surrender value. What happens if premium is not paid. Basis of
values.
SECTION 7. LOANS
Policy loans. Premium loans. Effect of policy debt. Interest on loans.
SECTION 8. CHANGE OF POLICY
SECTION 9. BENEFICIARIES
Naming and change of beneficiaries. Marital deduction provision for
spouse of Insured. Succession in interest of beneficiaries.
SECTION 10. PAYMENT OF POLICY BENEFITS
Payment of surrender or death proceeds. Payment plans for policy
proceeds. Right to increase income under payment plans. Guaranteed
payment tables.
ADDITIONAL BENEFITS (if any)
APPLICATION
NN.21
<PAGE> 3
BENEFITS AND PREMIUMS
DATE OF ISSUE - AUGUST 1, 1987
ANNUAL PAYABLE
PLAN AND ADDITIONAL BENEFITS AMOUNT PREMIUM FOR
CORPORATE WHOLE LIFE II $ 1,156.62 55 YEARS
BASIC AMOUNT $ 32,387
ADDITIONAL PROTECTION 66,514*
TOTAL INSURANCE AMOUNT 98,901
* THE AMOUNT OF ADDITIONAL PROTECTION IS GUARANTEED FOR THE FIRST
POLICY YEAR. TO CONTINUE THE ADDITIONAL PROTECTION SCHEDULED FOR THE
SECOND AND SUBSEQUENT POLICY YEARS, AN INCREASED PREMIUM MAY BE REQUIRED
UNDER SECTION 3.2.
A PREMIUM IS PAYABLE ON AUGUST 1, 1987 AND EVERY AUGUST 1 AFTER THAT.
THE FIRST PREMIUM IS $1,156.62 WHICH INCLUDES A SCHEDULED ADDITIONAL PREMIUM
OF $453.58 USED TO PURCHASE PAID UP INSURANCE OF $1,667. EACH SUBSEQUENT
ANNUAL PREMIUM ALSO INCLUDES A SCHEDULED ADDITIONAL PREMIUM OF $453.58.
THE OWNER MAY ELECT THE SPECIFIED RATE OR THE VARIABLE RATE LOAN INTEREST
OPTION. SEE SECTIONS 7.4 THROUGH 7.6 OF THE POLICY. THE SPECIFIED RATE LOAN
INTEREST OPTION WAS ELECTED ON THE APPLICATION.
THIS POLICY IS ISSUED IN A SELECT PREMIUM CLASS.
DIRECT BENEFICIARY JANE M DOE, WIFE OF THE INSURED
OWNER XYZ CORPORATION
INSURED JOHN J DOE AGE AND SEX 35 MALE
POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021
PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $32,387
WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514
TOTAL INSURANCE AMOUNT 98,901
NN 21 PAGE 3
<PAGE> 4
TABLE OF INSURANCE AMOUNTS
DURING POLICY
YEAR BEGINNING BASIC ADDITIONAL TOTAL
AUGUST 1, AMOUNT PROTECTION* INSURANCE
1987 $32,387 $66,514 $98,901
1988 32,387 66,115 98,502
1989 32,387 65,830 98,217
1990 32,387 65,692 98,079
1991 32,387 65,704 98,091
1992 32,387 65,868 98,255
1993 32,387 66,157 98,544
1994 32,387 66,571 98,958
1995 32,387 67,155 99,542
1996 32,387 67,915 100,302
1997 32,387 68,861 101,248
1998 32,387 70,002 102,389
1999 32,387 71,349 103,736
2000 32,387 72,912 105,299
2001 32,387 74,705 107,092
2002 32,387 76,741 109,128
2003 32,387 79,035 111,422
2004 32,387 81,603 113,990
2005 32,387 84,463 116,850
2006 32,387 87,631 120,018
2007 32,387 91,130 123,517
2008 32,387 94,981 127,368
2009 32,387 99,207 131,594
2010 32,387 103,836 136,223
2011 32,387 108,894 141,281
2012 32,387 114,411 146,798
2013 32,387 120,421 152,808
2014 32,387 126,957 159,344
2015 32,387 134,060 166,447
2016 32,387 141,768 174,155
2017 32,387 289,733 322,120
2018 32,387 310,739 343,126
2019 32,387 333,092 365,479
2020 32,387 356,876 389,263
2021 32,387 382,184 414,571
2022 32,387 409,112 441,499
2023 32,387 437,762 470,149
2024 32,387 468,249 500,636
2025 32,387 500,690 533,077
2026 32,387 535,212 567,599
CONTINUED ON PAGE 3B
INSURED JOHN J DOE AGE AND SEX 35 MALE
POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021
PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $32,387
WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514
TOTAL INSURANCE AMOUNT 98,901
NN 21 PAGE 3A
<PAGE> 5
TABLE OF INSURANCE AMOUNTS
DURING POLICY
YEAR BEGINNING BASIC ADDITIONAL TOTAL
AUGUST 1, AMOUNT PROTECTION* INSURANCE
2027 $32,387 $ 571,951 $ 604,338
2028 32,387 611,050 643,437
2029 32,387 652,669 685,056
2030 32,387 696,969 729,356
2031 32,387 744,130 776,517
2032 32,387 794,342 826,729
2033 32,387 847,808 880,195
2034 32,387 904,746 937,133
2035 32,387 965,390 997,777
2036 32,387 1,029,987 1,062,374
2037 32,387 1,098,804 1,131,191
2038 32,387 1,172,128 1,204,515
2039 32,387 1,250,264 1,282,651
2040 32,387 1,333,540 1,365,927
2041 32,387 1,422,307 1,454,694
2042 32,387 1,422,307 1,454,694
2043 32,387 1,422,307 1,454,694
2044 32,387 1,422,307 1,454,694
2045 32,387 1,422,307 1,454,964
2046 32,387 1,422,307 1,454,964
2047 32,387 1,422,307 1,454,694
2048 32,387 1,422,307 1,454,694
2049 32,387 1,422,307 1,454,694
2050 32,387 1,422,307 1,454,694
2051 32,387 1,422,307 1,454,694
* THE AMOUNT OF ADDITIONAL PROTECTION IS GUARANTEED FOR THE FIRST
POLICY YEAR. TO CONTINUE THE ADDITIONAL PROTECTION SCHEDULED FOR THE
SECOND AND SUBSEQUENT POLICY YEARS, AN INCREASED PREMIUM MAY BE REQUIRED
UNDER SECTION 3.2.
VALUES DO NOT INCLUDE PAID UP INSURANCE PURCHASED BY ADDITIONAL PREMIUMS.
INSURED JOHN J DOE AGE AND SEX 35 MALE
POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021
PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $32,387
WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514
TOTAL INSURANCE AMOUNT 98,901
NN 21 PAGE 3B
<PAGE> 6
TABLE OF GUARANTEED VALUES
FOR $32,387 BASIC AMOUNT
END OF
POLICY CASH PAID-UP
YEAR AUGUST 1, VALUE INSURANCE
1 1988 $ 0 $ 0
2 1989 382 1,392
3 1990 775 2,785
4 1991 1,180 4,080
5 1992 1,595 5,376
6 1993 2,021 6,574
7 1994 2,457 7,740
8 1995 2,903 8,874
9 1996 3,360 9,975
10 1997 3,827 11,011
11 1998 4,304 11,983
12 1999 4,793 12,954
13 2000 5,292 13,894
14 2001 5,802 14,768
15 2002 6,323 15,610
16 2003 6,856 16,452
17 2004 7,397 17,229
18 2005 7,948 17,974
19 2006 8,506 18,719
20 2007 9,071 19,399
AGE 60 2012 11,996 22,476
AGE 65 2017 15,044 24,937
AGE 70 2022 18,086 26,881
VALUES ARE INCREASED BY PAID UP ADDITIONS AND DIVIDEND ACCUMULATIONS
AND DECREASED BY POLICY DEBT. VALUES SHOWN AT END OF POLICY YEAR
DO NOT REFLECT ANY PREMIUM DUE ON THAT POLICY ANNIVERSARY.
INSURED JOHN J DOE AGE AND SEX 35 MALE
POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021
PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $ 32,387
WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514
TOTAL INSURANCE AMOUNT 98,901
NN 21 PAGE 4
<PAGE> 7
TABLE OF ANNUAL PREMIUMS PER $1,000 OF TERM INSURANCE
USED TO CALCULATE INCREASED PREMIUMS.
SEE SECTION 3.2.
