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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-7127
FIRST CHICAGO NBD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 36-1984850
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60670
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
Registrant's telephone number, including area code: (312) 732-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $1.00 par value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Preferred Stock with Cumulative and Adjustable
Dividends, Series B ($100 stated value), no par value New York Stock Exchange
Preferred Stock with Cumulative and Adjustable
Dividends, Series C ($100 stated value), no par value New York Stock Exchange
Depositary Shares, each representing one-twenty-fifth
of a share of 8.45% Cumulative Preferred Stock,
Series E ($625 stated value), no par value New York Stock Exchange
Depositary Shares, each representing one-hundredth of
a share of 5 3/4% Cumulative Convertible Preferred
Stock, Series B ($5,000 stated value),
no par value New York Stock Exchange
7 1/2% Preferred Purchase Units New York Stock Exchange
7 1/4% Subordinated Debentures Due 2004 New York Stock Exchange
8.10% Subordinated Notes Due 2002 New York Stock Exchange
8 1/2% Notes Due June 1, 1998 New York Stock Exchange
5 1/2% Exchangeable Notes Due February 15, 1997 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
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TITLE OF CLASS
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8.45% Cumulative Preferred Stock, Series E ($625
stated value)
5 3/4% Cumulative Convertible Preferred Stock, Series
B ($5,000 stated value)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
Corporation as of December 31, 1995, was approximately $11,268,000,000. At
December 31, 1995, the Corporation had 315,241,109 shares of its Common Stock,
$1.00 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE CORPORATION'S DEFINITIVE PROXY STATEMENT DATED APRIL 5,
1996, ARE INCORPORATED BY REFERENCE INTO PART III HEREOF.
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FIRST CHICAGO NBD CORPORATION
FORM 10-K INDEX
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PAGE
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PART I
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Item 1. Business..................................................... 2
Description of Business...................................... 2
Employees.................................................... 6
Competition.................................................. 6
Monetary Policy and Economic Controls........................ 6
Supervision and Regulation................................... 6
Financial Review............................................. 12
Item 2. Properties................................................... 86
Item 3. Legal Proceedings............................................ 87
Item 4. Submission of Matters to a Vote of Security Holders.......... 87
Executive Officers of the Registrant..................................... 87
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters..................................................... 88
Item 6. Selected Financial Data...................................... 88
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 88
Item 8. Financial Statements and Supplementary Data.................. 88
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 88
PART III
Item 10. Directors and Executive Officers of the Registrant........... 88
Item 11. Executive Compensation....................................... 88
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 88
Item 13. Certain Relationships and Related Transactions............... 88
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 89
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PART I
ITEM 1. BUSINESS
DESCRIPTION OF BUSINESS
General
First Chicago NBD Corporation (the "Corporation"), incorporated in Delaware
in 1972, is a multibank holding company registered under the Bank Holding
Company Act of 1956 (the "BHC Act"). The Corporation is the surviving
corporation resulting from the merger (the "Merger"), effective December 1,
1995, of First Chicago Corporation ("FCC"), a Delaware corporation and
registered bank holding company, with and into NBD Bancorp, Inc. ("NBD"), also
a Delaware corporation and registered bank holding company. Through its bank
subsidiaries, the Corporation provides consumer and corporate banking products
and services. The Corporation's lead bank subsidiary is The First National
Bank of Chicago ("FNBC"). The Corporation also is the parent corporation of
NBD Bank (Michigan) ("NBD Michigan"), American National Bank and Trust Company
of Chicago ("ANB"), FCC National Bank ("FCCNB"), NBD Bank, N.A. (Indiana)
("NBD Indiana"), NBD Bank (Illinois) ("NBD Illinois"), NBD Bank (Florida)
("NBD Florida"), and several other bank subsidiaries. In addition, the
Corporation directly or indirectly owns the stock of various nonbank companies
engaged in businesses related to banking and finance. The Corporation also
directly or indirectly raises funds principally to finance the operations of
its nonbank subsidiaries. A substantial portion of the Corporation's annual
income typically has been derived from dividends from its subsidiaries and
from interest on loans, some of which are subordinated, to its subsidiaries.
The Corporation, on an ongoing basis, evaluates its existing business
operations and organizational structures, and routinely explores opportunities
for additional acquisitions of financial institutions and other financial
services-related businesses and assets. In addition, the Corporation
occasionally sells assets, or exits businesses or markets determined not to be
consistent with the Corporation's overall business strategy. During 1995, the
Corporation consummated its previously announced acquisitions of Deerbank
Corporation and AmeriFed Financial Corp., and the related thrift subsidiary
mergers into NBD Illinois. On January 25, 1996, the Corporation executed a
definitive agreement to acquire Barrington Bancorp, Inc. ("Barrington"), a
one-thrift holding company with assets of approximately $68 million; the
transaction, which is subject to the approval of Barrington's stockholders and
various regulatory authorities, is expected to close in mid-1996, at which
time the thrift subsidiary will merge into FNBC. On February 23, 1996, the
Corporation sold substantially all of the assets and deposits of NBD Bank
(Ohio). During 1996, the Corporation intends to merge NBD Illinois with and
into FNBC and consolidate NBD Illinois' retail and middle market banking
operations with those of FNBC and ANB.
The Corporation engages primarily in four lines of business--Credit Card;
Regional Banking, which includes retail banking and middle market banking;
Corporate and Institutional Banking; and Corporate Investments. Each of these
businesses is conducted through the Corporation's bank and nonbank
subsidiaries, as described below.
Credit Card
Credit Card has primary responsibility for developing and marketing credit
card products and related services to individuals nationwide using direct
response, telemarketing and other techniques that do not require a local
physical presence. While the Corporation's proprietary First Card line of VISA
and MasterCard accounts are the primary Credit Card products, other products
include check-accessed lines of credit and certificates of deposit.
The majority of the Corporation's credit card accounts are owned and
administered by FCCNB, a Delaware-based national banking association. FCCNB
ranks among the largest issuers of bank credit cards in the United States. The
Corporation's Credit Card operations centers are located in Wilmington,
Delaware; Elgin, Illinois; Indianapolis, Indiana; Troy, Michigan; and
Uniondale (Long Island), New York. At December 31, 1995, Credit Card managed
approximately $17.5 billion in card-related receivables.
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Regional Banking
Retail Banking
Retail banking is conducted primarily through FNBC, NBD Michigan, NBD
Indiana, NBD Illinois and NBD Florida by providing traditional retail banking
products and services to consumers. Products and services offered include
demand, savings and time deposit accounts; installment loans and related
services; lines of credit and other open-end credit products; mortgage
banking; electronic banking; safekeeping; nondeposit investment products and
related services including mutual funds, annuities and discount brokerage
services; and trust and investment services. Trust and investment services
include financial planning, estate planning, retirement planning, tax
counseling, custody services, and fiduciary services including acting as
executor, administrator and personal representative of estates.
Retail banking offers an array of additional financial services, including
property and casualty insurance, and credit life and other life insurance
products. The Corporation also manages two proprietary mutual fund families,
the Woodward and Prairie Funds, that comprise a variety of mutual funds
covering a wide range of investment objectives. These fund families will be
combined during 1996. As of December 31, 1995, the combined funds ranked among
the largest bank-managed fund families in the country, with approximately $11
billion in assets.
The Corporation's primary retail banking markets are metropolitan Chicago
and the states of Michigan and Indiana. The Corporation enjoys a leading
market share in each of these geographic markets, serving in the aggregate
approximately 3,000,000 households through over 700 bank branches, more than
1,300 automatic teller machines ("ATMs"), 24-hour telephone support, and
online banking services available through personal computers. Additionally,
retail banking is available and marketed nationally through "direct banking,"
which offers 24-hour telephone support, nationwide debit card access to ATMs
and merchants, and online banking services.
ATM services are provided to retail banking clients through two regional
shared networks in which the Corporation has an ownership interest, CASH
STATION and Magic Line, and through the CIRRUS system, a national shared ATM
network. The Corporation, pursuant to a contract with MasterCard, operates the
computerized transaction routing switch for CIRRUS. The Corporation also
operates a similar routing switch for Magic Line.
Middle Market Banking
Middle market banking is conducted primarily through ANB, NBD Michigan, NBD
Indiana and NBD Illinois, serving companies and other middle market customers
located predominantly in the Midwest. Commercial banking products and services
offered include commercial loans, demand, savings and time deposit accounts,
and cash management services.
In addition, middle market banking offers a wide array of ancillary products
and services targeted principally to the commercial middle market customer
base. Corporate finance products and services offered include merger and
acquisition advisory services, financial advisory services, interest rate
protection products and, through ANB Mezzanine Corporation, mezzanine debt
capabilities. Lease financing is available to companies seeking an alternative
to loan products. International trade banking services and foreign exchange
capabilities are offered to customers involved in both import and export
activities. Treasury and investment products and services offered include
short-term investment management and employee benefit plans. Personal banking,
trust, insurance, investment, loan, deposit, estate planning, fiduciary
management and portfolio management services are offered to business owners,
executives and other individuals. Corporate trust services,
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including land trust services and indenture trustee services, are offered to
companies, municipalities and institutions that issue public or privately
placed debt. Specialized banking services are also offered and include asset-
based financing and commercial real estate financing.
Corporate and Institutional Banking
Corporate and Institutional Banking encompasses the broad range of
commercial and investment banking products and services that FNBC, NBD
Michigan and NBD Indiana, along with the subsidiaries referenced below,
provide to domestic and foreign customers. Corporate and Institutional
Banking's principal focus is the delivery of corporate financial services,
including the extension of credit, to commercial, financial and governmental
customers.
Corporate and Institutional Banking serves the manufacturing, wholesaling,
retailing, commodities, banking, finance, insurance, transportation,
securities, real estate, mortgage banking, communications, utilities, and
petroleum and mining industries, as well as municipalities and health,
education and service organizations. Customers include both large corporations
and upper-end middle market companies.
In the global financial marketplace, Corporate and Institutional Banking is
responsible for the Corporation's investment and trading activities in: U.S.
government, municipal, corporate fixed-income, and federal agency securities;
and the foreign exchange and futures markets. Corporate and Institutional
Banking also provides a wide range of risk management products such as foreign
exchange options, interest rate options, and interest rate and currency swaps.
First Chicago Capital Markets, Inc. ("FCCM"), one of the Corporation's
subsidiaries, is a primary government bond dealer and is principally
responsible for activities in the securities of states, municipalities, other
governmental entities and certain corporate entities, including trading,
sales, underwriting, research, and maintenance of an active secondary market
with national sales distribution.
Corporate and Institutional Banking also offers capital raising products
such as loans, private placements of debt securities, merger and acquisition
advisory services, highly leveraged transaction financing, asset sales and
distributions, and loan syndications.
In addition, Corporate and Institutional Banking develops, markets and
delivers cash management, operating, clearing and other noncredit products and
services, both overseas and domestically. These include money transfer,
collection, disbursement, documentary, remittance, trade finance and
international securities clearing services. Corporate and Institutional
Banking offers a wide range of administrative and trust and investment
advisory services to corporations, municipalities and charitable
organizations, including defined contribution plans and defined benefit plans.
Each of FNBC, NBD Michigan, NBD Indiana, and certain of the Corporation's
other bank subsidiaries act as trustee of corporate, pension, profit-sharing
and other employee-benefit trusts, provide custody services, and act as
registrar, fiscal and paying agent for business entities.
Corporate and Institutional Banking includes the operations of three
subsidiaries of the Corporation: First Chicago National Processing
Corporation, which provides noncredit clearing services, including lock box
processing, on a nationwide basis; First Chicago International, which provides
clearing and documentary services; and First Chicago Trust Company of New
York, a New York state-chartered trust company ranking among the largest stock
transfer agents in the United States, which provides custody, special agency,
stock transfer, and securities issuing, paying and clearance services. In
addition, the First Chicago Clearing Center in London is that city's principal
depository for certificates of deposit and other short-term securities.
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Corporate Investments
Corporate Investments encompasses mostly noncustomer-oriented activities
that are conducted primarily through the Corporation's nonbank subsidiaries,
including First Chicago Investment Corporation, First Chicago Equity
Corporation, First Chicago Leasing Corporation, First Chicago Capital
Corporation and First Chicago Financial Corporation, which raises funds to
help finance these activities. The activities of Corporate Investments
comprise growth equity investments, tax-advantaged investments, value-oriented
investments, and funding and liquidity investments.
Growth equity investment activities include various forms of equity funding
for acquisitions, management buyouts and growing businesses; funding for these
activities is provided by First Chicago Investment Corporation. First Chicago
Equity Corporation, a small business investment company licensed under the
Small Business Investment Act of 1958, offers equity funding for small
business ventures.
Tax-advantaged investment activities include advising on and investing in
leases for commercial aircraft and major industrial facilities and equipment.
Investments are also made in alternative energy programs and affordable
housing projects qualifying for tax credits under Section 29 and Section 42,
respectively, of the Internal Revenue Code of 1986. Primary support for these
activities is provided by First Chicago Leasing Corporation.
Value-oriented investment activities include positions in the distressed and
value investment markets, such as: loans, letters of credit, trade claims and
securities of distressed companies; securities of companies whose debt trades
below full face value of the claim; below-investment-grade tranches of
commercial mortgage-backed securities; and fixed-income securities, publicly
traded debt (including subordinated debt), equities, options and other
securities. Support for the majority of these activities is provided by First
Chicago Capital Corporation.
Funding and liquidity investment activities provide funding to meet the
incremental financing needs of the Corporation's bank subsidiaries through
placing deposits and making investments in the wholesale money markets to
provide a diversified funding base. These liquid investments include Fed funds
and interest-bearing deposits. In addition, investments are generally made in
short- to medium-term municipal, government, and agency securities that
provide increased liquidity and satisfy various collateral requirements.
Financial and Risk Policy
The Corporation's Risk Management Committee determines the desired risk
profile of the Corporation, allocates resources, including risk capacity
against expected return, to the lines of business, approves major investment
programs that are consistent with strategic priorities and risk appetite, and
makes capital management decisions to appropriately fund the Corporation's
portfolio of investments. The Risk Management Committee includes, among
others, the Chairman, the Chief Executive Officer, the Vice Chairmen, the
Chief Risk Management Officer and the Chief Financial Officer.
The Risk Management Committee is supported by: the Credit Risk Committees,
which are responsible for approving credit exposures within authorities
granted; the Investment Risk Management Committee, which is responsible for
approving trading and investment/sale decisions for the Corporation's own
account, managing the Corporation's liquidity, monitoring and adjusting
structural interest rate risk, and overseeing market-related trading
activities; the Fiduciary Risk Committee, which is responsible for approving
the processes and mechanisms designed to mitigate fiduciary risks; the
Operating Risk Committee, which is responsible for approving the processes and
mechanisms designed to mitigate operating risks; and the Review Committee,
which is responsible for providing strategic direction and senior management
oversight for the risk management process.
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EMPLOYEES
As of December 31, 1995, the Corporation and its subsidiaries had 35,328
employees on a full-time-equivalent basis.
COMPETITION
All of the Corporation's principal business activities are highly
competitive. The Corporation's subsidiaries, including the bank subsidiaries
(the "Banks"), compete actively with other financial services providers
offering a wide array of financial products and services. The Corporation's
competitors include other national and state banks, savings banks, savings and
loan associations, finance companies, credit unions, mutual funds, securities
brokers, mortgage bankers, leasing companies, insurance companies, other
domestic and foreign financial institutions and various nonfinancial
intermediaries.
MONETARY POLICY AND ECONOMIC CONTROLS
The earnings of the Banks, and therefore the earnings of the Corporation,
are affected by the policies of regulatory authorities, including the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). An
important function of the Federal Reserve Board is to promote orderly economic
growth by influencing interest rates and the supply of money and credit. Among
the methods that have been used to achieve this objective are open market
operations in U.S. government securities, changes in the discount rate on
member bank borrowings, and changes in reserve requirements against bank
deposits. These methods are used in varying combinations to influence overall
growth and distribution of bank loans, investments and deposits, interest
rates on loans and securities, and rates paid for deposits.
The Federal Reserve Board's monetary policies strongly influence the
behavior of interest rates and can have a significant effect on the operating
results of commercial banks. Recently, economic growth has been moderate, and
wage and price inflation stable. Given such circumstances, the Federal Reserve
Board has begun a gradual easing of credit conditions, nudging down interest
rates.
The effects of the various Federal Reserve Board policies on the future
business and earnings of the Corporation cannot be predicted. Other economic
controls also have affected the Corporation's operations in the past. The
management of the Corporation cannot predict the nature or extent of any
effects that possible future governmental controls or legislation may have on
its business and earnings.
SUPERVISION AND REGULATION
General
Bank holding companies, banks and financial institutions generally are
highly regulated, with numerous federal and state laws and regulations
governing their activities. As a bank holding company, the Corporation is
subject to regulation under the BHC Act and is subject to examination and
supervision by the Federal Reserve Board. Under the BHC Act, the Corporation
is prohibited, with certain exceptions, from acquiring or retaining direct or
indirect ownership or control of voting shares of any company that is not a
bank or bank holding company, and from engaging in activities other than those
of banking or of managing or controlling banks, other than subsidiary
companies engaged in activities that the Federal Reserve Board determines to
be so closely related to the business of banking as to be a proper incident
thereto. The acquisition of direct or indirect ownership or control of a bank
or bank holding company by the Corporation is also subject to certain
restrictions under the BHC Act and applicable state laws.
The Corporation is a legal entity separate and distinct from the Banks and
the Corporation's other affiliates. The Banks are subject to certain
restrictions imposed by the laws of the United States on any extensions of
credit to the Corporation or, with certain exceptions, other affiliates; on
investments in stock or other securities thereof; on the taking of such
securities as collateral for loans; and on the terms of transactions between
the Banks and other subsidiaries. The Corporation and its subsidiaries are
also subject to certain restrictions with respect to engaging in the issuance,
flotation, underwriting, public sale or distribution of securities.
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The national bank subsidiaries of the Corporation, including FNBC, ANB,
FCCNB and NBD Indiana, are supervised, examined and regulated by the Office of
the Comptroller of the Currency (the "Comptroller") under the National Bank
Act. Since national banks are also members of the Federal Reserve System and
their deposits are insured by the Federal Deposit Insurance Corporation (the
"FDIC"), they are also subject to the applicable provisions of the Federal
Reserve Act, the Federal Deposit Insurance Act, and, in certain respects, to
state laws applicable to financial institutions. NBD Michigan, NBD Illinois
and the other state-chartered bank subsidiaries of the Corporation are, in
general, subject to the same or similar restrictions and regulations, but with
more extensive regulation and examination by state banking departments, the
Federal Reserve Board for state banks that are members of the Federal Reserve
System, and the FDIC for state banks that are not members of the Federal
Reserve System. In addition, the Banks' operations in other countries are
subject to various restrictions imposed by the laws of such countries.
Federal law prohibits the Corporation and certain of its affiliates from
borrowing from the Banks without the prior approval of the respective Bank's
Board of Directors and unless such loans are secured by United States Treasury
securities or other specified obligations. Further, such secured loans and
investments by any of the Banks are limited in amount as to the Corporation or
any other such affiliate to 10% of the respective Bank's capital and surplus
and as to the Corporation and all such affiliates to an aggregate 20% of the
respective Bank's capital and surplus. Under Federal Reserve Board policy, the
Corporation is expected to act as a source of financial strength to each Bank
and to commit resources to support such Bank in circumstances where it might
not do so absent such policy. In addition, any capital loans by the
Corporation to any of the Banks would be subordinate in right of payment to
deposits and to certain other indebtedness of such Bank.
Additionally, there are certain federal and state regulatory limitations on
the payment of dividends to the Corporation by the Banks. Dividend payments by
national banks are limited to the lesser of (i) the level of "undivided
profits then on hand" less the amount of bad debts, as defined, in excess of
the allowance for credit losses and (ii) absent regulatory approval, an amount
not in excess of "net profits" for the current year combined with "retained
net profits" for the preceding two years. As of January 1, 1996, the Banks
could have declared additional dividends of approximately $1.2 billion without
the approval of banking regulatory agencies. The payment of dividends by any
Bank may also be affected by other factors, such as the maintenance of
adequate capital for such Bank. Banking regulatory agencies have the authority
to prohibit the banking organizations they supervise from paying dividends if,
in the banking regulator's opinion, the payment of dividends would, in light
of the financial condition of such bank, constitute an unsafe or unsound
practice.
As a bank holding company, the Corporation, along with its subsidiaries, is
prohibited from engaging in certain tie-in arrangements in connection with
extensions of credit or providing property or services.
Legislation may be enacted or regulation imposed in the United States or its
political subdivisions, or in any other jurisdiction in which the Corporation
does business, to further regulate banking and financial services. There can
be no assurance whether any such legislation or regulation will place
additional limitations on the Corporation's operations.
A number of lawsuits and administrative actions have been filed in several
states against credit card issuing banks challenging various fees and charges
assessed against residents of the states in which such suits were filed. Two
state supreme courts and two federal appeals courts have affirmed dismissal of
these cases on the ground that individual state prohibitions on assessing
these fees or charges are preempted by federal laws. In 1995, the New Jersey
Supreme Court ruled that state prohibitions on late fees are not preempted by
federal laws, and the issue is now before the U.S. Supreme Court. If the
Supreme Court resolves this case adversely to credit card issuing banks, the
decision could have the effect of limiting certain fees and charges that could
be assessed on credit card accounts and could subject card issuing banks to
the payment of refunds or civil penalties. It is not practicable to determine
the amount of such refunds or penalties FCCNB, the Corporation's primary
issuer of bank credit cards, might have to pay in such event, but any such
payment could have an adverse impact on the Corporation's Credit Card
business.
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Capital Adequacy
The Federal Reserve Board has adopted risk-based capital guidelines that
require bank holding companies to maintain a minimum ratio of total capital to
risk-weighted assets (including certain off-balance-sheet items, such as
standby letters of credit) of 8%. At least half of total capital must be
composed of common stockholders' equity, noncumulative perpetual preferred
stock, and a limited amount of cumulative perpetual preferred stock, less
disallowed intangibles and other adjustments ("Tier I capital"). The remainder
("Tier II capital") may consist of subordinated debt, other preferred stock,
certain other instruments and a limited amount of loan loss reserves. At
December 31, 1995, the Corporation's consolidated Tier I capital and total
capital ratios were 7.8% and 11.8%, respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier I capital to total average assets (the "leverage ratio")
of 3% for bank holding companies that meet certain specified criteria,
including those having the highest regulatory rating. All other bank holding
companies generally are required to maintain a leverage ratio of at least 3%
plus an additional cushion of 100 to 200 basis points. The Corporation's
leverage ratio at December 31, 1995, was 6.9%. The guidelines also provide
that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the Federal Reserve Board has
indicated that it will consider a "tangible Tier I capital leverage ratio"
(deducting all intangibles) and other indicia of capital strength in
evaluating proposals for expansion or new activities.
Each of the Banks is subject to similar risk-based and leverage capital
requirements adopted by its applicable federal banking agency. Each of the
Corporation's Banks was in compliance with the applicable minimum capital
requirements as of December 31, 1995. Neither the Corporation nor any of the
Banks has been advised by any federal banking regulatory agency of any
specific minimum leverage ratio requirement applicable to it.
Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described below
under "FDICIA and FIRREA."
Banking regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations beyond their current levels.
However, the management of the Corporation is unable to predict whether higher
capital requirements will be imposed and, if so, at what levels and on what
schedule.
FDICIA and FIRREA
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
significantly expanded the regulatory and enforcement powers of federal
banking regulators, in particular the FDIC, and has important consequences for
the Corporation, the Banks and other depository institutions located in the
United States.
A major feature of FDICIA is the comprehensive directions it gives to
federal banking regulators to promptly direct or require the correction of
problems at inadequately capitalized banks in the manner that is least costly
to the federal deposit insurance funds. The degree of corrective regulatory
involvement in the operations and management of banks and their holding
companies is, under FDICIA, largely determined by the actual or anticipated
capital positions of the subject institutions.
FDICIA established five tiers of capital measurement for regulatory purposes
ranging from "well-capitalized" to "critically undercapitalized." Under
regulations adopted by the federal banking agencies, a depository institution
is well-capitalized if it significantly exceeds the minimum level required by
regulation for each relevant capital measure, adequately capitalized if it
meets such measure, undercapitalized if it fails to meet any such measure,
significantly undercapitalized if it is significantly below such measure and
critically undercapitalized if its tangible equity is not greater than 2% of
total tangible assets. A depository institution may
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be deemed to be in a capitalization category lower than is indicated by its
actual capital position if it receives an unsatisfactory examination rating.
FDICIA requires banking regulators to take increasingly strong corrective
steps, based on the capital tier of any subject bank, to cause such bank to
achieve and maintain capital adequacy. Even if a bank is adequately
capitalized, however, the banking regulators are authorized to apply
corrective measures if the bank is determined to be in an unsafe or unsound
condition or engaging in an unsafe or unsound activity.
Depending on the level of capital of an insured depository institution, the
banking regulatory agencies' corrective powers can include: requiring a
capital restoration plan; placing limits on asset growth and restrictions on
activities; requiring the institution to reduce total assets; requiring the
institution to issue additional stock (including voting stock) or to be
acquired; placing restrictions on transactions with affiliates; restricting
the interest rate the institution may pay on deposits; ordering a new election
for the institution's board of directors; requiring that certain senior
executive officers or directors be dismissed; prohibiting the institution from
accepting deposits from correspondent banks; requiring the institution to
divest certain subsidiaries; prohibiting the payment of principal or interest
on subordinated debt; prohibiting the institution's parent holding company
from making capital distributions without prior regulatory approval; and,
ultimately, appointing a receiver for the institution.
If the insured depository institution is undercapitalized, the parent
holding company is required to guarantee that the institution will comply with
any capital restoration plan submitted to, and approved by, the appropriate
federal banking agency in an amount equal to the lesser of (i) 5% of the
institution's total assets at the time the institution became undercapitalized
or (ii) the amount that is necessary (or would have been necessary) to bring
the institution into compliance with all applicable capital standards as of
the time the institution fails to comply with the capital restoration plan. If
such parent holding company guarantee is not obtained, the capital restoration
plan may not be accepted by the banking regulators. As a result, such
institution would be subject to the more severe restrictions imposed on
significantly undercapitalized institutions. Further, the failure of such a
depository institution to submit an acceptable capital plan is grounds for the
appointment of a conservator or receiver.
FDICIA also contains a number of other provisions affecting depository
institutions, including additional reporting and independent auditing
requirements, the establishment of safety and soundness standards, the system
of risk-based assessments described below under "FDIC Insurance," a review of
accounting standards, and supplemental disclosures and limits on the ability
of all but well-capitalized depository institutions to acquire brokered
deposits. The Riegle Community Development and Regulatory Improvement Act of
1994, however, among other things, contains a number of specific provisions
easing the regulatory burden on banks and bank holding companies, including
some imposed by FDICIA, and making the bank regulatory system more efficient.
Federal banking regulators are taking actions to implement these provisions.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), among other things, provides generally that, upon the default of
any bank of a multi-unit holding company, the FDIC may assess an affiliated
insured depository institution for the estimated losses incurred by the FDIC.
Specifically, FIRREA provides that a depository institution insured by the
FDIC can be held liable for any loss incurred by, or reasonably expected to be
incurred by, the FDIC in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to a commonly controlled FDIC-insured depository institution in
danger of a default. "Default" is defined generally as the appointment of a
conservator or receiver. "In danger of a default" is defined generally as the
existence of certain conditions indicating that a default is likely to occur
in the absence of regulatory assistance. All of the Banks are FDIC-insured
depository institutions.
FDIC Insurance
The Banks are subject to FDIC deposit insurance assessments. Under the
FDIC's risk-based assessment system, the assessment rate is based on
classification of a depository institution in one of nine risk assessment
categories. Such classification is based upon the institution's capital level
and upon certain supervisory evaluations of the institution by its primary
regulator.
9
<PAGE>
The assessment rate schedule, effective January 1, 1996, creates a spread in
assessment rates ranging from 0.27% per annum on the amount of domestic
deposits for banks classified as weakest by the FDIC down to the statutory
annual minimum of $2,000 for banks classified as strongest by the FDIC.
Interstate Banking and Branching
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Riegle-Neal Act") significantly revised prior laws applicable to interstate
acquisitions of banks and bank holding companies and the branching powers of
national banks. Prior to the Riegle-Neal Act, the Federal Reserve Board was
not permitted to approve an application to acquire shares of a bank located
outside the state in which the operations of the applicant's bank subsidiaries
were principally conducted unless the acquisition was specifically authorized
by a statute of the acquired bank's state. Effective September 29, 1995, the
Federal Reserve Board is now authorized to approve an application of an
adequately capitalized and adequately managed bank holding company to acquire
control of a bank located in another state without regard to whether such
transaction is prohibited under the laws of such state. The Federal Reserve
Board may not, however, approve such an application if, following the
acquisition, the applicant would control either (l) more than 10% of all
insured depository institution deposits in the United States or (2) under
certain circumstances, 30% or more of all insured depository institution
deposits in any state where either the applicant or the acquired bank is
located. The 30% limit on aggregate deposits that may be controlled by an
applicant can be adjusted by the states on a non-discriminatory basis.
The Riegle-Neal Act also revises the laws applicable to mergers between
insured banks located in different states. Before passage of the Riegle-Neal
Act, such mergers generally were not authorized. Commencing June l, 1997,
however, adequately capitalized and adequately managed insured banks in
different states may merge without regard to whether the merger is authorized
under the laws of any state. States may elect to prohibit interstate bank
mergers or may elect to permit early interstate bank mergers by adopting,
prior to June 1, 1997, legislation that expressly so provides, and that
applies on equal terms to all out-of-state banks. The Riegle-Neal Act provides
that an interstate merger involving the acquisition of a branch (as
distinguished from an entire bank) or the de novo establishment of a national
bank branch in another state may be approved only if the law of the host state
expressly permits such action. An interstate merger may not be approved if,
following the merger, the resulting bank would control (1) more than 10% of
all insured depository institution deposits in the United States or (2) under
certain circumstances, 30% or more of all insured depository institution
deposits in any state where the resulting bank will be located. The 30% limit
on aggregate deposits that may be controlled by the resulting bank can be
adjusted by the states on a non-discriminatory basis. The laws of the host
state regarding community reinvestment, consumer protection, fair lending and
the establishment of intrastate branches will apply to any out-of-state branch
of a national bank unless preempted by federal law or the Comptroller
determines that application of such laws would have a discriminatory effect on
the national bank.
The Riegle-Neal Act contains a number of other provisions related to banks
and bank holding companies, including: authorization of interstate branching
by foreign banks; additional branch closing notice requirements for interstate
banks proposing to close a branch in a low- or moderate-income area;
amendments to the Community Reinvestment Act of 1977 to require separate
written evaluations of an insured depository institution for each state in
which it maintains branches; a prohibition on interstate banks maintaining
out-of-state deposit production offices; and authorization for a bank
subsidiary of a bank holding company to receive deposits, renew time deposits,
close and service loans, and receive payments on loans as agent for a
depository institution affiliate of such bank.
The extent to and terms on which full interstate branching and certain other
actions authorized under the Riegle-Neal Act are implemented will depend on
the actions of entities other than the Corporation and the Banks, including
the legislatures of the various states. Further developments by state and
federal authorities, including legislation, with respect to matters covered by
the Riegle-Neal Act reasonably can be anticipated to occur in the future. In
addition, there may be new, significant banking legislation enacted or
introduced in the current Congress related to bank holding companies and their
powers; the likelihood of passage and effect, if any, of such legislation on
the Corporation and the Banks cannot be predicted.
10
<PAGE>
Other
FNBC, NBD Michigan and ANB are registered with the Comptroller or the
Securities and Exchange Commission (the "Commission") as transfer agents and
are subject to the rules and regulations of the Commission and/or the
Comptroller with respect to their activities as transfer agents.
Certain organizational units within FNBC, NBD Michigan, ANB and NBD Indiana
are registered with the Commission as municipal securities dealers. These
units are subject to the applicable rules and regulations of the Commission
and the Municipal Securities Rulemaking Board with respect to transactions in
municipal securities performed in a municipal securities dealer capacity.
FNBC, NBD Michigan and NBD Indiana also are regulated government securities
brokers and dealers under the Government Securities Act, and are subject to
regulations issued thereunder in connection with the conduct of their United
States government securities business.
In addition, First NBD Investment Services, Inc. ("FNIS"), a brokerage
subsidiary of FNBC, and NBD Brokerage Services, Inc. ("NBD Brokerage"), an
indirect brokerage subsidiary of the Corporation, are registered as broker-
dealers with the Commission and are members of the National Association of
Securities Dealers ("NASD"). The brokerage activities of FNIS and NBD
Brokerage are subject to the applicable rules and regulations of the
Commission and the NASD. It is anticipated that NBD Brokerage will merge with
and into FNIS during 1996. FCCM is also registered as a broker-dealer with the
Commission and is a member of the NASD. The securities distribution and
trading activities of FCCM are subject to the applicable rules and regulations
of the Federal Reserve Board, the Commission and the NASD.
First Chicago Futures, Inc. ("FCFI"), a subsidiary of FNBC that conducts a
commodities brokerage business and is a market maker in foreign currency
options, is registered with the Commission as a broker-dealer and with the
Commodity Futures Trading Commission ("CFTC") as a futures commission
merchant, and is a member of the National Futures Association ("NFA"). FCFI is
subject to the applicable rules and regulations of the Commission, the CFTC,
the NFA, and certain commodities and securities exchanges of which FCFI is a
member with respect to its activities as a foreign currency market maker and a
futures commission merchant.
First Chicago Investment Management Company ("FCIMC"), a subsidiary of FNBC,
and ANB Investment Management and Trust Company ("ANB IMC"), a subsidiary of
FCIMC, provide investment advisory, management and administrative services to
a variety of clients. FCIMC and ANB IMC are registered with the Commission as
investment advisers and, as such, are subject to the Investment Advisers Act
of 1940. In addition, as advisers to regulated investment companies, FCIMC and
NBD Michigan also may be subject to certain provisions of the Investment
Company Act of 1940.
The Corporation's insurance services and products are marketed through
various bank and nonbank subsidiaries, each of which is licensed and regulated
by applicable state insurance regulatory agencies. Similarly, certain of the
Corporation's mortgage banking activities are subject to various federal and
state licensing and/or regulatory requirements.
11
<PAGE>
FINANCIAL REVIEW
INDEX TO FINANCIAL REVIEW
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Selected Financial Data.................................................... 13
Business Segments.......................................................... 14
Earnings Analysis.......................................................... 18
Risk Management............................................................ 23
Liquidity Risk Management.................................................. 24
Market Risk Management..................................................... 25
Credit Risk Management..................................................... 29
Derivative Financial Instruments........................................... 34
Capital Management......................................................... 36
Consolidated Financial Statements.......................................... 40
Notes to Consolidated Financial Statements................................. 44
Report of Management on Responsibility for Financial Reporting............. 71
Report of Independent Public Accountants................................... 73
Selected Statistical Information........................................... 74
</TABLE>
12
<PAGE>
Selected Financial Data
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER 1995 1994 1993 1992 1991
SHARE DATA) -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
SUMMARY OF INCOME
Net interest income............. $3,208 $2,956 $2,784 $2,692 $2,418
Provision for credit losses..... 510 276 390 653 606
Provision for assets held for
accelerated disposition (1).... -- -- -- 625 --
Noninterest income.............. 2,591 2,393 2,769 2,018 1,703
Merger-related charges.......... 267 -- -- 76 --
Other noninterest expense....... 3,268 3,220 3,161 3,084 2,867
Income before cumulative effect
of changes in accounting
principles..................... 1,150 1,221 1,290 224 478
Net income...................... 1,150 1,221 1,290 394 478
EARNINGS PER SHARE
Primary
Income before cumulative
effect of changes in
accounting principles........ $3.45 $3.62 $3.91 $0.60 $1.56
Net income.................... 3.45 3.62 3.91 1.17 1.56
Fully diluted
Income before cumulative
effect of changes in
accounting principles........ 3.41 3.58 3.79 0.60 1.55
Net income.................... 3.41 3.58 3.79 1.17 1.55
PERIOD-END BALANCES
Total assets.................... $122,002 $112,763 $93,140 $90,011 $87,573
Long-term debt.................. 8,163 7,246 5,250 4,175 3,822
Total stockholders' equity...... 8,450 7,809 7,499 6,323 5,660
COMMON SHARE DATA
Dividends declared.............. $ 1.35 $ 1.23 $ 1.08 $ 1.04 $ 0.95
Book value, year-end............ 25.25 22.60 21.25 18.27 18.06
Market price, year-end.......... 39 1/2 27 3/8 29 3/4 32 3/4 29 3/4
CAPITAL RATIOS (2)
Common equity-to-assets ratio... 6.9% 6.8% 7.6% 6.5% 6.0%
Regulatory leverage ratio....... 6.9 7.3 7.8 6.6 6.5
Risk-based capital
Tier 1 ratio.................. 7.8 8.6 9.0 7.4 6.5
Total capital ratio........... 11.8 13.0 13.6 11.3 9.8
</TABLE>
- --------
(1) Of the total provision, $491 million relates to loans and $134 million
relates to other real estate held for accelerated disposition.
(2) Net of investment in FCCM.
13
<PAGE>
Business Segments
OVERVIEW
Financial results are reported by major business lines,
principally structured around the customer segments served. These
major business segments are: Credit Card, Regional Banking (retail
and middle market), Corporate and Institutional Banking, and
Corporate Investments. Investment management activities, while
managed separately, serve customers in both the Regional and
Corporate and Institutional Banking segments and, therefore,
investment management's financial results are captured within those
businesses.
EARNINGS CONTRIBUTION BY BUSINESS LINES
[PIE CHART] [PIE CHART]
1995* 1994
Credit Card = 23% Credit Card = 27%
Retail = 17% Retail = 15%
Middle Market = 21% Middle Market = 18%
Corporate and Institutional = 21% Corporate and Institutional = 18%
Corporate Investments = 17% Corporate Investments = 17%
Other = 1% Other = 5%
*Operating Earnings
Certain corporate revenues and expenses, generally unusual or one
time in nature, are included in Other Activities. Information for
1994 has been restated to reflect the management of activities
consistent with the major business segments. Information for 1993 is
not available to present a meaningful analysis of such results.
Results are derived from the internal profitability reporting
systems and reflect full allocation of all institutional and
overhead items. These systems use a detailed funds transfer
methodology and a common equity allocation based on risk elements.
Credit Card results are presented before the securitization of
credit card receivables ("presecuritized") to facilitate analysis of
trends. See the discussion of net interest income on page 19 and a
reconciliation of reported to presecuritized results on page 75.
CREDIT CARD
<TABLE>
<CAPTION>
(PRESECURITIZED)
1995 1994(1)
(DOLLARS IN MILLIONS, EXCEPT WHERE NOTED) ------ -----
<S> <C> <C>
Net interest income--tax-equivalent basis................. $1,175 $987
Provision for credit losses............................... 708 477
Noninterest income........................................ 560 491
Noninterest expense....................................... 541 459
Net income................................................ 302 336
Return on equity.......................................... 36% 52%
Efficiency ratio(2)....................................... 31% 31%
Average loans (in billions)............................... $14.3 $11.4
Average common equity (in billions)....................... 0.8 0.6
</TABLE>
-------
(1) For comparison purposes, 1994 noninterest income and noninterest
expense have been adjusted to reflect the terms of the current
Mileage Plus affinity agreement; see the discussion of this
agreement on page 21.
(2) Noninterest expense as a percentage of total revenue.
14
<PAGE>
Among the four largest bankcard issuers in the United States, Credit Card is
a prominent business for the Corporation. For the year, Credit Card posted a
superior return on equity of 36%, with net income of $302 million, or 23% of
total operating earnings. Earnings in 1994 were $336 million. During 1995, a
record 3.4 million new credit card accounts were added, and managed credit
card receivables grew 34% to $17.5 billion at year-end 1995.
Net interest income rose $188 million, or nearly 20%, in 1995 as higher
credit card volume more than offset the effect of reduced spreads from
competitive pricing pressures. Expenses also increased significantly,
reflecting the costs of soliciting new accounts. Credit Card's operating
efficiency remained excellent in 1995, at 31%.
The Credit Card business experienced some deterioration in credit quality in
1995, as reflected in the substantial increase in provision. The net charge-
off rate for managed credit card receivables rose to 4.0% for the year from
3.5% in 1994. The Corporation, however, maintains a high level of reserves
related to this business. At December 31, 1995, the allowance for credit
losses related to Credit Card was $303 million. In addition, the reserve for
securitized credit card receivables totaled $302 million.
Although the rate of growth in receivables may decline in 1996 from 1995's
very high level, Credit Card should continue to provide attractive returns.
REGIONAL BANKING
<TABLE>
<CAPTION>
MIDDLE
RETAIL MARKET
-------------- ------------
1995 1994 1995 1994
(DOLLARS IN MILLIONS, EXCEPT WHERE NOTED) ------ ------ ----- -----
<S> <C> <C> <C> <C>
Net interest income--tax-equivalent basis......... $1,174 $1,088 $ 834 $ 719
Provision for credit losses....................... 47 27 50 49
Noninterest income................................ 493 440 156 154
Noninterest expense............................... 1,237 1,216 488 461
Net income........................................ 234 183 280 221
Return on equity.................................. 17% 17% 16% 15%
Efficiency ratio(1)............................... 74% 80% 49% 53%
Average loans (in billions)....................... $15.9 $13.2 $15.3 $13.2
Average assets (in billions)...................... 18.3 14.4 17.7 15.6
Average common equity (in billions)............... 1.3 1.1 1.7 1.4
</TABLE>
- --------
(1) Noninterest expense as a percentage of total revenue.
Regional Banking is conducted through the branch and electronic networks of
NBD Banks in Michigan, Indiana, Illinois and Florida, and FNBC. Additionally,
ANB provides banking services specifically tailored to middle market
businesses in Chicagoland.
Close to 40% of the Corporation's operating earnings in 1995 were generated
from these retail and middle market businesses, where the Corporation is the
leading banking company in the three-state region of Michigan, Indiana and
Illinois. Combined loans in Regional Banking averaged $31.2 billion in 1995,
representing 53% of the Corporation's total loans and up 18% from 1994.
Retail banking produced net income of $234 million, for a return on equity
of 17%. Earnings for retail banking were $183 million in 1994. The significant
improvement in profitability was driven by all key areas. A 20% increase in
loan volume contributed to higher spread income, while the results of a
deposit fee restructuring program boosted noninterest income. Careful
noninterest expense management (less than 2% growth) helped improve the
efficiency ratio for retail banking from 80% in 1994 to 74% in 1995.
Middle market earnings in 1995 were $280 million, up from $221 million in
1994. Return on equity was 16%. The growth in net interest income was due to
favorable interest rate spreads and higher average loan volumes (up 16%).
Provision expense remained fairly stable in 1995 and operating efficiency
continued to be excellent.
The growth dynamics for Regional Banking present opportunities for further
profit improvement. The potential for cost savings is especially high as the
full integration of NBD Illinois into FNBC and ANB takes place in 1996.
15
<PAGE>
CORPORATE AND INSTITUTIONAL BANKING
<TABLE>
<CAPTION>
1995 1994
(DOLLARS IN MILLIONS, EXCEPT WHERE NOTED) ----- -----
<S> <C> <C>
Net interest income--tax-equivalent basis......................... $ 700 $ 613
Provision for credit losses....................................... 41 (21)
Noninterest income................................................ 718 597
Noninterest expense............................................... 930 875
Net income........................................................ 278 217
Return on equity.................................................. 9% 7%
Efficiency ratio(1)............................................... 66% 72%
Average loans (in billions)....................................... $19.3 $16.7
Average assets (in billions)...................................... 54.7 44.2
Average common equity (in billions)............................... 2.9 2.8
</TABLE>
- --------
(1) Noninterest expense as a percentage of total revenue.
Through its Corporate and Institutional Banking business, the Corporation is
the leading provider of banking services to large corporations, governments,
institutions and investors in Chicago and the Midwest. It is also among the
top U.S. banking companies serving national and international customers.
Corporate and Institutional Banking earned $278 million in 1995, up from
$217 million in 1994. This segment received the largest allocation of equity
among all business lines and generated a return of 9% in 1995. Revenues from
the major product sets within this large business line are presented in the
following table.
TOTAL REVENUE
<TABLE>
<CAPTION>
1995 1994
(IN MILLIONS) ------ ------
<S> <C> <C>
Trading........................................................... $ 210 $ 91
Servicing......................................................... 539 502
Lending........................................................... 411 389
Financing......................................................... 118 119
Other............................................................. 140 109
------ ------
Total......................................................... $1,418 $1,210
====== ======
</TABLE>
Revenue from trading activities (trading profits and related net interest
income) was $210 million in 1995, up from $91 million in 1994. This
substantial improvement was primarily in emerging markets and derivatives
trading. The emerging markets segment had modest gains in 1995 compared with a
loss of $49 million in 1994. In the third quarter of 1995, the Corporation
announced its exit from trading in emerging markets securities.
Servicing revenue was higher year to year, largely due to cash management
operations. Lending revenue was also up as average loans grew over 15% in 1995
to $19.3 billion.
The 1995 growth in expenses was due in part to higher incentive compensation
resulting from the improved trading performance as well as initiatives to
expand cash management and risk management capabilities. In 1996, cost savings
are expected from the integration of Corporate and Institutional Banking's
international network. Furthermore, the Merger offers cross-selling
opportunities in this business, which should result in revenue growth.
Rigorous management of capital and expenses will continue in order to improve
profitability further.
16
<PAGE>
CORPORATE INVESTMENTS
<TABLE>
<CAPTION>
1995 1994
(DOLLARS IN MILLIONS, EXCEPT WHERE NOTED) ----- -----
<S> <C> <C>
Net interest income--tax-equivalent basis......................... $ 117 $ 135
Provision for credit losses....................................... -- --
Noninterest income................................................ 297 254
Noninterest expense............................................... 62 58
Net income........................................................ 232 207
Return on equity.................................................. 32% 24%
Average assets (in billions)...................................... $24.2 $27.6
Average common equity (in billions)............................... 0.7 0.8
</TABLE>
Many of the Corporation's business activities that are not specifically
oriented to its customers are combined in Corporate Investments. Included in
this segment are the venture capital portfolio, leveraged leasing, funding and
arbitrage, the investment account and assorted other investment and trading
activities.
In 1995, Corporate Investments was a significant contributor to earnings,
generating $232 million, or 17%, of consolidated operating net income. Strong
equity securities gains--$253 million--were the driver of this performance.
The nature of Corporate Investments implies that it will be a more variable
component of earnings going forward than the other business lines. However,
because of the Corporation's experience in this high-return area, continued
significant earnings contributions are expected.
OTHER ACTIVITIES
<TABLE>
<CAPTION>
1995 1994
(DOLLARS IN MILLIONS, EXCEPT WHERE NOTED) ----- ----
<S> <C> <C>
Total revenue...................................................... $ 14 $141
Noninterest expense................................................ 277 79
Net income (loss).................................................. (176) 57
Average assets (in billions)....................................... 0.4 0.1
</TABLE>
Merger-related charges totaled $267 million in 1995, of which $225 million
was related to direct merger and restructuring costs. The implementation of
these restructuring efforts will contribute to estimated annualized cost
savings of $200 million by 1997. The remaining one-time charges of $42 million
were for the conformance of accounting practices between the merged companies.
(See Note 4 beginning on page 48 for more details.)
Investment securities losses of $19 million are included in Other
Activities. These losses were produced from the sale of approximately $1.5
billion in investment securities, where the returns were not commensurate with
the securities' risks and volatilities. These sales were part of the merger-
related program to reduce assets by $25 billion by 1997.
Net gains from the disposition of assets held in the accelerated disposition
portfolio totaled $37 million in 1995, compared with $46 million in 1994. Also
included in 1994 results is a $35 million gain from the sale of an interest in
an investment management business.
Noninterest expense in 1994 included a charge of $25 million related to the
depreciation of personal computer equipment and other expenses of $19 million
related to general corporate activities.
17
<PAGE>
STAFFING LEVELS
The following table lists average staff levels for each business segment and
for corporate staff and other functions. The corporate staff costs are
included in the major business lines.
<TABLE>
<CAPTION>
1995 1994
AVERAGE FULL-TIME-EQUIVALENT STAFF ------ ------
<S> <C> <C>
Credit Card.................................................... 3,562 3,020
Retail......................................................... 14,481 14,985
Middle Market.................................................. 3,367 3,383
Corporate and Institutional Banking............................ 6,961 7,138
Corporate Investments.......................................... 220 222
Corporate Staff/Other.......................................... 6,761 6,894
------ ------
Total First Chicago NBD Corporation........................ 35,352 35,642
====== ======
</TABLE>
Earnings Analysis
SUMMARY
Net income for 1995 was $1.150 billion, or $3.41 per share, compared with
$1.221 billion, or $3.58 per share, in 1994 and $1.290 billion, or $3.79 per
share, in 1993.
Operating earnings, which exclude the after-tax effect of merger-related
charges and fourth quarter 1995 investment securities losses, were $1.341
billion, or $3.99 per share in 1995.
<TABLE>
<CAPTION>
1995 1994 1993
(IN MILLIONS, EXCEPT PER SHARE DATA) ------ ------ ------
<S> <C> <C> <C>
Reported
Net income.............................................. $1,150 $1,221 $1,290
Fully diluted earnings per share........................ 3.41 3.58 3.79
Operating
Net income.............................................. $1,341 $1,221 $1,290
Fully diluted earnings per share........................ 3.99 3.58 3.79
</TABLE>
The Corporation's 1995 results continued to reflect excellent performance in
its core businesses. Highlights of the year were:
. The Credit Card business posted earnings of $302 million. Average managed
credit card receivables increased 24% and managed receivables reached
$17.5 billion at year-end 1995.
. Combined trading profits were $210 million, reflecting significant
improvement from $86 million generated in 1994.
. Loan growth of 18% in the Regional Banking businesses contributed to the
increase in net interest income.
. Equity securities gains rose substantially to $253 million.
. Noninterest expense growth in 1995, excluding merger-related charges of
$267 million and adjusted for the Mileage Plus reclassification, was
limited to 4%.
. Commercial credit quality remained strong. Commercial nonperforming
assets totaled $397 million at year-end 1995, contributing to an overall
nonperforming asset ratio of 0.6% and resulting in a commercial coverage
ratio of 272%.
. A strong capital position was maintained during 1995 with key ratios in
excess of regulatory guidelines.
On an operating earnings basis, return on common equity was 16.8% for 1995,
compared with 16.6% for 1994 and 19.9% for 1993.
18
<PAGE>
NET INTEREST INCOME
Net interest income includes fundamental spreads on earning assets as well as
such items as loan fees, cash interest collections on problem loans, dividend
income, interest reversals, and income or expense on interest rate derivatives
used to manage interest rate risk.
Net interest margin measures the efficiency of the use of the Corporation's
earning assets and its underlying capital. In order to analyze fundamental
trends in net interest margin, it is useful to adjust for securitization of
credit card receivables and the activities of FCCM.
<TABLE>
<CAPTION>
1995 1994 1993
(DOLLARS IN MILLIONS) -------- ------- -------
<S> <C> <C> <C>
Reported
Net interest income--tax-equivalent basis......... $ 3,311 $ 3,043 $ 2,893
Average earning assets............................ 105,306 92,598 84,891
Net interest margin............................... 3.14% 3.29% 3.41%
Adjusted
Net interest income--tax-equivalent basis......... $ 3,956 $ 3,579 $ 3,353
Average earning assets............................ 101,793 88,969 82,984
Net interest margin............................... 3.89% 4.02% 4.04%
</TABLE>
When credit card receivables are sold in securitization transactions, the
Corporation's earnings are unchanged. However, the net interest income related
to these high-yield assets is replaced by increased servicing fees, net of
related credit losses. The average levels of securitized receivables were $7.2
billion in 1995, $5.5 billion in 1994 and $4.8 billion in 1993.
FCCM is the Corporation's wholly owned subsidiary engaged in permissible
investment banking activities. Because capital requirements for FCCM are risk-
exposure driven rather than based on asset levels, FCCM can generate
substantial volumes of relatively riskless, thin-spread earning assets that
require little additional capital. The Corporation's net interest margin trends
can be better analyzed if these earning assets and related margins are
excluded.
Adjusted net interest income increased 11% to $4.0 billion in 1995. In 1994,
adjusted net interest income was $3.6 billion, up 7% over 1993 levels. In both
periods, the increases were driven primarily by growth in average earning
assets. The following charts show the composition of both adjusted average
earning assets and adjusted average loans over the last two years.
ADJUSTED AVERAGE EARNING ASSETS ADJUSTED AVERAGE LOANS
[BAR GRAPH] [BAR GRAPH]
$ Billions $ Billions
1994 1995 1994 1995
Loans = 56 66 Corporate & Institutional = 17 19
Securities = 15 13 Middle Market = 13 15
Trading Assets = 7 11 Retail = 13 16
Other Short-term Credit Card = 11 14
Investments = 11 12 Corporate Investments/Other = 2 2
19
<PAGE>
Adjusted net interest margin in 1995 was 3.89%, down slightly from 4.02% in
1994. The decline was primarily attributable to a less profitable earning
asset mix, reflecting the growth in thinly priced assets, principally trading
assets and loans to large corporate customers.
NONINTEREST INCOME
<TABLE>
<CAPTION>
PERCENT
INCREASE (DECREASE)
-------------------
1995 1994 1993 1994-1995 1993-1994
(DOLLARS IN MILLIONS) ------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Combined trading profits............ $ 210 $ 86 $ 305 144% (72)%
Equity securities gains............. 253 229 488 10 (53)
Investment securities gains
(losses)........................... (16) (1) 2 N/M N/M
------ ------ ------
Market-driven revenue............. 447 314 795 42 (61)
Credit card fee revenue............. 901 871 730 3 19
Fiduciary and investment management
fees............................... 404 377 374 7 1
Service charges on deposits......... 382 372 377 3 (1)
Other service charges and
commissions........................ 353 316 327 12 (3)
Gain on sale of loans............... 7 6 50 17 (88)
Accelerated disposition portfolio
gains.............................. 37 46 60 (20) (23)
Gain on sale of investment advisory
business........................... -- 35 -- N/M N/M
Other............................... 60 56 56 7 --
------ ------ ------
Total........................... $2,591 $2,393 $2,769 8 (14)
====== ====== ======
</TABLE>
- --------
N/M--Not Meaningful
Noninterest income increased by $198 million in 1995, following a decrease
of $376 million, or 14%, in 1994. Much of the change in both years reflected
the volatility in market-driven revenue, principally the level of trading
profits and equity securities gains.
The following table provides additional details on revenue from the
Corporation's various trading businesses, including both trading profits and
net interest income generated from these activities.
TRADING REVENUE
<TABLE>
<CAPTION>
1995 1994 1993
(IN MILLIONS) ---- ---- ----
<S> <C> <C> <C>
Foreign exchange and derivatives............................... $ 83 $ 56 $113
Fixed income and derivatives................................... 106 74 121
Emerging markets............................................... 6 (49) 57
Other trading.................................................. 97 79 126
---- ---- ----
Total...................................................... $292 $160 $417
==== ==== ====
</TABLE>
Revenue from trading activities (trading profits and related net interest
income) totaled $292 million in 1995, versus $160 million in 1994. The marked
improvement from 1994 was concentrated in the foreign exchange and derivatives
segment, where increased customer demand and market volatility provided
additional profit opportunities. The Corporation decided to exit the emerging
markets trading business in the third quarter of 1995 and liquidated
substantially all of its positions by year-end 1995.
Equity securities gains, principally from Corporate Investment activities,
were $253 million during 1995, compared with $229 million in 1994 and a record
$488 million in 1993.
Investment securities losses totaled $16 million in 1995, compared with
losses of $1 million in 1994 and gains of $2 million in 1993. During the
fourth quarter of 1995, the Corporation sold $1.5 billion of investment
securities, which produced losses of $19 million. These sales were consistent
with the Corporation's asset
20
<PAGE>
reduction goal of $25 billion. From June 30, 1995, to December 31, 1995,
investment securities were reduced by $4.2 billion.
In 1995, the Corporation renewed its agreement with United Airlines,
extending the successful Mileage Plus credit card program into the next
century. As a result, beginning in 1995 payments to United Airlines reduce
credit card fee revenue rather than increase operating expense. Adjusted for
the effects of credit card securitizations and the change in the
classification of Mileage Plus payments, credit card fee revenue grew 15% in
1995. Increased transaction volume due in part to a growing cardholder base
was the primary reason for the revenue growth.
Fiduciary and investment management fees include revenue generated by the
Corporation's traditional trust products and services, investment management
activities, and the shareholder services business. Total fees generated from
these activities increased modestly in 1995 and in 1994. More transaction
activity contributed to the 1995 increase. Revenues from the shareholder
services business remained steady at $82 million in 1995 and $81 million in
both 1994 and 1993. Revenue growth in this business was negatively affected by
industry consolidation and price competition.
Net gains from the active management of assets held in the accelerated
disposition portfolio totaled $37 million in 1995, compared with $46 million
in 1994 and $60 million in 1993.
Other noninterest income in 1994 included a $35 million gain related to the
sale of the Corporation's remaining interest in Brinson Holdings, Inc. to
Brinson's management.
PROVISION FOR CREDIT LOSSES
Details of the Corporation's credit risk management and performance are
presented in the Credit Risk Management section, beginning on page 29.
NONINTEREST EXPENSE
Operating expense in 1995 was $3.268 billion, compared with $3.220 billion
in 1994 and $3.161 billion in 1993. Overall operating expense growth, adjusted
for the reclassification of Mileage Plus payments, was limited to 4% despite
higher employee costs, increased equipment costs, and investments in selected
businesses.
SALARIES AND BENEFITS
<TABLE>
<CAPTION>
PERCENT
INCREASE (DECREASE)
-------------------
1995 1994 1993 1994-1995 1993-1994
(DOLLARS IN MILLIONS) ------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Salaries.............................. $1,420 $1,325 $1,324 7% --%
Employee benefits..................... 272 277 234 (2) 18
------ ------ ------
Total............................. $1,692 $1,602 $1,558 6 3
====== ====== ======
Average full-time-equivalent
employees............................ 35,352 35,642 35,795 (1)% --%
====== ====== ======
</TABLE>
Employee costs grew by $90 million, or 6%, in 1995, following an increase of
$44 million, or 3%, between 1993 and 1994. In 1995, the increase reflected
staff increases in certain business units as well as higher performance-based
incentive accruals tied to corporate results. The 1994 cost increase primarily
reflects the higher cost of pension and medical benefit programs.
21
<PAGE>
OTHER NONINTEREST EXPENSE
<TABLE>
<CAPTION>
PERCENT
INCREASE (DECREASE)
-------------------
1995 1994 1993 1994-1995 1993-1994
(DOLLARS IN MILLIONS) ------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Occupancy expense of premises, net.... $ 252 $ 244 $ 256 3% (5)%
Equipment rentals, depreciation and
maintenance.......................... 225 245 194 (8) 26
Marketing and public relations........ 161 128 108 26 19
FDIC insurance expense................ 58 105 116 (45) (9)
Amortization of intangible assets..... 88 93 123 (5) (24)
Telephone............................. 80 67 64 19 5
Freight and postage................... 78 68 65 15 5
Travel and entertainment.............. 50 47 46 6 2
Stationery and supplies............... 45 39 46 15 (15)
Operating and other taxes............. 29 31 29 (6) 7
Provision for other real estate....... 1 3 13 (67) (77)
Other................................. 509 548 543 (7) 1
------ ------ ------
Other operating expense............. 1,576 1,618 1,603 (3) 1
Merger-related charges................ 267 -- -- N/M N/M
------ ------ ------
Total............................. $1,843 $1,618 $1,603 14 1
====== ====== ======
</TABLE>
Occupancy expense increased by 3% in 1995 to $252 million. Occupancy expense
in 1993 included the incremental costs associated with both the relocation of
the shareholder services business and a reduction in other occupancy
requirements.
Equipment expense decreased 8% in 1995 to $225 million. A special charge of
$25 million was taken in 1994 to reflect the reduction in the estimated useful
life of existing personal computer equipment.
Operating expense associated with the Credit Card business (adjusted to
reflect the terms of the current Mileage Plus affinity agreement) increased
$82 million, or 18%, in 1995, reflecting both higher market solicitation costs
that supported portfolio growth and increased volume-driven expenses related
to servicing the larger customer base.
The reduction in the insurance rate for bank deposits from 23 basis points
to 4 basis points resulted in a significant decline in FDIC insurance expense
in 1995. Beginning January 1, 1996, the FDIC insurance rate was effectively
reduced to zero for Bank Insurance Fund deposits (approximately 94% of the
Corporation's insurable deposit base). A good portion of this expense savings,
however, is passed on to business customers in the form of fee reductions.
Intangible amortization expense decreased $5 million in 1995 as certain core
deposit intangibles became fully amortized. The 1993 results included a $12
million charge for the accelerated amortization of certain acquired
intangibles.
Special corporate expenses totaled $19 million in 1994 and $14 million in
1993. Excluding these items, other operating expense increased 1% in 1994.
Merger-related charges in 1995 totaled $267 million, of which $225 million
was related to direct merger and related restructuring costs. Other charges of
$42 million were related to the one-time conformance of accounting practices.
(See Note 4 beginning on page 48 for more details.)
22
<PAGE>
APPLICABLE INCOME TAXES
The following table shows the Corporation's income before income taxes,
applicable income taxes, and effective tax rate for each of the past three
years.
<TABLE>
<CAPTION>
1995 1994 1993
(DOLLARS IN MILLIONS) ------ ------ ------
<S> <C> <C> <C>
Income before income taxes.............................. $1,754 $1,853 $2,002
Applicable income taxes................................. 604 632 712
Effective tax rates..................................... 34.4% 34.1% 35.6%
</TABLE>
Tax expense for 1995 included benefits from general business tax credits
offset by the effect of nondeductible expenses, including goodwill.
Tax expense in 1994 included a one-time tax benefit related to the
implementation of final Internal Revenue Service ("IRS") bad debt recapture
regulations as well as the effects of several favorable tax rulings.
The effective tax rate for 1993 reflects the write-off of an intangible
asset that was not deductible for tax purposes.
Risk Management
The Corporation's various business activities generate liquidity, market and
credit risks:
. Liquidity risk is the possibility of being unable to meet all present and
future financial obligations in a timely manner.
. Market risk is the possibility that changes in future market rates or
prices will make the Corporation's positions less valuable.
. Credit risk is the possibility of loss from the failure of a customer to
perform according to the terms of a transaction.
The Corporation is compensated by customers for assuming these risks; this
compensation is reflected in interest income, combined trading profits and fee
income. In addition, these risks are factored into the allocation of capital
to support various business activities, as discussed in the Capital Management
section, beginning on page 36.
The Corporation is a party to transactions involving financial instruments
that create risks that may or may not be reflected on a traditional balance
sheet. These financial instruments can be subdivided into three categories:
. Cash financial instruments, generally characterized as on-balance-sheet
transactions, include loans, bonds, stocks and deposits.
. Credit-related financial instruments include such instruments as
commitments to extend credit and standby letters of credit.
. Derivative financial instruments include such instruments as interest
rate, foreign exchange, commodity price and equity price contracts,
including forwards, swaps and options.
The Corporation's risk management policies are intended to monitor and limit
exposure to liquidity, market and credit risks that arise from all these
financial instruments.
Credit-related and derivative financial instruments are generally
characterized as off-balance-sheet transactions; however, the carrying values
of derivative financial instruments are reflected on the balance sheet.
23
<PAGE>
Liquidity Risk Management
Liquidity risk is the possibility of being unable to meet all present and
future financial obligations in a timely manner. The Corporation considers
strong capital ratios, credit quality and core earnings as essential to
retaining high credit ratings and, thereby, cost-effective access to market
liquidity.
The Corporation believes its prudent management policies and guidelines will
ensure adequate levels of liquidity to fund anticipated needs based on its
assessment of on- and off-balance-sheet items. In addition, a contingency
funding plan identifies actions to be taken in response to a liquidity event.
Liquidity management policies include the following:
. maintain strong credit ratings and capital ratios;
. maintain liability diversification among markets, instruments, maturities
and customers;
. maintain a continuously strong market presence and customer funding base;
. maintain adequate liquid assets; and
. monitor the level of liquidity mismatch in the timing of cash flows.
The Statement of Cash Flows, on page 43, presents data on cash and cash
equivalents provided by and used in operating, investing and financing
activities.
The Corporation's ability to attract wholesale funds on a regular basis and
at a competitive cost is fostered by strong ratings from the major credit
rating agencies. The Corporation's principal Banks (referred to collectively
as the "Principal Banks"), comprising ANB, FNBC, FCCNB, NBD Indiana, NBD
Illinois and NBD Michigan, all have identical ratings. As of December 31,
1995, the parent company and the Principal Banks had the following long- and
short-term debt ratings. The short-term debt ratings for the parent cover
commercial paper issuances. The long- and short-term debt ratings for the
Principal Banks cover bank note issuances.
<TABLE>
<CAPTION>
LONG-TERM SHORT-TERM
DEBT DEBT
----------- ------------
S&P MOODY'S S&P MOODY'S
--- ------- ---- -------
<S> <C> <C> <C> <C>
First Chicago NBD Corporation (parent)................. A+ A1 A-1 P-1
The Principal Banks.................................... AA- Aa3 A-1+ P-1
</TABLE>
The Corporation maintains liquid assets in the form of federal funds sold,
deposit placements and selected investment securities to meet any immediate
cash flow obligations. Note 7, beginning on page 51, provides a detailed
breakdown of the investment portfolio. In addition, as part of the normal
liquidity management process, assets are securitized and sold. Securitization
of credit card receivables is an important funding vehicle that both
diversifies funding sources and accesses large amounts of term funding in a
cost-effective manner.
Access to a variety of funding markets and customers in the retail and
wholesale sectors is vital both to liquidity management and to cost
minimization. Through its various banking entities, the Corporation maintains
direct access to the local retail deposit market and uses a network of brokers
for gathering retail deposits on a national basis.
A large customer deposit base is one of the significant strengths of the
Corporation's liquidity position. As part of the monthly liquidity measurement
process, the extent to which core assets are funded by core liabilities is
monitored. Core assets and liabilities consist primarily of customer-driven
lending and deposit-taking activities. Core liabilities also include long-term
debt and equity. The Corporation has established a 35% limit for the use of
wholesale funds for funding core assets. As of December 31, 1995,
collectively, the Banks funded 80% of core assets with core liabilities,
accessing the wholesale market for only 20% of core asset funding. By limiting
dependence on the wholesale market, the risk of a disruption to the
Corporation's lending business from a liquidity event is minimized.
24
<PAGE>
In addition to this strong core funding base, a reliable, diversified mix of
funding from the wholesale market is created by active participation in global
capital markets. Internal guidelines are used to monitor the product mix and
customer concentration of the wholesale funding. The following table shows the
funding source mix for the past five years.
DEPOSITS AND OTHER PURCHASED FUNDS
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
DECEMBER 31 (IN MILLIONS) -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Domestic offices
Demand............................... $ 15,234 $14,378 $14,852 $14,247 $11,409
Savings.............................. 20,180 20,088 21,154 20,929 18,102
Time
Under $100,000..................... 9,972 8,720 8,310 9,779 12,426
$100,000 and over.................. 5,947 4,484 4,089 5,688 8,787
Foreign offices........................ 17,773 17,225 9,602 10,098 10,869
-------- ------- ------- ------- -------
Total deposits................... 69,106 64,895 58,007 60,741 61,593
Federal funds purchased and securities
under repurchase agreements........... 15,711 16,919 11,038 10,591 8,611
Commercial paper....................... 288 206 323 357 364
Other short-term borrowings............ 9,514 8,216 6,506 3,808 2,609
Long-term debt......................... 8,163 7,246 5,250 4,175 3,822
-------- ------- ------- ------- -------
Total other purchased funds...... 33,676 32,587 23,117 18,931 15,406
-------- ------- ------- ------- -------
Total............................ $102,782 $97,482 $81,124 $79,672 $76,999
======== ======= ======= ======= =======
</TABLE>
Market Risk Management
OVERVIEW
Market risk arises from changes in interest rates, exchange rates, commodity
prices and equity prices. The Corporation maintains risk management policies
to monitor and limit exposure to market risk. Through its trading activities,
the Corporation strives to take advantage of profit opportunities available in
interest and exchange rate movements. In asset and liability management
activities, policies are in place to minimize structural interest rate and
foreign exchange rate risk. The measurement of market risk associated with
financial instruments is meaningful only when all related and offsetting on-
and off-balance-sheet transactions are aggregated, and the resulting net
positions are identified. Disclosures about the fair value of financial
instruments, which reflect changes in market prices and rates, can be found in
Note 18, beginning on page 64.
TRADING ACTIVITIES
The Corporation maintains active trading positions in a variety of markets
and instruments, including U.S. government, municipal and money market
securities. It also maintains positions in derivative products associated with
these markets and instruments, such as interest rate and currency swaps, and
commodity and equity index options.
Revenue related to trading activities was $292 million in 1995, up from $160
million in 1994. Most of the improvement was in the foreign exchange and
derivatives category.
The Corporation's trading activities are primarily customer-oriented, and
trading positions are established as necessary for customers. In order to
accommodate customer demand for such transactions, an inventory in capital
markets instruments is carried, and access to market liquidity is maintained
by making bid-offer prices to other market makers. Although these two
activities constitute proprietary trading business, they are essential to
providing customers with capital markets products at competitive prices.
25
<PAGE>
Many trading positions are kept open for brief periods of time, often less
than one day. Other trading positions are maintained for longer periods, and
these positions are valued at prevailing market rates on a present value
basis. Realized and unrealized gains and losses on these trading positions are
included in noninterest income as combined trading profits.
The overall market risk that any business can assume is approved by the Risk
Management Committee of the Board of Directors, which utilizes a risk point
system. Risk points measure the market risk (potential overnight loss) in a
capital markets product. Products that have more inherent price volatility
incur more risk points. The risk point system, therefore, is the means by
which the Corporation manages its value at risk.
Value at risk is monitored in each significant trading portfolio on a daily
basis. The following charts show the average, maximum and minimum daily value
at risk, for 1994 and 1995, and the actual trading revenue for each year.
Daily Value at Risk Trading Revenue*
[BAR GRAPH] [BAR GRAPH]
$ Millions $ Millions
1994 1995
Average = $45 Average = $32 1994 = $160
Maximum = $66 Maximum = $45
Minimum = $34 Minimum = $24 1995 = $292
*Includes trading
profits and net
interest income
Value at risk is estimated using statistical models calibrated at a three-
standard-deviation confidence interval. The Corporation has made significant
progress in recognizing offsets and correlations across different trading
portfolios. This has contributed to a decline in daily value at risk from 1994
to 1995. However, the reported value at risk remains somewhat overstated
because all offsets and correlations are not fully considered in the
calculation. The Corporation is continuing its progress toward a fully
consolidated view of market risk.
STRUCTURAL INTEREST RATE RISK MANAGEMENT
Movements in interest rates can create fluctuations in the Corporation's net
interest income and economic value due to an imbalance in the repricing or
maturity of assets and liabilities. Asset and liability positions are actively
managed with the goal of minimizing the impact of interest rate volatility on
current earnings and on the market value of equity.
Whenever possible, assets are matched with liabilities of similar repricing
characteristics. However, the loans and deposits generated through ordinary
business activity do not naturally create offsetting positions with respect to
repricing or maturity. Asset and liability positions that are not
appropriately offset with either specific on-balance-sheet transactions or
with asset or liability pools are offset through the use of off-balance-sheet
derivatives positions (asset and liability management or "ALM" derivatives).
Traditional gap analysis is one of a variety of measurement tools used to
monitor and control the interest rate risk position. To measure the gap,
asset, liability, equity and off-balance-sheet positions are distributed to
26
<PAGE>
future calendar periods based primarily on contractual interest rate repricing
dates and contractual maturity (including principal amortization) dates.
Maturity distributions are modified to reflect historical differences between
contractual and actual payment flows and management's assumptions regarding
the effect current interest rate levels may have on principal prepayments.
Additionally, assumptions are made as to the repricing frequency and balance
behavior of indeterminate maturity liabilities. Finally, credit card
securitizations, which subject credit card servicing fee revenue to interest
rate risk, are included in the gap analysis measure.
The net difference between the amount of assets and funding sources
repricing within a cumulative calendar period is typically referred to as the
"rate sensitivity position." Its magnitude in the various calendar periods
provides a general indication of the extent to which future earnings may be
affected by interest rate changes. A positive cumulative one-year gap position
indicates more assets than liabilities are anticipated to reprice over the
next 12-month period. Such a position implies that, assuming no management
action, the Corporation's net interest income would be positively affected by
rising interest rates and negatively affected by falling rates. The gap
position does not reflect the potential impact of embedded options on income
sensitivity.
The following table details the Corporation's interest rate gap analysis as
of December 31, 1995. Interest rate risks in trading and overseas asset and
liability positions are assumed to be matched and are managed principally as
trading risks.
INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
181-
0-90 91-180 365 1-5 BEYOND
DECEMBER 31, 1995 (DOLLARS DAYS DAYS DAYS YEARS 5 YEARS TOTAL
IN MILLIONS) ------- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Loans..................... $43,506 $ 3,820 $4,339 $12,962 $ 2,459 $ 67,086
Investment securities..... 1,192 783 1,020 4,489 2,452 9,936
Other earning assets...... 36,686 101 -- -- -- 36,787
Nonearning assets......... 12,183 107 213 1,708 1,861 16,072
------- ------- ------ ------- ------- --------
Total assets.......... $93,567 $ 4,811 $5,572 $19,159 $ 6,772 $129,881
======= ======= ====== ======= ======= ========
Deposits.................. $28,875 $ 3,582 $4,103 $14,105 $ 865 $ 51,530
Other interest-bearing
liabilities.............. 51,978 2,655 1,757 3,814 2,309 62,513
Noninterest-bearing
liabilities.............. 5,279 175 46 543 1,345 7,388
Equity.................... 389 199 398 3,284 4,180 8,450
------- ------- ------ ------- ------- --------
Total liabilities and
equity............... $86,521 $ 6,611 $6,304 $21,746 $ 8,699 $129,881
======= ======= ====== ======= ======= ========
Balance sheet sensitivity
gap...................... $ 7,046 $(1,800) $ (732) $(2,587) $(1,927) --
Cumulative gap as a % of
total assets............. 5.4% 4.0% 3.5% 1.5% -- --
Effect of off-balance-
sheet ALM derivative
transactions:
Specific transactions... $(2,349) $ 277 $ 814 $ (202) $ 1,460 --
Specific asset or
liability pools........ (3,782) 247 452 3,010 73 --
------- ------- ------ ------- ------- --------
Interest rate sensitivity
gap...................... $ 915 $(1,276) $ 534 $ 221 $ (394) --
======= ======= ====== ======= ======= ========
Cumulative gap............ 915 (361) 173 394 -- --
Cumulative gap as a % of
total assets............. 0.7% (0.3)% 0.1% 0.3% -- --
</TABLE>
The Corporation's policy is to limit the cumulative one-year gap position,
including ALM derivatives, to within 4% of total assets. As of December 31,
1995, the cumulative one-year gap position was 0.1% of total assets. The
Corporation uses off-balance-sheet transactions, principally interest rate
swaps, to adjust the interest rate sensitivity of specific transactions, as
well as pools of assets or liabilities, to remain structurally neutral to
interest rate changes. As shown in the table above, the net result of ALM
derivatives was to reduce the cumulative one-year gap position from 3.5% to
0.1% of total assets.
In addition to static gap analysis, an earnings simulation analysis and a
value-at-risk measure are performed to identify more dynamic interest rate
risk exposures of the businesses, including embedded option positions.
27
<PAGE>
The earnings simulation analysis estimates the effect that specific interest
rate changes would have on pretax earnings. The Corporation's policy is to
limit the change in annual pretax earnings to $100 million from an immediate
parallel change in interest rates of 200 basis points. As of December 31,
1995, the Corporation had the following estimated earnings sensitivity
profile.
<TABLE>
<CAPTION>
IMMEDIATE
CHANGE IN RATES
---------------
+200 BP -200 BP
(IN MILLIONS) ------- -------
<S> <C> <C>
Pretax earnings change.......................................... $(38) $10
</TABLE>
Access to the derivatives market is an important element in maintaining the
interest rate risk position within policy guidelines. At year-end 1995, ALM
interest rate swaps totaled $9.7 billion, including $3.8 billion against
specific transactions and $5.9 billion against specific pools of assets or
liabilities. Swaps used to adjust the interest rate sensitivity of specific
transactions will not need to be replaced as they mature since the
corresponding asset or liability will mature along with the swap. However,
swaps against the asset and liability pools will have an impact on the overall
risk position as they mature and, assuming no change to the underlying pool's
characteristics, will need to be reissued to maintain the same interest rate
risk profile. These swaps could create modest earnings sensitivity to changes
in interest rates. The following table summarizes the interest rate swaps used
for asset and liability management purposes.
ASSET AND LIABILITY MANAGEMENT SWAPS--NOTIONAL PRINCIPAL
<TABLE>
<CAPTION>
PAY FIXED
RECEIVE FIXED RECEIVE BASIS
PAY FLOATING FLOATING SWAPS TOTAL
DECEMBER 31, 1995 --------------- ------------- ----- ------
SPECIFIC POOL SPECIFIC POOL POOL
(IN MILLIONS) -------- ------ -------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Swaps associated with:
Loans............................. $ -- $1,097 $ 131 $ -- $-- $1,228
Investment securities............. -- -- 300 -- -- 300
Securitized credit card
receivables...................... -- 825 -- -- -- 825
Deposits.......................... 5 3,228 -- -- -- 3,233
Funds borrowed (including long-
term debt)....................... 2,787 -- 600 725 50 4,162
------ ------ ------ ---- --- ------
Total........................... $2,792 $5,150 $1,031 $725 $50 $9,748
====== ====== ====== ==== === ======
</TABLE>
28
<PAGE>
Substantially all ALM interest rate swaps are standard swap contracts. The
table that follows summarizes the contractual maturities and weighted average
pay and receive rates for the ALM swap position at December 31, 1995. The
variable interest rates, which generally are the one-month, three-month and
six-month LIBOR rates in effect on the date of repricing, are assumed to
remain constant. However, the variable interest rates will change and would
affect the related weighted average information presented in the table.
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 THEREAFTER TOTAL
(DOLLARS IN MILLIONS) ------ ------ ---- ---- ---- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Receive fixed/pay
floating swaps
Notional amount......... $3,127 $2,016 $865 $222 $116 $1,596 $7,942
Weighted average
Receive rate........... 6.58% 6.21% 6.33% 7.05% 6.23% 7.33% 6.62%
Pay rate............... 6.02% 6.15% 6.04% 6.18% 6.21% 6.01% 6.06%
Pay fixed/receive
floating swaps
Notional amount......... $1,319 $ 95 $ 80 $ 81 $118 $ 63 $1,756
Weighted average
Receive rate........... 5.95% 5.88% 5.88% 5.88% 5.89% 5.89% 5.93%
Pay rate............... 6.22% 7.20% 8.11% 7.99% 7.56% 8.01% 6.59%
Basis swaps
Notional amount......... $ 50 -- -- -- -- -- $ 50
Weighted average
Receive rate........... 6.15% -- -- -- -- -- 6.15%
Pay rate............... 5.89% -- -- -- -- -- 5.89%
------ ------ ---- ---- ---- ------ ------
Total notional
amount.............. $4,496 $2,111 $945 $303 $234 $1,659 $9,748
====== ====== ==== ==== ==== ====== ======
</TABLE>
FOREIGN EXCHANGE RISK MANAGEMENT
Wherever possible, foreign currency-denominated assets are funded with
liability instruments denominated in the same currency. If a liability
denominated in the same currency is not immediately available or desired, a
forward foreign exchange contract is used to fully hedge the risk due to
cross-currency funding.
To minimize the earnings and capital impact of translation gains or losses
measured on an after-tax basis, the Corporation uses forward foreign exchange
contracts on a selective basis to hedge the exposure created by investments in
overseas branches and subsidiaries.
Credit Risk Management
The Corporation has developed policies and procedures to manage the level
and composition of risk in its credit portfolio. The objective of this credit
risk management process is to quantify and manage credit risk on a portfolio
basis as well as reduce the risk of a loss resulting from a customer's failure
to perform according to the terms of a transaction.
Customer transactions create credit exposure that is reported both on and
off the balance sheet. On-balance-sheet credit exposure includes such items as
loans and derivative financial instruments. Off-balance-sheet credit exposure
includes credit-related and derivative financial instruments.
29
<PAGE>
The following discussion and related tables do not include those assets in
the accelerated asset disposition portfolio since their transfer in the third
quarter of 1992.
SELECTED STATISTICAL INFORMATION
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
(DOLLARS IN MILLIONS) ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
At year-end
Loans outstanding............... $64,434 $55,176 $48,654 $47,836 $49,434
Nonperforming loans............. 363 294 485 717 1,209
Other real estate, net.......... 34 57 87 81 517
Nonperforming assets............ 397 351 572 798 1,726
Allowance for credit losses..... 1,338 1,158 1,106 1,041 1,136
Nonperforming assets/loans
outstanding and other real
estate, net.................... 0.6% 0.6% 1.2% 1.7% 3.5%
Allowance for credit
losses/loans outstanding....... 2.1 2.1 2.3 2.2 2.3
Allowance for credit
losses/nonperforming loans..... 369 394 228 145 94
For the year
Average loans................... $58,944 $50,083 $47,110 $49,042 $50,571
Net charge-offs................. 264 192 296 572 702
Net charge-offs/average loans... 0.4% 0.4% 0.6% 1.2% 1.4%
</TABLE>
For analytical purposes, the Corporation's portfolio is divided into
commercial (domestic and foreign) and consumer (credit card and other
consumer) segments.
LOAN COMPOSITION
<TABLE>
<CAPTION>
1995 1994 1993 1992
DECEMBER 31 (IN MILLIONS) ------- ------- ------- -------
<S> <C> <C> <C> <C>
Commercial risk
Domestic
Commercial.................................... $25,551 $22,546 $19,310 $19,944
Real estate
Construction................................. 1,151 1,074 1,105 1,323
Other........................................ 6,103 5,903 5,613 5,869
Lease financing............................... 1,588 1,381 1,295 1,312
Foreign........................................ 3,726 3,305 3,083 3,176
------- ------- ------- -------
Total commercial............................ 38,119 34,209 30,406 31,624
------- ------- ------- -------
Consumer risk
Credit cards................................... 9,649 6,980 6,393 4,829
Secured by real estate
Mortgage...................................... 6,669 4,963 4,285 4,257
Home equity................................... 2,264 2,062 1,803 1,906
Automotive..................................... 4,477 3,994 3,241 2,911
Other.......................................... 3,256 2,968 2,526 2,309
------- ------- ------- -------
Total consumer.............................. 26,315 20,967 18,248 16,212
------- ------- ------- -------
Total....................................... $64,434 $55,176 $48,654 $47,836
======= ======= ======= =======
</TABLE>
At December 31, 1991, total loans were $49.434 billion, which included
$34.666 billion of commercial loans and $14.768 billion of consumer loans.
Further category breakdowns for 1991 are not available.
ALLOWANCE FOR CREDIT LOSSES
Although the allowance for credit losses is available to absorb potential
losses inherent in the Corporation's total credit portfolio, its composition
reflects an internal allocation to the commercial, credit card and other
consumer segments.
30
<PAGE>
ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
1995
---------------------------------
CREDIT OTHER
COMMERCIAL CARD CONSUMER TOTAL
(DOLLARS IN MILLIONS) ---------- ------ -------- ------
<S> <C> <C> <C> <C>
Balance, beginning of period................ $907 $215 $36 $1,158
Provision for credit losses................. 91 371 48 510
Charge-offs................................. (98) (241) (70) (409)
Recoveries.................................. 86 33 26 145
---- ---- --- ------
Net charge-offs............................. (12) (208) (44) (264)
Acquisitions and dispositions, net.......... -- -- 9 9
Other, transferred to other assets related
to securitized receivables................. -- (75) -- (75)
---- ---- --- ------
Balance, end of period...................... $986 $303 $49 $1,338
==== ==== === ======
Allowance as a percentage of:
loans outstanding......................... 2.6% 3.1% 0.3% 2.1%
nonperforming loans....................... 272 -- -- 369
<CAPTION>
1994
---------------------------------
CREDIT OTHER
COMMERCIAL CARD CONSUMER TOTAL
(DOLLARS IN MILLIONS) ---------- ------ -------- ------
<S> <C> <C> <C> <C>
Balance, beginning of period................ $870 $201 $35 $1,106
Provision for credit losses................. 26 224 26 276
Charge-offs................................. (121) (193) (50) (364)
Recoveries.................................. 115 32 25 172
---- ---- --- ------
Net charge-offs............................. (6) (161) (25) (192)
Acquisitions and dispositions, net.......... 17 -- -- 17
Other, transferred to other assets related
to securitized receivables................. -- (49) -- (49)
---- ---- --- ------
Balance, end of period...................... $907 $215 $36 $1,158
==== ==== === ======
Allowance as a percentage of:
loans outstanding......................... 2.7% 3.1% 0.3% 2.1%
nonperforming loans....................... 309 -- -- 394
</TABLE>
The allowance for credit losses is maintained at a level that in
management's judgment is adequate to provide for inherent credit losses
resulting from on-balance-sheet credit exposure for financial instruments such
as loans and derivatives, and off-balance-sheet credit exposure for credit-
related and derivative financial instruments. The level of the allowance
reflects management's formal review and analysis of potential credit losses,
as well as prevailing economic conditions. Each quarter, the adequacy of the
allowance for credit losses is evaluated and reported to a committee of the
Board of Directors.
In addition, a separate reserve is maintained for securitized credit card
receivables, included in the other assets category. This reserve totaled $302
million at December 31, 1995, compared with $255 million at December 31, 1994.
NONPERFORMING ASSETS
Nonperforming assets, which consist of nonperforming loans and other real
estate, increased from $351 million at December 31, 1994, to $397 million at
December 31, 1995. Nonperforming assets as a percentage of total loans and
other real estate were 0.6% at December 31, 1995, unchanged from a year ago.
31
<PAGE>
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
DECEMBER 31 (DOLLARS IN MILLIONS) ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Commercial real estate....................... $ 91 $129 $203 $203 $ 463
Other........................................ 272 165 282 514 746
---- ---- ---- ---- ------
Total nonperforming loans.................. 363 294 485 717 1,209
Other real estate, net......................... 34 57 87 81 517
---- ---- ---- ---- ------
Total nonperforming assets................. $397 $351 $572 $798 $1,726
==== ==== ==== ==== ======
Nonperforming assets/loans outstanding and
other real estate, net........................ 0.6% 0.6% 1.2% 1.7% 3.5%
</TABLE>
CONSUMER RISK MANAGEMENT
Consumer loans consist of credit card receivables as well as home mortgage
loans, home equity loans, automobile financing and other forms of consumer
installment credit. The consumer loan portfolio increased $5.3 billion during
the year to $26.3 billion at year-end 1995. Including securitized credit card
receivables, the consumer portfolio increased $7.1 billion, or 26%, to $34.2
billion at December 31, 1995.
CONSUMER LOANS
<TABLE>
<CAPTION>
1995 1994 1993 1992
DECEMBER 31 (IN MILLIONS) ------- ------- ------- -------
<S> <C> <C> <C> <C>
Credit card loans............................... $ 9,649 $ 6,980 $ 6,393 $ 4,829
Securitized credit card receivables............. 7,877 6,117 4,958 4,500
------- ------- ------- -------
Total managed credit card receivables....... 17,526 13,097 11,351 9,329
Other consumer loans
Secured by real estate
Mortgage.................................... 6,669 4,963 4,285 4,257
Home equity................................. 2,264 2,062 1,803 1,906
Automotive.................................... 4,477 3,994 3,241 2,911
Other......................................... 3,256 2,968 2,526 2,309
------- ------- ------- -------
Other consumer loans........................ 16,666 13,987 11,855 11,383
------- ------- ------- -------
Total..................................... $34,192 $27,084 $23,206 $20,712
======= ======= ======= =======
</TABLE>
The consumer risk management process focuses on the credit card segment
separately from other parts of the portfolio. For both the on-balance-sheet
and the securitized credit card portfolios, loss potential is tested using
statistically expected levels of losses based on the source, age and other
risk characteristics of each portfolio.
For the other segments of the consumer portfolio, reserve factors are based
on historical loss rates, vintage, and other relevant risk factors, including
forecasted regional delinquency levels and trends.
32
<PAGE>
Total managed credit card receivables (i.e. those held in the portfolio and
those sold to investors through securitization) were $17.5 billion at December
31, 1995, up 34% from 1994. Average managed credit card receivables grew to
$14.2 billion in 1995, up 24% from 1994.
AVERAGE CREDIT CARD RECEIVABLES
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
(DOLLARS IN MILLIONS) ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Credit card loans.................... $ 7,006 $ 5,904 $4,772 $4,155 $4,127
Securitized credit card receivables.. 7,179 5,538 4,839 3,918 3,320
------- ------- ------ ------ ------
Total managed credit card
receivables....................... $14,185 $11,442 $9,611 $8,073 $7,447
======= ======= ====== ====== ======
Total net charge-offs (including
securitizations).................... $572 $403 $342 $333 $328
======= ======= ====== ====== ======
Net charge-offs/average total
receivables......................... 4.0% 3.5% 3.6% 4.1% 4.4%
</TABLE>
The net charge-off rate for the total average managed credit card portfolio
was 4.0% in 1995, compared with 3.5% in 1994. Current levels of unemployment
and personal bankruptcy filings make reductions in the charge-off rate unlikely
in the near term. Consumer debt service burden and defaults have increased as a
result of the growing consumer debt levels coupled with stagnant real wage
growth. In response to these trends, credit management policies and practices
have been tightened.
COMMERCIAL RISK MANAGEMENT
The commercial risk portfolio includes all domestic and foreign commercial
credit exposure. Credit exposure includes the credit risks associated with both
on- and off-balance-sheet financial instruments. Credit risks from off-balance-
sheet instruments arise from credit-related and derivative financial
instruments. See Note 16, beginning on page 61, for information on the credit
exposure associated with these off-balance-sheet instruments.
Commercial loans increased 11% from $34.2 billion at December 31, 1994, to
$38.1 billion at December 31, 1995. The increase reflects growth in both the
large corporate and middle market portfolios.
In the commercial portfolio, credit quality is rated according to defined
levels of credit risk. The lower categories of credit risk are equivalent to
the four bank regulatory classifications: Special Mention, Substandard,
Doubtful and Loss. These categories define levels of credit deterioration at
which it may be increasingly difficult for the Corporation to be fully repaid
without restructuring the credit.
Each quarter, the Corporation conducts an asset-by-asset review of
significant lower-rated credit or country exposure. Potential losses are
identified during this review, and reserves are adjusted accordingly.
Allowance for Commercial Credit Losses as % of Nonperforming Commercial
Loans* [BAR GRAPH]
1993 = 179%
1994 = 309%
1995 = 272%
*At year-end
Nonperforming Assets as % of Loans and Other Real Estate* [BAR GRAPH]
1991 = 3.5%
1992 = 1.7%
1993 = 1.2%
1994 = 0.6%
1995 = 0.6%
*At year-end
33
<PAGE>
Commercial credit quality remained favorable in 1995, as net charge-offs
were $12 million, compared with $6 million in 1994. The provision for
commercial credit losses increased to $91 million in 1995 from $26 million in
1994, reflecting growth in the loan portfolio. The commercial reserve of $986
million represented 2.6% of total commercial loans at December 31, 1995,
compared with $907 million, or 2.7%, at December 31, 1994.
COMMERCIAL REAL ESTATE
Commercial real estate consists primarily of loans secured by real estate as
well as certain loans that are real estate-related. A loan is categorized as
real estate-related when 80% or more of the borrower's revenues are derived
from real estate activities and the loan is not collateralized by cash or
marketable securities.
At December 31, 1995, commercial real estate loans totaled $7.3 billion, or
19% of commercial loans, compared with $7.0 billion, or 20% of commercial
loans, at December 31, 1994. During 1995, net charge-offs in the commercial
real estate portfolio segment were $9 million, compared with $26 million in
1994. Nonperforming commercial real estate assets, including other real
estate, totaled $125 million, or 1.7% of related assets, at December 31, 1995,
compared with $186 million, or 2.6% of related assets, at December 31, 1994.
Derivative Financial Instruments
The Corporation uses a variety of derivative financial instruments in its
trading, asset and liability management, and Corporate Investment activities.
These instruments include interest rate, currency, commodity and equity swaps,
forwards, futures, options, caps, floors, forward rate agreements, and other
conditional or exchange contracts, and include both exchange-traded and over-
the-counter contracts. See Note 16, on pages 62 and 63, for a discussion of
the nature and terms of derivative financial instruments.
NOTIONAL PRINCIPAL OR CONTRACTUAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS
The following tables represent the gross notional principal or contractual
amounts of outstanding derivative financial instruments used in certain
activities. These amounts do not represent the market or credit risk
associated with these instruments, but instead indicate the volume of the
transactions. The amounts greatly exceed the credit risk associated with these
instruments and do not reflect the netting of offsetting transactions.
<TABLE>
<CAPTION>
ASSET AND
LIABILITY CORPORATE
DECEMBER 31, 1995 TRADING MANAGEMENT INVESTMENTS TOTAL
(IN BILLIONS) ------- ---------- ----------- ------
<S> <C> <C> <C> <C>
Foreign exchange contracts................ $378.8 $ 1.8 $ -- $380.6
Interest rate contracts................... 415.4 9.7 -- 425.1
Commodity contracts....................... 1.0 -- -- 1.0
Equity contracts.......................... 7.9 -- 0.1 8.0
------ ----- ---- ------
Total................................. $803.1 $11.5 $0.1 $814.7
====== ===== ==== ======
<CAPTION>
ASSET AND
LIABILITY CORPORATE
DECEMBER 31, 1994 TRADING MANAGEMENT INVESTMENTS TOTAL
(IN BILLIONS) ------- ---------- ----------- ------
<S> <C> <C> <C> <C>
Foreign exchange contracts................ $295.1 $ 1.2 $ -- $296.3
Interest rate contracts................... 320.4 10.4 -- 330.8
Commodity contracts....................... 0.1 -- -- 0.1
Equity contracts.......................... 2.7 -- 0.3 3.0
------ ----- ---- ------
Total................................. $618.3 $11.6 $0.3 $630.2
====== ===== ==== ======
</TABLE>
34
<PAGE>
ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments used in trading activities are valued at
prevailing market rates on a present-value basis. Realized and unrealized
gains and losses are included in noninterest income as combined trading
profits. Where appropriate, compensation for credit risk and ongoing servicing
is deferred and taken into income over the term of the derivative financial
instrument.
Income or expense on most derivative financial instruments used to manage
interest rate exposure is recorded on the balance sheet on an accrual basis
and on the income statement as an adjustment to the yield of the related
exposures over the periods covered by the contracts. The income recognition
treatment on the related exposure, generally assets or liabilities carried at
historical cost, is recorded on an accrual basis. If an interest rate swap is
terminated early, any resulting gain or loss is deferred and amortized as an
adjustment of the yield on the underlying interest rate exposure position over
the remaining periods originally covered by the terminated swap. If all or
part of an underlying position is terminated, e.g., an underlying asset is
sold or prepaid, the related pro rata portion of any unrecognized gain or loss
on the swap is recognized in income at that time, as part of the gain or loss
on the termination, sale or prepayment.
In general, purchased option, cap and floor contracts are reported in
derivative product assets, and written option, cap and floor contracts are
reported in derivative product liabilities. For other derivative financial
instruments, an unrealized gain is reported in derivative product assets and
an unrealized loss is reported in derivative product liabilities. Derivative
financial instruments executed with the same counterparty under a legally
enforceable master netting arrangement are reported on a net basis. Cash flows
from derivative financial instruments are reported net as operating
activities.
INCOME RESULTING FROM DERIVATIVE FINANCIAL INSTRUMENTS
A discussion of the Corporation's income from derivatives used in trading
activities is presented on page 20.
The Corporation uses interest rate derivative financial instruments to
reduce structural interest rate risk and the volatility of net interest
margin. The consistency of the Corporation's net interest margin reflects the
effective use of these derivatives. Without their use, net interest income
would have been higher by $12 million in 1995, lower by $48 million in 1994,
and lower by $110 million in 1993.
The sale of fixed- and floating-rate credit card receivables as securities
to investors subjects servicing revenue to interest rate risk. Therefore,
interest rate derivatives, whose terms match those of the credit card
securitizations, are used to reduce this volatility. Without the use of these
instruments, credit card fee revenue would have been reduced by $6 million in
1995, $39 million in 1994 and $67 million in 1993.
Deferred gains and losses on the early termination of interest rate swaps
totaled a net deferred gain of $9 million as of December 31, 1995, and a net
deferred gain of $46 million as of December 31, 1994. A significant portion of
these deferred gains was related to securitized credit card receivables. The
amount at December 31, 1995, is scheduled to be amortized into income in the
following periods: $16 million in 1996, $(1) million in 1997, and $(6) million
in 1998 and thereafter.
CREDIT EXPOSURE RESULTING FROM DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation maintains risk management policies that monitor and limit
exposure to credit risks. For a further discussion of credit risks, see the
Credit Risk Management section, beginning on page 29.
Credit exposure resulting from derivative financial instruments is
represented by their fair value amounts, increased by an estimate of potential
adverse position exposure. The incremental amount of credit exposure for
potential adverse movement is calculated using a statistical model that
estimates changes over time in exchange rates, interest rates and other
relevant factors. Credit exposure amounts fluctuate as a function of maturity,
interest rates, foreign exchange rates, commodity prices and equity prices.
Gross credit exposure may be overstated because it does not consider
collateral and other security, or the offsetting of losses with the same
35
<PAGE>
counterparties based on legally enforceable termination and netting rights. A
reconciliation between gross credit exposure and balance sheet exposure is
presented in the following table.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 (IN BILLIONS)
<S> <C>
Gross credit exposure.................................................... $19.8
Less additional exposure based on estimate of potential adverse position
exposure................................................................ 6.8
-----
Gross fair value exposure................................................ $13.0
=====
Gross fair value exposure by type of contract
Interest rate contracts................................................ $ 6.4
Foreign exchange contracts............................................. 6.4
Equity contracts....................................................... 0.2
-----
Gross fair value exposure............................................ 13.0
Less netting adjustments due to master netting agreements................ 6.2
Less unrecognized net gain due to nontrading activities.................. 0.1
-----
Balance sheet exposure................................................... $ 6.7
=====
</TABLE>
Capital Management
SELECTED CAPITAL RATIOS
<TABLE>
<CAPTION>
CORPORATE
1995 1994 1993 1992 1991 GUIDELINE
DECEMBER 31 ---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Common equity/total assets(1)............ 6.9% 6.8% 7.6% 6.5% 6.0% N/A
Tangible common equity ratio(1).......... 6.4 6.3 6.9 5.7 5.1 N/A
Stockholders' equity/total assets........ 6.9 6.9 8.1 7.0 6.5 N/A
Risk-based capital ratios(1)(2)
Tier 1 ................................ 7.8 8.6 9.0 7.4 6.5 7-8%
Total ................................. 11.8 13.0 13.6 11.3 9.8 11-12%
Leverage ratio(1)(2)..................... 6.9 7.3 7.8 6.6 6.5 5.5-7.0%
Double leverage ratio.................... 115 113 108 112 111 less than or
equal to 120%
Dividend payout ratio.................... 39 34 28 89 61 30-40%
</TABLE>
- --------
(1) Net of investment in FCCM.
(2) Under 1992 risk-based capital rules.
N/A--Not Applicable.
Capital represents the stockholders' investment on which the Corporation
strives to generate attractive returns. It supports business growth and
provides protection to depositors and creditors. Management believes that
capital is the foundation of a cohesive risk management framework because it
links return with risk. Capital adequacy objectives have been developed for
the Corporation and the Principal Banks to meet these needs and also to
maintain a well-capitalized regulatory position.
Management believes that a strong capital base coupled with attractive
returns is instrumental in enhancing long-term stockholder value. To that end,
key capital management objectives are to:
. generate attractive returns to enhance shareholder value;
. maintain a capital base commensurate with overall risk profile;
. maintain strong capital ratios relative to peers; and
. meet or exceed all regulatory guidelines.
In conjunction with the annual planning process, a capital plan is
established to guide management in the achievement of these objectives. This
plan is intended to ensure that the Corporation and each of its subsidiaries
have capital structures consistent with prudent management principles and
regulatory requirements.
36
<PAGE>
ECONOMIC CAPITAL
In the normal course of business, the Corporation assumes several types of
risk: credit, liquidity, structural interest rate, market and
operating/fiduciary. As discussed in the Risk Management section, frameworks
have been developed to independently monitor and control many of these
exposures. To integrate these processes, an economic capital framework has
been constructed to allocate capital to business segments, products and
customers based on the amount and type of risk inherent in the activity. Once
economic capital is assigned, returns can be computed to determine if the
activity earns an adequate return on risk. This process forms a key decision-
making tool for managing risk-taking activities, as well as for ensuring that
capital is profitably employed.
A financial instrument or business activity attracts economic capital based
on its potential for loss of value over a particular time period. Capital is
designed to cover unexpected losses to a desired level of statistical
significance. Losses may result from adverse price movements for market and
interest rate risk, failure of a counterparty to perform according to the
terms of an agreement for credit risk, and operating errors and negligence for
operating/fiduciary risk. Credit and operating loss experiences form the basis
for assessing the volatility of these risks. Volatility of interest and
exchange rates and commodity and equity prices is used to determine the
capital for market risk.
Although capital is allocated to specific activities and instruments, a
diverse portfolio of activities requires less capital than the sum of the
individual components due to the unlikelihood that all activities will
experience large value declines at the same time. Consequently, the
Corporation's total capital level will be less than the sum of the individual
requirements.
The Corporation intends to maintain capital commensurate with its risk
profile and intermediary requirements, and to deploy its capital resources in
activities that earn attractive returns for stockholders. Total economic
capital will vary proportionately with the level and riskiness of its
businesses and products. During 1995, credit risk consumed the largest amount
of economic capital.
The Corporation has also established a capital level that it believes is
necessary to provide management flexibility while maintaining an adequate base
for its risk profile and in relation to its peers. This target, or
intermediary capital, is expressed in terms of Tier 1 capital and ranges from
7% to 8%.
As the following chart shows, average common equity during 1995 exceeded
economic capital (that needed for current business risks) and was more than
sufficient to meet intermediary capital goals.
AVERAGE ECONOMIC CAPITAL [BAR GRAPH]
$ Billions
1994 1995
Economic Capital = $5.6 $5.7
Required for Targeted Intermediary Capital = $1.1 $1.7
Excess Capital = $0.3 $0.3
37
<PAGE>
Excess capital, defined as common equity above the intermediary capital
target, is available for core business investment and acquisitions, and
averaged about $327 million during 1995. At year-end 1995, the Corporation had
no excess capital primarily due to merger-related charges. If attractive long-
term opportunities are not available over time in core businesses, management
intends to return to stockholders any excess capital, typically by way of
stock repurchase programs and/or dividend increases.
Integral to any successful capital management program is the ability to
generate acceptable returns on stockholders' capital. Even with excess
capital, the Corporation has been able to earn attractive returns on equity.
For the past three years, before merger-related charges, the return on average
common stockholders' equity has been greater than 15%--the Corporation's
minimum goal.
REGULATORY CAPITAL
The Corporation endeavors to maintain regulatory capital ratios, including
those of its principal banking subsidiaries, in excess of the well-capitalized
guidelines. To ensure this goal is met, target ranges of 7% to 8% have been
established for Tier 1 capital and 11% to 12% for total risk-based capital.
Both targets exceed the respective well-capitalized guidelines of 6% and 10%.
As shown in the following chart, these ratios for the past three years have
reached or exceeded the upper end of the target ranges. Lower year-end 1995
ratios primarily reflect the impact of merger-related charges.
TIER 1 AND TOTAL CAPITAL RATIOS* [BAR GRAPH]
1993 1994 1995
---- ---- ----
Tier 1 = 9.0% 8.6% 7.8%
Total = 13.6% 13.0% 11.8%
Regulatory Guideline
Tier 1 = 6.0% 6.0% 6.0%
Total = 10.0% 10.0% 10.0%
*At year-end
The following table shows the components of regulatory risk-based capital
and risk-weighted assets.
<TABLE>
<CAPTION>
1995 1994 1993
DECEMBER 31 (IN MILLIONS) ------- ------- -------
<S> <C> <C> <C>
Regulatory Risk-Based Capital
Tier 1 capital.......................................... $ 7,750 $ 7,489 $ 7,051
Tier 2 capital.......................................... 4,017 3,806 3,649
------- ------- -------
Total capital....................................... $11,767 $11,295 $10,700
======= ======= =======
Regulatory Risk-Weighted Assets
Balance sheet risk-weighted assets...................... $71,040 $62,778 $56,600
Off-balance-sheet risk-weighted assets.................. 28,403 23,852 22,041
------- ------- -------
Total risk-weighted assets.......................... $99,443 $86,630 $78,641
======= ======= =======
</TABLE>
38
<PAGE>
The Principal Banks have exceeded the well-capitalized guidelines for the
past three years, as shown in the following tables.
<TABLE>
<CAPTION>
NBD NBD NBD
FNBC FCCNB ANB MICHIGAN INDIANA ILLINOIS
DECEMBER 31, 1995 ---- ----- ---- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Risk-Based Capital Ratios
Tier 1 capital.................... 7.6% 10.0% 9.2% 7.6% 10.3% 9.9%
Total capital..................... 11.3 12.1 11.5 10.9 11.5 11.2
Leverage ratio...................... 5.9 11.7 9.2 7.4 7.9 8.3
<CAPTION>
NBD NBD NBD
FNBC FCCNB ANB MICHIGAN INDIANA ILLINOIS
DECEMBER 31, 1994 ---- ----- ---- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Risk-Based Capital Ratios
Tier 1 capital.................... 8.1% 12.1% 9.5% 7.5% 12.4% 10.3%
Total capital..................... 12.5 15.0 12.0 11.1 13.7 11.5
Leverage ratio...................... 6.3 14.4 9.1 6.1 8.9 7.9
<CAPTION>
NBD NBD NBD
FNBC FCCNB ANB MICHIGAN INDIANA ILLINOIS
DECEMBER 31, 1993 ---- ----- ---- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Risk-Based Capital Ratios
Tier 1 capital.................... 7.7% 10.0% 10.1% 8.1% 12.5% 11.8%
Total capital..................... 11.8 12.9 11.8 11.3 13.8 13.0
Leverage ratio...................... 6.7 12.3 8.7 6.7 8.9 9.1
</TABLE>
It is important to note that by maintaining regulatory well-capitalized
status, these banks benefit from lower FDIC deposit premiums.
DIVIDENDS
Dividends are an integral part of the capital management and stockholder
value program. The Corporation's common dividend policy reflects its earnings
outlook, desired payout ratios, peer comparisons, the need to maintain an
adequate capital level and alternative investment opportunities. Given these
factors, the Corporation is currently targeting a common dividend payout ratio
in the range of 30% to 40% of operating earnings over time. On December 8,
1995, the Corporation increased its quarterly common dividend to $0.36 per
share. This represented a 9% increase from the previous $0.33 per share common
dividend rate.
STOCK REPURCHASE PROGRAM AND OTHER CAPITAL ACTIVITIES
The repurchase of shares is used to manage excess capital and enhance
stockholder value. The Corporation's stock repurchase program, which combines
FCC's and NBD's pre-Merger programs, authorizes the repurchase of up to 28.7
million shares of common stock. At December 31, 1995, 9.4 million shares
remain available for repurchase under this program. During 1995 and prior to
the Merger, the Corporation repurchased 15 million shares of common stock at
an average price of $34.08 per share.
On August 1, 1995, the Corporation's $120.5 million issue of Preferred
Stock, Series A, was redeemed, reducing annual dividend requirements by $8.4
million. Regulatory total capital was increased in May 1995 through the
issuance of $200 million of subordinated debt.
DOUBLE LEVERAGE
Double leverage is the extent to which parent debt is used to finance equity
investments in subsidiaries. Presently, the Corporation intends to limit its
double leverage ratio to no more than 120% at any time. On December 31, 1995,
double leverage was 115%, compared with 113% at year-end 1994.
39
<PAGE>
CONSOLIDATED BALANCE SHEET
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
1995 1994
DECEMBER 31 (DOLLARS IN MILLIONS) -------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks................................. $ 7,297 $ 6,852
Interest-bearing due from banks......................... 10,241 8,697
Federal funds sold and securities under resale
agreements............................................. 11,698 13,702
Trading assets.......................................... 8,150 5,089
Derivative product assets............................... 6,713 4,447
Investment securities (fair values--$9,449 in 1995 and
$14,784 in 1994)....................................... 9,449 15,015
Loans (net of unearned income--$610 in 1995 and $469 in
1994).................................................. 64,434 55,176
Allowance for credit losses............................. (1,338) (1,158)
Premises and equipment.................................. 1,423 1,295
Customers' acceptance liability......................... 729 717
Other assets............................................ 3,206 2,931
-------- --------
Total assets........................................ $122,002 $112,763
======== ========
LIABILITIES
Deposits
Demand................................................ $ 15,234 $ 14,378
Savings............................................... 20,180 20,088
Time.................................................. 15,919 13,204
Foreign offices....................................... 17,773 17,225
-------- --------
Total deposits...................................... 69,106 64,895
Federal funds purchased and securities under repurchase
agreements............................................. 15,711 16,919
Other short-term borrowings............................. 9,802 8,422
Long-term debt.......................................... 8,163 7,246
Acceptances outstanding................................. 729 717
Derivative product liabilities.......................... 6,723 4,172
Other liabilities....................................... 3,318 2,583
-------- --------
Total liabilities................................... 113,552 104,954
STOCKHOLDERS' EQUITY
Preferred stock--without par value, authorized 10,000,000 shares
<CAPTION>
SHARES OUTSTANDING: 1995 1994
- ------------------- ----------- -----------
<S> <C> <C> <C> <C>
Series A ($50 stated value)..... -- 2,410,000 -- 121
Series B ($100 stated value).... 1,191,000 1,191,000 119 119
Series C ($100 stated value).... 713,800 713,800 71 71
Series E ($625 stated value).... 160,000 160,000 100 100
Convertible Series B ($5,000
stated value).................. 39,774 40,000 199 200
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C> <C> <C>
Common stock--$1 par value.............................. 319 329
Number of shares authorized... 750,000,000 500,000,000
Number of shares issued....... 318,535,798 329,474,942
Number of shares outstanding.. 315,241,109 318,554,906
Surplus................................................. 2,185 2,555
Retained earnings....................................... 5,497 4,808
Fair value adjustment on investment securities
available-for-sale..................................... 112 (158)
Deferred compensation................................... (39) (33)
Accumulated translation adjustment...................... 8 7
Treasury stock at cost, 3,294,689 shares in 1995 and
10,920,036 shares in 1994.............................. (121) (310)
-------- --------
Stockholders' equity................................ 8,450 7,809
-------- --------
Total liabilities and stockholders' equity.......... $122,002 $112,763
======== ========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
40
<PAGE>
CONSOLIDATED INCOME STATEMENT
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
1995 1994 1993
FOR THE YEAR (IN MILLIONS, EXCEPT PER SHARE DATA) ------ ------ ------
<S> <C> <C> <C>
INTEREST INCOME
Loans, including fees..................................... $5,260 $4,000 $3,612
Bank balances............................................. 620 395 332
Federal funds sold and securities under resale agreements. 922 624 350
Trading assets............................................ 467 284 227
Investment securities--taxable............................ 694 716 598
Investment securities--tax-exempt......................... 127 117 128
------ ------ ------
Total................................................. 8,090 6,136 5,247
INTEREST EXPENSE
Deposits.................................................. 2,581 1,653 1,472
Federal funds purchased and securities under repurchase
agreements............................................... 1,192 704 404
Other short-term borrowings............................... 538 378 253
Long-term debt............................................ 571 445 334
------ ------ ------
Total................................................. 4,882 3,180 2,463
------ ------ ------
NET INTEREST INCOME....................................... 3,208 2,956 2,784
Provision for credit losses............................... 510 276 390
------ ------ ------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES..... 2,698 2,680 2,394
NONINTEREST INCOME
Combined trading profits.................................. 210 86 305
Equity securities gains................................... 253 229 488
Investment securities gains (losses)...................... (16) (1) 2
------ ------ ------
Market-driven revenue................................... 447 314 795
Credit card fee revenue................................... 901 871 730
Fiduciary and investment management fees.................. 404 377 374
Service charges and commissions........................... 735 688 704
Other..................................................... 104 143 166
------ ------ ------
Total................................................. 2,591 2,393 2,769
NONINTEREST EXPENSE
Salaries and employee benefits............................ 1,692 1,602 1,558
Occupancy expense of premises, net........................ 252 244 256
Equipment rentals, depreciation and maintenance........... 225 245 194
FDIC insurance expense.................................... 58 105 116
Amortization of intangible assets......................... 88 93 123
Merger-related charges.................................... 267 -- --
Other..................................................... 953 931 914
------ ------ ------
Total................................................. 3,535 3,220 3,161
------ ------ ------
INCOME BEFORE INCOME TAXES................................ 1,754 1,853 2,002
Applicable income taxes................................... 604 632 712
------ ------ ------
NET INCOME................................................ $1,150 $1,221 $1,290
====== ====== ======
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS' EQUITY.... $1,113 $1,169 $1,233
====== ====== ======
EARNINGS PER SHARE
NET INCOME--PRIMARY..................................... $3.45 $3.62 $3.91
NET INCOME--FULLY DILUTED............................... $3.41 $3.58 $3.79
</TABLE>
The accompanying notes are an integral part of this statement.
41
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31 1995 1994 1993
(IN MILLIONS) ------ ------ ------
<S> <C> <C> <C>
PREFERRED STOCK
Balance, beginning of period............................. $ 611 $ 761 $ 669
Issuance of stock........................................ -- -- 200
Conversion of preferred stock............................ (1) -- --
Redemption of preferred stock............................ (121) (150) (108)
------ ------ ------
Balance, end of period................................... 489 611 761
------ ------ ------
COMMON STOCK
Balance, beginning of period............................. 329 318 309
Issuance of stock........................................ 1 -- 3
Redemption of preferred stock............................ -- -- 6
Acquisition of subsidiaries.............................. -- 11 --
Cancellation of shares held in treasury.................. (11) -- --
------ ------ ------
Balance, end of period................................... 319 329 318
------ ------ ------
CAPITAL SURPLUS
Balance, beginning of period............................. 2,555 2,542 2,399
Issuance of common stock................................. 14 14 38
Issuance of treasury stock............................... (21) (39) (1)
Issuance of preferred stock.............................. -- -- (4)
Redemption of preferred stock............................ -- (5) 101
Acquisition of subsidiaries.............................. (3) 39 --
Cancellation of shares held in treasury.................. (369) -- --
Other.................................................... 9 4 9
------ ------ ------
Balance, end of period................................... 2,185 2,555 2,542
------ ------ ------
RETAINED EARNINGS
Balance, beginning of period............................. 4,808 3,924 2,974
Net income............................................... 1,150 1,221 1,290
Cash dividends declared on common stock.................. (424) (367) (283)
Cash dividends declared on preferred stock............... (37) (47) (57)
Acquisition of subsidiaries.............................. -- 77 --
------ ------ ------
Balance, end of period................................... 5,497 4,808 3,924
------ ------ ------
FAIR VALUE ADJUSTMENT ON INVESTMENT SECURITIES AVAILABLE-
FOR-SALE
Balance, beginning of period............................. (158) (6) --
Unrealized loss at December 31, 1993 (net of taxes of
($3))................................................... -- -- (6)
Unrealized gain on securities transferred from held-to-
maturity to available-for-sale on November 17, 1995
(net of taxes of $55)................................... 101 -- --
Change in fair value (net of taxes of $99 in 1995 and
$(87) in 1994).......................................... 169 (148) --
Acquisition of subsidiaries.............................. -- (4) --
------ ------ ------
Balance, end of period................................... 112 (158) (6)
------ ------ ------
DEFERRED COMPENSATION
Balance, beginning of period............................. (33) (30) (34)
Awards granted........................................... (18) (28) (17)
Amortization of deferred compensation.................... 21 21 16
Other.................................................... (9) 4 5
------ ------ ------
Balance, end of period................................... (39) (33) (30)
------ ------ ------
ACCUMULATED TRANSLATION ADJUSTMENT
Balance, beginning of period............................. 7 3 7
Translation gain (loss), net of taxes.................... 1 4 (4)
------ ------ ------
Balance, end of period................................... 8 7 3
------ ------ ------
TREASURY STOCK
Balance, beginning of period............................. (310) (13) (1)
Purchase of common stock................................. (538) (388) (21)
Acquisition of subsidiaries.............................. 262 -- --
Cancellation of shares held in treasury.................. 380 -- --
Issuance of stock........................................ 85 91 9
------ ------ ------
Balance, end of period................................... (121) (310) (13)
------ ------ ------
Total Stockholders' Equity, end of period.............. $8,450 $7,809 $7,499
====== ====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
42
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
1995 1994 1993
FOR THE YEAR (IN MILLIONS) -------- -------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................... $ 1,150 $ 1,221 $ 1,290
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................... 274 277 295
Provision for credit losses..................... 510 279 403
Equity securities gains......................... (253) (229) (488)
Net (increase) decrease in net derivative
product balances............................... 296 (62) --
Net gains from accelerated disposition portfolio
activities..................................... (37) (46) (60)
Net (increase) in trading assets................ (2,766) (427) (1,165)
Net (increase) decrease in loans held for sale.. (243) 197 (111)
Net (increase) in accrued income receivable..... (131) (143) (37)
Net increase (decrease) in accrued expenses
payable........................................ (153) 102 317
Net (increase) decrease in other assets......... 174 (212) 66
Interest income from Brazilian debt
restructuring.................................. (2) (17) --
Merger-related charges.......................... 242 -- --
Other noncash adjustments....................... (67) 70 (421)
-------- -------- -------
Total adjustments............................... (2,156) (211) (1,201)
Net cash provided by (used in) operating
activities...................................... (1,006) 1,010 89
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold and
securities under resale agreements.............. 2,003 (4,623) (2,050)
Purchase of investment securities................ -- -- (7,722)
Purchase of investment securities--available-for-
sale............................................ (4,340) (6,392) --
Purchase of debt investment securities--held-to-
maturity........................................ (119) (3,081) --
Purchase of equity securities--fair value........ (385) (181) --
Proceeds from maturities of debt securities...... -- -- 8,265
Proceeds from maturities of debt securities--
available-for-sale.............................. 3,652 2,811 --
Proceeds from maturities of debt securities--
held-to-maturity................................ 1,042 2,052 --
Proceeds from sales of investment securities..... -- -- 679
Proceeds from sales of investment securities--
available-for-sale.............................. 5,564 2,164 --
Proceeds from sales of equity securities--fair
value........................................... 1,051 333 --
Credit card receivables securitized.............. 2,286 2,000 1,700
Net (increase) in loans.......................... (10,815) (8,200) (2,830)
Loan recoveries.................................. 142 155 189
Net proceeds from sales of assets held for
accelerated disposition......................... 59 112 829
Purchases of premises and equipment.............. (382) (370) (347)
Proceeds from sales of premises and equipment.... 74 107 137
Net cash and cash equivalents due to mergers and
acquisitions.................................... 116 38 --
-------- -------- -------
Net cash (used in) investing activities.......... (52) (13,075) (1,150)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits.............. 2,616 5,776 (2,700)
Net increase (decrease) in federal funds
purchased and securities under repurchase
agreements...................................... (1,208) 5,832 447
Net increase in other short-term borrowings...... 1,574 1,581 2,663
Proceeds from issuance of long-term debt......... 2,163 3,357 1,964
Repayment of long-term debt...................... (1,262) (1,231) (893)
Net increase in other liabilities................ 103 2 285
Dividends paid................................... (447) (397) (331)
Proceeds from issuance of common and treasury
stock........................................... 48 52 47
Purchase of treasury stock....................... (538) (397) (26)
Proceeds from issuance of preferred stock........ -- -- 196
Payment for redemption of preferred stock........ (121) (150) (1)
-------- -------- -------
Net cash provided by financing activities........ 2,928 14,425 1,651
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS..................................... 119 109 (80)
NET INCREASE IN CASH AND CASH EQUIVALENTS........ 1,989 2,469 510
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR... 15,549 13,080 12,570
-------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR......... $ 17,538 $ 15,549 $13,080
======== ======== =======
OTHER CASH FLOW DISCLOSURES:
Interest paid................................... $4,666 $3,165 $2,451
State and federal income taxes paid............. 808 575 379
</TABLE>
Loans transferred to other real estate were $18 million, $29 million and $57
million in 1995, 1994 and 1993, respectively. In 1993 the Corporation
reclassified $89 million of United Mexican States obligations from loans to
investment securities.
The accompanying notes are an integral part of this statement.
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements for the Corporation, including its
subsidiaries, have been prepared in conformity with generally accepted
accounting principles. Such preparation requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Prior years' financial
statements have been reclassified to conform with the current financial
statement presentation.
(a) Principles of Consolidation
The Corporation's consolidated financial statements include the accounts of
the Corporation (the "Parent Company") and all subsidiaries more than 50%
owned. All significant intercompany accounts and transactions have been
eliminated in consolidation.
(b) Trading Activities
Trading assets and liabilities are carried at fair value. Realized and
unrealized gains and losses related to trading activities are reflected in
noninterest income as combined trading profits.
Combined trading profits include interest rate, exchange rate, commodity
price, and equity price trading results from both cash and derivative
financial instruments. More information on the Corporation's trading revenue
is shown in the "Trading Revenue" table on page 20.
(c) Investment Securities
Effective November 17, 1995, the Corporation reclassified all held-to-
maturity debt securities to available-for-sale. Previously, these debt
investment securities were carried at amortized cost. The decision to
reclassify was made in conjunction with the Financial Accounting Standards
Board's ("FASB") issuance of an implementation guide that allowed a one-time
window period to reassess and reclassify investment securities. The
reclassified debt investment securities were revalued at fair value, which
resulted in a $156 million unrealized pretax gain being recorded in the fair
value adjustment on investment securities available-for-sale in stockholders'
equity.
Realized gains and losses and other than temporary impairments related to
debt and equity investment securities are determined using the specific
identification method and are reported in noninterest income as investment
securities gains (losses) or equity securities gains, as appropriate.
The Corporation carries investments of its venture capital subsidiaries at
fair value. Changes in the fair value of such investments are recognized in
noninterest income as equity securities gains. The fair value of publicly
traded investments takes into account their quoted market prices with
adjustments made for market liquidity or sale restrictions. For investments
that are not publicly traded, management has made estimates of fair value that
consider the investees' financial results, conditions and prospects, and the
values of comparable public companies. Because of the nature of these
investments, the equity method of accounting is not used in situations where
the Corporation has a greater than 20% ownership interest.
Other debt and equity investment securities classified as available-for-sale
are carried at fair value with unrealized gains and losses and applicable
income taxes reported in the fair value adjustment on investment securities
available-for-sale in stockholders' equity.
44
<PAGE>
(d) Loans
Loans are generally reported at the principal amount outstanding, net of
unearned income. Loans held for sale are valued at the lower of cost or fair
value. Unrealized losses as well as realized gains or losses are included in
other noninterest income.
Loan origination and commitment fees generally are deferred and amortized as
interest income over the life of the related loan. Other credit-related fees,
such as syndication management fees, commercial letters of credit fees, and
fees on unused, available lines of credit, are recorded as service charges and
commissions in noninterest income when earned.
Loans, including lease financing receivables, are considered nonperforming
when placed on nonaccrual status, or when renegotiated at terms that represent
an economic concession to the borrower.
A commercial loan is placed on nonaccrual status when the collection of
contractual principal or interest is deemed doubtful by management or becomes
90 days or more past due, and the loan is not well-secured and in the process
of collection. Accrued but uncollected interest is reversed and charged
against interest income when the commercial loan is placed on nonaccrual
status.
Interest payments received on a nonaccrual loan, in which ultimate
collection of the recorded investment amount is considered doubtful, are
recorded as a reduction to principal until such doubt no longer exists;
thereafter, interest payments received are recorded as a recovery, to the
extent of prior charge-offs, and then as interest income.
A charge-off on a commercial loan is recorded in the reporting period in
which either an event occurs that confirms the existence of a loss or it is
determined a loan or a portion of a loan is uncollectible. In general, a loan
or portion of a loan is considered to be uncollectible when the likelihood of
recovery is judged to be 25% or less. This does not suggest, however, that
there is no possibility of a recovery of a portion or all of the loan in a
subsequent period.
Consumer loans are generally not placed on nonaccrual status but are charged
off after reaching certain delinquency periods (120-180 days). The timing and
amount of the charge-off will depend on the type of consumer loan and any
related collateral. Accrued but uncollected interest on a consumer loan is
reversed against interest income when the loan is charged off.
An economic concession on a renegotiated loan may represent forgiveness of
principal and/or interest or a below-market interest rate offered to the
borrower to maximize recovery of the loan. Generally, this occurs when the
borrower's cash flow is insufficient to service the loan under its original
terms. Subject to the above nonaccrual policy, interest on these loans is
accrued at the reduced rates.
(e) Credit Card Securitization
The Corporation actively packages and sells credit card receivables as
securities to investors. At the time of securitization no gain or loss is
recorded since the amount of proceeds received is equal to the par value of
the receivables. Transaction costs are deferred and amortized ratably as a
reduction of servicing fees over the terms of the related securitizations. The
amount of credit card interest income and fee revenue in excess of interest
paid to certificate holders, credit losses and other trust expenses is
recognized on an accrual basis as servicing fees in credit card fee revenue.
(f) Allowance for Credit Losses
The allowance for credit losses is maintained at a level that in
management's judgment is adequate to provide for estimated probable credit
losses inherent in on- and off-balance-sheet credit exposure attributable to
various financial instruments. The amount of the allowance is based on formal
review and analysis of potential credit losses, as well as prevailing economic
conditions.
45
<PAGE>
(g) Premises and Equipment
Premises and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation is charged to noninterest expense over the
estimated useful lives of the assets and is computed on either a straight-line
or an accelerated depreciation method. Leasehold improvements are amortized
over the terms of the respective leases or the estimated useful lives of the
improvements, whichever is shorter. Maintenance, repairs and minor alterations
are expensed as incurred. Gains and losses on disposition are reflected in
other noninterest income.
(h) Other Real Estate
Other real estate includes primarily assets that have been acquired in
satisfaction of debt. Other real estate is initially recorded and subsequently
carried at the lower of cost or fair value less estimated selling costs. Any
valuation adjustments required at the date of transfer are charged to the
allowance for credit losses. Operating results from other real estate are
recorded in other noninterest expense.
(i) Intangible Assets
Intangible assets are included in other assets. Goodwill, representing the
cost of investments in subsidiaries and affiliated companies in excess of the
fair value of net assets acquired, is amortized on a straight-line basis over
periods ranging from 10 to 25 years.
Other intangible assets, such as purchased mortgage servicing rights,
customer lists, core deposits and credit card relationships, are amortized
using various methods over the periods benefited.
(j) Derivative Financial Instruments
For a discussion of the Corporation's accounting policies for derivative
financial instruments, see page 35.
(k) Foreign Currency Translation
When the primary operating currency (functional currency) of a foreign
installation is the U.S. dollar, its foreign currency-denominated monetary
assets and liabilities carried in local currency are remeasured into U.S.
dollars at current exchange rates. Its premises and equipment are remeasured
at historical exchange rates. Remeasurement effects and the results of related
hedging transactions are included in other noninterest income.
If the foreign installation's functional currency is its local currency, all
assets and liabilities are translated at current exchange rates. Translation
adjustments, related hedging results and applicable income taxes are included
in accumulated translation adjustment within stockholders' equity.
(l) Employee Benefits
The Corporation adopted Statement of Financial Accounting Standards ("SFAS")
No. 112, "Employers' Accounting for Postemployment Benefits," effective
January 1, 1994. This statement requires the accrual of benefits provided to
former or inactive employees after employment but before retirement. The
Corporation's prior practice was to expense these benefits when paid.
(m) Cash Flow Reporting
The Corporation uses the indirect method to report cash flows from operating
activities. Under this method, net income is adjusted to reconcile to net cash
flows from operating activities. Net reporting of cash transactions has been
used when the balance sheet items consist predominantly of maturities of three
months or less, or where otherwise permitted. Other items are reported on a
gross basis. Cash flows related to sales of debt investment securities within
three months of the maturity date are classified as maturities in the
consolidated statement of cash flows. Cash and cash equivalents consist of
cash and due from banks, whether interest-bearing or not.
Effective November 17, 1995, a noncash transfer of $7.2 billion attributable
to reclassifying debt securities from held-to-maturity to available-for-sale
was made. Please refer to section (c) of this note for more details.
46
<PAGE>
Upon adopting FASB Interpretation No. 39 on January 1, 1994, a noncash
transfer of balances attributable to derivative financial instruments on
December 31, 1993, was made from other assets ($1.5 billion) and other
liabilities ($1.3 billion) to net derivative product balances.
(n) Recently Issued Accounting Standards
In 1995 the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights," which requires the capitalization of servicing rights on mortgage
loans when the loans are to be sold and the servicing retained, and SFAS No.
123, "Accounting for Stock-Based Compensation," which encourages the use of a
fair value-based method of accounting for certain but not all employee stock
compensation plans.
Implementation of these statements is not expected to be material to the
Corporation's business practices or results of operations.
NOTE 2--EARNINGS PER SHARE
Earnings per share are presented on both a primary and a fully diluted
basis. Primary earnings per share were computed by dividing net income, after
deducting dividends on preferred stock, by the average number of common and
common-equivalent shares outstanding during the period. Common-equivalent
shares consist of net shares issuable under the Employee Stock Purchase and
Savings Plan and outstanding stock options.
The fully diluted earnings per share calculation also includes common shares
that would result from the conversion of convertible preferred stock and
convertible notes. Accordingly, net income was not reduced by preferred stock
dividend requirements related to convertible preferred stock or the interest
expense on the convertible notes.
<TABLE>
<CAPTION>
1995 1994 1993
(IN MILLIONS) ------ ------ ------
<S> <C> <C> <C>
Primary
Net income........................................... $1,150 $1,221 $1,290
Preferred stock dividends (1)........................ (37) (52) (57)
------ ------ ------
Net income attributable to common stockholders'
equity.............................................. $1,113 $1,169 $1,233
====== ====== ======
Fully diluted
Net income........................................... $1,150 $1,221 $1,290
Preferred stock dividends, excluding convertible
Series A and B, where applicable (1)................ (26) (40) (44)
Interest on convertible notes, net of taxes.......... -- 2 10
------ ------ ------
Fully diluted net income............................. $1,124 $1,183 $1,256
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
(IN THOUSANDS) ------- ------- -------
<S> <C> <C> <C>
Average shares outstanding............................. 320,049 319,929 313,248
Common stock equivalents............................... 2,808 2,737 2,170
------- ------- -------
Average number of common and common-equivalent shares
(primary)............................................. 322,857 322,666 315,418
Incremental shares related to convertible preferred
stock, debentures and other......................... 7,240 8,145 15,871
------- ------- -------
Average number of shares, assuming full dilution....... 330,097 330,811 331,289
======= ======= =======
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Earnings Per Share
Net income--primary.................................. $3.45 $3.62 $3.91
===== ===== =====
Net income--fully diluted............................ $3.41 $3.58 $3.79
===== ===== =====
</TABLE>
- --------
(1) 1994 preferred dividends include a $4.5 million, or 3%, premium paid on
the redemption of the Corporation's Cumulative Preferred Stock, Series D.
47
<PAGE>
NOTE 3--FIRST CHICAGO NBD CORPORATION MERGER
On December 1, 1995 (the "Effective Time"), FCC merged with and into NBD,
with the combined company renamed First Chicago NBD Corporation. At the
Effective Time, each share of FCC common stock was converted into 1.81 shares
of common stock of the Corporation. In aggregate, 87.1 million shares of FCC
common stock were converted into 157.7 million shares of the Corporation's
common stock. Each share of NBD common stock remained outstanding representing
one share of the Corporation's common stock. Each share of FCC preferred stock
outstanding immediately prior to the Merger was converted into one share of
the Corporation's preferred stock with substantially similar terms. FCC
treasury shares held at the Effective Time were canceled. The Merger was
accounted for as a pooling of interests and, accordingly, the Financial
Statements have been restated.
The following presents financial information for FCC and NBD for the periods
prior to December, 1995. To conform to consistent methods of accounting,
certain reclassifications of historical data have been made. Among these were
the reclassification of the 1994 extraordinary item (to other noninterest
income), the 1994 cumulative effect of changes in accounting principles (to
salaries and employee benefits), and the 1993 cumulative effect of changes in
accounting principles (to applicable income taxes).
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
FCC NBD FCC NBD FCC NBD
(IN MILLIONS) ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net interest income................. $1,350 $1,577 $1,331 $1,625 $1,226 $1,558
Noninterest income.................. 1,873 519 1,875 545 2,202 585
Noninterest expense................. 1,765 1,200 1,919 1,304 1,858 1,322
Income before income taxes.......... 1,114 814 1,063 814 1,300 702
Income before extraordinary item and
cumulative effect of changes in
accounting principles.............. 727 535 690 547 804 482
Extraordinary items................. -- -- -- (8) -- --
Cumulative effect of changes in
accounting principles.............. -- -- -- (8) -- 4
Net income.......................... 727 535 690 531 804 486
</TABLE>
NOTE 4--MERGER-RELATED CHARGES
Merger-related charges were $267 million and included direct merger and
restructuring-related charges totaling $225 million, as well as the effect of
conforming a number of accounting practices between FCC and NBD, which totaled
$42 million. The effect of conforming these practices is not material to the
Corporation's financial statements.
The following table provides details on merger-related charges associated
with the business combination and restructuring plan (in millions).
<TABLE>
<S> <C>
Personnel-related................................................... $ 93
Facilities and equipment............................................ 95
Other............................................................... 37
----
$225
====
</TABLE>
48
<PAGE>
The reserve associated with such charges as of December 31, 1995, was $200
million. Most of the actions incorporated in the established business plans
will be implemented over a 12-15 month period following the Effective Time.
Personnel-related costs reflect primarily the costs of the benefit package
for separated employees. Facilities costs consist of lease termination costs
and other facilities-related exit costs arising from the closing of duplicate
branch facilities and from the consolidation of duplicate headquarters and
operational facilities. Equipment costs consist of computer equipment and
software write-offs due to duplication or incompatibility.
Targeted staff reductions total 1,700, coming primarily from the overlap in
the Chicago retail banking business, product synergies in the large corporate
and middle market businesses, as well as redundant staff and administrative
support functions. The benefit package for affected employees has been
approved by management and communicated on a corporate-wide basis.
Other merger-related charges include investment banking fees, securities
registration and listing fees, filing fees, and various accounting, legal and
other related costs. Investment banking fees of $12 million represent the
largest component of such costs.
NOTE 5--ACQUISITIONS
In July 1995, the Corporation consummated its merger with Deerbank
Corporation, a $766 million thrift holding company located in Deerfield,
Illinois. The merger was accounted for as a purchase. The purchase price of
$106 million was funded by the issuance of 3.3 million shares of the
Corporation's common stock. Before the closing, the Corporation repurchased an
amount of shares equivalent to the shares issued in the transaction.
In January 1995, the Corporation consummated its merger with AmeriFed
Financial Corp., a thrift holding company located in Joliet, Illinois, with
total assets of $910 million. The purchase price of $148 million was funded by
the issuance of 5.2 million shares of the Corporation's common stock. The
merger was accounted for as a purchase. The Corporation had repurchased 5.0
million of the shares issued before the closing of the merger, and repurchased
the remaining shares issued soon after the closing.
On July 8, 1994, the Corporation issued approximately 11.6 million shares of
its common stock for all of the common stock of Lake Shore Bancorp., Inc. of
Chicago, Illinois, with total assets of $1.2 billion and capital of $123
million. The combination was accounted for on a pooling-of-interests basis;
however, because the transaction was not considered significant from an
accounting perspective, the Corporation did not restate either 1994 or prior-
year financial data.
49
<PAGE>
NOTE 6--BUSINESS SEGMENTS
The Corporation is engaged primarily in the banking business, and with the
continuing globalization of financial markets, the distinction between
international and domestic activities has become less important. The following
table shows approximate consolidated financial data for the three years ended
December 31, 1995, attributable to domestic and foreign operations. No foreign
geographic region accounted for more than 10% of consolidated results.
<TABLE>
<CAPTION>
INCOME
BEFORE
INCOME NET TOTAL
REVENUES(1) EXPENSES(2) TAXES INCOME ASSETS
(IN MILLIONS) ----------- ----------- ------ ------ --------
<S> <C> <C> <C> <C> <C>
1995
Domestic operations............ $ 9,277 $7,590 $1,687 $1,099 $100,601
Foreign operations............. 1,404 1,337 67 51 21,401
------- ------ ------ ------ --------
Consolidated................... $10,681 $8,927 $1,754 $1,150 $122,002
======= ====== ====== ====== ========
1994
Domestic operations............ $ 7,745 $5,926 $1,819 $1,204 $ 97,372
Foreign operations............. 784 750 34 17 15,391
------- ------ ------ ------ --------
Consolidated................... $ 8,529 $6,676 $1,853 $1,221 $112,763
======= ====== ====== ====== ========
1993
Domestic operations............ $ 7,202 $5,375 $1,827 $1,172 $ 82,830
Foreign operations............. 814 639 175 118 10,310
------- ------ ------ ------ --------
Consolidated................... $ 8,016 $6,014 $2,002 $1,290 $ 93,140
======= ====== ====== ====== ========
</TABLE>
- --------
(1) Includes interest income and noninterest income.
(2) Includes interest expense, provision for credit losses and noninterest
expense.
Results from foreign operations include provisions for credit losses of
$(11) million in 1995, $(42) million in 1994 and $(16) million in 1993.
Recoveries, including those related to the Brazilian debt restructuring,
contributed to the negative provisions in all three years.
Because many of the resources employed by the Corporation are common to both
its foreign and domestic activities, it is difficult to segregate assets,
related revenues and expenses into their foreign and domestic components. The
amounts in the preceding table are estimated on the basis of internally
developed assignment and allocation procedures, which to some extent are
subjective. The principal internal allocations used to prepare this
information are described below.
Corporate overhead is allocated based on individual activities. Expenses are
generally allocated to the geographic area benefited. Assets and revenues are
generally allocated based on the domicile of the customer. Capital, with the
exception of that invested in foreign subsidiaries, is allocated to domestic
operations.
For information regarding the Corporation's line of business activities, see
the Business Segments Overview section on page 14 as well as the tables on
pages 14 to 18, which summarize financial results for the Corporation's major
business segments and other activities.
50
<PAGE>
NOTE 7--INVESTMENT SECURITIES
The following is a summary of the Corporation's available-for-sale and held-
to-maturity securities.
<TABLE>
<CAPTION>
INVESTMENT SECURITIES--AVAILABLE-FOR-SALE
-----------------------------------------------------------
AMORTIZED GROSS UNREALIZED GROSS UNREALIZED FAIR VALUE
DECEMBER 31, 1995 (IN COST GAINS LOSSES (BOOK VALUE)
MILLIONS) ------------ ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury........... $1,416 $ 8 $ 1 $1,423
U.S. government agencies
Mortgage-backed
securities........... 4,855 119 20 4,954
Collateralized
mortgage obligations. 5 -- -- 5
Other................. 457 1 -- 458
States and political
subdivisions........... 1,383 81 2 1,462
Collateralized mortgage
obligations (1)........ 1 -- -- 1
Other debt securities... 91 2 -- 93
Equity securities
(2)(3)................. 986 152 85 1,053
------ ---- ---- ------
Total............... $9,194 $363 $108 $9,449
====== ==== ==== ======
<CAPTION>
INVESTMENT SECURITIES--AVAILABLE-FOR-SALE
-----------------------------------------------------------
AMORTIZED GROSS UNREALIZED GROSS UNREALIZED FAIR VALUE
DECEMBER 31, 1994 (IN COST GAINS LOSSES (BOOK VALUE)
MILLIONS) ------------ ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury........... $ 951 $ -- $ 7 $ 944
U.S. government agencies
Mortgage-backed
securities........... 2,658 -- 160 2,498
Collateralized
mortgage obligations. 1,461 5 46 1,420
Other................. 47 1 -- 48
States and political
subdivisions........... 77 -- 1 76
Collateralized mortgage
obligations (1)........ 111 -- -- 111
Other debt securities... 206 -- 41 165
Equity securities
(2)(3)................. 1,255 526 93 1,688
------ ---- ---- ------
Total............... $6,766 $532 $348 $6,950
====== ==== ==== ======
<CAPTION>
INVESTMENT SECURITIES--HELD-TO-MATURITY
-----------------------------------------------------------
AMORTIZED
COST GROSS UNREALIZED GROSS UNREALIZED
(BOOK VALUE) GAINS LOSSES FAIR VALUE
------------ ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury........... $ 785 $ -- $ 21 $ 764
U.S. government agencies
Mortgage-backed
securities........... 5,666 45 282 5,429
Other................. 18 -- -- 18
States and political
subdivisions........... 1,591 53 26 1,618
Other debt securities... 5 -- -- 5
------ ---- ---- ------
Total............... $8,065 $ 98 $329 $7,834
====== ==== ==== ======
</TABLE>
- --------
(1) All collateralized mortgage obligations of private issuers have underlying
collateral consisting of obligations of U.S. government agencies.
(2) The fair values of certain securities for which market quotations were not
available were estimated. In addition, the fair values of certain
securities reflect liquidity and other market-related factors.
(3) Includes investments accounted for at fair value, in keeping with
specialized industry practice.
Proceeds from the sale of available-for-sale investment securities,
excluding equity securities accounted for at fair value, during 1995 were
$5.564 billion, resulting in gross realized gains of $45 million and gross
realized losses of $62 million.
51
<PAGE>
Proceeds from the sale of available-for-sale investment securities,
excluding equity securities accounted for at fair value, during 1994 were
$2.164 billion, resulting in gross realized gains of $14 million and gross
realized losses of $15 million. Proceeds from the sale of debt investment
securities during 1993 were $57 million, resulting in gross realized gains of
$3 million and gross realized losses of $1 million.
The maturity distribution of debt investment securities at December 31,
1995, is shown below. The distribution of mortgage-backed securities and
collateralized mortgage obligations is based on average expected maturities.
Actual maturities may differ because issuers may have the right to call or
prepay obligations.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
(IN MILLIONS) --------- ------
<S> <C> <C>
Due in one year or less....................................... $1,720 $1,725
Due after one year through five years......................... 2,650 2,764
Due after five years through ten years........................ 3,466 3,515
Due after ten years........................................... 372 392
------ ------
$8,208 $8,396
====== ======
</TABLE>
NOTE 8--LOANS
Following is a breakdown of loans included in the consolidated balance sheet
as of December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
(IN MILLIONS) ------- -------
<S> <C> <C>
Commercial
Domestic
Commercial.................................................. $25,551 $22,546
Real estate
Construction.............................................. 1,151 1,074
Other..................................................... 6,103 5,903
Lease financing............................................. 1,588 1,381
Foreign....................................................... 3,726 3,305
------- -------
Total commercial........................................ 38,119 34,209
------- -------
Consumer
Credit cards.................................................. 9,649 6,980
Secured by real estate
Mortgage.................................................... 6,669 4,963
Home equity................................................. 2,264 2,062
Automotive.................................................... 4,477 3,994
Other......................................................... 3,256 2,968
------- -------
Total consumer.......................................... 26,315 20,967
------- -------
Total................................................... $64,434 $55,176
======= =======
</TABLE>
The amount of interest shortfall (the difference between interest
contractually due and interest actually recorded) related to nonperforming
loans at year-end was $19 million in 1995 and $16 million in 1994.
Credit card receivables are available for sale at par value through the
Corporation's credit card securitization program. In addition, other loans
available for sale at December 31, 1995 and 1994, totaled $556 million and
$312 million, respectively.
The Corporation has loans outstanding to certain of its directors and
executive officers and to partnerships or companies in which a director or
executive officer has at least a 10% beneficial interest. At December 31, 1995
and 1994, $271 million and $297 million, respectively, of such loans to
related parties were outstanding. An analysis of the activity during 1995 with
respect to such loans includes additions of $793 million, and reductions of
$819 million.
52
<PAGE>
NOTE 9--ALLOWANCE FOR CREDIT LOSSES
Changes in the allowance for credit losses for the three years ended
December 31, 1995, were as follows.
<TABLE>
<CAPTION>
1995 1994 1993
(IN MILLIONS) ------ ------ ------
<S> <C> <C> <C>
Balance, beginning of year.............................. $1,158 $1,106 $1,041
Additions (deductions)
Charge-offs........................................... (409) (364) (485)
Recoveries............................................ 145 172 189
------ ------ ------
Net charge-offs....................................... (264) (192) (296)
Provision for credit losses........................... 510 276 390
Other
Acquisitions.......................................... 9 16 --
Transfers related to securitized receivables.......... (75) (49) (29)
Other................................................. -- 1 --
------ ------ ------
Balance, end of year.................................... $1,338 $1,158 $1,106
====== ====== ======
</TABLE>
Effective January 1, 1995, the Corporation adopted 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." SFAS
No. 114 addresses the accounting for a loan when it is probable that all
principal and interest amounts due will not be collected in accordance with
its contractual terms. Certain loans, such as loans carried at the lower of
cost or market or small-balance homogeneous loans (e.g., credit card,
installment credit), are exempt from SFAS No. 114 provisions. Nonperforming
loans are generally identified as "impaired loans."
On a quarterly basis, the Corporation identifies impaired loans, and
impairment is recognized to the extent the recorded investment of an impaired
loan or pool of loans exceeds the calculated present value. For non-collateral
dependent loans, the calculated present value is measured using a discounted
cash flow approach. Loans having a significant recorded investment are
measured on an individual basis while loans not having a significant recorded
investment are grouped and measured on a pool basis. Collateral-dependent
loans, primarily real estate, are separately measured for impairment by
determining the fair value of the collateral less estimated costs to sell.