FOR FOR
POLICY YEAR POLICY YEAR
BEGINNING BEGINNING
AUGUST 1, PREMIUM AUGUST 1, PREMIUM
1987 $ 2.65 2032 $ 96.93
1988 2.65 2033 105.40
1989 2.65 2034 114.98
1990 2.65 2035 125.78
1991 2.74 2036 137.54
1992 2.96 2037 149.99
1993 3.23 2038 162.88
1994 3.49 2039 176.08
1995 3.80 2040 189.53
1996 4.11 2041 203.28
1997 4.46
1998 4.82
1999 5.22
2000 5.63
2001 6.09
2002 6.58
2003 7.16
2004 7.81
2005 8.54
2006 9.38
2007 10.27
2008 11.24
2009 12.25
2010 13.33
2011 14.48
2012 15.77
2013 17.20
2014 18.82
2015 20.65
2016 22.69
2017 24.93
2018 27.31
2019 29.85
2020 32.55
2021 35.47
2022 38.75
2023 42.46
2024 46.73
2025 51.62
2026 57.06
2027 62.95
2028 69.17
2029 75.63
2030 82.28
2031 89.29
INSURED JOHN J DOE AGE AND SEX 35 MALE
POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021
PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $ 32,387
WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514
TOTAL INSURANCE AMOUNT 98,901
NN 21 PAGE 4A
<PAGE> 8
TABLE OF CASH VALUES
FOR $1.00 OF PAID-UP ADDITIONS
END OF END OF
POLICY CASH POLICY CASH
YEAR AUGUST 1, VALUE YEAR AUGUST 1, VALUE
0 1987 $.25173
1 1988 .26019 31 2018 $.61689
2 1989 .26892 32 2019 .63072
3 1990 .27790 33 2020 .64453
4 1991 .28712 34 2021 .65831
5 1992 .29659 35 2022 .67206
6 1993 .30630 36 2023 .68574
7 1994 .31623 37 2024 .69929
8 1995 .32641 38 2025 .71262
9 1996 .33683 39 2026 .72564
10 1997 .34748 40 2027 .73828
11 1998 .35837 41 2028 .75052
12 1999 .36951 42 2029 .76238
13 2000 .38089 43 2030 .77391
14 2001 .39252 44 2031 .78517
15 2002 .40440 45 2032 .79621
16 2003 .41653 46 2033 .80702
17 2004 .42888 47 2034 .81756
18 2005 .44143 48 2035 .82774
19 2006 .45416 49 2036 .83745
20 2007 .46704 50 2037 .84665
21 2008 .48007 51 2038 .85536
22 2009 .49324 52 2039 .86362
23 2010 .50655 53 2040 .87153
24 2011 .52002 54 2041 .87921
25 2012 .53364 55 2042 .88679
26 2013 .54739
27 2014 .56124
28 2015 .57516
29 2016 .58909
30 2017 .60301
VALUES DURING A POLICY YEAR WILL REFLECT ANY PORTION OF THE YEAR'S PREMIUM PAID
AND THE TIME ELAPSED IN THAT YEAR. THESE CASH VALUES ARE NOT GUARANTEED FOR
UNSCHEDULED ADDITIONAL PREMIUMS PAID AFTER THE FIRST 20 POLICY YEARS.
INSURED JOHN J DOE AGE AND SEX 35 MALE
POLICY DATE AUGUST 1, 1987 POLICY NUMBER 2 000 021
PLAN CORPORATE WHOLE LIFE II BASIC AMOUNT $ 32,387
WITH ADDITIONAL PROTECTION ADDITIONAL PROTECTION 66,514
TOTAL INSURANCE AMOUNT 98,901
NN 21 PAGE 4B
<PAGE> 9
SECTION 1. THE CONTRACT
1.1 LIFE INSURANCE BENEFIT
The Northwestern Mutual Life Insurance Company
will pay a benefit on the death of the Insured. Subject
to the terms and conditions of the policy:
- payment of the death proceeds will be made
after proof of the death of the Insured is re-
ceived at the Home Office; and
- payment will be made to the beneficiary or other
payee under Sections 9 and 10.
The amount of the death proceeds when all pre-
miums due have been paid will be:
- the Basic Amount shown on page 3; plus
- the amount of Additional Protection then in
force under Section 3; plus
- the amount of any paid-up additions in force
under Section 4.3; plus
- the amount of any dividend accumulations
(Section 5.2); plus
- the amount of any premium refund (Section 4.1)
and any dividend at death (Section 5.4); less
- the amount of any policy debt (Section 7.3).
These amounts will be determined as of the date of
death.
The amount of the death proceeds when the In-
sured dies during the grace period following the due
date of an unpaid premium will be:
- the amount determined above assuming the
overdue premium had been paid; less
- the amount of the unpaid premium.
The amount of the death proceeds when the In-
sured dies while the policy is in force as paid-up
insurance will be determined under Section 6.2.
1.2 ENTIRE CONTRACT; CHANGES
This policy with the attached application is the en-
tire contract. Statements in the application are repre-
sentations and not warranties. A change in the policy
is valid only if it is approved by an officer of the
Company. The Company may require that the policy
be sent to it for endorsement to show a change. No
agent has the authority to change the policy or to
waive any of its terms.
1.3 INCONTESTABILITY
The Company will not contest insurance after the
insurance has been in force during the lifetime of the
Insured for two years from the Date of Issue. In
issuing the insurance, the Company has relied on the
application. While the insurance is contestable, the
Company, on the basis of a misstatement in the appli-
cation, may rescind the policy or deny a claim.
1.4 SUICIDE
If the Insured dies by suicide within one year from
the Date of Issue, the amount payable by the Com-
pany will be limited to the premiums paid, less the
amount of any policy debt.
1.5 DATES
The contestable and suicide periods begin with the
Date of Issue. Policy months, years and anniversaries
are computed from the Policy Date. Both dates are
shown on page 3.
The Date of Issue for an increase in insurance that
occurs as a result of the Owner regaining the right to
continue the amount of Additional Protection (Section
3.2) will be the date that this increase takes effect.
1.6 MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured has been misstated,
the amount payable will be the amount which the
premiums paid would have purchased at the correct
age and sex.
1.7 PAYMENTS BY THE COMPANY
All payments by the Company under this policy are
payable at its Home Office.
SECTION 2. OWNERSHIP
2.1 THE OWNER
The Owner is named on page 3. The Owner, his
successor or his transferee may exercise policy rights
without the consent of any beneficiary. After the
death of the Insured, policy rights may be exercised
only as provided in Sections 9 and 10.
2.2 TRANSFER OF OWNERSHIP; LIMITATION
This policy is designed for ownership by a corpora-
tion. The Owner may transfer the ownership of this
policy, but only to another corporation. Written proof
of transfer satisfactory to the Company must be re-
ceived at its Home Office. The transfer will then take
effect as of the date that it was signed. The Company
may require that the policy be sent to it for endorse-
ment to show the transfer.
2.3 COLLATERAL ASSIGNMENT
The Owner may assign this policy as collateral secu-
rity. The Company is not responsible for the validity or
effect of a collateral assignment. The Company will
not be responsible to an assignee for any payment or
other action taken by the Company before receipt of
the assignment in writing at its Home Office.
The interest of any beneficiary will be subject to any
collateral assignment made either before or after the
beneficiary is named.
A collateral assignee is not an Owner. A collateral
assignment is not a transfer of ownership. Ownership
can be transferred only by complying with Section 2.2.
5
<PAGE> 10
SECTION 3. ADDITIONAL PROTECTION
3.1 ADDITIONAL PROTECTION
DESCRIPTION. Additional Protection consists of one
year term insurance and paid-up dividend additions. At
first, it is all one year term insurance. Each dividend is
used to purchase paid-up additions. These additions
reduce the amount of one year term insurance until
Additional Protection is all paid-up additions. The
amount of one year term insurance may increase if the
amount of Additional Protection increases.
One year term insurance will generally be in force
for the entire policy year; however, as provided in
Section 3.2 and in Section 3.3, the one year term
insurance may be terminated, or the amount of one
year term insurance may be reduced during a policy
year.
AMOUNT. The amount of Additional Protection for
each policy year will be the amount shown on page
3A so long as premiums are paid when due unless:
- the amount of Additional Protection is reduced
by the Company under Section 3.2;
- the amount of Additional Protection is reduced
by the Owner under Section 3.3; or
- the amount of paid-up dividend additions in
force exceeds the amount of Additional Protec-
tion shown on page 3A. In that case, the amount
of Additional Protection will be the amount of
paid-up dividend additions in force.
3.2 REDUCTION BY COMPANY; OWNER'S RIGHT
TO CONTINUE EXISTING PROTECTION
If, at the end of any policy month after the first
policy anniversary, any part of Additional Protection is
one year term insurance, the Company may reduce
the one year term insurance portion of Additional
Protection for the remainder of the policy year. The
reduction will cause a like reduction in the amount of
Additional Protection, so that the amount of Addi-
tional Protection will be less than that shown on page
3A. The Company may do this if it determines that the
premium, not including any amount used to purchase
paid-up insurance or to pay for any additional benefits,
is not large enough to pay for the Basic Amount and
the amount of term insurance that would be part of
Additional Protection for the remainder of the policy
year. The Company will send written notice of the
reduction.
The Owner may prevent a reduction that would
otherwise occur on or before the policy anniversary
nearest to the Insured's 89th birthday. This may be
done by written request and the payment of an in-
creased premium. The amount of the premium in-
crease will not be more than:
a) the amount of the reduction in one year term
insurance; multiplied by
b) the premium rate for one year term insurance for
the policy year.
The premium rates for term insurance are shown on
page 4A. The increased premium will be payable for
the remainder of the premium paying period. The
Owner's request and the premium must be received
at the Home Office within 31 days of the date the
reduction would take effect.
The right of the Owner to continue the amount of
Additional Protection will terminate as of the first poli-
cy month for which the Owner fails to pay an in-
creased premium when due, or, if earlier, when the
Owner reduces the Additional Protection under Sec-
tion 3.3. If the right to continue the amount of Addi-
tional Protection has terminated for failure to pay an
increased premium when due, the right will be re-
stored the first day of any later policy month on which
the Company determines that the amount of Addi-
tional Protection in force need not be reduced below
the amount shown on page 3A. On or before the
policy anniversary nearest the Insured's 75th birthday,
the Owner may also regain the right to continue the
amount of Additional Protection if:
- the increased premium is paid;
- evidence of insurability is given that is satisfactory
to the Company; and
- Company requirements place the Insured in an
underwriting ciass that is the same as, or is better
than, the one for this policy.
The Company may charge a fee for underwriting ex-
penses.
3.3 REDUCTION OF ADDITIONAL PROTECTION BY
OWNER
REDUCTION IF DIVIDEND OPTION CHANGED. If the Own-
er directs that dividends be used other than to pur-
chase paid-up additions, any one year term insurance
in force will terminate. The right to continue the
amount of Additional Protection under Section 3.2 will
also terminate. The amount of Additional Protection
will then be the amount of paid-up additions in force.
REDUCTION IF ADDITIONS SURRENDERED. The amount of
Additional Protection in force for the remainder of a
policy year will be reduced by the amount of dividend
additions being surrendered during that year. Also, the
amounts of Additional Protection scheduled for future
policy years, as shown on page 3A, will be reduced by
the amount of dividend additions surrendered, except
to the extent that the proceeds of the surrender are
used to pay the premium then due on this policy.
6
<PAGE> 11
SECTION 4. PREMIUMS AND REINSTATEMENT
4.1 PREMIUMS
PAYMENT. All premiums after the first are payable at
the Home Office or to an authorized agent. A receipt
signed by an officer of the Company will be furnished
on request. A premium must be paid on or before its
due date. The date when each premium is due and
the number of years for which premiums are payable
are described on page 3.
No premiums may be paid while the policy is in
force as paid-up insurance under Section 6.2, except
as provided in Reinstatement (Section 4.4).
FREQUENCY. Premiums may be paid every 3, 6 or 12
months at the published rates of the Company. A
change in premium frequency will take effect when
the Company accepts a premium on a new frequency.
Premiums may be paid on any other frequency ap-
proved by the Company.
GRACE PERIOD. A grace period of 31 days will be
allowed to pay a premium that is not paid on its due
date. The policy will be in full force during this period.
If the Insured dies during the grace period, any over-
due premium will be paid from the proceeds of the
policy.
If the premium is not paid within the grace period,
the policy will terminate as of the due date unless it
continues as paid-up insurance under Section 6.2.
PREMIUM REFUND AT DEATH. The Company will refund
a portion of a premium which was due and was paid
for the policy year in which the Insured dies. The
refund will be the amount by which the premium paid
is more than that premium on an annual basis multi-
plied by the fraction of the policy year that has
elapsed at the time of death. Any premium amount
used to purchase a paid-up addition will not be in-
cluded in determining the refund. The refund will be
part of the policy proceeds.
4.2 AMOUNT OF PREMIUM; ADJUSTMENTS
The amount of the premium due is shown on page
3. The premium due on the policy may be increased
as provided in Section 3.2. Any scheduled additional
premium may be decreased as provided in Section
4.3.
4.3 ADDITIONAL PREMIUMS
PURCHASE OF PAID-UP ADDITIONS. Additional premiums
are used to purchase paid-up additional insurance. The
Company will deduct a charge of 7 1/2% for expenses
from each additional premium. Each addition will im-
mediately increase the death proceeds payable under
Section 1.1. Paid-up additions increase the policy's
cash value and will share in divisible surplus. They may
be surrendered unless used for a loan or for paid-up
insurance under Section 6.2.
ADDITIONAL PREMIUMS SCHEDULED AT ISSUE. Scheduled
additional premiums are level and are payable for the
number of years shown on page 3. Each scheduled
additional premium paid will be used, as of the due
date of the premium, to purchase a paid-up addition.
OWNER'S RIGHT TO DECREASE SCHEDULED ADDITIONAL
PREMIUMS. The Owner may decrease the scheduled
additional premium amount. This may be done at any
time by written request sent to the Home Office. A
premium decrease will take effect on the first premium
due date that follows the receipt at the Home Office
of the Owner's written request For change. When the
Owner decreases premiums, the Company will send
an amendment to the schedule of benefits and pre-
miums.
UNSCHEDULED ADDITIONAL PREMIUM OPTION. Un-
scheduled additional premiums may be paid to the
Company at any time before the policy anniversary
that is nearest to the Insured's 75th birthday. An
unscheduled additional premium may be paid only if,
at the time the premium is paid:
- the insurance in force after applying the un-
scheduled additional premium will be within the
Company's issue limits;
- evidence of insurability is given that is satisfactory
to the Company;
- Company requirements place the Insured in an
underwriting classification that is the same as, or
is better than, the one for this policy; and
- the total amount of the unscheduled additional
premiums and other premiums paid to the Com-
pany under any policy for purchases of paid-up
life insurance on the life of the Insured is within
the Company's limits for such premiums; how-
ever, the Company may not set a limit below
$1,000.
Each unscheduled premium may not be less than
$1,000. Each unscheduled premium will be used, as of
the date the premium is paid, to purchase a paid-up
addition.
4.4 REINSTATEMENT
The policy may be reinstated within five years after
the due date of the overdue premium. All unpaid
premiums (and interest as required below) must be
received by the Company while the Insured is alive.
The policy may not be reinstated if the policy was
surrendered for its cash surrender value. Any policy
debt on the due date of the overdue premium, with
interest at the policy loan interest rate from that date,
must be repaid or reinstated.
In addition, for the policy to be reinstated more
than 31 days after the end of the grace period:
- evidence of insurability must be given that is
satisfactory to the Company; and
- all unpaid premiums (except for scheduled addi-
tional premiums) must be paid with interest from
the due date of each premium. Interest is at an
annual effective rate of 6%.
7
<PAGE> 12
SECTION 5. DIVIDENDS
5.1 ANNUAL DIVIDENDS
This policy will share in the divisible surplus of the
Company. This surplus is determined each year. This
policy's share will be credited as a dividend on the
poiicy anniversary. The dividend will reflect the mor-
tality, expense and investment experience of the Com-
pany and will be affected by any policy debt during
the policy year.
5.2 USE OF DIVIDENDS
Annual dividends may be paid in cash or used for
one of the following:
- PAID-UP ADDITIONS. Dividends will purchase paid-
up additional insurance. Paid-up additions share
in the divisible surplus. Paid-up additions pur-
chased by dividends will be part of Additional
Protection.
- DIVIDEND ACCUMULATIONS. Dividends will accu-
mulate at interest. Interest is credited at an an-
nual effective rate of 3 1/2%. The Company may
set a higher rate.
- PREMIUM PAYMENT. Dividends will be used to
reduce premiums. If the balance of a premium is
not paid, or if this policy is in force as paid-up
insurance, the dividend will purchase paid-up
additions.
Other uses of dividends may be made available by
the Company.
If no direction is given for the use of dividends,
they will purchase paid-up additions.
5.3 ADDITIONS AND ACCUMULATIONS
Paid-up additions and dividend accumulations
increase the policy's cash value. They are payable as
part of the policy proceeds. Additions may be
surrendered and accumulations may be withdrawn
unless they are used for a loan or for paid-up
insurance.
5.4 DIVIDEND AT DEATH
A dividend for the period from the beginning of the
policy year to the date of the Insured's death will be
payable as part of the policy proceeds.
SECTION 6. CASH VALUES AND PAID-UP INSURANCE
6.1 CASH VALUE
The cash value for this policy, when all premiums
due have been paid, will be the sum of:
- the cash value from the Table of Guaranteed
Values;
- the cash value of any paid-up additions; and
- the amount of any dividend accumulations.
The cash value within three months after the due
date of any unpaid premium will be the cash value on
that due date reduced by any later surrender of
paid-up additions and by any later withdrawal of
dividend accumulations. After that, the cash value will
be the cash value of the insurance then in force,
including the cash value of any paid-up additions and
any dividend accumulations.
The cash value of any paid-up insurance or paid-up
additions will be the net single premium for that
insurance at the attained age of the Insured.
6.2 PAID-UP INSURANCE
If any premium is unpaid at the end of the grace
period, this policy will be in force as paid-up
insurance. The amount of insurance will be
determined by using the cash value as a net single
premium at the attained age of the Insured. Any policy
debt will continue. Paid-up insurance will share in
divisible surplus.
The amount of the death proceeds when this policy
is in force as paid-up insurance will be:
- the amount of paid-up insurance determined
above; plus
- the amount of any in force paid-up additions
purchased by dividends after the policy has
become paid-up insurance (Section 5.2); plus
- the amount of any existing dividend
accumulations (Section 5.2); plus
- the amount of any dividend at death (Section
5.4); less
- the amount of any policy debt (Section 7.3).
These amounts will be determined as of the date of
death.
If paid-up insurance is surrendered within 31 days
after a policy anniversary, the cash value will not be
less than the cash value on that anniversary reduced
by any later surrender of paid-up additions and by any
later withdrawal of dividend accumulations.
6.3 CASH SURRENDER
The Owner may surrender this policy for its cash
surrender value. The cash surrender value is the cash
value less any policy debt. A written surrender of all
claims, satisfactory to the Company, will be required.
The date of surrender will be the date of receipt at
the Home Office of the written surrender. The policy
will terminate and the cash surrender value will be
determined as of the date of surrender. The Company
may require that the policy be sent to it.
8
<PAGE> 13
6.4 TABLE OF GUARANTEED VALUES
Cash values and paid-up insurance for the Basic
Amount are shown on page 4 for the end of the
policy years indicated. These values assume that all
premiums due have been paid for the number of years
stated. They do not reflect paid-up additions, dividend
accumulations or policy debt. Values during a policy
year will reflect any portion of the year's premium paid
and the time elapsed in that year.
Values for policy years not shown are calculated on
the same basis as those on page 4. A list of these
values will be furnished on request. A detailed state-
ment of the method of calculation of all values has
been filed with the insurance supervisory official of the
state in which this policy is delivered. The Company
will furnish this statement at the request of the Own-
er. All values are at least as great as those required by
that state.
6.5 BASIS OF VALUES
The cash value for each policy year not shown on
page 4 equals the reserve for the Basic Amount for
that year calculated on the Commissioners Reserve
Valuation Method. Cash values and net single pre-
miums are based on the Commissioners 1980 Stan-
dard Ordinary Mortality Table for the sex of the In-
sured. Interest is based on an annual effective rate of
4%. Calculations assume the continuous payment of
premiums and the immediate payment of claims.