The allocated reserve associated with impaired loans is considered in
management's determination of the allowance for credit losses. The adoption of
this accounting standard did not have a significant effect on net income or
allowance for credit losses.
At December 31, 1995, the recorded investment in loans considered impaired
was $363 million, which required a related allowance for credit losses of $36
million. Of the $363 million in impaired loans, $194 million required the
establishment of an allocated reserve. The average recorded investment in
impaired loans was approximately $302 million for the year ended December 31,
1995. The Corporation recognized interest income associated with impaired
loans of $15 million during the year.
NOTE 10--PLEDGED AND RESTRICTED ASSETS
Assets carried at $22.3 billion in the consolidated balance sheet at
December 31, 1995, were pledged to secure government deposits, trust deposits,
and borrowings, and for other purposes required by law.
The Banks are required to maintain noninterest-bearing cash balances with
the Federal Reserve based on the types and amounts of deposits held. During
1995 and 1994, the average balances maintained to meet this requirement were
$867 million and $928 million, respectively.
53
<PAGE>
NOTE 11--LONG-TERM DEBT
Long-term debt consists of borrowings having an original maturity of over
one year. Original issue discount and deferred issuance costs are amortized
over the terms of the related notes. Long-term debt at December 31, 1995 and
1994, was as follows.
<TABLE>
<CAPTION>
1995 1994
(IN MILLIONS) ------ ------
<S> <C> <C>
PARENT COMPANY
SUBORDINATED DEBT
9% notes due 1999............................................... $ 199 $ 199
9 7/8% notes due 2000........................................... 99 99
9 1/5% notes due 2001........................................... 5 5
9 1/4% notes due 2001........................................... 100 100
10 1/4% notes due 2001.......................................... 100 100
11 1/4% notes due 2001.......................................... 96 96
8 7/8% notes due 2002........................................... 100 100
8 1/10% notes due 2002.......................................... 200 200
8 1/4% notes due 2002........................................... 100 100
7 5/8% notes due 2003........................................... 199 199
6 7/8% notes due 2003........................................... 200 200
Floating rate notes due 2003.................................... 149 149
7 1/4% debentures due 2004...................................... 200 200
Floating rate notes due 2005.................................... 96 96
7 1/8% notes due 2007........................................... 199 --
6 3/8% notes due 2009........................................... 198 198
7 1/2% preferred purchase units due 2023........................ 150 150
9 7/8% equity commitment notes due 1999......................... 200 200
Floating rate equity contract notes due 1996.................... 125 125
SENIOR DEBT
8 1/2% notes due 1998........................................... 100 100
Other Parent Company debt....................................... 1,624 1,385
------ ------
Total Parent Company.......................................... 4,439 4,001
------ ------
SUBSIDIARIES
Bank notes, various rates and maturities........................ 2,944 2,434
Subordinated 6 1/4% notes due 2003.............................. 200 200
Subordinated 8 1/4% notes due 2024.............................. 250 250
8 3/4% notes due 1997-1999...................................... 10 10
Capitalized lease obligations, various rates and maturities..... 15 52
Other........................................................... 305 299
------ ------
Total subsidiaries............................................ 3,724 3,245
------ ------
Total long-term debt.......................................... $8,163 $7,246
====== ======
</TABLE>
(A) PARENT COMPANY LONG-TERM DEBT
SUBORDINATED NOTES
These notes are subordinated to other indebtedness of the Corporation. The
fixed-rate notes have interest rates that range from 6 3/8% to 11 1/4% and
maturities that range from 1999 to 2023. The floating rate notes due in 2003
have an interest rate priced at the greater of 4 1/4% or the three-month
London interbank offered rate plus 1/8%. The interest rate on this issue on
December 31, 1995, was 6 1/16%. The floating rate notes due 2005 may be
redeemed, in whole or in part, on any interest payment date at par. Interest
payment on the notes is at a rate of 1/4% above the average offered rate
quoted in the London interbank market for three-month Eurodollar deposits but
in no event may the rate be less than 5.25%. On December 31, 1995, the
interest rate was 5 13/16%.
54
<PAGE>
Each 7 1/2% preferred purchase unit consists of a 7.40% subordinated
debenture due May 10, 2023, in a principal amount of $25 and a related
purchase contract paying fees of 0.10% of the principal amount of the
debenture per year. The contract requires the purchase on May 10, 2023 (or
earlier at the Corporation's election), of one depositary share representing a
one-fourth interest in a share of 7 1/2% cumulative preferred stock of the
Corporation at a purchase price of $25 per depositary share.
The equity commitment notes may not be redeemed prior to their stated
maturity. The agreements under which these notes were issued require the
Corporation, prior to maturity, to issue common stock, perpetual preferred
stock or other forms of equity approved by the Federal Reserve Board in an
amount equal to the original aggregate principal amount of the notes. As of
December 31, 1995, all the equity securities required by the agreements had
been issued.
The interest rate on the floating rate equity contract notes is reset
quarterly at 3/16% over the average offered rate quoted in the London
interbank market for three-month Eurodollar deposits. The interest rate on
this issue as of December 31, 1995, was 6.00%.
SENIOR DEBT
The 8 1/2% notes are unsecured obligations that are not subordinated to any
other indebtedness of the Corporation and may not be redeemed prior to their
stated maturity.
Other Parent Company long-term debt of $1.624 billion includes various notes
with a weighted average interest rate of 6.63% and remaining weighted average
maturity of 25 months at December 31, 1995.
(B) SUBSIDIARIES' LONG-TERM DEBT
The bank notes are unsecured and unsubordinated debt obligations of the
Banks. At December 31, 1995, the weighted average rate of the bank notes was
6.07% and remaining weighted average maturity was 12 months.
The 6 1/4% subordinated notes due 2003 are unsecured, subordinated to the
claims of depositors and other creditors of NBD Michigan, and are not
redeemable prior to maturity.
The 8 1/4% subordinated notes due 2024 are unsecured, subordinated to the
claims of depositors and other creditors of NBD Michigan, and are not
redeemable by the bank prior to maturity. Registered holders have a one-time
right to redeem the notes at par, in whole or in part, on November 1, 2004.
Other long-term debt at December 31, 1995, included $281 million related to
the sale and lease-back of certain bank properties. The effective interest
rate related to this transaction is 8.7%, with expected maturity in 2018.
(C) MATURITY OF LONG-TERM DEBT
Of the Corporation's $8.163 billion total long-term debt, $2.225 billion,
$1.461 billion, $621 million, $653 million and $360 million is scheduled to
mature in 1996, 1997, 1998, 1999 and 2000, respectively.
NOTE 12--PREFERRED STOCK
The Corporation is authorized to issue 10,000,000 shares of preferred stock,
without par value. The Board of Directors is authorized to fix the particular
designations, preferences, rights, qualifications and restrictions for each
series of preferred stock issued. All preferred shares rank prior to common
shares both as to dividends and liquidation, but have no general voting
rights. The dividend rate on each of the cumulative adjustable rate series is
based on stated value and adjusted quarterly, based on a formula that
considers the interest rates for selected
55
<PAGE>
short- and long-term U.S. Treasury securities prevailing at the time the rate
is set. The minimum, maximum and current dividend rates as of December 31,
1995, are presented in the following table.
<TABLE>
<CAPTION>
STATED ANNUAL DIVIDEND RATE EARLIEST
SHARES VALUE PER ----------------------- REDEMPTION REDEMPTION
PREFERRED STOCK SERIES OUTSTANDING SHARE MAXIMUM MINIMUM CURRENT DATE PRICE(1)
- ---------------------- ----------- --------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cumulative Adjustable
Rate
Series B............... 1,191,000 $ 100.00 12.00% 6.00% 6.00% (2) $ 100.00
Series C............... 713,800 100.00 12.50 6.50 6.50 (2) 100.00
Cumulative Fixed Rate
Series E (3)........... 160,000 625.00 8.45 8.45 8.45 11/16/97(4) 625.00
Cumulative Convertible
Fixed Rate
Series B (5)........... 39,774 5,000.00 5.75 5.75 5.75 4/1/97(6) 5,172.50
</TABLE>
- --------
(1) Plus accrued and unpaid dividends.
(2) Currently redeemable.
(3) Represented by 4,000,000 depositary shares, with a corresponding annual
dividend rate of $2.11 each and a $25 stated value.
(4) The preferred shares are redeemable on or after November 16, 1997, at $625
per share (equivalent to $25 per depositary share).
(5) Represented by 3,977,400 depositary shares, with a corresponding annual
dividend rate of $2.875 each and a $50 stated value.
(6) The preferred shares may be converted into shares of the Corporation's
common stock at the option of the stockholders at any time at the
conversion price of $29.6271 per common share, subject to adjustment under
certain conditions. In the fourth quarter of 1995, 226 preferred shares
were converted into 38,158 shares of the Corporation's common stock. Shares
are redeemable beginning April 1, 1997, at the option of the Corporation,
at a price of $5,172.50 ($51.725 per depositary share), with the redemption
price decreasing annually until the shares are redeemable on or after April
1, 2003, at their stated value of $5,000 per share ($50 per depositary
share).
All shares of Cumulative Preferred Stock, Series A, were called for
redemption in August 1995. The redemption price was $50 per share plus accrued
and unpaid dividends.
All shares of 10% Cumulative Preferred Stock, Series D, were called for
redemption in July 1994. The redemption price of $25.75 per share plus accrued
and unpaid dividends included a 3% premium, totaling $4.5 million.
All shares of Cumulative Convertible Preferred Stock, Series A, were called
for redemption on September 2, 1993. Each such share was convertible into 2.518
shares of the Corporation's common stock at the option of the stockholder, and
approximately 2.1 million shares of the preferred stock were converted into
approximately 5.4 million shares of common stock. Resultant fractional shares
were paid in cash. On September 2, 1993, the Corporation redeemed the remaining
shares of the Cumulative Convertible Preferred Stock, Series A, at the price of
$51.50 per share plus accrued and unpaid dividends.
NOTE 13--EMPLOYEE BENEFITS
The Corporation is currently in the process of reviewing its pension,
employee savings, postemployment, and postretirement benefit plans with the
objective of establishing common plans for all employees of the combined
Corporation. Such new plans are intended to become effective by January 1,
1997.
(A)PENSION PLANS
The Corporation sponsors pension plans covering substantially all salaried
employees. The pension plans are noncontributory, defined benefit plans that
provide benefits based on years of service and compensation level. The funding
policy varies for each plan. Depending on the plan, consideration is given to
net periodic pension cost for the year, the minimum required by the Employee
Retirement Income Security Act of 1974 ("ERISA"), and the maximum tax
deductible amount based on IRS limits.
56
<PAGE>
Plan assets primarily include equity securities and debt securities issued by
the U.S. government and its agencies or by corporations. Plan assets include
common stock of the Corporation having a fair value of $15 million in 1995 and
$20 million in 1994.
Net periodic pension (credit) cost includes the following components for the
years ended December 31.
<TABLE>
<CAPTION>
1995 1994 1993
(IN MILLIONS) ----- ----- -----
<S> <C> <C> <C>
Service cost--benefits earned during period............... $ 45 $ 53 $ 42
Interest cost on projected benefit obligation............. 100 93 84
Actual loss (return) on assets............................ (351) 13 (183)
Net amortization and deferral............................. 206 (154) 49
----- ----- -----
Net periodic pension (credit) cost........................ $ -- $ 5 $ (8)
===== ===== =====
</TABLE>
The following table reconciles the aggregated funded status of the plans and
amounts recognized in the consolidated balance sheet at December 31.
<TABLE>
<CAPTION>
1995 1994
(IN MILLIONS) ------- -------
<S> <C> <C>
Actuarial present value of the projected benefit obligation,
based on employment service to date, and current salary
levels:
Vested employees.......................................... $(1,105) $ (816)
Nonvested employees....................................... (88) (80)
------- -------
Accumulated benefit obligation............................ (1,193) (896)
Additional amounts related to projected salary increases.... (259) (230)
------- -------
Projected benefit obligation................................ (1,452) (1,126)
Plan assets (at fair value)................................. 1,803 1,499
------- -------
Plan assets in excess of projected benefit obligation....... 351 373
Unrecognized net gain due to experience different from
assumptions................................................ (6) (54)
Unrecognized transition asset............................... (55) (64)
Unrecognized prior service cost............................. 97 107
------- -------
Prepaid pension cost included in the consolidated balance
sheet...................................................... $ 387 $ 362
======= =======
</TABLE>
Each plan was separately valued based on the individual plan's underlying
terms, demographics and asset mix. The assumptions used in determining the
projected benefit obligation and net periodic pension (credit) cost of such
plans at December 31 are as follows.
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Discount rate.................................... 7.25% 8.0%-9.0% 7.0%-7.5%
Salary increase assumption....................... 5.25% 5.0%-5.5% 4.5%-5.5%
Expected long-term rate of return on plan assets. 9.0%-9.5% 9.5% 9.5%
</TABLE>
(B) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Corporation sponsors postretirement plans that provide life insurance and
health care benefits for certain employees when they retire. The postretirement
health care benefit, which can also cover eligible dependents, is contributory,
with retiree contributions adjusted annually to reflect increases in the
Corporation's health care costs. The postretirement life insurance benefit is
noncontributory.
Net periodic postretirement benefit cost included the following components
for the years ended December 31.
<TABLE>
<CAPTION>
1995 1994 1993
(IN MILLIONS) ---- ---- ----
<S> <C> <C> <C>
Service cost..................................................... $ 1 $1 $2
Interest cost.................................................... 4 3 5
Net amortization................................................. 14 -- --
--- --- ---
Net periodic postretirement benefit cost......................... $19 $4 $7
=== === ===
</TABLE>
57
<PAGE>
The Corporation funds postretirement benefit cost as claims are incurred.
The following table reconciles the plan's funded status and amounts recognized
in the consolidated balance sheet at December 31.
<TABLE>
<CAPTION>
1995 1994
(IN MILLIONS) ---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees......................................................... $(55) $(37)
Fully eligible active plan participants.......................... (11) (4)
Other active plan participants................................... (11) (8)
---- ----
Total accumulated postretirement benefit obligation................ (77) (49)
Plan assets (at market value)...................................... -- --
---- ----
Accumulated postretirement benefit obligation in excess of plan
assets............................................................ (77) (49)
Unrecognized net (gain)............................................ (9) (17)
Unrecognized prior service cost.................................... 4 --
---- ----
Accrued postretirement benefit liability recognized in the
consolidated balance sheet........................................ $(82) $(66)
==== ====
</TABLE>
The assumption used to measure postretirement benefit costs is a 9% annual
rate of increase in the per capita cost of covered health care benefits for
1996, trending downward to 5.5% by the year 2000, and remaining at that level
thereafter. This assumption has a significant effect on the amounts reported.
Increasing the assumed health care cost trend rates by one percentage point in
each year would have increased the accumulated postretirement benefit
obligation as of December 31, 1995, by $4 million and the aggregate of the
service and interest cost components of net periodic postretirement benefit
cost for 1995 by approximately $0.4 million.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% at December 31, 1995, and 8.0% at
year-end 1994.
The Corporation adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," effective January 1, 1994. The cumulative effect of
adoption was a charge of $12 million ($8 million net of income taxes). The
effect of postemployment benefit costs on income before income taxes was not
significant in 1995 or 1994.
(C) EMPLOYEE SAVINGS PLANS
The Corporation maintains various savings plans for U.S.-based employees
meeting certain eligibility requirements.
Under the existing FCC 401(k) plan, participants may contribute from 1% to
6% of their salary on a pretax basis, and an additional 1% to 10% of salary on
an after-tax basis. Beginning in 1994, the employer contribution to the plan
was determined as 100% of the first $750 of pretax contributions made by
participants and 50% of any pretax contributions in excess of $750. The plan
was amended in 1993 to allow a supplemental profit-based contribution to the
plan.
The existing NBD 401(k) plan requires employer contributions equal to
participants' contributions up to 2% of their salary, plus an amount equal to
one-half of participants' contributions between 2% and 6% of their salary
subject to certain limitations imposed by the IRS.
Total expense for these plans was $37 million in 1995, $36 million in 1994,
and $35 million in 1993.
The Corporation also maintains an Employee Stock Purchase and Savings Plan
that allows eligible employees to authorize payroll deductions for deposit in
interest-bearing savings accounts for up to two years. Employees then have the
option to either withdraw their savings balance in cash or purchase shares of
the Corporation's common stock at a price fixed under the plan. No expense is
recognized in connection with such stock purchases.
58
<PAGE>
(D) STOCK AWARD AND STOCK OPTION PLANS
The Corporation maintains various incentive plans that allow the granting of
restricted shares, stock options, or other stock-based awards to eligible
employees. Restricted shares granted to key officers require them to continue
employment from one to seven years beginning on the original grant date before
the shares are ultimately distributed to the employee. The market value of the
restricted shares as of the date of grant is amortized to compensation expense
over the restriction period.
The Corporation also maintains performance-based stock plans. The shares
issued under these programs are distributed only if performance criteria are
met. The ultimate expense attributable to these plans is based on the market
value of the shares on the date the shares are awarded. For both the
restricted stock plans and the performance-based stock plans, the unamortized
cost of such shares is included in stockholders' equity. At December 31, 1995,
the number of restricted shares and performance-based shares outstanding was
3,071,074.
The various incentive plans also permit the granting of stock options. In
addition, stock options may be granted that include the right to receive a
restorative option. A restorative option allows a participant who exercises
the original option, and who meets several specific criteria related to the
payment of the purchase price of the option with shares of the Corporation's
common stock, the right to receive an option to purchase the number of shares
of common stock equal to the number of shares used by the participant in
payment of the original option price plus, in the case of certain plans, the
number of shares used by the participant in payment of related tax withholding
obligations. The exercise price of the restorative option is equal to the fair
market value of the common stock on the date the reload option is granted.
The following table summarizes stock option activity related to the various
incentive plans for 1995.
<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING OPTION PRICE
(SHARES IN THOUSANDS) ----------- -------------
<S> <C> <C>
Balance as of January 1, 1995........................ 12,864 $ 9.38-$36.06
Granted............................................ 4,150 $25.35-$41.82
Exercised.......................................... (4,394) $ 6.26-$35.13
Forfeited, expired or canceled..................... (232) $15.29-$33.06
Other.............................................. 18 $ 6.26-$10.49
------
Balance as of December 31, 1995...................... 12,406 $ 6.26-$41.82
======
</TABLE>
At December 31, 1995, 6,442,956 options were exercisable.
NOTE 14--INCOME TAXES
The components of total applicable income tax expense (benefit) in the
consolidated income statement for the years ended December 31, 1995, 1994 and
1993, are as follows.
<TABLE>
<CAPTION>
1995 1994 1993
(IN MILLIONS) ----- ---- ----
<S> <C> <C> <C>
Income tax expense (benefit)
Current
Federal.................................................... $ 737 $397 $372
Foreign.................................................... 27 14 31
State...................................................... 84 64 63
----- ---- ----
Total.................................................... 848 475 466
Deferred
Federal.................................................... (216) 149 228
State...................................................... (28) 8 18
----- ---- ----
Total.................................................... (244) 157 246
----- ---- ----
Applicable income taxes........................................ $ 604 $632 $712
===== ==== ====
</TABLE>
59
<PAGE>
The tax effects of fair value adjustments on securities available-for-sale,
foreign currency translation adjustments, and certain tax benefits related to
stock options are recorded directly to stockholders' equity. The net tax
expense (benefits) recorded directly in stockholders' equity amounted to $133
million, ($86) million and ($14) million in 1995, 1994 and 1993, respectively.
A summary reconciliation of the differences between applicable income taxes
and the amounts computed at the applicable regular federal tax rate of 35% is
as follows.
<TABLE>
<CAPTION>
1995 1994 1993
(IN MILLIONS) ---- ---- ----
<S> <C> <C> <C>
Taxes at statutory federal income tax rate.................... $614 $649 $701
Increase (decrease) in taxes resulting from:
Tax-exempt income (net)..................................... (54) (50) (57)
State income taxes, net of federal income taxes............. 37 47 46
Other....................................................... 7 (14) 22
---- ---- ----
Applicable income taxes....................................... $604 $632 $712
==== ==== ====
</TABLE>
A net deferred tax liability is included in other liabilities in the
consolidated balance sheet as a result of temporary differences between the
carrying amounts of assets and liabilities in the financial statements and
their related tax bases. The components of the net deferred tax liability as
of December 31, 1995 and 1994, are as follows.
<TABLE>
<CAPTION>
1995 1994
(IN MILLIONS) ------ ------
<S> <C> <C>
Deferred tax liabilities
Deferred income on lease financing............................. $ 828 $ 785
Appreciation on equity security investments.................... 111 219
Prepaid pension asset.......................................... 144 98
Fair value adjustment on investment securities available-for-
sale.......................................................... 63 --
Other.......................................................... 181 237
------ ------
Gross deferred tax liabilities................................. 1,327 1,339
------ ------
Deferred tax assets
Allowance for credit losses.................................... 491 451
Securitization of credit card receivables...................... 102 86
Depreciation................................................... 66 34
Fair value adjustment on investment securities available-for-
sale.......................................................... -- 90
Other.......................................................... 341 272
------ ------
Gross deferred tax assets...................................... 1,000 933
Valuation allowance............................................ -- --
------ ------
Gross deferred tax assets, net of valuation allowance.......... 1,000 933
------ ------
Net deferred tax liability....................................... $ 327 $ 406
====== ======
</TABLE>
NOTE 15--LEASE COMMITMENTS
The Corporation has entered into a number of operating and capitalized lease
agreements for premises and equipment. The minimum annual rental commitments
under these leases are shown below.
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
1996................................................................. $ 89
1997................................................................. 82
1998................................................................. 73
1999................................................................. 69
2000................................................................. 61
2001 and thereafter.................................................. 260
----
$634
====
</TABLE>
60
<PAGE>
Occupancy expense has been reduced by rental income from premises leased to
others in the amount of $44 million in 1995, $38 million in 1994 and $38
million in 1993.
NOTE 16--FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
In the normal course of business, the Corporation is a party to financial
instruments containing credit and/or market risks that are not required to be
reflected in a balance sheet. These financial instruments include credit-
related instruments as well as certain derivative and cash instruments.
The Corporation's risk management policies monitor and limit exposure to
credit, liquidity and market risks.
(A) CREDIT RISK
The following disclosures represent the Corporation's credit exposure,
assuming that every counterparty to financial instruments with off-balance-
sheet credit risk fails to perform completely according to the terms of the
contracts, and that the collateral, and other security if any, proves to be of
no value to the Corporation.
(B) MARKET RISK
This note does not address the amount of market losses the Corporation would
incur if future changes in market prices make financial instruments with off-
balance-sheet market risk less valuable or more onerous. The measurement of
market risk is meaningful only when all related and offsetting on- and off-
balance-sheet transactions are aggregated, and the resulting net positions are
identified.
(C) COLLATERAL AND OTHER SECURITY ARRANGEMENTS
The credit risk of both on- and off-balance-sheet financial instruments
varies based on many factors, including the value of collateral held and other
security arrangements. To mitigate credit risk, the Corporation generally
determines the need for specific covenant, guarantee and collateral
requirements on a case-by-case basis, depending on the nature of the financial
instrument and the customer's creditworthiness. The Corporation may also
receive comfort letters and oral assurances. The amount and type of collateral
held to reduce credit risk varies but may include real estate, machinery,
equipment, inventory and accounts receivable, as well as cash on deposit,
stocks, bonds and other marketable securities that are generally held in the
Corporation's possession or at another appropriate custodian or depository.
This collateral is valued and inspected on a regular basis to ensure both its
existence and adequacy. Additional collateral is requested when appropriate.
(D) CREDIT-RELATED FINANCIAL INSTRUMENTS
The table below summarizes credit-related financial instruments, including
both commitments to extend credit and letters of credit.
<TABLE>
<CAPTION>
COMMITMENTS AND LETTERS OF CREDIT 1995 1994
DECEMBER 31 (IN BILLIONS) ----- -----
<S> <C> <C>
Unused loan commitments*........................................... $54.0 $45.6
Unused credit card lines........................................... 76.7 65.0
Unused home equity lines........................................... 1.8 1.8
Commercial letters of credit....................................... 0.9 1.1
Standby letters of credit and foreign office guarantees............ 6.9 6.2
</TABLE>
- --------
*Includes unused commercial real estate exposure of $1.2 billion and $1.0
billion at December 31, 1995 and 1994, respectively.
Since many of the unused commitments are expected to expire unused or be only
partially used, the total amount of unused commitments in the preceding table
does not necessarily represent future cash requirements.
61
<PAGE>
Loan commitments are agreements to make or acquire a loan or lease as long
as the agreed-upon terms (e.g., expiry, covenants or notice) are met. The
Corporation's commitments to purchase or extend loans help its customers meet
their liquidity needs. Credit card lines allow customers to use a credit card
to buy goods or services and to obtain cash advances. However, the Corporation
has the right to change or terminate any terms or conditions of the credit
card account. Extensions of credit under home equity lines are secured by
residential real estate.
Commercial letters of credit are issued or confirmed to ensure payment of
customers' payables or receivables in short-term international trade
transactions. Generally, drafts will be drawn when the underlying transaction
is consummated as intended. However, the short-term nature of this instrument
serves to mitigate the risk associated with these contracts.
Standby letters of credit and foreign office guarantees are issued in
connection with agreements made by customers to counterparties. If the
customer fails to comply with the agreement, the counterparty may enforce the
standby letter of credit or foreign office guarantee as a remedy. Credit risk
arises from the possibility that the customer may not be able to repay the
Corporation for standby letters of credit or foreign office guarantees. At
December 31, 1995 and 1994, standby letters of credit and foreign office
guarantees had been issued for the following purposes.
<TABLE>
<CAPTION>
STANDBY LETTERS OF CREDIT AND
FOREIGN OFFICE GUARANTEES 1995 1994
DECEMBER 31 (IN MILLIONS) ------ ------
<S> <C> <C>
Financial
Tax-exempt obligations.......................................... $2,407 $2,032
Insurance-related............................................... 849 796
Other financial................................................. 3,031 2,614
Performance....................................................... 616 770
------ ------
Total*........................................................ $6,903 $6,212
====== ======
</TABLE>
- --------
*Includes $833 million and $820 million participated to other institutions
at December 31, 1995, and December 31, 1994, respectively.
At December 31, 1995, $5.453 billion of standby letters of credit was due to
expire within three years and $1.450 billion was to expire after three years.
(E) DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation enters into a variety of derivative financial instruments in
its trading, asset and liability management, and corporate investment
activities. These instruments offer customers protection from rising or
falling interest rates, exchange rates, commodity prices and equity prices.
They can either reduce or increase the Corporation's exposure to such changing
rates or prices.
Following is a brief description of such derivative financial instruments.
. Interest rate forward and futures contracts represent commitments to
either purchase or sell a financial instrument at a specified future date
for a specified price, and may be settled in cash or through delivery.
. An interest rate swap is an agreement in which two parties agree to
exchange, at specified intervals, interest payment streams calculated on
an agreed-upon notional principal amount with at least one stream based
on a specified floating rate index. Certain agreements are combined
interest rate and foreign currency swap transactions.
. Interest rate options are contracts that grant the purchaser, for a
premium payment, the right to either purchase or sell a financial
instrument at a specified price within a specified period of time or on a
specified date from the writer of the option.
62
<PAGE>
. Interest rate caps and floors are contracts with notional principal
amounts that require the seller, in exchange for a fee, to make payments
to the purchaser if a specified market interest rate exceeds the fixed
cap rate or falls below the fixed floor rate on specified future dates.
. Forward rate agreements are contracts with notional principal amounts
that settle in cash at a specified future date based on the differential
between a specified market interest rate and a fixed interest rate.
. Foreign exchange contracts represent spot, forward, futures and option
contracts to exchange currencies.
. Commodity price contracts represent swap, futures, cap, floor and option
contracts that derive their value from underlying commodity prices.
. Equity price contracts represent swap, futures, cap, floor and option
contracts that derive their value from underlying equity prices.
The Corporation's objectives and strategies for using derivative financial
instruments for structural interest rate risk management and foreign exchange
risk management are discussed on pages 26 to 29.
Balance sheet exposure for derivative financial instruments includes the
amount of recognized gains in the market valuation of those contracts. Those
amounts fluctuate as a function of maturity, interest rates, foreign exchange
rates, commodity prices and equity prices.
The credit risk associated with exchange-traded derivative financial
instruments is limited to the relevant clearinghouse. Options written do not
expose the Corporation to credit risk, except to the extent of the underlying
risk in a financial instrument that the Corporation may be obligated to
acquire under certain written put options. Caps and floors written do not
expose the Corporation to credit risk.
On some derivative financial instruments, the Corporation may have
additional risk. This is due to the underlying risk in the financial
instruments that the Corporation may be obligated to acquire, or the risk that
the Corporation will deliver under a contract but the customer will fail to
deliver the countervailing amount. The Corporation believes its credit and
settlement procedures minimize these risks.
Not all derivative financial instruments have off-balance-sheet market risk.
Market risk associated with options purchased and caps and floors purchased is
recorded in the balance sheet.
The tables on page 34 report the Corporation's gross notional principal or
contractual amounts of derivative financial instruments as of December 31,
1995, and December 31, 1994. These instruments include swaps, forwards,
futures, options, caps, floors, forward rate agreements, and other conditional
and exchange contracts. The amounts do not represent the market or credit risk
associated with these contracts, as previously defined, but rather give an
indication of the volume of the transactions.
(F) CASH FINANCIAL INSTRUMENTS
The face amount of securities sold but not yet purchased totaled $1.723
billion at December 31, 1995, and $1.036 billion at December 31, 1994. The
fair value of these obligations is reflected in the balance sheet in other
short-term borrowings. The fair value of such securities totaled $1.765
million at December 31, 1995, and $972 million at December 31, 1994.
NOTE 17--CONCENTRATIONS OF CREDIT RISK
The Corporation provides a wide range of financial services, including
credit products, to consumers, middle market businesses and large corporate
customers. Credit policies and processes emphasize diversification of risk
among industries, geographic areas and borrowers. The only significant
domestic credit concentrations for the Corporation were consumer, commercial
real estate and the U.S. government.
Information on the Corporation's consumer and commercial real estate loans
is presented in Note 8, on page 52, and information on unused consumer and
commercial real estate commitments is presented in Note 16, on page 61.
63
<PAGE>
U.S. government risk arises primarily from the holding of government
securities and short-term credits collateralized by such securities.
Information on foreign outstandings is presented in the "Foreign
Outstandings" table on page 75. In addition to these foreign outstandings, the
Corporation's credit risk from derivative financial instruments and other off-
balance-sheet commitments to banks in Japan was approximately $2.9 billion and
$1.3 billion at December 31, 1995, and December 31, 1994, respectively.
NOTE 18--ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The Corporation is required to disclose the estimated fair value of its
financial instruments in accordance with SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments." These disclosures do not attempt to estimate
or represent an estimate of the Corporation's fair value as a whole. The
Corporation does not plan to dispose of, either through sale or settlement,
the majority of its financial instruments at these estimated fair values.
Certain limitations are inherent in the methodologies used to estimate fair
value. As a result, disclosed fair values may not be the amount realized in a
current transaction between willing parties. Specifically, the fair values
disclosed represent point-in-time estimates that may change in subsequent
reporting periods due to market conditions or other factors. Further, quoted
market prices may not be realized because the financial instrument may be
traded in a market that lacks liquidity; or a fair value derived using a
discounted cash flow approach may not be the amount realized because of the
subjectivity involved in selecting underlying assumptions, such as projecting
cash flows or selecting a discount rate. The fair value amount also may not be
realized because it ignores transaction costs and does not include potential
tax effects. Additionally, estimated fair values of certain financial
instruments ignore intangible value associated with the financial instruments;
for example, significant unrecognized value exists that is attributable to the
Corporation's credit card relationships and core deposits.
The only fair value disclosure provided in addition to those made for the
Corporation's financial instruments pertains to credit card securitizations;
this disclosure is provided because the interest rate risk exposure related to
such securitization is reduced by financial instruments.
64
<PAGE>
The following table summarizes the carrying values and estimated fair values
of financial instruments as of December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
(IN MILLIONS) -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Financial assets
Cash and other short-term financial
instruments (a)..................... $29,236 $29,236 $29,251 $29,251
Trading assets (a)................... 8,150 8,150 5,089 5,089
Investment securities (b)............ 9,449 9,449 15,015 14,784
Loans (c)............................ 64,434 64,208 55,176 53,871
Derivative product assets
Trading purposes (1)(a)............ 6,644 6,644 4,408 4,408
Other than trading purposes (f).... 69 217 39 52
------- ------- ------- -------
Total derivative product assets.. 6,713 6,861 4,447 4,460
Other financial instruments (a)...... 1,666 1,666 1,516 1,516
Allowance for credit losses............ (1,338) -- (1,158) --
Financial liabilities
Deposits(a)(d)....................... $69,106 $69,168 $64,895 $64,749
Securities sold but not yet
purchased (a)....................... 1,765 1,765 972 972
Other short-term financial
instruments (a)..................... 24,477 24,477 25,089 25,089
Long-term debt (a)(e)................ 8,163 8,504 7,246 7,084
Derivative product liabilities
Trading purposes (1)(a)............ 6,681 6,681 4,133 4,133
Other than trading purposes (f).... 42 55 39 311
------- ------- ------- -------
Total derivative product
liabilities..................... 6,723 6,736 4,172 4,444
Off-balance-sheet exposure--
nonfinancial instruments
Credit card securitizations, net (g). 294 266 265 (60)
</TABLE>
- --------
(1) The estimated average fair values of derivative financial instruments used
in trading activities during 1995 were $7.1 billion classified as assets
and $6.7 billion classified as liabilities.
Estimated fair values are determined as follows:
(A) FINANCIAL INSTRUMENTS WHERE CARRYING VALUE APPROXIMATES FAIR VALUE
A financial instrument's carrying value approximates its fair value when the
financial instrument has an immediate or short-term maturity (generally 90 days
or less), or is carried at fair value. Additionally, the carrying value of
financial instruments that reprice frequently, such as floating rate debt,
represents fair value.
The estimated fair values of trading securities and securities sold but not
yet purchased were generally based on quoted market prices or dealer quotes.
The estimated fair value of commercial real estate loans held for accelerated
disposition was based on their estimated liquidation value. The estimated fair
value of derivative product assets and liabilities was based on quoted market
prices or pricing and valuation models on a present-value basis using current
market information.
The majority of commitments to extend credit and letters of credit would
result in loans with a market rate of interest if funded. The fair value of
these commitments are the fees that would be charged customers to enter into
similar agreements with comparable pricing and maturity. The recorded book
value of deferred fee income approximates the fair value.
65
<PAGE>
(B) INVESTMENT SECURITIES
The estimated fair values of debt investment securities were generally based
on quoted market prices or dealer quotes. See Note 1, beginning on page 44,
and Note 7, beginning on page 51, for information on methods for estimating
the fair value of equity investment securities.
(C) LOANS
The discounted cash flow method was used to estimate the fair value of
certain commercial and consumer installment loans. Discount rates used
represent current lending rates for new loans with similar characteristics.
The fair value of floating rate loans is equal to their carrying value.
The estimated fair value of consumer mortgage loans was based on committed
sales prices and a valuation model using current market information.
(D) DEPOSITS
The fair value of demand and savings deposits with no defined maturity is
the amount payable on demand at the report date. The fair value of fixed-rate
time deposits is estimated by discounting the future cash flows to be paid,
using the current rates at which similar deposits with similar remaining
maturities would be issued.
(E) LONG-TERM DEBT
Quoted market prices or the discounted cash flow method was used to estimate
the fair value of the Corporation's fixed-rate long-term debt. Discounting was
based on the contractual cash flows and the current rates at which debt with
similar terms could be issued.
(F) DERIVATIVE PRODUCT ASSETS AND LIABILITIES--OTHER THAN TRADING PURPOSES
The estimated fair values of derivative product assets and liabilities used
for risk management purposes were based on quoted market prices or pricing and
valuation models on a present-value basis using current market information.
(G) CREDIT CARD SECURITIZATIONS (OFF-BALANCE-SHEET EXPOSURE)
Floating and fixed rate credit card receivables sold as securities to
investors through a separate trust are not financial instruments of the
Corporation. However, the Corporation uses financial instruments (see (f)
above) to reduce interest rate risk exposure attributable to these
securitizations. The carrying value and the interest rate effect on
anticipated excess servicing fee income are disclosed in the preceding table.
The carrying value represents the reserve for credit losses related to
securitized credit card receivables and net deferred income or expense. The
interest rate effect on anticipated excess servicing fee income represents the
difference between the par value and the quoted market price of the
securitized credit card receivables held by investors.
NOTE 19--CONTINGENCIES
The Corporation and certain of its subsidiaries are defendants in various
lawsuits, including certain class actions, arising out of the normal course of
business, and the Corporation has received certain tax deficiency assessments.
Since the Corporation and certain of its subsidiaries, which are regulated by
one or more federal and state regulatory authorities, also are the subject of
numerous examinations and reviews by such authorities, the Corporation is and
will, from time to time, normally be engaged in various disagreements with
regulators, related primarily to banking matters. In the opinion of management
and the Corporation's general counsel, the ultimate resolution of the matters
referred to in this note will not have a material effect on the consolidated
financial statements.
66
<PAGE>
NOTE 20--FIRST CHICAGO NBD CORPORATION (PARENT COMPANY ONLY) CONDENSED
FINANCIAL STATEMENTS
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
1995 1994
DECEMBER 31 (IN MILLIONS) ------- -------
<S> <C> <C>
ASSETS
Cash and due from banks--bank subsidiaries...................... $ 24 $ 2
Interest-bearing due from banks
Bank subsidiaries............................................. 313 161
Other......................................................... 500 396
Resale agreement with bank subsidiary........................... 3 42
Trading assets.................................................. 74 --
Investment securities--available-for-sale....................... 43 93
Loans and receivables--subsidiaries
Bank subsidiaries............................................. 1,789 1,783
Nonbank subsidiaries.......................................... 1,072 1,014
Investment in subsidiaries
Bank subsidiaries............................................. 8,701 7,831
Nonbank subsidiaries.......................................... 1,051 993
Premises and equipment.......................................... -- 53
Other assets.................................................... 127 133
------- -------
Total assets................................................ $13,697 $12,501
======= =======
LIABILITIES
Borrowings--nonbank subsidiaries................................ $ 139 $ 82
Other short-term borrowings..................................... 288 189
Long-term debt.................................................. 4,439 4,001
Other liabilities............................................... 381 420
------- -------
Total liabilities........................................... 5,247 4,692
Stockholders' Equity............................................ 8,450 7,809
------- -------
Total liabilities and stockholders' equity.................. $13,697 $12,501
======= =======
</TABLE>
67
<PAGE>
FIRST CHICAGO NBD CORPORATION (PARENT COMPANY ONLY)
CONDENSED INCOME STATEMENT
<TABLE>
<CAPTION>
1995 1994 1993
FOR THE YEAR (IN MILLIONS) ------ ------ ------
<S> <C> <C> <C>
OPERATING INCOME
Dividends
Bank subsidiaries...................................... $ 686 $ 575 $ 377
Nonbank subsidiaries................................... 114 111 71
Interest income
Bank subsidiaries...................................... 163 139 140
Nonbank subsidiaries................................... 67 62 82
Other.................................................. 48 29 15
Other income (loss)
Bank subsidiaries...................................... 8 9 11
Nonbank subsidiaries................................... 1 1 1
Other........................ ......................... -- 26 (2)
------ ------ ------
Total................................................ 1,087 952 695
OPERATING EXPENSE
Interest expense
Nonbank subsidiaries................................... 4 1 4
Other.................................................. 367 298 293
Merger-related charges................................... 69 -- --
Other expense............................................ 39 31 30
------ ------ ------
Total................................................ 479 330 327
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED
NET INCOME OF SUBSIDIARIES.............................. 608 622 368
Applicable income taxes (benefit)........................ (59) (26) (31)
INCOME BEFORE EQUITY IN UNDISTRIBUTED NET INCOME OF
SUBSIDIARIES............................................ 667 648 399
Equity in undistributed net income of subsidiaries
Bank subsidiaries...................................... 418 552 732
Nonbank subsidiaries................................... 65 21 159
------ ------ ------
NET INCOME............................................... $1,150 $1,221 $1,290
====== ====== ======
</TABLE>
The Parent Company Only Statement of Stockholders' Equity is the same as the
Consolidated Statement of Stockholders' Equity (see page 42).
68
<PAGE>
FIRST CHICAGO NBD CORPORATION (PARENT COMPANY ONLY)
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
FOR THE YEAR (IN MILLIONS) ------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................... $ 1,150 $ 1,221 $ 1,290
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in net income of subsidiaries............... (1,282) (1,259) (1,340)
Dividends received from subsidiaries............... 800 677 422
Depreciation and amortization...................... 8 9 9
Merger-related charges............................. 45 -- --
Net (increase) in trading account assets........... (74) -- --
Net (increase) decrease in accrued income
receivable........................................ (2) (2) 5
Net (decrease) in accrued expenses payable......... (7) (5) (5)
Other noncash adjustments.......................... (88) 46 3
------- ------- -------
Total adjustments.................................. (600) (534) (906)
------- ------- -------
Net cash provided by operating activities............ 550 687 384
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in loans to subsidiaries................ 35 66 241
Net (increase) decrease in resale agreements with
bank subsidiary..................................... 39 179 (134)
Net (increase) decrease in capital investments in
subsidiaries........................................ 101 (141) (135)
Purchase of investment securities--available-for-
sale................................................ (71) (225) --
Purchase of investment securities.................... -- -- (16)
Proceeds from maturities of investment securities--
available-for-sale.................................. 78 52 --
Proceeds from maturities of investment securities.... -- -- 8
Proceeds from sales of investment securities--
available-for-sale.................................. 48 107 --
Proceeds from sales of investment securities......... -- -- 6
Purchases of premises and equipment.................. (1) -- (4)
Sales of premises and equipment...................... 51 -- 4
Other, net........................................... -- -- 1
------- ------- -------
Net cash provided by (used in) investing activities.. 280 38 (29)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings..... 155 (80) (180)
Proceeds from issuance of long-term debt............. 772 935 887
Redemption and repayment of long-term debt........... (335) (640) (748)
Net increase (decrease) in other liabilities......... (86) (29) 48
Dividends paid....................................... (447) (397) (331)
Proceeds from issuance of common and treasury stock.. 48 52 47
Purchase of treasury stock........................... (538) (397) (26)
Proceeds from issuance of preferred stock............ -- -- 196
Payment for redemption of preferred stock............ (121) (150) (1)
------- ------- -------
Net cash (used in) financing activities.............. (552) (706) (108)
------- ------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS............ 278 19 247
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR....... 559 540 293
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR............. $ 837 $ 559 $ 540
======= ======= =======
OTHER CASH FLOW DISCLOSURES
Interest paid...................................... $364 $322 $322
Income tax payment (receipt)....................... (53) 6 (96)
</TABLE>
69
<PAGE>
Dividends that may be paid by national bank subsidiaries are subject to two
statutory limitations. Under the first, dividends cannot exceed the level of
"undivided profits then on hand" less the amount of bad debts, as defined, in
excess of the allowance for credit losses. In addition, a bank cannot declare
a dividend, without regulatory approval, in an amount in excess of its net
profits, as defined, for the current year combined with the retained net
profits for the preceding two years. State bank subsidiaries may also be
subject to limitations on dividend payments.
Based on these statutory requirements, the Principal Banks could, in the
aggregate, have declared additional dividends of up to approximately $1.2
billion without regulatory approval at January 1, 1996. The payment of
dividends by any bank may also be affected by other factors, such as the
maintenance of adequate capital. As of December 31, 1995, all of the Principal
Banks significantly exceeded the regulatory guidelines for "well-capitalized"
status.
Federal banking law also restricts each bank subsidiary from extending
credit to the Corporation in excess of 10% of the subsidiary's capital stock
and surplus, as defined. Any such extensions of credit are subject to strict
collateral requirements.
In connection with issuances of commercial paper, the Corporation has
agreements providing future credit availability (back-up lines of credit) with
various nonaffiliated banks. The agreements aggregated $300 million at
December 31, 1995. The commitment fee paid under each agreement is 0.125%. The
back-up lines of credit, together with overnight money market loans, short-
term investments and other sources of liquid assets, exceeded the amount of
commercial paper issued at December 31, 1995.
70
<PAGE>
REPORT OF MANAGEMENT ON RESPONSIBILITY FOR FINANCIAL REPORTING
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
To the Stockholders of First Chicago NBD Corporation:
FINANCIAL STATEMENTS
The Management of First Chicago NBD Corporation and its subsidiaries is
responsible for the preparation, integrity and objectivity of the financial
statements and footnotes contained in this Form 10-K. The financial statements
have been prepared in accordance with generally accepted accounting principles
and are free from material fraud or error. The other financial information in
this Form 10-K is consistent with the financial statements. Where financial
information must of necessity be based upon estimates and judgments, they
represent the best estimates and judgments of Management.
The Corporation's financial statements have been audited by Arthur Andersen
LLP, independent public accountants, whose appointment is ratified by the
stockholders. The independent public accountants' responsibility is to express
an opinion on the Corporation's financial statements. As described further in
the report that follows, their opinion is based on their audit, which was
conducted in accordance with generally accepted auditing standards and is
believed by them to provide a reasonable basis for their opinion. Management
has made available to Arthur Andersen LLP all of the Corporation's financial
records and related data. Furthermore, Management believes that all
representations made to Arthur Andersen LLP during their audit were valid and
appropriate.
INTERNAL CONTROL STRUCTURE OVER FINANCIAL REPORTING
Management is also responsible for establishing and maintaining the
Corporation's internal control structure that provides reasonable, but not
absolute, assurance as to the integrity and reliability of the financial
statements. Management continually monitors the internal control structure for
compliance with established policies and procedures. The Corporation maintains
a strong internal auditing program that independently assesses the
effectiveness of the internal control structure. The Audit Committee of the
Board of Directors, composed entirely of outside Directors, oversees the
Corporation's financial reporting process on behalf of the Board of Directors
and has responsibility for recommending the independent public accountants for
the Corporation who are appointed by the Board of Directors. The Audit
Committee reviews with the independent public accountants the scope of their
audit and audit reports and meets with them on a scheduled basis to review
their findings and any action to be taken thereon. In addition, the Audit
Committee meets with the internal auditors and with Management to review the
scope and findings of the internal audit program and any actions to be taken
by Management. The independent public accountants and the internal auditors
meet periodically with the Audit Committee without Management being present.
Management also recognizes its responsibility for fostering a strong ethical
climate so that the Corporation's affairs are conducted according to the
highest standards of personal and corporate conduct. This responsibility is
characterized by and reflected in the Corporation's integrity policies, which
address, among other things, the necessity of ensuring open communication
within the Corporation; potential conflicts of interest; compliance with all
domestic and foreign laws, including those related to financial disclosure;
and the confidentiality of proprietary information. The Corporation maintains
a systematic program to assess compliance with these policies.
There are inherent limitations in the effectiveness of any internal control
structure, including the possibility of human error or the circumvention or
overriding of controls. Accordingly, even an effective internal control
structure can provide only reasonable assurance with respect to reliability of
financial statements and safeguarding of assets. Furthermore, because of
changes in conditions, internal control structure effectiveness may vary over
time.
71
<PAGE>
The Corporation assessed its internal control structure over financial
reporting as of December 31, 1995, in relation to the criteria described in
the "Internal Control--Integrated Framework" issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this assessment,
the Corporation believes that as of December 31, 1995, in all material
respects, the Corporation maintained an effective internal control structure
over financial reporting.
/s/ Richard L. Thomas
Richard L. Thomas
Chairman
/s/ Verne G. Istock
Verne G. Istock
President and Chief Executive
Officer
/s/ Robert A. Rosholt
Robert A. Rosholt
Executive Vice President and
Chief Financial Officer
72
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of First Chicago NBD Corporation:
We have audited the accompanying consolidated balance sheet of First Chicago
NBD Corporation (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
First Chicago NBD Corporation's management. Our responsibility is to express
an opinion of 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 financial position of First Chicago NBD
Corporation and its subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois,
January 16, 1996
73
<PAGE>
SELECTED STATISTICAL INFORMATION
FIRST CHICAGO NBD CORPORATION AND SUBSIDIARIES
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
1995 1994 1993
DECEMBER 31 (IN MILLIONS) ------ ------- -------
<S> <C> <C> <C>
Debt securities
U.S. government and federal agency
Held-to-maturity..................................... $ -- $ 6,469 $ 5,344
Available-for-sale................................... 6,840 4,910 3,609
------ ------- -------
Total.............................................. 6,840 11,379 8,953
States and political subdivisions
Held-to-maturity..................................... -- 1,591 1,667
Available-for-sale................................... 1,462 76 1
------ ------- -------
Total.............................................. 1,462 1,667 1,668
Other bonds, notes and debentures
Held-to-maturity..................................... -- 5 7
Available-for-sale................................... 94 276 365
------ ------- -------
Total.............................................. 94 281 372
------ ------- -------
Total debt securities.............................. 8,396 13,327 10,993
Equity securities(1)..................................... 1,053 1,688 1,654
------ ------- -------
Total.............................................. $9,449 $15,015 $12,647
====== ======= =======
</TABLE>
- --------
(1) Includes Federal Reserve stock.
MATURITY OF DEBT INVESTMENT SECURITIES
As of December 31, 1995, debt investment securities had the following
maturity and yield characteristics.
<TABLE>
<CAPTION>
BOOK
VALUE YIELD
(DOLLARS IN MILLIONS) ------ -----
<S> <C> <C>
U.S. government and federal agency
Within one year................................................... $1,501 5.91%
After one but within five years................................... 2,064 7.40
After five but within ten years................................... 3,186 7.10
After ten years................................................... 89 7.42
------ -----
$6,840 6.93%
====== =====
States and political subdivisions*
Within one year................................................... $ 176 10.92%
After one but within five years................................... 666 10.85
After five but within ten years................................... 324 9.60
After ten years................................................... 296 9.43
------ -----
$1,462 10.30%
====== =====
Other bonds, notes and debentures
Within one year................................................... $48 12.25%
After one but within five years................................... 34 6.53
After five but within ten years................................... 5 7.92
After ten years................................................... 7 5.39
------ -----
$94 9.51%
====== =====
</TABLE>
- --------
* Yields for obligations of states and political subdivisions are calculated
on a tax-equivalent basis using a tax rate of 35%.
74
<PAGE>
SECURITIZATION OF CREDIT CARD RECEIVABLES
Since 1987, the Corporation has actively packaged and sold credit card assets
as securities to investors. The securitization of credit card receivables is an
effective balance sheet management tool since capital is freed for other uses.
In addition, while such securitizations affect net interest income, the
provision for credit losses and noninterest income, net income is essentially
unaffected.
Credit Card continues to service credit card accounts even after receivables
are securitized. Net interest income and certain fee revenue on the securitized
portfolio are not recognized; however, these are offset by servicing fees as
well as by lower provisions for credit losses.
At year-end 1995, $7.9 billion in credit card receivables was securitized,
compared with $6.1 billion at year-end 1994.
For analytical purposes only, the following table shows income statement line
items adjusted for the net impact of securitization of credit card receivables.
<TABLE>
<CAPTION>
1995 1994
--------------------------------- ---------------------------------
CREDIT CARD CREDIT CARD
REPORTED SECURITIZATIONS ADJUSTED REPORTED SECURITIZATIONS ADJUSTED
(IN MILLIONS) -------- --------------- -------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Net interest income--
tax-equivalent basis... $3,311 $ 658 $3,969 $3,043 $ 550 $3,593
Provision for credit
losses................. 510 336 846 276 253 529
Noninterest income...... 2,591 (322) 2,269 2,393 (297) 2,096
Noninterest expense..... 3,535 -- 3,535 3,220 -- 3,220
Net income.............. 1,150 -- 1,150 1,221 -- 1,221
Assets--year-end........ $122,002 $7,877 $129,879 $112,763 $6,117 $118,880
--average......... 122,370 7,179 129,549 107,846 5,538 113,384
</TABLE>
FOREIGN OUTSTANDINGS
The Corporation's cross-border outstandings consist of loans (including
accrued interest), acceptances, interest-bearing deposits with other banks,
equity investments, other interest-bearing investments and other nonlocal
currency monetary assets. The table below presents a breakout of cross-border
outstandings for each of the past three year-ends where such outstandings
exceeded 1.0% of total assets.
<TABLE>
<CAPTION>
(IN MILLIONS)
GOVERNMENT AND BANKS AND OTHER COMMERCIAL
COUNTRY DECEMBER 31 OFFICIAL INSTITUTIONS FINANCIAL INSTITUTIONS AND INDUSTRIAL OTHER TOTAL
- ------- ----------- --------------------- ---------------------- -------------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Japan................... 1995 $ -- $6,140 $169 $20 $6,329
1994 -- 4,724 156 30 4,910
1993 -- 3,693 85 21 3,799
United Kingdom.......... 1995 $360 $ 671 $292 $45 $1,368
1994 * * * * *
1993 * * * * *
France.................. 1995 $162 $1,077 $ 25 $-- $1,264
1994 * * * * *
1993 * * * * *
</TABLE>
- --------
*Outstandings were less than 1% of total assets.
75
<PAGE>
At December 31, 1995, the only country for which cross-border outstandings
totaled between 0.75% and 1.0% of total assets was Korea; such outstandings
totaled $1.023 billion.
At December 31, 1994, the only countries for which cross-border outstandings
totaled between 0.75% and 1.0% of total assets were the United Kingdom and
Korea; such outstandings totaled $1.921 billion.
At December 31, 1993, the only country for which cross-border outstandings
totaled between 0.75% and 1.0% of total assets was Canada; such outstandings
totaled $830 million.
MATURITY DISTRIBUTION AND INTEREST RATE SENSITIVITY OF LOANS
The following table shows a distribution of the maturity of loans and, for
those loans due after one year, a breakdown between those loans that have
floating interest rates and those that have predetermined interest rates. The
amounts exclude domestic consumer loans and domestic lease financing
receivables.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 ONE YEAR ONE TO OVER
(IN MILLIONS) OR LESS FIVE YEARS FIVE YEARS TOTAL
-------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Domestic
Commercial............................ $17,132 $1,660 $6,759 $25,551
Real estate........................... 1,695 3,840 1,719 7,254
------- ------ ------ -------
Total domestic...................... 18,827 5,500 8,478 32,805
Foreign................................. 2,665 525 536 3,726
------- ------ ------ -------
Total............................... $21,492 $6,025 $9,014 $36,531
======= ====== ====== =======
Loans with floating interest rates...... $3,240 $8,046 $11,286
Loans with predetermined interest rates. 2,785 968 3,753
------ ------ -------
Total............................... $6,025 $9,014 $15,039
====== ====== =======
</TABLE>
NONPERFORMING LOANS
The following table shows a breakout of nonperforming loans for the past
five years.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
DECEMBER 31 (DOLLARS IN MILLIONS) ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans................................ $344 $267 $478 $712 $1,195
Accrual renegotiated loans...................... 19 27 7 5 14
---- ---- ---- ---- ------
Total nonperforming loans................... $363 $294 $485 $717 $1,209
==== ==== ==== ==== ======
Nonperforming loans
Domestic...................................... $360 $284 $421 $589 $1,001
Foreign....................................... 3 10 64 128 208
---- ---- ---- ---- ------
Total nonperforming loans................... $363 $294 $485 $717 $1,209
==== ==== ==== ==== ======
Nonperforming loans/loans outstanding........... 0.6% 0.5% 1.0% 1.5% 2.4%
</TABLE>
ACCELERATED ASSET DISPOSITION PORTFOLIO
During the third quarter of 1992, the Corporation segregated approximately
$2.0 billion of commercial real estate exposure at FNBC to be managed under an
accelerated disposition program. By year-end 1994, the liquidation of this
portfolio had been virtually completed.
During 1995, assets having nearly $147 million in original contractual
exposure were sold or otherwise liquidated. This resulted in a $29 million
reduction in the portfolio's carrying value and the recognition of net
76
<PAGE>
gains of $37 million in noninterest income during 1995. The carrying value of
the remaining assets in the portfolio was $22 million at year-end 1995,
representing 26% of original contractual exposure. Nonperforming assets in
this portfolio totaled $22 million at year-end 1995, $37 million at year-end
1994, and $87 million at year-end 1993.
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING INTEREST
The following table summarizes those loans that are 90 days or more past due
and still accruing interest.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
DECEMBER 31 (IN MILLIONS) ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Domestic............................................... $197 $150 $121 $122 $188
Foreign................................................ -- -- -- -- 3
---- ---- ---- ---- ----
Total.............................................. $197 $150 $121 $122 $191
==== ==== ==== ==== ====
</TABLE>
INTEREST SHORTFALL ON NONPERFORMING LOANS
Interest at original contractual rates (based on average outstanding
balances) and interest actually recorded for those periods at December 31 was
as follows.
<TABLE>
<CAPTION>
1995 1994
---------------------------------- ----------------------------------
ACCELERATED ACCELERATED
DISPOSITION DISPOSITION
DOMESTIC FOREIGN PORTFOLIO TOTAL DOMESTIC FOREIGN PORTFOLIO TOTAL
(IN MILLIONS) -------- ------- ----------- ----- -------- ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest at original
contract rates......... $32 $-- $ 2 $34 $25 $ 1 $-- $26
Interest actually
recognized............. 13 -- 1 14 10 -- -- 10
--- --- --- --- --- --- --- ---
Interest shortfall,
before income tax
effect................. $19 $-- $ 1 $20 $15 $ 1 $-- $16
=== === === === === === === ===
</TABLE>
77
<PAGE>
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
(IN MILLIONS) ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year............. $1,158 $1,106 $1,041 $1,136 $1,257
Provision for credit losses............ 510 276 390 653 606
Provision for loans held for
accelerated disposition............... -- -- -- 491 --
Charge-offs
Commercial
Domestic
Commercial.......................... 70 68 122 253 259
Real estate......................... 25 41 99 149 229
Lease financing..................... 2 3 6 6 18
Foreign(1)........................... 1 9 47 78 83
Consumer
Credit card.......................... 241 193 165 180 194
Other................................ 70 50 46 52 56
------ ------ ------ ------ ------
Total charge-offs.................. 409 364 485 718 839
Recoveries
Commercial
Domestic
Commercial.......................... 59 55 81 39 28
Real estate......................... 16 15 9 6 4
Lease financing..................... 2 1 2 5 2
Foreign.............................. 9 44 17 22 35
Consumer
Credit card.......................... 33 32 57 52 48
Other................................ 26 25 23 22 20
------ ------ ------ ------ ------
Total recoveries................... 145 172 189 146 137
Net charge-offs........................ 264 192 296 572 702
Charge-offs of loans upon transfer to
accelerated disposition portfolio..... -- -- -- 636 --
Transfers related to securitized
receivables........................... (75) (49) (29) (42) (28)
Other(2)............................... 9 17 -- 11 3
------ ------ ------ ------ ------
Balance, end of year................... $1,338 $1,158 $1,106 $1,041 $1,136
====== ====== ====== ====== ======
</TABLE>
- --------
(1) 1992 amounts include $12 million defined as commercial real estate.
(2) Primarily acquisitions.
78
<PAGE>
ALLOCATED ALLOWANCE FOR CREDIT LOSSES
While the allowance for credit losses is available to absorb credit losses
in the entire portfolio, the tables below present an estimate of the allowance
for credit losses allocated by loan type and the percentage of loans in each
category to total loans.
<TABLE>
<CAPTION>
1995 1994 1993
DECEMBER 31 (DOLLARS IN MILLIONS) ------ ------ ------
<S> <C> <C> <C>
Commercial
Domestic.............................................. $ 929 $ 848 $ 789
Foreign............................................... 57 59 81
Consumer
Credit card........................................... 303 215 201
Other................................................. 49 36 35
------ ------ ------
Total............................................... $1,338 $1,158 $1,106
====== ====== ======
Percentage of loans in each category to total loans
Commercial
Domestic.............................................. 53% 56% 56%
Foreign............................................... 6 6 6
Consumer
Credit card........................................... 15 13 13
Other................................................. 26 25 25
------ ------ ------
Total............................................... 100% 100% 100%
====== ====== ======
</TABLE>
Allocation for potential losses not specifically identified is included in
the commercial segment. Allocation information is not available for 1992 and
1991.
79
<PAGE>
DEPOSITS
The following tables show a maturity distribution of domestic time
certificates of deposit of $100,000 and over, other domestic time deposits of
$100,000 and over, and deposits in foreign offices, predominantly in amounts in
excess of $100,000, at December 31, 1995.
<TABLE>
<CAPTION>
DOMESTIC TIME CERTIFICATES OF DEPOSIT OF $100,000 AND OVER
AMOUNT PERCENT
(DOLLARS IN MILLIONS) ------- -------
<S> <C> <C>
Three months or less............................................... $3,217 65%
Over three months to six months.................................... 602 12
Over six months to twelve months................................... 646 13
Over twelve months................................................. 489 10
------- ---
Total.......................................................... $4,954 100%
======= ===
<CAPTION>
DOMESTIC OTHER TIME DEPOSITS OF $100,000 AND OVER
AMOUNT PERCENT
(DOLLARS IN MILLIONS) ------- -------
<S> <C> <C>
Three months or less............................................... $501 51%
Over three months to six months.................................... 78 8
Over six months to twelve months................................... 122 12
Over twelve months................................................. 292 29
------- ---
Total.......................................................... $993 100%
======= ===
<CAPTION>
FOREIGN OFFICES
AMOUNT PERCENT
(DOLLARS IN MILLIONS) ------- -------
<S> <C> <C>
Three months or less............................................... $16,880 95%
Over three months to six months.................................... 678 4
Over six months to twelve months................................... 208 1
Over twelve months................................................. 7 --
------- ---
Total.......................................................... $17,773 100%
======= ===
</TABLE>
80
<PAGE>
SHORT-TERM BORROWINGS
Borrowings with original maturities of one year or less are classified as
short-term. The following is a summary of short-term borrowings for each of the
three years ended December 31, 1995.
<TABLE>
<CAPTION>
1995 1994 1993
(DOLLARS IN MILLIONS) ------- ------- -------
<S> <C> <C> <C>
Federal funds purchased
Outstanding at year-end............................ $ 3,447 $ 2,562 $ 2,923
Weighted average rate at year-end.................. 5.49% 5.72% 3.03%
Daily average outstanding for the year............. $ 3,505 $ 2,846 $ 3,263
Weighted average rate for the year................. 6.24% 4.48% 3.25%
Highest outstanding at any month-end............... $ 4,824 $ 3,087 $ 4,850
Securities under repurchase agreements
Outstanding at year-end............................ $12,264 $14,357 $ 8,115
Weighted average rate at year-end.................. 5.79% 4.65% 2.95%
Daily average outstanding for the year............. $16,536 $13,519 $ 9,982
Weighted average rate for the year................. 5.88% 4.27% 2.98%
Highest outstanding at any month-end............... $20,439 $17,977 $11,178
Bank notes
Outstanding at year-end............................ $ 7,027 $ 6,070 $ 3,720
Weighted average rate at year-end.................. 5.93% 5.72% 3.35%
Daily average outstanding for the year............. $ 5,731 $ 5,181 $ 3,067
Weighted average rate for the year................. 5.96% 4.71% 3.33%
Highest outstanding at any month-end............... $ 7,027 $ 6,537 $ 3,823
Other short-term borrowings
Outstanding at year-end............................ $ 2,775 $ 2,352 $ 3,109
Weighted average rate at year-end.................. 5.45% 4.51% 3.68%
Daily average outstanding for the year............. $ 3,436 $ 3,448 $ 4,307
Weighted average rate for the year................. 5.72% 3.88% 3.50%
Highest outstanding at any month-end............... $ 4,212 $ 4,722 $ 5,982
Total short-term borrowings
Outstanding at year-end............................ $25,513 $25,341 $17,867
Weighted average rate at year-end.................. 5.75% 5.00% 3.17%
Daily average outstanding for the year............. $29,208 $24,994 $20,619
Weighted average rate for the year................. 5.92% 4.33% 3.19%
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
COMMON STOCK AND STOCKHOLDER DATA* ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Market price
High for the year................ $42 1/2 $33 $36 3/8 $33 1/8 $30 1/8
Low for the year................. 27 3/8 26 3/4 28 5/8 26 3/4 20 3/4
At year-end...................... 39 1/2 27 3/8 29 3/4 32 3/4 29 3/4
Book value (at year-end)........... 25.25 22.60 21.25 18.27 18.06
Dividend payout ratio.............. 39% 34% 28% 89% 61%
</TABLE>
- --------
*There were 40,119 common stockholders of record as of December 31, 1995.
81
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
FINANCIAL RATIOS ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income as a percentage of:
Average stockholders' equity.................. 13.8% 15.8% 18.5% 6.4% 8.6%
Average common stockholders' equity........... 14.3 16.6 19.9 6.3 8.7
Average total assets.......................... 0.94 1.13 1.33 0.42 0.53
Average earning assets........................ 1.09 1.32 1.52 0.48 0.61
Stockholders' equity at year-end as a percentage
of:
Total assets at year-end...................... 6.9 6.9 8.1 7.0 6.5
Total loans at year-end....................... 13.1 14.2 15.4 13.2 11.4
Total deposits at year-end.................... 12.2 12.0 12.9 10.4 9.2
Average stockholders' equity as a percentage of:
Average assets................................ 6.8 7.2 7.2 6.5 6.2
Average loans................................. 14.1 15.4 14.8 12.6 11.0
Average deposits.............................. 12.4 12.8 11.7 9.9 8.9
Income to fixed charges:
Excluding interest on deposits................ 1.8X 2.2x 3.0x 1.3x 1.6x
Including interest on deposits................ 1.4X 1.6x 1.8x 1.1x 1.1x
</TABLE>
QUARTERLY DIVIDENDS AND MARKET PRICE SUMMARY
<TABLE>
<CAPTION>
DIVIDENDS STOCK MARKET
DECLARED PRICE RANGE(1)
--------- ---------------
PER SHARE LOW HIGH
--------- ------- -------
<S> <C> <C> <C>
1995
First quarter....................................... $0.33 $27 3/8 $32 7/8
Second quarter...................................... 0.33 30 1/8 33 1/4
Third quarter....................................... 0.33 31 1/2 39 1/4
Fourth quarter...................................... 0.36 36 1/2 42 1/2
-----
Year.............................................. $1.35 27 3/8 42 1/2
=====
1994
First quarter....................................... $0.30 $27 1/4 $30 3/4
Second quarter...................................... 0.30 27 3/8 32
Third quarter....................................... 0.30 28 3/8 33
Fourth quarter...................................... 0.33 26 3/4 31
-----
Year.............................................. $1.23 26 3/4 33
=====
</TABLE>
- --------
(1) The principal market for the Corporation's common stock is the New York
Stock Exchange (the "NYSE"). In addition to the NYSE, the Corporation's
common stock is listed on the Chicago Stock Exchange and the Pacific Stock
Exchange.
82
<PAGE>
CONSOLIDATED SUMMARY OF QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1995 (IN MILLIONS, EXCEPT PER SHARE DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
DATA) ----------- ------------ ------- --------
<S> <C> <C> <C> <C>
Interest income...................... $2,066 $2,054 $2,011 $1,959
Net interest income.................. 834 796 784 794
Provision for credit losses.......... 210 125 90 85
Noninterest income................... 655 702 631 603
Noninterest expense.................. 1,088 827 821 799
Net income........................... 126 357 331 336
Earnings per share
Primary.............................. $0.37 $1.07 $0.99 $1.01
Fully diluted........................ 0.37 1.06 0.98 0.99
<CAPTION>
1994 (IN MILLIONS, EXCEPT PER SHARE DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
DATA) ----------- ------------ ------- --------
<S> <C> <C> <C> <C>
Interest income...................... $1,754 $1,607 $1,461 $1,314
Net interest income.................. 756 749 739 712
Provision for credit losses.......... 96 63 52 65
Noninterest income................... 622 589 558 624
Noninterest expense.................. 806 811 788 815
Net income........................... 315 301 304 301
Earnings per share
Primary............................ $0.94 $0.89 $0.89 $0.90
Fully diluted...................... 0.93 0.88 0.88 0.88
</TABLE>
Amounts presented above reflect the Merger and have not been previously
reported on Form 10-Q for any quarter. See Note 3 to the Consolidated Financial
Statements on page 48 for a discussion of the Merger.
83
<PAGE>
AVERAGE BALANCES/NET INTEREST MARGIN/RATES
First Chicago NBD Corporation and Subsidiaries
<TABLE>
<CAPTION>
1995
YEAR ENDED DECEMBER 31 --------------------------
AVERAGE AVERAGE
(INCOME AND RATES ON TAX-EQUIVALENT BASIS) BALANCE INTEREST RATE
(DOLLARS IN MILLIONS) -------- -------- -------
<S> <C> <C> <C>
ASSETS
Interest-bearing due from banks (1)................................ $ 10,011 $ 620 6.19%
Federal funds sold and securities under resale agreements.......... 15,701 922 5.87
Trading assets..................................................... 7,300 469 6.42
Investment securities (2)
U.S. government and federal agency................................ 10,023 681 6.79
States and political subdivisions................................. 1,546 141 9.12
Other............................................................. 1,781 71 3.99
-------- ------ ----
Total investment securities..................................... 13,350 893 6.69
Loans (3)(4)
Domestic offices.................................................. 55,530 5,043 9.21
Foreign offices................................................... 3,414 246 7.21
-------- ------ ----
Total loans..................................................... 58,944 5,289 9.09
-------- ------ ----
Total earning assets (5)........................................ 105,306 8,193 7.78
Cash and due from banks............................................ 6,328
Allowance for credit losses........................................ (1,198)
Other assets....................................................... 11,934
--------
Total assets.................................................... $122,370
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits--interest-bearing
Savings........................................................... $ 11,716 $ 313 2.67%
Money market...................................................... 8,942 354 3.96
Time.............................................................. 17,346 1,008 5.81
Foreign offices (6)............................................... 15,821 906 5.73
-------- ------ ----
Total deposits--interest-bearing................................ 53,825 2,581 4.80
Federal funds purchased and securities under repurchase agreements. 20,041 1,192 5.95
Other short-term borrowings........................................ 9,167 538 5.87
Long-term debt..................................................... 7,941 571 7.19
-------- ------ ----
Total interest-bearing liabilities.............................. 90,974 4,882 5.37
Demand deposits.................................................... 13,254
Other liabilities.................................................. 9,807
Preferred stock.................................................... 570
Common stockholders' equity........................................ 7,765
--------
Total liabilities and stockholders' equity...................... $122,370
========
Interest income/earning assets (5)................................. $8,193 7.78%
Interest expense/earning assets.................................... 4,882 4.64
------ ----
Net interest margin................................................ $3,311 3.14%
====== ====
</TABLE>
- --------
(1) Principally balances in overseas offices.
(2) The combined amounts for investment securities available-for-sale and held-
to-maturity are based on their respective carrying values. Based on the
amortized cost of investment securities available-for-sale, the combined
average balance for 1995 would be $13.428 billion, and the average earned
rate would be 6.65%.
(3) Rates are calculated on average lease-financing receivable balances reduced
by deferred liability for taxes.
(4) Nonperforming loans are included in average balances used to determine
rates.
(5) Includes tax-equivalent adjustments based on federal income tax rate of 35%
for 1995, 1994 and 1993, and 34% for 1992.
(6) Includes International Banking Facilities' deposit balances in domestic
offices and balances of Edge Act and overseas offices.
84
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
----------------------------------------------------- -------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ------- ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8,497 $ 395 4.65% $ 8,098 $ 332 4.10% $ 8,136 $ 406 4.99%
14,340 624 4.35 11,740 350 2.98 8,356 291 3.48
4,927 286 5.80 4,876 229 4.70 4,556 270 5.93
11,093 698 6.29 8,973 585 6.52 8,084 613 7.58
1,649 146 8.85 1,757 151 8.59 2,009 179 8.91
1,990 48 2.41 2,054 57 2.78 2,552 95 3.72
-------- ------ ---- ------- ------ ---- ------- ------ ----
14,732 892 6.05 12,784 793 6.20 12,645 887 7.01
47,208 3,832 8.24 44,262 3,441 7.88 45,514 3,678 8.17
2,894 194 6.70 3,131 211 6.74 3,727 293 7.86
-------- ------ ---- ------- ------ ---- ------- ------ ----
50,102 4,026 8.15 47,393 3,652 7.80 49,241 3,971 8.15
-------- ------ ---- ------- ------ ---- ------- ------ ----
92,598 6,223 6.72 84,891 5,356 6.31 82,934 5,825 7.02
6,553 6,171 5,425
(1,132) (1,062) (1,117)
9,827 6,642 6,968
-------- ------- -------
$107,846 $96,642 $94,210
======== ======= =======
$ 11,815 $ 274 2.32% $11,100 $ 265 2.39% $ 9,732 $ 296 3.04%
9,280 261 2.81 10,163 247 2.43 10,211 311 3.05
13,650 570 4.18 14,204 543 3.82 18,665 910 4.88
12,347 548 4.44 10,944 417 3.81 11,972 566 4.73
-------- ------ ---- ------- ------ ---- ------- ------ ----
47,092 1,653 3.51 46,411 1,472 3.17 50,580 2,083 4.12
16,365 704 4.30 13,245 404 3.05 13,419 469 3.50
8,629 378 4.38 7,374 253 3.43 3,896 159 4.08
6,755 445 6.59 4,817 334 6.93 4,025 310 7.70
-------- ------ ---- ------- ------ ---- ------- ------ ----
78,841 3,180 4.03 71,847 2,463 3.43 71,920 3,021 4.20
13,377 13,078 11,620
7,898 4,730 4,505
686 794 581
7,044 6,193 5,584
-------- ------- -------
$107,846 $96,642 $94,210
======== ======= =======
$6,223 6.72% $5,356 6.31% $5,825 7.02%
3,180 3.43 2,463 2.90 3,021 3.64
------ ---- ------ ---- ------ ----
$3,043 3.29% $2,893 3.41% $2,804 3.38%
====== ==== ====== ==== ====== ====
</TABLE>
85
<PAGE>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
The following table shows the approximate effect on net interest income of
volume and rate changes for 1995 and 1994. For purposes of this table, changes
that are not due solely to volume or rate changes are allocated to volume.
<TABLE>
<CAPTION>
1995 OVER 1994 1994 OVER 1993
------------------ ------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
YEAR ENDED DECEMBER 31 (IN MILLIONS) ------ ---- ------ ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
Interest income
Interest-bearing due from banks......... $ 94 $131 $ 225 $ 19 $ 44 $ 63
Federal funds sold and securities under
resale agreements...................... 80 218 298 113 161 274
Trading assets.......................... 152 31 183 3 54 57
Investment securities
U.S. government and federal agency.... (73) 56 (17) 133 (20) 113
States and political subdivisions..... (9) 4 (5) (10) 5 (5)
Other................................. (8) 31 23 (1) (8) (9)
Loans
Domestic offices...................... 756 455 1,211 239 152 391
Foreign offices....................... 37 15 52 (16) (1) (17)
------ ----
Total................................. 1,970 867
Increase (decrease) in
Interest expense
Deposits
Savings............................... (3) 42 39 17 (8) 9
Money market.......................... (13) 106 93 (25) 39 14
Time.................................. 215 223 438 (23) 50 27
Foreign offices....................... 199 159 358 62 69 131
Federal funds purchased and securities
under repurchase agreements.............. 219 269 488 134 166 300
Other short-term borrowings............... 32 128 160 55 70 125
Long-term debt............................ 85 41 126 128 (17) 111
------ ----
Total................................. 1,702 717
------ ----
Increase in net interest income........... $ 268 $150
====== ====
</TABLE>
ITEM 2. PROPERTIES
The Corporation's headquarters are at One First National Plaza, Chicago,
Illinois, a 60-story building located in the center of the Chicago "Loop"
business district. The building is master-leased by FNBC and has approximately
1,850,000 square feet of rentable space, of which the Corporation occupies
approximately 59% and the balance is subleased to others. In 1995, First
Chicago Building Corporation, a wholly-owned subsidiary of FNBC, purchased a
23-story office building in Chicago's west Loop business district providing
approximately 1,036,000 square feet for future operations consolidation and
expansion. Also in 1995, FCCNB exercised its option to purchase three
buildings in Elgin, Illinois, comprising in the aggregate approximately
520,000 square feet on approximately 31 acres of land, housing Illinois Credit
Card operations.
NBD Michigan owns and occupies a 14-story, 540,000-square-foot main office
building in Detroit's central financial and business district; a 14-story,
300,000-square-foot office building in Troy, Michigan, housing its retail
support activities; and a 380,000-square-foot facility in Van Buren Township,
near Detroit Metropolitan Airport, housing its data center and check
processing operations. NBD Michigan also owns approximately 143 acres of land
in Farmington Hills, Michigan, for possible future facility needs. In
addition, NBD Michigan leases
86
<PAGE>
and occupies a 200,000-square-foot office center in Troy, Michigan, and NBD
Indiana leases and occupies a 380,000-square-foot office building in
Indianapolis, Indiana.
At December 31, 1995, the Corporation and its subsidiaries occupied 939
locations within the United States, including 742 bank branches. Foreign
offices, including Adelaide, Melbourne and Sydney, Australia; Beijing; Buenos
Aires; Frankfurt; Hong Kong; London; Mexico City; Seoul; Taipei; Tokyo; and
Toronto and Windsor, Canada, are located in leased premises.
ITEM 3. LEGAL PROCEEDINGS
The information required by this Item is set forth in Note 19 to the
Consolidated Financial Statements, on page 66 of this Form 10-K, and is
expressly incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation held a Special Meeting of Stockholders on October 20, 1995.
Stockholders approved and adopted the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of July 11, 1995, as amended, by and between FCC
and NBD, and the consummation of the transactions contemplated thereby,
pursuant to which FCC merged with and into NBD upon the terms and subject to
the conditions set forth in the Merger Agreement.
A total of 120,223,918 shares were represented in person or by proxy at the
Special Meeting, or approximately 75.6 percent of the total shares outstanding
and entitled to vote. Of the total number of outstanding shares entitled to
vote, 116,642,706.2 (73.375%) were voted for; 3,051,366.7 (1.919%) were voted
against; and 529,845.4 (0.333%) abstained. There were no broker non-votes.
Executive Officers of the Registrant
<TABLE>
<CAPTION>
PRESENT POSITION HELD WITH THE CORPORATION AND
NAME AND AGE EFFECTIVE DATE FIRST ELECTED TO OFFICE INDICATED
- ------------ ------------------------------------------------
<S> <C>
Richard L. Thomas (65).. Director and Chairman of the Board (12-1-95)
Verne G. Istock (55).... Director (10-1-85), Chief Executive Officer (1-1-94) and President (12-1-95)
Thomas H. Jeffs II (57). Director and Vice Chairman of the Board (10-1-85)
Scott P. Marks, Jr.
(50)................... Director and Vice Chairman of the Board (12-1-95)
David J. Vitale (49).... Director and Vice Chairman of the Board (12-1-95)
Frederick M. Adams, Jr.
(51)................... Executive Vice President (6-15-92)
John W. Ballantine (49). Executive Vice President (12-1-95)
Gordon S. Crimmins (61). Executive Vice President (1-1-94)
Robert A. DeAlexandris
(55)................... Executive Vice President (6-15-92)
Alan F. Delp (55)....... Executive Vice President (12-1-95)
Sherman I. Goldberg
(53)................... Executive Vice President, General Counsel and Secretary (12-1-95)
Thomas H. Hodges (50)... Executive Vice President (12-1-95)
Philip S. Jones (53).... Executive Vice President (6-15-92)
W.G. Jurgensen (44)..... Executive Vice President (12-1-95)
James R. Lancaster (64). Executive Vice President (6-15-92)
Thomas J. McDowell (57). Executive Vice President (1-1-95)
Timothy P. Moen (43).... Executive Vice President (12-1-95)
Susan S. Moody (42)..... Executive Vice President (1-1-95)
Andrew J. Paine, Jr.
(58)................... Executive Vice President (10-15-92)
Robert A. Rosholt (46).. Executive Vice President and Chief Financial Officer (12-1-95)
</TABLE>
Each of the executive officers has served as an officer of the Corporation
or a subsidiary, or their respective predecessors, for more than five years.
Executive officers of the Corporation serve until the annual meeting of the
Board of Directors (May 10, 1996).
87
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is set forth in this Form 10-K in the
third paragraph on page 7, the "Common Stock and Stockholder Data" table on
page 81 and the "Quarterly Dividends and Market Price Summary" table on page
82, and is expressly incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is set forth in this Form 10-K in the
"Selected Financial Data" table on page 13 and the "Financial Ratios" table on
page 82, and is expressly incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is set forth on pages 13 to 39 of this
Form 10-K, and is expressly incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is set forth in this Form 10-K in the
"Selected Financial Data" table on page 13, the "Selected Statistical
Information" table on page 30, the "Loan Composition" table on page 30, the
Consolidated Financial Statements and the Notes thereto on pages 40 to 70, the
"Report of Independent Public Accountants" on page 73 and the "Selected
Statistical Information" section on pages 74 to 86, and is expressly
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required by this Item has been previously reported in the
Corporation's Current Report on Form 8-K dated September 18, 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item pertaining to executive officers of
the Corporation is set forth on page 87 of this Form 10-K under the heading
"Executive Officers of the Registrant," and is expressly incorporated herein
by reference. The information required by this Item pertaining to directors of
the Corporation is set forth under the heading "Election of Directors" in the
Corporation's definitive proxy statement dated April 5, 1996, and is expressly
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth under the headings
"Compensation of Executive Officers," "Director Meeting Attendance and Fee
Arrangements" and "Committees of the Board of Directors--Organization,
Compensation and Nominating Committee--Committee Interlocks and Insider
Participation" in the Corporation's definitive proxy statement dated April 5,
1996, and is expressly incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth under the heading
"Beneficial Ownership of the Corporation's Common Stock" in the Corporation's
definitive proxy statement dated April 5, 1996, and is expressly incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth under the headings
"Committees of the Board of Directors--Organization, Compensation and
Nominating Committee--Committee Interlocks and Insider Participation" and
"Transactions with Directors, Executive Officers, Stockholders and Associates"
in the Corporation's definitive proxy statement dated April 5, 1996, and is
expressly incorporated herein by reference.
88
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Balance Sheet--December 31, 1995 and 1994................. 40
Consolidated Income Statement--Three Years Ended December 31, 1995..... 41
Consolidated Statement of Stockholders' Equity--Three Years Ended
December 31, 1995..................................................... 42
Consolidated Statement of Cash Flows--Three Years Ended December 31,
1995.................................................................. 43
Notes to Financial Statements.......................................... 44
</TABLE>
(2) Financial Statement Schedules.
All schedules normally required by Form 10-K are omitted since they either
are not applicable or the required information is shown in the financial
statements or the notes thereto.
(3) Exhibits.
<TABLE>
<C> <S> <C>
3(A). Restated Certificate of Incorporation of the Corporation,
as amended.
3(B). By-Laws of the Corporation, as amended.
4. Instruments defining the rights of security holders, in-
cluding indentures.+
10(A). NBD Bancorp, Inc. Performance Incentive Plan, as amended
[Exhibit 10(a) to the Corporation's 1991 Annual Report on
Form 10-K (File No. 1-7127) incorporated herein by refer-
ence].*
10(B). NBD Bancorp, Inc. Executive Incentive Plan [Exhibit (10)
(b) to the Corporation's 1994 Annual Report on Form 10-K
(File No. 1-7127) incorporated herein by reference].*
10(C). NBD Bancorp, Inc. Pension Restoration/Supplemental Plan
[Exhibit (10) (c) to the Corporation's 1994 Annual Report
on Form 10-K (File No. 1-7127) incorporated herein by ref-
erence].*
10(D). First Chicago NBD Corporation Plan for Deferring the Pay-
ment of Directors' Fees.*
10(E). NBD Bancorp, Inc. Executive Estate Plan [Exhibit (10) (g)
to the Corporation's 1994 Annual Report on Form 10-K (File
No. 1-7127) incorporated herein by reference].*
10(F). NBD Bancorp, Inc. Non-Employee Director Stock Award Plan
[Exhibit 10 (h) to the Corporation's 1992 Annual Report on
Form 10-K (File No. 1-7127) incorporated herein by refer-
ence].*
10(G). Supplemental Disability and Split-Dollar Life Insurance
Policies of NBD Indiana, Inc. covering the named executive
officers [Exhibit 10 (i) to the Corporation's 1992 Annual
Report on Form 10-K (File No. 1-7127) incorporated herein
by reference].*
10(H). NBD Bancorp, Inc. Long-Term Disability Restoration Plan
[Exhibit 10 (k) to the Corporation's 1993 Annual Report on
Form 10-K (File No. 1-7127) incorporated herein by refer-
ence].*
10(I). First Chicago Corporation Stock Incentive Plan [Exhibit
10(A) to FCC's 1990 Annual Report on Form 10-K (File No.
1-6052) incorporated herein by reference].*
10(J). First Chicago Corporation Strategic Stock Incentive Plan,
as amended [Exhibit 10(A) to FCC's 1988 Annual Report on
Form 10-K (File No. 1-6052) incorporated herein by
reference].*
10(K). First Chicago Corporation 1983 Stock Option Plan, as
amended and restated [Exhibit 28 to FCC's Post-Effective
Amendment No. 1 to Form S-8 Registration Statement (File
No. 33-15779) incorporated herein by reference].*
</TABLE>
89
<PAGE>
<TABLE>
<C> <S> <C>
10(L). Form of The First National Bank of Chicago Compensation
Agreement, as amended.*
10(M). Form of First Chicago Corporation Compensation Agreement,
as amended.*
10(N). First Chicago Corporation Compensation Deferral Plan, as
amended.*
10(O). First Chicago Corporation Executive Estate Plan.*
10(P). First Chicago Corporation Savings Incentive Plan, as
amended and restated [Exhibit 10(G) to FCC's 1994 Annual
Report on Form 10-K (File No. 1-6052) incorporated herein
by reference].*
10(Q). First Chicago Corporation Supplemental Savings Incentive
Plan [Exhibit 10(I) to FCC's 1990 Annual Report on Form
10-K (File No. 1-6052) incorporated herein by reference].*
10(R). First Chicago Corporation Executive Retirement Plan [Ex-
hibit 10(I) to FCC's 1992 Annual Report on Form 10-K (File
No. 1-6052) incorporated herein by reference].*
10(S). Form of Individual Change of Control Employment Agree-
ment.*
10(T). Form of Individual Executive Employment Agreement.*
10(U). First Chicago Corporation Trust Agreement (Trust A) [Ex-
hibit 10(K) to FCC's 1992 Annual Report on Form 10-K (File
No. 1-6052) incorporated herein by reference].*
10(V). First Chicago Corporation Trust Agreement (Trust B) [Ex-
hibit 10(L) to FCC's 1992 Annual Report on Form 10-K (File
No. 1-6052) incorporated herein by reference].*
10(W). Letter dated December 18, 1995, from the Corporation to
Richard L. Thomas.*
10(X). Form of First Chicago NBD Corporation Director Stock
Plan.*
10(Y). Form of First Chicago NBD Corporation Stock Performance
Plan.*
10(Z). Form of First Chicago NBD Corporation Senior Management
Annual Incentive Plan.*
10(AA). Agreement and Plan of Merger, dated as of July 11, 1995,
between NBD Bancorp, Inc. and First Chicago Corporation,
as amended.
12. Statements re computation of ratios.
21. Subsidiaries of the Corporation.
23. Consents of experts and counsel.
27. Financial Data Schedule.
</TABLE>
(b) The Corporation filed the following Current Reports on Form 8-K during the
quarter ended December 31, 1995:
<TABLE>
<CAPTION>
DATE ITEM REPORTED
---- -------------
<S> <C>
November 10, 1995 The following announcements: (i) on October 20, 1995,
FCC's and NBD's respective stockholders approved the
Merger; (ii) on November 7, 1995, the Federal Reserve
Board approved the Corporation's Merger application; and
(iii) the composition of the Corporation's Board of
Directors following the Effective Time.
November 14, 1995 The Corporation's pro forma financial information and
certain historical financial information.
December 1, 1995 Announcement that the Merger became effective.
December 4, 1995 The Corporation's supplemental financial information.
December 8, 1995 Announcement that the Corporation increased the common
stock quarterly dividend.
</TABLE>
- --------
+ The Corporation hereby agrees to furnish to the Commission upon request
copies of instruments defining the rights of holders of long-term debt of
the Corporation and its consolidated subsidiaries; the total amount of
such debt does not exceed 10% of the total assets of the Corporation and
its subsidiaries on a consolidated basis.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K.
90
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE CORPORATION HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, THIS 8TH DAY OF
MARCH, 1996.
First Chicago NBD Corporation
(Registrant)
/s/ Verne G. Istock
By __________________________________
Verne G. Istock
Principal Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
CORPORATION AND IN THE CAPACITIES INDICATED, THIS 8TH DAY OF MARCH, 1996.
/s/ Terence E. Adderley /s/ Scott P. Marks, Jr.
- ------------------------------------- -------------------------------------
Terence E. Adderley Scott P. Marks, Jr.
Director Director
/s/ James K. Baker /s/ William T. McCormick , Jr.
- ------------------------------------- -------------------------------------
James K. Baker William T. McCormick, Jr.
Director Director
/s/ John H. Bryan /s/ Earl L. Neal
- ------------------------------------- -------------------------------------
John H. Bryan Earl L. Neal
Director Director
/s/ Siegfried Buschmann /s/ James J. O'Connor
- ------------------------------------- -------------------------------------
Siegfried Buschmann James J. O'Connor
Director Director
/s/ James S. Crown /s/ Thomas E. Reilly, Jr.
- ------------------------------------- -------------------------------------
James S. Crown Thomas E. Reilly, Jr.
Director Director
/s/ Maureen A. Fay /s/ Patrick G. Ryan
- ------------------------------------- -------------------------------------
Maureen A. Fay Patrick G. Ryan
Director Director
/s/ Charles T. Fisher III /s/ Adele Simmons
- ------------------------------------- -------------------------------------
Charles T. Fisher III Adele Simmons
Director Director
/s/ Donald V. Fites /s/ Richard L. Thomas
- ------------------------------------- -------------------------------------
Donald V. Fites Richard L. Thomas
Director Director
/s/ Verne G. Istock /s/ David J. Vitale
- ------------------------------------- -------------------------------------
Verne G. Istock David J. Vitale
Director Director
/s/ Thomas H. Jeffs II /s/ Robert A. Rosholt
- ------------------------------------- -------------------------------------
Thomas H. Jeffs II Robert A. Rosholt
Director Principal Financial Officer
/s/ Richard A. Manoogian /s/ William J. Roberts
- ------------------------------------- -------------------------------------
Richard A. Manoogian William J. Roberts
Director Principal Accounting Officer
91
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<TABLE>
<CAPTION>
EXHIBIT INDEX TO EXHIBITS PAGE
------- ----------------- ----
<S> <C> <C>
3(A). Restated Certificate of Incorporation of the Corporation,
as amended.
3(B). By-Laws of the Corporation, as amended.
4. Instruments defining the rights of security holders, in-
cluding indentures.+
10(A). NBD Bancorp, Inc. Performance Incentive Plan, as amended
[incorporated herein by reference].
10(B). NBD Bancorp, Inc. Executive Incentive Plan [incorporated
herein by reference].
10(C). NBD Bancorp, Inc. Pension Restoration/Supplemental Plan
[incorporated herein by reference].
10(D). First Chicago NBD Corporation Plan for Deferring the Pay-
ment of Directors' Fees.
10(E). NBD Bancorp, Inc. Executive Estate Plan [incorporated
herein by reference].
10(F). NBD Bancorp, Inc. Non-Employee Director Stock Award Plan
[incorporated herein by reference].
10(G). Supplemental Disability and Split-Dollar Life Insurance
Policies of NBD Indiana, Inc. covering the named executive
officers [incorporated herein by reference].
10(H). NBD Bancorp, Inc. Long-Term Disability Restoration Plan
[incorporated herein by reference].
10(I). First Chicago Corporation Stock Incentive Plan
[incorporated herein by reference].
10(J). First Chicago Corporation Strategic Stock Incentive Plan,
as amended [incorporated herein by reference].
10(K). First Chicago Corporation 1983 Stock Option Plan, as
amended and restated [incorporated herein by reference].
10(L). Form of The First National Bank of Chicago Compensation
Agreement, as amended.
10(M). Form of First Chicago Corporation Compensation Agreement,
as amended.
10(N). First Chicago Corporation Compensation Deferral Plan, as
amended.
10(O). First Chicago Corporation Executive Estate Plan.
10(P). First Chicago Corporation Savings Incentive Plan, as
amended and restated [incorporated herein
by reference].
10(Q). First Chicago Corporation Supplemental Savings Incentive
Plan [incorporated herein by reference].
10(R). First Chicago Corporation Executive Retirement Plan
[incorporated herein by reference].
10(S). Form of Individual Change of Control Employment Agree-
ment.
10(T). Form of Individual Executive Employment Agreement.
10(U). First Chicago Corporation Trust Agreement (Trust A)
[incorporated herein by reference].
10(V). First Chicago Corporation Trust Agreement (Trust B)
[incorporated herein by reference].
10(W). Letter dated December 18, 1995, from the Corporation to
Richard L. Thomas.
10(X). Form of First Chicago NBD Corporation Director Stock
Plan.
10(Y). Form of First Chicago NBD Corporation Stock Performance
Plan.
10(Z). Form of First Chicago NBD Corporation Senior Management
Annual Incentive Plan.
10(AA). Agreement and Plan of Merger, dated as of July 11, 1995,
between NBD Bancorp, Inc. and First Chicago Corporation,
as amended.
12. Statements re computation of ratios.
21. Subsidiaries of the Corporation.
23. Consents of experts and counsel.
27. Financial Data Schedule.
</TABLE>
- --------
+ The Corporation hereby agrees to furnish to the Commission upon request
copies of instruments defining the rights of holders of long-term debt of
the Corporation and its consolidated subsidiaries; the total amount of
such debt does not exceed 10% of the total assets of the Corporation and
its subsidiaries on a consolidated basis.
<PAGE>
EXHIBIT 3(A).
RESTATED CERTIFICATE OF INCORPORATION OF
FIRST CHICAGO NBD CORPORATION
(As last amended effective December 30, 1995)
This Restated Certificate of Incorporation of First Chicago NBD
Corporation, originally incorporated in the State of Delaware under the name
National Detroit Corporation pursuant to a certificate of incorporation filed
July 14, 1972, amends the Restated Certificate of Incorporation last amended
effective October 28, 1993 and has been duly adopted in accordance with the
General Corporation Law of Delaware.
FIRST. The name of the corporation is
First Chicago NBD Corporation.
SECOND. The address of its registered office in the State of Delaware is
1209 Orange Street, County of New Castle, Wilmington, Delaware 19801. The name
of its registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 760,000,000 shares which shall be
divided into two classes as follows:
(a) 10,000,000 shares of Preferred Stock without par value (Preferred
Stock), which shall include, but not be limited to, Preferred Stock with
Cumulative and Adjustable Dividends, Series B; Preferred Stock with Cumulative
and Adjustable Dividends, Series C; 8.45% Cumulative Preferred Stock; and 5 3/4%
Cumulative Convertible Preferred Stock; Series B; and
(b) 750,000,000 shares of Common Stock of the par value of $1.00 per share
(Common Stock).
The designations, voting powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions of the above classes of stock and other general provisions relating
thereto shall be as follows and as set forth in Exhibits A-D attached hereto:
PART I
PREFERRED STOCK
(a) Shares of Preferred Stock may be issued in one or more series at such
time or times and for such consideration or considerations as the Board of
Directors may determine. All shares of any one series shall be of equal rank
and identical in all respects except that the dates from which dividends accrue
or accumulate with respect thereto may vary.
<PAGE>
(b) The Board of Directors is expressly authorized at any time, and from
time to time, to provide for the issuance of shares of Preferred Stock in one or
more series, with such voting powers, full or limited, or without voting powers,
and with such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
as shall be stated and expressed in the resolution or resolutions providing for
the issue thereof adopted by the Board of Directors, and as are not stated and
expressed in this Certificate of Incorporation, or any amendment thereto,
including (but without limiting the generality of the foregoing) the following:
(i) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board of
Directors in creating such series) be increased or decreased (but not below the
number of shares then outstanding) from time to time by action of the Board of
Directors.
(ii) The dividend rate or rates on the shares of such series and the
relation which such dividends shall bear to the dividends payable on any other
class of capital stock or on any other series of Preferred Stock, the terms and
conditions upon which and the periods in respect of which dividends shall be
payable, whether and upon what conditions such dividends shall be cumulative
and, if cumulative, the date or dates from which dividends shall accumulate.
(iii) Whether the shares of such series shall be redeemable, and, if
redeemable, whether redeemable for cash, property or rights, including
securities of any other corporation, at the option of either the holder or the
corporation or upon the happening of a specified event, the limitations and
restrictions with respect to such redemption, the time or times when, the price
or prices or rate or rates at which, the adjustments with which and the manner
in which such shares shall be redeemable, including the manner of selecting
shares of such series for redemption if less than all shares are to be redeemed.
(iv) The rights to which the holders of shares of such series shall be
entitled, and the preferences, if any, over any other series (or of any other
series over such series), upon the voluntary or involuntary liquidation,
dissolution, distribution or winding up of the corporation, which rights may
vary depending on whether such liquidation, dissolution, distribution or winding
up is voluntary or involuntary, and, if voluntary, may vary at different dates.
(v) Whether the shares of such series shall be subject to the operation
of a purchase, retirement or sinking fund, and, if so, whether and upon what
conditions such purchase, retirement or sinking fund shall be cumulative or
noncumulative, the extent to which and the manner in which such fund shall be
applied to the purchase or redemption of the shares of such series for
retirement or to other corporate purposes and the terms and provisions relative
to the operation thereof.
(vi) Whether the shares of such series shall be convertible into or
exchangeable for shares of any other class or of any other series of any class
of capital stock of the
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<PAGE>
corporation, and, if so convertible or exchangeable, the price or prices or the
rate or rates of conversion or exchange and the method, if any, of adjusting the
same, and any other terms and conditions of such conversion or exchange.
(vii) The voting powers, full and/or limited, if any, of the shares of
such series, and whether and under what conditions the shares of such series
(along or together with the shares of one or more other series having similar
provisions) shall be entitled to vote separately as a single class, for the
election of one or more additional directors of the corporation in case of
dividend arrearages or other specified events, or upon other matters.
(viii) Whether the issuance of any additional shares of such series, or of
any shares of any other series, shall be subject to restrictions as to issuance,
or as to the powers, preferences or rights of any such other series.
(ix) Any other preferences, privileges and powers and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of such series, as the Board of Directors may deem advisable and
as shall not be inconsistent with the provisions of this Restated Certificate of
Incorporation.
(c) Unless and except to the extent otherwise required by law or provided
in the resolution or resolutions of the Board of Directors creating any series
of Preferred Stock pursuant to this Part I, the holders of the Preferred Stock
shall have no voting power with respect to any matter whatsoever. In no event
shall the Preferred Stock be entitled to more than one vote in respect of each
share of stock.
(d) Shares of Preferred Stock redeemed, converted, exchanged, purchased,
retired or surrendered to the corporation, or which have been issued and
reacquired in any manner, may, upon compliance with any applicable provisions of
the General Corporation Law of the State of Delaware, be given the status of
authorized and unissued shares of Preferred Stock and may be reissued by the
Board of Directors as part of the series of which they were originally a part or
may be reclassified into and reissued as part of a new series or as a part of
any other series, all subject to the protective conditions or restrictions of
any outstanding series of Preferred Stock.
PART II
COMMON STOCK
(a) Except as otherwise required by law or by any amendment to this
Restated Certificate of Incorporation, each holder of Common Stock shall have
one vote for each share of stock held by him on all matters voted upon by the
stockholders.
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<PAGE>
(b) Subject to the preferential dividend rights, if any, applicable to
shares of Preferred Stock and subject to applicable requirements, if any, with
respect to the setting aside of sums for purchase, retirement or sinking funds
for Preferred Stock, the holders of Common Stock shall be entitled to receive,
to the extent permitted by law, such dividends as may be declared from time to
time by the Board of Directors.
(c) In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the corporation, after distribution in
full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled to receive
all of the remaining assets of the corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively. The Board of Directors may distribute
in kind to the holders of Common Stock such remaining assets of the corporation,
or may sell, transfer, or otherwise dispose of all or any part of such remaining
assets to any corporation, trust or entity, or any combination thereof, and may
sell all or any part of the consideration so received and distribute any balance
thereof in kind to holders of Common Stock. The merger or consolidation of the
corporation into or with any other corporation, or the merger of any other
corporation into it, or any purchase or redemption of shares of stock of the
corporation of any class, shall not be deemed to be a dissolution, liquidation
or winding up of the corporation for the purposes of this paragraph.
(d) Such numbers of shares of Common Stock as may from time to time be
required for such purpose shall be reserved for issuance (i) upon conversion of
any shares of Preferred Stock or any obligation of the corporation convertible
into shares of Common Stock which is at the time outstanding or issuable upon
exercise of any options or warrants at the time outstanding and (ii) upon
exercise of any options or warrants at the time outstanding to purchase shares
of Common Stock.
PART III
GENERAL PROVISIONS
(a) At any meeting of stockholders, the presence in person or by proxy of
the holders of record of a majority of the outstanding shares of stock of the
corporation entitled to be voted at such meeting shall constitute a quorum for
all purposes, except as otherwise provided by this Restated Certificate of
Incorporation or required by applicable law.
(b) Subject to the protective conditions or restrictions of any outstanding
series of Preferred Stock, any amendment to this Restated Certificate of
Incorporation which shall increase or decrease the authorized capital stock of
any class or classes may be adopted by the affirmative vote of the holders of a
majority of the stock of the corporation entitled to vote.
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<PAGE>
(c) No holder of stock of any class of the corporation shall be entitled as
a matter of right to purchase or subscribe for any part of any unissued stock of
any class, or of any additional stock of any class of capital stock of the
corporation, or of any bonds, certificates of indebtedness, debentures, or other
securities, whether or not convertible into stock of the corporation, now or
hereafter authorized, but any such stock or other securities may be issued and
disposed of pursuant to resolution by the Board of Directors to such persons,
firms, corporations or associations and upon such terms and for such
consideration (not less than the par value or stated value thereof) as the Board
of Directors in the exercise of its discretion may determine and may be
permitted by law without action by the stockholders. The Board of Directors may
provide for payment therefor to be received by the corporation in cash, personal
property, real property (or leases thereof) or services. Any and all shares of
stock so issued for which the consideration so fixed has been paid or delivered,
shall be deemed fully paid and not liable to any further call or assessment.
FIFTH. Reserved.
SIXTH. Subject to any provision contained in any resolution of the Board of
Directors adopted pursuant to Part I of Article Fourth of this Certificate of
Incorporation requiring an increase or increases in the number of directors, the
number of directors constituting the Board of Directors shall be that number as
shall be fixed from time to time in the manner provided by Article Eleventh of
this Restated Certificate of Incorporation and by By-laws in conformity
therewith. Election of directors need not be by written ballot unless the By-
laws of the corporation shall so provide.
In addition to all of the powers conferred by statute, the Board of
Directors is expressly authorized to make, alter or repeal the By-laws of the
corporation.
Wherever the term "Board of Directors" is used in this Restated Certificate
of Incorporation, such term shall mean the Board of Directors of the
corporation; provided, however, that, to the extent any committee of directors
of the corporation is lawfully entitled to exercise the powers of the Board of
Directors, such committee may exercise any right or authority of the Board of
Directors under this Restated Certificate of Incorporation.
SEVENTH. No contract or transaction between the corporation and one or more
of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board
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<PAGE>
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
EIGHTH. (a) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for
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<PAGE>
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery of Delaware or such
other court shall deem proper. Any person entitled to indemnification against
expenses under this paragraph (b) shall, to the extent not prohibited by the
laws of Delaware and any other applicable law, also be entitled to
indemnification, and the corporation shall indemnify him, against judgments and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action or suit, upon the same terms and conditions and subject to the
same limitations as provided with respect to expenses.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on merits or otherwise in defense of any action,
suit or proceeding referred to in paragraphs (a) and (b) of this Article or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Any indemnification under paragraphs (a) and (b) of this Article
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum (as defined in the By-laws of the corporation) consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion or (iii) by the
stockholders. Notwithstanding the failure or refusal of the directors, counsel
and stockholders to make provision therefor, such indemnification shall be made
if a court of competent jurisdiction makes a determination that the director,
officer, employee or agent has a right to indemnification hereunder in any
specific case upon the application of such director, officer, employee or agent.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation.
(f) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statute, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue
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<PAGE>
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
(g) The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article.
(h) For the purposes of this Article, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
(i) Neither the corporation nor its directors or officers nor any person
acting on its behalf shall be liable to anyone for any determination as to the
existence or absence of conduct which would provide a basis for making or
refusing to make any payment under this Article or for taking or omitting to
take any other action under this Article, in reliance upon the advice of
counsel.
(j) A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the shareholders of this provision to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the shareholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.
NINTH. The corporation shall have perpetual existence.
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<PAGE>
TENTH. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by the laws of Delaware, and all rights
conferred herein upon stockholders and directors are granted subject to this
reservation.
ELEVENTH. Board of Directors.
(a) Number, Election and Terms of Directors: The business and affairs of
the corporation shall be managed by or under the direction of a Board of
Directors. The number of the directors of the corporation shall be fixed from
time to time by resolution adopted by the affirmative vote of a majority of the
entire Board of Directors of the corporation, except that the minimum number of
directors shall be fixed at no less than 15 and the maximum number of directors
shall be fixed at no more than 30. The directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall consist,
as nearly equal in number as possible, of one-third of the total number of
directors constituting the entire Board of Directors. At the 1986 annual
meeting of stockholders, Class I directors shall be elected for a one-year term,
Class II directors for a two-year term and Class III directors for a three-year
term. At each succeeding annual meeting of stockholders beginning in 1987,
successors of the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible.
(b) Stockholder Nomination of Director Candidates: Nominations for
election to the Board of Directors of the corporation at a meeting of
stockholders may be made by the Board of Directors, on behalf of the Board of
Directors by any nominating committee appointed by the Board of Directors, or by
any stockholder of the corporation entitled to vote for the election of
directors at the meeting. Nominations, other than those made by or on behalf of
the Board of Directors, shall be made by notice in writing delivered to or
mailed, postage prepaid, and received by the Secretary of the corporation at
least 60 days but no more than 90 days prior to the anniversary date of the
immediately preceding Annual Meeting of Stockholders. The notice shall set
forth (i) the name and address of the stockholder who intends to make the
nomination; (ii) the name, age, business address and, if known, residence
address of each nominee; (iii) the principal occupation or employment of each
nominee; (iv) the number of shares of stock of the corporation which are
beneficially owned by each nominee and by the nominating stockholder; (v) any
other information concerning the nominee that must be disclosed of nominees in
proxy solicitation pursuant to Regulation 14A of the Securities Exchange Act of
1934 (or any subsequent provisions replacing such Regulation); and (vi) the
executed consent of each nominee to serve as a director of the corporation, if
elected. The chairman of the meeting of stockholders may, if the facts warrant,
determine that a nomination was not made in accordance with the foregoing
procedures, and if the chairman should so determine, the chairman shall so
declare to the meeting and the defective nomination shall be disregarded.
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<PAGE>
(c) Newly Created Directorships and Vacancies: Newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum, or by a sole
remaining director. Any director of any class chosen to fill a vacancy in such
class shall hold office for a term that shall coincide with the remaining term
of that class, but in no case will a decrease in the number of directors shorten
the term of any incumbent director. A director shall hold office until the next
annual meeting for the year in which his or her term expires and until such
director's successor shall have been elected and qualified.
(d) Removal: Any director may be removed from office only for cause and
only by the affirmative vote of the holders of at least a majority of the voting
power of all the shares of the corporation entitled to vote generally in the
election of directors, voting together as a single class.
(e) Preferred Stock: Notwithstanding the foregoing paragraphs, whenever
the holders of any one or more classes or series of Preferred Stock issued by
the corporation shall have the right, voting separately by class or series, to
elect directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of the Certificate of Incorporation applicable
thereto. The then authorized number of directors of the corporation shall be
increased by the number of additional directors to be elected, and such
directors so elected shall not be divided into classes pursuant to this Article
Eleventh unless expressly provided by such terms.
(f) Amendment or Repeal: Notwithstanding anything contained in this
Certificate of Incorporation or the By-laws of the corporation to the contrary,
the affirmative vote of the holders of at least 80% of the voting power of all
the shares of the corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend,
repeal or adopt any provision inconsistent with the purpose and intent of this
Article Eleventh.
TWELFTH. Stockholder Action.
Any action required or permitted to be taken by any stockholders of the
corporation must be effected at a duly called annual or special meeting of such
stockholders and may not be effected by any consent in writing by such
stockholders. Except as may be otherwise required by law, special meetings of
stockholders of the corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the Board of Directors.
Notwithstanding anything contained in this Certificate of Incorporation or the
By-laws of the corporation to the contrary, the affirmative vote of at least 80%
of the voting power of all the shares of the corporation entitled to vote
generally in the election of directors, voting together
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as a single class, shall be required to alter, amend or adopt any provision
inconsistent with the purpose and intent of this Article Twelfth.
THIRTEENTH. (a) In addition to any affirmative vote required by law or by
or under this Restated Certificate of Incorporation or the By-laws and except as
otherwise expressly herein provided in this Article Thirteenth, the approval or
authorization of a Business Combination (which together with certain other terms
used in this Article, are hereinafter defined) shall require the affirmative
vote of a majority of the voting power of all the shares of Voting Stock held by
stockholders other than an Interested Stockholder, with which or by or on whose
behalf, directly or indirectly, a Business Combination is proposed, voting
together as a single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required or that a lesser
percentage or separate class vote may be otherwise required.
(b) The provisions of paragraph (a) of this Article shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote, if any, as is required by law or by or under
any other provision of this Restated Certificate of Incorporation, or the By-
laws of the corporation, or otherwise, if all the conditions specified in either
of the following paragraphs First or Second are met:
First: The Business Combination shall have been approved by a majority
(whether such approval is made prior to or subsequent to the acquisition of
beneficial ownership of the Voting Stock that caused the Interested Stockholder
to become an Interested Stockholder) of the Continuing Directors; or
Second: All of the following conditions shall have been met:
(1) The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of consideration other
than cash to be received per share by holders of Common Stock in such Business
Combination shall be at least equal to the highest amount determined under
subparagraphs (i) and (ii) below:
(i) The highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by or on behalf on the
Interested Stockholder for any shares of Common Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of shares of
Common Stock (a) within the two-year period immediately prior to the first
public announcement of the proposed Business Combination (the "Announcement
Date") or (b) in the transaction in which it became an Interested Stockholder,
whichever is higher; and
(ii) The Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Stockholder became an
Interested Stockholder (the "Determination Date"), whichever is higher.
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All per share prices shall be adjusted to reflect any intervening stock
splits, stock dividends, and reverse stock splits.
(2) The aggregate amount of the cash and the Fair Market Value as of
the date of the consummation of the Business Combination of consideration other
than cash to be received per share by holders of shares of any class or series
of outstanding Voting Stock, other than Common Stock, shall be at least equal to
the highest amount determined under clauses (i), (ii), and (iii) below.
(i) The highest per share price (including any brokerage commissions,
transfer taxes, and soliciting dealers' fees) paid by or on behalf of the
Interested Stockholder for any share of such class or series of Voting Stock in
connection with the acquisition by the Interested Stockholder of beneficial
ownership of shares of such class or series of Voting Stock (a) within the two-
year period immediately prior to the Announcement Date or (b) in the transaction
in which it became an Interested Stockholder, whichever is higher.
(ii) The Fair Market Value per share of such class or series of
Voting Stock on the Announcement Date or on the Determination Date, whichever is
higher; and
(iii) The highest preferential amount per share to which the holders
of shares of such class or series of Voting Stock would be entitled, if any, in
the event of any voluntary or involuntary liquidation, dissolution or winding up
of the corporation, regardless of whether the Business Combination to be
consummated constitutes such an event.
All per share prices shall be adjusted for intervening stock splits,
stock dividends, and reverse stock splits.
The provisions of this paragraph Second (2) shall be required to be
met with respect to every class or series of outstanding Voting Stock, whether
or not the Interested Stockholder has previously acquired beneficial ownership
of any shares of a particular class or series of Voting Stock.
(3) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (i)
except as approved by a majority of the Continuing Directors, there shall have
been no failure to declare and pay at the regular date therefor any full
periodic dividends (whether or not cumulative) in accordance with the terms of
any outstanding Preferred Stock; (ii) there shall have been (a) no reduction in
the annual rate of dividend paid on the Common Stock (except as necessary to
reflect any stock split, stock dividend or subdivision of the Common Stock),
except as approved by a majority of the Continuing Directors, and (b) an
increase in such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization, or any similar transaction which has the effect of reducing the
number of outstanding shares of
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Common Stock, unless the failure so to increase such annual rate is approved by
a majority of the Continuing Directors, and (iii) such Interested Stockholder
shall have not become the beneficial owner of any additional shares of Voting
Stock except as part of the transaction which results in such Interested
Stockholder becoming an Interested Stockholder and except in a transaction that,
after giving effect thereto, would not result in any increase in the Interested
Stockholder's percentage of beneficial ownership of any class or series of
capital stock.
(4) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges, or other financial assistance or any tax credits
or other tax advantages provided by the corporation, whether in anticipation of
or in connection with such Business Combination or otherwise.
(5) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange Act
of 1934 and the rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to stockholders of the
corporation at least 30 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to such Act or subsequent provisions).
(6) Such Interested Stockholder shall not have made any major change
in the corporation's business or equity capital structure without the approval
of a majority of the Continuing Directors.
(c) For the purposes of this Article Thirteenth:
(i) The term "Business Combination" shall mean:
(a) any merger or consolidation of the corporation or any Subsidiary (as
hereinafter defined) with (a) any Interested Stockholder or (b) any other
company (whether or not such other company is an Interested Stockholder)
which is, or after such merger or consolidation would be, an Affiliate or
Associate of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
or security arrangement, investment, loan, advance, guarantee, agreement to
purchase, agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or a series of
transactions) with or for the benefit of any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder involving any
Substantial Part of the assets, securities or commitments of the
corporation, any Subsidiary or any Interested Stockholder or any Affiliate
or Associate of any Interested Stockholder; or
(c) the adoption of any plan or proposal for the liquidation or dissolution of
the corporation proposed by or on behalf of any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder; or
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(d) any reclassification of securities (including any reverse stock split), or
recapitalization of the corporation or any merger or consolidation of the
corporation with any of its Subsidiaries or any other transaction (whether or
not with or otherwise involving an Interested Stockholder) that has the effect,
directly or indirectly, of increasing the proportionate share of the outstanding
shares of any class or series of Voting Stock, or any securities convertible
into Voting Stock, or into equity securities of any Subsidiary, that is
beneficially owned by an Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder; or
(e) any agreement, contract, or other arrangement providing for any one or more
of the actions specified in the foregoing clauses (a) through (d).
(ii) The term "Voting Stock" shall mean all outstanding shares of
capital stock of the corporation of whatever class or series which is entitled
to vote under any circumstances in the election of directors of the corporation.
(iii) A "person" shall mean any individual, firm, corporation,
partnership, trust or other entity and shall include any group comprised of any
person and any other person with whom such person or any Affiliate or Associate
of such person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting, or disposing of
Voting Stock.
(iv) "Interested Stockholder" shall mean any person (other than the
corporation or any Subsidiary and other than any profit-sharing, employee stock
ownership or other employee benefit plan of the corporation or any Subsidiary or
any trustee of or fiduciary with respect to any such plan when acting in such
capacity) who or which:
(a) is a person who is the beneficial owner, directly or
indirectly, of more than 10% of the voting power of the then outstanding Voting
Stock; or
(b) is an Affiliate or Associate of the corporation and at any
time within the two-year period immediately prior to the date in question was
the beneficial owner of 10% or more of the voting power of the then outstanding
Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any shares
of Voting Stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested Stockholder,
if such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(v) A person shall be a "beneficial owner" of any Voting Stock:
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
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(b) which such person or any of its Affiliates or
Associates has (1) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (2) the right to vote pursuant to
any agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or indirectly,
by any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Voting Stock. For the
purposes of determining whether a person is an Interested Stockholder pursuant
to paragraph (c)(iv) of this Article, the number of shares of capital stock
deemed to be outstanding shall include shares deemed beneficially owned by such
person through application of paragraph (c)(v) of this Article but shall not
include any other shares of Voting Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(vi) An "Affiliate" of, or a person "affiliated" with, a specified
person, is a person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified.
(vii) "Associate" used to indicate a relationship with any person,
means (1) any corporation or organization (other than the corporation or a
majority- owned subsidiary of the corporation) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities, (2) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity, and (3) any relative or
spouse of such person, or any relative of such spouse, who has the same home as
such person.
(viii) "Subsidiary" means any company of which a majority of any class
of equity security is owned, directly or indirectly, by the corporation.
(ix) The term "Substantial Part" shall mean an amount equal to or
greater than an amount equal to fifteen percent of the stockholders' equity of
the corporation as reflected in the most recent fiscal year-end consolidated
balance sheet of the corporation.
(x) "Continuing Director" means any member of the Board of Directors
of the corporation (the "Board") while such person is a member of the Board, who
is not an Affiliate or Associate or representative of the Interested Stockholder
and was a member of the Board prior to the time that the Interested Stockholder
became an Interested Stockholder, and any successor of a Continuing Director,
while such successor is a member of the Board, who is not an Affiliate or
Associate or representative of the Interested Stockholder and is recommended to
succeed the Continuing Director by a majority of Continuing Directors then on
the Board.
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(xi) "Fair Market Value" means (a) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape
for the New York Stock Exchange, or if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or if such
stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the Fair Market Value on the date in question of a share of such
stock as determined by a majority of the Continuing Directors in good faith and
(b) in the case of property other than cash or stock, the Fair Market Value of
such property on the date in question as determined in good faith by a majority
of Continuing Directors then on the Board.
(xii) In the event of any Business Combination in which the
corporation survives, the phrase "consideration other than cash to be received"
as used in paragraphs (b) Second (1) and (2) of this Article shall include the
shares of Common Stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
(d) The Board shall have the power and duty to determine for the purposes
of this Article Thirteenth, on the basis of information known to it after
reasonable inquiry (i) whether a person is an Interested Stockholder; (ii) the
number of shares of Voting Stock beneficially owned by any person; (iii) whether
a person is an Affiliate or Associate of another; (iv) whether the requirements
of paragraph (b) Second of this Article have been met with respect to any
Business Combination; and (v) whether any sale, lease, exchange, mortgage,
pledge, transfer or other disposition or security arrangement, investment,
loan, advance, guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one transaction or
a series of transactions) with or for the benefit of any Interested Stockholder
or any Affiliate or Associate of any Interested Stockholder involving any
assets, securities or commitments of the corporation, any Subsidiary, or any
Interested Stockholder, or any Affiliate or Associate of any Interested
Stockholder constitutes a Substantial Part. Any such determination made in good
faith shall be binding and conclusive on all parties.
(e) The Board of Directors shall not approve, adopt or recommend any
proposal to enter into a Business Combination, or any offer of any person, other
than the corporation, to make a tender or exchange offer for any capital stock
of the corporation, unless and until the Board of Directors shall first
establish a procedure for evaluating, and shall have evaluated, the proposal or
offer, and determined that it would be in compliance with all applicable laws
and in the best interests of the corporation and its stockholders. In
connection with its evaluation, the Board of Directors may seek and obtain the
advice of independent investment counsel, may seek and rely upon an opinion of
legal counsel and other independent advisers, and may test such compliance with
laws in any state or federal court or before any state or federal administrative
agency which may have appropriate jurisdiction. In connection with its
evaluation as to the best
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interests of the corporation and its stockholders, the Board of Directors shall
consider all factors which it deems relevant, or the stockholders might deem
relevant, including without limitation: (i) the adequacy and fairness of the
consideration to be received by the corporation and/or its stockholders
considering the future prospects for the corporation and its business,
historical trading prices of the corporation's capital stock, the price that
might be achieved in a negotiated sale of the corporation as a whole, and
premiums over trading prices which have been proposed or offered with respect to
the securities of other companies in the past in connection with similar offers;
(ii) the business, financial condition and earnings prospects of the acquiring
person or entity and the competence, experience and integrity of the acquiring
person or entity and their or its management, and (iii) the potential social
and economic impact of the offer and its consummation on the communities in
which the corporation and its subsidiaries operate or are located and upon the
corporation, its subsidiaries, and their employees, depositors, and loan and
other customers.
(f) The Board of Directors shall not approve, adopt or recommend any offer
of any person, other than the corporation, to make a tender or exchange offer
for any capital stock of the corporation in which the Fair Market Value per
share of the consideration to be received by one or more stockholders is
substantially more than the Fair Market Value per share of the consideration to
be received by other stockholders holding shares of the same class and series,
or any tender or exchange offer the consummation of which is reasonably likely,
in the good faith determination of the Board of Directors, in one transaction or
a series of transactions, to have that result.
(g) Nothing contained in this Article Thirteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
(h) The fact that any Business Combination complies with the provisions of
paragraph (b) Second of this Article Thirteenth shall not be construed to impose
any fiduciary duty, obligation, or responsibility on the Board of Directors, or
any member thereof, to approve such Business Combination or recommend its
adoption or approval to the stockholders of the corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the Board of
Directors, or any member thereof, with respect to evaluations of or actions and
responses taken with respect to such Business Combination.
(i) Notwithstanding any other provisions of this Restated Certificate of
Incorporation or the By-laws of the corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this Restated Certificate of
Incorporation or the By-laws of the corporation), the affirmative vote of the
holders of at least 80% of the voting power of all the shares of the Voting
Stock, voting together as a single class, shall be required to alter, amend or
adopt any provisions inconsistent with or to repeal this Article Thirteenth;
provided, however, that if such action has been proposed, directly or
indirectly, on behalf of an Interested Stockholder, it must also be approved by
the affirmative vote of a majority of the voting power of all the shares of
Voting Stock held by stockholders other than such Interested Stockholder.
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FOURTEENTH. This Restated Certificate of Incorporation shall be effective
at 12:01 a.m. Eastern Standard Time on December 30, 1995.
IN WITNESS WHEREOF, First Chicago NBD Corporation has caused its corporate
seal to be hereunto affixed and this Restated Certificate of Incorporation to be
signed by M. Eileen Kennedy, its Senior Vice President and Treasurer, and the
same to be attested by Michael Lipsitz, its Assistant Secretary, this 22nd day
of December, 1995.
FIRST CHICAGO NBD CORPORATION
/s/ M. Eileen Kennedy
By: ______________________________
Senior Vice President and Treasurer
(Corporate Seal)
ATTEST:
/s/ Michael Lipsitz
By: _______________________
Assistant Secretary
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Exhibit A
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS,
SERIES B
(Without Par Value)
OF
FIRST CHICAGO NBD CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of FIRST CHICAGO NBD CORPORATION, formerly
known as NBD BANCORP, INC., a Delaware corporation (hereinafter called the
"Corporation"), at a meeting duly convened and held on July 11, 1995, at which a
quorum was present and acting throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of the Corporation, by the Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation") of the Corporation, the Board
hereby provides for and authorizes the issuance of a series of Preferred Stock
of the Corporation to consist of 1,191,000 shares, and hereby fixes the voting
powers, designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series, in addition to those set forth in the Certificate of
Incorporation, as follows:
(a) Designation.
------------
The designation of the series of Preferred Stock created by this resolution
shall be "Preferred Stock with Cumulative and Adjustable Dividends, Series B"
(hereinafter called this "Series") and the number of shares constituting this
Series is 1,191,000. Shares of this Series shall have a stated value of $100
per share. The number of authorized shares of this
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Series may be reduced by further resolution duly adopted by the Board and by the
filing of a certificate pursuant to the provisions of the General Corporation
Law of the State of Delaware stating that such reduction has been so authorized,
but the number of authorized shares of this Series shall not be increased.
(b) Dividend Rate.
--------------
(1) Dividend rates on the shares of this Series shall be for each
quarterly dividend period (hereinafter referred to as a "Quarterly Dividend
Period"; and any Quarterly Dividend Period being hereinafter individually
referred to as a "Dividend Period" and collectively referred to as "Dividend
Periods"), which Quarterly Dividend Periods shall commence on March 1, June 1,
September 1 and December 1 in each year and shall end on and include the day
next preceding the first day of the next Quarterly Dividend Period, at a rate
per annum of the stated value thereof 3.75% below the Applicable Rate (as
defined in paragraph (2) of this Section (b)) in respect of such Quarterly
Dividend Period. Anything to the contrary herein notwithstanding, the dividend
rate for any Quarterly Dividend Period shall in no event be less than 6.00% or,
greater than 12.00% per annum. Such dividends shall be cumulative from December
1, 1995, and shall be payable, when and as declared by the Board, on the last
day of February, May, August and November of each year, commencing the last day
of February, 1996. Each such dividend shall be paid to the holders of record of
shares of this Series as they appear on the stock register of the Corporation on
such record date, not exceeding 30 days preceding the payment date thereof, as
shall be fixed by the Board. Dividends on account of arrears for any past
Dividend Periods may be declared and paid at any time, without reference to any
regular dividend payment date, to holders of record on such date, not exceeding
45 days preceding the payment date thereof, as may be fixed by the Board.
(2) Except as provided below in this paragraph, the "Applicable Rate" for
any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such Dividend Period. In the event that the
Corporation determines in good faith that for any reason one or more of such
rates cannot be determined for any Quarterly Dividend Period, then the
Applicable Rate for such Dividend Period shall be the higher of whichever of
such rates can be so determined. In the event that the Corporation determines
in good faith that none of such rates can be determined for any Quarterly
Dividend Period, then the Applicable Rate in effect for the preceding Dividend
Period shall be continued for such Dividend Period.
(3) Except as provided below in this paragraph, the "Treasury Bill Rate"
for each Quarterly Dividend Period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period as provided below) for three-month U.S. Treasury bills,
as published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the
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last day of February, May, August or November, as the case may be, prior to the
Quarterly Dividend Period for which the dividend rate on this Series is being
determined. In the event that the Federal Reserve Board does not publish such a
weekly per annum market discount rate during such Calendar Period, then the
Treasury Bill Rate for such Dividend Period shall be the arithmetic average of
the two most recent weekly per annum market discount rates (or the one weekly
per annum market discount rate, if only one such rate shall be published during
the relevant Calendar Period as provided below) for three-month U.S. Treasury
bills, as published weekly during such Calendar Period by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Corporation.
In the event that a per annum market discount rate for three-month U.S. Treasury
bills shall not be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency during such Calendar
Period, then the Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if only one such rate shall
be published during the relevant Calendar Period as provided below) for all of
the U.S. Treasury bills then having maturities of not less than 80 nor more than
100 days, as published during such Calendar Period by the Federal Reserve Board
or, if the Federal Reserve Board shall not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason no such U.S. Treasury Bill Rates are published as provided above
during such Calendar Period, then the Treasury Bill Rate for such Dividend
Period shall be the arithmetic average of the per annum market discount rates
based upon the closing bids during such Calendar Period for each of the issues
of marketable noninterest-bearing U.S. Treasury securities with a maturity of
not less than 80 nor more than 100 days from the date of each such quotation, as
quoted daily for each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Corporation by at least
three recognized U.S. Government securities dealers selected by the Corporation.
In the event that the Corporation determines in good faith that for any reason
the Corporation cannot determine the Treasury Bill Rate for any Quarterly
Dividend Period as provided above in this paragraph, the Treasury Bill Rate for
such Dividend Period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for each
of the issues of marketable interest-bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
(4) Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or the
one weekly per annum Ten Year Average Yield, if only one such Yield shall be
published during the relevant Calendar Period as provided below), as published
weekly by the Federal Reserve Board during the Calendar Period immediately prior
to the ten calendar days immediately preceding the last day of February, May,
August or November, as the case may be, prior to the Quarterly Dividend
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Period for which the dividend rate on this Series is being determined. In the
event that the Federal Reserve Board does not publish such a weekly per annum
Ten Year Average Yield during such Calendar Period, then the Ten Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum Ten Year Average Yields (or the one weekly per
annum Ten Year Average Yield, if only one such Yield shall be published during
the relevant Calendar Period as provided below), as published weekly during such
Calendar Period by any Federal Reserve Bank or by any U.S. Government department
or agency selected by the Corporation. In the event that a per annum Ten Year
Average Yield shall not be published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield to maturity, if only
one such yield shall be published during the relevant Calendar Period as
provided below) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) then having maturities
of not less than eight nor more than twelve years, as published during such
Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board
shall not publish such yields, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event that
the Corporation determines in good faith that for any reason the Corporation
cannot determine the Ten Year Constant Maturity Rate for any Quarterly Dividend
Period as provided above in this paragraph, then the Ten Year Constant Maturity
Rate for such Dividend Period shall be the arithmetic average of the per annum
average yields to maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) with a final maturity
date not less than eight nor more than twelve years from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
(5) Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day of
February, May, August or November, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum Twenty Year Average Yield during such Calendar Period, then the Twenty
Year Constant Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly during such Calendar Period by any Federal
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Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that a per annum Twenty Year Average Yield shall not
be published by any Federal Reserve Board or by any Federal Reserve Bank or by
any U.S. Government department or agency during such Calendar Period, then the
Twenty Year Constant Maturity Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per annum average yields to
maturity (or the average yield to maturity, if only one such yield shall be
published during the relevant Calendar Period as provided below) for all of the
actively traded marketable U.S. Treasury fixed interest rate securities (other
than Special Securities) then having maturities of not less than eighteen nor
more than twenty-two years, as published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve Board shall not publish such
yields, by any Federal Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that the Corporation determines
in good faith that for any reason the Corporation cannot determine the Twenty
Year Constant Maturity Rate for any Quarterly Dividend Period as provided above
in this paragraph, then the Twenty Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the per annum average yields to
maturity based upon the closing bids during such Calendar Period for each of the
issues of actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final maturity date not less
than eighteen nor more than twenty-two years from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
(6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
(7) The dividend rate with respect to each Quarterly Dividend Period will
be calculated as promptly as practicable by the Corporation according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new Quarterly Dividend Period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of shares of this Series.
(8) For purposes of this Section (b), the term
(i) "Calendar Period" shall mean 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the option of
the holder, be surrendered at face value in payment of any Federal estate tax or
which provide tax benefits to the holder and are priced to reflect such tax
benefits or which were originally issued at a deep or substantial discount;
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(iii) "Ten Year Average Yield" shall mean the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of ten years); and
(iv) "Twenty Year Average Yield" shall mean the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 20 years).
(9) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to this Series for any period unless full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(10) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided in
paragraph (9) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this Series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of this Series shall have been
paid for all past dividend payment periods.
(11) Dividends payable on each share of this Series for each full
Quarterly Dividend Period shall be computed by dividing the dividend rate for
such Quarterly Dividend Period by four and applying such rate against the stated
value per share of this Series. Dividends payable on this Series for any period
less than a full Quarterly Dividend Period shall be computed on the basis of a
360 day year consisting of 30 day months.
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<PAGE>
(c) Redemption.
-----------
(1) The Corporation, at its option, may redeem shares of this Series, as a
whole or in part, at any time or from time to time, at a redemption price of
$100 per share, plus, in each case, accrued and unpaid dividends thereon to the
date fixed for redemption.
(2) In the event that fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board and the shares to be redeemed shall be determined by lot or pro rata
as may be determined by the Board or by any other method as may be determined by
the Board in its sole discretion to be equitable.
(3) In the event the Corporation shall redeem shares of this Series,
notice of such redemption shall be given by first class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the redemption date, to
each holder of record of the shares to be redeemed, at such holder's address as
the same appears on the stock register of the Corporation. Each such notice
shall state: (i) the redemption date; (ii) the number of shares of this Series
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any shares
of this Series; provided, however, that the foregoing shall not
A-7
<PAGE>
prevent the purchase or acquisition of shares of this Series pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of this Series.
(d) Conversion or Exchange.
-----------------------
The holders of shares of this Series shall not have any rights herein to
convert such shares into or exchange such shares for shares of any other class
or classes or of any other series of any class or classes of capital stock of
the Corporation.
(e) Voting.
-------
The shares of this Series shall not have any voting powers either general
or special, except that
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66-2/3% of all of the shares of this Series at the time outstanding, given in
person or by proxy, either in writing or by a vote at a meeting called for the
purpose at which the holders of shares of this Series shall vote together as a
separate class, shall be necessary for authorizing, effecting or validating the
amendment, alteration, or repeal of any of the provisions of the Certificate of
Incorporation or of any certificate amendatory thereof or supplemental thereto
(including any Certificate of Designation, Preferences and Rights or any similar
document relating to any series of Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66-
2/3% of all of the shares of this Series and all other series of Preferred Stock
ranking on a parity with shares of this Series, either as to dividends or upon
liquidation, at the time outstanding, given in person or by proxy, either in
writing or by a vote at a meeting called for the purpose at which the holders of
shares of this Series and such other series of Preferred Stock shall vote
together as a single class without regard to series, shall be necessary for
authorizing, effecting or validating the creation, authorization or issue of any
shares of any class of stock of the Corporation ranking prior to the shares of
this Series as to dividends or upon liquidation, or the reclassification of any
authorized stock of the Corporation into any such prior shares, or the creation,
authorization or issue of any obligation or security convertible into or
evidencing the right to purchase any such prior shares;
(3) If at any time a default in preference dividends on the Preferred
Stock shall exist, the number of directors constituting the Board of Directors
of the Corporation shall be increased by two, and the holders of the Preferred
Stock of all series shall have the right at an annual or special meeting of
stockholders, voting together as a single class without regard to series, to the
exclusion of the holders of Common Stock, to elect two directors of the
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<PAGE>
Corporation to fill such newly created directorships. Such right shall continue
until there are no dividends in arrears upon the Preferred Stock. Each director
elected by the holders of shares of Preferred Stock (herein called a "Preferred
Director") shall continue to serve as such director for the full term for which
he shall have been elected, notwithstanding that prior to the end of such term a
default in preference dividends shall cease to exist. Any Preferred Director
may be removed by, and shall not be removed except by, the vote of the holders
of record of the outstanding shares of Preferred Stock, voting together as a
single class without regard to series, at a meeting of the stockholders, or of
the holders of shares of Preferred Stock, called for that purpose. So long as a
default in any preference dividends on the Preferred Stock shall exist, (A) any
vacancy in the office of a Preferred Director may be filled (except as provided
in the following clause (B)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (B) in the case of the
removal of any Preferred Director, the vacancy may be filled by the vote of the
holders of the outstanding shares of Preferred Stock, voting together as a
single class without regard to series, at the same meeting at which such removal
shall be voted. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred Director.
Whenever the term of office of the Preferred Directors shall end and a default
in preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes hereof, a "default in preference dividends" on the Preferred
Stock shall be deemed to have occurred whenever the amount of accrued dividends
upon any series of the Preferred Stock shall be equivalent to six full quarter-
yearly dividends or more, and, having so occurred, such default shall be deemed
to exist thereafter until, but only until, all accrued dividends on all shares
of Preferred Stock of each and every series then outstanding shall have been
paid to the end of the last preceding quarterly dividend period.
(f) Liquidation Rights.
-------------------
(1) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made on
the Common Stock or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $100 per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
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<PAGE>
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holders of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends, Series C (Without Par
Value), the Corporation's 8.45% Cumulative Preferred Stock, Series E (Stated
Value $625 per share) or the Corporation's 5 3/4% Cumulative Convertible
Preferred Stock, Series B (Stated Value $5,000 per share), or if the holders of
such stock shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as between the
holders of such stock and the holders of shares of this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the holders of shares of
this Series shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes."
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The foregoing Certificate of Voting Powers, Designation, Preferences and
Relative, Participating, Optional and Other Special Rights and the
Qualifications, Limitations or Restrictions relating to this Series shall be
effective at 12:01 a.m. Eastern Standard Time on December 1, 1995 in accordance
with the provisions of Sections 103 and 151(g) of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, First Chicago NBD Corporation has caused this
certificate to be signed by Verne G. Istock, its Chief Executive Officer, and
the same to be attested by Daniel T. Lis, its Assistant Secretary, this 29th day
of November, 1995.
FIRST CHICAGO NBD CORPORATION
By: \s\ Verne G. Istock
---------------------------------
Title: Chief Executive Officer
ATTEST:
By: \s\ Daniel T. Lis
---------------------------
Assistant Secretary
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<PAGE>
Exhibit B
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
PREFERRED STOCK WITH CUMULATIVE AND ADJUSTABLE DIVIDENDS,
SERIES C
(Without Par Value)
OF
FIRST CHICAGO NBD CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of FIRST CHICAGO NBD CORPORATION, formerly
known as NBD BANCORP, INC., a Delaware corporation (hereinafter called the
"Corporation"), at a meeting duly convened and held on July 11, 1995, at which a
quorum was present and acting throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of the Corporation, by the Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation") of the Corporation, the Board
hereby provides for and authorizes the issuance of a series of Preferred Stock
of the Corporation to consist of 713,800 shares, and hereby fixes the voting
powers, designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series, in addition to those set forth in the Certificate of
Incorporation, as follows:
(a) Designation.
------------
The designation of the series of Preferred Stock created by this resolution
shall be "Preferred Stock with Cumulative and Adjustable Dividends, Series C"
(hereinafter called this "Series") and the number of shares constituting this
Series is 713,800. Shares of this Series shall have a stated value of $100 per
share. The number of authorized shares of this
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<PAGE>
Series may be reduced by further resolution duly adopted by the Board and by the
filing of a certificate pursuant to the provisions of the General Corporation
Law of the State of Delaware stating that such reduction has been so authorized,
but the number of authorized shares of this Series shall not be increased.
(b) Dividend Rate.
--------------
(1) Dividend rates on the shares of this Series shall be for each quarterly
dividend period (hereinafter referred to as a "Quarterly Dividend Period"; and
any Quarterly Dividend Period being hereinafter individually referred to as a
"Dividend Period" and collectively referred to as "Dividend Periods"), which
Quarterly Dividend Periods shall commence on, March 1, June 1, September 1 and
December 1 in each year and shall end on and include the day next preceding the
first day of the next Quarterly Dividend Period, at a rate per annum of the
stated value thereof 1.80% below the Applicable Rate (as defined in paragraph
(2) of this Section (b)) in respect of such Quarterly Dividend Period. Anything
to the contrary herein notwithstanding, the dividend rate for any Quarterly
Dividend Period shall in no event be less than 6.50% or greater than 12.50% per
annum. Such dividends shall be cumulative from December 1, 1995 and shall be
payable, when and as declared by the Board, on the last day of February, May,
August and November of each year, commencing the last day of February, 1996.
Each such dividend shall be paid to the holders of record of shares of this
Series as they appear on the stock register of the Corporation on such record
date, not exceeding 30 days preceding the payment date thereof, as shall be
fixed by the Board. Dividends on account of arrears for any past Dividend
Periods may be declared and paid at any time, without reference to any regular
dividend payment date, to holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the Board.
(2) Except as provided below in this paragraph, the "Applicable Rate" for
any Quarterly Dividend Period shall be the highest of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate or the Twenty Year Constant Maturity Rate
(each as hereinafter defined) for such Dividend Period. In the event that the
Corporation determines in good faith that for any reason one or more of such
rates cannot be determined for any Quarterly Dividend Period, then the
Applicable Rate for such Dividend Period shall be the higher of whichever of
such rates can be so determined. In the event that the Corporation determines
in good faith that none of such rates can be determined for any Quarterly
Dividend Period, then the Applicable Rate in effect for the preceding Dividend
Period shall be continued for such Dividend Period.
(3) Except as provided below in this paragraph, the "Treasury Bill Rate"
for each Quarterly Dividend Period shall be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate shall be published during the
relevant Calendar Period as provided below) for three-month U.S. Treasury bills,
as published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the
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last day of February, May, August or November, as the case may be, prior to the
Quarterly Dividend Period for which the dividend rate on this Series is being
determined. In the event that the Federal Reserve Board does not publish such a
weekly per annum market discount rate during such Calendar Period, then the
Treasury Bill Rate for such Dividend Period shall be the arithmetic average of
the two most recent weekly per annum market discount rates (or the one weekly
per annum market discount rate, if only one such rate shall be published during
the relevant Calendar Period as provided below) for three-month U.S. Treasury
bills, as published weekly during such Calendar Period by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Corporation.
In the event that a per annum market discount rate for three-month U.S. Treasury
bills shall not be published by the Federal Reserve Board or by any Federal
Reserve Bank or by any U.S. Government department or agency during such Calendar
Period, then the Treasury Bill Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if only one such rate shall
be published during the relevant Calendar Period as provided below) for all of
the U.S. Treasury bills then having maturities of not less than 80 nor more than
100 days, as published during such Calendar Period by the Federal Reserve Board
or, if the Federal Reserve Board shall not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that the Corporation determines in good faith that
for any reason no such U.S. Treasury Bill Rates are published as provided above
during such Calendar Period, then the Treasury Bill Rate for such Dividend
Period shall be the arithmetic average of the per annum market discount rates
based upon the closing bids during such Calendar Period for each of the issues
of marketable noninterest-bearing U.S. Treasury securities with a maturity of
not less than 80 nor more than 100 days from the date of each such quotation, as
quoted daily for each business day in New York City (or less frequently if daily
quotations shall not be generally available) to the Corporation by at least
three recognized U.S. Government securities dealers selected by the Corporation.
In the event that the Corporation determines in good faith that for any reason
the Corporation cannot determine the Treasury Bill Rate for any Quarterly
Dividend Period as provided above in this paragraph, the Treasury Bill Rate for
such Dividend Period shall be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for each
of the issues of marketable interest-bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
(4) Except as provided below in this paragraph, the "Ten Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Ten Year Average Yields (or the
one weekly per annum Ten Year Average Yield, if only one such Yield shall be
published during the relevant Calendar Period as provided below), as published
weekly by the Federal Reserve Board during the Calendar Period immediately prior
to the ten calendar days immediately preceding the last day of February, May,
August or November, as the case may be, prior to the Quarterly Dividend
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Period for which the dividend rate on this Series is being determined. In the
event that the Federal Reserve Board does not publish such a weekly per annum
Ten Year Average Yield during such Calendar Period, then the Ten Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
two most recent weekly per annum Ten Year Average Yields (or the one weekly per
annum Ten Year Average Yield, if only one such Yield shall be published during
the relevant Calendar Period as provided below), as published weekly during such
Calendar Period by any Federal Reserve Bank or by any U.S. Government department
or agency selected by the Corporation. In the event that a per annum Ten Year
Average Yield shall not be published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend
Period shall be the arithmetic average of the two most recent weekly per annum
average yields to maturity (or the one weekly average yield to maturity, if only
one such yield shall be published during the relevant Calendar Period as
provided below) for all of the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) then having maturities
of not less than eight nor more than twelve years, as published during such
Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board
shall not publish such yields, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Corporation. In the event that
the Corporation determines in good faith that for any reason the Corporation
cannot determine the Ten Year Constant Maturity Rate for any Quarterly Dividend
Period as provided above in this paragraph, then the Ten Year Constant Maturity
Rate for such Dividend Period shall be the arithmetic average of the per annum
average yields to maturity based upon the closing bids during such Calendar
Period for each of the issues of actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securities) with a final maturity
date not less than eight nor more than twelve years from the date of each such
quotation, as quoted daily for each business day in New York City (or less
frequently if daily quotations shall not be generally available) to the
Corporation by at least three recognized U.S. Government securities dealers
selected by the Corporation.
(5) Except as provided below in this paragraph, the "Twenty Year Constant
Maturity Rate" for each Quarterly Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately preceding the last day of
February, May, August or November, as the case may be, prior to the Quarterly
Dividend Period for which the dividend rate on this Series is being determined.
In the event that the Federal Reserve Board does not publish such a weekly per
annum Twenty Year Average Yield during such Calendar Period, then the Twenty
Year Constant Maturity Rate for such Dividend Period shall be the arithmetic
average of the two most recent weekly per annum Twenty Year Average Yields (or
the one weekly per annum Twenty Year Average Yield, if only one such Yield shall
be published during the relevant Calendar Period as provided below), as
published weekly during such Calendar Period by any Federal
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<PAGE>
Reserve Bank or by any U.S. Government department or agency selected by the
Corporation. In the event that a per annum Twenty Year Average Yield shall not
be published by any Federal Reserve Board or by any Federal Reserve Bank or by
any U.S. Government department or agency during such Calendar Period, then the
Twenty Year Constant Maturity Rate for such Dividend Period shall be the
arithmetic average of the two most recent weekly per annum average yields to
maturity (or the one weekly average yield to maturity, if only one such yield
shall be published during the relevant Calendar Period as provided below) for
all of the actively traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) then having maturities of not less
than eighteen nor more than twenty-two years, as published during such Calendar
Period by the Federal Reserve Board or, if the Federal Reserve Board shall not
publish such yields, by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Corporation. In the event that the
Corporation determines in good faith that for any reason the Corporation cannot
determine the Twenty Year Constant Maturity Rate for any Quarterly Dividend
Period as provided above in this paragraph, then the Twenty Year Constant
Maturity Rate for such Dividend Period shall be the arithmetic average of the
per annum average yields to maturity based upon the closing bids during such
Calendar Period for each of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) with a
final maturity date not less than eighteen nor more than twenty-two years from
the date of each such quotation, as quoted daily for each business day in New
York City (or less frequently if daily quotations shall not be generally
available) to the Corporation by at least three recognized U.S. Government
securities dealers selected by the Corporation.
(6) The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the
Twenty Year Constant Maturity Rate shall each be rounded to the nearest five
hundredths of a percentage point.
(7) The dividend rate with respect to each Quarterly Dividend Period will
be calculated as promptly as practicable by the Corporation according to the
appropriate method described herein. The mathematical accuracy of each such
calculation will be confirmed in writing by independent accountants of
recognized standing. The Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New York City prior to the
commencement of the new Quarterly Dividend Period to which it applies and will
cause notice of such dividend rate to be enclosed with the dividend payment
checks next mailed to the holders of shares of this Series.