For increases in coverage or premium that occur
under Sections 3 or 4 after the twentieth policy year,
the Company may base cash values and premiums on
the interest rates and mortality tables being used as
the basis of values of whole life insurance then being
issued by the Company.
SECTION 7. LOANS
7.1 POLICY AND PREMIUM LOANS
The Owner may obtain a loan from the Company in
an amount that is not more than the loan value.
POLICY LOAN. The loan may be obtained on written
request. The Company may defer making the loan for
up to six months unless the loan is to be used to pay
premiums due the Company.
PREMIUM LOAN. If the premium loan provision is in
effect on this policy a loan will be made to pay an
overdue premium. If the loan value is not large
enough to pay the overdue premium, a premium will
be paid for any other frequency permitted by this
policy for which the loan value is large enough. The
Owner may elect or revoke the premium loan provi-
sion by written request received at the Home Office.
7.2 LOAN VALUE
The loan value is the smaller of a. or b., less any
policy debt and any premium then due or billed; a.
and b. are defined as:
a. the cash value one year after the date of the
loan, assuming all premiums due within that year
are paid, less interest to one year from the date
of the loan.
b. the cash value on the due date of the first
premium not yet billed that is due after the date
of the loan, less interest from the date of the
loan to that premium due date.
7.3 POLICY DEBT
Policy debt consists of all outstanding loans and
accrued interest. It may be paid to the Company at
any time. Policy debt affects dividends under Section
5. Any policy debt will be deducted from the policy
proceeds.
If the policy debt equals or exceeds the cash value,
this policy will terminate. Termination occurs 31 days
after a notice has been mailed to the Owner and to
any assignee on record at the Home Office.
7.4 LOAN INTEREST
Interest accrues and is payable on a daily basis from
the date of the loan on policy loans and from the
premium due date on premium loans. Unpaid interest
is added to the loan.
The Specified Rate loan interest option or the Var-
iable Rate loan interest option is elected on the appli-
cation.
CHANGE TO VARIABLE RATE LOAN INTEREST OPTION. The
Owner may request a change to the Variable Rate loan
interest option at any time, with the change to take
effect on the January 1st following receipt of a written
request at the Company's Home Office.
CHANGE TO SPECIFIED RATE LOAN INTEREST OPTION.
The Owner may request a change to the Specified
Rate loan interest option if the interest rate set by the
Company under Section 7.6 for the year beginning on
the next January 1st is less than 8%. The written
request to change must be received at the Home
Office between November 15th and the last business
day of the calendar year; the change will take effect
on the January 1st following receipt of the request at
the Home Office.
9
<PAGE> 14
7.5 SPECIFIED RATE LOAN INTEREST OPTION
Interest is payable at an annual effective rate of 8%.
7.6 VARIABLE RATE LOAN INTEREST OPTION
Interest is payable at an annual effective rate that is
set by the Company annually and applied to new or
outstanding policy debt during the year beginning
each January 1st. The highest loan interest rate that
may be set by the Company is the greater of 5% or a
rate based on the Moody's Corporate Bond Yield
Averages-Monthly Average Corporates for the imme-
diately preceding October. This Average is published
by Moody's Investor's Service, Inc. If it is no longer
published, the highest loan rate will be based on
some other similar average established by the insur-
ance supervisory official of the state in which this
policy is delivered.
The loan interest rate set by the Company will not
exceed the maximum rate permitted by the laws of
the state in which this policy is delivered. The loan
interest rate may be increased only if the increase in
the annual effective rate is at least 1/2%. The loan
interest rate will be decreased if the decrease in the
annual effective rate is at least 1/2%.
The Company will give notice:
- of the initial loan interest rate in effect at the
time a policy or premium loan is made.
- of an increase in loan interest rate on outstand-
ing policy debt no later than 30 days before the
January 1st on which the increase takes effect.
This policy will not terminate during a policy year as
the sole result of an increase in the loan interest rate
during that policy year.
SECTION 8. CHANGE OF POLICY
8.1 CHANGE OF PLAN
The Owner may change this policy to any perma-
nent life insurance plan agreed to by the Owner and
the Company by:
- paying the required costs; and
- meeting any other conditions set by the Com-
pany.
8.2 CHANGE OF INSURED
CHANGE. The Owner may change the insured under
this policy by:
- paying the required costs; and
- meeting any other conditions set by the Com-
pany, including the following:
a. on the date of change, the new insured's age
may not be more than 69;
b. the new insured must have been born on or
before the Policy Date of this policy;
c. the new insured must be insurable; and
d. the Owner must have an insurable interest in
the life of the new insured.
DATE OF CHANGE. The date of change will be the later
of:
- the date of the request to change; or
- the date of the medical examination (or the non-
medical application).
TERMS OF POLICY AFTER CHANGE. The policy will cover
the new insured starting on the date of change. When
coverage on the new insured starts, coverage on the
prior insured will terminate.
The contestable and suicide periods for the new
insured start on the date of change. If the Company
contests the new policy or if the new insured dies by
suicide, the cash value of the new policy on the date
of change will be taken into account in determining
any amount payable by the Company.
The amount of insurance on the new insured will
be set so that there will be no change in the cash
value of the policy at the time of change. If the policy
has no cash value, the amount will be set so that
premiums do not change.
Any policy debt or assignment will continue after
the change.
10
<PAGE> 15
SECTION 9. BENEFICIARIES
9.1 DEFINITION OF BENEFICIARIES
The term "beneficiaries" as used in this policy in-
cludes direct beneficiaries, contingent beneficiaries
and further payees.
9.2 NAMING AND CHANGE OF BENEFICIARIES
BY OWNER. The Owner may name and change the
beneficiaries of death proceeds:
- while the Insured is living.
- during the first 60 days after the date of death of
the Insured, if the Insured just before his death
was not the Owner. No one may change this
naming of a direct beneficiary during this 60
days.
BY DIRECT BENEFICIARY. A direct beneficiary may name
and change the contingent beneficiaries and further
payees of his share of the proceeds:
- if the direct beneficiary is the Owner;
- if, at any time after the death of the Insured, no
contingent beneficiary or further payee of that
share is living; or
- if, after the death of the Insured, the direct
beneficiary elects a payment plan. The interest of
any other beneficiary in the share of that direct
beneficiary will end.
These direct beneficiary rights are subject to the
Owner's rights during the 60 days after the date of
death of the Insured.
BY SPOUSE (MARITAL DEDUCTION PROVISION).
- POWER TO APPOINT. The spouse of the Insured
will have the power alone and in all events to
appoint all amounts payable to the spouse under
the policy if:
a. the Insured just before his death was the
Owner; and
b. the spouse is a direct beneficiary; and
c. the spouse survives the Insured.
- TO WHOM SPOUSE CAN APPOINT. Under this
power, the spouse can appoint:
a. to the estate of the spouse; or
b. to any other persons as contingent benefi-
ciaries and further payees.
- EFFECT OF EXERCISE. As to the amounts appoint-
ed, the exercise of this power will:
a. revoke any other designation of beneficiaries;
b. revoke any election of payment plan as it
applies to them; and
c. cause any provision to the contrary in Section
9 or 10 of this policy to be of no effect.
EFFECTIVE DATE. A naming or change of a beneficiary
will be made on receipt at the Home Office of a
written request that is acceptable to the Company.
The request will then take effect as of the date that it
was signed. The Company is not responsible for any
payment or other action that is taken by it before the
receipt of the request. The Company may require that
the policy be sent to it to be endorsed to show the
naming or change.
9.3 SUCCESSION IN INTEREST OF
BENEFICIARIES
DIRECT BENEFICIARIES. The proceeds of this policy will
be payable in equal shares to the direct beneficiaries
who survive and receive payment. If a direct benefi-
ciary dies before he receives all or part of his full
share, the unpaid part of his share will be payable in
equal shares to the other direct beneficiaries who
survive and receive payment.
CONTINGENT BENEFICIARIES. At the death of all of the
direct beneficiaries, the proceeds, or the present value
of any unpaid payments under a payment plan, will be
payable in equal shares to the contingent beneficiaries
who survive and receive payment. If a contingent
beneficiary dies before he receives all or part of his
full share, the unpaid part of his share will be payable
in equal shares to the other contingent beneficiaries
who survive and receive payment.
FURTHER PAYEES. At the death of all of the direct and
contingent beneficiaries, the proceeds, or the present
value of any unpaid payments under a payment plan,
will be paid in one sum:
- in equal shares to the further payees who survive
and receive payment; or
- if no further payees survive and receive payment,
to the estate of the last to die of all of the direct
and contingent beneficiaries.
OWNER OR HIS ESTATE. If no beneficiaries are alive
when the Insured dies, the proceeds will be paid to
the Owner or to his estate.
9.4 GENERAL
TRANSFER OF OWNERSHIP. A transfer of ownership of
itself will not change the interest of a beneficiary.
CLAIMS OF CREDITORS. So far as allowed by law, no
amount payable under this policy will be subject to
the claims of creditors of a beneficiary.
SUCCESSION UNDER PAYMENT PLANS. A direct or contin-
gent beneficiary who succeeds to an interest in a
payment plan will continue under the terms of the
plan.
11
<PAGE> 16
SECTION 10. PAYMENT OF POLICY BENEFITS
10.1 PAYMENT OF PROCEEDS
Death proceeds will be paid under the payment
plan that takes effect on the date of death of the
Insured. The Interest Income Plan (Option A) will be
in effect if no payment plan has been elected. Interest
will accumulate from the date of death until a pay-
ment plan is elected or the proceeds are withdrawn in
cash.
Surrender proceeds will be the cash surrender value
as of the date of surrender. These proceeds will be
paid in cash or under a payment plan that is elected.
The Company may defer paying the surrender pro-
ceeds for up to six months from the date of surren-
der. If payment is deferred for 30 days or more,
interest will be paid on the surrender proceeds from
the date of surrender to the date of payment. Interest
will be at an annual effective rate of 4%.
10.2 PAYMENT PLANS
INTEREST INCOME PLAN (OPTION A). The proceeds will
earn interest which may be received each month or
accumulated. The first payment is due one month
after the date on which the plan takes effect. Interest
that has accumulated may be withdrawn at any time.
Part or all of the proceeds may be withdrawn at any
time.
INSTALLMENT INCOME PLANS. Payments will be made
each month on the terms of the plan that is elected.
The first payment is due on the date that the plan
takes effect.
- SPECIFIED PERIOD (OPTION B). The proceeds with
interest will be paid over a period of from one to
30 years. The present value of any unpaid install-
ments may be withdrawn at any time.
- SPECIFIED AMOUNT (OPTION D). Payments of not
less than $10.00 per $1,000 of proceeds will be
made until all of the proceeds with interest have
been paid. The balance may be withdrawn at any
time.
LIFE INCOME PLANS. Payments will be made each
month on the terms of the plan that is elected. The
first payment is due on the date that the plan takes
effect. Proof of the date of birth, acceptable to the
Company, must be furnished for each person on
whose life the payments are based.
- SINGLE LIFE INCOME (OPTION C). Payments will be
made for a chosen period and, after that, for the
life of the person on whose life the payments are
based. The choices for the period are:
a. zero years;
b. 10 years;
c. 20 years; or
d. a refund period which continues until the sum
of the payments that have been made is equal
to the proceeds that were placed under the
plan.
- JOINT AND SURVIVOR LIFE INCOME (OPTION E). Pay-
ments are based on the lives of two persons.
Level payments will be made for a period of 10
years and, after that, for as long as one or both
of the persons are living.
- OTHER SELECTIONS. The Company may offer other
selections under the Life Income Plans.
- WITHDRAWAL. The present value of any unpaid
payments that are to be made for the chosen
period (Option C) or the 10 year period (Option
E) may be withdrawn only after the death of all
of the persons on whose lives the payments are
based.
- LIMITATIONS. A direct or contingent beneficiary
who is a natural person may be paid under a Life
Income Plan only if the payments depend on his
life. A corporation may be paid under a Life
Income Plan only if the payments depend on the
life of the Insured or, after the death of the
Insured, on the life of his spouse or his depend-
ent.
PAYMENT FREQUENCY. On request, payments will be
made once every 3, 6 or 12 months instead of each
month.
TRANSFER BETWEEN PAYMENT PLANS. A beneficiary who
is receiving payment under a plan which includes the
right to withdraw may transfer the amount withdrawa-
ble to any other plan that is available.
MINIMUM PAYMENT. The Company may limit the elec-
tion of a payment plan to one that results in payments
of at least $50.
If payments under a payment plan are or become
less than $50, the Company may change the fre-
quency of payments. If the payments are being made
once every 12 months and are less than $50, the
Company may pay the present value or the balance of
the payment plan.
10.3 PAYMENT PLAN RATES
INTEREST INCOME AND INSTALLMENT INCOME PLANS. Pro-
ceeds will earn interest at rates declared each year by
the Company. None of these rates will be less than an
annual effective rate of 3 1/2%. Interest of more than
3 1/2% will increase the amount of the payments or,
for the Specified Amount Plan (Option D), increase
the number of payments. The present value of any
unpaid installments will be based on the 3 1/2% rate
of interest.
The Company may offer guaranteed rates of interest
higher than 3 1/2% with conditions on withdrawal.
LIFE INCOME PLANS. Payments will be based on rates
declared by the Company. These rates will provide at
least as much income as would the Company's rates,
on the date that the payment plan takes effect, for a
single premium immediate annuity contract, with no
charge for issue expenses. Payments under these rates
will not be less than the amounts that are described in
Minimum Payment Rates.
12
<PAGE> 17
MINIMUM PAYMENT RATES. The minimum payment
rates for the Installment Income Plans (Options B and
D) and the Life Income Plans (Options C and E) are
shown in the Minimum Payment Rate Tables.
The Life Income Plan payment rates in those tables
depend on the sex and on the adjusted age of each
person on whose life the payments are based. The
adjusted age is:
- the age on the birthday that is nearest to the
date on which the payment plan takes effect;
plus
- the age adjustment shown below for the number
of policy years that have elapsed from the Policy
Date to the date that the payment plan takes
effect. A part of a policy year is counted as a full
year.
POLICY POLICY
YEARS AGE YEARS AGE
ELAPSED ADJUSTMENT ELAPSED ADJUSTMENT
1 to 5 +8 31 to 35 -2
6 to 10 +6 36 to 40 -3
11 to 15 +4 41 to 45 -4
16 to 20 +2 46 to 50 -5
21 to 25 0 51 or more -6
26 to 30 -1
10.4 EFFECTIVE DATE FOR PAYMENT PLAN
A payment plan that is elected for death proceeds
will take effect on the date of death of the Insured if:
- the plan is elected by the Owner; and
- the election is received at the Home Office while
the Insured is living.
In all other cases, a payment plan that is elected will
take effect:
- on the date the election is received at the Home
Office; or
- on a later date, if requested.
10.5 PAYMENT PLAN ELECTIONS
FOR DEATH PROCEEDS BY OWNER. The Owner may elect
payment plans for death proceeds:
- while the Insured is living.
- during the first 60 days after the date of death of
the Insured, if the Insured just before his death
was not the Owner. No one may change this
election made during those 60 days.
FOR DEATH PROCEEDS BY DIRECT OR CONTINGENT BENE-
FICIARY. A direct or contingent beneficiary may elect
payment plans for death proceeds payable to him if
no payment plan that has been elected is in effect.
This right is subject to the Owner's rights during the
60 days after the date of death of the Insured.
FOR SURRENDER PROCEEDS. The Owner may elect pay-
ment plans for surrender proceeds. The Owner will be
the direct beneficiary.
10.6 INCREASE OF MONTHLY INCOME
A direct beneficiary who is to receive proceeds
under a payment plan may increase the amount of the
monthly payments. This is done by the payment of an
annuity premium to the Company at the time the
payment plan elected under Section 10.5 takes effect.
The amount that will be applied under the payment
plan will be the net premium. The net premium is the
annuity premium less a charge of not more than 2%
and less any premium tax. The net premium will be
applied under the same payment plan and at the same
rates as the proceeds. The Company may limit this net
premium to an amount that is equal to the direct
beneficiary's share of the proceeds payable under this
policy.
MINIMUM PAYMENT RATE TABLE
MINIMUM MONTHLY INCOME PAYMENTS PER $1,000 PROCEEDS
<TABLE>
<CAPTION>
INSTALLMENT INCOME PLANS (OPTIONS B AND D)
- -------------------------------------------------------------------------------
PERIOD MONTHLY PERIOD MONTHLY PERIOD MONTHLY
(YEARS) PAYMENT (YEARS) PAYMENT (YEARS) PAYMENT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $84.65 11 $9.09 21 $5.56
2 43.05 12 8.46 22 5.39
3 29.19 13 7.94 23 5.24
4 22.27 14 7.49 24 5.09
5 18.12 15 7.10 25 4.96
6 15.35 16 6.76 26 4.84
7 13.38 17 6.47 27 4.73
8 11.90 18 6.20 28 4.63
9 10.75 19 5.97 29 4.53
10 9.83 20 5.75 30 4.45
</TABLE>
NN.21 13
<PAGE> 18
MINIMUM PAYMENT RATE TABLES
MINIMUM MONTHLY INCOME PAYMENTS PER S1,000 PROCEEDS
LIFE INCOME PLAN (OPTION C)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SINGLE LIFE MONTHLY PAYMENTS
- -------------------------------------------------------------------------------
MALE CHOSEN PERIOD (YEARS) FEMALE CHOSEN PERIOD (YEARS)
ADJUSTED ADJUSTED
AGE* ZERO 10 20 REFUND AGE* ZERO 10 20 REFUND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.99 $4.91 $4.66 $4.73 55 $4.54 $4.51 $4.38 $4.40
56 5.09 5.00 4.72 4.81 56 4.62 4.58 4.44 4.47
57 5.20 5.10 4.78 4.90 57 4.71 4.66 4.51 4.54
58 5.32 5.20 4.85 4.99 58 4.80 4.75 4.57 4.62
59 5.44 5.31 4.91 5.08 59 4.90 4.84 4.64 4.70
60 5.57 5.42 4.97 5.18 60 5.00 4.93 4.70 4.78
61 5.71 5.54 5.04 5.29 61 5.11 5.03 4.77 4.87
62 5.86 5.67 5.10 5.40 62 5.23 5.14 4.84 4.96
63 6.02 5.80 5.16 5.51 63 5.36 5.25 4.91 5.06
64 6.20 5.94 5.22 5.63 64 5.49 5.37 4.98 5.17
65 6.38 6.08 5.28 5.76 65 5.64 5.50 5.05 5.28
66 6.54 6.23 5.33 5.90 66 5.79 5.63 5.12 5.39
67 6.70 6.38 5.38 6.04 67 5.94 5.77 5.19 5.52
68 6.87 6.54 5.43 6.19 68 6.09 5.91 5.25 5.65
69 7.05 6.71 5.48 6.35 69 6.2S 6.07 5.32 5.79
70 7.21 6.87 5.52 6.52 70 6.42 6.23 5.37 5.94
71 7.40 7.05 5.55 6.69 71 6.59 6.40 5.43 6.09
72 7.58 7.21 5.59 6.88 72 6.78 6.58 5.48 6.26
73 7.77 7.40 5.62 7.07 73 6.96 6.76 5.52 6.44
74 7.95 7.57 5.64 7.28 74 7.16 6.95 5.57 6.63
75 8.14 7.75 5.66 7.49 75 7.35 7.14 5.60 6.83
76 8.32 7.92 5.68 7.72 76 7.56 7.34 5.63 7.04
77 8.49 8.09 5.70 7.96 77 7.77 7.54 S.66 7.26
78 8.84 8.26 5.71 8.21 78 7.97 7.74 5.68 7.51
79 9.18 8.42 5.72 8.47 79 8.18 7.94 5.70 7.76
80 9.51 8.57 5.73 8.74 80 8.37 8.13 5.71 8.03
81 9.84 8.71 5.74 9.04 81 8.57 8.32 5.72 8.32
82 10.18 8.85 5.74 9.34 82 8.93 8.50 5.73 8.61
83 10.49 8.97 5.75 9.65 83 9.28 8.67 5.74 8.93
84 10.82 9.09 5.75 9.98 84 9.62 8.83 5.74 9.27
85 and over 11.13 9.20 5.75 10.34 85 and over 9.96 8.97 5.75 9.62
</TABLE>
- -------------------------------------------------------------------------------
LIFE INCOME PLAN (OPTION E)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
JOINT AND SURVIVOR MONTHLY PAYMENTS
- -------------------------------------------------------------------------------
MALE FEMALE ADJUSTED AGE*
ADJUSTED ----------------------------------------------------------------
AGE* 55 60 65 70 75 80 85 and over
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 $4.16 $4.34 $4.51 $4.65 $4.76 $4.84 $4.88
60 4.26 4.51 4.75 4.98 5.16 5.29 5.37
65 4.35 4.65 4.98 5.31 5.61 5.84 5.98
70 4.41 4.76 5.17 5.62 6.07 6.44 6.68
75 4.46 4.84 5.32 5.88 6.48 7.03 7.42
80 4.48 4.89 5.41 6.05 6.79 7.52 8.07
85 and over 4.50 4.92 5.46 6.15 6.99 7.85 8.53
- -------------------------------------------------------------------------------
<FN>
*See Section 10.3.