(8) For purposes of this Section (b), the term
(i) "Calendar Period" shall mean 14 calendar days;
(ii) "Special Securities" shall mean securities which can, at the option of
the holder, be surrendered at face value in payment of any Federal estate tax or
which provide tax benefits to the holder and are priced to reflect such tax
benefits or which were originally issued at a deep or substantial discount;
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<PAGE>
(iii) "Ten Year Average Yield" shall mean the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of ten years); and
(iv) "Twenty Year Average Yield" shall mean the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 20 years).
(9) No full dividends shall be declared or paid or set apart for payment on
Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to this Series for any period unless full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(10) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided in
paragraph (9) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of this Series shall have been
paid for all past dividend payment periods.
(11) Dividends payable on each share of this Series for each full
Quarterly Dividend Period shall be computed by dividing the dividend rate for
such Quarterly Dividend Period by four and applying such rate against the stated
value per share of this Series. Dividends payable on this Series for any period
less than a full Quarterly Dividend Period shall be computed on the basis of a
360 day year consisting of 30 day months.
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<PAGE>
(c) Redemption.
-----------
(1) The Corporation, at its option, may redeem shares of this Series, as a
whole or in part, at any time or from time to time, at a redemption price of
$100 per share, plus, in each case, accrued and unpaid dividends thereon to the
date fixed for redemption.
(2) In the event that fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board and the shares to be redeemed shall be determined by lot or pro rata
as may be determined by the Board or by any other method as may be determined by
the Board in its sole discretion to be equitable.
(3) In the event the Corporation shall redeem shares of this Series, notice
of such redemption shall be given by first class mail, postage prepaid, mailed
not less than 30 nor more than 60 days prior to the redemption date, to each
holder of record of the shares to be redeemed, at such holder's address as the
same appears on the stock register of the Corporation. Each such notice shall
state: (i) the redemption date; (ii) the number of shares of this Series to be
redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption price aforesaid.
In case fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any shares
of this Series; provided, however, that the foregoing shall not
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<PAGE>
prevent the purchase or acquisition of shares of this Series pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of this Series.
(d) Conversion or Exchange.
-----------------------
The holders of shares of this Series shall not have any rights herein to
convert such shares into or exchange such shares for shares of any other class
or classes or of any other series of any class or classes of capital stock of
the Corporation.
(e) Voting.
-------
The shares of this Series shall not have any voting powers either general
or special, except that
(1) Unless the vote or consent of the holders of a greater number of shares
shall then be required by law, the consent of the holders of at least 66-2/3%
of all of the shares of this Series at the time outstanding, given in person or
by proxy, either in writing or by a vote at a meeting called for the purpose at
which the holders of shares of this Series shall vote together as a separate
class, shall be necessary for authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of the Certificate of
Incorporation or of any certificate amendatory thereof or supplemental thereto
(including any Certificate of Designation, Preferences and Rights or any similar
document relating to any series of Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of shares
shall then be required by law, the consent of the holders of at least 66-2/3% of
all of the shares of this Series and all other series of Preferred Stock ranking
on a parity with shares of this Series, either as to dividends or upon
liquidation, at the time outstanding, given in person or by proxy, either in
writing or by a vote at a meeting called for the purpose at which the holders of
shares of this Series and such other series of Preferred Stock shall vote
together as a single class without regard to series, shall be necessary for
authorizing, effecting or validating the creation, authorization or issue of any
shares of any class of stock of the Corporation ranking prior to the shares of
this Series as to dividends or upon liquidation, or the reclassification of any
authorized stock of the Corporation into any such prior shares, or
the creation, authorization or issue of any obligation or security convertible
into or evidencing the right to purchase any such prior shares;
(3) If at any time a default in preference dividends on the Preferred Stock
shall exist, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two, and the holders of the Preferred Stock of
all series shall have the right at an annual or special meeting of stockholders,
voting together as a single class without regard to series, to the exclusion of
the holders of Common Stock, to elect two directors of the
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<PAGE>
Corporation to fill such newly created directorships. Such right shall continue
until there are no dividends in arrears upon the Preferred Stock. Each director
elected by the holders of shares of Preferred Stock (herein called a "Preferred
Director") shall continue to serve as such director for the full term for which
he shall have been elected, notwithstanding that prior to the end of such term a
default in preference dividends shall cease to exist. Any Preferred Director
may be removed by, and shall not be removed except by, the vote of the holders
of record of the outstanding shares of Preferred Stock, voting together as a
single class without regard to series, at a meeting of the stockholders, or of
the holders of shares of Preferred Stock, called for that purpose. So long as a
default in any preference dividends on the Preferred Stock shall exist, (A) any
vacancy in the office of a Preferred Director may be filled (except as provided
in the following clause (B)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (B) in the case of the
removal of any Preferred Director, the vacancy may be filled by the vote of the
holders of the outstanding shares of Preferred Stock, voting together as a
single class without regard to series, at the same meeting at which such removal
shall be voted. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred Director.
Whenever the term of office of the Preferred Directors shall end and a default
in preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes hereof, a "default in preference dividends" on the Preferred
Stock shall be deemed to have occurred whenever the amount of accrued dividends
upon any series of the Preferred Stock shall be equivalent to six full quarter-
yearly dividends or more, and, having so occurred, such default shall be deemed
to exist thereafter until, but only until, all accrued dividends on all shares
of Preferred Stock of each and every series then outstanding shall have been
paid to the end of the last preceding quarterly dividend period.
(f) Liquidation Rights.
-------------------
(1) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made on
the Common Stock or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $100 per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
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<PAGE>
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of this Series then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) For purposes of this resolution, any stock of any class or classes of
the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holders of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends, Series B (Without Par
Value), the Corporation's 8.45% Cumulative Preferred Stock, Series E (Stated
Value $625 per share), or the Corporation's 5 3/4% Cumulative Convertible
Preferred Stock, Series B (Stated Value $5,000 per share), or if the holders of
such stock shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in proportion to their respective dividend rates or liquidation
prices, without preference or priority, one over the other, as between the
holders of such stock and the holders of shares of this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the holders of shares of
this Series shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes."
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<PAGE>
The foregoing Certificate of Voting Powers, Designation, Preferences and
Relative, Participating, Optional and Other Special Rights and the
Qualifications, Limitations or Restrictions relating to this Series shall be
effective at 12:01 a.m. Eastern Standard Time on December 1, 1995 in accordance
with the provisions of Sections 103 and 151(g) of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, First Chicago NBD Corporation has caused this
certificate to be signed by Verne G. Istock, its Chief Executive Officer, and
the same to be attested by Daniel T. Lis, its Assistant Secretary, this 29th day
of November, 1995.
FIRST CHICAGO NBD CORPORATION
By: \s\ Verne G. Istock
---------------------------------
Title: Chief Executive Officer
ATTEST:
By: \s\ Daniel T. Lis
---------------------------
Assistant Secretary
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<PAGE>
Exhibit C
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
8.45% CUMULATIVE PREFERRED STOCK,
SERIES E
(Stated Value $625 per share)
OF
FIRST CHICAGO NBD CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of FIRST CHICAGO NBD CORPORATION, formerly
known as NBD BANCORP, INC., a Delaware corporation (hereinafter called the
"Corporation"), at a meeting duly convened and held on July 11, 1995, at which a
quorum was present and acting throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of the Corporation, by the Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation") of the Corporation, the Board
hereby provides for and authorizes the issuance of a series of Preferred Stock
of the Corporation to consist of 160,000 shares, and hereby fixes the voting
powers, designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series, in addition to those set forth in the Certificate of
Incorporation, as follows:
(a) Designation.
------------
The designation of the series of Preferred Stock created by this resolution
shall be "8.45% Cumulative Preferred Stock, Series E" (hereinafter called this
"Series") and the number of shares constituting this Series is 160,000. Shares
of this Series shall have a stated value of $625 per share. The number of
authorized shares of this Series may be reduced by
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<PAGE>
further resolution duly adopted by the Board of Directors and by the filing of a
certificate pursuant to the provisions of the General Corporation Law of the
State of Delaware stating that such reduction has been so authorized, but the
number of authorized shares of this Series shall not be increased.
(b) Dividend Rate.
--------------
(1) Shares of this Series shall be entitled to receive dividends at a
fixed annual rate of $52.8125 per share. Such dividends shall be cumulative
from October 1, 1995, and shall be payable, when and as declared by the Board of
Directors, on the first day of January, April, July and October of each year,
commencing the first day of January, 1996. Each such dividend shall be paid to
the holders of record of shares of this Series as they appear on the stock
register of the Corporation on the applicable record date, not exceeding 30 days
preceding the payment date thereof, as shall be fixed by the Board of Directors.
Dividends on account of arrears for any past dividend periods may be declared
and paid at any time, without reference to any regular dividend payment date, to
holders of record on such date as may be fixed by the Board of Directors which
shall not exceed 45 days preceding such dividend payment date thereof.
(2) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with this
Series for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(3) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided in
paragraph (2) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this Series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any
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<PAGE>
moneys paid to or made available for a sinking fund for the redemption of any
shares of any such stock) by the Corporation (except by conversion into or
exchange for stock of the Corporation ranking junior to this Series as to
dividends and upon liquidation) unless, in each case, the full cumulative
dividends on all outstanding shares of this Series shall have been paid for all
past dividend payment periods.
(4) Dividends payable on this Series for any period less than a full
quarterly dividend period shall be computed on the basis of a 360 day year
consisting of twelve 30-day months. The amount of dividends payable on shares
of this Series for each full quarterly dividend period shall be computed by
dividing by four the annual rate per share set forth in Section (b)(1).
(c) Redemption.
-----------
(1) The shares of this Series shall not be redeemable prior to November
16, 1997. On and after November 16, 1997, the Corporation, at its option, and
with the prior consent of the Board of Governors of the Federal Reserve System
may redeem shares of this Series, as a whole or in part, at any time or from
time to time, at a redemption price per share of $625, plus, in each case,
accrued and unpaid dividends thereon to the date fixed for redemption.
(2) In the event that fewer than all the outstanding shares of this Series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Board of Directors or by any other
method as may be determined by the Board of Directors in its sole discretion to
be equitable.
(3) In the event the Corporation shall redeem shares of this Series,
notice of such redemption shall be given by first class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the redemption date, to
each holder of record of the shares to be redeemed, at such holder's address as
the same appears on the stock register of the Corporation. Each such notice
shall state: (i) the redemption date; (ii) the number of shares of this Series
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said
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notice of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors shall so require and the notice
shall so state), such shares shall be redeemed by the Corporation at the
redemption price aforesaid. In case fewer than all the shares represented by
any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any shares
of this Series; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of this Series pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
this Series.
(d) Conversion.
-----------
The holders of shares of this Series shall not have any rights herein to
convert such shares into or exchange such shares for shares of any other class
or classes or of any other series of any class or classes of capital stock of
the Corporation.
(e) Voting.
-------
The shares of this Series shall not have any voting powers either general
or special, except that:
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66 2/3% of all of the shares of this Series at the time outstanding, given in
person or by proxy, either in writing or by a vote at a meeting called for the
purpose at which the holders of shares of this Series shall vote together as a
separate class, shall be necessary for authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of the Certificate of
Incorporation or of any certificate amendatory thereof or supplemental thereto
(including any Certificate of Designation, Preferences and Rights or any similar
document relating to any series of Preferred Stock) which would adversely affect
the preferences, rights, powers or privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66 2/3% of all of the shares of this Series and all other series of Preferred
Stock ranking on a parity with shares of this Series, either as to dividends or
upon liquidation, at the time outstanding, given in person or by
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<PAGE>
proxy, either in writing or by a vote at a meeting called for the purpose at
which the holders of shares of this Series and such other series of Preferred
Stock shall vote together as a single class without regard to series, shall be
necessary for authorizing, effecting or validating the creation, authorization
or issue of any shares of any class of stock of the Corporation ranking prior to
the shares of this Series as to dividends or upon liquidation, or the
reclassification of any authorized stock of the Corporation into any such prior
shares, or the creation, authorization or issue of any obligation or security
convertible into or evidencing the right to purchase any such prior shares;
(3) If at any time a default in preference dividends (as defined below) on
the Preferred Stock shall exist, the number of directors constituting the Board
of Directors of the Corporation shall be increased by two, and the holders of
the Preferred Stock of all series shall have the right at an annual or special
meeting of stockholders voting together as a single class without regard to
series, to the exclusion of the holders of Common Stock, to elect two directors
of the Corporation to fill such newly created directorships. Such right shall
continue until there are no dividends in arrears upon the Preferred Stock. Each
director elected by the holders of shares of Preferred Stock (herein called a
"Preferred Director") shall continue to serve as such director for the full term
for which he shall have been elected, notwithstanding that prior to the end of
such term a default in preference dividends shall cease to exist. Any Preferred
Director may be removed by, and shall not be removed except by, the vote of the
holders of record of the outstanding shares of Preferred Stock, voting together
as a single class without regard to series, at a meeting of the stockholders, or
of the holders of shares of Preferred Stock, called for that purpose. So long
as a default in any preference dividends on the Preferred Stock shall exist, (i)
any vacancy in the office of a Preferred Director may be filled (except as
provided in the following clause (ii)) by an instrument in writing signed by the
remaining Preferred Director and filed with the Corporation and (ii) in the case
of the removal of any Preferred Director, the vacancy may be filled by the vote
of the holders of the outstanding shares of Preferred Stock, voting together as
a single class without regard to series, at the same meeting at which such
removal shall be voted. Each director appointed as aforesaid by the remaining
Preferred Director shall be deemed, for all purposes hereof, to be a Preferred
Director. Whenever the term of office of the Preferred Directors shall end and
a default in preference dividends shall no longer exist, the number of directors
constituting the Board of Directors of the Corporation shall be reduced by two.
For the purposes hereof, a "default in preference dividends" on the Preferred
Stock shall be deemed to have occurred whenever the amount of accrued dividends
upon any series of the Preferred Stock shall be equivalent to six full quarter-
yearly dividends or more, and, having so occurred, such default shall be deemed
to exist thereafter until, but only until, all accrued dividends on all shares
of Preferred Stock of each and every
series then outstanding shall have been paid to the end of the last preceding
quarterly dividend period.
(4) A holder of shares of this Series shall be entitled to one vote per
share of the Series held by him when such holder is permitted to vote pursuant
to the foregoing.
C-5
<PAGE>
(f) Liquidation Rights.
-------------------
(1) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made on
the Common Stock or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $625 per share,
plus a sum equal to all dividends (whether or not earned or declared) on such
shares accrued and unpaid thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation,
the holders of shares of this Series then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to the
holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) Priority.
---------
For purposes of this resolution, any stock of any class or classes of the
Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts
C-6
<PAGE>
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holder of shares of this
Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends, Series B (Without Par
Value), Preferred Stock with Cumulative and Adjustable Dividends, Series C
(Without Par Value) or the Corporation's 5 3/4% Cumulative Convertible Preferred
Stock, Series B (Stated Value $5,000 per share), or if the holders of such stock
shall be entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or if the holders of shares of
this Series shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes.
(h) Sinking or Retirement Fund.
---------------------------
The shares of this Series shall not be entitled to the benefit of a sinking
or retirement fund to be applied to the purchase or redemption of such stock."
C-7
<PAGE>
The foregoing Certificate of Voting Powers, Designation, Preferences and
Relative, Participating, Optional and Other Special Rights and the
Qualifications, Limitations or Restrictions relating to this Series shall be
effective at 12:01 a.m. Eastern Standard Time on December 1, 1995 in accordance
with the provisions of Sections 103 and 151(g) of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, First Chicago NBD Corporation has caused this
certificate to be signed by Verne G. Istock, its Chief Executive Officer, and
the same to be attested by Daniel T. Lis, its Assistant Secretary, this 29th day
of November, 1995.
FIRST CHICAGO NBD CORPORATION
By: \s\ Verne G. Istock
---------------------------------
Title: Chief Executive Officer
ATTEST:
By: \s\ Daniel T. Lis
---------------------------
Assistant Secretary
C-8
<PAGE>
Exhibit D
CERTIFICATE OF THE VOTING POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THEREOF, OF THE
5 3/4% CUMULATIVE CONVERTIBLE PREFERRED STOCK,
SERIES B
(Stated Value $5,000 per share)
OF
FIRST CHICAGO NBD CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of FIRST CHICAGO NBD CORPORATION, formerly
known as NBD BANCORP, INC., a Delaware corporation (hereinafter called the
"Corporation"), at a meeting duly convened and held on July 11, 1995, at which a
quorum was present and acting throughout:
"RESOLVED, that pursuant to authority conferred upon the Board of Directors
(the "Board") of the Corporation by the Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation") of the Corporation, the Board
hereby provides for and authorizes the issuance of a series of Preferred Stock
of the Corporation to consist of 40,000 shares, and hereby fixes the voting
powers, designation, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series, in addition to those set forth in the Certificate of
Incorporation, as follows:
(a) Designation.
------------
The designation of the series of Preferred Stock created by this resolution
shall be "5 3/4% Cumulative Convertible Preferred Stock, Series B" (hereinafter
called this "Series") and the number of shares constituting this Series is
40,000. Shares of this Series shall have a
D-1
<PAGE>
stated value of $5,000 per share. The number of authorized shares of this
Series may be reduced by further resolution duly adopted by the Board of
Directors and by the filing of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such reduction has
been so authorized, but the number of authorized shares of this Series shall not
be increased.
(b) Dividend Rate.
--------------
(1) Shares of this Series shall be entitled to receive dividends at a
fixed annual rate of $287.50 per share. Such dividends shall be cumulative from
October 1, 1995, and shall be payable, when and as declared by the Board of
Directors, on the first day of January, April, July and October of each year,
commencing the first day of January, 1996. Each such dividend shall be paid to
the holders of record of shares of this Series as they appear on the stock
register of the Corporation on the applicable record date, not exceeding 30 days
preceding the payment date thereof, as shall be fixed by the Board of Directors.
Dividends on account of arrears for any past dividend periods may be declared
and paid at any time, without reference to any regular dividend payment date, to
holders of record on such date as may be fixed by the Board of Directors which
shall not exceed 45 days prior to such dividend payment date thereof.
(2) No full dividends shall be declared or paid or set apart for payment
on Preferred Stock of any series ranking, as to dividends, on a parity with this
Series for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on this Series for all dividend
payment periods terminating on or prior to the date of payment of such full
cumulative dividends. When dividends are not paid in full, as aforesaid, upon
the shares of this Series and any other Preferred Stock ranking on a parity as
to dividends with this Series, all dividends declared upon shares of this Series
and any other Preferred Stock ranking on a parity as to dividends with this
Series shall be declared pro rata so that the amount of dividends declared per
share on this Series and such other Preferred Stock shall in all cases bear to
each other the same ratio that accrued dividends per share on the shares of this
Series and such other Preferred Stock bear to each other. Holders of shares of
this Series shall not be entitled to any dividend, whether payable in cash,
property or stocks, in excess of full cumulative dividends, as herein provided,
on this Series. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series which may
be in arrears.
(3) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior to
this Series as to dividends and upon liquidation and other than as provided in
paragraph (2) of this Section (b)) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to or on a parity with this Series as to dividends or
upon liquidation, nor shall any Common Stock or any other stock of the
Corporation ranking junior to or on a parity with this Series as to dividends or
upon
D-2
<PAGE>
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys paid to or made available for a sinking fund for the redemption
of any shares of any such stock) by the Corporation (except by conversion into
or exchange for stock of the Corporation ranking junior to this series as to
dividends and upon liquidation) unless, in each case, the full cumulative
dividends on all outstanding shares of this series shall have been paid for all
past dividend payment periods.
(4) Dividends payable on this Series for any period less than a full
quarterly dividend period shall be computed on the basis of a 360 day year
consisting of twelve 30-day months. The amount of dividends payable on shares
of this Series for each full quarterly dividend period shall be computed by
dividing by four the annual rate per share set forth in Section (b)(1).
(c) Redemption.
-----------
(1) The shares of this series shall not be redeemable prior to April 1,
1997. On and after April 1, 1997, the Corporation, at its option, and with the
prior consent of the Board of Governors of the Federal Reserve System may redeem
shares of this Series, as a whole or in part, at any time or from time to time,
at a redemption price as set forth below, plus, in each case, accrued and unpaid
dividends thereon to the date fixed for redemption:
<TABLE>
<CAPTION>
If Redeemed During the
Twelve-Month Period Redemption Price
Beginning on April 1, per share
---------------------- ----------------
<S> <C>
1997 $5,172.50
1998 5,143.75
1999 5,115.00
2000 5,086.25
2001 5,057.50
2002 5,028.75
2003 and thereafter 5,000.00
</TABLE>
(2) In the event that fewer than all the outstanding shares of this series
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Board of Directors or by any other
method as may be determined by the Board of Directors in its sole discretion to
be equitable.
(3) In the event the Corporation shall redeem shares of this Series, notice
of such redemption shall be given by first class mail, postage prepaid, mailed
not less than 30 nor more than 60 days prior to the redemption date, to each
holder of record of the shares to be redeemed, at such holder's address as the
same appears on the stock register of the Corporation. Each such notice shall
state: (i) the redemption date; (ii) the number of shares
D-3
<PAGE>
of this Series to be redeemed and, if fewer than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the then current Conversion Price (as
defined herein), together with a statement that all conversion rights with
respect to the shares of the Series called for redemption will terminate at the
close of business on the fifth Business Day preceding the redemption date; (v)
the place or places where certificates for such shares are to be surrendered for
payment of the redemption price; and (vi) that dividends on the shares to be
redeemed will cease to accrue on such redemption date.
(4) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price) dividends on the shares of this Series so
called for redemption shall cease to accrue, and said shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as stockholders
of the Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the redemption price
aforesaid. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
(5) Any shares of this Series which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors.
(6) Notwithstanding the foregoing provisions of this Section (c), if any
dividends on this Series are in arrears, no shares of this Series shall be
redeemed unless all outstanding shares of this Series are simultaneously
redeemed, and the Corporation shall not purchase or otherwise acquire any shares
of this Series; provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of this Series (i) upon the conversion of
shares of the Series into shares of Common Stock pursuant to Section (d) hereof
or (ii) pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of this Series.
(d) Conversion.
-----------
(1) (A) Subject to the provisions for adjustment hereinafter set forth,
each share of the Series shall be convertible at the option of the holder
thereof, in whole or part, in the manner hereinafter set forth, into fully paid
and nonassessable shares of Common Stock (as hereinafter defined) at the
conversion price, determined as hereinafter provided, in effect on the date of
conversion, each share of the Series being credited at its stated value;
provided that if any shares of the Series are called for redemption, the
conversion rights pertaining thereto will terminate at the close business on the
fifth Business Day preceding the
D-4
<PAGE>
redemption date, unless the Corporation shall default in providing money for the
payment of the redemption price as provided in Section (c) hereof. The price at
which shares of Common Stock shall be delivered upon conversion of the shares of
the Series (hereinafter referred to as the "Conversion Price") shall be
initially $29.6271 per share of Common Stock. The Conversion Price shall be
adjusted in certain instances as provided in paragraph (2) of this Section (d).
(B) Any holder of shares of the Series desiring to convert such stock into
shares of Common Stock shall surrender the certificate or certificates for the
shares of the Series being converted, duly endorsed or assigned to the
Corporation or in blank, at the principal office of the Corporation for that
purpose, accompanied by a written notice of conversion specifying the number of
shares of the Series to be converted and the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued;
in case such notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issue of shares of Common Stock in such name or names. In case
less than all of the shares of the Series represented by a certificate are to be
converted by a holder, upon such conversion the Corporation shall issue and
deliver or cause to be issued and delivered to such holder a certificate or
certificates for the shares of the Series not so converted. The holders of
shares of the Series at the close of business on a dividend payment record date
shall be entitled to receive the dividend payable on such shares of the Series
(except shares of the Series redeemed on a redemption date between such record
date and the dividend payment date) on the corresponding dividend payment date
notwithstanding the subsequent conversion thereof or the Corporation's default
in payment of the dividend due on such dividend payment date. However, shares
of the Series surrendered for conversion during the period from the close of
business on any dividend payment record date for the Series to the opening of
business on the corresponding dividend payment date (except shares of the Series
called for redemption on a redemption date after the dividend payment record
date and on or before the fifth business day following the dividend payment
date) must be accompanied by payment of an amount equal to the dividend payable
on such shares of the Series on such dividend payment date. A holder of shares
of the Series on a dividend payment record date who (or whose transferee)
converts shares of the Series on a dividend payment date will receive the
dividend payable on such shares of the Series by the Corporation on such date,
and the converting holder need not include payment in the amount of such
dividend upon surrender of shares of the Series for conversion. Except as
provided above, no payment or adjustment will be made on account of accrued or
unpaid dividends upon the conversion of shares of the Series.
(C) As promptly as practicable after the surrender of certificates for
shares of the Series as aforesaid, the Corporation shall issue and shall deliver
at such office to such holder, or on his or her written order, a certificate or
certificates for the number of full shares of Common Stock issuable upon the
conversion of such share in accordance with the provisions of this Section (d),
and any fractional interest in respect of a share of Common Stock arising upon
such conversion shall be promptly settled as provided in paragraph (11) of this
Section (d).
D-5
<PAGE>
(D) Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares of the
Series shall have been surrendered and such notice (and if applicable, payment
of an amount equal to the dividend payable on such shares) received by the
Corporation as aforesaid; the shares of the Series so surrendered for conversion
shall no longer be deemed to be outstanding and all rights with respect to such
shares of the Series shall cease, except the right of the holders thereof to
receive full shares of Common Stock in exchange therefor and payment for any
fractional shares; and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby at such time on such date and such conversion
shall be at the Conversion Price in effect at such time on such date, unless the
stock transfer books of the Corporation shall be closed on that date, in which
event such person or persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day on which
stock transfer books are open, but such conversion shall be at the Conversion
Price in effect on the date upon which such shares shall have been surrendered
and such notice received by the Corporation. All shares of Common Stock
delivered upon conversion of shares of the Series will upon delivery be duly and
validly issued and fully paid and nonassessable.
(2) The Conversion Price shall be adjusted from time to time as follows:
(A) In case the Corporation shall pay or make a dividend or other
distribution on any class of capital stock of the Corporation in shares of
Common Stock, the Conversion Price in effect at the opening of business on the
date following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination, and the denominator shall be the sum of (i) such number
of shares and (ii) the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately after the
opening of business on the date following the date fixed for such determination.
(B) In case the Corporation shall issue rights or warrants to all holders
of its shares of Common Stock entitling them to subscribe for or purchase Common
Stock at a price per share less than the current market price per share
(determined as provided in paragraph (3)) of the Common Stock on the date fixed
for the determination of stockholders entitled to receive such rights or
warrants, the Conversion Price in effect at the opening of business on the date
following the date fixed for such determination shall be reduced by multiplying
such Conversion Price by a fraction of which the numerator shall be the sum of
(i) the number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus (ii) the number of shares of Common
Stock which the aggregate offering price of the total number of shares of Common
Stock so offered for subscription or purchase would purchase at such current
market price, and the denominator shall be the sum of (x) the number of shares
of Common Stock outstanding at the close of business on the date fixed for
D-6
<PAGE>
such determination plus (y) the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the date following the date fixed for such
determination.
(C) In case the Corporation shall, by dividend or otherwise, distribute to
all holders of shares of Common Stock evidences of indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
paragraph (2)(B), any dividend or distribution paid in cash out of the surplus
or retained earnings of the Corporation and any dividend or distribution
referred to in paragraph (2)(A)), the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the current market price per share
(determined as provided in paragraph (3)) of the Common Stock on the date fixed
for such determination, less the then fair market value (as determined by the
Board of Directors of the Corporation, whose determination shall be conclusive)
of the portion of the assets or evidences of indebtedness so distributed
allocable to one share of Common Stock, and the denominator shall be such
current market price per share of Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
distribution. Notwithstanding the foregoing, in the event that the Corporation
shall distribute or shall have distributed any rights or warrants to acquire
capital stock ("Rights") pursuant to this subparagraph (C), the distribution of
separate certificates representing the Rights subsequent to their initial
distribution (whether or not the initial distribution of the Rights shall have
occurred prior to the date of the issuance of the Series) shall be deemed to be
the distribution of the Rights for purposes of this subparagraph (C); provided
that the Corporation may, in lieu of making any adjustment pursuant to this
subparagraph (C) upon a distribution of separate certificates representing the
Rights, make proper provision so that each holder of the Series who converts the
shares of this Series (or any portion hereof) (i) on or before the record date
for such distribution of separate certificates shall be entitled to receive upon
conversion shares of Common Stock issued with Rights and (ii) after such record
date and prior to the expiration, redemption or termination of the Rights shall
be entitled to receive upon conversion, in addition to the shares of Common
Stock issuable upon conversion, the same number of Rights as would a holder of
the number of shares of Common Stock that the shares of such Series so converted
would have entitled the holder thereof to purchase in accordance with the terms
and provisions applicable to the Rights if the shares of such Series were
converted immediately prior to the record date for such distribution. Common
Stock owned by or held for the account of the Corporation or any majority owned
subsidiary shall not be deemed outstanding for the purpose of any adjustment
required under this subparagraph (C).
(D) In case the outstanding shares of Common Stock shall be subdivided into
a greater number of shares, the Conversion Price in effect at the opening of
business on the date following the date upon which such subdivision becomes
effective shall be proportionately reduced, and, conversely, in case outstanding
shares of Common Stock shall
D-7
<PAGE>
each be combined into a smaller number of shares, the Conversion Price in effect
at the opening of business on the date following the date upon which such
combination becomes effective shall be proportionately increased, such reduction
or increase, as the case may be, to become effective immediately after the
opening of business on the day following the date upon which such subdivision or
combination becomes effective.
(E) The reclassification of Common Stock into securities other than Common
Stock (other than any reclassification upon a consolidation or merger to which
paragraph (6) applies) shall be deemed to involve (i) a distribution of such
securities other than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be "the date fixed
for the determination of stockholders entitled to receive such distribution" and
the "date fixed for such determination" within the meaning of paragraph (2)(C)),
and (ii) a subdivision or combination, as the case may be, of the number of
shares of Common Stock outstanding immediately prior to such reclassification
into the number of shares of Common Stock outstanding immediately thereafter
(and the effective date of such reclassification shall be deemed to be "the day
upon which such subdivision becomes effective," or "the day upon which such
combination becomes effective," as the case may be, and "the day upon which such
subdivision or combination becomes effective" within the meaning of paragraph
(2)(D) of this Section (d)).
(3) For the purpose of any computation under paragraphs (2)(B) and 2(C),
the current market price per share of Common Stock on any day shall be deemed to
be the average of the daily Closing Prices (as hereinafter defined) per share of
Common Stock for the 30 consecutive Trading Days (as hereinafter defined) ending
on the fifth Trading Day before the day in question.
(4) Notwithstanding the provisions of paragraph (2) above, no adjustment in
the Conversion Price shall be required unless such adjustment (plus any
adjustments not previously made by reason of this paragraph (4)) would require
an increase or decrease of at least 1% in such price; provided, however, that
any adjustments which by reason of this paragraph (4) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. Notwithstanding any other provisions of this Section (d), the
Corporation shall not be required to make any adjustment of the Conversion Price
for the issuance of any shares of Common Stock pursuant to any plan providing
for the reinvestment of dividends or interest payable on securities of the
Corporation and the investment of additional optional amounts in shares of
Common Stock under such plan. All calculations under this Section (d) shall be
made to the nearest 1/100 of a cent (with $.00005 being rounded upward) or to
the nearest 1/10,000 of a share (with .00005 of a share being rounded upward),
as the case may be.
(5) The Corporation may make such reductions in the Conversion Price, in
addition to those required by this Section (d), as it considers to be advisable
in order to avoid or diminish any income tax to any holder of shares of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe
D-8
<PAGE>
for stock or from any event treated as such for income tax purposes or for any
other reasons. The Corporation shall have the power to resolve any ambiguity or
correct any error in this Section (d) and its actions in so doing shall be final
and conclusive.
(6) In case the Corporation shall effect any capital reorganization of the
Common Stock (other than a subdivision, combination, capital reorganization or
reclassification provided for in paragraph (2)) or shall consolidate, merge or
engage in a statutory share exchange with or into any other corporation (other
than a consolidation, merger or share exchange in which the Corporation is the
surviving corporation and each share of Common Stock outstanding immediately
prior to such consolidation or merger is to remain outstanding immediately after
such consolidation or merger) or shall sell or transfer all or substantially all
its assets to any other corporation, lawful provision shall be made as a part of
the terms of such transaction whereby the holders of shares of the Series shall
receive upon conversion thereof, in lieu of each share of Common Stock which
would have been issuable upon conversion of such stock if converted immediately
prior to the consummation of such transaction, the same kind and amount of stock
(or other securities, cash or property, if any) as may be issuable or
distributable in connection with such transaction with respect to each share of
Common Stock outstanding at the effective time of such transaction subject to
subsequent adjustments for subsequent stock dividends and distributions,
subdivisions or combinations of shares, capital reorganizations,
reclassification, consolidations, mergers or share exchanges, as nearly
equivalent as possible to the adjustments provided for in this Section (d).
(7) Whenever the Conversion Price is adjusted as herein provided:
(A) the Corporation shall compute the adjusted Conversion Price and shall
cause to be prepared a certificate signed by the chief financial or accounting
officer of the Corporation setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is based and
the computation thereof and such certificate shall forthwith be filed with each
transfer agent for the Series; and
(B) a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall, as soon as practicable, be
mailed to the holders of record of outstanding shares of the Series.
(8) In case:
(A) the Corporation shall declare a dividend or other distribution on the
Common Stock other than in cash out of its surplus or retained earnings;
(B) the Corporation shall authorize the granting to the holders of the
Common Stock of rights or warrants entitling them to subscribe for or purchase
any shares of capital stock of any class or of any other rights;
D-9
<PAGE>
(C) of any reclassification of the Common Stock (other than a subdivision
or combination of outstanding shares of Common Stock), or of any consolidation,
merger or share exchange to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or of the sale or
transfer of all or substantially all the assets of the Corporation; or
(D) of the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation;
then the Corporation shall cause to be mailed to each transfer agent for the
Series and to the holders of record of the outstanding shares of the Series, at
least 20 days (or 10 days in any case specified in paragraph (A) or (B) above)
prior to the applicable record or effective date hereinafter specified, a notice
stating (i) the date as of which the holders of record of shares of Common Stock
to be entitled to such dividend, distribution, rights or warrants are to be
determined, or (ii) the date on which such reclassification, consolidation,
merger, share exchange, sale, transfer, liquidation, dissolution or winding up
is expected to become effective and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their shares for
securities or other property, if any, deliverable upon such reclassification,
consolidation, merger, share exchange, sale, transfer, liquidation, dissolution
or winding up. Such notice shall also state whether such transaction will
result in any adjustment in the Conversion Price applicable to the Series and,
if so, shall state what the adjusted Conversion Price will be and when it will
become effective. Neither the failure to give the notice required by this
paragraph (8), nor any defect therein, to any particular holder shall affect the
sufficiency of the notice or the legality or validity of the proceedings
described in paragraphs (8)(A) through (8)(D).
(9) Any shares of this Series which shall at any time have been converted
shall, after such conversion, have the status as authorized but unissued shares
of Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock for the purpose of issuance upon conversion
of shares of the Series, the full number of shares of Common Stock then issuable
upon the conversion of all shares of the Series then outstanding and shall take
all action necessary so that shares of Common Stock so issued will be validly
issued, fully paid and nonassessable; provided, however, that nothing contained
herein shall preclude the Corporation from satisfying its obligations in respect
of the conversion of the shares by delivery of purchased shares of Common Stock
which are held in the treasury of the Corporation.
(10) The Corporation will pay any and all stamp or similar taxes that may
be payable in respect of the issuance or delivery of shares of Common Stock on
conversion of shares of the Series. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of shares of Common Stock in a name other than that
in which the shares of the Series so converted were
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<PAGE>
registered, and no such issuance or delivery shall be made unless and until the
person requesting such issuance has paid to the Corporation the amount of any
such tax or has established to the satisfaction of the Corporation that such tax
has been paid.
(11) No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon the conversion of shares of the Series. If
any such conversion would otherwise require the issuance of such a fractional
share (determined to the extent of four decimal places after taking into account
all shares of the Series being converted into Common Stock by the holder), an
amount equal to such fraction multiplied by the Closing Price per share of
Common Stock for the day of conversion shall be paid to the holder in cash by
the Corporation. Any share of the Series may be converted, at the request of
its holder, in part into Common Stock. If a part of a share of the Series is
converted, then the Corporation will convert such shares into the requested
shares of Common Stock (subject to this paragraph (11)) and issue a fractional
share of the Series evidencing the remaining interest of such holder.
(12) Notwithstanding anything elsewhere contained herein, any funds which
at any time shall have been deposited by the Corporation or on its behalf with
any paying agent for the purpose of paying dividends on, or the redemption price
of, any shares of the Series and which shall not be required for such purposes
because of the conversion of such shares shall after such conversion be repaid
to the Corporation by the paying agent.
(13) In any case in which paragraph (2) of this Section (d) provides that
an adjustment shall become effective on the day next following a record date for
an event, the Corporation may defer until the occurrence of such event (a)
issuance to the holder of any share of this Series converted after such record
date and before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment required by such
event over and above the Common Stock issuable upon such conversion before
giving effect to such adjustment and (B) paying to such holder any amount in
cash in lieu of any fraction pursuant to paragraph (11) of this Section (d).
(14) If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one paragraph of this Section (d), only
one adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value.
(15) If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section (d), that in the opinion of the
Board of Directors would materially adversely affect the conversion rights of
the holders of the shares of the Series, the Conversion Price for the Series may
be adjusted, to the extent permitted by law, in such manner, if any, and at such
time, as the Board of Directors may determine to be equitable in the
circumstances.
D-11
<PAGE>
(16) The certificate of any independent firm of public accountants of
recognized standing selected by the Board shall be presumptive evidence of the
correctness of any computation made under this Section (d).
(17) For purposes of this resolution, the following terms shall have the
following meanings:
(i) "Closing Price" shall mean the last sale price as shown on the New York
Stock Exchange Composite Transactions Tape, or in case no such sale takes place
on such day, the average of the closing bid and asked prices on the New York
Stock Exchange, or, if the Common Stock is not listed or admitted to trading on
such Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or, if it is not listed or admitted to
trading on any national securities exchange, on the National Association of
Securities Dealers Automated Quotations National Market System, or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted on such National Market System, the average of the closing
bid and asked prices as furnished by any New York Stock Exchange member firm
selected from time to time by the Board of Directors for such purposes (other
than the Corporation or a subsidiary thereof).
(ii) "Common Stock" shall mean the Corporation's Common Stock, $1.00 par
value per share, as the same exists at the date of filing of the Certificate of
Designation relating to this Series or any other class of stock resulting from
successive changes or reclassification of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value.
(iii) "Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, a day which is a
Business Day.
(iv) "Business Day" shall mean a day which is not a Saturday, Sunday or
other day on which commercial banking institutions in the City of Chicago,
Illinois or The City of New York, New York are authorized or obligated by law or
executive order to close.
(e) Voting.
-------
The shares of this Series shall not have any voting powers either general
or special, except that:
(1) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66
2/3% of all of the shares of this Series at the time outstanding, given in
person or by proxy, either in writing or by a vote at
D-12
<PAGE>
a meeting called for the purpose at which the holders of shares of this Series
shall vote together as a separate class, shall be necessary for authorizing,
effecting or validating the amendment, alteration or repeal of any of the
provisions of the Certificate of Incorporation or of any certificate amendatory
thereof or supplemental thereto (including any Certificate of Designation,
Preferences and Rights or any similar document relating to any series of
Preferred Stock) which would adversely affect the preferences, rights, powers or
privileges of this Series;
(2) Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least 66
2/3% of all of the shares of this Series and all other series of Preferred Stock
ranking on a parity with shares of this Series, either as to dividends or upon
liquidation, at the time outstanding, given in person or by proxy, either in
writing or by a vote at a meeting called for the purpose at which the holders of
shares of this Series and such other series of Preferred Stock shall vote
together as a single class without regard to series, shall be necessary for
authorizing, effecting or validating the creation, authorization or issue of any
shares of any class of stock of the Corporation ranking prior to the shares of
this Series as to dividends or upon liquidation, or the reclassification of any
authorized stock of the Corporation into any such prior shares, or the creation,
authorization or issue of any obligation or security convertible into or
evidencing the right to purchase any such prior shares;
(3) If at any time a default in preference dividends (as defined below) on
the Preferred Stock shall exist, the number of directors constituting the Board
of Directors of the Corporation shall be increased by two, and the holders of
the Preferred Stock of all series shall have the right at an annual or special
meeting of stockholders, voting together as a single class without regard to
series, to the exclusion of the holders of Common Stock, to elect two directors
of the Corporation to fill such newly created directorships. Such right shall
continue until there are no dividends in arrears upon the Preferred Stock. Each
director elected by the holders of shares of Preferred Stock (herein called a
"Preferred Director") shall continue to serve as such director for the full term
for which he shall have been elected, notwithstanding that prior to the end of
such term a default in preference dividends shall cease to exist. Any Preferred
Director may be removed by, and shall not be removed except by, the vote of the
holders of record of the outstanding shares of Preferred Stock, voting together
as a single class without regard to series, at a meeting of the stockholders, or
of the holders of shares of Preferred Stock, called for that purpose. So long as
a default in any preference dividends on the Preferred Stock shall exist, (i)
any vacancy in the office of a Preferred Director may be filled (except as
provided in the following clause (ii)) by an instrument in writing signed by the
Preferred Director and filed with the Corporation and (ii) in the case of the
removal of any Preferred Director, the vacancy may be filled by the vote of
holders of the outstanding shares of Preferred Stock, voting together as a
single class without regard to series, at the same meeting at which such removal
shall be voted. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred Director.
Whenever the term of office of the Preferred Directors shall end and a default
in preference dividends shall no longer exist, the number of
D-13
<PAGE>
directors constituting the Board of Directors of the Corporation shall be
reduced by two. For the purposes hereof, a "default in preference dividends" on
the Preferred Stock shall be deemed to have occurred whenever the amount of
accrued dividends upon any series of the Preferred stock shall be equivalent to
six full quarter-yearly dividends or more, and, having so occurred, such default
shall be deemed to exist thereafter until, but only until, all accrued dividends
on all shares of Preferred Stock of each and every series then outstanding shall
have been paid to the end of the last preceding quarterly dividend period.
(4) A holder of shares of this Series shall be entitled to one vote per
share of the Series held by him when such holder is permitted to vote pursuant
to the foregoing.
(f) Liquidation Rights.
-------------------
(1) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of the shares of this Series shall be entitled to receive out of the
assets of the Corporation, before any payment or distribution shall be made on
the Common Stock or on any other class of stock ranking junior to the Preferred
Stock upon liquidation, the amount of $5,000 per share, plus a sum equal to all
dividends (whether or not earned or declared) on such shares accrued and unpaid
thereon to the date of final distribution.
(2) Neither the sale of all or substantially all the property or business
of the Corporation, nor the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (f).
(3) After the payment to the holders of the shares of this Series of the
full preferential amounts provided for in this Section (f), the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to paragraph (1) of this Section (f), no such distribution shall be
made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of this Series upon such dissolution,
liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of this Series, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(5) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of this Series then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders all amounts to which such holders are entitled pursuant to
paragraph (1) of this Section (f) before any payment shall be made to
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<PAGE>
the holders of any class of capital stock of the Corporation ranking junior upon
liquidation to this Series.
(g) Priority. For purposes of this resolution, any stock of any class or
classes of the Corporation shall be deemed to rank:
(1) prior to the shares of this Series, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holder of shares of this Series;
(2) on a parity with shares of this Series, either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share or sinking fund provisions, if any,
be different from those of this Series, if such stock is the Corporation's
Preferred Stock with Cumulative and Adjustable Dividends, Series B (Without Par
Value), Preferred Stock with Cumulative and Adjustable Dividends, Series C
(Without Par Value), or the Corporation's 8.45% Cumulative Preferred Stock,
Series E (Stated Value $625 per share), or if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of this Series; and
(3) junior to shares of this Series, either as to dividends or upon
liquidation, if such class shall be Common Stock or the holders of shares of
this Series shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes.
(h) Sinking or Retirement Fund.
---------------------------
The shares of this Series shall not be entitled to the benefit of a sinking
or retirement fund to be applied to the purchase or redemption of such stock."
D-15
<PAGE>
The foregoing Certificate of Voting Powers, Designation, Preferences and
Relative, Participating, Optional and Other Special Rights and the
Qualifications, Limitations or Restrictions relating to this Series shall be
effective at 12:01 a.m. Eastern Standard Time on December 1, 1995 in accordance
with the provisions of Sections 103 and 151(g) of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, First Chicago NBD Corporation has caused this
certificate to be signed by Verne G. Istock, its Chief Executive Officer, and
the same to be attested by Daniel T. Lis, its Assistant Secretary, this 29th day
of November, 1995.
FIRST CHICAGO NBD CORPORATION
By: \s\ Verne G. Istock
---------------------------------
Title: Chief Executive Officer
ATTEST:
By: \s\ Daniel T. Lis
---------------------------
Assistant Secretary
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<PAGE>
EXHIBIT 3(B).
BY-LAWS
As Adopted December 29, 1972
(As last amended effective March 8, 1996)
First Chicago NBD Corporation
(A Delaware Corporation)
- --------------------------------------------------------------------------------
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the Corporation is
located at 1209 Orange Street, Wilmington, Delaware 19801. The Corporation may,
by resolution of the Board of Directors, change the location to any other place
in Delaware.
Section 2. Other offices. The Corporation may have such other offices, within
or without the State of Delaware, as the Board of Directors may from time to
time establish.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. The annual meeting of the stockholders for the
election of directors and for the transaction of any other business as may
properly come before the meeting shall be held on the second Friday in May of
each year or at such other date as from time to time may be designated by the
Board of Directors.
Section 2. Special Meetings. A special meeting of the stockholders may be
called at any time only by the Board of Directors pursuant to a resolution
approved by a majority of the Board of Directors.
Section 3. Place of Meetings. The Board of Directors may designate any place,
either within or without the State of Delaware, as the place of meeting for any
annual meeting or for any special meeting of stockholders.
Section 4. Notice of Meetings. Written notice stating the place, date and hour
of the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by or under the direction of the
Secretary, to each stockholder of record entitled to vote at such meeting.
Except as otherwise required by statute, the written notice shall be given not
less than ten nor more than sixty days before the date of the meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid,
<PAGE>
directed to the stockholder at his address as it appears on the records of the
Corporation. Attendance of a person at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
Section 5. Adjourned Meetings. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 6. Voting Lists. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders of record entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder of record
who is present.
Section 7. Quorum. Except as otherwise required by statute, the presence at
any meeting, in person or by proxy, of the holders of record of a majority of
the shares then issued and outstanding and entitled to vote shall be necessary
and sufficient to constitute a quorum for the transaction of business. In the
absence of a quorum, the stockholders of record entitled to vote, present in
person or by proxy, may adjourn the meeting from time to time until a quorum is
present.
Section 8. Proxies. Each stockholder of record entitled to vote at a meeting
of stockholders may authorize another person or persons (but no more than three)
to act for him by proxy, but no such proxy shall be voted or acted upon other
than at the meeting specified in the proxy or any adjournment of such meeting.
Section 9. Voting Rights. Except as otherwise provided by statute or by the
Certificate of Incorporation, and subject to the provisions of Article VII of
these By-Laws, each stockholder of record shall at every meeting of the
stockholders be entitled to one vote for each share of the capital stock having
voting power held by such stockholder.
Section 10. Required Vote. Except as otherwise required by statute or by the
Certificate of Incorporation, the holders of record of a majority of the capital
stock having voting power, present in person or by proxy, shall decide any
question brought before a meeting of the stockholders at which a quorum is
present.
Section 11. Elections of Directors. Elections of directors need not be by
written ballot.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business of the Corporation shall be managed by
the Board of Directors, except as otherwise provided by statute or by the
Certificate of Incorporation.
Section 2. Number. The number of the Directors of the Corporation shall be
fixed from time to time by resolution adopted by the affirmative vote of a
majority of the entire Board of Directors of the Corporation, except that the
minimum number of directors shall be fixed at no less than 15 and the maximum
number of directors shall be fixed at no more than 30. The directors shall be
divided into three classes, designated Class I, Class II and Class III.
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<PAGE>
Each class shall consist, as nearly equal in number as possible, of one-third of
the total number of directors constituting the entire Board of Directors. At the
1986 annual meeting of stockholders, Class I directors shall be elected for a
one-year term, Class II directors for a two-year term and Class III directors
for a three-year term. At each succeeding annual meeting of stockholders
beginning in 1987, successors of the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible.
Section 3. Election and Term of Office. Except as otherwise provided in these
By-laws, directors shall be elected at the annual meeting of stockholders. Newly
created directorships resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum, or by a sole remaining director. Any director of any class chosen to
fill a vacancy in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case will a decrease in the
number of directors shorten the term of any incumbent director. A director shall
hold office until the next annual meeting for the year in which his or her term
expires and until such director's successor shall have been elected and
qualified.
Section 4. First Meetings. The first meeting of each newly elected Board of
Directors shall be held without notice immediately after the annual meeting of
the stockholders for the purpose of the organization of the Board, the election
of officers, and the transaction of such other business as may properly come
before the meeting.
Section 5. Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such times and at such places, within or without the
State of Delaware, as shall from time to time be determined by the Board.
Section 6. Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board, the President, any Director who is a Vice
Chairman of the Board or the Secretary, and shall be called by the Secretary on
the written request of three directors. Such meetings shall be held at such
times and at such places, within or without the State of Delaware, as shall be
determined by the officer calling or by the directors requesting the meeting.
Notice of the time and place thereof shall be mailed to each director, addressed
to him at his address as it appears on the records of the Corporation, at least
two days before the day on which the meeting is to be held, or sent to him at
such place by telegraph, radio or cable, or telephoned or delivered to him
personally, not later than the day before the day on which the meeting is to be
held. Such notice need not state the purposes of the meeting. Any or all
directors may waive notice of any meeting, either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except when the director attends for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
Section 7. Quorum, Required Vote, and Adjournment. The presence, at any
meeting, of a majority of the whole Board shall be necessary and sufficient to
constitute a quorum for the transaction of business. Except as otherwise
required by statute or by the Certificate of Incorporation, the vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum, a
majority of the directors present at the time and place of any meeting may
adjourn such meeting from time to time until a quorum be present.
Section 8. Consent of Directors in Lieu of Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting if all the members of the Board or
committee consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or Committee.
Section 9. Participation - Meeting by Telephone. A member of the Board or any
committee thereof may participate in a meeting of such Board or committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this subsection shall constitute presence
in person at such meeting.
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<PAGE>
Section 10. Compensation. The Board of Directors may authorize the payment to
directors of a fixed fee and expenses for attendance at meetings of the board or
any committee thereof, and annual fees for service as directors. No such payment
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor.
ARTICLE IV
EXECUTIVE COMMITTEE
Section 1. Number and Qualifications. There shall be a committee composed of
not less than four (4) members to be known as the Executive Committee which
shall consist of all the officer-directors of the Corporation and two (2) other
directors appointed as shall be provided by the Board of Directors. Provision
shall be made by the Board of Directors for the appointment of alternates from
among the directors, to act for members in the event of their absence or
disability.
Section 2. Presiding Officer. The Chairman of the Board shall act as presiding
officer of any meeting of the Executive Committee. In the event of the absence
or disability of the Chairman of the Board, the President shall act as presiding
officer. In the event of the absence or disability of the Chairman of the Board
and the President, another officer-director, if present, shall act as the
presiding officer. If no officer-director is present, the other members present
at the meeting shall elect one of their number as presiding officer.
Section 3. Quorum. Any two (2) persons each of whom is a member or alternate
member of the Executive Committee, of whom not less than one (1) shall be non-
officer directors, shall constitute a quorum for the transaction of business at
any meeting of the Executive Committee.
Section 4. Duties. The Executive Committee shall function from day to day or
such other short intervals as shall be found requisite and expedient in carrying
on of the business and affairs of the Corporation, and between meetings of the
Board of Directors, said Committee shall have and may exercise, so far as may be
permitted by law, all power and authority of the Board of Directors (including
the right to authorize the seal of the Corporation to be affixed to all
instruments on which the same may be required or appropriate). A record of the
meetings of the Committee shall be kept, which shall be accessible to inspection
by the Directors at all times, and the Committee shall, at each regular meeting
of the Board of Directors and at such other times as the Board of Directors may
request, submit in writing a full report of its actions. The Board of Directors
shall approve or disapprove the report of the Executive Committee, such action
to be recorded in the minutes of the meeting; provided, however, that no rights
of third parties shall be affected by any action of the Board of Directors, if
such rights have attached by virtue of action of the Executive Committee.
ARTICLE V
OTHER COMMITTEES
The Board of Directors may, by resolution, designate one or more other regular
and special committees, consisting of directors, officers or other persons which
shall have and may exercise such powers and functions as the Board may prescribe
in the management of the business and affairs of the Corporation.
Such committees shall keep regular minutes of their proceedings and report the
same to the Board of Directors when required.
The Board of Directors may from time to time suspend, alter, continue or
terminate any such committee or the powers and functions thereof.
-4-
<PAGE>
ARTICLE VI
OFFICERS
Section 1. Number, Election, Term of Office and Qualification. The number,
titles and duties of the officers shall be determined by the Board of Directors
from time to time, subject to the provisions of applicable law, the Certificate
of Incorporation, and these By-Laws. Each officer shall be elected by the Board
of Directors and shall hold office until such officer's successor is elected and
qualified or until such officer's death, resignation or removal. The election of
officers shall be held annually at the first meeting of the Board of Directors
held after each annual meeting of stockholders, subject to the power of the
Board of Directors to designate any office at any time and elect any person
thereto. The officers shall include a Chairman of the Board, a President, and
may include one or more Vice Chairman of the Board, one or more Vice Presidents,
a Secretary, a Treasurer, and such other officers as the Board of Directors may
determine. The same person may hold any two or more offices, and in any such
case, these By-Laws shall be construed and understood accordingly; provided that
the same person may not hold the offices of Chairman of the Board and Secretary
or President and Secretary. No officer other than the Chairman of the Board,
President or Vice Chairman of the Board need be a director of the Corporation.
Section 2. Removal. Any officer or agent may be removed at any time, with or
without cause, by the Board of Directors.
Section 3. Vacancies. Any vacancy occurring in any office of the Corporation
may be filled for the unexpired term in the manner prescribed by these By-Laws
for the regular election to such office.
Section 4. Chief Executive Officer. The Board of Directors shall designate one
of the officers to be the Chief Executive Officer. Subject to the direction and
under the supervision of the Board of Directors, the Chief Executive Officer
shall have general charge of the business, affairs and property of the
Corporation, and control over its officers, agents and employees.
Section 5. The Secretary. The Secretary shall keep the minutes of the
proceedings of the stockholders and of the Board of Directors in one or more
books to be kept for that purpose. He shall have custody of the seal of the
Corporation and shall have authority to cause such seal to be affixed to, or
impressed or otherwise reproduced upon, all documents the execution and delivery
of which on behalf of the Corporation shall have been duly authorized. He shall
in general, perform all duties and have all powers incident to the office of
Secretary and shall perform such other duties and have such other powers as may
from time to time be assigned to him by these By-Laws, by the Board of Directors
or by the Chief Executive Officer.
Section 6. Treasurer. The Treasurer shall have custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation. He shall cause all moneys
and other valuable effects to be deposited in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
He shall cause the funds of the Corporation to be disbursed when such
disbursements have been duly authorized, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board of
Directors, whenever requested, an account of all his transactions as Treasurer
and of the financial condition of the Corporation. He shall, in general, perform
all duties and have all powers incident to the office of Treasurer and shall
perform such other duties and have such other powers as may from time to time be
assigned to him by these By-Laws, by the Board of Directors or by the Chief
Executive Officer.
ARTICLE VII
FIXING RECORD DATE
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock,
-5-
<PAGE>
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty days nor less than
ten days before the date of such meeting, nor more than sixty days prior to any
other action. If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VIII
EXECUTION OF INSTRUMENTS
Section 1. Execution of Instruments Generally. All documents, instruments or
writings of any nature shall be signed, executed, verified, acknowledged and
delivered by such officer or officers or such agent or agents of the Corporation
and in such manner as the Board of Directors from time to time may determine.
Section 2. Checks, Drafts, Etc. All notes, drafts, acceptances, checks,
endorsements, and all evidence of indebtedness of the Corporation whatsoever,
shall be signed by such officer or officers or such agent or agents of the
Corporation and in such manner as the Board of Directors from time to time may
determine. Endorsements for deposit to the credit of the Corporation in any of
its duly authorized depositories shall be made in such manner as the Board of
Directors from time to time may determine.
Section 3. Proxies and Consents. Proxies to vote and written consent with
respect to shares of stock of other corporations owned by or standing in the
name of the Corporation may be executed and delivered from time to time on
behalf of the Corporation by two officers, one of whom shall be the Chairman,
President, Vice Chairman, or a Vice President and the other of whom shall be the
Secretary or an Assistant Secretary of the Corporation; or by any other person
or persons duly authorized by the Board of Directors.
ARTICLE IX
CAPITAL STOCK
Section 1. Stock Certificates. The interest of every holder of stock in the
Corporation shall be evidenced by a certificate or certificates signed by, or in
the name of the Corporation by the Chairman, President, Vice Chairman or a Vice
President, and by the Secretary or an Assistant Secretary of the Corporation
certifying the number of shares owned by him in the Corporation and in such form
not inconsistent with the Certificate of Incorporation or applicable law as the
Board of Directors may from time to time prescribe. If such certificate is
countersigned (1) by a transfer agent, whether or not a subsidiary of the
Corporation, other than the Corporation or its employee, or (2) by a registrar,
whether or not a subsidiary of the Corporation, other than the Corporation or
its employee, the signatures of the officers of the Corporation may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer at the date of issue.
Section 2. Transfer of Stock. Shares of stock of the Corporation shall only be
transferred on the books of the Corporation by the holder of record thereof or
by his attorney duly authorized in writing, upon surrender to the Corporation of
the certificates for such shares endorsed by the appropriate person or persons,
with such evidence of the authenticity of such endorsement, transfer,
authorization and other matters as the Corporation may reasonably require, and
accompanied by all necessary stock transfer tax stamps. In that event it shall
be the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction on its books.
-6-
<PAGE>
Section 3. Rights of Corporation with Respect to Registered Owners. Prior to
the surrender to the Corporation of the certificates for shares of stock with a
request to record the transfer of such shares, the Corporation may treat the
registered owner as the person entitled to receive dividends, to vote, to
receive notifications, and otherwise to exercise all the rights and powers of an
owner.
Section 4. Transfer Agents and Registrars. The Board of Directors may make
such rules and regulations as it may deem expedient concerning the issuance and
transfer of certificates for shares of the stock of the Corporation and may
appoint transfer agents or registrars or both, and may require all certificates
of stock to bear the signature of either or both. Nothing herein shall be
construed to prohibit the Corporation or any subsidiary of it from acting as its
own transfer agent or registrar at any of its offices.
Section 5. Lost, Destroyed and Stolen Certificates. Where the owner of a
certificate for shares claims that such certificate has been lost, destroyed or
wrongfully taken, the Corporation shall issue a new certificate in place of the
original certificate if the owner satisfies such reasonable requirements,
including evidence of such loss, destruction, or wrongful taking, as may be
imposed by the Corporation, including but without limitation, the delivery to
the Corporation of an indemnity bond satisfactory to it.
ARTICLE X
SEAL
The corporate seal, subject to alteration by the Board of Directors, shall be in
the form of a circle and shall bear the name of the Corporation and the year of
its incorporation and shall indicate its formation under the laws of the State
of Delaware. Such seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year except as
otherwise provided by the Board of Directors.
ARTICLE XII
AMENDMENTS
The By-Laws of the Corporation may be amended or repealed, or new By-Laws not
inconsistent with law or any provision of the Certificate of Incorporation, as
amended, may be made and adopted by a majority vote of the whole Board of
Directors at any regular or special meeting of the Board.
-7-
<PAGE>
EXHIBIT 10(D).
THE FIRST CHICAGO NBD CORPORATION
PLAN FOR DEFERRING THE
PAYMENT OF DIRECTORS' FEES
AS AMENDED AS OF DECEMBER 1, 1995
SECTION I
PURPOSE
-------
The purpose of the First Chicago NBD Corporation Plan for Deferring the Payment
of Directors' Fees (the "Plan") is to enable each Director to defer all or a
portion of his or her fees for future service as a member of the Board of
Directors of First Chicago NBD Corporation (the "Corporation") or as a member of
the Board of Directors of any affiliate or subsidiary of the Corporation.
SECTION II
ELIGIBILITY
-----------
Any Director of the Corporation or Advisory Member of the Board of Directors of
the Corporation (herein included in the term Director) who is not an employee of
the Corporation, or any affiliate or subsidiary thereof, shall be eligible to
participate in the Plan. In addition, any member of the Board of Directors of
any affiliate or subsidiary of the Corporation who is not an employee of the
Corporation, or any subsidiary or affiliate thereof, shall also be eligible,
provided the Corporation's Board authorizes such eligibility.
SECTION III
ELECTION, MODIFICATION, AND TERMINATION PROCEDURES
--------------------------------------------------
Any Director wishing to participate in the Plan must file with the Secretary of
the applicable Board of Directors, in the calendar year preceding the year in
which the deferred Director's fees are to be earned, a written Notice of
Election to Defer the Payment of Director's Fees in the form attached as Exhibit
"A" ("Notice of Election") to defer payment of all or a portion of his or her
<PAGE>
Director's fees for that year. The Director must file a Notice of Election on an
annual basis for each year that the Director elects to defer fees, provided that
the Notice of Election is filed in the calendar year preceding the year in which
the deferred fees are to be earned. An effective election with respect to
Director's fees that have been deferred under the terms of this Plan and fees
that have already been earned may not be modified or revoked.
A new Director who first becomes eligible under the Plan may elect to defer fees
that have not been earned in the first year of being a Director by filing a
Notice of Election within thirty (30) days after becoming eligible to enter the
Plan.
Any election made prior to the effective date of this Plan as modified shall not
apply to any fees earned after such effective date except that the payment
election shall remain the same. Election may be made by December of the year
preceding the effective date as stated in Section XII of this Plan.
SECTION IV
ESTABLISHMENT AND ADMINISTRATION OF
DEFERRED DIRECTOR'S FEE ACCOUNT
-----------------------------------
The amount of any Director's fees deferred in accordance with an election shall
be credited to a deferred Director's fee account maintained by the Corporation.
Such account shall remain a part of the general funds of the Corporation and
shall be subject to the claims of its general creditors. The Plan is intended
to be "unfunded" for tax purposes and for purposes of Title I of ERISA. Nothing
contained in the Plan shall be deemed to create a trust or fund of any kind or
create any fiduciary relationship, and the obligation to make payment of
deferred fees shall be and remain an unsecured, unfunded general obligation of
the Corporation.
A Director shall elect by filing a Notice of Investment Election in the form
attached as Exhibit "B" ("Notice of Investment Election"), at the same time as
the election to defer fees is made, to have earnings or losses on the deferred
<PAGE>
fees credited to the Director's deferred fee account consistent with the
earnings or losses of any of the investment options then being offered to
participants in the NBD Investment Plus Plan or any successor plan (with the
exception of the FCN Fund or any other investment option which invests in equity
securities, including derivative securities, of the Corporation). The Director
may also elect, at the time of the Director's annual deferral election (or if
none, prior to the calendar year in which such earnings are to be credited) to
change the investment options for all or a portion of the existing balance in
the Director's deferred fee account. A Director may also elect quarterly, using
the Notice of Investment Election, effective as of April 1, July 1, or October
1, as the case may be, to change the options for all or a portion of the
deferred fees to be credited to the Director's deferred fee account and the
existing balance in the deferred fee account. The quarterly election should be
made at least fifteen (15) days prior to the effective date of the election. The
Director's investment election is to be used only for the purpose of valuing the
Director's deferred fee account; the Corporation shall be under no obligation to
invest any funds in accordance with the Director's elections.
As of the last day of each month, the deferred fee account balance of each
Director who has filed an effective deferral election shall be adjusted as
follows:
(a) The account balance shall first be charged with any distributions
made during the month.
(b) The account balance shall then be credited with an amount equivalent to
the rate of return for that month. Such amount shall be computed by
multiplying the account balance after the adjustment provided for in
Subsection (a) by a rate equal to the rate of return for that month
earned by the applicable investment option elected by the Director.
<PAGE>
(c) Finally, the account balance shall be credited with the amount, if any,
of Director's fees deferred during that month.
A separate record of deferred Director's fees and applicable earnings or losses
shall be maintained by the Corporation for each participant in the Plan. The
computations of the Corporation with respect to the amount equivalent to the
applicable rate of return shall be conclusive and binding in the absence of bad
faith.
SECTION V
PAYMENT OF DEFERRED DIRECTOR'S FEES
-----------------------------------
Deferred fees shall be paid to a Director or, in the event of death, to his or
her designated beneficiary in accordance with the Notice of Election and
Beneficiary Designation (as defined below) that have been filed with the
Secretary of the applicable Board of Directors. If a Director elects to receive
payment of his or her deferred fees in installments rather than in a lump sum,
the payment period shall not exceed ten years following the payment commencement
date. The amount of any installment payment for any month shall be determined by
multiplying the account balance of the Director's unpaid deferred fees as of the
date of payment by a fraction, the numerator of which is one and the denominator
of which is the number of remaining unpaid installments. Such balance shall be
appropriately reduced to reflect the installment payments made hereunder.
SECTION VI
WHEN PAYMENT OF DEFERRED DIRECTOR'S FEES COMMENCES
--------------------------------------------------
The payment in a lump sum or installments of amounts deferred pursuant to an
election under the Plan shall commence on January 15 of the first year to which
payment has been deferred, and shall be paid in accordance with the terms of
such election. Installment payments shall be made either annually or quarterly
as the Director has elected. The first year to
<PAGE>
which payment has been deferred may not be later than the second year after the
Director has attained the age of seventy (70) years. If a Director shall die
prior to the first year to which payment has been deferred, such payment shall
commence on January 15 of the calendar year immediately following the year of
death, and shall be paid in the manner specified in such election.
Each election shall defer payment to commence on the date specified in the
initial election, payable in the same manner.
SECTION VII
DESIGNATION OF BENEFICIARY
--------------------------
Each Director, on becoming a participant, shall file with the Secretary of the
applicable Board of Directors a Beneficiary Designation in the form attached as
Exhibit "C" ("Beneficiary Designation") designating one or more beneficiaries to
whom payments otherwise due the participant shall be made in the event of his or
her death while serving as a Director or after leaving the Board. A Beneficiary
Designation will be effective only if the signed form is filed with the
Secretary of the applicable Board of Directors while the Director is alive, and
will cancel all Beneficiary Designations signed and filed previously. If the
primary beneficiary shall survive the Director but dies before receiving all the
amounts due hereunder, the deferred amounts remaining unpaid at the time of
death shall be paid in one lump sum to the legal representative of the primary
beneficiary's estate. If the primary beneficiary shall predecease the Director,
amounts remaining unpaid at the time of the Director's death shall be paid to
the contingent beneficiary(s) surviving the Director, in the order specified by
the Director in the Beneficiary Designation in effect and filed by the Director.
If the contingent beneficiary(s) dies before receiving all the amounts due
hereunder, the unpaid amount shall be paid in one lump sum to the legal
representative of such contingent beneficiary(s) estate. If the Director shall
fail to designate a
<PAGE>
beneficiary(s) as provided in this Section, or if all designated beneficiaries
shall predecease the Director, the deferred amounts remaining unpaid at the time
of such Director's death shall be paid in one lump sum to the legal
representative of the Director's estate.
SECTION VIII
NONALIENATION OF BENEFITS
-------------------------
Neither the Director nor any beneficiary designated by him or her shall have any
right, directly or indirectly, to alienate, assign, or encumber any amount that
is or may be payable hereunder.
SECTION IX
ADMINISTRATION OF PLAN
----------------------
Full power and authority to construe, interpret, and administer the Plan shall
be vested in the Corporation's Board of Directors. Decisions of the Board shall
be final, conclusive, and binding upon all parties.
SECTION X
AMENDMENT OR TERMINATION OF PLAN
--------------------------------
The Board of Directors may amend or terminate this Plan at any time. Any
amendment or termination of this Plan shall not affect the rights of
participants or beneficiaries to the amounts in the Director's deferred fee
accounts at the time of such amendment or termination.
SECTION XI
APPLICABLE LAW
--------------
The provisions of this Plan shall be interpreted and construed in accordance
with the laws of the State of Michigan.
SECTION XII
EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become operative and in effect for the fees to be earned
<PAGE>
in the year 1995 and thereafter until amended or terminated by the Board of
Directors of the Corporation.
<PAGE>
EXHIBIT 10(L).
THE FIRST NATIONAL BANK OF CHICAGO COMPENSATION AGREEMENT
THIS AGREEMENT executed this ________ day of ___________________, l9__, by
and between THE FIRST NATIONAL BANK OF CHICAGO, a national banking association
(hereinafter referred to as "BANK") and ____________________________________
(hereinafter referred to as "DIRECTOR").
W I T N E S S E T H:
-------------------
WHEREAS, DIRECTOR is a director of BANK; and
WHEREAS, BANK and DIRECTOR desire to enter into a compensation agreement.
NOW, THEREFORE, the parties agree that:
l. BANK shall pay and DIRECTOR shall receive compensation for any services
rendered by him as a director to the extent, at the time, and in the manner
hereinafter provided.
2. BANK will cause to be set up upon its books two bookkeeping accounts,
the first to be known as DIRECTOR'S "Deferred Compensation (Cash Account)"
(hereinafter referred to as "Cash Account"), and the second as DIRECTOR'S
"Deferred Compensation (Stock Account)" (hereinafter referred to as "Stock
Account").
(a) Cash Account
------------
BANK will regularly credit to the Cash Account the amount which
DIRECTOR would otherwise be entitled to receive for his services as a
director in accordance with the terms and provisions of any resolution duly
adopted by the Board of Directors (hereinafter referred to as "BOARD"),
and, on the dividend payment date, an amount equal to the cash dividend
which would have been payable upon that number of shares of First Chicago
Corporation credited to the Stock Account on the record date applicable to
such cash dividend, such credit to continue so long as there shall be
shares credited to the Stock Account.
(b) Stock Account
-------------
On the tenth day (or next business day if a weekend or holiday) of
January, April, July and October of each year, BANK shall determine the
number of full shares of First Chicago Corporation stock which it could
have purchased on that date with the amounts then in the Cash Account,
based upon the closing price of such shares on the New York Stock Exchange
on that date. Such shares shall be credited to the Stock Account and the
amount in the Cash Account reduced accordingly. In addition, the Stock
Account shall be credited with any stock splits or similar distributions
which would have been payable on the number of shares then credited to such
account.
<PAGE>
These amounts are to be established for bookkeeping purposes only, shall not
represent either a cash deposit or actual shares, shall not give DIRECTOR any
special right in cash or shares held or owned by BANK, and shall not give rise
to any cause of action by DIRECTOR against BANK, except at such time as DIRECTOR
shall become entitled to receive payment of compensation in accordance with the
terms of this Agreement. BANK shall furnish DIRECTOR quarterly statements
showing the balances in each of these accounts as they exist at the time such
statement is rendered.
3. Commencing in the _________ /1/ year following DIRECTOR'S retirement,
DIRECTOR shall be entitled to receive ________________ /2/ annual payments, such
payments to be made on the first business day of April in each year. In the
event of the death of DIRECTOR prior to said year, the payments shall commence
on the first business day in April in the year following his death. Each
payment shall be determined by dividing the number of payments remaining due
hereunder into the aggregate of:
(a) the amount in the Cash Account, and
(b) the fair market value (on the date such payment is due) of the
shares of stock then credited to the Stock Account, which fair market value
shall be the price at which such stock closed on the New York Stock
Exchange on the last trading day preceding the due date of the payment.
Notwithstanding anything in this Agreement to the contrary, no payments shall be
made pursuant to paragraph 3 hereof prior to the first to occur of Director's
retirement or termination of service as a director, or Director's disability or
death.
4. Any payments due hereunder which shall not have been paid to DIRECTOR
during his lifetime shall be paid to his surviving spouse or to any other person
as he may have designated in a writing filed with BANK to receive the same;
these payments shall be made at the same time or times and in the same amount or
amounts as would have been paid to DIRECTOR had he survived. DIRECTOR shall
have the right during his lifetime to designate in writing and to change (in
writing) the designation of any person to whom BANK shall make payments, if any,
which remain unpaid at his death, and BANK may rely upon the last of such
written designations in its possession in making any such payments.
If any payments remain due hereunder upon the death of the survivor of
DIRECTOR, his spouse or any person designated as the person entitled in a
writing signed by DIRECTOR and filed with BANK to receive payments, BANK may
make any payments due hereunder to the Executor or Administrator of the estate
of the last to survive of the aforementioned.
5. The right of DIRECTOR, his spouse and of any person designated by him
to receive payments hereunder is personal and is not subject to acceleration or
assignment, and BANK shall have no liability for payments hereunder to any
person or in any manner other than is herein provided. However, BANK, by
resolution duly adopted by its BOARD, shall
- -------------
1 Insert when payment is to commence, eg., "first", "second", "fifth".
2 Insert number of annual payments to be received.
<PAGE>
have the right, at its option and at any time in its sole discretion, to pay all
or any part of the aggregate amount of payments otherwise due hereunder, in cash
(by check), and in advance of any scheduled payment date or dates otherwise
prescribed herein.