</TABLE>
14
<PAGE> 19
<TABLE>
<CAPTION>
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY No. 0021
MILWAUKEE, WISCONSIN --------
[ ] Companion policies
[ ] Life & Disability Insurance
LIFE INSURANCE APPLICATION [ ] 1035 Exchange
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. INSURED John J Doe [X] Male
(Print) First Middle Initial Last [ ] Female
2. A. INSURED'S DATE OF BIRTH ______/______/______ B. PLACE OF BIRTH ________________________________________________________
Month Day Year State of Birth (if other than USA, indicate country)
3. APPLICANT, if other than insured
Relationship
________________________________________________________________________________ to Insured ___________________________________
First Middle Initial Last
IF BUSINESS ORGANIZATION: [ ] Corporation [ ] Partnership [ ] Other type of business _________________________
4. RESIDENCE OF INSURED 1234 Main Street
---------------------------------------------------------------------
Street & No. or RFD
Milwaukee Milwaukee WI 53200 This address will be used for
--------------------------------------------------------------------- all of the Insured's policies.
City County State Zip Code
5. A. PREMIUM PAYER Send premium and other notices regarding this policy B. PAYERS DAYTIME
to: [X] Insured [ ] Owner [ ] Applicant TELEPHONE NUMBER:
to: [ ] Insurance Service [ ] Other _______________________________________ (414) 778-9999
Account (ISA) or Full Name ---------------------------
Payer at [X] Insured's address in 4 or Area Code
_________________________________________________
Street & No. or RFD
_________________________________________________
City
_________________________________________________
State Zip Code
6. Has an application or informal inquiry ever been made to Northwestern Mutual Life for annuity, life or disability insurance on
the life of the Insured? [ ] Yes [X] No If yes, the last policy number is __________________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
7. COMPLETE THIS QUESTION ONLY IF EXERCISING AN ADDITIONAL PURCHASE BENEFIT OPTION. (Smoking questionaire may be required.)
A. State the policy number(s) under which the option is being exercised. ________________________________________________________
B. This application is: [ ] Regular Purchase [ ] Advance Purchase (Complete item C. below)
C. If this is an Advance Purchase, the event is: [ ] Marriage [ ] Birth of child [ ] Adoption of child
[ ] Spouse Date and place _________/_________/________
Name of:[ ] Child ----------------------------- Month Day Year
of event: __________________________________________________________________
City State
- ------------------------------------------------------------------------------------------------------------------------------------
8. SPECIAL DATE
[ ] Short term -- Policy Date will coincide with ISA Payment Date.
Prepaid: [ ] Short term to _______/______/______ [ ] Date to save age [ ] Backdate to _______/______/______
Month Day Year Month Day Year
[ ] Specified future date _______/______/______ [ ] Date to save age [ ] Backdate to _______/______/______
Month Day Year Month Day Year
- ------------------------------------------------------------------------------------------------------------------------------------
9. POLICY APPLIED FOR (FOR COMPLIFE PLANS DO NOT COMPLETE A & B. GO ON TO C.)
A. PLAN and AMOUNT B. ADDITIONAL BENEFITS
(1) (1) [ ] (2) [ ] Waiver of Premium
----------------------------------------------- (1) [ ] (2) [ ] Accidental Death (1) $_________ (2) $__________
Plan (1) [ ] (2) [ ] Additional Purchase (1) $_________ (2) $__________
$ --------------------------------------------- Benefit Amt. per Amt. per
Amount option option
(2) (1) [ ] (2) [ ] Payor Benefit
----------------------------------------------- (1) [ ] (2) [ ] Indexed Protection
Plan (1) [ ] (2) [ ] Other _______________________
$ ---------------------------------------------
Amount
90-1 L.I. (0186)
</TABLE>
<PAGE> 20
<TABLE>
<S> <C>
9C. FLEXIBLE LIFE PLANS (COMPLIFE)
[ ] WHOLE LIFE $___________________ WITH ADDITIONAL PROTECTION $____________________ (CUSTOM COMPLIFE)
Amount Amount
(1) [ ] Additional initial premium $___________________ Use to: [ ] Reduce term insurance ________%
[ ] Increase coverage ________%
(2) [ ] Inflation Protection Option
[ ] WHOLE LIFE $___________________ WITH A PREMIUM FOR INCREASING INSURANCE OF $____________________ (INCREASING COMPLIFE)
Amount Level annual premium
[ ] Additional initial premium $___________________
[ ] EXECUTIVE WHOLE LIFE $____________________ WITH ADDITIONAL PROTECTION $_____________________ (EXECUTIVE COMPLIFE)
Amount Amount
PREMIUM FOR INCREASING INSURANCE $_______________________ Use to: [ ] Convert term insurance________%
[ ] Increase coverage ________%
[ ] Additional initial premium $___________________ Use to: [ ] Convert term insurance________%
[ ] Increase coverage ________%
[ ] WHOLE LIFE $__________________ WITH ADJUSTABLE TERM PROTECTION $___________________ (ADJUSTABLE COMPLIFE)
Amount Amount
(1)a.[ ] Scheduled annual addition premium $_______________________________ [ ] Reduce term insurance_______%
Level annual premium Use to:
b.[ ] Annual increase in additional premium __________ $________________ [ ] Increase coverage _______%
(Not more than 20 years or No. of years Annual increase
to age 69, if less)
(2)[ ] Additional initial premium $___________________ Use to: [ ] Reduce term insurance _______%
[ ] Increase coverage _______%
[ ] Inflation Protection Option
(3) Only one may be selected:
[ ] Scheduled annual increase in term amount __________ $_____________________
(Not more than 20 years, or No. of years Annual increase amt.
to age 69, if less)
[X] CORPORATE WHOLE LIFE (See attached Supplement)
9D. ADDITIONAL BENEFITS FOR FLEXIBLE LIFE PLANS
[ ] Waiver of Premium [ ] Additional Purchase Benefit $__________________________________
Amount per option
[ ] Accidental Death $_________________________________ [ ] Other _________________________________________________________
Amount
- ------------------------------------------------------------------------------------------------------------------------------------
10. If an additional benefit cannot be approved, should the Company issue the policy without the benefit? [ ] Yes [ ] No
11. Shall the PREMIUM LOAN provision, if available, become operative according to its terms? [X] Yes [ ] No
12. ANNUAL DIVIDENDS until otherwise directed will:
FIRST SECOND
POLICY POLICY
[ ] [ ] Reduce current premium.
If flexible life plan with ADDITIONAL PROTECTION or ADJUSTABLE TERM, additions
[X] [ ] Purchase paid-up additions.
purchased by eligible dividend will be used to: [ ] Reduce term insurance______%
[ ] [ ] Accumulate at interest.
[ ] Increase coverage ______%
[ ] [ ] Be paid in cash.
[ ] [ ] Be used for a combination of options above. (Complete form 18-1364)
13. POLICY LOAN INTEREST RATE OPTION [ ] 8% [X] VARIABLE RATE
14. PREMIUM PAYABLE [X] Annually [ ] Semianually [ ] Quarterly [ ] Single [ ] Monthly (Variable Life only)
- ------------------------------------------------------------------------------------------------------------------------------------
(PAGE 2)
90-1 L.I. (0186)
</TABLE>
<PAGE> 21
INSURED John J. Doe
------------------------------------------------------
First Middle Initial Last
- -------------------------------------------------------------------------------
15. A. DIRECT BENEFICIARY
Jane M. Doe Wife
-------------------------------------------------------------
First Middle Initial Last Relationship To Insured
-------------------------------------------------------------
First Middle Initial Last Relationship To Insured
-------------------------------------------------------------
First Middle Initial Last Relationship To Insured
B. CONTINGENT BENEFICIARY
-------------------------------------------------------------
First Middle Initial Last Relationship To Insured
-------------------------------------------------------------
First Middle Initial Last Relationship To Insured
Box (1) or (2) may be selected to include all the children or brothers and
sisters without naming them, or to add to the contingent beneficiaries
named. Box (3) may be selected to provide for the children of a deceased
contingent beneficiary; use only if contingent beneficiaries are named
and/or box (1) or (2) is checked, NOTE: The word "children" includes
child and any legally adopted child.
[X] (1) and all (other) children of the Insured.
[ ] (2) and all (other) brothers and sisters of the Insured born of the
marriage of or legally adopted by______________and______________
before the Insured's death.
[ ] (3) any amount that would have been paid to a deceased contingent
beneficiary, if living, will be paid in one sum and in equal
shares to the children of that contingent beneficiary who survive
and receive payment.
C. FURTHER PAYEES
-------------------------------------------------------------
First Middle Initial Last Relationship To Insured
-------------------------------------------------------------
First Middle Initial Last Relationship To Insured
[ ] SEE ATTACHED SUPPLEMENT FORM
(To be used in place of designations above)
- -------------------------------------------------------------------------------
16. The OWNER will be: (OWNER MUST COMPLETE SUBSTITUTE FORM W-9 15-1272X.)
Note: If the Insured is under age 15, consider selecting item D, E or F.
SELECT ONLY ONE.
[X] A. Insured
[ ] B. Applicant
[ ] C. Other ________________________________________________
First Middle Initial Last
________________________________________________
Relationship to Insured
[ ] D. Applicant. If the Applicant dies before the Insured, the Insured
will be the Owner.
[ ] E. Applicant. If the Applicant dies before the Insured, the Owner will
be:
________________________________________________
First Middle Initial Last
________________________________________________
Relationship to Insured
If both die before the Insured, the Insured will be the Owner.
[ ] F. The Applicant until the Insured attains the age of ___________
years. If the applicant dies before the Insured, the Owner will be:
________________________________________________
First Middle Initial Last
_____________________________________ until the Insured attains
Relationship to Insured
such age. Upon the Insured attaining such age, or if both die
before the Insured, the Insured will be the Owner.
[ ] G. SEE ATTACHED SUPPLEMENT FORM.
(To be used in place of designations above.)
- -------------------------------------------------------------------------------
17. Has the premium for the policy applied for been paid to the agent in
exchange for the CONDITIONAL LIFE INSURANCE AGREEMENT with the same number
as this application? [X]Yes [ ]No
18. Will the insurance applied for replace insurance (or annuities) on the
Insured's life in this Company or elsewhere? If yes, agent should explain
and send required papers. [ ]Yes [X]No
- -------------------------------------------------------------------------------
THE INSURED CONSENTS TO THIS APPLICATION AND DECLARES THAT THE ANSWERS AND
STATEMENTS IN THIS APPLICATION ARE CORRECTLY RECORDED, COMPLETE AND TRUE TO THE
BEST OF HIS KNOWLEDGE AND BELIEF. STATEMENTS IN THIS APPLICATION ARE
REPRESENTATIONS AND NOT WARRANTIES.
It is agreed that
(1) If the premium is not paid when the application is signed, no insurance
will be in effect. The insurance will take effect at the time the policy is
delivered and the premium is paid, if
- the Insured is living at that time; and
- the answers and statements in the application are then true to the best of
the knowledge and belief of the Insured.
(2) If the premium is paid when the application is taken, no life insurance
will have been in effect if Section I. of the Conditional Insurance Agreement
applies.
(3) If the policy is issued in an extra premium class, acceptance of the policy
will amend it so that extended term insurance can be in force only if
- the Company gives its consent, or
- the loan value is not large enough to grant a premium loan.
If a premium is not paid within the grace period and extended term insurance
cannot be in force, paid-up insurance will be selected.
(4) No agent is authorized to make or alter contracts or to waive any of the
Company's rights to requirements.
_____________________________________ ____________________________________
Signature of INSURED (if other than Signature of APPLICANT
Applicant and 15 yrs of age and over)
Signed at____________________ Date_____/___/____ ____________________________
City, County & State Month Day Year Signature of LICENSED AGENT
90-1 L.I. (0186) (page 3)
<PAGE> 22
SUPPLEMENT TO APPLICATION
FOR CORPORATE WHOLE LIFE II
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
INSURED: John J. Doe
PLAN: Corporate Whole Life II $32,387 With Additional Protection $66,514
Scheduled Additional Premium $453.58
Additional Initial Premium None
Additional Benefits None
Policy Loan Interest Rate 8%
<TABLE>
<CAPTION>
Policy Total Policy Total Policy Total
Year Insurance Year Insurance Year Insurance
- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C>
1 $ 98,901 19 $116,850 37 $ 470,149
2 $ 98,502 20 $120,018 38 $ 500,636
3 $ 98,217 21 $123,517 39 $ 533,077
4 $ 98,079 22 $127,368 40 $ 567,599
5 $ 98,091 23 $131,594 41 $ 604,338
6 $ 98,255 24 $136,223 42 $ 643,437
7 $ 98,544 25 $141,281 43 $ 685,056
8 $ 98,958 26 $146,798 44 $ 729,356
9 $ 99,542 27 $152,808 45 $ 776,517
10 $100,302 28 $159,344 46 $ 826,729
11 $101,248 29 $166,447 47 $ 880,195
12 $102,389 30 $174,155 48 $ 937,133
13 $103,736 31 $322,120 49 $ 997,777
14 $105,299 32 $343,126 50 $1,062,374
15 $107,092 33 $365,479 51 $1,131,191
16 $109,128 34 $389,263 52 $1,204,515
17 $111,422 35 $414,571 53 $1,282,651
18 $113,990 36 $441,499 54 $1,365,927
55 $1,454,694
Values do not include paid up insurance purchased by additional premiums.
</TABLE>
DATE: 8/1/87 Signature of Applicant: (Signed) John J. Doe
------------ ----------------------
----------------------
----------------------
For Office Use Only
Illustration No. 001
90-1 Supp. (0887) Und. Amt: $124,000
Policy No.
-----------
<PAGE> 23
IT IS RECOMMENDED THAT YOU ...
read your policy.
notify your Northwestern Mutual agent or the Company at
720 E. Wisconsin Avenue, Milwaukee, Wis. 53202, of an
address change.
call your Northwestern Mutual agent for information --
particularly on a suggestion to terminate or exchange
this policy for another policy or plan.
ELECTION OF TRUSTEES
The members of The Northwestern Mutual Life Insurance
Company are its policyholders of insurance policies and
deferred annuity contracts. The members exercise
control through a Board of Trustees. Elections to the
Board are held each year at the annual meeting of
members. Members are entitled to vote in person or by
proxy.
CORPORATE WHOLE LIFE POLICY II
WITH ADDITIONAL PROTECTION
ELIGIBLE FOR ANNUAL DIVIDENDS.
Basic Amount plus Additional Protection payable on
death of Insured. Premiums payable for period shown
on page 3.
NN.21
[NORTHWESTERN MUTUAL LIFE LOGO]
<PAGE> 24
AMENDMENT
THE EFFECTIVE DATE OF THIS AMENDMENT IS THE DATE OF ISSUE OF THE CORPORATE
WHOLE LIFE POLICY II WITH ADDITIONAL PROTECTION TO WHICH THIS POLICY IS
ATTACHED.
SECTION 2.2 TRANSFER OF OWNERSHIP; LIMITATION IS AMENDED TO READ AS FOLLOWS:
2.2 TRANSFER OF OWNERSHIP
The Owner may transfer the ownership of this policy. Written proof of
transfer satisfactory to the Company must be received at its Home Office. The
transfer will then take effect as of the date that it was signed. The Company
may require that the policy be sent to it for endorsement to show the transfer.
SECTION 4.3 ADDITIOINAL PREMIUMS IS AMENDED BY THE DELETION OF THE SUBSECTION
ENTITLED "UNSCHEDULED ADDITIONAL PREMIUM OPTION."
SECTION 8. CHANGE OF POLICY IS DELETED.
Secretary
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
NN.221F.(0691)
<PAGE> 1
<TABLE>
EXHIBIT (11) -- COMPUTATION OF EARNINGS PER SHARE
NATIONAL CITY CORPORATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
FOR THE CALENDAR YEAR
____________________________________________
1994 1993 1992
____________ ____________ ____________
<S> <C> <C> <C>
PRIMARY:
___________
Net Income $429,434 $403,997 $346,923
Less Preferred Dividend Requirements 15,200 15,966 16,000
------------ ------------ ------------
Net Income Applicable to Common Stock $414,234 $388,031 $330,923
============ ============ ============
Average Common Shares Outstanding 153,353,555 161,163,816 158,011,980
============ ============ ============
Net Income Per Share - Primary $2.70 $2.41 $2.09
============ ============ ============
ASSUMING FULL DILUTION:
_____________________________
Net income $429,434 $403,997 $346,923
============ ============ ============
Average Common Shares Outstanding 153,353,555 161,163,816 158,011,980
Pro Forma Effect of Assumed Conversion
of 8% Cumulative Convertible
Preferred Stock 8,941,907 9,455,420 9,535,160
Pro Forma Average Fully Diluted Common
Shares Outstanding Assuming Exercise
of all Outstanding Stock Options as of
the Beginning of Year or Date of Grant,
if Later 80,038 64,276 518,232
------------ ------------ ------------
Pro Forma Fully Diluted Common
Shares Outstanding 162,375,500 170,683,512 168,065,372
============ ============ ============
Pro Forma Fully Diluted Net Income
Per Share $2.64 $2.37 $2.06
============ ============ ============
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
The following table sets forth all of National City Corporation's direct or
indirect subsidiaries, as of December 31, 1994.