5A. Notwithstanding paragraph 3 hereof, upon Director's retirement or
termination of service as a director within one year following a Change of
Control (as defined below), the amount in the Cash Account and the fair market
value of the shares of stock then credited to the Stock Account (equal to the
price at which such stock closed on the New York Stock Exchange on the day of
such retirement or termination) shall be immediately paid in a cash lump sum as
soon thereafter as is practicable to Director.
For this purpose, a "Change of Control" shall mean any of the following
events:
(i) The acquisition, other than from First Chicago Corporation
("FIRST"), by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either
the then outstanding shares of common stock of FIRST or the combined voting
power of the then outstanding voting securities of FIRST entitled to vote
generally in the election of directors, but excluding, for this purpose,
any such acquisition by FIRST or any of its subsidiaries, or any employee
benefit plan (or related trust) of FIRST or its subsidiaries, or any
corporation with respect to which, following such acquisition, more than
50% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the common stock and voting securities of FIRST
immediately prior to such acquisition in substantially the same proportion
as their ownership, immediately prior to such acquisition, of the then
outstanding shares of common stock of FIRST or the combined voting power of
the then outstanding voting securities of FIRST entitled to vote generally
in the election of directors, as the case may be; or
(ii) Individuals who, as of the date hereof, constitute the Board (as
of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by FIRST's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of FIRST (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or
(iii) Approval by the stockholders of FIRST of a reorganization,
merger or consolidation of FIRST, in each case, with respect to which all
or substantially all of the individuals and entities who were the
respective beneficial owners of the common
<PAGE>
stock and voting securities of FIRST immediately prior to such
reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such reorganization, merger
or consolidation, or a complete liquidation or dissolution of FIRST or of
the sale or other disposition of all or substantially all of the assets of
FIRST."
6. This Agreement may be amended in writing at any time and in any manner
without consent of any person other than DIRECTOR and BANK, but no such
amendment shall have retroactive effect, and such amendment shall become
effective only as to the next succeeding calendar quarter following the date of
such amendment and thereafter.
7. This Agreement shall be binding upon, and shall inure to the benefit
of, the successors and assigns of BANK.
IN WITNESS WHEREOF, BANK has caused these presents to be executed in its
name and on its behalf pursuant to the authorization of its Board of Directors,
and DIRECTOR has hereunto set his hand all on the day and year first above
written.
THE FIRST NATIONAL BANK OF CHICAGO
By:________________________________________
(SEAL)
Attest:
- ------------------------------------------------
Assistant Cashier
----------------------------------------------
DIRECTOR
<PAGE>
AMENDMENT TO
THE FIRST NATIONAL BANK OF CHICAGO
COMPENSATION AGREEMENT
Pursuant to The First National Bank of Chicago Compensation Agreement
between The First National Bank of Chicago and me, as amended from time to time,
(this "Agreement"), said Agreement is amended as follows:
1. A new paragraph 8 is added as follows:
"The DIRECTOR'S right to defer future compensation hereunder shall cease
as of July 31, 1996 and the value of the DIRECTOR'S Cash Account and Stock
Account shall be transferred to the deferred stock unit alternative under the
First Chicago NBD Corporation Director Stock Plan ("Plan"), subject to (i) the
terms and conditions of the Plan, (ii) First Chicago NBD Corporation stockholder
approval of the Plan and (iii) compliance with the requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934; payments to
DIRECTOR under the Plan of amounts deferred hereunder shall be made in
accordance with DIRECTOR'S deferral elections."
Notwithstanding the provisions of paragraph 6 of the Agreement, this
Amendment shall become effective on the date hereof.
__________________________
THE FIRST NATIONAL BANK OF CHICAGO
By: ________________________
Executive Vice President
Date: January __, 1996
<PAGE>
EXHIBIT 10(M).
FIRST CHICAGO CORPORATION COMPENSATION AGREEMENT
THIS AGREEMENT executed this ________ day of ___________________, l9__, by
and between FIRST CHICAGO CORPORATION, a Delaware corporation (hereinafter
referred to as "FIRST") and ________________________________________________
(hereinafter referred to as "DIRECTOR").
W I T N E S S E T H:
-------------------
WHEREAS, DIRECTOR is a director of FIRST; and
WHEREAS, FIRST and DIRECTOR desire to enter into a compensation agreement.
NOW, THEREFORE, the parties agree that:
l. FIRST shall pay and DIRECTOR shall receive compensation for any services
rendered by him as a director to the extent, at the time, and in the manner
hereinafter provided.
2. FIRST will cause to be set up upon its books two bookkeeping accounts,
the first to be known as DIRECTOR'S "Deferred Compensation (Cash Account)"
(hereinafter referred to as "Cash Account"), and the second as DIRECTOR'S
"Deferred Compensation (Stock Account)" (hereinafter referred to as "Stock
Account").
(a) Cash Account
------------
FIRST will regularly credit to the Cash Account the amount which DIRECTOR
would otherwise be entitled to receive for his services as a director in
accordance with the terms and provisions of any resolution duly adopted by
the Board of Directors (hereinafter referred to as "BOARD"), and, on the
dividend payment date, an amount equal to the cash dividend which would have
been payable upon that number of shares of First Chicago Corporation credited
to the Stock Account on the record date applicable to such cash dividend,
such credit to continue so long as there shall be shares credited to the
Stock Account.
(b) Stock Account
-------------
On the tenth day (or next business day if a weekend or holiday) of
January, April, July and October of each year, FIRST shall determine the
number of full shares of First Chicago Corporation stock which it could have
purchased on that date with the amounts then in the Cash Account, based upon
the closing price of such shares on the New York Stock Exchange on that date.
Such shares shall be credited to the Stock Account and the amount in the Cash
Account reduced accordingly. In addition, the Stock Account shall be
credited with any stock splits or similar distributions which would have been
payable on the number of shares then credited to such account.
<PAGE>
These amounts are to be established for bookkeeping purposes only, shall not
represent either a cash deposit or actual shares, shall not give DIRECTOR any
special right in cash or shares held or owned by FIRST, and shall not give rise
to any cause of action by DIRECTOR against FIRST, except at such time as
DIRECTOR shall become entitled to receive payment of compensation in accordance
with the terms of this Agreement. FIRST shall furnish DIRECTOR quarterly
statements showing the balances in each of these accounts as they exist at the
time such statement is rendered.
3. Commencing in the _________/1/ year following DIRECTOR'S retirement,
DIRECTOR shall be entitled to receive ________________/2/ annual payments, such
payments to be made on the first business day of April in each year. In the
event of the death of DIRECTOR prior to said year, the payments shall commence
on the first business day in April in the year following his death. Each
payment shall be determined by dividing the number of payments remaining due
hereunder into the aggregate of:
(a) the amount in the Cash Account, and
(b) the fair market value (on the date such payment is due) of the shares
of stock then credited to the Stock Account, which fair market value shall be
the price at which such stock closed on the New York Stock Exchange on the
last trading day preceding the due date of the payment.
Notwithstanding anything in this Agreement to the contrary, no payments shall be
made pursuant to paragraph 3 hereof prior to the first to occur of Director's
retirement or termination of service as a director, or Director's disability or
death.
4. Any payments due hereunder which shall not have been paid to DIRECTOR
during his lifetime shall be paid to his surviving spouse or to any other person
as he may have designated in a writing filed with FIRST to receive the same;
these payments shall be made at the same time or times and in the same amount or
amounts as would have been paid to DIRECTOR had he survived. DIRECTOR shall
have the right during his lifetime to designate in writing and to change (in
writing) the designation of any person to whom FIRST shall make payments, if
any, which remain unpaid at his death, and FIRST may rely upon the last of such
written designations in its possession in making any such payments.
If any payments remain due hereunder upon the death of the survivor of
DIRECTOR, his spouse or any person designated as the person entitled in a
writing signed by DIRECTOR and filed with FIRST to receive payments, FIRST may
make any payments due hereunder to the Executor or Administrator of the estate
of the last to survive of the aforementioned.
5. The right of DIRECTOR, his spouse and of any person designated by him
to receive payments hereunder is personal and is not subject to acceleration or
assignment, and FIRST shall have no liability for payments hereunder to any
person or in any manner other than is herein provided. However, FIRST, by
resolution duly adopted by its BOARD, shall have the right, at its option and at
any time in its sole discretion, to pay all or any part of the aggregate amount
of payments otherwise due hereunder, in cash (by check), and in advance of
- -------------
/1/Insert when payment is to commence, e.g., "first", "second", "fifth".
/2/Insert number of annual payments to be received.
<PAGE>
any scheduled payment date or dates otherwise prescribed herein.
5A. Notwithstanding paragraph 3 hereof, upon Director's retirement or
termination of service as a director within one year following a Change of
Control (as defined below), the amount in the Cash Account and the fair market
value of the shares of stock then credited to the Stock Account (equal to the
price at which such stock closed on the New York Stock Exchange on the day of
such retirement or termination) shall be immediately paid in a cash lump sum as
soon thereafter as is practicable to Director.
For this purpose, a `Change of Control' shall mean any of the following
events:
(i) The acquisition, other than from First Chicago Corporation (`FIRST'),
by any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the `Exchange
Act')) of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either the then outstanding shares
of common stock of FIRST or the combined voting power of the then outstanding
voting securities of FIRST entitled to vote generally in the election of
directors, but excluding, for this purpose, any such acquisition by FIRST or
any of its subsidiaries, or any employee benefit plan (or related trust) of
FIRST or its subsidiaries, or any corporation with respect to which,
following such acquisition, more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the common
stock and voting securities of FIRST immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately prior to
such acquisition, of the then outstanding shares of common stock of FIRST or
the combined voting power of the then outstanding voting securities of FIRST
entitled to vote generally in the election of directors, as the case may be;
or
(ii) Individuals who, as of the date hereof, constitute the Board (as of
the date hereof the `Incumbent Board') cease for any reason to constitute at
least a majority of the Board, provided that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by FIRST's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption
of office is in connection with an actual or threatened election contest
relating to the election of the directors of FIRST (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or
(iii) Approval by the stockholders of FIRST of a reorganization, merger
or consolidation of FIRST, in each case, with respect to which all or
substantially all of the individuals and entities who were the respective
beneficial owners of the common stock and voting securities of FIRST
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization,
merger or consolidation, or a complete
<PAGE>
liquidation or dissolution of FIRST or of the sale or other disposition of
all or substantially all of the assets of FIRST.
6. This Agreement may be amended in writing at any time and in any manner
without consent of any person other than DIRECTOR and FIRST, but no such
amendment shall have retroactive effect, and such amendment shall become
effective only as to the next succeeding calendar quarter following the date of
such amendment and thereafter.
7. This Agreement shall be binding upon, and shall inure to the benefit of,
the successors and assigns of FIRST.
IN WITNESS WHEREOF, FIRST has caused these presents to be executed in its
name and on its behalf pursuant to the authorization of its Board of Directors,
and DIRECTOR has hereunto set his hand all on the day and year first above
written.
FIRST CHICAGO CORPORATION
By:
--------------------------
(SEAL)
Attest:
- -----------------------
Assistant Secretary
-----------------------------
DIRECTOR
<PAGE>
AMENDMENT TO
FIRST CHICAGO CORPORATION COMPENSATION AGREEMENT
Pursuant to the First Chicago Corporation Compensation Agreement between
First Chicago Corporation and me, as amended from time to time, (this
"Agreement"), said Agreement is amended as follows:
1. Paragraph 3 is amended by adding the following:
"DIRECTOR will not be considered to have retired or terminated as a DIRECTOR
of FIRST as a result of the merger of FIRST with and into NBD Bancorp, Inc. if
upon such merger, DIRECTOR is a director of FIRST'S successor corporation or The
First National Bank of Chicago."
2. A new paragraph 8 is added as follows:
"The DIRECTOR'S right to defer future compensation hereunder shall cease
as of July 31, 1996 and the value of the DIRECTOR'S Cash Account and Stock
Account shall be transferred to the deferred stock unit alternative under the
First Chicago NBD Corporation Director Stock Plan ("Plan"), subject to (i) the
terms and conditions of the Plan, (ii) stockholder approval of the Plan and
(iii) compliance with the requirements of the Securities Act of 1933 and the
Securities Exchange Act of 1934; provided, however that payments to DIRECTOR
under the Plan of amounts deferred hereunder shall be made in accordance with
DIRECTOR'S deferral election."
Notwithstanding the provisions of paragraph 6 of the Agreement, this
Amendment shall become effective on the date hereof.
----------------------
FIRST CHICAGO NBD CORPORATION
By:
-------------------------
Executive Vice President
Date: January __, 1996
<PAGE>
EXHIBIT 10(N).
DRAFT
11-20-95
FIRST CHICAGO CORPORATION
COMPENSATION DEFERRAL PLAN
Amended and Restated Effective December 1, 1993
<PAGE>
In exercise of the authority delegated to the undersigned by
resolutions of the Board of Directors of First Chicago Corporation ("Board")
adopted October 14, 1994 and the Organization, Compensation and Nominating
Committee of the Board approved December 9, 1994, the undersigned has caused the
attached document, FIRST CHICAGO CORPORATION COMPENSATION DEFERRAL PLAN (Amended
and Restated Effective December 1, 1993), to be executed this __ day of
______________, 1995.
FIRST CHICAGO CORPORATION
By:
------------------------------
Marvin James Alef, Jr.
Head of Human Resources
<PAGE>
DRAFT
FIRST CHICAGO CORPORATION
-------------------------
COMPENSATION DEFERRAL PLAN
--------------------------
Amended and Restated Effective December 1, 1993
-----------------------------------------------
1. Purpose. The purpose of the First Chicago Corporation
Compensation Deferral Plan is to permit eligible Employees of First Chicago
Corporation and its subsidiaries to elect to defer the payment of all or a
portion of their Covered Compensation.
2. Definitions.
2.1 Beneficiary means any person or entity designated by a
Participant on a form provided by the Plan Administrator to receive benefits in
the event of the death of the Participant. Each designation shall revoke a
Participant's previous designations and shall be effective only when filed in
writing with the Plan Administrator during the Participant's lifetime. If a
Participant fails to designate a Beneficiary in the manner provided above, or if
the Beneficiary designated by such Participant dies before the Participant or
before complete payment of all amounts due, the remaining balance in the
Participant's account hereunder shall be distributed to the legal representative
or representatives of the estate of the later to die of the Participant or the
Participant's designated Beneficiary.
2.2 Board means the Board of Directors of the Corporation,
excluding any member who is an officer or Employee of the Corporation or who
would otherwise not be considered a disinterested person within the meaning of
Rule 16b-3 of the Securities and Exchange Commission.
<PAGE>
2.3 Corporation means First Chicago Corporation or its
successor or successors and its fifty percent (50%) or more owned subsidiaries.
2.4 Covered Compensation means the annual cash bonus or,
effective December 1, 1994, fifty percent of the bi-weekly salary earned by a
Participant and any other cash compensation designated by the Organization,
Compensation and Nominating Committee of the Board as eligible for deferral.
2.5 Employee means an employee or retiree of the
Corporation or any of its subsidiaries of which the Corporation owns directly or
indirectly at least a 50% interest.
2.6 Exchange Act means the Securities Exchange Act of 1934,
as amended.
2.7 Investment Funds means those investment alternatives
under the Plan which will be used to calculate the periodic investment
experience of each Participant's account and shall be the investment
alternatives offered under the First Chicago Corporation Savings Incentive Plan
or any other investment alternatives designated by the Organization,
Compensation and Nominating Committee. With respect to amounts deferred prior to
December 1, 1993, Investment Funds shall include the investment alternatives
available under the incentive deferral program then in effect.
2.8 Participant means either (a) an Employee who has met the
eligibility requirements of Section 3 to participate in the Plan and who has
elected to defer all or a portion of Covered Compensation or (b) an individual
whose account balance from another deferral plan is transferred to this Plan as
described in Section 3.
2.9 Plan means the First Chicago Corporation Compensation
Deferral Plan. This Plan is an amendment and restatement of the First Chicago
Corporation Incentive Deferral Plan.
2
<PAGE>
2.10 Plan Administrator means the Executive Compensation
Services Unit; provided however, the Organization, Compensation and Nominating
Committee of the Board shall be the Plan Administrator with respect to any
Participant who is an "officer" as defined in Section 16 of the Exchange Act, to
the extent necessary to comply with Rule 16a-1(c)(3) of the Securities and
Exchange Commission or any successor provision.
3. Eligibility. The Organization, Compensation and
Nominating Committee of the Board shall designate the Employees who are eligible
to participate in this Plan. In addition, each Employee who deferred any portion
of an annual bonus under the incentive deferral program in effect prior to
December 1, 1993 shall participate in this Plan to the extent of any deferred
amounts which remain unpaid.
Subject to the approval of the Plan Administrator, the Plan may accept
the transfer of an individual's account balance or accrued benefit from another
deferral plan maintained by the Corporation or an entity acquired by the
Corporation at which time the individual will become a Participant to the extent
of the transferred balance. Such transferred balance shall be credited to the
Participant's account under this Plan and shall become subject to the terms and
conditions of this Plan except that the timing of the distribution of such
transferred balance (and subsequent earnings thereon) shall be governed by the
Participant's election as filed under the prior plan except as otherwise
determined by the Plan Administrator or permitted under this Plan.
4. Election to Defer Covered Compensation.
(a) Initial Election to Defer. Each eligible Employee may
file an irrevocable election to defer any portion of Covered Compensation until
a future calendar year or
3
<PAGE>
years which date must be at least six months after such Covered Compensation
would otherwise be paid to the Employee. An Employee's election to defer must be
in writing on a form prescribed by the Plan Administrator, must be filed with
the Plan Administrator on or before the date prescribed and must defer an amount
which is at least equal to the minimum deferral amount as set by the Plan
Administrator.
(b) Additional Deferral. A Participant may elect on a one
time basis with respect to any deferred amount of Covered Compensation to
further defer the payment of such Covered Compensation provided such election to
defer is made more than 12 months in advance of the payment of such deferred
Covered Compensation.
5. Participant's Account. The amount of Covered Compensation
which has been deferred shall be credited to a memorandum account maintained on
behalf of the Participant. Amounts credited pursuant to this Plan are credited
for bookkeeping purposes only, shall not represent either a cash deposit or
actual shares or units in any of the Investment Funds, shall not give any
Participant any special right in cash or shares held or owned by the
Corporation, and shall not give rise to any cause of action by Participants
against the Corporation, except at such time as the Participant shall become
entitled to receive payment in cash in accordance with the terms of this Plan.
The Plan Administrator shall furnish quarterly statements to Participants
showing the balances in each of their Investment Funds as of the statement date.
6. Investment of Participant's Account. A Participant shall
elect to have his or her account treated as if invested in one of the Investment
Funds. The Participant's account will be adjusted periodically to reflect the
investment experience of the Investment Funds which the
4
<PAGE>
Participant elected. Each Participant may file an election with the Plan
Administrator (on a form prescribed by the Plan Administrator) to reallocate the
investment of his account among the Investment Funds. The frequency and timing
of investment reallocation directions shall be limited in the same manner as
under the First Chicago Corporation Savings Incentive Plan. Senior Vice
Presidents and above of the Corporation may only direct the reallocation of the
portion of their Investment Funds attributable to First Chicago Corporation
common stock during the window periods which follow the announcement of the
Corporation's earnings. Executive Vice Presidents and above may only reallocate
the portion of their Investment Funds attributable to First Chicago Corporation
common stock once every six months during such window periods.
7. Investment of Participant's Account - Pre-December 1, 1993
Deferred Amounts. Each Participant with amounts deferred under the incentive
deferral program in effect prior to December 1, 1993, shall continue to have the
periodic investment experience of his account attributable to pre-December 1,
1993 deferrals calculated pursuant to the terms of his income deferral election
in effect at the time of his deferral. However, such Participant may elect
during a period prescribed by the Plan Administrator to have the investment
experience of such portion of his account calculated as if invested in the
investment alternatives of the First Chicago Corporation Savings Incentive Plan.
After such election, such portion of his account shall be continued to be
invested pursuant to Section 6.
8. Benefit. A Participant shall be entitled to a distribution of
his account balance equal to the amount deferred, adjusted for the investment
experience attributable to such deferred amounts had such amounts been invested
in the Investment Funds as directed by the Participant.
5
<PAGE>
9. Distribution of Account Balances Pursuant to Participant's
Election. A Participant's account shall be distributed in cash only (and in no
case in equity securities) and paid to the participant, at the time or times
elected or, if earlier, upon the Participant's retirement (as defined under the
First Chicago Corporation Pension Plan). A Participant, at the time he files an
election to defer, may elect to receive payment in (a) a lump sum payment or (b)
a series of substantially equal annual or, effective December 1, 1994, monthly
installments over a period of time not exceeding ten (10) years (fifteen (15)
years effective December 1, 1994).
10. Distribution upon Participant's Death or Termination of
Employment. If prior to the distribution of the entire account balance under
this Plan, a Participant dies or terminates employment before retirement (as
defined under the First Chicago Corporation Pension Plan), the remaining account
balance will be distributed in cash in the form of a single lump sum payment to
either (i) the Beneficiary, in the case of the Participant's death, or (ii) the
Participant, in the case of termination of employment; however, in the case of a
Participant whose account balance (or a portion thereof) is transferred from
another deferral plan maintained by the Corporation or an entity acquired by the
Corporation, the portion of such Participant's account balance attributable to
the transferred account balance will be distributed in cash pursuant to the
terms of the deferral election as filed with respect to the transferred balance.
11. Emergency Payments.
(a) In the event of an unforeseeable emergency as determined
hereunder, the Plan Administrator may authorize the distribution of all or a
portion of the Participant's account, without regard to the payment dates
provided in paragraph 4, but only if the Plan Administrator
6
<PAGE>
determines that such action is necessary to prevent severe financial hardship to
the Participant. Such action shall be taken only if a Participant (or his legal
representatives or successors) shall sign an application describing fully the
circumstances which are deemed to justify the payment, together with an estimate
of the amounts necessary to prevent severe financial hardship. Each such
application shall be approved by the Plan Administrator, who shall certify that
according to the best of his knowledge and belief the statements on the
application are true.
(b) For the purpose of this paragraph 11, the term
"unforeseeable emergency" shall mean a severe financial hardship to a
Participant or his dependents (as defined in section 152(a) of the Internal
Revenue Code of 1986, as amended), loss of a Participant's property due to
casualty, or other similar extraordinary and unforeseeable circumstances beyond
the Participant's control. Hardship payments shall only be made to the extent
necessary to satisfy the emergency need, and shall not be made to the extent
that the hardship is or may be relieved through other means, including
reimbursement or compensation, by insurance or otherwise, or by cessation of
deferrals pursuant to this Plan.
(c) The Plan Administrator may also authorize the
distribution of all or a portion of the Participant's account, without regard to
the payment dates provided in paragraph 4, provided the portion of the
Participant's account from which such distribution is made is first reduced by
an amount that shall equal the greater of either (i) 10% of the applicable
portion of the Participant's account, (ii) 125% of the interest rate The First
National Bank of Chicago announces from time to time as its corporate base rate
multiplied by the applicable portion of the Participant's account or (iii) a
"substantial penalty" as determined by the Plan Administrator upon advice of
counsel so as to assure there is no constructive receipt of Participants'
accounts under the Plan.
7
<PAGE>
12. Acceleration of Payment. The inside directors of the
Corporation may, in their sole discretion, accelerate any payment under this
Plan for any Participants who are not "officers" as defined under Section 16 of
the Exchange Act.
The Organization, Compensation and Nominating Committee of the Board
of Directors of the Corporation may, in its sole discretion, accelerate any
payment under this Plan for Participants who are "officers" defined under
Section 16 of the Exchange Act.
13. Valuation of Account Prior to Distribution. A Participant's
account distributable shall be valued as of the end of the month preceding
payment.
14. Administration. This Plan shall be administered by the Plan
Administrator and its decision on any matter involving the interpretation of the
Plan shall be binding on everyone; provided, however, that the Plan
Administrator may not take any action with respect to any benefits payable to
the Plan Administrator under the Plan unless such action could have been taken
even if he were not the Plan Administrator.
15. Miscellaneous.
15.1 Prohibition of Alienation. Benefits under the Plan may
not be anticipated, alienated, assigned or encumbered and any attempt to do so
shall be void.
15.2 Litigation by Participants or Other Persons. To the
extent permitted by law, if a legal action begun against the Corporation or an
Employee or director thereof, or the Board, or any member thereof, by or on
behalf of any person results adversely to that person, or if a legal action
arises because of conflicting claims to a grant payable to a participant or
Beneficiary,
8
<PAGE>
the cost to the Corporation or Employee or director thereof, or the Board or any
member thereof, of defending the action will be charged to the extent possible
to the sums, if any, that were involved in the action or were payable to, or on
account of, the Participant or Beneficiary concerned.
15.3 Indemnification. Any person who is or was a director,
officer, or Employee of the Corporation and each member of the Board shall be
indemnified and saved harmless by the Corporation from and against any and all
liability or claims of liability to which such person may be subjected by reason
of any act done or omitted to be done in good faith with respect to the
administration of the Plan, including all expenses reasonably incurred in the
Participant's defense in the event that the Corporation fails to provide such
defense.
15.4 Rights to Employment. Participation in the Plan shall
not confer upon any Participant any right with respect to continued employment
by the Corporation.
15.5 Expenses. All expenses of administering the Plan shall
be borne by the Corporation.
15.6 Other Plans. Nothing contained herein shall prevent the
Corporation from establishing or maintaining other plans in which Participants
in this Plan may also participate.
15.7 Facility of Payment. When, in the Board's opinion or in
the opinion of anyone authorized by the Board, a Participant or Beneficiary is
under a legal disability or incapacitated in any way so to be unable to manage
the Participant's or Beneficiary's financial affairs, the Board may direct that
the amount of the Participant's or Beneficiary's payment hereunder be made to
the Participant's or Beneficiary's legal representative or to another person for
such Participant's or Beneficiary's benefit, or the Board may direct that such
amount be applied for the benefit of the Participant or Beneficiary in any way
the Board considers advisable.
15.8 Notices. Any communication, statement or notice
addressed to a
9
<PAGE>
Participant at the Participant's last post office address shown on his
employer's records, will be binding upon the Participant for all purposes of the
Plan. Neither the Board nor the Corporation shall be obliged to search for or
ascertain the whereabouts of any Participant. For purposes of this section 15.8,
the term "Participant" includes any person entitled by reason of a Participant's
death or legal disability to that Participant's deferred Covered Compensation
under the Plan.
15.9 Records. All records held by the Corporation's
Executive Compensation Services Unit with respect to an Employee shall be
binding upon everyone for purposes of the Plan .
16. Amendment and Termination. The Corporation, by a resolution
of its Board or by anyone authorized by the Board, may amend or terminate the
Plan at any time; provided, however, that, except as may otherwise be required
by law, no such amendment to or termination of the Plan shall reduce the
benefits to which a Participant (or his Beneficiary) is entitled under the Plan
as of the date of such amendment or termination.
17. Financing of Plan Benefits. Any benefits payable to a
Participant under the Plan shall be financed from the general assets of his
employer, and no Participant, or group of Participants, shall acquire any claim
upon any specific asset of an employer solely by reason of his being a
Participant in the Plan. This paragraph shall not prohibit the Corporation from
transferring assets to a grantor trust for the purpose of providing benefits
hereunder, which grantor trust shall remain subject to the claims of creditors.
The accounting and recordkeeping of this Plan shall be entirely separate from
any other plan.
10
<PAGE>
18. Benefits Intended for Select Group of Management or Highly
Compensated Employees. This Plan is intended to be maintained primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees and shall be interpreted and administered
accordingly.
19. Compliance with "Cash Only Plan" Rules under Rule 16-b. With
respect to each Participant who is an "officer,"as defined in the regulations
promulgated under Section 16 of the Exchange Act, this Plan and all transactions
under this Plan are intended to comply with rules under the regulations
promulgated under Section 16 of the Exchange Act, specifically Rule 16a-1(c)(3),
which exempt any such officer from the reporting, disclosure and short-swing
profit rules of the Exchange Act with respect to amounts deferred under this
Plan and the Plan shall be interpreted, construed and administered to effectuate
that intent. To the extent any provision of the Plan or action by the Plan
Administrator fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Plan Administrator.
20. Controlling Laws. To the extent not superseded by Federal
law, the laws of Illinois, without regard to its laws of conflict, shall be
controlling in all matters relating to the Plan.
11
<PAGE>
EXHIBIT 10(O).
DRAFT
10-03-95
FIRST CHICAGO CORPORATION
EXECUTIVE ESTATE PLAN
SECTION 1 - PURPOSE
The FIRST CHICAGO CORPORATION EXECUTIVE ESTATE PLAN (hereinafter called the
"Plan") is established and maintained to promote and advance the performance of
First Chicago Corporation (hereinafter called the "Corporation") by providing
designated senior officers of the Corporation and of its affiliated companies
who have significant responsibility for such performance with competitive death
benefit coverage and to assist the Corporation in attracting and retaining as
senior officers individuals of superior ability by enhancing the value of the
death benefit coverage benefits.
SECTION 2 - DEFINITIONS
(a) The term "affiliated companies" shall mean those corporations a
majority of the outstanding voting capital stock of which is directly or
indirectly owned or controlled by the Corporation.
(b) The term "after-tax equivalent" shall mean such amount that would
provide the recipient of a taxable death benefit under the Plan with an amount,
after the payment of federal income tax, approximately equal to the death
benefit the recipient would have received if the taxable death benefit were not
subject to federal income taxation when made.
(c) The term "Committee" shall mean the Organization, Compensation and
Nominating Committee of the Board of Directors of the Corporation, the members
of which shall be "disinterested persons" under Rule 16b-3 of the Securities and
Exchange Commission or any successor regulation issued under the federal
securities laws and shall be ineligible to participate in the Plan.
(d) The term "disability" shall mean the incapability of a participant to
perform the principal duties of his or her customary employment or position as
the result of a physical or mental condition that is expected to be permanent
and continuous during the remainder of the participant's life, as determined in
the sole discretion of the Committee on the basis of evidence satisfactory to
it.
(e) The term "disabled participant" shall mean a participant who incurs a
disability hereunder while a participant under the Plan from which he or she has
not recovered.
<PAGE>
(f) The term "participant" shall mean a senior officer of the Corporation
or of one of its affiliated companies who becomes and remains a participant in
the Plan as provided in Section 6 of the Plan.
(g) The term "retired participant" shall mean a participant whose
employment with the Corporation and all its affiliated companies terminates as
the result of retirement hereunder and who does not subsequently resume such
employment.
(h) The term "retirement" shall mean the cessation of employment with the
Corporation and all its affiliated companies on or after the date a participant
(i) attains age sixty-five (65), or (ii) completes five (5) years of service,
attains age fifty-five (55), and receives the consent of the Committee.
SECTION 3 - EFFECTIVE DATE AND DURATION
The Plan shall be effective as of September 8, 1995. The Plan shall
continue until it is terminated by the Board of Directors of the Corporation as
provided in Section 11.
SECTION 4 - ADMINISTRATION
The Committee shall be responsible for the general operation and
administration of the Plan and shall have the authority to interpret the Plan
and to adopt administrative rules and regulations governing its operation. The
Committee may delegate the performance of administrative functions to the
Secretary of the Committee.
SECTION 5 - FUND
The death benefits payable under the Plan shall be paid out of the general
assets of the Corporation.
SECTION 6 - PARTICIPATION
(a) Eligibility for participation in the Plan shall be limited to such
senior officers of the Corporation or one of its affiliated companies as are
designated from time to time by the Committee and approved by the Board of
Directors.
(b) Participation in the Plan by an eligible officer shall be solely within
the discretion of the Committee. The Committee shall individually select and
designate each eligible officer for participation, who shall become a
participant as of the date specified by the Committee.
(c) A participant shall remain a participant only for so long as he
continues in the employ of the Corporation or one of its affiliated companies or
is a retired participant or a disabled participant. The Committee in its sole
discretion may terminate a participant's participation in the Plan only as
provided in Section 10.
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SECTION 7 - AMOUNT OF PRE-RETIREMENT DEATH BENEFIT
(a) Upon the death of a participant prior to his or her retirement from the
Corporation and its affiliated companies, the Corporation shall pay to his or
her designated beneficiary an after-tax equivalent death benefit equal to six
hundred percent (600%) of the participant's base salary at the time of death.
(b) If a disabled participant dies before attaining age sixty-five (65),
the Corporation shall pay to his or her designated beneficiary an after-tax
equivalent death benefit equal to six hundred percent (600%) of the
participant's annual base salary determined as of the date of his or her
disability. If a disabled participant attains age sixty-five (65), such
participant shall thereupon be deemed to be a retired participant and entitled
to benefit coverage only in accordance with Section 8, based on the
participant's annual base salary determined as of the date of his or her
disability. If a disabled participant recovers from disability before attaining
age sixty-five (65), the participant shall be deemed to be a retired participant
as of the date he or she recovers from the disability if such participant is at
least age fifty-five (55) on that date and does not then return to employment
with the Corporation or any affiliated company. In all other cases, a disabled
participant who recovers from disability shall have no further interest or
rights under the Plan, except as may be provided by such person's subsequent
participation in the Plan.
SECTION 8 - AMOUNT OF POST-RETIREMENT DEATH BENEFIT
Upon the death of a retired participant (i) during the first twelve (12)
months following retirement, the Corporation shall pay to the participant's
designated beneficiary an after-tax equivalent death benefit equal to two
hundred percent (200%) of the participant's annual base salary at the time of
the participant's retirement; (ii) during the second twelve (12) month period
following retirement, the Corporation shall pay to the participant's designated
beneficiary an after-tax equivalent death benefit equal to one hundred seventy-
five percent (175%) of the participant's annual base salary at the time of the
participant's retirement; (iii) during the third twelve (12) month period
following retirement, the Corporation shall pay to the participant's designated
beneficiary an after-tax equivalent death benefit equal to one hundred fifty
percent (150%) of the participant's annual base salary at the time of the
participant's retirement; or (iv) during or subsequent to the thirty-seventh
month following retirement, the Corporation shall pay to the participant's
designated beneficiary an after-tax equivalent death benefit equal to one
hundred percent (100%) of the participant's annual base salary at the time of
the participant's retirement plus the lesser of Twenty-Five Thousand Dollars
($25,000) or twenty-five percent (25%) of the participant's annual base salary
at the time of the participant's retirement.
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SECTION 9 - BENEFICIARY DESIGNATION AND PAYMENT
(a) Each participant shall complete a beneficiary designation form as
prescribed by the Committee designating the beneficiary or beneficiaries to
receive the amounts hereunder upon the participant's death. Each participant
may designate one or more individuals, trusts or organizations as the primary
beneficiary(ies). If more than one primary beneficiary is designated, the
participant shall specify the percentage to be paid to each primary beneficiary.
Each participant shall also designate a contingent beneficiary(ies), who shall
receive payment hereunder only if the designated primary beneficiary(ies) does
not survive the participant.
(b) Unless a participant has previously made an irrevocable beneficiary
designation, a participant may change his or her beneficiary designation at any
time without the consent of any previously designated beneficiary by completing
a new beneficiary designation form and delivering such form to the Secretary of
the Committee. Such new beneficiary designation shall be effective when the
completed form is received by the Secretary of the Committee.
(c) In the event a participant failed to make a beneficiary designation,
the amount payable under Section 7 or Section 8 shall be paid to the
participant's estate. The amount payable under Section 7 or Section 8 shall be
paid within sixty (60) days of the receipt by the Secretary of the Committee of
a certified copy of the death certificate of the deceased participant. Any
amount not paid within sixty (60) days of such receipt shall bear interest at
the rate of interest announced from time to time as the corporate base rate
announced from time to time by The First National Bank of Chicago or its
successor by merger during the period from the date the payment shall have been
made to the date it is made. The Corporation shall withhold from such payment
any applicable federal, state or local taxes thereon.
SECTION 10 - GENERAL
(a) Neither the establishment of the Plan nor any provisions of the Plan or
modification thereof shall be held or construed as giving any participant in the
Plan the right to be retained in the service of the Corporation or its
affiliated companies, and the Corporation and its affiliated companies expressly
reserve the right to discharge any such participant whenever the interests of
the Corporation and its affiliated companies may so require.
(b) Notwithstanding any other provision in the Plan to the contrary, but
subject to Paragraph (c) of this Section 10, and as determined solely by the
Committee, (i) no benefit or coverage shall be provided under the Plan to any
participant, including a retired participant or disabled participant, who
engages in any activity that, in the opinion of the Committee, is competitive
with any activity of the Corporation or any affiliated company (except that
employment at the request of the Corporation with an entity in which the
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Corporation has, directly or indirectly, a substantial ownership interest, or
other employment specifically approved by the Committee, shall not be considered
to be an activity that is competitive with any activity of the Corporation or
any affiliated company) or otherwise acts, either prior to or after termination
of employment, in any manner inimical or in any way contrary to the best
interests of the Corporation; and (ii) no benefit or coverage under the Plan
shall be provided to any participant, including a disabled participant or
retired participant, if the participant's employment with the Corporation or an
affiliated company terminates because of dishonesty, fraud, misappropriation of
funds, the commission of a felony, or willful or gross misconduct or willful or
gross negligence in the performance of such person's duties, or if during the
course of such employment, the participant engages in, or had engaged in, such
conduct.
(c) Any right of a participant and his beneficiary hereunder shall be that
of an unsecured general creditor of the Corporation, and no participant or
beneficiary shall have any preferred claims on, or any beneficial ownership in,
the assets of the Corporation, including any assets in which the Corporation may
invest to aid in meeting its obligations under the Plan.
(d) To the maximum extent permitted by law, a participant's or
beneficiary's interest and rights shall not be assignable in law or in equity or
subject to any manner of alienation, sale, transfer, claims of creditors,
pledge, attachment, garnishment, levy, execution, or encumbrances of any kind,
except that a participant shall have the right under Section 9 to designate
irrevocably a beneficiary to receive the amounts hereunder upon the
participant's death.
(e) If the Committee determines that a beneficiary is legally incompetent
to receive a distribution hereunder, the Committee may cause any distribution
due to such beneficiary to be made to the guardian or other legal representative
of such beneficiary, or in the absence of such guardian or other legal
representative, to such other person or institution who is otherwise maintaining
and has custody of such beneficiary. Such distribution, to the extent made,
shall be a valid and complete discharge of liability therefor under the Plan.
SECTION 11 - AMENDMENT, SUSPENSION AND TERMINATION
The Board of Directors of the Corporation reserves the right at any time to
amend, suspend or terminate the Plan; provided, however, no such amendment,
suspension or termination shall adversely affect the rights hereunder of any
participant in the Plan unless the prior written approval of the participant so
affected is obtained.
SECTION 12 - GOVERNING LAW
The Plan and all determinations made and action taken pursuant thereto
shall be governed by the laws of the State of Delaware and construed in
accordance therewith.
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EXHIBIT 10(S).
FORM OF INDIVIDUAL CHANGE OF CONTROL EMPLOYMENT AGREEMENT
Each of the following individuals is a party to a Change of Control
Employment Agreement with the Corporation, the form and terms of which are
substantially as attached.
Frederick M. Adams, Jr.
John W. Ballantine
Gordon S. Crimmins
Robert A. DeAlexandris
Alan F. Delp
Sherman I. Goldberg
Thomas H. Hodges
Verne G. Istock
Thomas H. Jeffs II
Philip S. Jones
W.G. Jurgensen
James R. Lancaster
Scott P. Marks, Jr.
Thomas J. McDowell
Timothy P. Moen
Susan S. Moody
Andrew J. Paine, Jr.
Robert A. Rosholt
Richard L. Thomas
David J. Vitale
<PAGE>
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between First Chicago NBD Corporation, a Delaware corporation
(the "Company"), and _______________ (the "Executive"), dated as of the 11th day
of July, 1995.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on the
date hereof and ending on the third anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be automatically extended so as
to terminate three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the Executive that the
Change of Control Period shall not be so extended.
<PAGE>
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities"),
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, the corporation resulting from such Business
Combination or the combined voting power of the then
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outstanding voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
Notwithstanding the foregoing, the merger of the Company with First Chicago
Corporation shall not constitute a Change of Control.
3. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base
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salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve-month period immediately
preceding the month in which the Effective Date occurs. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12 months after
the last salary increase awarded to the Executive prior to the Effective Date
and thereafter at least annually. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this Agreement shall refer to Annual
Base Salary as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall
be awarded, for each fiscal year ending during the Employment Period, an annual
bonus in cash at least equal to the Executive's average bonus under the
Company's annual incentive plans, for the last three full fiscal years prior to
the Effective Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent Average Bonus").
Each such annual bonus shall be paid no later than the end of the third month of
the fiscal year next following the fiscal year for which the annual bonus is
awarded, unless the Executive shall elect to defer the receipt of such annual
bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the
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Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement of all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the
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Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the Executive's
duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
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(ii) any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or
location other than as provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business to a substantially greater
extent than required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 11(c) of
this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 12(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
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6. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Cause, Death or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (2) the product of (x) the
Recent Average Bonus and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation previously deferred by the
Executive (together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (1), (2) and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) two and one-half (2.5) and (2)
the sum of (x) the Executive's Annual Base Salary and (y) the Recent Average
Bonus; and
C. an amount equal to the excess of (a) the actuarial equivalent of the
benefit under the Company's qualified defined benefit retirement plan (the
"Retirement Plan") (utilizing actuarial assumptions no less favorable to the
Executive than those in effect under the Company's Retirement Plan immediately
prior to the Effective Date), and any excess or supplemental retirement plan in
which the Executive participates (together, the "SERP") which the Executive
would receive if the Executive's employment continued for thirty months after
the Date of Termination assuming for this purpose that all accrued benefits are
fully vested, and assuming that the Executive's compensation in each of the
three years is that required by Section 4(b)(i) and Section 4(b)(ii), over (b)
the actuarial equivalent of the Executive's actual benefit (paid or payable), if
any, under the Retirement Plan and the SERP as of the Date of Termination.
(ii) for thirty months after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the Company and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility.
For purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be
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<PAGE>
considered to have remained employed until thirty months after the Date of
Termination and to have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the Company and
its affiliated companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least to the most favorable of
those generally provided by the Company and its affiliated companies to disabled
executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect generally
with respect to other peer executives and their families at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
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<PAGE>
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the
Employment Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f) shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with the Company or any of its affiliated companies at
or subsequent to the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise
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<PAGE>
tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 9(a), if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but that the
Executive, after taking into account the Payments and the Gross-Up Payment,
would not receive a net after-tax benefit of at least $50,000 (taking into
account both income taxes and any Excise Tax) as compared to the net after-tax
proceeds to the Executive resulting from an elimination of the Gross-Up Payment
and a reduction of the Payment, in the aggregate, to an amount (the "Reduced
Amount") such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations required
to be made under this Section 9, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by Deloitte & Touche
or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall
be paid by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up
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<PAGE>
Payment. Such notification shall be given as soon as practicable but no later
than ten business days after the Executive is informed in writing of such claim
and shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
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(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no
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<PAGE>
force or effect. This Agreement may not be amended or modified otherwise than by
a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
-------------------
Name of Executive
Street Address
City, Michigan 48XXX
If to the Company:
------------------
Fred J. Johns
Secretary to the Compensation Committee
Board of Directors
First Chicago NBD Corporation
One First National Plaza
Chicago, IL 60670
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
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(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time, in which case the Executive shall have no
further rights under this Agreement. From and after the Effective Date this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
FIRST CHICAGO NBD CORPORATION
By:
--------------------------------------
-----------------------------------------
[Name of Executive]
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EXHIBIT 10(T).
FORM OF INDIVIDUAL EXECUTIVE EMPLOYMENT AGREEMENT
Each of the following individuals is a party to an Executive Employment
Agreement with the Corporation, the form and terms of which are substantially as
attached.
Frederick M. Adams, Jr.
John W. Ballantine
Gordon S. Crimmins
Robert A. DeAlexandris
Alan F. Delp
Sherman I. Goldberg
Thomas H. Hodges
Verne G. Istock
Thomas H. Jeffs II
Philip S. Jones
W.G. Jurgensen
James R. Lancaster
Scott P. Marks, Jr.
Thomas J. McDowell
Timothy P. Moen
Susan S. Moody
Andrew J. Paine, Jr.
Robert A. Rosholt
Richard L. Thomas
David J. Vitale
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT by and between First Chicago NBD Corporation, a Delaware
corporation (the "Company") and _________ (the "Executive"), dated as of the
______ day of December, 1995.
In light of the merger of First Chicago Corporation and the Company
("Merger"), the Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive to provide
the Company after the Merger with continuity of management. Therefore, in order
to accomplish these objectives, the Board has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean the effective date of
the Merger.
2. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on December 1, 1997 (the "Employment
Period").
3. Terms of Employment. (a) Position and Duties. (i) During the Employment
Period, (A) the Executive shall serve as _______, with such authority, duties
and responsibilities as are assigned to the Executive on the Effective Date and
as may be consistent with such position as may be assigned to him by the Chief
Executive Officer of the Company and (B) the Executive's services shall be
performed at any Company office located in the Midwestern United States.
(ii) During the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees to devote
substantially all of his attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
<PAGE>
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Incentive, Savings and Retirement Plans. During the Employment Period,
the Executive shall be entitled to participate in all incentive, savings and
retirement plans applicable generally to other peer executives of the Company
and its affiliated companies.
(iii) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
provided by the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, employee life, accidental
death and travel accident insurance plans) to the extent applicable generally to
other peer executives of the Company and its affiliated companies.
(iv) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the Company's policies.
(v) Fringe Benefits. During the Employment Period, the Executive shall be
entitled to fringe benefits, in accordance with Company policy as in effect from
time to time.
(vi) Office and Support Staff. During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments as provided generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(vii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the plans, policies, programs and
practices of the Company and its affiliated companies as in effect generally at
any time with respect to other peer executives of the Company and its affiliated
companies.
4. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment
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Period. If the Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant to the definition
of Disability set forth below), it may give to the Executive written notice in
accordance with Section 12(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the continued failure of the Executive to perform substantially the
Executive's duties with the Company or one of its affiliates (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Executive by
the Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company, or
(iii) conviction of a felony or any other offense involving dishonesty or
breach of trust, or entry of a guilty or nolo contendere plea by the Executive
or participation in a pre-trial diversion with respect thereto, or
(iv) a material breach of the covenants contained in
Section 9.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-
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fourths of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together with counsel, to be heard
before the Board) finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph (i) or (ii) above,
and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean in the absence of a written consent of the Executive:
(i) any action by the Company which results in a diminution of officer title
or a material diminution in the position, authority, duties or responsibilities
associated with such officer title as are assigned to the Executive as of the
Effective Date, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(ii) any material failure by the Company to comply with any of the
provisions of Section 3(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any office or
location outside of the Midwestern United States;
(iv) any purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 10(c) of
this Agreement.
For purposes of this Section 4(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 12(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than thirty days
after the giving of such notice). The failure by the Executive or the Company
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any
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right of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein within 30 days of such notice, as the case may be, (ii) if the
Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
5. Obligations of the Company upon Termination. (a) Good Reason; Other Than
for Cause, Death or Disability. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause or Disability or
the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base salary through the Date of
Termination to the extent not theretofore paid, (2) the product of (x) the
Executive's average bonus under the Company's annual incentive plans with
respect to the last three full fiscal years prior to the Date of Termination
(the "Average Annual Bonus") and (y) a fraction, the numerator of which is
the number of days in the fiscal year in which the Date of Termination occurs
through the Date of Termination, and the denominator of which is 365; and
B. the amount equal to the product of (1) two and one-half and (2) the
sum of (x) the Executive's Annual Base Salary and (y) the Average Annual
Bonus;
(ii) the Company shall pay the following to the Executive after the Date of
Termination pursuant to the terms of the applicable plan and/or deferral
election:
A. any compensation previously deferred (other than pursuant to a
qualified plan) by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent
not theretofore paid (the sum of the amounts described in clauses (i)(A)(1),
(i)(A)(2), and this (ii)(A) shall be hereinafter referred to as the "Accrued
Obligations"); and
B. an amount equal to the excess of (a) the actuarial equivalent of the
benefit under the Company's qualified defined benefit retirement plan (the
"Retirement Plan") (utilizing actuarial assumptions no less favorable to the
Executive than those in effect
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under the Company's Retirement Plan immediately prior to the Effective Date),
and any excess and/or supplemental retirement plans in which the Executive
participates (together, the "SERPs") which the Executive would receive if the
Executive's employment continued for thirty months after the Date of
Termination assuming for this purpose that all accrued benefits are fully
vested, and, assuming that the Executive's compensation in each of the three
years is that required by Section 3(b)(i) and assuming an annual bonus equal
to the Average Annual Bonus, over (b) the actuarial equivalent of the
Executive's actual benefit (paid or payable), if any, under the Retirement
Plan and the SERPs as of the Date of Termination;
(iii) for thirty months after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, the
Company shall continue benefits to the Executive and/or the Executive's family
at least equal to those which would have been provided to them in accordance
with the plans, described in Section 3(b)(iii) of this Agreement if the
Executive's employment had not been terminated; provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility.
For purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans, the
Executive shall be considered to have remained employed until thirty months
after the Date of Termination and to have retired on the last day of such
period;
(iv) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services at a cost not to exceed $35,000; provided
that the provider of such services must be approved by the Company; and
(v) to the extent not theretofore paid or provided, the Company shall
provide to the Executive for one year following the Date of Termination
reasonable and appropriate office space, secretarial support and use of a
Company provided automobile, but only if such automobile was provided prior to
the Date of Termination.
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
of death benefits as in effect on the date of the Executive's death with respect
to other peer executives of the Company and its affiliated companies and their
beneficiaries. Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination.
(c) Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the
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timely payment, after the Disability Effective Date, of disability benefits as
in effect on the Disability Effective Date with respect to other peer executives
of the Company and its affiliated companies. Accrued Obligations shall be paid
to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
(d) Cause; Other than for Good Reason. If the Executive's employment shall
be terminated for Cause or the Executive terminates his employment without Good
Reason during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date of Termination, (y) the
amount of any compensation previously deferred by the Executive (such deferred
amounts payable pursuant to the terms of the applicable plan or deferral
election) and (z) any accrued vacation pay, in each case to the extent
theretofore unpaid.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with the Company or any of its affiliated companies at
or subsequent to the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
7. Set-Off; No Mitigation; Legal Expenses. Notwithstanding any provision of
this Agreement, the Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder are subject to
and may be reduced by all rights of set-off, counterclaim, recoupment, defense
or other claim, right or action which the Company may have against the Executive
or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
provided in Section 5(a)(iii), such amounts shall not be reduced whether or not
the Executive obtains other employment. The Company agrees to pay as incurred,
to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the application Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
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8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 8) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 8(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that the Executive, after
taking into account the Payments and the Gross-Up Payment, would not receive a
net after-tax benefit of at least $50,000 (taking into account both income taxes
and any Excise Tax) as compared to the net after-tax proceeds to the Executive
resulting from an elimination of the Grosse-Up Payment and a reduction of the
Payments, in the aggregate, to an amount (the "Reduced Amount") such that the
receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the Executive and the Payments, in the aggregate, shall
be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all determinations required
to be made under this Section 8, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by Arthur Andersen LLP
or such other certified public accounting firm reasonably acceptable to the
Company as may be designated by the Executive (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the surviving corporation following the Merger, the Executive may
appoint another nationally recognized accounting firm reasonably acceptable to
the Company to make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the
Company to the Executive within five days of the later of (i) the due date for
the payment of any Excise Tax or (ii) the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive.
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As a result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 8(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim; provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 8(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for
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a refund, the Company shall advance the amount of such payment to the Executive,
on an interest-free basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 8(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 8(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Confidential Information. (a) The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. A violation of the provisions of this Section 9 shall
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
(b) In the event of a breach or threatened breach of this Section 9, the
Executive agrees that the Company shall be entitled to injunctive relief in a
court of appropriate jurisdiction to remedy any such breach or threatened breach
and the Executive acknowledges that damages would be inadequate and
insufficient.
(c) Any termination of the Executive's employment or of this Agreement shall
have no effect on the continuing operation of this Section 9.
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10. Successors. (a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
11. Non-Solicitation. The Executive acknowledges that the Executive has and
will learn confidential information relating to the customers of the Company and
its affiliated companies. The Executive further acknowledges that the Company's
relationship with its customers are extremely valuable to them, are generally
the result of the investment of substantial time and effort by them, and tend to
be near permanent. Therefore, the Executive agrees that in the event
Executive's employment terminates during the Employment Period for any reason
whatsoever, the Executive shall not, for a period of one year after the
occurrence of such termination, for himself, or as the agent of, on behalf of,
or in conjunction with, any person or entity, solicit or attempt to solicit,
whether directly or indirectly: (i) any employee of the Company or its
affiliated companies to terminate such employee's employment relationship with
the Company or its affiliated companies, or (ii) any business of the type
provided by the Company or its affiliated companies from any person or entity
that is or was a client, employee, or customer of the Company or its affiliated
companies and had dealt with the Executive or any other employee of the Company
or its affiliated companies under the supervision of the Executive.
12. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
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If to the Executive:
-------------------
Name of Executive
One First National Plaza
Chicago, Illinois 60670
If to the Company:
-----------------
First Chicago Corporation
One First National Plaza
Chicago, Illinois 60670
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 4(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is "at will", and prior
to the Effective Date, the Executive's employment may be terminated by either
the Executive or the Company at any time for any reason, in which case the
Executive shall have no further rights under this Agreement. From and after the
Effective Date this Agreement shall supersede any other employment, severance or
change of control agreement between the parties with respect to the subject
matter hereof other than the Change of Control Employment Agreement dated July
11, 1995 between the parties, which shall, upon a Change of Control (as defined
therein) supersede this Agreement.
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(g) Notwithstanding any provision of this Agreement, the Company shall have
no obligation to make any payments to the Executive if or to the extent such
payments are prohibited by any applicable law or regulation, including, without
limitation, Section 18(k) of the Federal Deposit Insurance Act and regulations
regarding golden parachute and indemnification payments promulgated thereunder.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
-------------------------
[Name of Executive]
FIRST CHICAGO NBD CORPORATION
By:
----------------------------
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FIRST EXHIBIT 10(W).
CHICAGO
NBD
CORPORATION
One First National Plaza
Chicago, Illinois 60670
Telephone: (312) 732-7200
Fax: (312) 732-5309
TIMOTHY P. MOEN
Executive Vice President
Human Resources
December 18, 1995
Richard L. Thomas
Chairman
First Chicago NBD Corporation
One First National Plaza, Suite 0518
Chicago, IL 60670
Dear Dick:
The purpose of this letter is to confirm the recent compensation actions
approved for you by the Boards of First Chicago and First Chicago NBD
Corporation.
On November 10, 1995, the First Chicago Corporation Board of Directors
authorized the following:
. Based on anticipated performance levels for 1995, your annual incentive
award is to be $1,670,000. Your award is scheduled to be paid in late
January, 1996. The award amount is subject to change based on any
significant change in either individual performance and/or the performance
of the Corporation.
. A cash payment for your lifetime of service to First Chicago Corporation
of $151,000 payable in January, 1996.
. Other actions in anticipation of your retirement:
- Office space and secretarial support for your lifetime
- A car and driver while you serve as a director of the Corporation
- Business travel and entertainment expenses up to $50,000 per year while
you serve as a director of the Corporation
- Continuation of the security system installed at your home while you
serve as director of the Corporation
On December 8, 1995, the First Chicago NBD Corporation Board approved a special
service recognition of $1.0 million to be paid on, or about May 10, 1996.
Yours sincerely,
/s/ Tim
TPM/yt
<PAGE>
EXHIBIT 10(X)
FIRST CHICAGO NBD CORPORATION
DIRECTOR STOCK PLAN
1. PURPOSE OF THE PLAN
The purpose of the First Chicago NBD Corporation Director Stock Plan is to
promote the long-term growth of First Chicago NBD Corporation by increasing
the proprietary interest of non-employee directors in First Chicago NBD
Corporation and to attract and retain highly qualified and capable directors.
2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms shall
have the following meanings:
(a) "Annual Retainer" means the annual cash retainer fee payable during
the Plan Year by the Corporation or any subsidiary or affiliate of the
Corporation to a Director for services as a Director of the Corporation or
any subsidiary or affiliate. To the extent a Director is also entitled to
an additional retainer as a result of being the chairperson of a committee
of the Board, Annual Retainer will also include such additional annual cash
retainer.
(b) "Award" means an award granted to a Director under the Plan in the
form of Options, Shares, or Stock Units or any combination thereof.
(c) "Award Grant Date" means the date upon which an Award is granted to
the Director.
(d) "Award Summary" means a written summary setting forth the terms and
conditions of each Award made under this Plan.
(e) "Board" means the Board of Directors of First Chicago NBD
Corporation.
(f) "Change of Control" means a change of control as defined in the First
Chicago NBD Corporation Stock Performance Plan or any successor thereto.
(g) "Committee" means the Organization, Compensation and Nominating
Committee of the Board or such other Committee of the Board as may be
designated by the Board from time to time to administer the Plan.
(h) "Corporation" means First Chicago NBD Corporation, a Delaware
Corporation.
(i) "Director" means a director of the Corporation who is not an employee
of the Corporation or any subsidiary of the Corporation. Director shall
also include a director of any subsidiary or affiliate of the Corporation
who is not an employee of the Corporation or a subsidiary or affiliate of
the Corporation provided that the Board has approved adoption of the Plan
by the subsidiary or affiliate.
(j) "Fair Market Value" means the average of the highest and the lowest
quoted selling prices on the New York Stock Exchange Composite Transactions
Tape on the relevant valuation date or, if there were no sales on the
valuation date, on the next preceding date on which such selling prices
were recorded.
(k) "Option" means an option to purchase Shares awarded under Section 9
which does not meet the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended, or any successor law.
(l) "Optionee" means a Director of the Corporation to whom an Option has
been granted or, in the event of such Director's death prior to the
expiration of an Option, such Director's executor, administrator,
beneficiary or similar person.
(m) "Plan" means the First Chicago NBD Corporation Director Stock Plan,
as amended and restated from time to time.
(n) "Plan Year" means the twelve month period from April 1 to March 31.
(o) "Share" means a share of common stock, $1.00 par value per share, of
the Corporation.
(p) "Stock Unit" means the right to receive a Share on a date elected by
the Director pursuant to rules established by the Committee along with such
dividend or dividend equivalent rights as may be permitted hereunder.
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3. ELIGIBILITY
Directors shall be eligible to participate in the Plan in accordance with
Sections 7, 8 and 9.
4. PLAN ADMINISTRATION
(a) Administrator of Plan. The Plan shall be administered by the Committee.
(b) Authority of Committee. The Committee shall have full power and
authority to (i) interpret and construe the Plan and Award Summaries and adopt
such rules as it shall deem necessary and advisable to implement and
administer the Plan and (ii) designate persons other than members of the
Committee to carry out its responsibilities, subject to such limitations,
restrictions and conditions as it may prescribe, such determinations to be
made in accordance with the Committee's best business judgment as to the best
interests of the Corporation and its stockholders and in accordance with the
purposes of the Plan. The Committee may delegate administrative duties under
the Plan to one or more agents as it shall deem necessary or advisable.
(c) Determinations of Committee. A majority of the Committee shall
constitute a quorum at any meeting of the Committee, and all determinations of
the Committee shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or a meeting of the
Committee by a written consent signed by all members of the Committee.
(d) Effect of Committee Determinations. No member of the Committee or the
Board shall be personally liable for any action or determination made in good
faith with respect to the Plan or any Award or to any settlement of any
dispute between a Director and the Corporation. Any decision made or action
taken by the Committee or the Board with respect to an Award or the
administration or interpretation of the Plan shall be conclusive and binding
upon all persons.
5. SHARES SUBJECT TO THE PLAN
Subject to adjustments as provided in Section 14, the aggregate number of
Shares which may be issued pursuant to Awards shall not exceed 1,000,000
Shares. To the extent that Shares subject to an outstanding Option are not
issued or delivered by reason of the expiration, termination, cancellation or
forfeiture of such Option or by reason of the delivery of Shares to pay all or
a portion of the exercise price of such Option, then such Shares shall again
be available for issuance under the Plan.
6. AWARDS UNDER THE PLAN
Awards in the form of Shares shall be granted to Directors in accordance
with Section 7. Awards in the form of Options, Shares or Stock Units, or a
combination thereof, may be granted to Directors in accordance with Section 8.
Awards in the form of Stock Units may be granted to Directors in accordance
with Section 9. Each Award granted under Section 8 and Section 9 shall be
evidenced by an Award Summary. Delivery of an Award Summary shall constitute
an agreement, subject to Section 3 and Section 11, between the Corporation and
the Director as to the terms and conditions of the Award.
7. ANNUAL STOCK RETAINER
Each Director shall be granted Shares, subject to the following terms and
conditions:
(a) Time of Grant. Each Director shall be granted, as of the date of each
annual meeting of stockholders of the Corporation (except in 1996, as of
August 1, 1996) the Director's annual stock retainer. In the case of a
Director who is appointed to the Board on a date during the Plan Year which
follows the date of an annual meeting of stockholders, the Director shall
be granted, as of the date such Director is first appointed to the Board,
the Director's annual stock retainer, as prorated in the manner described
below.
(b) Number of Shares. The number of Shares granted pursuant to this
Section shall be the number of whole Shares equal to (i) one-half of the
Annual Retainer (without taking into consideration any chairperson
retainer) divided by (ii) the Fair Market Value per Share on the Award
Grant Date (increased to the next whole share in case of any fractional
share). In the case of a Director who is appointed to the Board on a date
during the Plan Year which follows the date of an annual meeting of
stockholders, the number of Shares granted pursuant to this Section for
such Director shall be calculated in the manner described in the previous
sentence, except that (i) the Fair Market Value per Share shall be
determined as of the date the Director is appointed to the Board, and (ii)
the number of Shares granted shall be prorated
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based upon the number of calendar months during which such Director will
serve on the Board prior to the beginning of the next Plan Year. (Any part
of a calendar month will count as a whole month for purposes of these
calculations.)
8. ELECTIVE OPTIONS, SHARES AND STOCK UNITS
Each Director shall be granted Options, Shares or Stock Units, or a
combination thereof, subject to the following terms and conditions:
(a) Time of Grant. As of the date of each annual meeting of stockholders
of the Corporation (except in 1996, as of August 1, 1996), an Award, shall
be granted to each Director who, at least six months prior thereto, files
with the Committee or its designee a written election to receive such
Award, or a combination thereof, in lieu of all or a portion of such
Director's Annual Retainer. Each Director's election shall remain in effect
and be applicable with respect to subsequent years' Annual Retainers unless
the Director files a revised election pursuant to the first sentence of
this Section 8(a). In the event a Director does not file a written election
in accordance with the first sentence by reason of becoming a Director
after the date which is six months prior to the annual meeting of
stockholders of the Corporation in any year, an Award, shall be granted to
such Director pursuant to rules established by the Committee on the first
day (the "Effective Date") which is six months after the date such Director
files with the Committee or its designee a written election to receive such
Award, in lieu of all or a portion of such Director's Annual Retainer;
provided, however, that such election may apply only to the portion of such
Director's Annual Retainer multiplied by a fraction, the numerator of which
is the number of months from and including the Effective Date to and
including the end of such Plan Year and the denominator of which is 12. An
election pursuant to the first sentence of this Section 8(a) may be revoked
or changed only on or prior to the date which is six months prior to the
annual meeting of stockholders of the Corporation. An election pursuant to
the third sentence of this Section 8(a) shall be irrevocable with respect
to the Director's Annual Retainer paid during the Director's first Plan
Year.
(b) Number of Shares. The number of Shares granted pursuant to Section
8(a) shall be the number of whole Shares (increased to the next highest
whole Share in case of any fractional Share) equal to (i) the portion of
the Annual Retainer which the Director has elected pursuant to Section 8(a)
to be payable in Shares, divided by (ii) the Fair Market Value per Share on
the Award Grant Date.
(c) Number and Purchase Price of Options. The number of Shares subject to
an Option granted pursuant to Section 8(a) shall be the number of Shares
equal to the product of three (3) times the number of Shares the Director
would have received had the Director elected to receive Shares under
Section 8(b) rather than Options under this Section 8(c). The purchase
price per Share under each Option granted shall be 100% of the Fair Market
Value per Share on the Award Grant Date.
(d) Exercise of Options. Each Option shall be fully exercisable on and
after that date which is six months after the Award Grant Date and, subject
to Section 11, shall not be exercisable prior to such date. An Option may
be exercised until the date which is ten years after the Award Grant Date
of such Option. An Option, or portion thereof, may be exercised in whole or
in part only with respect to whole Shares.
Shares shall be issued to the Optionee pursuant to the exercise of an
Option only upon receipt by the Corporation from the Optionee of payment in
full either in cash or by submitting acceptable proof to the Committee of
the ownership of Shares which have been owned by the Optionee for at least
six months prior to the date of exercise of the Option, or a combination of
cash and Shares, in an amount or having a combined value equal to the
aggregate purchase price for the Shares subject to the Option or portion
thereof being exercised. The Shares issued to an Optionee for the portion
of any Option exercised by submitting proof of acceptable ownership of
Shares shall not exceed the number of Shares issuable as a result of such
exercise (determined as though payment in full therefor were being made in
cash) less the number of Shares for which proof of ownership is submitted.
The value of owned Shares for which proof of ownership is submitted in full
or partial payment for the Shares purchased upon the exercise of an Option
shall be equal to the aggregate Fair Market Value of such owned Shares on
the date of the exercise of such Option.
(e) Number of Stock Units. The number of Stock Units granted pursuant to
Section 8(a) shall be the number of Stock Units equal to (i) the portion of
the Annual Retainer which the Director has elected pursuant to Section 8(a)
to be payable in Stock Units, divided by (ii) the Fair Market Value per
Share on the Award Grant Date. A Director who has been awarded Stock Units
shall be credited while such Stock Units remain outstanding with additional
Stock Units equal to (1) the product of (i) the cash dividend per Share
declared after the Stock Units are awarded and (ii) the number of Stock
Units credited to the Director divided by (2) the Fair Market Value of a
Share on the date the dividend is paid. Such additional Stock Units shall
be issued as Shares at the same time and in the same manner as the
underlying Stock Units to which they are attributable.
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(f) Distribution of Stock Units. Upon the date elected by the Director,
the Director will receive one Share for each Stock Unit including any
fraction thereof. In the event of a Director's death prior to the issuance
of Shares attributable to Stock Units, Shares attributable to such
Director's Stock Units shall become immediately distributable to such
Director's executor, administrator, beneficiary or similar person.
9. AWARD OF STOCK UNITS BASED UPON VALUE OF TERMINATED DIRECTOR RETIREMENT PLAN
BENEFITS AND PRIOR DIRECTOR DEFERRALS
(a) Terminated Retirement Plan Benefits. Pursuant to rules established by the
Committee, a Director who participated in either the NBD Bancorp, Inc. Non-
Employee Director Retirement Plan or the First Chicago Corporation Director
Retirement Income Plan ("Retirement Plans"), both of which were terminated
effective January 31, 1996, may elect pursuant to a six-month irrevocable
election to receive all or a portion of the Director's benefit under the
Retirement Plans in Stock Units payable in Shares upon the such Director's
retirement from the Board. The number of Stock Units awarded pursuant to this
Section 9(a) shall be determined consistent with Section 8(e).
(b) Prior Director Deferrals of NBD Bancorp, Inc. Directors. Pursuant to
rules established by the Committee, a Director who deferred annual retainers
under the NBD Bancorp, Inc. Plan for Deferring the Payment of Directors' Fees
may elect pursuant to a six-month irrevocable election to receive all or a
portion of the Director's benefits under such plan in Stock Units payable in
Shares pursuant to the election filed by the Director under such plan. The
number of Stock Units awarded pursuant to this Section 9(b) shall be determined
consistent with Section 8(e).
(c) Prior Director Deferrals of First Chicago Corporation Directors. Pursuant
to rules established by the Committee, each Director who deferred annual
retainers under the First Chicago Corporation Compensation Agreement and The
First National Bank of Chicago Compensation Agreement ("Agreements") may elect
pursuant to a six-month irrevocable election to have the value of the deferred
retainers under the Agreements as of a date determined by the Committee awarded
in Stock Units payable in Shares at the time elected by such Directors under
the Agreements. The number of Stock Units awarded pursuant to this Section 9(c)
shall be determined consistent with Section 8(e).
10. ISSUANCE OF SHARES
Upon an Award of Shares to a Director pursuant to this Plan, the Shares shall
be credited to a book entry account in the name of the Director at a trust
company designated by the Committee, whereupon the Director shall become a
stockholder of the Corporation with respect to such Shares and shall be
entitled to vote the Shares.
11. NON-TRANSFERABILITY OF OPTIONS AND STOCK UNITS
All Options and Stock Units granted under the Plan shall not be transferable
by a Director during his or her lifetime and may not be assigned, exchanged,
pledged, transferred or otherwise encumbered or disposed of except by court
order, will or by the laws of descent and distribution. Notwithstanding the
foregoing, in the event Options may be transferable in accordance with the
provisions of Rule 16b-3 under the Securities Exchange Act of 1934, as amended,
then each Option shall be transferable to the extent set forth under the terms
of each Award, as determined by the Committee. In the event that any Option is
thereafter transferred as permitted by the preceding sentence, the permitted
transferee thereof shall be deemed the Optionee hereunder. Options shall be
exercisable during the Optionee's lifetime only by the Optionee or by the
Optionee's guardian, legal representative or similar person.
12. CHANGE OF CONTROL
Upon the occurrence of a Change of Control, any and all outstanding Options
shall become immediately exercisable and all Stock Units shall become
distributable in Shares.
13. AMENDMENT AND TERMINATION
The Board may amend the Plan from time to time or terminate the Plan at any
time; provided, however, than no action authorized by this Section shall
adversely change the terms and conditions of an outstanding Option or Stock
Unit without the Optionee's consent and, subject to Section 14, the number of
Shares subject to an Option granted under Section 8, the purchase price
therefor, the date of grant of any such Option and the termination provisions
relating to such Option, and shall not be amended more than once every six
months, other than to comply with changes in the Internal Revenue Code of 1986,
as amended, or any successor law, or the Employee Retirement Income Security
Act of 1974, as amended, or any successor law, or the rules and regulations
thereunder.
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14. RECAPITALIZATION
The aggregate number of shares of Common Stock as to which Awards may be
granted to Directors, the number of shares thereof covered by each outstanding
Award, and the price per share thereof in each such Award, shall all be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of Shares or other capital
adjustment, or the payment of a stock dividend or other increase or decrease in
such Shares, effected without receipt of consideration by the Corporation, or
other change in corporate or capital structure; provided, however, that any
fractional Shares resulting from any such adjustment shall be eliminated. The
Committee may also make the foregoing changes and any other changes, including
changes in the classes of securities available, to the extent it is deemed
necessary or desirable to preserve the intended benefits of the Plan for the
Corporation and the Directors in the event of any other reorganization,
recapitalization, merger, consolidation, spin-off, extraordinary dividend or
other distribution or similar transaction.
15. GOVERNING LAW
To the extent that federal laws do not otherwise control, the Plan shall be
construed in accordance with and governed by the law of the State of Delaware.
16. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulation, including, Section 16 of the Securities Exchange Act of 1934 and
Rule 16b-3 of the Securities and Exchange Commission. In case any one or more
of the provisions of this Plan shall be held invalid, illegal or unenforceable
in any respect under applicable law and regulation (including Rule 16b-3), the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby and the invalid, illegal or
unenforceable provision shall be deemed null and void; however, to the extent
permissible by law, any provision which could be deemed null and void shall
first be construed, interpreted or revised retroactively to permit this Plan to
be construed in compliance with all applicable laws (including Rule 16b-3) so
as to foster the intent of this Plan.
17. EFFECTIVE DATE AND TERM
The effective date of this Plan is January 2, 1996, subject to its approval
by the stockholders of the Corporation at the annual meeting to be held on May
10, 1996, or any adjournment thereof. The Plan shall remain in effect until
terminated by the Board.
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EXHIBIT 10(Y)
FIRST CHICAGO NBD CORPORATION
STOCK PERFORMANCE PLAN
1. PURPOSE
The purpose of the First Chicago NBD Corporation Stock Performance Plan is
to provide incentives and rewards for Employees of the Corporation and its
Subsidiaries (i) to support the execution of the Corporation's business and
human resource strategies and the achievement of its goals and (ii) to
associate the interests of Employees with those of the Corporation's
stockholders.
2. DEFINITIONS
(a) "Award" includes, without limitation, stock options (including incentive
stock options under Section 422 of the Code), stock appreciation rights,
performance share or unit awards, dividend or equivalent rights, stock awards,
restricted share or unit awards, or other awards that are valued in whole or
in part by reference to, or are otherwise based on, the Corporation's Common
Stock ("other Common Stock-based Awards"), all on a stand alone, combination
or tandem basis, as described in or granted under this Plan.
(b) "Award Summary" means a written summary setting forth the terms and
conditions of each Award made under this Plan.