<TABLE>
<CAPTION>
State or
Jurisdiction
Under the Law
% of Voting of which
Securities Owned Organized
---------------- --------------
SUBSIDIARIES OF NATIONAL CITY CORPORATION:
<S> <C> <C>
Buckeye Service Corporation 100% Ohio
Circle Equity Leasing Corproation of Michigan 100% Michigan
Circle Leasing Corporation 100% Indiana
Cortland Bancorp 7.15% Ohio
Gem America Realty and Investment Corporaton 100% Ohio
Madison Bank & Trust Company 100% Indiana
Merchants Capital Management, Inc. 100% Indiana
Merchants Mortgage Corporation 100% Indiana
Merchants Service Corporation 100% Indiana
Money Station, Inc. 100% Ohio
Mortgage Company of Indiana, Inc. 100% Indiana
National Asset Management Corporation 100% Kentucky
National City Bank 100% United States
National City Bank, Ashland 99.5% United States
National City Bank, Columbus 100% United States
National City Bank, Dayton 100% United States
National City Bank, Indiana 100% United States
National City Bank, Kentucky 100% United States
National City Bank, Northeast 100% United States
National City Bank, Northwest 100% United States
National City Bank, Southern Indiana 100% United States
National City Capital Corporation 100% Delaware
National City Community Development Corporation 100% Ohio
National City Credit Corporation 100% Ohio
National City Financial Corporation 100% Ohio
National City Holding Company 100% Delaware
National City Investments Capital, Inc. 100% Indiana
National City Life Insurance Co. 100% Arizona
National City Mortgage Company 100% Ohio
National City Processing Company 100% Kentucky
National City Trust Company 100% United States
National City Venture Corporation 100% Delaware
NC Acquisition, Inc. 100% Delaware
NCC Services, Inc. (pending merger) 100% Ohio
Ohio National Corporation of Columbus 100% Ohio
Second Premises Corporation 100% Kentucky
</TABLE>
<PAGE> 2
EXHIBIT (22)--SUBSIDIARIES
Page 2 (Continued)
<TABLE>
<S> <C> <C>
SUBSIDIARIES OF NATIONAL CITY BANK:
Capstone Realty, Inc. 100% Ohio
National City Investments Corporation 100% Kentucky
SUBSIDIARY OF NATIONAL CITY BANK, NORTHEAST:
AKREO Service Corporation 100% Ohio
SUBSIDIARIES OF NATIONAL CITY BANK, COLUMBUS:
Buckeye Capital Corp. I (dissolution pending) 100% Delaware
Scott Street Properties, Inc. 100% Ohio
SUBSIDIARIES OF NATIONAL CITY BANK, KENTUCKY:
Churchill Insurance Agency, Inc. 100% Kentucky
First National Broadway Corp. 100% Kentucky
First Premises Corporation 100% Kentucky
FNB Service Corporation 100% Kentucky
National Capital Properties, Inc. 100% Kentucky
National City Leasing Corporation 100% Kentucky
NCBK Holdings, Inc. 100% Delaware
SUBSIDIARIES OF NATIONAL CITY PROCESSING COMPANY:
B&L Consultants, Inc. 100% Massachusetts
NPC Check Cashing, Inc. 100% Delaware
NPC Internacional, S.A. de C.V. 100% Mexico
SUBSIDIARY OF GEM AMERICA REALTY & INVESTMENT CORP.
Gem Financial Insurance Agency, Inc. 100% Ohio
SUBSIDIARIES OF NATIONAL CITY BANK, INDIANA
Ash Realty Company, Inc. 100% Indiana
Bank Service Corporation of Indiana 33 1/3% Indiana
MNB Financial Corporation 100% Indiana
MNB Trustee Co., (UK) Ltd. 50%* United Kingdom
Newcorp, Inc. 100% Indiana
SUBSIDIARY OF MADISON BANK & TRUST COMPANY:
National City Insurance Agency, Inc. 100% Indiana
SUBSIDIARY OF CIRCLE LEASING CORPORATION:
Circle Acceptance Leasing Corporation 100% Ohio
SUBSIDIARY OF MNB FINANCIAL CORPORATION:
Indiana Plaza Leasing, Inc. 100% New York
SUBSIDIARY OF ASH REALTY COMPANY, INC.:
Sterling Equities Corp. 100% Indiana
- ---------------
*Additional 50% owned by National City Bank.
</TABLE>
<PAGE> 1
EXHIBIT (23)
CONSENT OF INDEPENDENT AUDITORS
- -------------------------------
We consent to the incorporation by reference in Registration Statement
No. 33-39479 on Form S-3, Registration Statement No. 33-39480 on Form S-3,
Registration Statement No. 33-44209 on Form S-3, Post-Effective Amendment No. 1
(on Form S-8) to Registration Statement No. 33-20267 on Form S-4, Registration
Statement No. 33-52271 on Form S-8, Registration Statement No. 33-45363 on Form
S-8, Post Effective Amendment No. 1 (on Form S-8) to Registration Statement No.
33-45980 on Form S-4, Post Effective Amendment No. 1 (on Form S-8) to
Registration Statement No. 33-56539, Registration Statement No. 33-57045 on
Form S-8, and Registration Statement No. 33-54323 on Form S-3 of our report
dated January 20, 1995, with respect to the consolidated financial statements
of National City Corporation included in this Annual Report (Form 10-K) for the
year ended December 31, 1994.
ERNST & YOUNG LLP
CLEVELAND, OHIO
JANUARY 30, 1995
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
The undersigned Directors and Officers of National City Corporation, a Delaware
corporation (the "Corporation"), which anticipates filing a Form 10-K annual
report pursuant to Section 12(g) of the Securities Exchange Act of 1934 for the
Corporation's fiscal year ended December 31, 1994, with the Securities and
Exchange Commission hereby constitute and appoint David L. Zoeller, Carlton E.
Langer and Thomas A. Richlovsky, and each of them, with full power of
substitution and resubstitution, as attorneys or attorney to sign for us and in
our names, in the capacities indicated below, said Form 10-K, and any and all
amendments and exhibits thereto, or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform any and all acts and things whatsoever required and
necessary to be done in the premises, as fully to all intents and purposes as
we could do if personally present, hereby ratifying and approving the acts of
said attorneys, and any of them, and any such substitute.
EXECUTED this 19th day of December, 1994.
/s/ Sandra H. Austin Director
- ----------------------------------
Sandra H. Austin
Director
- ----------------------------------
James M. Biggar
/s/ Charles H. Bowman Director
- ----------------------------------
Charles H. Bowman
/s/ Edward B. Brandon Chairman of the Board and Chief
- ---------------------------------- Executive Officer (Principal
Edward B. Brandon Executive Officer)
/s/ John G. Breen Director
- ----------------------------------
John G. Breen
/s/ David A. Daberko Director, President and Chief Operating
- ---------------------------------- Officer
David A. Daberko
<PAGE> 2
Director
- ----------------------------------
Richard E. Disbrow
/s/ Daniel E. Evans Director
- ----------------------------------
Daniel E. Evans
/s/ Otto N. Frenzel III Director
- ----------------------------------
Otto N. Frenzel III
/s/ Joseph H. Lemieux Director
- ----------------------------------
Joseph H. Lemieux
/s/ A. Stevens Miles Director
- ----------------------------------
A. Stevens Miles
/s/ Burnell R. Roberts Director
- ----------------------------------
Burnell R. Roberts
/s/ William R. Robertson Director and Deputy Chairman of
- ---------------------------------- the Board
William R. Robertson
Director
- ----------------------------------
Stephen A. Stitle
/s/ Morry Weiss Director
- ----------------------------------
Morry Weiss
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000069970
<NAME> National City Bank
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,401,728
<INT-BEARING-DEPOSITS> 96,615
<FED-FUNDS-SOLD> 672,945
<TRADING-ASSETS> 7,940
<INVESTMENTS-HELD-FOR-SALE> 3,218,940
<INVESTMENTS-CARRYING> 1,176,115
<INVESTMENTS-MARKET> 1,156,811
<LOANS> 23,034,775
<ALLOWANCE> 469,019
<TOTAL-ASSETS> 32,114,008
<DEPOSITS> 24,471,920
<SHORT-TERM> 3,713,790
<LIABILITIES-OTHER> 583,575
<LONG-TERM> 743,669
<COMMON> 590,223
0
187,540
<OTHER-SE> 1,823,291
<TOTAL-LIABILITIES-AND-EQUITY> 32,114,008
<INTEREST-LOAN> 1,765,898
<INTEREST-INVEST> 244,548
<INTEREST-OTHER> 31,418
<INTEREST-TOTAL> 2,041,864
<INTEREST-DEPOSIT> 592,870
<INTEREST-EXPENSE> 805,055
<INTEREST-INCOME-NET> 1,236,809
<LOAN-LOSSES> 79,356
<SECURITIES-GAINS> 10,530
<EXPENSE-OTHER> 1,403,133
<INCOME-PRETAX> 617,688
<INCOME-PRE-EXTRAORDINARY> 617,688
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 429,434
<EPS-PRIMARY> 2.70
<EPS-DILUTED> 2.64
<YIELD-ACTUAL> 4.65
<LOANS-NON> 107,600
<LOANS-PAST> 27,900
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 443,412
<CHARGE-OFFS> 120,234
<RECOVERIES> 56,756
<ALLOWANCE-CLOSE> 469,019
<ALLOWANCE-DOMESTIC> 236,219
<ALLOWANCE-FOREIGN> 300
<ALLOWANCE-UNALLOCATED> 232,500
</TABLE>