(c) "Board" means the Board of Directors of the Corporation, excluding any
member who is an officer or Employee of the Corporation or who otherwise would
not be considered a disinterested person within the meaning of Rule 16b-3 of
the Securities and Exchange Commission.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(e) "Committee" means the Organization, Compensation and Nominating Committee
of the Board or such other committee of the Board as may be designated by the
Board from time to time to administer this Plan.
(f) "Common Stock" means the Common Stock, par value $1.00 per share, of the
Corporation.
(g) "Corporation" means First Chicago NBD Corporation, a Delaware
corporation.
(h) "Employee" means an employee of First Chicago NBD Corporation or a
Subsidiary.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(j) "Fair Market Value" means the average of the highest and the lowest
quoted selling prices on the New York Stock Exchange Composite Transactions
Tape on the relevant valuation date or, if there were no sales on the
valuation date, on the next preceding date on which such selling prices were
recorded; provided, however, that the Committee may modify the definition of
Fair Market Value with respect to any particular Award.
(k) "Participant" means an Employee who has been granted an Award under the
Plan.
(l) "Plan" means this First Chicago NBD Corporation Stock Performance Plan.
(m) "Plan Year" means a twelve-month period beginning with January 1 of each
year.
(n) "Subsidiary" means any corporation or other entity, whether domestic or
foreign, in which the Corporation has or obtains, directly or indirectly, a
proprietary interest of at least 50% by reason of stock ownership or
otherwise.
3. ELIGIBILITY
Any Employee selected by the Committee is eligible to receive an Award. In
addition, the Committee may select those former Employees who have a
consulting arrangement with the Corporation or a Subsidiary whom the Committee
determines have a significant responsibility for the success and future growth
and profitability of the Corporation.
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4. PLAN ADMINISTRATION
(a) Except as otherwise determined by the Board, the Plan shall be
administered by the Committee. The Board, or the Committee to the extent
determined by the Board, shall periodically make determinations with respect
to the participation of Employees in the Plan and, except as otherwise
required by law or this Plan, the grant terms of Awards including vesting
schedules, price, length of relevant performance, restriction or option
period, dividend rights, post-retirement and termination rights, payment
alternatives such as cash, stock, contingent awards or other means of payment
consistent with the purposes of this Plan, and such other terms and conditions
as the Board or the Committee deems appropriate.
(b) The Committee shall have authority to interpret and construe the
provisions of the Plan and the Award Summaries and make determinations
pursuant to any Plan provision or Award Summary which shall be final and
binding on all persons. No member of the Committee shall be liable for any
action or determination made in good faith, and the members shall be entitled
to indemnification and reimbursement in the manner provided in the
Corporation's Certificate of Incorporation, as it may be amended from time to
time.
(c) The Committee may designate persons other than its members to carry out
its responsibilities under such conditions or limitations as it may set, other
than its authority with regard to Awards granted to Employees who are officers
or directors of the Corporation for purposes of Section 16 of the Exchange
Act.
(d) The Committee shall have the authority at any time prior to a Change of
Control (as defined in Section 12(b)) to cancel Awards for reasonable cause
and to provide for the conditions and circumstances under which Awards shall
be forfeited.
5. STOCK SUBJECT TO THE PROVISIONS OF THIS PLAN
(a) The stock subject to the provisions of this Plan shall be shares of
authorized but unissued Common Stock and shares of Common Stock held as
treasury stock. Subject to adjustment in accordance with the provisions of
Section 10, and subject to Section 5(b) below, the total number of shares of
Common Stock available for grants of Awards in any Plan Year shall not exceed
2% of the outstanding Common Stock as reported in the Corporation's Annual
Report on Form 10-K for the fiscal year ending immediately prior to such Plan
Year.
(b) There shall be available for Awards under the Plan in any Plan Year, in
addition to shares available for grant under paragraph (a) of this Section 5,
all of the following: (i) any unused portion of the limit set forth in
paragraph (a) of this Section 5 for any prior Plan Year; (ii) shares
represented by Awards which are cancelled, forfeited, surrendered, terminated,
paid in cash or expire unexercised; (iii) the excess amount of variable Awards
which become fixed at less than their maximum limitations; (iv) any shares of
Common Stock that are used to pay the purchase price or any withholding taxes
associated therewith upon the exercise of an option, to the extent such shares
result in the grant of a replacement option; provided, however, that the total
number of shares of Common Stock which may be available for Awards under the
Plan in any Plan Year may not exceed 5% of the outstanding Common Stock as
reported in the Corporation's Annual Report on Form 10-K for the fiscal year
ending immediately prior to the applicable Plan Year.
(c) The exercise of an option or stock appreciation right granted in tandem
therewith will reduce proportionately the amount of shares subject to the
tandem stock appreciation right or option. In addition, any shares ceasing to
be subject to the related option or right because of such reduction shall not
increase the number of shares of Common Stock available for future Awards
granted under the Plan. The grant of a performance or restricted share unit
Award shall be deemed to be equal to the maximum number of shares which may be
issued under the Award. Where the value of an Award is variable on the date it
is granted, the value shall be deemed to be the maximum limitation of the
Award. Awards payable solely in cash will not reduce the number of shares
available for Awards granted under the Plan.
6. AWARDS UNDER THIS PLAN
As the Board or Committee may determine, the following types of Awards and
other Common Stock-based Awards may be granted under this Plan on a stand
alone, combination or tandem basis:
(a) Stock Option. A right to buy a specified number of shares of Common
Stock at a fixed exercise price during a specified time, all as the
Committee may determine; provided that the exercise price of any option
shall not be less than 100% of the Fair Market Value of the Common Stock on
the date of grant of such Award; provided further that no more than
2,000,000 stock options and stock appreciation rights in the aggregate
(except that a stock option issued in
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tandem with a stock appreciation right shall be counted as one stock option
for purposes of this maximum) may be granted to any Employee during any
five-year period.
(b) Incentive Stock Option. An Award in the form of a stock option which
shall comply with the requirements of Section 422 of the Code or any
successor Section of the Code as it may be amended from time to time.
Subject to adjustment in accordance with the provisions of Section 10, the
aggregate number of shares which may be subject to incentive stock option
Awards under this Plan shall not exceed 10,000,000 shares, subject in any
Plan Year to the limitations of Section 5 of this Plan.
(c) Stock Appreciation Right. A right to receive the excess of the Fair
Market Value of a share of Common Stock on the date the stock appreciation
right is exercised over the Fair Market Value of a share of Common Stock on
the date the stock appreciation right was granted; provided that no more
than 2,000,000 stock options and stock appreciation rights in the aggregate
(except that a stock appreciation right issued in tandem with a stock
option shall be counted as one stock option for purposes of this maximum)
may be granted to any Participant during any five-year period.
(d) Restricted And Performance Shares. A transfer of Common Stock to a
Participant, subject to such restrictions on transfer or other incidents of
ownership, or subject to specified performance standards, for such periods
of time as the Committee may determine; provided that no more than 700,000
performance shares (determined based upon the maximum number of shares of
Common Stock that may be earned) may be granted to any Employee during any
five-year period.
(e) Restricted And Performance Share Unit. A fixed or variable share or
dollar denominated unit subject to such conditions of vesting, performance
and time of payment as the Committee may determine, which are valued at the
Committee's discretion in whole or in part by reference to, or otherwise
based on, the Fair Market Value of Common Stock and which may be paid in
Common Stock, cash or a combination of both.
(f) Dividend Or Equivalent Right. A right to receive dividends or their
equivalent in value in Common Stock, cash or in a combination of both with
respect to any new or previously existing Award.
(g) Stock Award. An unrestricted transfer of ownership of Common Stock
which may only be made to Employees other than Employees who are officers
or directors of the Corporation for purposes of Section 16 of the Exchange
Act.
(h) Other Stock-Based Awards. Other Common Stock-based Awards which are
related to or serve a similar function to those Awards set forth in this
Section 6.
No Common Stock shall be issued pursuant to any Award unless consideration
at least equal to the par value thereof has been received by the Corporation
in the form of cash, services rendered or property.
The Committee may from time to time, establish performance criteria with
respect to an Award. The performance criteria or standards may be based upon
(i) earnings per share, (ii) return on average assets or (iii) return on
average equity. Performance standards shall be determined by the Committee in
its sole discretion and may be absolute in their terms or measured against or
in relationship to other companies comparably, similarly or otherwise situated
and may be based on or adjusted for any other objective goals, events, or
occurrences established by the Committee, including earnings, earnings growth,
revenues, expenses, stock price, market share, charge-offs, loan loss
reserves, reductions in non-performing assets, return on assets, return on
equity or return on investment, regulatory compliance, satisfactory internal
or external audits, improvement of financial ratings, achievement of balance
sheet or income statement objectives, extraordinary charges, losses from
discontinued operations, restatements and accounting changes and other
unplanned special charges such as restructuring expenses, acquisition expenses
including goodwill, unplanned stock offerings and strategic loan loss
provisions. Such performance standards may be particular to a line of
business, subsidiary or other unit or may be based on the performance of the
Corporation generally.
7. AWARD SUMMARIES
Each Award under the Plan shall be evidenced by an Award Summary. Delivery
of an Award Summary to each Participant shall constitute an agreement, subject
to Section 4(d) and Section 9 hereof, between the Corporation and the
Participant as to the terms and conditions of the Award.
8. OTHER TERMS AND CONDITIONS
(a) Assignability. Except to the extent permitted by Rule 16b-3 under the
Exchange Act, or Section 422 of the Code, and as otherwise provided in the
Award Summary, no Award shall be assignable or transferable except by will, by
the laws
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of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code, and during the lifetime of a Participant, the
Award shall be exercisable only by such Participant or such Participant's
guardian, legal representative or assignee pursuant to a qualified domestic
relations order. In the event that any Award is thereafter transferred as
permitted by the preceding sentence, the permitted transferee thereof shall be
deemed the Award recipient hereunder. Stock options, incentive stock options
and stock appreciation rights shall be exercisable during the transferee's
lifetime only by the Award recipient or by the Award recipient's guardian,
legal representative or similar person.
(b) Termination Of Employment. The Committee shall determine the disposition
of the grant of each Award in the event of the retirement, disability, death
or other termination of a Participant's employment.
(c) Rights As A Stockholder. A Participant shall have no rights as a
stockholder with respect to shares covered by an Award until the date the
Participant or his nominee, guardian or legal representative is the holder of
record. No adjustment will be made for dividends or other rights for which the
record date is prior to such date.
(d) No Obligation To Exercise. The grant of an Award shall impose no
obligation upon the Participant to exercise the Award.
(e) Payments By Participants. The Committee may determine that Awards for
which a payment is due from a Participant may be payable: (i) in U.S. dollars
by personal check, bank draft or money order payable to the order of the
Corporation, by money transfers or direct account debits; (ii) through the
delivery or deemed delivery based on attestation to the ownership of shares of
Common Stock with a Fair Market Value equal to the total payment due from the
Participant; (iii) by a combination of the methods described in (i) and (ii)
above; or (iv) by such other methods as the Committee may deem appropriate.
(f) Withholding. Except as otherwise provided by the Committee, (i) the
deduction of withholding and any other taxes required by law will be made from
all amounts paid in cash and (ii) in the case of payments of Awards in shares
of Common Stock, the Participant shall be required to pay the amount of any
taxes required to be withheld prior to receipt of such stock, or alternatively,
a number of shares the Fair Market Value of which equals the amount required to
be withheld may be deducted from the payment. The Committee may provide for
shares of Common Stock to be withheld for tax withholding purposes in excess of
the required minimum amount but not in excess of a Participant's maximum
marginal tax rate.
(g) Restrictions On Sale and Exercise. With respect to Employees who are
officers and directors for purposes of Section 16 of the Exchange Act, and if
required to comply with rules promulgated thereunder, (i) no Award providing
for exercise, a vesting period, a restriction period or the attainment of
performance standards shall permit unrestricted ownership of Common Stock by
the Participant for at least six months from the date of grant, and (ii)
Common Stock acquired pursuant to this Plan (other than Common Stock acquired
as a result of the granting of a "derivative security") may not be sold for at
least six months after acquisition.
9. AMENDMENTS
The Board may alter, amend, suspend or discontinue the Plan or at any time
prior to a Change of Control (as defined in Section 12(b)) alter or amend any
or all Award Summaries granted under the Plan to the extent permitted by law.
Any such action of the Board may be taken without the approval of the
Corporation's stockholders, but only to the extent that such stockholder
approval is not required by applicable law or regulation, including
specifically Rule 16b-3 of the Securities and Exchange Commission.
10. RECAPITALIZATION
The aggregate number of shares of Common Stock as to which Awards may be
granted to Participants, the number of shares thereof covered by each
outstanding Award, and the price per share thereof in each such Award, shall
all be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a subdivision or consolidation of
shares or other capital adjustment, or the payment of a stock dividend or
other increase or decrease in such shares, effected without receipt of
consideration by the Corporation, or other change in corporate or capital
structure; provided, however, that any fractional shares resulting from any
such adjustment shall be eliminated. The Committee may also make the foregoing
changes and any other changes, including changes in the classes of securities
available, to the extent it is deemed necessary or desirable to preserve the
intended benefits of the Plan for the Corporation and the Participants in the
event of any other reorganization, recapitalization, merger, consolidation,
spinoff, extraordinary dividend or other distribution or similar transaction.
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11. NO RIGHT TO EMPLOYMENT
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to
be retained in the employ of the Corporation or a Subsidiary. Further, the
Corporation and each Subsidiary expressly reserve the right at any time to
dismiss a Participant free from any liability, or any claim under the Plan,
except as provided herein or in any Award Summary issued hereunder.
12. CHANGE OF CONTROL
(a) Notwithstanding anything contained in this Plan or any Award Summary to
the contrary, in the event of a Change of Control, as defined below, the
following shall occur with respect to any and all Awards outstanding as of
such Change of Control:
(i) automatic maximization of performance standards, lapse of all
restrictions and acceleration of any time periods relating to the exercise,
realization or vesting of such Awards so that such Awards may be immediately
exercised, realized or vested in full on or before the relevant date fixed in
the Award Summary;
(ii) performance shares or performance units shall be paid entirely in
cash;
(iii) upon exercise of a stock option or an incentive stock option
(collectively an "Option") during the 60-day period from and after the date
of a Change of Control, the Participant exercising the Option may in lieu
of the receipt of Common Stock upon the exercise of the Option, elect by
written notice to the Corporation to receive an amount in cash equal to the
excess of the aggregate Value (as defined below) of the shares of Common
Stock covered by the Option or portion thereof surrendered determined on
the date the Option is exercised, over the aggregate exercise price of the
Option (such excess is referred to herein as the "Aggregate Spread");
provided, however, and notwithstanding any other provision of the Plan, if
the end of such 60-day period from and after the date of a Change of
Control is within six months of the date of grant of an Option held by a
Participant who is an officer or director of the Corporation (within the
meaning of Section 16(b) of the Exchange Act), such Option shall be
cancelled in exchange for a cash payment to the Participant equal to the
Aggregate Spread on the day which is six months and one day after the date
of grant of such Option. As used in this Section 12(a)(iii) the term
"Value" means the higher of (i) the highest Fair Market Value during the
60-day period from and after the date of a Change of Control and (ii) if
the Change of Control is the result of a transaction or series of
transactions described in paragraphs (I) or (III) of the definition of
Change of Control set forth in Section 12(b), the highest price per share
of the Common Stock paid in such transaction or series of transactions
(which in the case of paragraph (I) shall be the highest price per share of
the Common Stock as reflected in a Schedule 13D by the person having made
the acquisition);
(iv) if a Participant's employment terminates for any reason other than
retirement or death following a Change of Control, any Options held by the
Participant may be exercised by the Participant until the earlier of three
months after such termination of employment or the expiration date of such
Options; and
(v) all Awards become noncancellable.
(b) A "Change of Control" of the Corporation shall be deemed to have
occurred upon the happening of any of the following events:
(I) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (A) the then outstanding shares
of common stock of the Corporation (the "Outstanding Corporation Common
Stock") or (B) the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities"), provided,
however, that for purposes of this subsection (I), the following
acquisitions shall not constitute a Change of Control: (A) any acquisition
directly from the Corporation, (B) any acquisition by the Corporation, (C)
any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any corporation controlled by the
Corporation or (D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection
(III) of this Section 12(b); or
(II) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Corporation's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption
5
<PAGE>
of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(III) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the
Corporation (a "Business Combination"), in each case, unless, following
such Business Combination, (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Corporation or
all or substantially all of the Corporation's assets either directly or
through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or
more of, the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(IV) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
13. GOVERNING LAW
To the extent that federal laws do not otherwise control, the Plan shall be
construed in accordance with and governed by the law of the State of Delaware.
14. SUPPLEMENTAL PLANS
The Board shall have the authority to adopt plans, supplemental to this Plan,
covering Employees residing outside the United States, including but not limited
to the United Kingdom.
15. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulation, including, with respect to those Employees who are officers or
directors for purposes of Section 16 of the Exchange Act, Rule 16b-3 of the
Securities and Exchange Commission. In case any one or more of the provisions
of this Plan shall be held invalid, illegal or unenforceable in any respect
under applicable law and regulation (including Rule 16b-3), the validity,
legality and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby and the invalid, illegal or unenforceable
provision shall be deemed null and void; however, to the extent permissible by
law, any provision which could be deemed null and void shall first be construed,
interpreted or revised retroactively to permit this Plan to be construed in
compliance with all applicable laws (including Rule 16b-3) so as to foster the
intent of this Plan.
16. EFFECTIVE DATE AND TERM
The effective date of this Plan is January 1, 1996, subject to its approval
by the stockholders of the Corporation at the annual meeting to be held on May
10, 1996, or any adjournment thereof. The Plan shall remain in effect until
terminated by the Board.
6
<PAGE>
15. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulation, including, with respect to those Employees who are officers or
directors for purposes of Section 16 of the Exchange Act, Rule 16b-3 of the
Securities and Exchange Commission. In case any one or more of the provisions
of this Plan shall be held invalid, illegal or unenforceable in any respect
under applicable law and regulation (including Rule 16b-3), the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby and the invalid, illegal or unenforceable
provision shall be deemed null and void; however, to the extent permissible by
law, any provision which could be deemed null and void shall first be
construed, interpreted or revised retroactively to permit this Plan to be
construed in compliance with all applicable laws (including Rule 16b-3) so as
to foster the intent of this Plan.
16. EFFECTIVE DATE AND TERM
The effective date of this Plan is January 1, 1996, subject to its approval
by the stockholders of the Corporation at the annual meeting to be held on May
10 , 1996, or any adjournment thereof. The Plan shall remain in effect until
terminated by the Board.
7
<PAGE>
EXHIBIT 10(Z)
FIRST CHICAGO NBD CORPORATION SENIOR MANAGEMENT
ANNUAL INCENTIVE PLAN
1. PURPOSE
The First Chicago NBD Corporation Senior Management Annual Incentive Plan is
designed to (i) assist First Chicago NBD Corporation in attracting, retaining
and motivating senior management employees, (ii) associate Participant's
interests with those of the Corporation's stockholders and (iii) qualify
annual incentive compensation paid to Participants who are "covered employees"
as "other performance-based compensation" within the meaning of Section 162(m)
of the Code or a successor provision.
2. DEFINITIONS
Terms not otherwise defined herein shall have the following meanings:
(a) "Board" means the Board of Directors of First Chicago NBD
Corporation.
(b) "Change of Control" means a change of control as defined in the First
Chicago NBD Corporation Stock Performance Plan or any successor thereto.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee appointed by the Board to administer
the Plan as provided herein. Unless otherwise determined by the Board, the
Organization, Compensation and Nominating Committee of the Board shall be
the Committee.
(e) "Corporation" means First Chicago NBD Corporation and its successors
and assigns and any corporation which shall acquire substantially all of
its assets. In addition, Corporation shall include any corporation or other
entity, whether domestic or foreign, in which the Corporation has or
obtains, directly or indirectly, a proprietary interest of at least 50% by
reason of stock ownership or otherwise.
(f) "Incentive Payment" means a payment under this Plan made in cash to a
Participant, subject to Section 4 hereof.
(g) "Incentive Period" means the calendar year, except to the extent the
Committee determines otherwise.
(h) "Participant" means an employee of the Corporation who is a member of
senior management and is designated by the Committee as eligible to receive
an Incentive Payment under the Plan for an Incentive Period.
(i) "Performance Goals" mean (i) earnings per share, (ii) return on
average equity, (iii) return on average assets, or (iv) any other objective
performance goals as may be established by the Committee for an Incentive
Period. Performance Goals may be absolute in their terms or measured
against or in relationship to other companies comparably, similarly or
otherwise situated and may be based on or adjusted for any other objective
goals, events, or occurrences established by the Committee for an Incentive
Period, including earnings, earnings growth, revenues, expenses, stock
price, market share, charge-offs, loan loss reserves, reductions in non-
performing assets, return on assets, return on equity or return on
investment, regulatory compliance, satisfactory internal or external
audits, improvement of financial ratings, achievement of balance sheet or
income statement objectives, extraordinary charges, losses from
discontinued operations, restatements and accounting changes and other
unplanned special charges such as restructuring expenses, acquisition
expenses including goodwill, unplanned stock offerings and strategic loan
loss provisions. Such Performance Goals may be particular to a line of
business, subsidiary or other unit or may be based on the performance of
the Corporation generally. Such Performance Goals may cover such period as
may be specified by the Committee.
(j) "Plan" means the First Chicago NBD Corporation Senior Management
Annual Incentive Plan.
3. ADMINISTRATION
(a) The Plan shall be administered by the Committee. The Committee shall
have authority to determine the terms of all Incentive Payments hereunder,
including, without limitation, the Participants to whom, and the time or times
at which, payments are made, the amount of a Participant's Incentive Payments,
the Incentive Period to which each Incentive Payment shall relate, the actual
dollar amount to be paid, and when the Incentive Payments shall be made (which
payments may, without limitation, be made during or after an Incentive Period,
on a deferred basis or in installments).
1
<PAGE>
(b) Subject to the express provisions of the Plan, the Committee shall have
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The determinations
of the Committee pursuant to its authority under the Plan shall be conclusive
and binding.
(c) The Committee may, in its discretion, authorize the Chief Executive
Officer of the Corporation to act on its behalf, except with respect to
matters relating to such Chief Executive Officer or any executive vice
president or above of the Corporation.
4. DETERMINATION OF PERFORMANCE GOALS AND INCENTIVE PAYMENTS
(a) Prior to the completion of 25% of the Incentive Period or such earlier
date as required under Section 162(m) of the Code, the Committee shall, in its
sole discretion, for each such Incentive Period determine and establish in
writing the following:
(i) The Performance Goals applicable to the Incentive Period; and
(ii) The performance/payout schedule detailing the total amount which may
be available for payout to all Participants as Incentive Payments based
upon the relative level of attainment of the Performance Goals.
(b) After the end of each Incentive Period, the Committee shall:
(i) Certify in writing, prior to the unconditional payment of any
Incentive Payment, whether the Performance Goals for the Incentive Period
were satisfied and to what extent they were satisfied;
(ii) Determine the total amount available for Incentive Payments pursuant
to the performance/payout schedule established in Section 4(a)(ii) above,
which amount shall be based upon the extent to which the Performance Goals
established by the Committee for the Incentive Period have been achieved;
(iii) In its sole discretion, reduce the size of or eliminate the total
amount available for payment for an Incentive Period; and
(iv) In its sole discretion, determine the share, if any, of the
available amount to be paid to each Participant as that Participant's
Incentive Payment and authorize payment of such amount; except, however, in
the case of a Participant who is at or above the level of vice chairman of
First Chicago NBD Corporation, the Board shall approve (but only to the
extent permitted under Section 162(m) of the Code and underlying
regulations) the Committee's determination of such Participant's share
before the Committee may authorize payment.
(v) Anything in this Plan to the contrary notwithstanding, if the minimum
Performance Goals established by the Committee for the Incentive Period
under Section 4(a)(i) are attained and certified by the Committee in
accordance with Section 4(b)(i), the Committee may award the maximum amount
(or in its sole discretion any lesser amount) set forth in Section 4(f) as
a Participant's Incentive Payment for the Incentive Period.
(c) The Committee may authorize a conditional payment of a Participant's
Incentive Payment prior to the end of an Incentive Period based upon the
Committee's good faith determination of the projected size of (i) the total
amount which will become available for payout as Incentive Payments for the
Incentive Period pursuant to Section 4(b)(ii) above, and (ii) a Participant's
Incentive Payment.
(d) Unless otherwise determined by the Committee or required by applicable
law, no payment pursuant to this Plan shall be made to a Participant unless
the Participant is employed by the Corporation as of the date of payment.
(e) Incentive Payments shall be subject to applicable federal, state and
local withholding taxes and other applicable withholding in accordance with
the Corporation's payroll practices as from time-to-time in effect.
(f) The Incentive Payment for any Incentive Period for each Participant who
is a "covered employee" under Section 162(m) of the Code and/or a member of
the senior management committee (as designated by the Chief Executive Officer
of the Corporation) shall in no event exceed $4,000,000.
5. TRANSFERABILITY
Incentive Payments shall not be subject to the claims of creditors and may
not be assigned, alienated, transferred or encumbered in any way by a
Participant prior to the payment thereof.
2
<PAGE>
6. TERMINATION OR AMENDMENT
The Board may amend, modify or terminate the Plan in any respect at any time
without the consent of Participants. Any such action of the Board may be taken
without the approval of the Corporation's stockholders, but only to the extent
that such stockholder approval is not required by applicable law or regulation,
including specifically Section 162(m) of the Code.
7. CHANGE OF CONTROL
Notwithstanding anything contained in this Plan, in the event of a Change of
Control, the following provisions shall be applicable:
(a) The Incentive Period will be deemed to have concluded on the date of
the Change of Control and the total amount available pursuant to Section
4(b) will fund on a pro-rata basis (based upon the number of days in such
Incentive Period elapsed through the date of Change of Control) assuming
the Corporation had attained Performance Goals at a level generating
funding at 200% of target funding; and
(b) The Committee in its sole discretion will determine the share of the
available amount payable to each Participant as that Participant's
Incentive Payment (provided that in all events the entire available amount
as calculated pursuant to Section 7(a) shall be paid to Participants as
Incentive Payments) and payments shall be made to each Participant as soon
thereafter as is practicable.
8. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable law and
regulation, including, with respect to those Participants who are "covered
employees," Section 162(m) of the Code. In case any one or more of the
provisions of this Plan shall be held invalid, illegal or unenforceable in any
respect under applicable law and regulation, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and the invalid, illegal or unenforceable provision shall be
deemed null and void; however, to the extent permissible by law, any provision
which could be deemed null and void shall first be construed, interpreted or
revised retroactively to permit this Plan to be construed in compliance with
all applicable laws (including Code Section 162(m)), so as to foster the
intent of this Plan.
9. CONFER NO OTHER RIGHTS
The establishment of the Plan shall not confer upon any Participant any
legal or equitable right against the Corporation, except as expressly provided
in the Plan.
10. NO RIGHT TO EMPLOYMENT
The Plan, an Incentive Payment, or the designation of an employee as a
Participant for an Incentive Period do not constitute an inducement or
consideration for the employment of any Participant, nor is the Plan or any
Incentive Payment a contract between the Corporation and any Participant.
Participation in the Plan shall not give a Participant any right to be
retained in the employ of the Corporation.
11. OTHER PLANS
Nothing contained in this Plan shall prevent the Board or Committee from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required, and such arrangements may benefit
Participants and may be either generally applicable or applicable only in
specific cases.
12. GOVERNING LAW
The Plan shall be governed, construed and administered in accordance with
the laws of the State of Delaware except where such laws may be superseded by
federal law.
3
<PAGE>
13. EFFECTIVE DATE; TERM OF THE PLAN
The Plan shall be effective as of January 1, 1996 subject to its approval by
the stockholders of the Corporation at the annual meeting of stockholders to
be held May 10, 1996, or any adjournment thereof. Unless sooner terminated by
the Board pursuant to Section 6, to the extent necessary to ensure that
Incentive Payments made to "covered employees" as defined under Section 162(m)
of the Code may be deductible for federal income tax purposes, the Plan shall
terminate as of the date of the first meeting of the Corporation's
stockholders occurring during the year 2001, unless the term of the Plan is
extended and reapproved at such stockholders' meeting. No additional Incentive
Payments may be paid after termination of the Plan. Termination of the Plan
shall not affect any Incentive Payments due and outstanding on the date of
termination and such Incentive Payments shall continue to be subject to the
terms of the Plan notwithstanding its termination.
4
<PAGE>
AGREEMENT AND PLAN OF MERGER
BETWEEN
FIRST CHICAGO CORPORATION
AND
NBD BANCORP, INC.
AS AMENDED
----------------
DATED AS OF JULY 11, 1995
<PAGE>
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
ARTICLE I
The Merger
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1.1 The Merger......................................................... 1
1.2 Effective Time..................................................... 1
1.3 Effects of the Merger.............................................. 1
1.4 Conversion of First Chicago Common Stock; First Chicago Preferred
Stock.............................................................. 1
1.5 NBD Common Stock................................................... 3
1.6 Options............................................................ 3
1.7 Certificate of Incorporation....................................... 4
1.8 By-Laws............................................................ 4
1.9 Tax Consequences................................................... 4
1.10 Management Succession.............................................. 4
1.11 Board of Directors................................................. 4
1.12 Headquarters of Surviving Corporation.............................. 4
ARTICLE II
Exchange of Shares
2.1 NBD to Make Shares Available....................................... 5
2.2 Exchange of Shares................................................. 5
ARTICLE III
Representations and Warranties of NBD
3.1 Corporate Organization............................................. 6
3.2 Capitalization..................................................... 7
3.3 Authority; No Violation............................................ 8
3.4 Consents and Approvals............................................. 8
3.5 Reports............................................................ 9
3.6 Financial Statements............................................... 9
3.7 Broker's Fees...................................................... 9
3.8 Absence of Certain Changes or Events............................... 9
3.9 Legal Proceedings.................................................. 10
3.10 Taxes and Tax Returns.............................................. 10
3.11 Employees.......................................................... 11
3.12 SEC Reports........................................................ 12
3.13 Compliance with Applicable Law..................................... 12
3.14 Certain Contracts.................................................. 12
3.15 Agreements with Regulatory Agencies................................ 13
3.16 Other Activities of NBD and its Subsidiaries....................... 13
3.17 Investment Securities.............................................. 14
3.18 Interest Rate Risk Management Instruments.......................... 14
3.19 Undisclosed Liabilities............................................ 14
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
3.20 Environmental Liability............................................. 14
3.21 State Takeover Laws................................................. 14
3.22 Pooling of Interests................................................ 14
ARTICLE IV
Representations and Warranties of First Chicago
4.1 Corporate Organization.............................................. 15
4.2 Capitalization...................................................... 15
4.3 Authority; No Violation............................................. 16
4.4 Consents and Approvals.............................................. 17
4.5 Reports............................................................. 17
4.6 Financial Statements................................................ 17
4.7 Broker's Fees....................................................... 18
4.8 Absence of Certain Changes or Events................................ 18
4.9 Legal Proceedings................................................... 18
4.10 Taxes and Tax Returns............................................... 18
4.11 Employees........................................................... 19
4.12 SEC Reports......................................................... 20
4.13 Compliance with Applicable Law...................................... 20
4.14 Certain Contracts................................................... 21
4.15 Agreements with Regulatory Agencies................................. 21
4.16 Other Activities of First Chicago and its Subsidiaries.............. 21
4.17 Investment Securities............................................... 22
4.18 Interest Rate Risk Management Instruments........................... 22
4.19 Undisclosed Liabilities............................................. 22
4.20 Environmental Liability............................................. 22
4.21 State Takeover Laws................................................. 23
4.22 Rights Agreement.................................................... 23
4.23 Pooling of Interests................................................ 23
ARTICLE V
Covenants Relating to Conduct of Business
5.1 Conduct of Businesses Prior to the Effective Time................... 23
5.2 Forbearances........................................................ 23
ARTICLE VI
Additional Agreements
6.1 Regulatory Matters.................................................. 25
6.2 Access to Information............................................... 26
6.3 Stockholders' Approvals............................................. 26
6.4 Legal Conditions to Merger.......................................... 26
6.5 Affiliates; Publication of Combined Financial Results............... 26
6.6 Stock Exchange Listing.............................................. 27
6.7 Employee Benefit Plans.............................................. 27
6.8 Indemnification; Directors' and Officers' Insurance................. 27
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
6.9 Additional Agreements............................................... 29
6.10 Advice of Changes................................................... 29
6.11 Dividends........................................................... 29
ARTICLE VII
Conditions Precedent
7.1 Conditions to Each Party's Obligation To Effect the Merger.......... 29
7.2 Conditions to Obligations of First Chicago.......................... 30
7.3 Conditions to Obligations of NBD.................................... 30
ARTICLE VIII
Termination and Amendment
8.1 Termination......................................................... 31
8.2 Effect of Termination............................................... 31
8.3 Amendment........................................................... 31
8.4 Extension; Waiver................................................... 31
ARTICLE IX
General Provisions
9.1 Closing............................................................. 32
9.2 Nonsurvival of Representations, Warranties and Agreements........... 32
9.3 Expenses............................................................ 32
9.4 Notices............................................................. 32
9.5 Interpretation...................................................... 33
9.6 Counterparts........................................................ 33
9.7 Entire Agreement.................................................... 33
9.8 Governing Law....................................................... 33
9.9 Severability........................................................ 33
9.10 Publicity........................................................... 33
9.11 Assignment; Third Party Beneficiaries............................... 33
</TABLE>
Exhibit A--First Chicago Option Agreement
Exhibit B--NBD Option Agreement
Exhibit 6.5(a)(1)--Form of Affiliate Letter Addressed to NBD
Exhibit 6.5(a)(2)--Form of Affiliate Letter Addressed to First Chicago
iii
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
BHC Act..................................................................... 7
CERCLA...................................................................... 14
Certificate................................................................. 3
Certificate of Merger....................................................... 1
Claim....................................................................... 28
Closing..................................................................... 32
Closing Date................................................................ 32
Code........................................................................ 4
Common Certificate.......................................................... 2
Confidentiality Agreement................................................... 26
Delaware Secretary.......................................................... 1
DGCL........................................................................ 1
DPC Shares.................................................................. 3
Effective Time.............................................................. 1
ERISA....................................................................... 11
Exchange Act................................................................ 9
Exchange Agent.............................................................. 5
Exchange Fund............................................................... 5
Exchange Ratio.............................................................. 2
Federal Reserve Board....................................................... 8
First Chicago............................................................... 1
First Chicago Bank Subsidiary............................................... 22
First Chicago Benefit Plans................................................. 19
First Chicago Capital Stock................................................. 2
First Chicago Common Stock.................................................. 2
First Chicago Contract...................................................... 21
First Chicago Convertible Preferred Stock................................... 15
First Chicago Disclosure Schedule........................................... 15
First Chicago DRIP.......................................................... 15
First Chicago ERISA Affiliate............................................... 19
First Chicago ESPSP......................................................... 16
First Chicago 8.45% Series E Cumulative Fixed Rate Preferred Stock.......... 15
First Chicago March 31, 1995 Form 10-Q...................................... 17
First Chicago Option Agreement.............................................. 1
First Chicago Preferred Stock............................................... 15
First Chicago Regulatory Agreement.......................................... 21
First Chicago Reports....................................................... 20
First Chicago Rights........................................................ 15
First Chicago Rights Agreement.............................................. 15
First Chicago Series A Cumulative Adjustable Rate Preferred Stock........... 15
First Chicago Series B Cumulative Adjustable Rate Preferred Stock........... 15
First Chicago Series C Cumulative Adjustable Rate Preferred Stock........... 15
First Chicago Stock Plans................................................... 3
GAAP........................................................................ 9
Governmental Entity......................................................... 8
HOLA........................................................................ 7
Indemnified Parties......................................................... 27
Injunction.................................................................. 29
Insurance Amount............................................................ 28
IRS......................................................................... 10
</TABLE>
i
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<TABLE>
<S> <C>
Joint Proxy Statement....................................................... 8
Liens....................................................................... 7
LSARS....................................................................... 27
Material Adverse Effect..................................................... 6
Merger...................................................................... 1
NBD......................................................................... 1
NBD Bank Subsidiary......................................................... 13
NBD Benefit Plans........................................................... 11
NBD Capital Stock........................................................... 2
NBD Common Stock............................................................ 2
NBD Contract................................................................ 13
NBD Convertible Preferred Stock............................................. 2
NBD Disclosure Schedule..................................................... 6
NBD 8.45% Series E Cumulative Fixed Rate Preferred Stock.................... 2
NBD ERISA Affiliate......................................................... 11
NBD March 31, 1995 Form 10-Q................................................ 9
NBD New Preferred Stock..................................................... 2
NBD Option Agreement........................................................ 1
NBD Preferred Stock......................................................... 7
NBD Regulatory Agreement.................................................... 13
NBD Reports................................................................. 12
NBD Series A Cumulative Adjustable Rate Preferred Stock..................... 2
NBD Series B Cumulative Adjustable Rate Preferred Stock..................... 2
NBD Series C Cumulative Adjustable Rate Preferred Stock..................... 2
NBD Stock Plans............................................................. 27
NBD Units................................................................... 7
New Benefit Plans........................................................... 27
NYSE........................................................................ 6
OCC......................................................................... 9
Option Agreements........................................................... 1
OTS......................................................................... 8
Preferred Stock Certificate................................................. 3
Regulatory Agencies......................................................... 9
Requisite Regulatory Approvals.............................................. 29
S-4......................................................................... 8
SBA......................................................................... 8
SEC......................................................................... 8
Securities Act.............................................................. 12
Significant Subsidiary...................................................... 13
SRO......................................................................... 8
State Approvals............................................................. 8
State Regulator............................................................. 9
Subsidiary.................................................................. 7
Surviving Corporation....................................................... 1
Taxes....................................................................... 11
Trust Account Shares........................................................ 3
Trust Activities............................................................ 13
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 11, 1995, as amended by and
between FIRST CHICAGO CORPORATION, a Delaware corporation ("First Chicago")
and NBD BANCORP, INC., a Delaware corporation ("NBD").
WHEREAS, the Boards of Directors of NBD and First Chicago have determined
that it is in the best interests of their respective companies and their
stockholders to consummate the business combination transaction provided for
herein in which First Chicago will, subject to the terms and conditions set
forth herein, merge with and into NBD (the "Merger"), so that NBD is the
surviving corporation (hereinafter sometimes called the "Surviving
Corporation") in the Merger; and
WHEREAS, it is the intent of the respective Boards of Directors of First
Chicago and NBD that the Merger be structured as a "merger of equals" of First
Chicago and NBD and that the Surviving Corporation be governed and operated on
this basis; and
WHEREAS, as a condition to, and immediately after the execution of, this
Agreement, First Chicago and NBD are entering into a First Chicago stock
option agreement (the "First Chicago Option Agreement") attached hereto as
Exhibit A; and
WHEREAS, as a condition to, and immediately after the execution of, this
Agreement, First Chicago and NBD are entering into a NBD stock option
agreement (the "NBD Option Agreement"; and together with the First Chicago
Option Agreement, the "Option Agreements") attached hereto as Exhibit B; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
The Merger
1.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the Delaware General Corporation Law (the "DGCL"), at the
Effective Time (as defined in Section 1.2), First Chicago shall merge with and
into NBD. NBD shall be the Surviving Corporation in the Merger, and shall
continue its corporate existence under the laws of the State of Delaware. Upon
consummation of the Merger, the separate corporate existence of First Chicago
shall terminate.
1.2 Effective Time. The Merger shall become effective as set forth in the
certificate of merger (the "Certificate of Merger") which shall be filed with
the Secretary of State of the State of Delaware (the "Delaware Secretary") on
the Closing Date (as defined in Section 9.1). The term "Effective Time" shall
be the date and time when the Merger becomes effective, as set forth in the
Certificate of Merger.
1.3 Effects of the Merger. At and after the Effective Time, the Merger shall
have the effects set forth in Section 261 of the DGCL.
1.4 Conversion of First Chicago Common Stock; First Chicago Preferred
Stock. At the Effective Time, in each case, subject to Section 2.2(e), by
virtue of the Merger and without any action on the part of First Chicago, NBD
or the holder of any of the following securities:
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(a) Each share of the common stock, par value $5.00 per share, of First
Chicago (the "First Chicago Common Stock"; and together with the First
Chicago Preferred Stock (as defined in Section 4.2(a)), the "First Chicago
Capital Stock") issued and outstanding immediately prior to the Effective
Time (other than shares of First Chicago Capital Stock held (x) in First
Chicago's treasury or (y) directly or indirectly by First Chicago or NBD or
any of their respective wholly owned Subsidiaries (as defined in Section
3.1) (except for Trust Account Shares and DPC shares, as such terms are
defined in Section 1.4(i) and as set forth in the First Chicago Disclosure
Schedule)) shall be converted into the right to receive 1.81 shares (the
"Exchange Ratio") of the common stock, par value $1.00 per share, of NBD
(the "NBD Common Stock"; the NBD Common Stock, the NBD Preferred Stock (as
defined in Section 3.2) and the NBD New Preferred Stock (as defined Section
1.4(f)) being referred to herein as the "NBD Capital Stock").
(b) Each share of First Chicago Series A Cumulative Adjustable Rate
Preferred Stock (as defined in Section 4.2(a)) issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive one share of preferred stock with cumulative and adjustable
dividends of NBD (the "NBD Series A Cumulative Adjustable Rate Preferred
Stock"). The terms of the NBD Series A Cumulative Adjustable Rate Preferred
Stock shall be substantially the same as the terms of the First Chicago
Series A Cumulative Adjustable Rate Preferred Stock.
(c) Each share of First Chicago Series B Cumulative Adjustable Rate
Preferred Stock (as defined in Section 4.2(a)) issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive one share of preferred stock with cumulative and adjustable
dividends of NBD (the "NBD Series B Cumulative Adjustable Rate Preferred
Stock"). The terms of the NBD Series B Cumulative Adjustable Rate Preferred
Stock shall be substantially the same as the terms of the First Chicago
Series B Cumulative Adjustable Rate Preferred Stock.
(d) Each share of First Chicago Series C Cumulative Adjustable Rate
Preferred Stock (as defined in Section 4.2(a)) issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive one share of preferred stock with cumulative and adjustable
dividends of NBD (the "NBD Series C Cumulative Adjustable Rate Preferred
Stock"). The terms of the NBD Series C Cumulative Adjustable Rate Preferred
Stock shall be substantially the same as the terms of the First Chicago
Series C Cumulative Adjustable Rate Preferred Stock.
(e) Each share of First Chicago 8.45% Series E Cumulative Fixed Rate
Preferred Stock (as defined in Section 4.2(a)) issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive one share of preferred stock with a fixed rate dividend of NBD
(the "NBD 8.45% Series E Cumulative Fixed Rate Preferred Stock"). The terms
of the NBD 8.45% Series E Cumulative Fixed Rate Preferred Stock shall be
substantially the same as the terms of the First Chicago 8.45% Series E
Cumulative Fixed Rate Preferred Stock.
(f) Each share of First Chicago Convertible Preferred Stock (as defined
in Section 4.2(a)) issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive one share of
convertible preferred stock with a fixed rate dividend of NBD (the "NBD
Convertible Preferred Stock", and together with the NBD Series A Cumulative
Adjustable Rate Preferred Stock, NBD Series B Cumulative Adjustable Rate
Preferred Stock, NBD Series C Cumulative Adjustable Rate Preferred Stock,
and NBD 8.45% Series E Cumulative Fixed Rate Preferred Stock, the "NBD New
Preferred Stock"). The terms of the NBD Convertible Preferred Stock shall
be substantially the same as the terms of the First Chicago Convertible
Preferred Stock.
(g) At the Effective Time, any deposit agreements pursuant to which
shares of First Chicago Preferred Stock are held subject to depositary
receipts shall automatically, and without further action on the part of the
Surviving Corporation, be assumed by the Surviving Corporation.
(h) All of the shares of First Chicago Common Stock converted into NBD
Common Stock pursuant to this Article I shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist as of the
Effective Time, and each certificate (each a "Common Certificate")
previously representing any such shares of First Chicago Common Stock shall
thereafter represent the right to receive (i) a certificate
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representing the number of whole shares of NBD Common Stock and (ii) cash
in lieu of fractional shares into which the shares of First Chicago Common
Stock represented by such Common Certificate have been converted pursuant
to this Section 1.4 and Section 2.2(e). Common Certificates previously
representing shares of First Chicago Common Stock shall be exchanged for
certificates representing whole shares of NBD Common Stock and cash in lieu
of fractional shares issued in consideration therefor upon the surrender of
such Common Certificates in accordance with Section 2.2, without any
interest thereon. If, prior to the Effective Time, the outstanding shares
of NBD Common Stock or First Chicago Common Stock shall have been
increased, decreased, changed into or exchanged for a different number or
kind of shares or securities as a result of a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split, or other similar change in capitalization, then an appropriate
and proportionate adjustment shall be made to the Exchange Ratio.
(i) At the Effective Time, all shares of First Chicago Common Stock that
are owned by First Chicago as treasury stock and all shares of First
Chicago Common Stock that are owned, directly or indirectly, by First
Chicago or NBD or any of their respective wholly owned Subsidiaries (other
than shares of First Chicago Common Stock held, directly or indirectly, in
trust accounts, managed accounts and the like or otherwise held in a
fiduciary capacity that are beneficially owned by third parties (any such
shares, and shares of NBD Common Stock which are similarly held, whether
held directly or indirectly by First Chicago or NBD, as the case may be,
being referred to herein as "Trust Account Shares") and other than any
shares of First Chicago Common Stock held by First Chicago or NBD or any of
their respective Subsidiaries in respect of a debt previously contracted
(any such shares of First Chicago Common Stock, and shares of NBD Common
Stock which are similarly held, whether held directly or indirectly by
First Chicago or NBD or any of their respective Subsidiaries, being
referred to herein as "DPC Shares") and as set forth in the First Chicago
Disclosure Schedule) shall be cancelled and shall cease to exist and no
stock of NBD or other consideration shall be delivered in exchange
therefor. All shares of NBD Common Stock that are owned by First Chicago or
any of its wholly owned Subsidiaries (other than Trust Account Shares and
DPC Shares) shall become treasury stock of NBD.
(j) All of the shares of First Chicago Preferred Stock converted into NBD
New Preferred Stock pursuant to this Article I shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist
as of the Effective Time, and each certificate (each a "Preferred Stock
Certificate"; and together with a Common Certificate, a "Certificate")
previously representing any such shares of First Chicago Preferred Stock
shall thereafter represent the right to receive a certificate representing
the number of whole shares of corresponding NBD New Preferred Stock into
which the shares of First Chicago Preferred Stock represented by such
Preferred Stock Certificate have been converted pursuant to this Section
1.4. Preferred Stock Certificates previously representing shares of First
Chicago Preferred Stock shall be exchanged for certificates representing
whole shares of corresponding NBD New Preferred Stock issued in
consideration therefor upon the surrender of such Preferred Stock
Certificates in accordance with Section 2.2 hereof, without any interest
thereon.
1.5 NBD Common Stock. At and after the Effective Time, each share of NBD
Common Stock issued and outstanding immediately prior to the Closing Date
shall remain an issued and outstanding share of common stock of the Surviving
Corporation and shall not be affected by the Merger.
1.6 Options. (a) At the Effective Time, each option granted by First Chicago
to purchase shares of First Chicago Common Stock which is outstanding and
unexercised immediately prior thereto shall cease to represent a right to
acquire shares of First Chicago Common Stock and shall be converted
automatically into an option to purchase shares of NBD Common Stock in an
amount and at an exercise price determined as provided below (and otherwise,
in the case of options, subject to the terms of the First Chicago benefit
plans under which they were issued (collectively, the "First Chicago Stock
Plans") and the agreements evidencing grants thereunder)):
(i) The number of shares of NBD Common Stock to be subject to the new
option shall be equal to the product of the number of shares of First
Chicago Common Stock subject to the original option and the Exchange Ratio,
provided that any fractional shares of NBD Common Stock resulting from such
multiplication shall be rounded to the nearest whole share; and
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(ii) The exercise price per share of NBD Common Stock under the new
option shall be equal to the exercise price per share of First Chicago
Common Stock under the original option divided by the Exchange Ratio,
provided that such exercise price shall be rounded down to the nearest
whole cent.
(b) The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code. The duration
and other terms of the new option shall be the same as the original option
except that all references to First Chicago shall be deemed to be references
to NBD.
1.7 Certificate of Incorporation. Subject to the terms and conditions of
this Agreement, at the Effective Time, the Certificate of Incorporation of NBD
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law, except that such
Certificate of Incorporation shall be amended to provide: (a) that the number
of shares of authorized Common Stock of the Surviving Corporation shall be
increased to 750,000,000; (b) that the name of the Surviving Corporation shall
be "First Chicago NBD Corporation"; (c) for the deletion of the Series A
Preferred Stock, par value $1.00 per share; and (d) for the NBD New Preferred
Stock.
1.8 By-Laws. Subject to the terms and conditions of this Agreement, at the
Effective Time, the By-Laws of NBD, shall be the By-Laws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.9 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(i)(A) of the Code, and
that this Agreement shall constitute a "plan of reorganization" for the
purposes of Section 368 of the Code.
1.10 Management Succession. (a) At the Effective Time, Mr. Richard L. Thomas
shall be Chairman of the Board of the Surviving Corporation, and shall serve
in such capacity until the annual meeting of stockholders of the Surviving
Corporation (anticipated to be held on May 20, 1996). At the Effective Time,
Mr. Verne G. Istock shall be the President and Chief Executive Officer of the
Surviving Corporation. Mr. Istock shall immediately and without further action
of the Board of Directors become Chairman of the Board of the Surviving
Corporation on the date (which in no event shall be later than May 31, 1996)
upon which Mr. Thomas ceases to be Chairman of the Board.
(b) At the annual meeting of stockholders of the Surviving Corporation
(anticipated to be held on May 20, 1996), Mr. Thomas shall retire from all
positions he then holds as an officer of the Surviving Corporation or as an
officer or employee of any of its Subsidiaries.
1.11 Board of Directors. (a) From and after the Effective Time, the Board of
Directors of the Surviving Corporation shall consist of 22 persons, including
Messrs. Thomas and Istock, 10 additional persons, two of whom may be executive
officers of First Chicago, to be named by Mr. Thomas and the Board of
Directors of First Chicago, and 10 additional persons, one of whom may be an
executive officer of NBD, to be named by Mr. Istock and the Board of Directors
of NBD.
(b) The representatives selected by First Chicago and NBD, respectively,
shall be divided as equally as practicable among the three classes of
directors in proportion to the aggregate representation set forth above. From
and after the Effective Time, the representatives of First Chicago and NBD
shall also be represented in proportion to the aggregate representation set
forth above on all committees of the Board of Directors of the Surviving
Corporation.
1.12 Headquarters of Surviving Corporation. At the Effective Time, the
headquarters and principal executive offices of the Surviving Corporation
shall be Chicago, Illinois.
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ARTICLE II
Exchange of Shares
2.1 NBD to Make Shares Available. At or prior to the Effective Time, NBD
shall deposit, or shall cause to be deposited, with First Chicago Trust
Company of New York, or another bank or trust company reasonably acceptable to
each of First Chicago and NBD (the "Exchange Agent"), for the benefit of the
holders of Certificates, for exchange in accordance with this Article II,
certificates representing the shares of NBD Common Stock and NBD New Preferred
Stock and cash in lieu of any fractional shares (such cash and certificates
for shares of NBD Common Stock and NBD New Preferred Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant
to Section 2.2(a) in exchange for outstanding shares of First Chicago Common
Stock.
2.2 Exchange of Shares. (a) As soon as practicable after the Effective Time,
and in no event later than five business days thereafter, the Exchange Agent
shall mail to each holder of record of one or more Certificates a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing, the
shares of NBD Common Stock, NBD New Preferred Stock and any cash in lieu of
fractional shares into which the shares of First Chicago Common Stock or First
Chicago Preferred Stock represented by such Certificate or Certificates shall
have been converted pursuant to this Agreement. Upon proper surrender of a
Certificate for exchange and cancellation to the Exchange Agent, together with
such properly completed letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor, as
applicable, (i) a certificate representing that number of whole shares of NBD
Common Stock or NBD New Preferred Stock to which such holder of First Chicago
Common Stock or First Chicago Preferred Stock shall have become entitled
pursuant to the provisions of Article I, and (ii) a check representing the
amount of any cash in lieu of fractional shares which such holder has the
right to receive in respect of the Certificate surrendered pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on any cash in
lieu of fractional shares or on any unpaid dividends and distributions payable
to holders of Certificates.
(b) No dividends or other distributions declared with respect to NBD Common
Stock or NBD New Preferred Stock with a record date following the 30th day to
occur after the Effective Time shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Article II. Subject to Section 6.11 and to
the effect of applicable laws, (i) until such 30th day, there shall be paid to
each former holder of shares of First Chicago Common Stock or First Chicago
Preferred Stock, the amount of dividends or other distributions with a record
date after the Effective Time but on or before such 30th day payable with
respect to the shares of NBD Common Stock or NBD New Preferred into which such
First Chicago Common Stock or First Chicago Preferred Stock has been converted
pursuant to this Article II and (ii) after the surrender of a Certificate in
accordance with this Article II, the record holder thereof shall be entitled
to receive any such dividends or other distributions with a record date
following the 30th day to occur after the Effective Time, without any interest
thereon, which theretofore had become payable with respect to shares of NBD
Common Stock or NBD New Preferred Stock represented by such Certificate.
(c) If any certificate representing shares of NBD Common Stock or NBD New
Preferred Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered shall be
properly endorsed (or accompanied by an appropriate instrument of transfer)
and otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other
taxes required by reason of the issuance of a certificate representing shares
of NBD Common Stock or NBD New Preferred Stock in any name other than that of
the registered holder of the Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
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(d) After the Effective Time, there shall be no transfers on the stock
transfer books of First Chicago of the shares of First Chicago Common Stock or
First Chicago Preferred Stock which were issued and outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates
representing such shares are presented for transfer to the Exchange Agent,
they shall be cancelled and exchanged for certificates representing shares of
NBD Common Stock or NBD New Preferred Stock as provided in this Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of NBD Common Stock shall
be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to NBD Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of
First Chicago. In lieu of the issuance of any such fractional share, NBD shall
pay to each former stockholder of First Chicago who otherwise would be
entitled to receive such fractional share an amount in cash determined by
multiplying (i) the average of the closing-sale prices of NBD Common Stock on
the New York Stock Exchange, Inc. (the "NYSE") as reported by The Wall Street
Journal for the five trading days immediately preceding the date of the
Effective Time by (ii) the fraction of a share (rounded to the nearest
thousandth when expressed as an Arabic number) of NBD Common Stock to which
such holder would otherwise be entitled to receive pursuant to Section 1.4.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of First Chicago for 12 months after the Effective Time shall be
paid to NBD. Any stockholders of First Chicago who have not theretofore
complied with this Article II shall thereafter look only to NBD for payment of
the shares of NBD Common Stock or NBD New Preferred Stock, cash in lieu of any
fractional shares and any unpaid dividends and distributions on the NBD Common
Stock or NBD New Preferred Stock deliverable in respect of each share of First
Chicago Common Stock or First Chicago Preferred Stock, as the case may be,
such stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon. Notwithstanding the foregoing, none of First
Chicago, NBD, the Exchange Agent or any other person shall be liable to any
former holder of shares of First Chicago Common Stock or First Chicago
Preferred Stock for any amount delivered in good faith to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if reasonably required by
NBD, the posting by such person of a bond in such amount as NBD may determine
is reasonably necessary as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the shares of NBD
Capital Stock and any cash in lieu of fractional shares deliverable in respect
thereof pursuant to this Agreement.
ARTICLE III
Representations and Warranties of NBD
Except as disclosed in the NBD disclosure schedule delivered to First
Chicago concurrently herewith (the "NBD Disclosure Schedule") NBD hereby
represents and warrants to First Chicago as follows:
3.1 Corporate Organization. (a) NBD is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. NBD has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect on NBD. As used in this Agreement, the term
"Material Adverse Effect" means, with respect to First Chicago, NBD or the
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Surviving Corporation, as the case may be, a material adverse effect on the
business, results of operations, financial condition, or (insofar as they can
reasonably be foreseen) prospects of such party and its Subsidiaries taken as
a whole. As used in this Agreement, the word "Subsidiary" when used with
respect to any party means any bank, corporation, partnership, limited
liability company, or other organization, whether incorporated or
unincorporated, which is consolidated with such party for financial reporting
purposes. NBD is duly registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended (the "BHC Act") and as a savings and
loan holding company under the Home Owners' Loan Act ("HOLA"). True and
complete copies of the Certificate of Incorporation and By-Laws of NBD, as in
effect as of the date of this Agreement, have previously been made available
by NBD to First Chicago.
(b) Each NBD Subsidiary (i) is duly organized and validly existing as a
bank, corporation, partnership or limited liability company under the laws of
its jurisdiction of organization, (ii) is duly qualified to do business and in
good standing in all jurisdictions (whether federal, state, local or foreign)
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and in which the failure to be so qualified
would have a Material Adverse Effect on NBD, and (iii) has all requisite
corporate power and authority to own or lease its properties and assets and to
carry on its business as now conducted.
(c) The minute books of NBD accurately reflect in all material respects all
corporate actions held or taken since January 1, 1993 of its stockholders and
Board of Directors (including committees of the Board of Directors of NBD).
3.2 Capitalization. (a) The authorized capital stock of NBD consists of (i)
500,000,000 shares of NBD Common Stock, of which as of June 30, 1995,
157,139,395 shares were issued and outstanding and 3,743,613 shares were held
in treasury, and (ii) 10,460,000 shares of Preferred Stock (the "NBD Preferred
Stock"), of which as of June 30, 1995, (A) 10,000,000 shares were designated
and no shares were issued and outstanding as Preferred Stock, no par value,
and (B) 460,000 shares were designated and no shares were issued and
outstanding as Series A Preferred Stock, par value $1.00 per share. All of the
issued and outstanding shares of NBD Capital Stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. As of
the date of this Agreement, except pursuant to the terms of NBD's issued and
outstanding Preferred Stock Purchase Units ("NBD Units") and for the NBD
Option Agreement, NBD does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of NBD Capital
Stock or any other equity securities of NBD or any securities representing the
right to purchase or otherwise receive any shares of NBD Common Stock or NBD
Preferred Stock. As of June 30, 1995, no shares of NBD Common Stock were
reserved for issuance, except for (i) 2,152,022 shares reserved for issuance
upon the exercise of stock options pursuant to the NBD Stock Plans (as defined
in Section 6.7), (ii) 32,243 shares reserved for issuance as awards under the
NBD Directors Stock Award Plans and (iii) 546,170 shares reserved for issuance
upon the exercise of options granted in substitution for options assumed in
prior NBD acquisitions. The only shares of NBD Preferred Stock reserved for
issuance were 1,500,000 shares reserved pursuant to NBD Units. Since June 30,
1995, NBD has not issued any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock, other
than pursuant to the exercise of employee stock options granted prior to such
date. The shares of NBD Capital Stock to be issued pursuant to the Merger will
be duly authorized and validly issued and, at the Effective Time, all such
shares will be fully paid, nonassessable and free of preemptive rights, with
no personal liability attaching to the ownership thereof.
(b) NBD owns, directly or indirectly, all of the issued and outstanding
shares of capital stock of each of the NBD Subsidiaries, free and clear of any
liens, pledges, charges, encumbrances and security interests whatsoever
("Liens"), and all of such shares are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No NBD Subsidiary has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of any
shares of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares
of capital stock or any other equity security of such Subsidiary.
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3.3 Authority; No Violation. (a) NBD has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of NBD. The Board of Directors of
NBD has directed that this Agreement and the transactions contemplated hereby
be submitted to NBD's stockholders for approval at a meeting of such
stockholders and, except for the adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of NBD Common
Stock, no other corporate proceedings on the part of NBD are necessary to
approve this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by NBD and
(assuming due authorization, execution and delivery by First Chicago)
constitutes a valid and binding obligation of NBD, enforceable against NBD in
accordance with its terms.
(b) Neither the execution and delivery of this Agreement by NBD nor the
consummation by NBD of the transactions contemplated hereby, nor compliance by
NBD with any of the terms or provisions hereof, will (i) violate any provision
of the Certificate of Incorporation or By-Laws of NBD or (ii) assuming that
the consents and approvals referred to in Section 3.4 are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to NBD or any of its Subsidiaries or any of
their respective properties or assets, or (y) violate, conflict with, result
in a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of NBD or any of its Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which NBD or any of its
Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected, except (in the case of clause
(y) above) for such violations, conflicts, breaches or defaults which, either
individually or in the aggregate, will not have or be reasonably likely to
have a Material Adverse Effect on NBD or the Surviving Corporation.
3.4 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHC Act and approval of such
applications and notices, (ii) the filing of any required applications with
the Office of Thrift Supervision (the "OTS") (iii) the filing of any required
applications or notices with any state or foreign agencies and approval of
such applications and notices (the "State Approvals"), (iv) the filing with
the Securities and Exchange Commission (the "SEC") of a joint proxy statement
in definitive form relating to the meetings of First Chicago's and NBD's
stockholders to be held in connection with this Agreement and the transactions
contemplated hereby (the "Joint Proxy Statement") and the registration
statement on Form S-4 (the "S-4") in which the Joint Proxy Statement will be
included as a prospectus, (v) the filing of the Certificate of Merger with the
Delaware Secretary pursuant to the DGCL, (vi) any notices to or filings with
the Small Business Administration ("SBA"), (vii) any consent, authorizations,
approvals, filings or exemptions in connection with compliance with the
applicable provisions of federal and state securities laws relating to the
regulation of broker-dealers or investment advisers, and federal commodities
laws relating to the regulation of futures commission merchants and the rules
and regulations thereunder and of any applicable industry self-regulatory
organization ("SRO"), and the rules of the NYSE, or which are required under
consumer finance, mortgage banking and other similar laws, (viii) such filings
and approvals as are required to be made or obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of the
shares of NBD Common Stock pursuant to this Agreement, and (ix) the approval
of this Agreement by the requisite vote of the stockholders of First Chicago
and NBD, no consents or approvals of or filings or registrations with any
court, administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with (A) the execution and delivery by NBD of this
Agreement and (B) the consummation by NBD of the Merger and the other
transactions contemplated hereby.
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3.5 Reports. NBD and each of its Subsidiaries have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since January 1, 1993
with (i) the Federal Reserve Board, (ii) the Federal Deposit Insurance
Corporation, (iii) any state regulatory authority (each a "State Regulator"),
(iv) the Office of the Comptroller of the Currency (the "OCC"), (v) the OTS,
(vi) the SEC and (vii) any SRO (collectively "Regulatory Agencies"), and all
other reports and statements required to be filed by them since January 1,
1993, including, without limitation, any report or statement required to be
filed pursuant to the laws, rules or regulations of the United States, any
state, or any Regulatory Agency and have paid all fees and assessments due and
payable in connection therewith, except where the failure to file such report,
registration or statement or to pay such fees and assessments, either
individually or in the aggregate, will not have a Material Adverse Effect on
NBD. Except for normal examinations conducted by a Regulatory Agency in the
regular course of the business of NBD and its Subsidiaries, no Regulatory
Agency has initiated any proceeding or, to the best knowledge of NBD,
investigation into the business or operations of NBD or any of its
Subsidiaries since January 1, 1993, except where such proceedings or
investigation are not likely, either individually or in the aggregate, to have
a Material Adverse Effect on NBD. There is no unresolved violation, criticism,
or exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of NBD or any of its Subsidiaries which, in the
reasonable judgment of NBD, is likely, either individually or in the
aggregate, to have a Material Adverse Effect on NBD.
3.6 Financial Statements. NBD has previously made available to First Chicago
copies of (a) the consolidated balance sheets of NBD and its Subsidiaries as
of December 31, for the fiscal years 1993 and 1994, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the fiscal years 1992 through 1994, inclusive, as reported in NBD's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 filed
with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in each case accompanied by the audit report of Deloitte &
Touche LLP, independent public accountants with respect to NBD, and (b) the
unaudited consolidated balance sheet of NBD and its Subsidiaries as of March
31, 1994 and March 31, 1995 and the related unaudited consolidated statements
of income, cash flows and changes in stockholders' equity for the three-month
periods then ended as reported in NBD's Quarterly Report on Form 10-Q for the
period ended March 31, 1995 filed with the SEC under the Exchange Act (the
"NBD March 31, 1995 Form 10-Q"). The December 31, 1994 consolidated balance
sheet of NBD (including the related notes, where applicable) fairly presents
the consolidated financial position of NBD and its Subsidiaries as of the date
thereof, and the other financial statements referred to in this Section 3.6
(including the related notes, where applicable) fairly present (subject, in
the case of the unaudited statements, to recurring audit adjustments normal in
nature and amount) the results of the consolidated operations and changes in
stockholders' equity and consolidated financial position of NBD and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; and each of such statements (including the related notes,
where applicable) has been prepared in all material respects in accordance
with generally accepted accounting principles ("GAAP") consistently applied
during the periods involved, except, in each case, as indicated in such
statements or in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. The books and records of NBD and its Subsidiaries have
been, and are being, maintained in all material respects in accordance with
GAAP and any other applicable legal and accounting requirements and reflect
only actual transactions.
3.7 Broker's Fees. Neither NBD nor any NBD Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in
connection with the Merger or related transactions contemplated by this
Agreement or the Option Agreements.
3.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in NBD Reports (as defined in Section 3.12) filed prior to the date hereof,
since March 31, 1995, (i) NBD and its Subsidiaries taken as a whole have not
incurred any material liability, except in the ordinary course of their
business, and (ii) no event has occurred which has had, individually or in the
aggregate, a Material Adverse Effect on NBD or the Surviving Corporation.
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(b) Except as publicly disclosed in NBD Reports filed prior to the date
hereof, since March 31, 1995, NBD and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary and usual
course.
(c) Since December 31, 1994, neither NBD nor any of its Subsidiaries has (i)
except for such actions as are in the ordinary course of business consistent
with past practice or except as required by applicable law, (A) increased the
wages, salaries, compensation, pension, or other fringe benefits or
perquisites payable to any executive officer, employee, or director from the
amount thereof in effect as of December 31, 1994, or (B) granted any severance
or termination pay, entered into any contract to make or grant any severance
or termination pay, or paid any bonuses aggregating in excess of 5% of NBD's
1994 salary and employee benefits expenses, other than customary year-end
bonuses for fiscal 1994 and 1995, or (ii) suffered any strike, work stoppage,
slowdown, or other labor disturbance which, in the reasonable judgment of NBD,
is likely, either individually or in the aggregate, to have a Material Adverse
Effect on NBD.
3.9 Legal Proceedings. (a) Neither NBD nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of NBD's knowledge,
threatened, material legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against NBD or any of its Subsidiaries or challenging the validity or
propriety of the transactions contemplated by this Agreement or the NBD Option
Agreement as to which there is a reasonable probability of an adverse
determination and which, if adversely determined, would, individually or in
the aggregate, have a Material Adverse Effect on NBD.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those that apply to similarly situated bank holding
companies or banks) imposed upon NBD, any of its Subsidiaries or the assets of
NBD or any of its Subsidiaries which has had, or might reasonably be expected
to have, a Material Adverse Effect on NBD.
3.10 Taxes and Tax Returns. (a) Each of NBD and its Subsidiaries has duly
filed all federal, state, county, foreign and, to the best of NBD's knowledge,
local information returns and tax returns required to be filed by it on or
prior to the date hereof (all such returns being accurate and complete in all
material respects) and has duly paid or made provisions for the payment of all
Taxes (as defined in Section 3.10(b)) and other governmental charges which
have been incurred or are due or claimed to be due from it by federal, state,
county, foreign or local taxing authorities on or prior to the date of this
Agreement (including, without limitation, if and to the extent applicable,
those due in respect of its properties, income, business, capital stock,
deposits, franchises, licenses, sales and payrolls) other than (i) Taxes or
other charges which are not yet delinquent or are being contested in good
faith and have not been finally determined, or (ii) information returns, tax
returns, Taxes or other governmental charges the failure to file, pay or make
provision for, either individually or in the aggregate, are not likely, in the
reasonable judgment of NBD, to have a Material Adverse Effect on NBD. The
income tax returns of NBD and its Subsidiaries have been examined by the
Internal Revenue Service (the "IRS") and any liability with respect thereto
has been satisfied for all years to and including 1987, and either no material
deficiencies were asserted as a result of such examination for which NBD does
not have adequate reserves or all such deficiencies were satisfied. To the
best of NBD's knowledge, there are no material disputes pending, or claims
asserted for, Taxes or assessments upon NBD or any of its Subsidiaries for
which NBD does not have adequate reserves, nor has NBD or any of its
Subsidiaries given any currently effective waivers extending the statutory
period of limitation applicable to any federal, state, county or local income
tax return for any period. In addition, (A) proper and accurate amounts have
been withheld by NBD and its Subsidiaries from their employees for all prior
periods in compliance in all material respects with the tax withholding
provisions of applicable federal, state and local laws, except where failure
to do so would not have a Material Adverse Effect on NBD, (B) federal, state,
county and local returns which are accurate and complete in all material
respects have been filed by NBD and its Subsidiaries for all periods for which
returns were due with respect to income tax withholding, Social Security and
unemployment taxes, except where failure to do so would not have a Material
Adverse Effect on NBD, (C) the amounts shown on such federal, state, local or
county returns to be due and payable have been paid in full or adequate
provision therefor has been included by NBD in its consolidated
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financial statements as of December 31, 1994, except where failure to do so
would not have a Material Adverse Effect on NBD and (D) there are no Tax liens
upon any property or assets of NBD or its Subsidiaries except liens for
current taxes not yet due or liens that would not have a Material Adverse
Effect on NBD. Neither NBD nor any of its Subsidiaries has been required to
include in income any adjustment pursuant to Section 481 of the Code by reason
of a voluntary change in accounting method initiated by NBD or any of its
Subsidiaries, and the IRS has not initiated or proposed any such adjustment or
change in accounting method, in either case which has had or is reasonably
likely to have a Material Adverse Effect on NBD. Except as set forth in the
financial statements described in Section 3.6, neither NBD nor any of its
Subsidiaries has entered into a transaction which is being accounted for as an
installment obligation under Section 453 of the Code, which would be
reasonably likely to have a Material Adverse Effect on NBD.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all federal,
state, county, local, and foreign income, excise, gross receipts, gross
income, ad valorem, profits, gains, property, capital, sales, transfer, use,
payroll, employment, severance, withholding, duties, intangibles, franchise,
backup withholding, and other taxes, charges, levies or like assessments
together with all penalties and additions to tax and interest thereon.
(c) Any amount that is reasonably likely to be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of NBD or
any of its affiliates who is a "Disqualified Individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or NBD Benefit Plan (as defined in Section 3.11(a)) currently in effect should
not be characterized as an "excess parachute payment" (as such term is defined
in Section 280G(b)(1) of the Code).
(d) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by NBD or any Subsidiary
of NBD under any contract, plan, program, arrangement or understanding would
be reasonably likely to have a Material Adverse Effect on NBD.
3.11 Employees. (a) The NBD Disclosure Schedule sets forth a true and
complete list of each material employee benefit plan, arrangement or agreement
that is maintained as of the date of this Agreement (the "NBD Benefit Plans")
by NBD or any of its Subsidiaries or by any trade or business, whether or not
incorporated (an "NBD ERISA Affiliate"), all of which together with NBD would
be deemed a "single employer" within the meaning of Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(b) NBD has heretofore delivered to First Chicago true and complete copies
of each of the NBD Benefit Plans and certain related documents, including, but
not limited to, (i) the actuarial report for such NBD Benefit Plan (if
applicable) for each of the last two years, and (ii) the most recent
determination letter from the IRS (if applicable) for such Plan.
(c) (i) Each of the NBD Benefit Plans has been operated and administered in
all material respects with applicable laws, including, but not limited to,
ERISA and the Code, (ii) each of the NBD Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified,
(iii) with respect to each Plan which is subject to Title IV of ERISA, the
present value of accrued benefits under such Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Plan's actuary with respect to such Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such
Plan allocable to such accrued benefits, (iv) no NBD Benefit Plan provides
benefits, including, without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees of NBD, its
Subsidiaries or any ERISA Affiliate beyond their retirement or other
termination of service, other than (A) coverage mandated by applicable law,
(B) death benefits or retirement benefits under any "employee pension plan"
(as such term is defined in Section 3(2) of ERISA), (C) deferred compensation
benefits accrued as liabilities on the books of NBD, its Subsidiaries or the
ERISA Affiliates or (D) benefits the full cost of which is borne by the
current or former employee (or his beneficiary), (v) no material liability
under Title IV of ERISA has been incurred by NBD, its Subsidiaries or any
ERISA Affiliate that has not been satisfied in full, and no condition exists
that presents a material risk to NBD, its Subsidiaries or any ERISA Affiliate
of incurring
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a material liability thereunder, (vi) no Plan is a "multiemployer pension
plan" (as such term is defined in Section 3(37) of ERISA), (vii) all
contributions or other amounts payable by NBD or its Subsidiaries as of the
Effective Time with respect to each NBD Benefit Plan in respect of current or
prior plan years have been paid or accrued in accordance with GAAP and Section
412 of the Code, (viii) neither NBD, its Subsidiaries nor any ERISA Affiliate
has engaged in a transaction in connection with which NBD, its Subsidiaries or
any ERISA Affiliate reasonably could be subject to either a material civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best
knowledge of NBD there are no pending, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any of the NBD
Benefit Plans or any trusts related thereto which are, in the reasonable
judgment of NBD, likely, either individually or in the aggregate, to have a
Material Adverse Effect on NBD.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or
any employee of NBD or any of its affiliates from NBD or any of its affiliates
under any NBD Benefit Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any NBD Benefit Plan or (iii) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent.
3.12 SEC Reports. NBD has previously made available to First Chicago an
accurate and complete copy of each (a) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since
January 1, 1993 by NBD with the SEC pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act (the "NBD Reports") and
prior to the date hereof and (b) communication mailed by NBD to its
stockholders since January 1, 1993 and prior to the date hereof, and no such
registration statement, prospectus, report, schedule, proxy statement or
communication contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading, except that information as of a later date shall be
deemed to modify information as of an earlier date. Since January 1, 1993, NBD
has timely filed all NBD Reports and other documents required to be filed by
it under the Securities Act and the Exchange Act, and, as of their respective
dates, all NBD Reports complied in all material respects with the published
rules and regulations of the SEC with respect thereto.
3.13 Compliance with Applicable Law. NBD and each of its Subsidiaries hold
all material licenses, franchises, permits and authorizations necessary for
the lawful conduct of their respective businesses under and pursuant to all,
and have complied in all material respects with and are not in default in any
material respect under any, applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to NBD or any of
its Subsidiaries, except where the failure to hold such license, franchise,
permit or authorization or such noncompliance or default would not,
individually or in the aggregate, have a Material Adverse Effect on NBD.
3.14 Certain Contracts. (a) Neither NBD nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers or employees other than in the ordinary course of business consistent
with past practice, (ii) which, upon the consummation of the transactions
contemplated by this Agreement will (either alone or upon the occurrence of
any additional acts or events) result in any payment (whether of severance pay
or otherwise) becoming due from First Chicago, NBD, the Surviving Corporation,
or any of their respective Subsidiaries to any officer or employee thereof,
(iii) which is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of
this Agreement that has not been filed or incorporated by reference in the NBD
Reports, (iv) which materially restricts the conduct of any line of business
by NBD, (v) with or to a labor union or guild (including any collective
bargaining agreement) or (vi) (including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan) any of
the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the benefits of which
will be
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calculated on the basis of any of the transactions contemplated by this
Agreement. NBD has previously made available to First Chicago true and correct
copies of all employment and deferred compensation agreements which are in
writing and to which NBD is a party. Each contract, arrangement, commitment or
understanding of the type described in this Section 3.14(a), whether or not
set forth in the NBD Disclosure Schedule, is referred to herein as an "NBD
Contract", and neither NBD nor any of its Subsidiaries knows of, or has
received notice of, any violation of the above by any of the other parties
thereto which, individually or in the aggregate, would have a Material Adverse
Effect on NBD.
(b) (i) Each NBD Contract is valid and binding on NBD or any of its
Subsidiaries, as applicable, and in full force and effect, (ii) NBD and each
of its Subsidiaries has in all material respects performed all obligations
required to be performed by it to date under each NBD Contract, except where
such noncompliance, individually or in the aggregate, would not have a
Material Adverse Effect on NBD, and (iii) no event or condition exists which
constitutes or, after notice or lapse of time or both, would constitute, a
material default on the part of NBD or any of its Subsidiaries under any such
NBD Contract, except where such default, individually or in the aggregate,
would not have a Material Adverse Effect on NBD.
3.15 Agreements with Regulatory Agencies. Neither NBD nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or
is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been since
January 1, 1993, a recipient of any supervisory letter from, or since January
1, 1993, has adopted any board resolutions at the request of any Regulatory
Agency or other Governmental Entity that currently restricts in any material
respect the conduct of its business or that in any material manner relates to
its capital adequacy, its credit policies, its management or its business
(each, whether or not set forth in the NBD Disclosure Schedule, an "NBD
Regulatory Agreement"), nor has NBD or any of its Subsidiaries been advised
since January 1, 1993, by any Regulatory Agency or other Governmental Entity
that it is considering issuing or requesting any such Regulatory Agreement.
3.16 Other Activities of NBD and its Subsidiaries.
(a) Neither NBD nor any of its Subsidiaries that is neither a bank, a bank
operating subsidiary or a bank service corporation, directly or indirectly,
engages in any activity prohibited by the Federal Reserve Board. Without
limiting the generality of the foregoing, any equity investment of NBD and
each Subsidiary that is not a bank, a bank operating subsidiary or a bank
service corporation, is not prohibited by the Federal Reserve Board.
(b) To NBD's knowledge, each NBD Subsidiary which is a bank (a "NBD Bank
Subsidiary") currently performs all personal trust, corporate trust and other
fiduciary activities ("Trust Activities") with requisite authority under
applicable law of Governmental Entities and in accordance in all material
respects with the agreed-upon terms of the agreements and instruments
governing such Trust Activities, sound fiduciary principles and applicable law
and regulation (specifically including, but not limited to, Section 9 of Title
12 of the Code of Federal Regulations); there is no investigation or inquiry
by any Governmental Entity pending, or to the knowledge of NBD, threatened,
against or affecting NBD, or any Significant Subsidiary thereof relating to
the compliance by NBD or any such Significant Subsidiary (as such term is
defined in Rule 1-02(w) of Regulation S-X of the SEC) with sound fiduciary
principles and applicable regulations; and except where any such failure would
not have a Material Adverse Effect on NBD, each employee of a NBD Bank
Subsidiary had the authority to act in the capacity in which he or she acted
with respect to Trust Activities, in each case, in which such employee held
himself or herself out as a representative of a NBD Bank Subsidiary; and each
NBD Bank Subsidiary has established policies and procedures for the purpose of
complying with applicable laws of Governmental Entities relating to Trust
Activities, has followed such policies and procedures in all material respects
and has performed appropriate internal audit reviews of, and has engaged
independent accountants to perform audits of, Trust Activities, which audits
since January 1, 1993 have disclosed no material violations of applicable laws
of Governmental Entities or such policies and procedures.
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3.17 Investment Securities. Each of NBD and its Subsidiaries has good and
marketable title to all securities held by it (except securities sold under
repurchase agreements or held in any fiduciary or agency capacity), free and
clear of any Lien, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent banking practices to
secure obligations of NBD or any of its Subsidiaries. Such securities are
valued on the books of NBD in accordance with GAAP.
3.18 Interest Rate Risk Management Instruments. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of NBD or for the account
of a customer of NBD or one of its Subsidiaries, were entered into in the
ordinary course of business and, to NBD's knowledge, in accordance with
prudent banking practice and applicable rules, regulations and policies of any
Regulatory Authority and with counterparties believed to be financially
responsible at the time and are legal, valid and binding obligations of NBD or
one of its Subsidiaries enforceable in accordance with their terms (except as
may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and the availability
of equitable remedies), and are in full force and effect. NBD and each of its
Subsidiaries have duly performed in all material respects all of their
material obligations thereunder to the extent that such obligations to perform
have accrued; and, to NBD's knowledge, there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
3.19 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of NBD
included in the NBD March 31, 1995 Form 10-Q and for liabilities incurred in
the ordinary course of business consistent with past practice, since March 31,
1995, neither NBD nor any of its Subsidiaries has incurred any liability of
any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either alone or when combined with all
similar liabilities, has had, or could reasonably be expected to have, a
Material Adverse Effect on NBD.
3.20 Environmental Liability. Except as set forth in the NBD Disclosure
Schedule, there are no legal, administrative, arbitral or other proceedings,
claims, actions, causes of action, private environmental investigations or
remediation activities or governmental investigations of any nature seeking to
impose, or that could reasonably result in the imposition, on NBD of any
liability or obligation arising under common law or under any local, state or
federal environmental statute, regulation or ordinance including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), pending or threatened against
NBD, which liability or obligation could reasonably be expected to have a
Material Adverse Effect on NBD. To the knowledge of NBD, there is no
reasonable basis for any such proceeding, claim, action or governmental
investigation that would impose any material liability or obligation that
could reasonably be expected to have a Material Adverse Effect on NBD. NBD is
not subject to any agreement, order, judgment, decree, letter or memorandum by
or with any court, governmental authority, regulatory agency or third party
imposing any material liability or obligation that could reasonably be
expected to have a Material Adverse Effect on NBD.
3.21 State Takeover Laws. The Board of Directors of NBD has approved the
transactions contemplated by this Agreement and the Option Agreements such
that the provisions of Section 203 of the DGCL will not apply to this
Agreement or the Option Agreements or any of the transactions contemplated
hereby or thereby.
3.22 Pooling of Interests. As of the date of this Agreement, NBD has no
reason to believe that the Merger will not qualify as a "pooling of interests"
for accounting purposes.
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ARTICLE IV
Representations and Warranties of First Chicago
Except as disclosed in the First Chicago disclosure schedule delivered to
NBD concurrently herewith (the "First Chicago Disclosure Schedule") First
Chicago hereby represents and warrants to NBD as follows:
4.1 Corporate Organization. (a) First Chicago is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. First Chicago has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is
now being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect on First
Chicago. First Chicago is duly registered as a bank holding company under the
BHC Act. True and complete copies of the Certificate of Incorporation and By-
Laws of First Chicago, as in effect as of the date of this Agreement, have
previously been made available by First Chicago to NBD.
(b) Each First Chicago Subsidiary (i) is duly organized and validly existing
as a bank, corporation, partnership or limited liability company under the
laws of its jurisdiction of organization, (ii) is duly qualified to do
business and in good standing in all jurisdictions (whether Federal, state,
local or foreign) where its ownership or leasing of property or the conduct of
its business requires it to be so qualified and in which the failure to be so
qualified would have a Material Adverse Effect on First Chicago, and (iii) has
all requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
(c) The minute books of First Chicago accurately reflect in all material
respects all corporate actions held or taken since January 1, 1993 of its
stockholders and Board of Directors (including committees of the Board of
Directors of First Chicago).
4.2 Capitalization. (a) The authorized capital stock of First Chicago
consists of 150,000,000 shares of First Chicago Common Stock, of which, as of
June 30, 1995, 89,719,497 were issued and outstanding, and 15,000,000 shares
of Preferred Stock, no par value (the "First Chicago Preferred Stock", of
which (i) 2,500,000 shares were designated and 2,410,000 shares were issued
and outstanding as Preferred Stock with Cumulative and Adjustable Dividends
("First Chicago Series A Cumulative Adjustable Rate Preferred Stock"), (ii)
1,250,000 shares were designated and 1,191,000 shares were issued and
outstanding as Preferred Stock with Cumulative and Adjustable Dividends,
Series B ("First Chicago Series B Cumulative Adjustable Rate Preferred
Stock"), (iii) 750,000 shares were designated and 713,800 were issued and
outstanding as Preferred Stock with Cumulative and Adjustable Dividends,
Series C ("First Chicago Series C Cumulative Adjustable Rate Preferred
Stock"), (iv) 160,000 shares were designated and 160,000 shares were issued
and outstanding as 8.45% Cumulative Preferred Stock, Series E ("First Chicago
8.45% Series E Cumulative Fixed Rate Preferred Stock"), and (v) 40,000 shares
were designated and 40,000 shares were issued and outstanding as 5 3/4%
Cumulative Convertible Preferred Stock, Series B ("First Chicago Convertible
Preferred Stock"). As of June 30, 1995, 3,710,822 shares of First Chicago
Common Stock were held in First Chicago's treasury. On June 30, 1995, no
shares of First Chicago Common Stock or First Chicago Preferred Stock were
reserved for issuance, except for (i) 5,877,204 shares of First Chicago Common
Stock reserved for issuance upon the exercise of stock options pursuant to the
First Chicago Stock Plans, (ii) shares of First Chicago Series A Junior
Participating Preferred Stock were reserved for issuance upon exercise of the
rights (the "First Chicago Rights") distributed to holders of First Chicago
Common Stock pursuant to the Rights Agreement, dated as of November 18, 1988,
between First Chicago and Bankers Trust Company, as Rights Agent (the "First
Chicago Rights Agreement"), (iii) the shares of First Chicago Common Stock
issuable pursuant to the First Chicago Option Agreement, (iv) shares of First
Chicago Common Stock reserved for issuance pursuant to the First Chicago
Dividend Reinvestment and Stock Purchase Plan (the "First Chicago DRIP"), (v)
shares of First Chicago Common Stock reserved for issuance pursuant to the
1994 offering of the First Chicago Employee Stock Purchase and Savings Plan
(as in
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effect as of the Effective Time, the "First Chicago ESPSP"), and (vi) shares
of First Chicago Common Stock reserved for issuance upon conversion of First
Chicago Convertible Preferred Stock. All of the issued and outstanding shares
of First Chicago Common Stock and First Chicago Preferred Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except for the First Chicago Rights
Agreement, the First Chicago Option Agreement, the First Chicago Convertible
Preferred Stock, the First Chicago DRIP, the First Chicago ESPSP and the First
Chicago Stock Plans, First Chicago does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of First
Chicago Common Stock or First Chicago Preferred Stock or any other equity
securities of First Chicago or any securities representing the right to
purchase or otherwise receive any shares of First Chicago Common Stock or
First Chicago Preferred Stock. Assuming compliance by NBD with Article I of
this Agreement, after the Effective Time, there will not be any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character by which First Chicago or any of its Subsidiaries will be bound
calling for the purchase or issuance of any shares of the capital stock of
First Chicago. First Chicago has previously provided NBD with a list of the
option holders, the date of each option to purchase First Chicago Common Stock
granted, the number of shares subject to each such option, the expiration date
of each such option, and the price at which each such option may be exercised
under an applicable First Chicago Stock Plan. Since June 30, 1995, First
Chicago has not issued any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock, other
than pursuant to (i) the exercise of employee stock options granted prior to
such date, (ii) the First Chicago DRIP, and (iii) the First Chicago ESPSP.
(b) First Chicago owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of the First Chicago Subsidiaries,
free and clear of any Liens, and all of such shares are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. No
First Chicago Subsidiary has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling
for the purchase or issuance of any shares of capital stock or any other
equity security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other equity
security of such Subsidiary.
4.3 Authority; No Violation. (a) First Chicago has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
and validly approved by the Board of Directors of First Chicago. The Board of
Directors of First Chicago has directed that this Agreement and the
transactions contemplated hereby be submitted to First Chicago's stockholders
for approval at a meeting of such stockholders and except for the adoption of
this Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of First Chicago Common Stock, no other corporate
proceedings on the part of First Chicago are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by First Chicago
and (assuming due authorization, execution and delivery by NBD) constitutes a
valid and binding obligation of First Chicago, enforceable against First
Chicago in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by First Chicago,
nor the consummation by First Chicago of the transactions contemplated hereby,
nor compliance by First Chicago with any of the terms or provisions hereof,
will (i) violate any provision of the Certificate of Incorporation or By-Laws
of First Chicago or (ii) assuming that the consents and approvals referred to
in Section 4.4 are duly obtained, (x) violate any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction applicable to
First Chicago or any of its Subsidiaries or any of their respective properties
or assets, or (y) violate, conflict with, result in a breach of any provision
of or the loss of any benefit under, constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any Lien
upon any of the respective properties or assets of First Chicago or any of its
Subsidiaries under, any of the terms, conditions
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or provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which First Chicago or
any of its Subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected, except (in the case
of clause (y) above) for such violations, conflicts, breaches or defaults
which either individually or in the aggregate will not have or be reasonably
likely to have a Material Adverse Effect on First Chicago.
4.4 Consents and Approvals. Except for (i) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act and
approval of such applications and notices, (ii) the State Approvals, (iii) the
filing with the SEC of the Joint Proxy Statement and the S-4, (iv) the filing
of the Certificate of Merger with the Delaware Secretary pursuant to the DGCL,
(v) any notices to or filings with the SBA, (vi) any consent, authorizations,
approvals, filings or exemptions in connection with compliance with the
applicable provisions of federal and state securities laws relating to the
regulation of broker-dealers or investment advisers, and federal commodities
laws relating to the regulation of futures commission merchants and the rules
and regulations thereunder and of any applicable SRO, and the rules of the
NYSE, or which are required under consumer finance, mortgage banking and other
similar laws and (vii) the approval of this Agreement by the requisite vote of
the stockholders of First Chicago and NBD, no consents or approvals of or
filings or registrations with any Governmental Entity or with any third party
are necessary in connection with (A) the execution and delivery by First
Chicago of this Agreement and (B) the consummation by First Chicago of the
Merger and the other transactions contemplated hereby.
4.5 Reports. First Chicago and each of its Subsidiaries have timely filed
all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file
since January 1, 1993 with the Regulatory Agencies, and all other reports and
statements required to be filed by them since January 1, 1993, including,
without limitation, any report or statement required to be filed pursuant to
the laws, rules or regulations of the United States, any state, or any
Regulatory Agency and have paid all fees and assessments due and payable in
connection therewith, except where the failure to file such report,
registration or statement or to pay such fees and assessments, either
individually or in the aggregate, will not have a Material Adverse Effect on
First Chicago. Except for normal examinations conducted by a Regulatory Agency
in the regular course of the business of First Chicago and its Subsidiaries,
no Regulatory Agency has initiated any proceeding or, to the best knowledge of
First Chicago, investigation into the business or operations of First Chicago
or any of its Subsidiaries since January 1, 1993, except where such
proceedings or investigation are not likely, either individually or in the
aggregate, to have a Material Adverse Effect on First Chicago. There is no
unresolved violation, criticism, or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations of First
Chicago or any of its Subsidiaries which, in the reasonable judgment of First
Chicago, is likely, either individually or in the aggregate, to have a
Material Adverse Effect on First Chicago.
4.6 Financial Statements. First Chicago has previously made available to NBD
copies of (a) the consolidated balance sheets of First Chicago and its
Subsidiaries as of December 31, for the fiscal years 1993 and 1994, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years 1992 through 1994, inclusive, as reported in
First Chicago's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 filed with the SEC under the Exchange Act, in each case accompanied
by the audit report of Arthur Andersen LLP, independent public accountants
with respect to First Chicago, and (b) the unaudited consolidated balance
sheet of First Chicago and its Subsidiaries as of March 31, 1994 and March 31,
1995 and the related unaudited consolidated statements of income, cash flows
and changes in stockholders' equity for the three-month periods then ended as
reported in First Chicago's Quarterly Report on Form 10-Q for the period ended
March 31, 1995 filed with the SEC under the Exchange Act (the "First Chicago
March 31, 1995 Form 10-Q"). The December 31, 1994 consolidated balance sheet
of First Chicago (including the related notes, where applicable) fairly
presents the consolidated financial position of First Chicago and its
Subsidiaries as of the date thereof, and the other financial statements
referred to in this Section 4.6 (including the related notes, where
applicable) fairly present (subject, in the case of the unaudited statements,
to recurring audit adjustments normal in nature and amount) the results of the
consolidated operations and changes in stockholders' equity and consolidated
financial position of First Chicago and its Subsidiaries for the respective
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fiscal periods or as of the respective dates therein set forth; each of such
statements (including the related notes, where applicable) comply in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable) has been
prepared in all material respects in accordance with GAAP consistently applied
during the periods involved, except in each case as indicated in such
statements or in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. The books and records of First Chicago and its
Subsidiaries have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
4.7 Broker's Fees. Neither First Chicago nor any First Chicago Subsidiary
nor any of their respective officers or directors has employed any broker or
finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with the Merger or related transactions
contemplated by this Agreement or the Option Agreements.
4.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in First Chicago Reports (as defined in Section 4.12) filed prior to the date
hereof, since March 31, 1995, (i) First Chicago and its Subsidiaries taken as
a whole have not incurred any material liability, except in the ordinary
course of their business and (ii) no event has occurred which has had,
individually or in the aggregate, a Material Adverse Effect on First Chicago.
(b) Except as publicly disclosed in First Chicago Reports filed prior to the
date hereof, since March 31, 1995, First Chicago and its Subsidiaries have
carried on their respective businesses in all material respects in the
ordinary and usual course.
(c) Since December 31, 1994, neither First Chicago nor any of its
Subsidiaries has (i) except for such actions as are in the ordinary course of
business consistent with past practice or except as required by applicable
law, (A) increased the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any executive officer, employee, or
director from the amount thereof in effect as of December 31, 1994, or (B)
granted any severance or termination pay, entered into any contract to make or
grant any severance or termination pay, or paid any bonuses aggregating in
excess of 5% of First Chicago's 1994 salary and employee benefit expenses,
other than customary year-end bonuses for fiscal 1994 and 1995, or (ii)
suffered any strike, work stoppage, slowdown, or other labor disturbance
which, in the reasonable judgment of First Chicago is likely, either
individually or in the aggregate, to have a Material Adverse Effect on First
Chicago.
4.9 Legal Proceedings. (a) Neither First Chicago nor any of its Subsidiaries
is a party to any and there are no pending or, to the best of First Chicago's
knowledge, threatened, material legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of
any nature against First Chicago or any of its Subsidiaries or challenging the
validity or propriety of the transactions contemplated by this Agreement or
the First Chicago Option Agreement as to which there is a reasonable
probability of an adverse determination and which, if adversely determined,
would, individually or in the aggregate, have a Material Adverse Effect on
First Chicago.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those that apply to similarly situated bank holding
companies or banks) imposed upon First Chicago, any of its Subsidiaries or the
assets of First Chicago or any of its Subsidiaries which has had, or might
reasonably be expected to have, a Material Adverse Effect on First Chicago or
the Surviving Corporation.
4.10 Taxes and Tax Returns. (a) Each of First Chicago and its Subsidiaries
has duly filed all federal, state, county, foreign and, to the best of First
Chicago's knowledge, local information returns and tax returns required to be
filed by it on or prior to the date hereof (all such returns being accurate
and complete in all material respects) and has duly paid or made provisions
for the payment of all Taxes and other governmental charges which have been
incurred or are due or claimed to be due from it by federal, state, county,
foreign or local taxing authorities on or prior to the date of this Agreement
(including, without limitation, if and to the extent applicable,
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those due in respect of its properties, income, business, capital stock,
deposits, franchises, licenses, sales and payrolls) other than (i) Taxes or
other charges which are not yet delinquent or are being contested in good
faith and have not been finally determined, or (ii) information returns, tax
returns, Taxes or other governmental charges the failure to file, pay or make
provision for, either individually or in the aggregate, is not likely, in the
reasonable judgment of First Chicago, to have a Material Adverse Effect on
First Chicago. The income tax returns of First Chicago and its Subsidiaries
have been examined by the IRS through 1991 and any liability with respect
thereto has been satisfied for all years to and including 1976, and either no
material deficiencies were asserted as a result of such examination for which
First Chicago does not have adequate reserves or all such deficiencies were
satisfied. To the best of First Chicago's knowledge, there are no material
disputes pending, or claims asserted for, Taxes or assessments upon First
Chicago or any of its Subsidiaries for which First Chicago does not have
adequate reserves, nor has First Chicago or any of its Subsidiaries given any
currently effective waivers extending the statutory period of limitation
applicable to any federal, state, county or local income tax return for any
period. In addition, (A) proper and accurate amounts have been withheld by
First Chicago and its Subsidiaries from their employees for all prior periods
in compliance in all material respects with the tax withholding provisions of
applicable federal, state and local laws, except where failure to do so would
not have a Material Adverse Effect on First Chicago, (B) federal, state,
county and local returns which are accurate and complete in all material
respects have been filed by First Chicago and its Subsidiaries for all periods
for which returns were due with respect to income tax withholding, Social
Security and unemployment taxes, except where failure to do so would not have
a Material Adverse Effect on First Chicago, (C) the amounts shown on such
federal, state, local or county returns to be due and payable have been paid
in full or adequate provision therefor has been included by First Chicago in
its consolidated financial statements as of December 31, 1994, except where
failure to do so would not have a Material Adverse Effect on First Chicago and
(D) there are no Tax liens upon any property or assets of First Chicago or its
Subsidiaries except liens for current taxes not yet due or liens that would
not have a Material Adverse Effect on First Chicago. Neither First Chicago nor
any of its Subsidiaries has been required to include in income any adjustment
pursuant to Section 481 of the Code by reason of a voluntary change in
accounting method initiated by First Chicago or any of its Subsidiaries, and
the IRS has not initiated or proposed any such adjustment or change in
accounting method, in either case, which has had or is reasonably likely to
have a Material Adverse Effect on First Chicago. Except as set forth in the
financial statements described in Section 4.6, neither First Chicago nor any
of its Subsidiaries has entered into a transaction which is being accounted
for as an installment obligation under Section 453 of the Code, which would be
reasonably likely to have a Material Adverse Effect on First Chicago.
(b) Any amount that is reasonably likely to be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of First
Chicago or any of its affiliates who is a "Disqualified Individual" (as such
term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or First Chicago Benefit Plan currently in effect should not be characterized
as an "excess parachute payment" (as such term is defined in Section
280G(b)(1) of the Code).
(c) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by First Chicago or any
Subsidiary of First Chicago under any contract, plan, program, arrangement or
understanding would be reasonably likely to have a Material Adverse Effect on
First Chicago.
4.11 Employees. (a) The First Chicago Disclosure Schedule sets forth a true
and complete list of each material employee benefit plan, arrangement or
agreement that is maintained as of the date of this Agreement (the "First
Chicago Benefit Plans") by First Chicago, any of its Subsidiaries or by any
trade or business, whether or not incorporated (a "First Chicago ERISA
Affiliate"), all of which together with First Chicago would be deemed a
"single employer" within the meaning of Section 4001 of ERISA.
(b) First Chicago has heretofore delivered to NBD true and complete copies
of each of the First Chicago Benefit Plans and certain related documents,
including, but not limited to, (i) the actuarial report for such First Chicago
Plan (if applicable) for each of the last two years, and (ii) the most recent
determination letter from the IRS (if applicable) for such First Chicago Plan.
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(c) (i) Each of the First Chicago Benefit Plans has been operated and
administered in all material respects with applicable laws, including, but not
limited to, ERISA and the Code, (ii) each of the First Chicago Benefit Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code is
so qualified, (iii) with respect to each First Chicago Plan which is subject
to Title IV of ERISA, the present value of accrued benefits under such First
Chicago Plan, based upon the actuarial assumptions used for funding purposes
in the most recent actuarial report prepared by such First Chicago Plan's
actuary with respect to such First Chicago Plan, did not, as of its latest
valuation date, exceed the then current value of the assets of such First
Chicago Plan allocable to such accrued benefits, (iv) no First Chicago Plan
provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees of First
Chicago, its Subsidiaries or any First Chicago ERISA Affiliate beyond their
retirement or other termination of service, other than (A) coverage mandated
by applicable law, (B) death benefits or retirement benefits under any
"employee pension plan" (as such term is defined in Section 3(2) of ERISA),
(C) deferred compensation benefits accrued as liabilities on the books of
First Chicago, its Subsidiaries or the First Chicago ERISA Affiliates or (D)
benefits the full cost of which is borne by the current or former employee (or
his beneficiary), (v) no material liability under Title IV of ERISA has been
incurred by First Chicago, its Subsidiaries or any First Chicago ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to First Chicago, its Subsidiaries or any First
Chicago ERISA Affiliate of incurring a material liability thereunder, (vi) no
First Chicago Plan is a "multiemployer pension plan" (as such term is defined
in Section 3(37) of ERISA), (vii) all contributions or other amounts payable
by First Chicago or its Subsidiaries as of the Effective Time with respect to
each First Chicago Plan in respect of current or prior plan years have been
paid or accrued in accordance with GAAP and Section 412 of the Code, (viii)
neither First Chicago, its Subsidiaries nor any First Chicago ERISA Affiliate
has engaged in a transaction in connection with which First Chicago, its
Subsidiaries or any First Chicago ERISA Affiliate reasonably could be subject
to either a material civil penalty assessed pursuant to Section 409 or 502(i)
of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the
Code, and (ix) to the best knowledge of First Chicago there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by,
on behalf of or against any of the First Chicago Benefit Plans or any trusts
related thereto which are, in the reasonable judgment of First Chicago,
likely, either individually or in the aggregate, to have a Material Adverse
Effect on NBD.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or
any employee of First Chicago or any of its affiliates from First Chicago or
any of its affiliates under any First Chicago Benefit Plan or otherwise, (ii)
materially increase any benefits otherwise payable under any First Chicago
Benefit Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits to any material extent.
4.12 SEC Reports. First Chicago has previously made available to NBD an
accurate and complete copy of each (a) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since
January 1, 1993 by First Chicago with the SEC pursuant to the Securities Act
or the Exchange Act (the "First Chicago Reports") and prior to the date hereof
and (b) communication mailed by First Chicago to its stockholders since
January 1, 1993 and prior to the date hereof, and no such registration
statement, prospectus, report, schedule, proxy statement or communication
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading, except that information as of a later date shall be deemed to
modify information as of an earlier date. Since January 1, 1993, First Chicago
has timely filed all First Chicago Reports and other documents required to be
filed by it under the Securities Act and the Exchange Act, and, as of their
respective dates, all First Chicago Reports complied in all material respects
with the published rules and regulations of the SEC with respect thereto.
4.13 Compliance with Applicable Law. First Chicago and each of its
Subsidiaries hold all material licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
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under and pursuant to all, and have complied in all material respects with and
are not in default in any material respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to First Chicago or any of its Subsidiaries, except where the failure
to hold such license, franchise, permit or authorization or such noncompliance
or default would not, individually or in the aggregate, have a Material
Adverse Effect on First Chicago.
4.14 Certain Contracts. (a) Neither First Chicago nor any of its
Subsidiaries is a party to or bound by any contract, arrangement, commitment
or understanding (whether written or oral) (i) with respect to the employment
of any directors, officers or employees other than in the ordinary course of
business consistent with past practice, (ii) which, upon the consummation of
the transactions contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from First Chicago, NBD, the
Surviving Corporation, or any of their respective Subsidiaries to any officer
or employee thereof, (iii) which is a "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after
the date of this Agreement that has not been filed or incorporated by
reference in the First Chicago Reports, (iv) which materially restricts the
conduct of any line of business by First Chicago, (v) with or to a labor union
or guild (including any collective bargaining agreement) or (vi) (including
any stock option plan, stock appreciation rights plan, restricted stock plan
or stock purchase plan) any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. First Chicago has previously made available to
NBD true and correct copies of all employment and deferred compensation
agreements which are in writing and to which First Chicago is a party. Each
contract, arrangement, commitment or understanding of the type described in
this Section 4.14(a), whether or not set forth in the First Chicago Disclosure
Schedule, is referred to herein as a "First Chicago Contract", and neither
First Chicago nor any of its Subsidiaries knows of, or has received notice of,
any violation of the above by any of the other parties thereto which,
individually or in the aggregate, would have a Material Adverse Effect on
First Chicago.
(b) (i) Each First Chicago Contract is valid and binding on First Chicago or
any of its Subsidiaries, as applicable, and in full force and effect, (ii)
First Chicago and each of its Subsidiaries has in all material respects
performed all obligations required to be performed by it to date under each
First Chicago Contract, except where such noncompliance, individually or in
the aggregate, would not have a Material Adverse Effect on First Chicago, and
(iii) no event or condition exists which constitutes or, after notice or lapse
of time or both, would constitute, a material default on the part of First
Chicago or any of its Subsidiaries under any such First Chicago Contract,
except where such default, individually or in the aggregate, would not have a
Material Adverse Effect on First Chicago.
4.15 Agreements with Regulatory Agencies. Neither First Chicago nor any of
its Subsidiaries is subject to any cease-and-desist or other order issued by,
or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has been since
January 1, 1993, a recipient of any supervisory letter from, or since January
1, 1993, has adopted any board resolutions at the request of any Regulatory
Agency or other Governmental Entity that currently restricts in any material
respect the conduct of its business or that in any material manner relates to
its capital adequacy, its credit policies, its management or its business
(each, whether or not set forth in the First Chicago Disclosure Schedule, a
"First Chicago Regulatory Agreement"), nor has First Chicago or any of its
Subsidiaries been advised since January 1, 1993, by any Regulatory Agency or
other Governmental Entity that it is considering issuing or requesting any
such Regulatory Agreement.
4.16 Other Activities of First Chicago and its Subsidiaries.
(a) Neither First Chicago nor any of its Subsidiaries that is neither a
bank, a bank operating subsidiary or a bank service corporation, directly or
indirectly engages in any activity prohibited by the Federal Reserve Board.
Without limiting the generality of the foregoing, any equity investment of
First Chicago and each Subsidiary that is not a bank, a bank operating
subsidiary or a bank service corporation, is not prohibited by the Federal
Reserve Board.
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(b) To First Chicago's knowledge, each First Chicago Subsidiary which is a
bank (a "First Chicago Bank Subsidiary") currently performs all Trust
Activities with requisite authority under applicable law of Governmental
Entities and in accordance in all material respects with the agreed-upon terms
of the agreements and instruments governing such Trust Activities, sound
fiduciary principles and applicable law and regulation (specifically
including, but not limited to, Section 9 of Title 12 of the Code of Federal
Regulations); there is no investigation or inquiry by any Governmental Entity
pending, or, to the knowledge of First Chicago, threatened, against or
affecting First Chicago or any Significant Subsidiary thereof relating to the
compliance by First Chicago or any such Significant Subsidiary with sound
fiduciary principles and applicable regulations; and except where any such
failure would not have a Material Adverse Effect on First Chicago, each
employee of a First Chicago Bank Subsidiary had the authority to act in the
capacity in which he or she acted with respect to Trust Activities, in each
case, in which such employee held himself or herself out as a representative
of a First Chicago Bank Subsidiary; and each First Chicago Bank Subsidiary has
established policies and procedures for the purpose of complying with
applicable laws of Governmental Entities relating to Trust Activities, has
followed such policies and procedures in all material respects and has
performed appropriate internal audit reviews of, and has engaged independent
accountants to perform audits of, Trust Activities, which audits have
disclosed no material violations of applicable laws of Governmental Entities
or such policies and procedures.
4.17 Investment Securities. Each of First Chicago and its Subsidiaries has
good and marketable title to all securities held by it (except securities sold
under repurchase agreements or held in any fiduciary or agency capacity), free
and clear of any Lien, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent banking practice to secure
obligations of First Chicago or any of its Subsidiaries. Such securities are
valued on the books of First Chicago in accordance with GAAP.
4.18 Interest Rate Risk Management Instruments. All interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements, whether entered into for the account of First Chicago or for the
account of a customer of First Chicago or one of its Subsidiaries, were
entered into in the ordinary course of business and, to First Chicago's
knowledge, in accordance with prudent banking practice and applicable rules,
regulations and policies of any Regulatory Authority and with counterparties
believed to be financially responsible at the time and are legal, valid and
binding obligations of First Chicago or one of its Subsidiaries enforceable in
accordance with their terms (except as may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the rights of
creditors generally and the availability of equitable remedies), and are in
full force and effect. First Chicago and each of its Subsidiaries has duly
performed in all material respects all of its material obligations thereunder
to the extent that such obligations to perform have accrued; and to First
Chicago's knowledge, there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
4.19 Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of First
Chicago included in the First Chicago March 31, 1995 Form 10-Q and for
liabilities incurred in the ordinary course of business consistent with past
practice, since March 31, 1995, neither First Chicago nor any of its
Subsidiaries has incurred any liability of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
that, either alone or when combined with all similar liabilities, has had, or
could reasonably be expected to have, a Material Adverse Effect on First
Chicago.
4.20 Environmental Liability. Except as set forth in the First Chicago
Disclosure Schedule, there are no legal, administrative, arbitral or other
proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably could result in the imposition,
on First Chicago of any liability or obligation arising under common law or
under any local, state or federal environmental statute, regulation or
ordinance including, without limitation, CERCLA, pending or threatened against
First Chicago, which liability or obligation could reasonably be expected to
have a Material Adverse Effect on First Chicago. To the knowledge of First
Chicago, there is no reasonable basis for any such proceeding, claim, action
or governmental investigation that would impose any
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material liability or obligation that could reasonably be expected to have a
Material Adverse Effect on First Chicago. First Chicago is not subject to any
agreement, order, judgment, decree, letter or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any material
liability or obligation that could reasonably be expected to have a Material
Adverse Effect on First Chicago.
4.21 State Takeover Laws. The Board of Directors of First Chicago has
approved the transactions contemplated by this Agreement and the Option
Agreements such that the provisions of Section 203 of the DGCL will not apply
to this Agreement or the Option Agreements or any of the transactions
contemplated hereby or thereby.
4.22 Rights Agreement. First Chicago has taken all action (including, if
required, redeeming all of the outstanding preferred stock purchase rights
issued pursuant to the First Chicago Rights Agreement or amending or
terminating the First Chicago Rights Agreement) so that the entering into of
this Agreement and the Option Agreements, the Merger, the acquisition of
shares pursuant to the Option Agreements and the other transactions
contemplated hereby and thereby do not and will not result in the grant of any
rights to any person under the First Chicago Rights Agreement or enable or
require the First Chicago Rights to be exercised, distributed or triggered.
4.23 Pooling of Interests. As of the date of this Agreement, First Chicago
has no reason to believe that the Merger will not qualify as a "pooling of
interests" for accounting purposes.
ARTICLE V
Covenants Relating to Conduct of Business
5.1 Conduct of Businesses Prior to the Effective Time.
During the period from the date of this Agreement to the Effective Time,
except as expressly contemplated or permitted by this Agreement (including the
NBD Disclosure Schedule and the First Chicago Disclosure Schedule) or the
Option Agreements, each of First Chicago and NBD shall, and shall cause each
of their respective Subsidiaries to, (a) conduct its business in the usual,
regular and ordinary course consistent with past practice, (b) use reasonable
best efforts to maintain and preserve intact its business organization,
employees and advantageous business relationships and retain the services of
its key officers and key employees and (c) take no action which would
adversely affect or delay the ability of either First Chicago or NBD to obtain
any necessary approvals of any Regulatory Agency or other governmental
authority required for the transactions contemplated hereby or to perform its
covenants and agreements under this Agreement or the Option Agreements.
5.2 Forbearances. During the period from the date of this Agreement to the
Effective Time, except as set forth in the First Chicago Disclosure Schedule
or the NBD Disclosure Schedule, as the case may be, and, except as expressly
contemplated or permitted by this Agreement or the Option Agreements, neither
First Chicago nor NBD shall, and neither First Chicago nor NBD shall permit
any of their respective Subsidiaries to, without the prior written consent of
the other:
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness and indebtedness
of NBD or any of its Subsidiaries to NBD or any of its Subsidiaries, on the
one hand, or of First Chicago or any of its Subsidiaries to First Chicago
or any of its Subsidiaries, on the other hand), assume, guarantee, endorse
or otherwise as an accommodation become responsible for the obligations of
any other individual, corporation or other entity, or make any loan or
advance (it being understood and agreed that incurrence of indebtedness in
the ordinary course of business shall include, without limitation, the
creation of deposit liabilities, purchases of Federal funds, sales of
certificates of deposit and entering into repurchase agreements);
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(b) (i) adjust, split, combine or reclassify any capital stock; (ii)
make, declare or pay any dividend or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock (except, (A) in the case
of NBD, for regular quarterly cash dividends at a rate not in excess of
$.33 per share of NBD Common Stock, (B) in the case of First Chicago, for
regular quarterly cash dividends on First Chicago Common Stock at a rate
not in excess of $.60 per share of First Chicago Common Stock, (C) in the
case of First Chicago Preferred Stock, for regular quarterly or semiannual
cash dividends thereon at the rates set forth in the applicable certificate
of incorporation or certificate of designation for such securities and
except for dividends paid by any of the Subsidiaries of each of First
Chicago and NBD to First Chicago or NBD or any of their Subsidiaries,
respectively, and (D) except for dividends paid in the ordinary course of
business by any subsidiaries (whether or not wholly owned) of each of First
Chicago and NBD), (iii) grant any stock appreciation rights or grant any
individual, corporation or other entity any right to acquire any shares of
its capital stock (except for options to purchase stock granted in the
ordinary course of business consistent with past practice pursuant to the
First Chicago Stock Plans, the First Chicago ESPSP, and the NBD Stock
Plans) or (iv) issue any additional shares of capital stock except pursuant
to (A) the exercise of stock options or warrants outstanding as of the date
hereof, (B) the First Chicago Convertible Preferred Stock, (C) the Option
Agreements, (D) the First Chicago Rights Agreement, (E) the First Chicago
DRIP, or (F) the First Chicago ESPSP;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties or assets to any individual, corporation or other entity other
than a Subsidiary, or cancel, release or assign any indebtedness to any
such person or any claims held by any such person, except in the ordinary
course of business consistent with past practice or pursuant to contracts
or agreements in force at the date of this Agreement;
(d) except for transactions in the ordinary course of business consistent
with past practice or pursuant to contracts or agreements in force at the
date of this Agreement, make any material investment either by purchase of
stock or securities, contributions to capital, property transfers, or
purchase of any property or assets of any other individual, corporation or
other entity other than a Subsidiary thereof;
(e) except for transactions in the ordinary course of business consistent
with past practice, enter into or terminate any material contract or
agreement, or make any change in any of its material leases or contracts,
other than renewals of contracts and leases without material adverse
changes of terms;
(f) increase in any manner the compensation or fringe benefits of any of
its employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees or become a party to,
amend or commit itself to any pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee other than in the ordinary course of business
consistent with past practice or accelerate the vesting of any stock
options or other stock-based compensation;
(g) solicit, encourage or authorize any individual, corporation or other
entity to solicit from any third party any inquiries or proposals relating
to the disposition of its business or assets, or the acquisition of its
voting securities, or the merger of it or any of its Subsidiaries with any
corporation or other entity other than as provided by this Agreement (and
each party shall promptly notify the other of all of the relevant details
relating to all inquiries and proposals which it may receive relating to
any of such matters);
(h) settle any claim, action or proceeding involving money damages,
except in the ordinary course of business consistent with past practice;
(i) take any action that would prevent or impede the Merger from
qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code; provided,
however, that nothing contained herein shall limit the ability of First
Chicago or NBD to exercise its rights under the NBD Option Agreement or the
First Chicago Option Agreement, as the case may be;
(j) amend its certificate of incorporation or articles of incorporation,
as the case may be, or its bylaws; or
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(k) other than in prior consultation with the other party to this
Agreement, restructure or materially change its investment securities
portfolio or its gap position, through purchases, sales or otherwise, or
the manner in which the portfolio is classified or reported;
(l) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set
forth in Article VII not being satisfied or in a violation of any provision
of this Agreement, except, in every case, as may be required by applicable
law; or
(m) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.2.
ARTICLE VI
Additional Agreements
6.1 Regulatory Matters. (a) First Chicago and NBD shall promptly prepare and
file with the SEC the Joint Proxy Statement and NBD shall promptly prepare and
file with the SEC the S-4, in which the Joint Proxy Statement will be included
as a prospectus. Each of First Chicago and NBD shall use all reasonable
efforts to have the S-4 declared effective under the Securities Act as
promptly as practicable after such filing, and First Chicago and NBD shall
thereafter mail or deliver the Joint Proxy Statement to their respective
stockholders. NBD shall also use all reasonable efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement, and First Chicago
shall furnish all information concerning First Chicago and the holders of
First Chicago Capital Stock as may be reasonably requested in connection with
any such action.
(b) The parties hereto shall cooperate with each other and use their best
efforts to promptly prepare and file all necessary documentation, to effect
all applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement (including, without
limitation, the Merger), and to comply with the terms and conditions of all
such permits, consents, approvals and authorizations of all such Governmental
Entities. First Chicago and NBD shall have the right to review in advance,
and, to the extent practicable, each will consult the other on, in each case
subject to applicable laws relating to the exchange of information, all the
information relating to NBD or First Chicago, as the case may be, and any of
their respective Subsidiaries, which appear in any filing made with, or
written materials submitted to, any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals
and authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) First Chicago and NBD shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Joint Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of First
Chicago, NBD or any of their respective Subsidiaries to any Governmental
Entity in connection with the Merger and the other transactions contemplated
by this Agreement.
(d) First Chicago and NBD shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement
which causes such party to believe that there is a reasonable likelihood that
any Requisite Regulatory Approval will not be obtained or that the receipt of
any such approval will be materially delayed.
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6.2 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each of First Chicago
and NBD shall, and shall cause each of their respective Subsidiaries to,
afford to the officers, employees, accountants, counsel and other
representatives of the other party, access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, each of First
Chicago and NBD shall, and shall cause their respective Subsidiaries to, make
available to the other party (i) a copy of each report, schedule, registration
statement and other document filed or received by it during such period
pursuant to the requirements of federal securities laws or federal or state
banking laws, savings and loan or savings association laws (other than reports
or documents which First Chicago or NBD, as the case may be, is not permitted
to disclose under applicable law) and (ii) all other information concerning
its business, properties and personnel as such party may reasonably request.
Neither First Chicago nor NBD nor any of their respective Subsidiaries shall
be required to provide access to or to disclose information where such access
or disclosure would violate or prejudice the rights of First Chicago's or
NBD's, as the case may be, customers, jeopardize the attorney-client privilege
of the institution in possession or control of such information or contravene
any law, rule, regulation, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The parties hereto
will make appropriate substitute disclosure arrangements under circumstances
in which the restrictions of the preceding sentence apply.
(b) Each of First Chicago and NBD shall hold all information furnished by or
on behalf of the other party or any of such party's Subsidiaries or
representatives pursuant to Section 6.2(a) in confidence to the extent
required by, and in accordance with, the provisions of the confidentiality
agreement, dated June 25, 1995, between First Chicago and NBD (the
"Confidentiality Agreement").
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other
set forth herein.
6.3 Stockholders' Approvals. Each of First Chicago and NBD shall call a
meeting of its stockholders to be held as soon as reasonably practicable for
the purpose of voting upon the requisite stockholder approvals required in
connection with this Agreement and the Merger, and each shall use its best
efforts to cause such meetings to occur on the same date.
6.4 Legal Conditions to Merger. Each of First Chicago and NBD shall, and
shall cause its Subsidiaries to, use their best efforts (a) to take, or cause
to be taken, all actions necessary, proper or advisable to comply promptly
with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the conditions set
forth in Article VII hereof, to consummate the transactions contemplated by
this Agreement and (b) to obtain (and to cooperate with the other party to
obtain) any consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and any other third party which is required to be
obtained by NBD or First Chicago or any of their respective Subsidiaries in
connection with the Merger and the other transactions contemplated by this
Agreement.
6.5 Affiliates; Publication of Combined Financial Results. (a) Each of First
Chicago and NBD shall use its best efforts to cause each director, executive
officer and other person who is an "affiliate" (for purposes of Rule 145 under
the Securities Act and for purposes of qualifying the Merger for "pooling of
interests" accounting treatment) of such party to deliver to the other party
hereto, as soon as practicable after the date of this Agreement, and prior to
the date of the stockholders meetings called by First Chicago and NBD to
approve this Agreement, a written agreement, in the form of Exhibit 6.5(a)(1)
or (2), as applicable, hereto, providing that such person will not sell,
pledge, transfer or otherwise dispose of any shares of First Chicago Capital
Stock or NBD Capital Stock held by such "affiliate" and, in the case of the
"affiliates" of First Chicago, the shares of NBD Capital Stock to be received
by such "affiliate" in the Merger: (i) in the case of shares of NBD Capital
Stock to be received by "affiliates" of First Chicago in the Merger, except in
compliance with the applicable provisions of the Securities Act and the rules
and regulations thereunder; and (ii) except to the extent and under the
conditions permitted therein, during the period commencing 30 days prior to
the Merger and ending at the time of the publication of financial results
covering at least 30 days of combined operations of First Chicago and NBD.
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(b) The Surviving Corporation shall use its best efforts to publish as
promptly as reasonably practical but in no event later than 90 days after the
end of the first month after the Effective Time in which there are at least 30
days of post-Merger combined operations (which month may be the month in which
the Effective Time occurs), combined sales and net income figures as
contemplated by and in accordance with the terms of SEC Accounting Series
Release No. 135.
6.6 Stock Exchange Listing. NBD shall cause the shares of NBD Common Stock
to be issued in the Merger to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Effective Time and shall use its
best efforts to cause the shares of NBD Preferred Stock to be so approved.
6.7 Employee Benefit Plans. (a) From and after the Effective Time, unless
otherwise mutually determined, the NBD Benefit Plans and First Chicago Benefit
Plans in effect as of the date of this Agreement shall remain in effect with
respect to employees of NBD or First Chicago (or their Subsidiaries) covered
by such plans at the Effective Time until such time as the Surviving
Corporation shall, subject to applicable law, the terms of this Agreement and
the terms of such plans, adopt new benefit plans with respect to employees of
the Surviving Corporation and its Subsidiaries (the "New Benefit Plans").
Prior to the Closing Date, NBD and First Chicago shall cooperate in reviewing,
evaluating and analyzing the First Chicago Benefit Plans and NBD Benefit Plans
with a view towards developing appropriate New Benefit Plans for the employees
covered thereby subsequent to the Merger. It is the intention of NBD and First
Chicago to develop New Benefit Plans, effective as of the Effective Time,
which, among other things, (i) treat similarly situated employees on a
substantially equivalent basis, taking into account all relevant factors,
including, without limitation, duties, geographic location, tenure,
qualifications and abilities, and (ii) do not discriminate between employees
of the Surviving Corporation who were covered by NBD Benefit Plans, on the one
hand, and those covered by First Chicago Benefit Plans, on the other, at the
Effective Time.
(b) The foregoing nothwithstanding, the Surviving Corporation agrees to
honor in accordance with their terms all benefits vested as of the date hereof
under the First Chicago Benefit Plans or the NBD Benefit Plans or under other
contracts, arrangements, commitments, or understandings described in the First
Chicago Disclosure Schedule and the NBD Disclosure Schedule.
(c) Nothing in this Section 6.7 shall be interpreted as preventing the
Surviving Corporation from amending, modifying or terminating any First
Chicago Benefit Plans, NBD Benefit Plans, or other contracts, arrangements,
commitments or understandings, in accordance with their terms and applicable
law.
(d) NBD and First Chicago shall take all actions necessary, including
securing the consent of optionees, to amend the terms of NBD Benefits Plans
pursuant to which options to purchase NBD Common Stock have been issued or
granted ("NBD Stock Plans") and the First Chicago Stock Plans and any
severance or other agreements that provide for the surrender of stock options
issued thereunder in exchange for a cash payment ("LSARs") as a result of or
in connection with the Merger to provide that such LSARs shall be settled in
stock with a fair market value equal to the cash that would otherwise have
been payable thereunder.
6.8 Indemnification; Directors' and Officers' Insurance. (a) In the event of
any threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, including, without limitation, any
such claim, action, suit, proceeding or investigation in which any individual
who is now, or has been at any time prior to the date of this Agreement, or
who becomes prior to the Effective Time, a director or officer or employee of
First Chicago or any of its Subsidiaries, including any entity specified in
the First Chicago Disclosure Schedule (the "Indemnified Parties"), is, or is
threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he is or was a
director, officer or employee of First Chicago, any of the First Chicago
Subsidiaries or any entity specified in the First Chicago Disclosure Schedule
or any of their respective predecessors or (ii) this Agreement, the Option
Agreements or any of the transactions contemplated hereby or thereby, whether
in any case asserted or arising before or after the Effective Time, the
parties hereto agree to cooperate and use their best efforts to defend against
and respond thereto. It is understood and agreed that after the Effective
Time, NBD shall indemnify and hold harmless, as
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and to the fullest extent permitted by law, each such Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorney's fees and expenses in advance of the final disposition of
any claim, suit, proceeding or investigation to each Indemnified Party to the
fullest extent permitted by law upon receipt of any undertaking required by
applicable law), judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit, proceeding or
investigation, and in the event of any such threatened or actual claim,
action, suit, proceeding or investigation (whether asserted of arising before
or after the Effective Time), the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with NBD; provided,
however, that (A) NBD shall have the right to assume the defense thereof and
upon such assumption NBD shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred by
any Indemnified Party in connection with the defense thereof, except that if
NBD elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises the Indemnified Parties that there are issues which raise
conflicts of interest between NBD and the Indemnified Parties, the Indemnified
Parties may retain counsel reasonably satisfactory to them after consultation
with NBD, and NBD shall pay the reasonable fees and expenses of such counsel
for the Indemnified Parties, (B) NBD shall be obligated pursuant to this
paragraph to pay for only one firm of counsel for all Indemnified Parties,
unless an Indemnified Party shall have reasonably concluded, based on the
advice of counsel, that in order to be adequately represented, separate
counsel is necessary for such Indemnified Party, in which case, NBD shall be
obligated to pay for such separate counsel, (C) NBD shall not be liable for
any settlement effected without its prior written consent (which consent shall
not be unreasonably withheld) and (D) NBD shall have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim Indemnification under this Section 6.8, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify NBD
thereof, provided that the failure to so notify shall not affect the
obligations of NBD under this Section 6.8 except to the extent such failure to
notify materially prejudices NBD. NBD's obligations under this Section 6.8
continue in full force and effect for a period of six years from the Effective
Time (or the period of the applicable statute of limitations, if longer);
provided, however, that all rights to indemnification in respect of any claim
(a "Claim") asserted or made within such period shall continue until the final
disposition of such Claim.
(b) NBD shall use its best efforts to cause the individuals serving as
officers and directors of First Chicago, its Subsidiaries or any entity
specified in the First Chicago Disclosure Schedule immediately prior to the
Effective Time to be covered for a period of six (6) years from the Effective
Time (or the period of the applicable statute of limitations, if longer) by
the directors' and officers' liability insurance policy maintained by First
Chicago (provided that NBD may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are not less
advantageous than such policy) with respect to acts or omissions occurring
prior to the Effective Time which were committed by such officers and
directors in their capacity as such; provided, however, that in no event shall
NBD be required to expend more than 200% of the current amount expended by
First Chicago (the "Insurance Amount") to maintain or procure insurance
coverage pursuant hereto and provided further that if NBD is unable to
maintain or obtain the insurance called for by this Section 6.8(b), NBD shall
use its best efforts to obtain as much comparable insurance as available for
the Insurance Amount.
(c) In the event NBD or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or
(ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of NBD
assume the obligations set forth in this section.
(d) The provisions of this Section 6.8 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
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6.9 Additional Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any merger between a Subsidiary of
NBD and a Subsidiary of First Chicago) or to vest the Surviving Corporation
with full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by, and at
the sole expense of, NBD.
6.10 Advice of Changes. First Chicago and NBD shall promptly advise the
other party of any change or event having a Material Adverse Effect on it or
which it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or covenants
contained herein.
6.11 Dividends. After the date of this Agreement, each of First Chicago and
NBD shall coordinate with the other the declaration of any dividends in
respect of First Chicago Common Stock and NBD Common Stock and the record
dates and payment dates relating thereto, it being the intention of the
parties hereto that holders of First Chicago Common Stock or NBD Common Stock
shall not receive two dividends, or fail to receive one dividend, for any
quarter with respect to their shares of First Chicago Common Stock and/or NBD
Common Stock and any shares of NBD Capital Stock any such holder receives in
exchange therefor in the Merger.
ARTICLE VII
Conditions Precedent
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the respective
requisite affirmative votes of the holders of NBD Common Stock and First
Chicago Common Stock entitled to vote thereon.
(b) NYSE Listing. The shares of NBD Common Stock which shall be issued to
the stockholders of First Chicago upon consummation of the Merger shall
have been authorized for listing on the NYSE, subject to official notice of
issuance.
(c) Other Approvals. All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall remain
in full force and effect and all statutory waiting periods in respect
thereof shall have expired (all such approvals and the expiration of all
such waiting periods being referred to herein as the "Requisite Regulatory
Approvals").
(d) S-4. The S-4 shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the S-4 shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or any of the other transactions contemplated by
this Agreement shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, materially restricts
or makes illegal consummation of the Merger.
(f) Federal Tax Opinion. First Chicago and NBD each shall have received
an opinion of Wachtell, Lipton, Rosen & Katz, in form and substance
reasonably satisfactory to First Chicago and NBD, dated as of the Effective
Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time:
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(i) The Merger will constitute a tax free reorganization under
Section 368(a)(1)(A) of the Code and First Chicago and NBD will each be
a party to the reorganization;
(ii) No gain or loss will be recognized by First Chicago or NBD as a
result of the Merger;
(iii) No gain or loss will be recognized by the stockholders of First
Chicago who exchange their First Chicago Capital Stock solely for NBD
Capital Stock pursuant to the Merger (except with respect to cash
received in lieu of a fractional share interest in NBD Capital Stock);
(iv) The tax basis of the NBD Capital Stock received by stockholders
who exchange all of their First Chicago Capital Stock solely for NBD
Capital Stock in the Merger will be the same as the tax basis of the
First Chicago Capital Stock surrendered in exchange therefor (reduced
by any amount allocable to a fractional share interest for which cash
is received); and
(v) The holding period of NBD Capital Stock received by stockholders
of First Chicago in the Merger will include the period during which the
shares of First Chicago Capital Stock surrendered in exchange therefor
were held; provided, such First Chicago Capital Stock was held as a
capital asset by the holder of such First Chicago Capital Stock at the
Effective Time.
In rendering such opinion, counsel may require and rely upon
representations contained in certificates of officers of First Chicago, NBD
and others.
(g) Pooling of Interests. First Chicago and NBD shall each have received
a letter from their respective independent accountants addressed to NBD or
First Chicago, as the case may be, to the effect that the Merger will
qualify for "pooling of interests" accounting treatment.
7.2 Conditions to Obligations of First Chicago. The obligation of First
Chicago to effect the Merger is also subject to the satisfaction or waiver by
First Chicago at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
NBD set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date. First Chicago
shall have received a certificate signed on behalf of NBD by the Chief
Executive Officer and the Chief Financial Officer of NBD to the foregoing
effect.
(b) Performance of Obligations of NBD. NBD shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and First Chicago shall have
received a certificate signed on behalf of NBD by the Chief Executive
Officer and the Chief Financial Officer of NBD to such effect.
7.3 Conditions to Obligations of NBD. The obligation of NBD to effect the
Merger is also subject to the satisfaction or waiver by NBD at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
First Chicago set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date. NBD shall
have received a certificate signed on behalf of First Chicago by the Chief
Executive Officer and the Chief Financial Officer of First Chicago to the
foregoing effect.
(b) Performance of Obligations of First Chicago. First Chicago shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and NBD shall
have received a certificate signed on behalf of First Chicago by the Chief
Executive Officer and the Chief Financial Officer of First Chicago to such
effect.
(c) First Chicago Rights Agreement. The rights issued pursuant to the
First Chicago Rights Agreement shall not have become nonredeemable,
exercisable, distributed or triggered pursuant to the terms of such
agreement.
30
<PAGE>
ARTICLE VIII
Termination and Amendment
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of First Chicago or NBD:
(a) by mutual consent of First Chicago and NBD in a written instrument,
if the Board of Directors of each so determines by a vote of a majority of
the members of its entire Board;
(b) by either the Board of Directors of First Chicago or the Board of
Directors of NBD if any Governmental Entity which must grant a Requisite
Regulatory Approval has denied approval of the Merger and such denial has
become final and nonappealable or any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order permanently
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(c) by either the Board of Directors of First Chicago or the Board of
Directors of NBD if the Merger shall not have been consummated on or before
the first anniversary of the date of this Agreement, unless the failure of
the Closing (as defined in Section 9.1) to occur by such date shall be due
to the failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth herein;
(d) by either the Board of Directors of First Chicago or the Board of
Directors of NBD (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein) if there shall have been a material breach of
any of the covenants or agreements or any of the representations or
warranties set forth in this Agreement on the part of the other party,
which breach is not cured within 45 days following written notice to the
party committing such breach, or which breach, by its nature or timing,
cannot be cured prior to the Closing Date; or
(e) by either First Chicago or NBD if any approval of the stockholders of
First Chicago or NBD required for the consummation of the Merger shall not
have been obtained by reason of the failure to obtain the required vote at
a duly held meeting of stockholders or at any adjournment or postponement
thereof.
8.2 Effect of Termination. In the event of termination of this Agreement by
either First Chicago or NBD as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, and none of First Chicago, NBD, any
of their respective Subsidiaries or any of the officers or directors of any of
them shall have any liability of any nature whatsoever hereunder, or in
connection with the transactions contemplated hereby, except that (i) Sections
6.2(b), 8.2, 9.2 and 9.3, shall survive any termination of this Agreement, and
(ii) notwithstanding anything to the contrary contained in this Agreement,
neither First Chicago nor NBD shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
8.3 Amendment. Subject to compliance with applicable law, this Agreement may
be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of NBD;
provided, however, that after any approval of the transactions contemplated by
this Agreement by the respective stockholders of First Chicago or NBD, there
may not be, without further approval of such stockholders, any amendment of
this Agreement which changes the amount or the form of the consideration to be
delivered to the holders of First Chicago Common Stock hereunder other than as
contemplated by this Agreement. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Board of Directors,
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive
any inaccuracies in the
31
<PAGE>
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein; provided, however, that after any approval of the
transactions contemplated by this Agreement by the respective stockholders of
First Chicago or NBD, there may not be, without further approval of such
stockholders, any extension or waiver of this Agreement or any portion thereof
which reduces the amount or changes the form of the consideration to be
delivered to the holders of First Chicago Common Stock hereunder other than as
contemplated by this Agreement. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing. Subject to the terms and conditions of this Agreement and the
Option Agreements, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. on a date and at a place to be specified by the parties, which
shall be no later than five business days after the satisfaction or waiver
(subject to applicable law) of the latest to occur of the conditions set forth
in Article VII hereof, unless extended by mutual agreement of the parties (the
"Closing Date").
9.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than pursuant to
the Option Agreements, which shall terminate in accordance with its terms)
shall survive the Effective Time, except for those covenants and agreements
contained herein and therein which by their terms apply in whole or in part
after the Effective Time.
9.3 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, provided, however, that the costs and expenses of
printing and mailing the Joint Proxy Statement, and all filing and other fees
paid to the SEC in connection with the Merger, shall be borne equally by First
Chicago and NBD.
9.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to First Chicago, to:
First Chicago Corporation
One First National Plaza, Suite O276
Chicago, Illinois 60670
Attn: General Counsel
Fax: (312) 732-1069
and
(b) if to NBD, to:
NBD Bancorp, Inc.
611 Woodward Avenue
Detroit, Michigan 48226
Attn: General Counsel
Fax: (313) 225-2070
32
<PAGE>
9.5 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require NBD,
First Chicago or any of their respective Subsidiaries or affiliates to take
any action which would violate any applicable law, rule or regulation.
9.6 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.7 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof other than the
Option Agreements and the Confidentiality Agreement.
9.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law.
9.9 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
9.10 Publicity. Except as otherwise required by applicable law or the rules
of the NYSE, neither First Chicago nor NBD shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be unreasonably withheld.
9.11 Assignment; Third Party Beneficiaries. Neither this Agreement nor any
of the rights, interests or obligations shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except as otherwise
specifically provided in Section 6.8, this Agreement (including the documents
and instruments referred to herein) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
IN WITNESS WHEREOF, First Chicago and NBD have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
NBD Bancorp, Inc. First Chicago Corporation
/s/ Verne G. Istock /s/ Richard L. Thomas
By: _________________________________ By: _________________________________
Verne G. Istock Richard L. Thomas
Chairman and Chief Executive Chairman and Chief Executive
Officer Officer
33
<PAGE>
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1, dated as of September 18, 1995, to the AGREEMENT AND PLAN
OF MERGER, dated as of July 11, 1995 (the "Merger Agreement"), by and between
FIRST CHICAGO CORPORATION, a Delaware corporation ("First Chicago") and NBD
BANCORP, INC., a Delaware corporation ("NBD").
1. Pursuant to Section 8.3 of the Merger Agreement, NBD and First Chicago
hereby amend and restate Section 1.7 thereof in its entirety as follows:
"1.7 Certificate of Incorporation. Subject to the terms and conditions
of this Agreement, at the Effective Time, the Certificate of Incorporation
of NBD shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law,
except that such Certificate of Incorporation shall be amended to provide:
(a) that the number of shares of authorized Common Stock of the Surviving
Corporation shall be increased to 750,000,000; (b) that the name of the
Surviving Corporation shall be "First Chicago NBD Corporation"; (c) for
the deletion of the Series A Preferred Stock, par value $1.00 per share;
and (d) for the NBD New Preferred Stock."
2. The Merger Agreement, as hereby amended, is ratified and confirmed in
all respects and remains in full force and effect.
IN WITNESS WHEREOF, First Chicago and NBD have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
NBD BANCORP, INC. FIRST CHICAGO CORPORATION
By: /s/ Verne G. Istock By: /s/ Richard L. Thomas
------------------------- -------------------------
Verne G. Istock Richard L. Thomas
Chairman and Chairman, President and
Chief Executive Officer Chief Executive Officer
<PAGE>
AMENDMENT NO. 2
TO
AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 2, dated as of October 20, 1995, to the AGREEMENT AND PLAN
OF MERGER, dated as of July 11, 1995, as amended as of September 18, 1995 (the
"Merger Agreement"), by and between FIRST CHICAGO CORPORATION, a Delaware
corporation ("First Chicago") and NBD BANCORP, INC., a Delaware corporation
("NBD").
1. Pursuant to Section 8.3 of the Merger Agreement, NBD and First Chicago
hereby amend and restate Section 1.11(a) thereof in its entirety as follows:
"1.11 Board of Directors. (a) At the Effective Time, the Board of
Directors of the Surviving Corporation shall consist of 20 persons,
including Messrs. Thomas and Istock, 9 additional persons, two of whom may
be executive officers of First Chicago, to be named by Mr. Thomas and the
Board of Directors of First Chicago, and 9 additional persons, one of whom
may be an executive officer of NBD, to be named by Mr. Istock and the Board
of Directors of NBD."
2. The Merger Agreement, as hereby amended, is ratified and confirmed in
all respects and remains in full force and effect.
IN WITNESS WHEREOF, First Chicago and NBD have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
NBD BANCORP, INC. FIRST CHICAGO CORPORATION
By: /s/ Verne G. Istock By: /s/ Richard L. Thomas
------------------------- -------------------------
Verne G. Istock Richard L. Thomas
Chairman and Chairman, President and
Chief Executive Officer Chief Executive Officer
<PAGE>
AMENDMENT NO. 3
TO
AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 3, dated as of November 20, 1995, to the AGREEMENT AND PLAN
OF MERGER, dated as of July 11, 1995, as amended as of September 18, 1995 and
October 20, 1995 (the "Merger Agreement"), by and between FIRST CHICAGO
CORPORATION, a Delaware corporation ("First Chicago") and NBD BANCORP, INC., a
Delaware corporation ("NBD").
1. Pursuant to Section 8.3 of the Merger Agreement, NBD and First Chicago
hereby amend Section 1.7 thereof by adding a second sentence as follows:
"Notwithstanding the foregoing, the amendment to the Certificate of
Incorporation increasing the number of shares of authorized Common Stock of
the Surviving Corporation may be made effective on any date within 60 days
after the Effective Time."
2. The Merger Agreement, as hereby amended, is ratified and confirmed in
all respects and remains in full force and effect.
IN WITNESS WHEREOF, First Chicago and NBD have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
NBD BANCORP, INC. FIRST CHICAGO CORPORATION
By: /s/ Verne G. Istock By: /s/ Richard L. Thomas
------------------------- -------------------------
Verne G. Istock Richard L. Thomas
Chairman and Chairman, President and
Chief Executive Officer Chief Executive Officer
<PAGE>
EXHIBIT 12.
STATEMENTS RE COMPUTATION OF RATIOS
The ratios of income to fixed charges have been computed on the basis of
the total enterprise (as defined by the Commission) by dividing income before
fixed charges and income taxes by fixed charges. Fixed charges consist of
interest expense on all long-term and short-term borrowings, excluding or
including interest on deposits as indicated. The computations of other ratios
are evident from the information presented in this Form 10-K.
<PAGE>
EXHIBIT 21.
FIRST CHICAGO NBD CORPORATION SUBSIDIARIES
As of March 1, 1996, the Corporation had the subsidiaries listed below, all
of which were wholly-owned except for directors' qualifying shares or as
otherwise indicated. The consolidated financial statements of the Corporation
include the accounts of all such subsidiaries.
Jurisdiction of
Names of Corporation and Subsidiaries Organization
- ------------------------------------- ------------
First Chicago NBD Corporation Delaware
Subsidiaries:
American National Bank and Trust Company United States
of Chicago
ANB Mezzanine Corporation Delaware
FCC National Bank United States
First Chicago Financial Corporation Delaware
Subsidiaries:
First Chicago Capital Corporation Delaware
First Chicago Capital Markets, Inc. Delaware
First Chicago Equity Corporation Illinois
First Chicago Hedging Services Corporation Delaware
First Chicago Investment Corporation Delaware
First Chicago Leasing Corporation Delaware
First Chicago Trust Company of New York New York
The First National Bank of Chicago United States
Subsidiaries:
First Chicago Building Corporation Illinois
First Chicago Futures, Inc. Delaware
First Chicago International United States
First Chicago International Finance Corporation United States
First Chicago Investment Management Company Delaware
Subsidiary:
ANB Investment Management and Illinois
Trust Company
First Chicago National Processing Corporation Delaware
<PAGE>
First Chicago Neighborhood Development Delaware
Corporation
First NBD Investment Services, Inc. Delaware
G-W Life Insurance Company Arizona
National Bank of Detroit-Dearborn United States
NBD Bank (Venice, Florida) Florida
NBD Bank (Wheaton, Illinois) Illinois
NBD Bank (Detroit, Michigan) Michigan
Subsidiaries:
NBD Bank, Canada Canada
NBD Equipment Finance, Inc. Delaware
Seed-Roberts Agency, Inc. Michigan
NBD Bank, N.A. (Fox River Grove, Illinois) United States
Subsidiary:
Deer Insurance Services, Inc. Illinois
NBD Community Development Corporation Michigan
NBD Indiana, Inc. Delaware
Subsidiaries:
NBD Brokerage Services, Inc. Indiana
NBD Bank (Elkhart, Indiana) Indiana
NBD Bank, N.A. (Indianapolis, Indiana) United States
NBD Neighborhood Revitalization Corporation Indiana
NBD Real Estate Services, Inc. Indiana
NBD Insurance Agency, Inc. Michigan
NBD Insurance Company Arizona
NBD Mortgage Company Delaware
NBD Service Corp. Delaware
The names of certain other subsidiaries of the Corporation have been
omitted because such subsidiaries, considered in the aggregate, would not
constitute a significant subsidiary.
2
<PAGE>
EXHIBIT 23.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Chicago NBD Corporation:
As independent public accountants, we hereby consent to the incorporation
of our report dated January 16, 1996, included in this Form 10-K, into the
Corporation's previously filed Form S-8 Registration Statement No. 33-62713,
Form S-3 Registration Statement No. 33-64755, Form S-3 Registration Statement
No. 33-65431, Form S-8 Registration Statement No. 33-21036, Form S-8
Registration Statement No. 33-48773, Form S-8 Registration Statement No. 33-
46906, Form S-8 Registration Statement No. 33-50300, Form S-8 Registration
Statement No. 33-53928, Form S-3 Registration Statement No. 33-60788, and
Form S-8 Registration Statement No. 33-17494.
/s/ Arthur Andersen LLP
Chicago, Illinois,
March 25, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 7,297
<INT-BEARING-DEPOSITS> 10,241
<FED-FUNDS-SOLD> 11,698
<TRADING-ASSETS> 8,150
<INVESTMENTS-HELD-FOR-SALE> 9,449
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 64,434
<ALLOWANCE> (1,338)
<TOTAL-ASSETS> 122,002
<DEPOSITS> 69,106
<SHORT-TERM> 25,513
<LIABILITIES-OTHER> 10,041
<LONG-TERM> 8,163
<COMMON> 319
0
489
<OTHER-SE> 7,642<F1>
<TOTAL-LIABILITIES-AND-EQUITY> 122,002
<INTEREST-LOAN> 5,260
<INTEREST-INVEST> 821
<INTEREST-OTHER> 1,542
<INTEREST-TOTAL> 8,090
<INTEREST-DEPOSIT> 2,581
<INTEREST-EXPENSE> 4,882
<INTEREST-INCOME-NET> 3,208
<LOAN-LOSSES> 510
<SECURITIES-GAINS> (16)<F2>
<EXPENSE-OTHER> 3,535<F3>
<INCOME-PRETAX> 1,754
<INCOME-PRE-EXTRAORDINARY> 1,150
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,150
<EPS-PRIMARY> 3.45
<EPS-DILUTED> 3.41
<YIELD-ACTUAL> 3.14
<LOANS-NON> 344
<LOANS-PAST> 197
<LOANS-TROUBLED> 19
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,158
<CHARGE-OFFS> 409
<RECOVERIES> 145
<ALLOWANCE-CLOSE> 1,338
<ALLOWANCE-DOMESTIC> 1,281
<ALLOWANCE-FOREIGN> 57
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1> Treasury stock of $121 million is included as a reduction of other
stockholders' equity.
<F2> Investment securities gains/losses do not include the Corporation's equity
securities gains which totaled $253 million.
<F3> Other expenses include: salaries and employee benefit expense of $1,692
million, occupancy expense of $252 million, equipment rentals, depreciation
and maintenance expense of $225 million, amortization of intangible assets
of $88 million, merger-related charges of $267 million and other expenses
which totaled $1,011 million.
</FN>
</TABLE>
